GERMANY – UPDATE: Let’s go Deutsch

With vineyard prices at a low and bulk wine prices newly up, now could well be the right time to invest in a German vineyard, says Margaret Rand

If you’re thinking of investing in a vineyard – and half the world, it sometimes seems, is thinking of that – then now might – just might – be the moment to think German. Why? Well, vineyard prices have fallen. Gunter Künstler points out that top Rheingau vineyards that cost DM 30-42 (e15-20) per square metre in 1982 could now be picked up for e7.50. Middling vineyard sites, more easily available, would be cheaper: e3-5 is widely quoted. Yes, including vines.

The idea that land prices are falling might not convince you. But bulk wine prices are newly up: e1.50 per litre for basic Mosel, e1.85-90 for something slightly better – compared to 35c per litre in the late 80s. So says Johannes Hübinger of Zimmerman Graeff-Muller. Prices for bottled wine at the higher end have risen by 20 to 25% in the last five years, according to Stefan Rumpf of Kruger-Rumpf in the Nahe. (At the lower end retail prices in Germany are more or less set by Aldi and Lidl, which between them have two-thirds of the retail market.)

Times have been hard in Germany. In the last eight years or so about a third of growers on the Mosel have simply given up, and about a quarter of the vineyard has gone; but even at e1.50 a litre we’re not talking about holidays in the Bahamas. Hübinger reckons that Mosel growers need a price of e1.70 a kilo for grapes or e2 for bulk wine to make a living long-term: if they survive at e1.50-e1.60 a litre it’s because they don’t cost in their time. “If we owned their vineyards and farmed them properly, taking wages into account,” he comments, “it would cost us more than we pay for the wine.”

Join the stars
If you’re a small grower with small ambitions, your options are not many. You can rent out your vineyards and get a job in town; or if you have five to six hectares, preferably not too steep, and you’re prepared to modernise your production, you can make a living by selling grapes or bulk wine, especially if you have a B&B as well, and sell some wine direct to private customers. If you want to bottle it all yourself, you and your spouse with one or two employees can probably manage about 15 hectares maximum: more than that and you’ll need a second press, more tanks, more of everything. But if you want to join the stars, the successful companies who have been taking advantage of low vineyard prices to increase their holdings in top sites (and, in the case of Balthasar Ress, buying the winery of the local co-op when it gave up – lots of capacity and lots of stainless steel, the latter paid for originally by EU subsidies and hardly used) you need something else; you need a cash cow.

A cash cow, in Germany, almost invariably takes the form of a dry Riesling Kabinett, often made at least partly from bought-in grapes. Ernie Loosen gets so pleasurably coy at the thought of his that he won’t reveal worldwide sales, saying only that he sells 8,000 cases in the UK, sells to 60 countries in all, and that UK and Scandinavian sales together are equal to US sales. Kunstler, gesturing towards a line-up of bottles open for tasting says, “The dry Riesling; that’s the cash cow. There’s no need to sell it: if you confirm the quality year by year it’s ordered automatically. The Erstes Gewachs, the first growths, are the stars. And the sweet Spätlese truly is the dog.” He says he wouldn’t bother to make the Spätlese at all if it wasn’t that it sells just about enough in Britain and the US, and to a few drinkers in Germany, to make it worthwhile. But the British market, still, is the despair of many growers.

Yet there are signs of life, even in a market regarded as addicted – insofar as it can be persuaded to drink German Riesling at all – to a sweetish style practically moribund in Germany itself. In Britain in the last two years there has been a 124% increase in sales of German wines at £6-7; and a 30% increase of those at £4-5. And it’s Dr L and Naked Grape from Loosen that are driving the increase. The under-£3 sector is sick unto death, and won’t be mourned.

Reasons to be cheerful
The main markets quoted by most growers, apart from Germany, are the US, Canada and Scandinavia. And these markets seem to put a smile on their faces; many good growers seem to be more cheerful about the present and the future than they have been for 20 years. The acid test, though, is whether a younger generation is coming into the wine industry. If people in their 20s see a future in winegrowing and are prepared to begin the long haul of investment and of building a brand, then it’s possible that German wine really has begun to turn the corner.

And they are coming in: to the Mosel a bit, to the Pfalz and Rheinhessen rather more. (“The Pfalz is kind of hip in Germany,” says Rainer Karl Lingenfelder.) Even the Mittelrhein seems to be attracting the first signs of interest. In the Mosel it’s Riesling that is the grape of the future (at the moment, anyway). The red grapes, often Spätburgunder, that were planted on the lower slopes and, at the time of planting, fetched three times the price of Riesling, now sell for half the Riesling price, because Riesling has risen faster than anything else. The Pfalz has successfully jumped on Germany’s red wine bandwagon.

So what sort of return are the best estates making at the moment? Robert Weil, which, says Wilhelm Weil, increases its prices every year, has a turnover of e7.5m and reckons to make 17% profit after tax. Steffen Christmann, the new head of the VDP, says that good estates are making two to three per cent on capital: not enough yet to attract big investors from abroad but certainly healthier than in the past.

Don’t expect to see Bernard Arnault or François Pinault sniffing round Germany yet. But it could be that all the hard work of German growers in the last two decades is finally coming to fruition. Well, they deserve it.

© db November 2007