This is the second part of our report on the five very different wineries that Sue and I visited during our brief stay in Andalusia. Click here to read the first half of the story.

Bodegas Tradición and Bodega Gonzalez Byass

We’d like to finish with an exercise in compare and contrast involving the smallest winery we visited (Bodegas Tradición) and the largest (Bodega Gonzalez Byass).

Big barrel rooms and small libraries were featured in both wineries. The barrels are easy to understand. Sherry wine ages in ranks of barrels called soleras, which slowly transform the wine and develop its special character. It is impossible to produce great Sherry any other way.

But before we surveyed the barrels we visited the small rooms at both wineries where records are stored. Time is integral to Sherry production and so is history. They recognize that the company records are important historical documents.

Gonzalez Byass, the largest Sherry producer and the only one still in family hands, was founded in 1835 as a shipper focusing on the British market. You will probably recognize its famous Tio Pepe brand. Like Port and Bordeaux, Sherry’s development was shaped by the fact that export markets could be reached by sea more economically than domestic markets that (until the arrival of trains) required costly and cumbersome land transport. Amazingly, the business has remained in the Gonzalez family through seven generations!

All in the Timing

The roots of Bodegas Tradición go all the way back to 1650 when Bodegas CZ (for the initials of the founder) was formed. The records room was filled with antique ledgers that told the story of the winery and the region. Exports were key here, too. The winery was named supplier to the British crown (1771) even before it received the same honor from the Spanish royal family (1887). One entry (I think it was from the 17th century) detailed exports to China!

Bodegas Tradición did not have a smooth journey through the Sherry industry’s booms and busts and was re-founded in 1998 as Bodegas Tradición CZ by Joaquín Rivero, who located the winery in an old building in the historic center of Jerez. It was, as I understand it, an attempt to revive the producer and rescue a particular way of making Sherry and the old soleras necessary for that process. Production is small both because the firm is relatively small (especially compared with Gonzalez Byass) and also because so much volume is lost a little at a time to the “angel’s share” during the long aging process. Time is the essence of Bodegas Tradición.

The Gonzalez Byass campus, Bodega Tio Pepe,  sits prominently on a hill, next door to the cathedral and just below the Alcázar de Jerez de la Frontera and Mezquita. Production is spread over a number of big buildings and there are tourist and hospitality facilities along with the Hotel Bodega Tio Pepe, where Sue and I stayed.

From Jerez to the World

It is interesting to compare and contrast the two producers by visiting their retail wine shops. Tradición radiates age and time. The Sherry wines and brandies are old and older (and almost insanely old) and command prices that are high when you think about it in bottle terms and cheap when you consider the time, history, and quality of the experience. It reminds me of a lunch we had in Seville at Bar Casa Plácido, where the proprietor was so proud to serve Tradición wines.

The wine shop of Bodega Tio Pepe is larger and brighter and reveals the company’s depth in Andalusia and breadth across Spain and increasingly around the world. The wall of wine and spirits brands from around the world (and the corresponding list you can find online) is really astonishing. Just as ships once set out from Seville and Cadiz to explore he world, Gonzalez Byass has charted a global course: Austria, Australia, Chile, Spain, France, Hungary, Italy, New Zealand, and South Africa. And that is just for wine. You can add the U.K. if you include spirits such as a Sherry-cask-aged gin!

Final Thoughts

The ships that forged Spain’s Age of Discovery set sail from this region (Seville and Cadiz). There is much exploration going on here now. Bodegas Tradición explores the past without losing touch with the present. Bodega Gonzalez Byass embraces the world of wine while firmly rooted in family and Jerez.

I thought I knew a bit about Sherry before we visited Jerez and maybe I did, but there is so much to learn and we love learning! But maybe the most surprising thing we discovered here is this: I have always seen Sherry as a special wine, something different from others in terms of both production and sensory perception. And it is unique.

But from an economic perspective, the Sherry industry is not so different from wine in other parts of Spain and the world. The booms and busts that the five Sherry houses we visited have navigated and the very different courses they have charted to their current success provide lessons that apply far beyond the Sherry Triangle.

Sue and I recently spent more than two weeks in Andalusia, Spain, about half of the time exploring the wine scene and the other half enjoying the region’s history and culture.

We covered a lot of territory and were a little surprised that the dominant feature of the landscape was not grape vines as you might expect, but olive trees! As far as the eye can see. Olives everywhere! We even visited an olive oil cooperative and learned that the main factors that lead an olive oil cooperative to either success or failure are much the same as those we observe in wine cooperatives.

But we came for wine. We tried to pick wineries that were very different from one another and so would together give us a more complete picture of this fascinating wine region. Let us tell you a bit about each one over the next two weeks.

Bodegas Alvear

Our first stop was Bodegas Alvear in the Montilla-Moriles region near Cordoba. The wines made here are much like Sherry but of course cannot be called Sherry because they are not in the Jerez D.O. (Confusingly, Pedro Ximenez grapes from Montilla can be made into Sherry wine by producers located in Jerez. PX grows really well in Montilla but struggles in Jerez.)

Alvear makes up for the absence of a famous appellation by having a famous brand. Indeed, Alvear is both the oldest winery in this area and one of the most respected in all of Spain. I haven’t seen many Montilla wines at local shops, but I have seen the Alvear PX Reserva, which I remember as the very first Robert Parker 100-point wine we tried (the current release is rated 98 points).

We had an excellent tour and tasting at Alvear and were impressed with the combination of tradition and innovation that we found there. The tradition is obviously the classic wine styles such as Fino and the PX. The innovation takes many forms. Important today is the development of non-fortified wines such as the refreshingly light El Rebate we sampled at the tasting and the complex red Palacio Quemado shown here that we were served a couple of nights before at La Montillana restaurant in Cordoba.

But maybe the most important innovation is the Alvear Vermut. Alvear is one of the pioneers in making Vermouth from Sherry-style wines. Alvear’s Vermut is popular (it was listed as “The Classic” at a Vermut bar we visited in Madrid) and has opened up opportunities for other producers in the region.

Bodegas Williams & Humbert

Bodegas Williams & Humbert occupies a vast industrial space on the edge of Jerez. The barrel room sort of takes your breath away. This is the home of famous brands such as Dry Sack (the go-to aprétif of White House dinners in the 1950s) and Canasta Cream Sherry among others.

We were there because of the memory of a dinner we had 20 years ago at a restaurant called La Madonnina del Pescatore in Senegalia, Italy. At the end of a fabulous seafood dinner we were served glasses of Don Zoilo PX.  This was probably our first PX and it simply blew us away. You know how some wines are impossible to forget? That was the Don Zoilo PX and it is made by Williams & Humbert. We had to visit.

(Aside: According to their website, La Madoninna del Pescatore no longer serves the Don Zoilo PX. They offer a Williams & Humbert PX instead. The PX seems to have stood the test of time!)

We toured the winery and tasted through the wines. It was quite an experience because each of the many brands and styles and different aging treatments. Every time we thought we’d found our favorite we encountered something new and delicious. This is not a bad problem to have.

It was at Williams & Humbert that we first saw the light wood barrels surrounded by traditional black barrels. The black casks age Sherry (many of them were signed by celebrities including all four Beatles when they visited the winery years ago). The light wood barrels also contained Sherry, but the point was to condition the wood for eventual use in production of Sherry-barrel-aged Whiskey.

It was also at Williams & Humbert that we first realized the significance of Brandy to many Sherry producers. Sherry is a fortified wine, so stills are a common sight. Brandy is often produced in addition to the spirits that fortify Sherry. This Brandy is popular in Spain and other countries including Mexico and the Philippines. The Brandy market is so important for Williams & Humbert that the company is actually co-owned by a Spanish family and a Philippine firm that markets the Brandy there.

It is interesting to consider how a sip of PX at a restaurant on the Adriatic coast could lead us to such an interesting experience.

Bodegas Lustau

It wasn’t hard to convince us to visit Bodegas Lustau, which is a well-known brand in the United States. The bottles and labels are attractive, the wines are full of character, and the products are well-priced and widely available. Lustau was always on our list and our Jerez friends encouraged us as well because a visit to Lustau gives a glimpse of Sherry history and tradition.  Our tour started in a conference room overlooking the big barrel cathedral. That’s got to be one of the best office views in the world.

Originally a family business, Lustau has weathered the booms and busts of the Sherry game. In 1990 it was acquired by the Luis Caballero Group, a Spanish family-owned company specializing in wine and spirits. With strong backing, Lustau has both expanded its Sherry business and also ventured into Vermut, Brandy de Jerez, vinegar, and Sherry casks for spirits.

The Lustau wines are impressive and we spent a very happy hour barrel-tasting with our host. But what I remember best is the importance of branding. Building the Lustau brand was important right from the start, especially in the export market. Indeed, Lustau was better known abroad than in Spain until recently. The advent of Sherry-based Lustau Vermut, wildly popular in Spain and now available in the U.S., too, brought the brand to the attention of the Spanish market.

I guess the success of Lustau Vermut shows that the company hasn’t lost its ability to create and develop successful brands. The winery hosts about 10,000 visitors a year, 40 percent from Spain and 60 percent from abroad.

Last week we analyzed the strategies that Andalusian wineries use to broaden and deepen their businesses while avoiding the boom-bust cycle. It is interesting to see these strategies at work at Alvear, Williams & Humbert, and Lustau. It is even more interesting to see the power of brands in this industry. Each of these wineries has succeeded in part by creating and maintaining powerful brand identities, some with global reach.

We published an article here at The Wine Economist a few  years ago, asking “Can Sherry be the Next Big Thing?” “Probably not,” we said. “But it doesn’t have to be. It is a timeless wine waiting to be re-discovered by a new generation of wine drinkers.”

I’m glad we didn’t go too far in our assessment of Sherry’s potential back in 2017 because Sherry producers who have been around for a while are cautious about booms because they know they can be followed by busts. That was one message we heard when we met with César Saldaña, the President of the Sherry D.O. Consejo Regulador, the industry organization that makes and enforces the rules that govern Sherry production and promotes the product, too.

A Sherry boom? Not a good idea, he told us. Sherry has a history of booms and busts, and what it needs today is stability to build a foundation for the future.

UK Supermarket Boom

Sherry’s most recent boom occurred in the 1980s when British supermarket wine sales were growing so fast. Britain has long been the key export market for Sherry wines, and the surge in sales of inexpensive private label Sherry combined with government subsidies to encourage exports caused the industry to explode. How big was the boom? Vineyard area increased from about 7000 hectares to over 20,000 hectares!

Booms are often followed by busts, and Sherry sales have fallen. The crisis came in 1986-87 when Spain entered the European Union and the flow of subsidies suddenly dried up. Sherry’s diminished reputation made it difficult to command prices necessary to sustain production without government assistance.

It has taken a while, but vineyard areas are finally back in the 6000 to 7000 hectare range again. Consolidation has occurred, with the large bodegas growing and acquiring brands as the number of independent producers has fallen. Cooperatives, which account for about half of total production according to my sources, sell young base wines to the big bodegas where they are aged, blended, bottled, and sold.

Sherry Crystal Ball

What does the future look like for the Sherry industry in this market environment? We will answer this question in more detail next week, when we look at five specific wineries and their particular strategies. But here are some general patterns we observed.

Innovation: Think about Sherry as an ingredient and not just a beverage. Sherry-based cocktails were featured in that Financial Times article about Sherry’s chic appeal, for example, and a popular drink hereabouts is Fino and Sprite or 7-Up. It is called Rebujito.

And then there is Croft Twist Fino Spritz, a delicious white spritz wine that blends Fino Sherry with elder flower, lemon, and mint cordials, along with sparkling water. It reminded us a little of the White Port Spritz drinks we enjoy in Porto. Finally, Sherry can be the base of delicious Vermut (Vermouth) drinks, which is another growing category.

Non-fortified wines. If fortified wines have plateaued, as they have in Spain and also in Portugal, attention naturally shifts to unfortified wines, which are seen as an opportunity for both growth and diversification. As noted last week, Sue and I found the red wines we sampled (made by Alvear and Gonzalez Byass wineries) more interesting than the white wines we sampled with a couple of exceptions (Forlong Blanco from Cadiz, for example).

Spanish brandy. Sherry wines are fortified with spirits, so stills are everywhere in the Sherry Triangle, and brandy production is common. Spanish brandy is popular both in Spain and in the Spanish-speaking world. In fact, I think brandy from Jerez is probably better known and more popular in some places than the region’s signature Sherry wine. It is an important source of revenue for the Sherry producers we met.

Sherry barrels. Forget the wine. Sometimes it is the barrel customers want. If you have ever toured a Sherry house you know that the barrels are painted black, so when you see a bunch of unpainted barrels they really stand out. And we saw many of these barrels because whiskey aged in Sherry barrels is a popular beverage these days. Sherry firms age their wines for a period in new barrels that they profitably sell to whiskey makers. It is interesting that some consumers who would probably not drink Sherry wine want to enjoy Sherry’s influence in this way.

Wine tourism. Jerez is a popular destination with good tourist facilities. The sherry bodegas receive about 240,000 visitors today. The region hosts many fairs and festivals and, when we were there, MotoGP races at the Jerez circuit that once was home to Formula One competitions.  You can find Jerez wine tours out of both Seville to the north and Cadiz, a popular cruise ship port, to the south. Many Sherry houses have ambitious wine tours and hospitality programs with restaurants and even hotels (we stayed at the Hotel Bodega Tio Pepe, for example, and dined at the winery’s Pedro Nolasco Restaurant).

Multi-region wine businesses. Finally, we have noticed in Spain (and in Italy, too) the tendency of wine businesses to build a portfolio of wineries across different regions. The ability to fill efficient production and distribution pipelines with a variety of products can be an advantage if done well. The addition of Sherry to a Spanish wine portfolio makes as much sense today as linking Port and Sherry producers together (think Sandeman or Osborne) did at an earlier stage.

César Saldaña is right. Sherry doesn’t need to boom (and bust) to succeed. There are many ways for the industry to broaden and deepen without supercharging sales.  Next week, we will examine several case studies to see what paths individual producers are taking to move beyond boom and bust.