Changing hands

Mergers and Acquisitions are cyclical and near the bottom of a recession (where we’re now hoping to be at) the M&A activity is supposed to be low. Or at least that’s what we were taught (well, we were also taught that liberal capitalism keeps the economy gravitating around the stationary point so there’s no need to intervene, so it’s up to you to believe it or not).

So here’s another topic to support the theory of Hungarian Wine Freakonomics. Rumor has it that many wineries are changing hands these days. Since this is not a business blog, what we are interested in here is the impact of this on wine quality and prices (we’re all consumers after all). I have no insider information so let’s just speculate and let’s see, 2 years from now, if my predictions were right or false.

First, you have to know that I have a mixed feeling about venture capital money flowing into cellars. Kreinbacher, Bukolyi and Hétszőlő are a few examples how this could work out very well (well, from consumer’s point of view of course). On the other hand, controversial privatizations or investments can prove otherwise (Csányi and Co.). But these cases explain themselves. Gróf Buttler’s Bukolyi became filthily rich before deciding to lose a decent sum on reconstructing an entire mountain only to produce some of the best wines, and almost for sure, the best Kadarka and Portugieser of not just Eger, but Hungary. Now he’s looking into enhancing the visitors’ facilities but more importantly, to boost sales. Now that he knows how to produce exceptional wines he needs someone to sell them. And we’re getting to my point here. Gróf Buttler wines are already unaffordable to the average Hungarian of course, but these are not average wines either. But even upper-middle class folk will think twice before buying the best Syrah this country’s ever seen. My fear is that the way to increase sales will not involve decreasing prices but to export these fine wines to markets with much bigger purchasing power (with the Forint’s recent volatility, this seems like a rather viable option). Consequently, prices can be expected to go up.

Hétszőlő’s been one of my favourite Tokaji producers. Not only because of Tibor Kovács’s persistent rebellious wine making practice but because of the reason behind this: the Hétszőlő slopes, some of the most traditional ones dating back to the XVIIth century, can produce some of the most elegant, delicious, light, yet complex dessert wines and dry Furmints using his methods. Kovács and Hétszőlő also gave us a dessert Pinot Noir, Főbor’s late harvest Kövérszőlő and even Olaszrizling! Now Grands Millésimes de France appear to have sold their stake to a venture capital firm which, by nature, is not expected to hold it for long. International sales of Hétszőlő may have been volatile but the new investor will certainly intervene in the the company’s operation and maybe even beyond that. So now I’m gonna go and buy some of the 1999 and 2000 Aszú from Tibor and wait for the 2007 and 2008 vintages.

Laposa Jr. is doing a good job as chief winemaker as we could see in the Somló Évjáratbemutató 2008 few weeks ago. I don’t know whether shares were simply changing hands or a capital injection was also made nor have I any information about the plans of the new shareholder. But it’ll be very interesting to see what impact this may have in the future so I’ll follow the evolution of their wines closely.