Baron de Ley S.A.

Ctra de Lodosa a Mendavia km 5.5
Mendavia E-31587
Telephone: +34 948 69 43 03
Fax: +34 948 69 43 04
Web site:

Public Company
Employees: 106
Sales: EUR 77.36 million ($101 million) (2004)
Stock Exchanges: Bolsa de Madrid
Ticker Symbol: BDL
NAIC: 312130 Wineries

Baron de Ley S.A. is a fast-growing Spanish winery. The Mendavia-based company focuses especially on producing mid- to high-end Rioja wine grades, with an emphasis on Crianza (62 percent of production) and Reserva (25 percent). The company also produces a limited range of premium Gran Reserva (less than 3 percent). The company's wines bear the labels of its two main wineries, Baron de Ley and El Coto de Rioja, as well as fast-growing El Meson. The company also bottles wines under the Maximo label, launched in 2002 to produce varietal wines, chiefly for the international market. Since 2003, the company also has been producing "modern" wines at its Finca Museum winery in the Cigales DOC region. Baron de Ley also has been developing the ambitious Los Almendros vineyard and winery, for which it has acquired a total of 235 hectares. Planting at Los Almendros was launched in 2004, with the final phase of planting expected to be completed by 2007. Baron de Ley, led by Eduardo Santos-Ruiz Diaz, is often cited as being a driving force behind the resurrection of Rioja's profile in the international wine market. In an extension into a new market, Baron de Ley has been developing a business producing cured Iberian ham, through subsidiary Dehesa Baron de Ley SL. The company expects production of its hams—said to be an excellent accompaniment for Rioja wines—by 2006. Established in 1985, the company has led the modernization of growing, production, and aging techniques to create superior wines. The company is listed on the Bolsa de Madrid. In 2004, Baron de Ley's sales topped EUR 77 million ($101 million).

Founding a Rioja Dream in the 1980s

Spanish wines, once international favorites—especially popularized by Ernest Hemingway, among others—had begun to fade in the face of growing international competition in the late 1960s. With high-quality wines appearing from the United States, South Africa, Australia, and elsewhere, sales of Spanish wines, and particularly its flagship Rioja wines, entered a long slump. Shifting consumer tastes, favoring the lighter and sweeter wines from the so-called "new world" producers, led wine drinkers away from the heavier flavors of the oak-aged Rioja wines. At the same time, Rioja, and Spanish wine in general, became associated with lower quality wines.

In the early 1970s, however, the Spanish government adopted a new DOC system, which established regulations governing Spain's appellations and their grades. In the case of Rioja, for example, the classification required the Gran Reserva wines be aged at least five years, while Reserva wines were to be aged for three years. At the mid-range, Crianza, the aging process was established at two years or more. The new classification system played an important role in restoring the reputation of Spanish wines, and particularly of the country's flagship Rioja appellation.

The promise of a new era for Rioja wines led to the creation of a number of new wineries in the early 1970s. In 1973, for example, a new winery, backed financially by Banco Union, was established in Oyon, Alava, called El Coto de Rioja. The winery, created to produce the full range of Rioja grades, later reached a production capacity of nearly nine million liters, based on some 90 hectares of vineyards. Yet compliance with the new regulations governing the Rioja appellation placed a heavy burden on the region's wineries, with El Coto de Rioja among them.

The new winery slipped into financial trouble soon after its founding. In response, Banco Union brought in Eduardo Santos-Ruiz Diaz to restructure the company. Santos-Ruiz then hired Julian Diez Blanco and Julio Noain to assist him. By the middle of the 1980s, the trio had succeeded in establishing El Coto de Rioja as one of the region's most prominent, and profitable, wineries. In 1985, therefore, Banco Union exited from its shareholding, selling the winery to expanding British drinks conglomerate Bass PLC.

By then, Santos-Ruiz, who continued to serve as managing director at El Coto de Rioja, and his partners had begun planning a new winery venture based on a new idea—that of emulating the Bordeaux estate wines. Into the mid-1980s, Rioja wines typically represented blends of grapes from a number of farmers and vineyards. Santos-Ruiz's idea, however, was to develop a winery based on the production of a specific vineyard, such as was the case with many of the Bordeaux region's famous labels.

In 1985, Santos-Ruiz and partners purchased a 16th-century Benedictine monastery, as well as the surrounding estate, in Mendavia, Navarre, and established Baron de Ley. The group's choice of location raised some eyebrows, given the arid conditions of the estate and the resulting difficulty of producing a quality Rioja wine from its grapes. Yet the soil and climate proved ideal for Baron de Ley's goal of developing a modernized version of Rioja wine.

Work began on planting the vineyards, including 90 hectares of Tempranillo, the traditional grape variety of Rioja wines. Yet Rioja regulations also permitted the planting of "experimental" grape varieties—in Baron de Ley's case, the company planted some 20 hectares of Cabernet Sauvignon, a prominent variety used in Bordeaux and other French wines. Meanwhile, the company converted the former monastery buildings into its headquarters, winery, and winery cellar.

Acquiring Scale in the 1990s

Baron de Ley released its first bottles of Reserva wine in 1990. The company also had begun building up its wine stock, which reached 6.5 million liters in 1991. That year marked an important milestone for the company as well. In 1991, Baron de Ley reached an agreement with Bass to acquire El Coto de Rioja. To raise funding for the acquisition, Baron de Ley turned to an investors consortium led by Mercapital, which then took control of more than 65 percent of the merged companies' shares.

Mercapital proved an important partner for Baron de Ley, providing investment capital, as well as assistance in establishing its international marketing and distribution operations. Backed by Mercapital, Baron de Ley undertook an extensive investment program, upgrading its two wineries and expanding capacity. The company also made the strategic decision of maintaining its two labels as separate entities, handled by different distributors. Baron de Ley's investment program also enabled it to shift its focus toward the higher range, increasing its percentage of Reserva and Gran Reserva. By the middle of the 2000s, the company's Reserva production accounted for 25 percent of its total production, while its Gran Reserva neared 3 percent.

Positioning itself toward the upper end enabled the company to build a strong export business. By the late 1990s, Baron de Ley's international sales represented nearly one-third of its total revenues. The company's wines were prized particularly in the northern European markets, especially Sweden, Switzerland, Germany, and the United Kingdom.

Having helped the company develop a strong and growing business, Mercapital decided to exit its shareholding in 1997, listing Baron de Ley on the Bolsa de Madrid that year. The public offering also enabled Baron de Ley to continue its investment in upgrading its facilities, with plans to spend more than $10 million into the end of the century. Part of the group's investment went into expanding its wine stocks. By 1994, the company boasted 16.4 million liters in stock; by 2000, the company's wine stock had expanded past 40 million.

Expansion in the 2000s

At the dawn of the 21st century, Baron de Ley began implementing a new phase in its growth. The company now began seeking to expand beyond its core operations at the Baron de Ley and El Coto de Rioja wineries, to enter a wider range of wine segments.

As part of this effort, the company established a new winery, Museum, to produce wines under the Cigales appellation. For this, the company invested some EUR 9 million, building a winery supported by 104 hectares of vineyards. The Museum winery, completed in 2002, quickly built up production capacity of more than 1.5 million liters, making it one of the largest of the Cigales producers. The company launched sales of the first bottles of Museum wines in 2003.

Baron de Ley also took steps to counter the growing popularity of varietal wines—that is, wines marketed according to the grapes used to produce them, rather than according to the location of the producer—on the international market. In 2002, the company launched its own varietal label, Maximo. The new label proved a success and, by 2004, sales of Maximo wines had reached nearly 25 countries.

In the meantime, Baron de Ley had begun planning a still more ambitious winery project. The company began buying up parcels of vineyards in the Rioja district in the early 2000s. By 2004, the company had succeeded in combining more than 240 plots of land previously held by more than 40 owners to create a single estate of 235 hectares. The company then began construction of a new winery, Los Almendros, and planted its first 40 acres of Tempranillo grapes in 2004.

Company Perspectives:

Our lands produce wines to enjoy and keep.

Planting at Los Almendros continued in 2005; by the end of that year, new vineyards were expected to add another 35 hectares. The planting of 60 more hectares was slated for 2006, and the first harvest was scheduled for 2007. At full planting, the Los Almendros winery was to become the largest single Rioja estate.

Baron de Ley restructured in 2004. As part of a reorganization, the company created a new company, Vinedos Baron de Ley SL, which became the owner of the company's land and vineyards, as well as overseer of its planting and grape production. At the same time, the company created separate companies for each of its wineries. Baron de Ley itself adopted a holding company structure, providing centralized services to its subsidiaries.

By then, the company had launched another subsidiary, taking the group in a new direction. In 2004, the company established Dehesa Baron de Ley, which began developing operations for the production of cured Iberian ham from acorn-fed pigs. The company began building a production facility in 2005, with completion expected for 2006.

Nonetheless, Baron de Ley's focus remained firmly on its wine labels. By 2005, the company had become one of the Rioja region's largest wine producers, with more than 700 hectares of land, including more than 300 hectares of planted land, as well as a new plot of 135 hectares acquired in the Cigales region in 2005. The company also had built up wine stocks of 64 million liters, representing some four years of sales. At the same time, Baron de Ley had established a solid international reputation for the quality of its wines, winning a number of awards, including that of Spanish Wine Producer of the Year at the London International Wine and Spirit Competition.

Principal Subsidiaries

Baron de Ley S.A.; Bodegas El Meson SL; Bodegas Maximo SL; Dehesa Baron de Ley SL; El Coto de Rioja S.A.; Finca Museum SL; Inversiones Coto de Rioja SL; Vinedos Baron de Ley SL.

Key Dates:

The El Coto de Rioja winery is founded, backed by Union Bank; Eduardo Santos-Ruiz Diaz becomes the winery's managing director.
Santos-Ruiz and partners set up Baron de Ley in order to establish a Bordeaux-style winery in the Rioja region.
El Coto de Rioja is sold to Bass PLC.
The first bottles of Baron de Ley are released.
Backed by Mercapital, Baron de Ley acquires El Coto de Rioja.
Baron de Ley goes public on the Bolsa de Madrid.
The Museum winery is created to produce Cigales wine.
Construction of the Museum winery is completed; the Maximo brand of varietal wines is launched for the international market.
The company releases the first bottles of Museum wines.
Baron de Ley restructures.

Principal Competitors

Osborne Compania S.A.; Freixenet S.A; J. Garcia Carrion S.A.; Grupo Codorniu; Gonzalez Byass S.A.; Miguel Torres S.A.; Felix Solis S.A.; Bodegas AGE S.A.; Grupo de Bodegas Vinartis S.A.; Mostos Vinos y Alcoholes S.A.

Further Reading

"Baron de Ley and Anodil (Iberia)," Acquisitions Monthly, November 2002, p. S59.

"Baron de Ley," , January 2005.

"Baron de Ley Improves," Food and, July 29, 2003.

Parry, John N., "Institutions Get Ready to Lay Down Rioja Shares," The European, July 10, 1997.

Walker, Larry, "A Wine Renaissance in Rioja," Wines & Vines, March 2002.

—M.L. Cohen

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