Foreign cash pumps new life into Tokaj

Wines & Vines, March, 2002 by Susan Low

It's harvest time in Tokaj, Hungary. At the Disznoko winery, a troupe of nimble-fingered pickers moves among the vines, carefully separating the shriveled, Botrytis-infected Aszu berries, the essence of Tokaji (Tokay), from the rest of the bunch. It's a harvesting technique that has changed little over the centuries in this ancient region, but that is not to say that time has stood still in Tokaj. Not at all. Tradition counts for a lot in here, it's true, but the past decade has seen changes so dramatic that they verge on the revolutionary. Those changes came lust in time, too.

At the Disznoko winery, situated between the towns of Mad and Tarcal, a staggering $US10 million has been invested by the French insurance group AXA Millesimes since 1992. (AXA Millesimes also owns other notable wine concerns, such as Chateau Pichon-Longueville Baron, Chateau Cantenac-Brown, Chateau Petit-Village, Chateau Suduiraut and part-owns Chateau Pibran, all in Bordeaux, as well as Quinta do Noval in Portugal.) And although the harvest ritual may seem timeless, Disznoko has only been in existence since 1992; 1995 was the winery's first vintage.

The state-of-the-art winery itself, designed by Hungarian architect Dezso Ekler, wouldn't look out of place in the Napa Valley. Sparkling with new stainless steel tanks and presses, and complete with its own design concept (the winery is designed to look like a typical Hungarian village street but more closely resembles the inside of a boat), this gravity-run winery is light years away from the tradition-steeped image associated with Tokaj.

There are other foreign interests who have invested in Tokaj, too. Perhaps the most famous is The Royal Tokaji Wine Company, in the town of Mad, which was set up by Danish-born Bordeaux winemaker, Peter Vinding-Diers, and British wine-writing guru, Hugh Johnson, (along with a consortium of 60 Danish investors) in 1989. Another winery, Oremus, in the town of Tolcsva, is owned by the esteemed Ribera del Duero wine producer, Vega Sicilia, which makes one of the best known (and most expensive) wines in Spain. Total investment here was $3 million.

In the town of Sarospatak, in the north of the region, Frenchman Jean-Louis Laborde, of Bordeaux estate Chateau Climens, and a consortium of other French individuals, has invested in the twin wineries of Chateau Megyer and Tokaji Pajzos. Laborde has also hired a Hungarian- Canadian winemaker, Thomas Laszlo, who used to make wine at the Henry of Pelham estate in Ontario.

In Tarcal, not far from the town of Tokaj, an American businessman, Anthony Hwang, has put up the money ($5 to $6 million) behind the historic Kiralyudvar Estate, where winemaker Istvan Szepsy makes both the estate wines and his own wines from his family's privately-owned land. And the Hetsz6l6 estate, near the town of Tokaj itself, is 90% owned by French insurance group Grand Millesime de France and the Japanese group Suntory (private investors making up the remaining 10%). Total investment here was about $5.8 million.

Money Is Flowing

By any account, that's a lot of foreign money to be flowing into a single region. Why are foreign investors putting up that sort of capital? There are two reasons: the first is, because they can; the second is that, because of Tokaji's fame, investors assumed that the region would make a good long-term investment.

To fully explain the first point, it's necessary to look at Hungary's complicated history. Before a law called the Wine Act was implemented in 1991, investing in Hungary was simply impossible. After World War II, Hungary was hidden behind the Iron Curtain. To say that the tenets of Communism were incompatible with quality wine production is to grossly understate the case. Tokaji wine had been recognized as a wine of quality since the 17th century, but its name was laid low with the changes brought by the Communist regime.

As Laszlo Meszaros, director of Tokaj Diszn6k6, explains: "Under Communism, we had to use very intensive growing methods, so we had to use tractors rather than pick by hand. Vineyards on the higher sites were abandoned because they were too difficult to cultivate. Instead, vines were planted at lower altitudes on the plains. The total surface area hadn't changed, but it had been restructured." Under the regime, individuals were forbidden from owning more than half a hold (about three quarters of an acre). The land was largely owned by the state, divided up into huge, state-run farms, with most of the rest controlled by cooperatives.

By the early 1960s, about 30% of the vineyard area in the region belonged to state farms, with 60% being controlled by co-ops and a tiny 11% in private ownership. Over the next two decades, this kind of centralization continued, until the Borkombinat, The State Wine Farm, was largely in control of the region. Even those who did own their own land had to sell either the grapes or the made wine to the co-ops, where it was all blended together. "We were allowed to make wine, but not to make business," as one winemaker put it. By the 1980s, about 90% of all the wine produced in Tokaj was sent to the USSR--never the most discerning of audiences--in exchange for natural gas. Yields were out of control, vineyards were in a sorry state and wine quality was poor.