To the untrained eye, all’s right with the world at Vega Sicilia. Managing director Pablo Álvarez continues to invest in new projects, including crafting a Ribera del Duero white, the wine trades well on the secondary markets, and export growth remains buoyant. But such apparent good fortune has masked a complex and intensely personal family conflict, as Álvarez battles his father for control of the Ribera del Duero estate.
The background
Vega Sicilia’s historic vineyards were purchased by the Álvarez family in 1982, who acquired Vega Sicilia as joint shareholders. The property came under the control of one of the family’s key companies, El Enebro, which today owns real estate and agricultural businesses in addition to wineries. Patriarch and company founder David Álvarez subsequently appointed his son Pablo as managing director of the property. Since then, the same family has steered the estate to greatness and ensured that the brand remains Spain's most renowned and prestigious wine – the country’s original ‘First Growth’.
In recent times, however, tensions have arisen between David Álvarez and some of his children concerning the future direction of Vega Sicilia. The Álvarez family, despite the inherent problems of power sharing between a patriarch and seven children, successfully ran their conglomerates for decades without any significant turmoil. But as Château Angelus’ deputy director Stephanie de Boüard so aptly observed about family businesses: “The biggest challenge of running any family wine outfit is keeping the estate under family control and maintaining harmony among family members. The more shareholders you have, the harder it is to keep everyone happy!”
Pablo Álvarez is currently awaiting a Spanish Supreme Court decision, which will decide whether he and his siblings will be ousted from their top management roles at El Enebro, a firm they have run for over 25 years. In turn, Álvarez and his siblings are petitioning the court to order their father to surrender control of the multinational business services firm, Grupo Eulen, which David Álvarez founded before his son Pablo was even born.
The origins of the legal battle lie in that old chestnut: conflicting loyalties. Álvarez explains: “The dispute with our father began in 2009 and since that time he has issued different lawsuits against our family.”
According to Pablo Álvarez, problems began when Juan Carlos, one of the sons, dismissed a long-time employee and trusted advisor to David Álvarez. The result was angry recriminations from David Álvarez, and a series of tit-for-tat corporate manoeuvrings and mutual degradation of position. David Álvarez forced Juan-Carlos out of his managerial position at Eulen; in retaliation, five of his seven children forced their father from his position as company president on the board of El Enebro, using their majority vote as the main shareholders. He responded with a counter legal claim to the Spanish Supreme Court, accusing his children of misappropriating funds at El Enebro.
Since the feud erupted, Pablo Álvarez has made damage control his top priority. The family, including David, has refused to give any Spanish press interview requests concerning the on-going dispute. “It is the family policy not to issue any personal comment regarding our views on our father’s actions. This we intend to maintain, above all else,” says Álvarez gravely. Despite this fact, the local media has been all over the conflict, describing the
series of lawsuits and counter claims as ‘Falcon Crest’, a reference to the 1980s television drama about a Californian winery. That said, Álvarez explains that he is happy to clarify facts and details concerning the conflict,
although to this day refuses to publicly speak out against his father. When asked that most pertinent question – what motivated David Álvarez’s behaviour – he simply responds: “This is a question you should ask him.”
At present, both sides are essentially stymied and can do no more until the Supreme Court reaches a decision on this long-running family feud. If it finds for David Álvarez, then he will return to his former role as Enebro’s president and regain full voting rights. In theory, his son could then be ousted from his role as the estate’s managing director, although he would retain his shares.
“We expect the court's decision at the end of 2015,” says Pablo Álvarez, although he notes that given the complexity of the legal battle, it may go longer, and a judgement may not be made until 2016.
Keeping the business going
Meanwhile, as this legal drama slowly reaches its conclusion in the Spanish Supreme Court, Álvarez’s top priority remains protecting and running his beloved Vega Sicilia.
When questioned as to whether he is worried about the wider implications for the winery, Pablo Álvarez is decidedly bullish. “As far as I'm concerned, this on-going legal dispute has not affected the day to day workings of Vega Sicilia – nothing has changed for the moment and I continue to run the company and look ahead to new projects.”
His partners in the wine trade also feel that Vega Sicilia's reputation remains untarnished.
“I certainly have seen no evidence that this family conflict has directly affected Vega Sicilia’s performance or image,” says Simon Field MW, Berry Bros & Rudd’s Spanish wine buyer. “For example, hard evidence that the winery had been affected would surely manifest itself in a fall in investment and clear direction due to squabbles over its future, but money has flowed into the property and other Álvarez family ventures of late. Pablo Álvarez remains a visionary director and I'm confident the family will, eventually, overcome these trials.”
The brand is clearly a success, particularly in the US, with Álvarez announcing that the firm is looking to acquire a new property. There was a logistical problem in early 2014 when the property offered to replace 100,000 bottles of its Pintia wine, due to excessive levels of sediment. Álvarez is, however, quick to dismiss any association between problems of family conflict and this winemaking hiccup. “In the end, we released 100,000 bottles and our clients returned 1,278 in total. So hardly a major crisis,” Álvarez says.
But the 59-year-old managing director becomes far more circumspect and guarded when asked about his personal feelings towards the family saga. All he will concede is that: “Of course, I’m unhappy with everything that has happened. This feud benefits no-one and it’s lamentable that this has happened to my family. However, we are not the first and we will not be the last,” he adds with a certain poignancy.
When families fight
Indeed, few would dispute that family conflicts over leadership and control are hardly virgin territory for the wine industry. The Mondavi family are a classic example. When Robert Mondavi left the family's Charles Krug winery in California due to his monumental bust up with brother, Peter, he filed suit against the family, demanding a 20% share of the company. Awarded more than $500,000 in 1976, Robert’s and Peter’s sides of the family were divided forever. And it seems that such family dysfunction is easily inherited by the next generation; Robert’s sons Michael and Tim Mondavi famously clashed constantly. Such lack of family unity eventually contributed to the sale of the family business to Constellation. Michael and Tim have gone their separate ways and Peter Mondavi’s family legacy is long gone.
The parallels between the Mondavi and the Álvarez family saga arguably lie in the problem of transference of leadership, and how it is managed – or seemingly, often mismanaged.
Jean-Claude Mas, owner of the large Languedoc empire Domaines Paul Mas is only too sympathetic to Pablo Álvarez’s plight, having experienced similar troubles with his father in 2006. “Situations like this constantly rear their ugly head in the wine business, as letting go of power is something few relish,” says Mas. “For decades, our family business was centred around supplying grapes rather than producing wine; when I spearheaded a move towards being a producer, it took my father and uncle some time to adjust to this new reality.” Mas says that his father let go in 2000, but in 2006 “the possibility of a serious battle occurred, during a disagreement about the future of the business.
Thankfully, a court battle was ultimately avoided, but it could have so easily gone the other way.”
Such accounts from the wine industry’s firmament illustrate just how fragile the family winery business model can be. The family-ownership structure often makes expansion, and maintaining harmony through effective management somewhat difficult, as this Spanish saga illustrates.
Yet, for his part, Álvarez remains fairly sanguine about the upcoming Supreme Court decision. His seemingly almost relaxed demeanour is at least partly understandable, as until now most consumers are likely to be blissfully unaware of a personal family drama that has been unfolding behind the scenes. The family’s policy of not discussing the conflict openly and their refusal to publicly denounce their father has prevented a strong link between the conflict and Vega Sicilia. “Honestly, we continue to run the business, for now, as we always have done while the different legal matters take their course,” insists Álvarez. “Nothing can be defined and truly understood until this war is over, a war that has been composed of many battles. And of course, the views will be very different depending on who has won and lost the battle.”
What comes next?
Over the past 32 years, Pablo Álvarez has been at the helm of Spain’s most iconic wine. The brand thrived under his leadership, and would undoubtedly continue to. This raises the question of what direction El Enebro would take, under the stewardship of a man of 87 years.
But even if David Álvarez returns to his top management role at El Enebro, he must then try and carve out his own destiny in the face of five opposing children who own 70% of the company’s shares. And then there is the question of who would succeed after his death. Spanish inheritance law is notoriously complex. More turbulent times for this troubled family are undoubtedly ahead, regardless of what conclusions the Supreme Court reaches in due course.
