Wine Terroirs
By by Alain Échalier, posted on 22 March 2022
Over the past few years, Bordeaux has had to contend with numerous challenges, ranging from ‘Bordeaux bashing’ in France to climate change, Brexit, the political crisis in Hong Kong, Trump taxes and the global pandemic. More than any other wine region, Bordeaux is France’s vinous showcase around the world, so how are markets performing in 2021 and what solutions have been devised to cope with these issues? To find out the real consequences of this string of crises, we interviewed a number of industry players. Here’s what they told us.
The oldest of its current woes is the ‘Bordeaux bashing’ phenomenon, in other words, a measure of disenchantment among some of the French for what used to be by far their favourite wine tipple. And yet, France accounts for 57% of the Bordeaux wine market by value. The issue has four main causes:
The trend seems to have gained traction over the last 10 years and is tarnishing the image of Bordeaux wines, irrespective of their category.
Let's start with China, the world's second largest economy which, when it does drink wine, has a preference for Bordeaux and is receptive to its prestige. In 2017, the market generated in excess of 700 million euros and the country is Bordeaux’s leading export destination. Traditionally, a significant share of these shipments entered via the free port of Hong Kong. However, the political crisis in the former British colony in 2019 and 2020 cannot alone explain the drop in exports. Other explanations include the all-time low crop in 2017 (-39% compared to 2016), competition from Chilean and Australian wines which were awarded preferential customs duties, and also a reduction by almost half of Chinese imports of still wines, irrespective of their provenance...
Another major export destination for Bordeaux wines is the United States, grossing over 300 million euros in 2018. But following a trade dispute in the aviation industry, the former president (Trump) introduced an additional tax of 25% on French wines under 14% ABV in October 2019. The tax remained in place until June 2021, resulting in a drop in sales of around €100 million for Bordeaux alone!
The region’s third largest, and long-time importer, is the UK. The never-ending time frame of Brexit and its uncertainties obviously impacted the market negatively. Despite this, Britain’s love of a wine it did so much to promote was sustained, particularly in the high-end categories. In 2020, 48% of top Bordeaux by volume continued to be shipped across the Channel.
Finally, Covid had an impact on all Bordeaux markets. Unlike a ‘normal’ crisis, the pandemic affected all consumer countries: China, starting at the end of 2019, then the West from March and April 2020. Successive waves of lockdown, with the closure of bars and restaurants, in France and in export markets, brought consumption and orders to an immediate standstill. China closed up completely. Although there were times when at-home consumption delivered good performance – with supermarkets and wine shops remaining open – this did not offset all the losses. For instance, in France, supermarket sales of Bordeaux fell by 5% in 2020, due to lower footfall caused by consumers favouring local shops. Uncertainty about the recovery also put the brake on most orders and logistics flows have undergone a sea-change due to the substantial fall in global volumes. This economic tsunami has severely rocked Bordeaux’s boat but the region is striving to stay on course. We review the current situation with winegrowers from a variety of backgrounds who show us that energy, determination and creativity can often “move mountains”.
This 140-hectare property is located in Reignac, on the right bank of the Gironde. Its owner is Laurent Dubois, and the château has been in the family for 9 generations. The wines are Blaye Côte de Bordeaux, reds, whites and rosés, sweet Bordeaux Supérieur and Clairet. Like many other Bordeaux producers, the winery exports 60% of its wines and sells 40% in France. China accounts for half its export sales, though the wines are also sold in Japan and Cambodia. Covid caused a very sharp decline in sales. “Over the first 8 months of 2020, we were down 50%. Then things started to improve from September 2020, but still did not revert to 2019 levels”, says Dubois. Among his Chinese importers who cover Shanghai and Beijing directly without transiting via Hong Kong, he noticed that the ones who fared best were the large ones, whilst the small ones suffered more. And as is often the case in China, the wines are almost entirely red, with fairly high alcohol content. The so-called Trump tax was also devastating for their wines, which are shipped to New York and California and generally retail for around 20 to 25 dollars. Dubois offered to absorb half of the 25% increase, and that the other half be absorbed by his importers. One refused, the others accepted. But the market struggled to bounce back. Maybe suppliers from other countries took his place. Whatever the explanation, there is no doubt that due to Covid, the reduction in maritime freight has led to an increase in transport prices: the cost of shipping a container to the USA has risen three-fold, and two-fold to Asia.
Château les Bertrands.
In France, the winery markets a significant amount of wine through trade fairs, attending 18 a year. Consequently, exhibition cancellations made a major dent in its sales. The Dubois therefore decided to keep up a constant flow of newsletters to their customers. Free carriage was reduced from the customary 48 bottles to 24, but ultimately, they still sold less. Now the trade shows are starting to resume so Laurent Dubois hopes to revert to the pre-Covid situation. One thing the company has understood is the importance of maintaining a customer database. “Before, we didn't always note their e-mail address”, he says. “Now it's automatic, and the impact is huge!”
Château Petit Val, which is near Saint-Emilion, has 12 hectares of vines on a mix of sandy-clay and clay-limestone soils. Its flagship wine is Saint-Emilion Grand Cru marketed under two labels: Château Petit Val and Muse du Val (the 2016s were awarded 92 and 95/100 respectively). David Liorit is the chateau manager, after joining owners Jean-Louis and Olivia Alloin in 2014. The vision here is clearly to produce high-end wines – yields average at around 35 hl/hectare – and the chateau has unfailingly been headed north since the outset. Exports account for 60% of sales and are bound for markets painstakingly built up through widespread travel and tastings across the globe. Liorit has put a considerable amount of energy into achieving this and has travelled to regions such as Florida, Japan and Morocco. Obviously, the pandemic has had an impact, with the compound effect of the closure of restaurants, the Trump tax and the American election period. But resignation is not part of the company’s genetic make-up and sales have already picked up.
Château Petit Val in Saint-Emilion.
Nationwide, the Château has explored new avenues. Examples include ‘wine merchant dating’ by video where samples are sent out for tasting, and use of social media, with new information put online every week. There are so many things that could be said about the range which, at the very least, is highly unique with wines such as a single varietal Malbec and a Riesling, along with amphora maturation to round out tannins. “All of a sudden, we had time on our hands and were able to sit down and think about different marketing strategies”, explains Liorit. “Direct-to-consumer sales are one of the alternatives and we are therefore going to open a shop at the chateau, where we will sell the estate's products and provide a tasting tour, combined with activities for children”. So finally, wine enthusiasts from far and wide will get the opportunity to discover this sensitively designed setting with its unique vineyard sites.
Cédric Coubris represents the Gironde branch of independent winegrowers, with its 550 members, rising to 7,800 nationwide. He explains the challenges his members have faced, and the solutions the organisation has aimed to provide. Even before Covid or the Trump taxes loomed on the horizon, Bordeaux bashing across France – often fuelled by environmental issues – was the first situation that had to be tackled. Whenever plant protection products are mentioned in the media, he stresses that they should be referred to per hectare. “Otherwise”, he says, “it is unfairly penalising for France’s largest wine region”. The organisation therefore fought for High Environmental Value (HVE) certification, which endorses good practice, to be officially recognised, just like organic farming. Consequently, Gironde is France’s leading HVE-certified region.
The Trump tax was brought to the attention of French MPs and plans for a solidarity fund materialised in January 2020. But before any funds could be released, the pandemic occurred. Restaurants became off-limits and none of the 12 annual shows that the Independent Winegrowers’ Federation organises, and which attract half a million visitors, could take place. The organisation subsequently expanded its e-commerce website considerably (vigneron-independant.com). Sales increased four-fold and the website was available in 5 languages, ramping up sales opportunities. It also helped its members improve their e-mailing shots and set up click & collect facilities. “The purpose is not just to grow sales but also to maintain engagement”, explains Coubris. Failure to do so would have left a gap for other platforms to develop. But for independent winegrowers, direct-to-consumer sales are the obvious marketing channel. The federation also made sure that the French State Guaranteed Loan applied to their members. Offering 0% interest and up to 25% of previous turnover, it prevented bankruptcies by providing between €10K and €500K in loans per farm. 2020 also saw tax exemptions. Repayment of the loan, initially planned for 2021, was postponed until spring 2022 and is likely to be spread over 7 years. On a positive note, Covid boosted membership of the organisation by 10%. In times of trouble, there is even greater strength in unity.
For the past two years, Damien Sartorius has been running the celebrated Deuxième Grand Cru Classé, with his mother. The family also owns Langoa-Barton, with which it shares cellars. The famous Saint-Julien wine is distributed solely through the Bordeaux trade, i.e. local negociants. The American market is sizeable and represents around 30% of the chateau’s sales (15% for Langoa-Barton). For a bottle of Léoville, which sells for around $150, a 25% increase is significant, particularly when you consider that the tax was not levied on fine Italian wines. On the right bank, where Merlot reigns supreme, the wines often naturally weigh in at 14.5% and therefore just managed to avoid the additional duty. So wasn't it tempting to tweak the alcohol content in Léoville to avoid the duties too? “We like to retain a little acidity in our wines”, says Sartorius. “Changing the style is not an option”. However, the En Primeur buying system, with its customary waiting period, allowed customers to reserve the wines. Orders were placed in the hope that the tax would disappear when the wines were shipped. The gamble paid off, and the market has picked up.
Damien Sartorius of Château Léoville Barton.
This great lull in sales provided time in which to reorganise production and incorporate safety measures. These include one worker per vineyard block, no sharing of tools, pickers divided into small groups so that one case of Covid does not require the entire team to self-isolate. The spring 2021 En Primeurs, however, showed genuine recovery. From a sales perspective, Sartorius has been holding a series of video conferences with trading companies and clients. Small samples of the famous growth were sent out so that customers could taste it. The experience has turned out to be positive because people who can be a little shy chat more easily with the winegrower by video conference. It involves less time, less money and helps the winery’s carbon footprint – and Sartorius is pleased with its efficiency.
But high-end restaurants are struggling to reopen, and fine wines are often drunk over business lunches in restaurants. Inventories are therefore increasing, but not to excess. “Bothering restaurateurs is out of the question. The wines are luxury goods and they sell thanks to the work of my ancestors. The brands are very well established”, says Sartorius, gratefully.
This co-operative winery, founded in 1974, now has 520 member winegrowers. Originally located in the Côtes de Bourg, Blaye and Côtes de Bordeaux appellation areas, it now includes Fronsac, Graves and even Sauternes. The vast majority of its members take their entire crop to the winery. “That’s important”, explains communications and marketing director Damien Malejacq. Gone are the days when co-operative winegrowers kept their good fruit... and took the rest to the winery. Also, a price scale with 10 different levels is applied to incoming fruit, to encourage quality. The co-operative's technicians also conduct visits out on the ground before the harvest to check that the grapes meet the set criteria.
A group of young Tutiac winegrowers.
55% of the winery’s sales are in France, 80% of them to supermarkets, 10% direct-to-consumer and 10% to wine merchants. Provided you can be flexible, supermarkets are performing relatively well. In response to environmental requirements, the winery now farms 88% of its vineyards under the HVE scheme, but is also focusing on an even more practical approach for 8 to 10% of its wines – Zero Pesticide Residue. The trust mark, which originated in the vegetable industry, is more restrictive than HVE for winegrowers, but it is also much clearer for consumers because it offers the promise of results, as confirmed by laboratory analyses of the wines. It requires a great deal of stringency and dedicated presses and pipes. It therefore costs about 20% more to produce than wine from conventional farming. However, it is more affordable than organic, estimated to cost 40% more, and it can also be obtained in 1 year, as compared with organic’s three-year switch-over.
In France, Covid led to a fall in average purchases as consumers prioritised what they perceived as essential goods. The pesticide-free wines were launched just in time to counter the decline. In export markets, it was more of an opportunity to gain market share. The winery didn't close, it kept in touch with its customers and the impact was minimal. The Japanese, English and Canadian markets even showed growth.
The Sauternes market, which has been hampered by the trend away from all things sweet, has been particularly hard hit. Producing 10% of the appellation's wines, the co-operative has reacted and changed its profile rationale, reducing sugar levels from 120 to 90 g/l. It also suggests Sauternes be drunk as a cocktail with Crémant de Bordeaux, a trend that is gaining traction in the American and Chinese markets.
This chateau is fairly representative of many estates across the region. Located on the right bank, it extends over 54 hectares, 58% of them planted to Merlot and 27% to Cabernet-Sauvignon. A family-owned property, it is run by brother and sister duo Anne & Hugues Mallet, with the help of a trained winemaker.
The wines are mainly sold in France, via a network of private customers, works committees and the hotel and restaurant trade. Five to 10% are exported to Japan, Malaysia, the United States, and sometimes a large order comes in from China. “Our first challenge”, says Hugues Mallet, “is the change in drinking patterns in France. A glass of wine with every meal is tending to disappear with this generation, and is being replaced by weekend drinking. So we have to respond with an affordable range for everyday drinking, and a more gourmet range around €10 to 12 for weekends. We must also try to compensate for this by targeting the restaurant trade”.
Initially, Covid led to a resurgence in sales. People who were confined to their homes wanted to treat themselves a little. But then, sales dropped away, so the Mallets went the extra mile on deliveries, even offering to deliver themselves on Saturdays and Sundays with their van – you don’t go to the winegrower, he comes to you! Fortunately, works committees are fairly loyal customers, and sales of end-of-year gifts tend to be recurrent. The major difficulty was more restaurant closures, and the timing of the various lockdowns. Haut-Macô was unable to take advantage of the ‘opening windows’ when restaurants reopened in France in the summers of 2020 and 2021 – it mainly produces red wine, which struggles to find an audience when the mercury soars over the summer. Sales are now picking up again, but orders are placed on a just-in-time basis, to within a single box, even if that means placing new orders and paying delivery charges again. In this way, clients can avoid holding inventories, should there be further lockdown measures.
In addition to its 4-5 annual newsletters, the chateau is very mindful to nurture its relationship with its direct customers and welcomes them to the chateau. Showing off the vineyards and the winery, explaining pruning and maturation, and tasting the range of wines, are all ways of forging a much stronger bond. This is precisely how Château Haut-Macô developed!
This Chateau, which we wrote about in Gilbert & Gaillard n°41, essentially produces Haut Médoc Cru Bourgeois Exceptionnel, over a 46-hectare vineyard. “The wine performs well in export markets, especially the United States. But the Trump tax proved to be extremely challenging”, explains Paul Bordes, the estate’s manager. With a price tag of between €25 and €30, the wine is mid-range where customers still keep an eye on expenditure, unlike high-end luxury goods. As for all winegrowers, Covid has had a detrimental effect, with sales dropping and inventories rising. So what are the most effective strategies for tackling these difficulties? “Continue to focus on improving quality”, is Bordes’ answer right off the bat. Since 2013, he has transformed the estate from top to bottom. The soils now benefit from natural amendments, cereal crops are planted between the vine rows to improve drainage, the grape harvest is entirely done by hand and the vat room and cellar have been completely revamped.
Grape picking at Château de Malleret.
The switch-over to organic farming has begun. The first certified vintage, after the 3 years without any treatments, should be 2023. Fruit trees are now being introduced to separate the blocks, and some beehives have been installed. This virtuous circle will certainly pay off in the long run, but it is already giving the staff plenty to do. Paul Bordes, who has worked in the Iberian Peninsula, has also had an olive grove planted. Not only is it good for biodiversity, but the plan is to market olive oil. Vines and olives are two long-standing companion crops, and diversification will contribute to the economic stability of the company.
Finally, in order to meet the needs of a market that increasingly uses the Internet, Château de Malleret has an online e-commerce website. Both modern and intuitive, it allows the wines to be sold direct-to-consumer.
In addition to his four chateaux in the Médoc (Puy Castéra, Pontey, Holden and Plagnac), Romain Roux owns 300 hectares of vines in the Entre-deux-Mers region. A dyed-in-the-wool entrepreneur, he insists on the importance of not becoming complacent and agrees to share some of his expertise. Through his direct partnership with supermarket buyers, he initially analysed the underlying trends, in order to be able to respond to customers’ needs. First and foremost, a tendency to buy just before drinking makes a range of instantly drinkable wines a requisite. That implies moving away from the dense and fairly muted style of traditional Bordeaux wines – they now have to be good straight away. Another aspect is consumers’ growing awareness of environmental issues. Whereas 10 years ago, the price alone was a buying cue, it is no longer enough. Roux has therefore made changes to his vineyard to secure High Environmental Value certification. However, value for money is still fundamental and requires cost control. For example, he co-designed the Château Les Tuileries brand with Lidl, which retails for €2.95 per bottle. By farming his own vines, the wines can be supplied all year round and the high volumes can generate profitability.
Romain Roux, winegrower and entrepreneur.
Finally, Romain Roux has diversified by trading in wines from the South of France. He supplies red, rosé and white wines under the Provenance brand, labelled IGP Terres du Midi, to supermarkets during in-store wine festivals. Consumers can find them in Auchan stores. The wines are sold in bottles, but also in boxed formats and now in soft discount outlets, and are undeniably successful.
There is no denying that the Bordeaux wine industry has fallen victim to a range of successive issues, but at the same time, its ability to react and adapt is tremendous and often enables it to save the fundamentals. Government aid is certainly a welcome life line, even if not everyone will emerge unscathed. Despite this, the latest figures are fairly encouraging and offer confirmation of economic recovery. This ancient land of winegrowing has been through numerous disasters and crises since its beginnings and has overcome them all. There is no reason for that to change.
Wine Terroirs
Wine Terroirs
Wine Terroirs