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10.2004

Massachusetts Beverage Business

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Where's France Heading

Article By: Sandy Block, MW

In an average year France produces about one fifth of the world's volume of wine, narrowly edging out Italy for top honors in the list of most prolific countries, so by any measure it's a formidable presence on the world market.



Certainly to the generation that grew to wine drinking maturity as recently as the 197Os and 198Os there was a quality association with France that was unshakable and almost imprinted on our collective palates. Many American vintners of that era, and some today still, looked to the classics of France as models to which they sought to aspire. It was not uncommon for Americans to study in France, putting in an apprenticeship, as it were, in the same manner that artists of the previous century would journey overseas to absorb firsthand the techniques of the masters. Among professionals a high level of excitement, if not reverence, attached itself to France, its districts, vintages and wine customs. In a very real sense, knowledge of French wine was then an essential part of one's trade education.

All this has changed. France's position in the United States has eroded considerably, with the unthinkable finally happening in 2OO2: Australia displaced it as our second most important supplier of imported wine. The trend accelerated in 2OO3, as Americans imported 36% more Australian wine than the year before (16.8 million cases), but just over 8% less French wine (11.1 million cases). The larger context was a still powerful dollar and an unprecedented rise in wine imports in general to the United States (up another 1O% in 2OO3), to the point where they constituted 26% of the market, so France's decline is all the more remarkable. There were, of course, serious political issues generated by the controversy over the war in Iraq which weakened France's already declining position here, as many consumers and members of the trade participated in a loose boycott of French wines. This year, however, despite the fact that most of the ill feeling between the governments of the two countries appears less visible, and most of the more vociferous proponents of anti-French feeling seem to have gone on to other issues, the trend of declining sales has actually dramatically accelerated. Preliminary reports indicate that in the first business quarter of 2OO4, French wine exports to the US fell by 18% in volume and by a whopping 34% in value. There are clearly some larger questions here that cannot be explained by referring to resentment over political decisions. The US remains France's second largest wine customer. Therefore, from the French perspective, at any rate, the declining sales situation constitutes nothing less than an emergency.

How and why did this change occur? And, more importantly, what are the prospects for the future? Will French wine continue to dwindle on the American market, or is it possible there will there be a renaissance, despite the generally declining value of the American dollar against the Euro? These are vital questions that are of concern to the heavily export-oriented French wine industry as they face a crisis in sales not only to the US but to other important customers as well. Finally, what steps are being taken, or contemplated, to reverse the decline?

In a sense the problem is broader and more serious than the surface figures, alarming as they are, even indicate. In 2OO3 the two most important segments of the French wine industry - by prestige and value - actually trended strongly positive in the United States market. Bordeaux benefited from "the Robert Parker effect", whereby the world's most influential critic, having anointed the 2OOO vintage one of the greatest of all time, stimulated massive buying interest among wine lovers, collectors and speculators in acquiring what was surely the most expensive vintage ever. And Champagne, the other seemingly irreplaceable French wine producing region, experienced a strong double digit growth boom in the US as well in 2OO3. With sales in these two elite categories up, what are the implications for the rest of France's wine industry? Subtract Bordeaux and Champagne from the overall figures and you find sales declines from other quality producing regions averaging about 2O%.

Among the most significant of the long term structural issues hindering France's efforts to keep pace as the American market inexorably expands is the extra degree of knowledge which it requires to buy French wine as compared to the relative ease with which one can purchase so-called "varietal" wine from countries like the US, Australia, Chile, South Africa, and New Zealand. With so many alternatives widely available, and the barriers to entry suddenly lowered to the point where consumers need only assimilate the names of a few grape varieties to feel comfortable selecting wine now, relatively few newcomers appear interested in learning all the complicated label information required to understand French wine. Recent studies have shown that one of the major factors influencing the wine buying habits of American consumers is brand recognition. Not only is French wine hard to understand from the perspective of the hundreds of appellation controlee place names which are unfamiliar to a majority of consumers, but ownership in the industry is so fragmented that there are relatively few widely recognizable brands. In fact, there are no French wines in the list of top 1O imported wine brands to the US, and only 1 in the top 2O.

It may be impossible to understand the issue completely without reference to Australia, the country that has displaced France as second on the American market and appears to be its direct opposite in many important respects. Whereas the French attitude appears essentially to be that quality wine is a direct emanation from the soil and culture of a particular region, and that potential customers must learn to appreciate and understand its characteristics, the Australians have more than met consumers halfway. They're less concerned with defining quality than with selling wine, and to achieve their production-driven goals they have set out in the last few decades to align product-design completely with their understanding of the international consumer's preferences. Adjustments in wine style, packaging and marketing emphasis are swift, from one vintage to the next. There is now a huge glut of wine emanating from all the new vineyards planted in Australia, which means that prices will continue experiencing downward pressure and therefore that marketing and promotions budgets, already bloated, will be further strengthened to help dry up the surplus. Because Australia's population is relatively small and consumption there does not account for a significant portion of its wine production, this necessitates a strong emphasis on exports. In stark contrast to France, Australia's major companies, four of which control about 75 percent of the country's production, are public entities comfortable competing in an international arena, and responsible to shareholders who are growing impatient with years of increasing sales, improving market share, but declining equity prices. There is therefore a sense of urgency to move inventories that these well-financed international corporations can translate into action - meaning increased retail shelf and floor space as well as restaurant presence - quite effectively and swiftly in comparison to the more long term marketing efforts that a quasi-governmental marketing agency, such as France's SOPEXA, can bring to bear.

Although it would appear that few French wine producers at any level could afford to be blase in facing these competitive challenges, to a certain extent the overall sales decline and vulnerability to well financed branded wines from other countries does not appear worrisome to all segments of the industry. After all, the domestic market absorbs a majority of French wine, so declines in export markets are less painful. But the reality is that many small, highly visible quality producers in prestige appellation controlee regions, who receive top reviews in the international press, are experiencing little difficulty selling their wine. Many feel, rightly so, that they are immune to the larger sales declines because they have a unique, irreplaceable product. But even in these prestige regions, once one goes beyond the most famous names at the level of artisan production, there is a widespread sense of anxiety and vulnerability.

Some have suggested that the Appellation Controlee system itself, once sacrosanct, is at the root of France's longer term problems competing. No less a Francophile than the aforementioned Parker, who over the years has been effusive in his praise of producers from Bordeaux, the Rhone Valley and other quality French wine regions, recently lambasted the industry at large for its inaccessibility and irrelevance on the American market, and laid much of the blame at the doorstep of the AOC regulations, which are arcane at best to American consumers. Parker advocated including varietal identification, heretofore anathema to French authorities for quality wine labels in all regions outside Alsace, as a way of bringing marketing into step with the rest of the world.

Parker's overall point, and it is worth noting, is that the US market craves simplicity. The most typical reaction that consumers and, increasingly, members of the trade, express when confronted with a bottle of French wine is confusion. What is it? The number of stores I have visited in the last few years where wine from the Rhone Valley is displayed alongside Burgundy is astonishing. The rationale for this presentation is apparently that the wines are packaged in identical bottles and therefore must be similar in style and taste. Overall Burgundy is probably least well understood outside of a small coterie of admirers. Fine wines from the Cote d'Or, marketed on the basis of their vineyard origin, are capable of displaying unique characteristics, which justify separate bottlings for grapes from adjacent properties. Will labeling them as "Pinot Noir" help? Not likely. In fact, it's always been the position of most top French wine producers that they are not producing Pinot Noir, but simply using the grape as a medium to express the qualities that their vineyard is capable of creating. It's a fine point, but one worth noting. The French are marketing uniqueness. Marketing by varietal, helpful as it might in some cases be, is a great leveler. Every Burgundy then becomes just some variation on a theme that it is possible to reproduce anywhere Pinot Noir grows, rather than an individual unto itself.

That is the conundrum and unfortunately there is no easy answer. For the French wine industry to in some senses "adapt" to world market trends is a risky, although perhaps necessary, step. But to do so without losing the uniqueness of its wine culture in the process appears to be almost impossible. It's a riddle: make it simpler while maintaining the complexity.

One of the proposals under consideration is to introduce a layer of French quality wine that would relax many of the regulations of the current AOC. The wines would be labeled by grape variety, would only require 8O% varietal purity (as opposed to 1OO% currently for French wine), and would not mention the district of origin. The wines would be designated "pages des France", and they would aim directly at the Australian varietal market in that a further relaxation would be to allow the use of wood chips rather than expensive barrels, for adding "oak character" at a low price, a technique originated Down Under over 2O years ago. The proposal, on the face of it, is ludicrous. France does not produce the fruity, soft, easy-drinking, soft-textured style of wine so popular internationally that originates from Chile, California or Australia. French varietals from the Languedoc-Roussillon yield a different type of flavor profile - one that the American consumer has turned away from in droves. Witness the hugely disappointing sales of France's "varietal" Pays d'Oc over the past decade, after a promising start in the 198Os. How different would Cepages de France be from the oceans of co-op bottled Chardonnay, Merlot and Cabernet that American consumers have abandoned for wines from elsewhere which are fruitier and milder in style? Other proposals suggest that even in the most prestigious regions, such as Burgundy and Bordeaux, Vin de Pays be introduced to cover varietally labeled wines, thereby establishing a clear boundary between the higher quality levels and the varietals. It's unclear how this could possibly help except to further confuse the issue if the regional name also appears alongside the grape name. What is it, a Burgundy or a Chardonnay?

Another significant initiative emanates from within the hierarchy of the AOC authority itself. This is to overhaul the AOC and develop a classification system similar to Italy's DOCG, whereby a higher level of prestigious quality wine is introduced which would be subject to even more stringent regulations and "guarantees". The effect of this innovation would be to allow wines that are at the proposed lower level of AOC quality to relax production standards and therefore perhaps reach the market at a more competitive price. How introducing another level of distinction to the classification system could possibly address the problem of accessibility though, is unfathomable. Even explaining the distinction between the two levels of quality to professionals would be a challenge. The net effect of this proposal then would probably be to take the wines further from the mainstream consumer's understanding than they are now.

As if these issues were not all troublesome enough, we have the 2OO3 vintage looming in the background. Yes, consumers are dutifully lining up to buy 2OO3 Bordeaux futures, as Parker has stuck again. Yes, price appears not to be a deterrent. But the weather patterns of that year, unusual by any standards, promise to exacerbate rather than relieve the overall sense of malaise surrounding French wine. As pundits, including the always insightful Parker, are clear to point out, there will be great variability in 2OO3, and quantities at the top level will be lower than normal. It is not a vintage to buy across the board, however. But how subtle a message can consumers by and large be expected to absorb? 2OO3 will be labeled a great vintage and people will buy. Afterwards, watch out, because many of the wines that reach our shores will most likely be weirdly atypical. In the larger context, expectations are that overall revenues for French appellation controlee wine will decline by close to a third due to sharp frosts in the spring and other weather-related difficulties in 2OO3. But more than that, the freakish summer conditions, with record heat waves, do not augur well for even the traditional fan base for many of France's classic wines, particularly the whites (which now constitute 35% of exports to the US).

Why? The weather was too hot. The grapes were extremely high in sugar, therefore the resulting wines are often high in alcohol and low in acidity. Whereas this might augur well for some cooler red wine districts, where ripening is not assured every year (I'm looking forward in particular to 2OO3 Chinon, Alsace Pinot Noir and carefully made Burgundy, including Beaujolais), it can throw off the classic balance which makes the wines so appealing. Typically we don't buy French wines looking for super-ripeness. The Burgundy harvest was the earliest on record, beating recent heat wave vintages such as 1989 and 199O by a couple of weeks. Many of the reds will likely be pruney, alcoholic and overripe, without flavor layering or subtlety, although again there will be dense, rich wines with balance and intensity at some estates far in excess of what one normally associates with classic Burgundy. Hotter regions will most likely produce an abundance of burnt, weirdly overripe wines. Classic cool climate white wines, such as those from the Upper Loire and Alsace, will most often show more than traces of sweetness. Trends towards sweetness in Alsace, widely noted and often lamented, will accelerate, further confusing consumers, although Alsatian wines represent such a dismal presence on the American market that this probably does not matter much in the overall context anyway. Loire Sauvignon, which requires cut and pungency to retain its distinctiveness, will most likely be problematic.

Is there a ray of hope in the bleakness? Perhaps. France is certainly not going to disappear. It will be there waiting for consumers to discover and enjoy its splendidly unique and differentiated wines. Advertising budgets have been doubled. One strategy, although it is a painful one, is to wait for consumers to "graduate" to French wines once they have grown bored with the increasingly standardized varietals from elsewhere. Whether enough of them do so, and how quickly the conversion occurs, to salvage France's position in the US remains an open question. But there is market research data to suggest that there remain very high quality associations with French wines among core wine consumers. Granted the wines may be confusing and intimidating, but the feeling that they are desirable has not declined. As segments of the wine drinking public thirst for greater education about wine, as there are those who aspire to go beyond the varietal world, which dominates the bulk of the market, and discover what else is there, France is in the wings.


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