All hands to the pumps

Bordeaux’s growers and merchants are beginning to work together in draining the region’s wine lake. But can they bail it out fast enough, asks Tom Bruce-Gardyne

We are told the Bordeaux 2005 is exciting great interest. With healthy, ripe grapes picked in near-ideal conditions, it promises to be a classic vintage, possibly the best since 1972. Yet while the same sun cast its benign rays over more-or-less the same terroir, the rewards will not be shared equally by the region’s 11,500 producers. For those in the charmed circle of top estates where demand invariably outstrips supply, en primeur prices are set to rise steeply – for some, perhaps double, or even triple, on last year. For those supplying AOC Bordeaux or Bordeaux Supérieur to the local co-op in, say, Entre-deux-Mers, the prospects are a lot less rosy.

“You have a different reality between the volume end and the grands crus classés, and we cannot say they have a lot of links,” says Patrick Jestin, head of CVBG-Dourthe-Kressman, one of the biggest négociants in Bordeaux. Traditionally there was a thin, elastic thread connecting the two. If the top names rose in price and prestige, it helped the rest of Bordeaux move in the same direction. “But the thread finally snapped in 1997,” says Charles Sichel, export manager at Maison Sichel.

His brother Allan, who runs the family firm and is head of the négociants’ trade body, puts the story in context. “It was UK journalists 15 years ago who first said, ‘Be careful, Bordeaux, things are changing in the world’. The reply was, ‘Yeah, we know, but we’re still selling an awful lot and as much as we can produce’. Then there were the dynamics of the 2000 vintage, which created a lot of attention and business, and then the fairly low crops of ’02 and ’03, which may have hidden the problem. Then, gradually, everything started falling apart: Bordeaux was losing market share in its export markets when suddenly it was faced with a normal crop for 2004.” This has contributed to a surplus that is currently put at 1 million hectolitres above the wine’s global market of around 5.5m hl.

Tackling the glut
“The main problem with Bordeaux is that we’ve been planting too much without a gentleman’s discussion between the two families – growers and shippers,” says Benoît Calvet of négociant BVC, who adds that the two are now talking as never before. With the benefit of hindsight, it was not the smartest move to allow the total vineyard area to swell by 15,000 hectares since the mid-1990s. That figure now haunts the Conseil Interprofessionnel du Vin de Bordeaux (CIVB), the wine’s controlling body, as it desperately tries to balance supply and demand.

A three-pronged attack is being used to tackle the glut. Firstly, yields have been cut by 13% in the last two years to 53hl/ha. Secondly, while the area under vine is shrinking naturally by 500ha a year as people retire, the whole process is being speeded up. Growers are being offered e15,000 per hectare to grub up their vines and reduce the region’s 123,000ha by 8–10,000 within the next three years. Alternatively, they can send excess wine for distillation. So far only 1,800ha are to be grubbed up, and only 180,000hl of wine distilled, a third of what the CIVB was hoping for.

If the surplus were contained in the tanks of the worst-affected growers, it would have less impact on the market. But, sadly, it is all too visible on the bargain shelves of the supermarkets, particularly in its homeland, which accounts for 70% of Bordeaux’s sales.

“It is dreadful when you step back and look at France,” says Allan Sichel. “We estimate that 20% of volumes are sold at or below e2, which is far too low. Nobody makes any money, it discredits the image of Bordeaux in the consumer’s eyes, and it cannot carry on.”

Unfortunately, 20% represents over 90m bottles. “In the short term, we can’t do without that consumption,” Sichel admits. “At the moment it is the price point that allows Bordeaux to sell so much wine. But it is a market Bordeaux needs to extract itself from.”

Yohan Bardeau, a militant leader of the local young farmer’s union, blames domestic woes on the recent tightening up of drink-drive laws, and the fact that just four big buyers dominate the off-trade. 

The roots of the problem
For Benoît Calvet, this is way too simplistic. “It’s like a traffic jam on the motorway. Suddenly you stop and wonder why. Well, there’s never just one reason, there’s a constant evolution. But now that the crisis is here, all our energy is focused on reform to change the way of doing things. I’m very positive – maybe it will take two years, but I hope this new vintage will help us.”

Calvet’s way of doing things is to create a “positive triangle” where the buyer, shipper and grower are all equally involved. With this approach, with wines of £4.99 and above, he is convinced Bordeaux can hold its own in the UK. With listings in Tesco and Waitrose, his wines are showing good growth here, unlike France, which now accounts for only 15% of his sales. For Allan Sichel, there has traditionally been far too much division and lack of co-ordination between production and distribution. “For too long growers would produce their wine and then put it on the Bordeaux market, and that was the end of story for them. Négociants would either buy or not buy and then offer to their customers.” Traded as an anonymous, low-cost commodity mainly within France, the wine began to seep into neighbouring countries as domestic consumption fell. It sloshed into the German hard-discount stores at prices that provoked a downward spiral in the supermarkets. And from here it spread across the Channel. Own-label bargain-basement Bordeaux has been around for some time, with wines like Asda Claret – a “great combination of juicy berries, savoury Marmite and smooth, ripe tannins”, all for just £2.62.

How it happens, Sichel can only speculate. “Growers are pushed. They might have loans to pay back, there’s pressure from the bank and they need to sell. The buyer says ‘I don’t need your wine – all my promotions are fixed’. And the guy says ‘At £2.62 you can’t go wrong’.”

It has been said time and again that Bordeaux’s base price should be a fiver. Below this means competing with the irrigated vineyards of the New World, and, as consultant Richard Bamfield MW explains, “Irrigation completely changes the economics of wine.” In Chile you can have yields of 160hl/ha, three times that of Bordeaux.

Putting the customers first
Yet, even if the CIVB could dictate terms to the multiples and insist that nothing below £4.99 should darken their shelves, it would mean kissing goodbye to three-quarters of the UK off-trade. For a region that produces more wine than Chile or South Africa, that would be one hell of a tough choice to make. Not that Bordeaux could ever come to such a collective decision, not with the anarchy of 11,500 growers and 400 négociants all acting on their own. And that, in a nutshell, is why Bordeaux’s wine lake needs draining fast.

As well as restricting supply, the CIVB is taking a more pragmatic approach to boosting demand. If that means more discounts and BOGOFs instead of fancy TV ads full of finesse and je ne sais quoi, so be it. With a change in the law, generic bodies can now pay for a gondola-end promotion where the real volumes are done, although the actual offers have to be funded by the individual brands. Discussions with the major UK buyers are ongoing, though apparently, when Tesco was told of the amount of money available, it just laughed. On the face of it, price promotion seems a curious path, given the desire to raise the average spend on Bordeaux. Yet, it will allow the wines to play New World brands at their own game and perhaps prove to buyers that the region really can fly off the shelf when given the chance. It may also help reach a younger audience and prevent Bordeaux from losing an entire generation of British wine drinkers.

With ACNielsen claiming UK supermarket sales of Bordeaux fell 18% last year to 1.17m cases, are the top agents and shippers slashing their wrists? Not a bit. Despite the shrinking market, Maison Sichel saw its UK turnover up 20% thanks to the strength of its grands crus, the launch of the Renaissance brand and “a tremendous business in own-label”, according to Allan Sichel. “The buyers want good claret and not just the cheapest-possible bargain they can find.”

The way forward

At Dourthe, according to Patrick Jestin, 2005 brought a 37% rise in volume and a 66% rise in value. Sara Chadwick, who handles sales in the UK, insists part of the reason is simply that Dourthe is catching up. Though the biggest exporter in Bordeaux, its UK presence has been relatively small until recently. There have been new listings at Tesco and in the specialist chains, continued growth for the Dourthe No.1 brand and some good volume-driving promotions.

The veteran négociant Jean-François Mau, who supplies Tesco with much of its claret, including own-label, raises a sceptical eyebrow at the reported success of his rivals. “Last year was not good,” he says, quoting the latest UK figures from the CIVB – down 26%. The pressure from the New World and the size of its promotional spend is causing real pain in a market increasingly driven by deals and special offers. It is also highly concentrated, with sales packed into the mid-price sector and very little activity above. This is different from other main markets, according to Mau. Despite this, his brands performed well, with Premius selling around 10,000 cases at £6.49 and Yves Court now on 40,000 at £4.99.

Patrick Jestin believes that if Bordeaux is to retain its huge vineyards, it will need to develop strong mid-price brands with an international style alongside real châteaux offering significant volume. If not, then a lot more grubbing up awaits. But Jean-François Mau refuses to be downcast. “We have faced so many crises in Bordeaux and we know they come in cycles. Australia is entering its first one now. It will be interesting to see how it copes.”  db  May 2006