Definitely not a “Bonne Année” for Bordeaux vineyards. The French wine industry has started 2021 battle weary after one of the toughest years for wine in living memory. Reporting in Vitisphere industry journalist Alexandre Abellan states that the French wine industry has lost 1 billion in exports in 2020.
As one of the major wine regions of the world Bordeaux and its vineyards reflect a similar story as a combination of catastrophic circumstances have combined to form the “perfect storm.” With Covid-19 shutting down most of the world for months in 2020 but particularly (and notably still today on February 11 2021) the hospitality industry wine consumption has been massively reduced. Bars and restaurants, hotels and resorts, basically anywhere that wine is sold for public consumption has been shut for almost a year now. But in addition, former President Trump’s taxes on wine imported into the USA and a sharp drop in Chinese wine consumption have compounded the pressure on the industry.
Abellan reports that turnover of French wine exports fell just under 5% in volume and almost 11% in value down to €8.7 billion when compared to 2019 according to the French Management of National Foreign Trade Statistics. It was particularly bad at the beginning of the year with signs of recovery towards the end: “In the first half of 2020, exports fell by 10% in volume and 20% in value. But this fall was reduced at the end of the year, with + 0.2% in volume and -1.8% in value in the second half of the year, which is very close to the second half of 2019 (+ 13% in volume and value for December 2020 compared to December 2019)” says Adrien Boussard, the wine and spirits sector spokesman for Business France.
The biggest losers in 2020 were in the still and sparkling bottled wine sectors. The only retail increase was in “bag in box” packaged wines that saw just over 7% sales increase in value. Bulk wine (unbottled) sold unconditioned was up also showing the creative nature of the French wine traders seeking a way to circumvent the Trump taxes by selling unconditioned wines to the US (no longer possible under new US surcharges). With parties, gatherings and celebrations on hold, the greatest concentration of financial pain was in the sparkling wine market lead by Champagne dropping €634 million while Bordeaux sparkling wine saw sales decline by €288 million. The vineyards of Bordeaux and their still wines were also hit hard by the fall in US imports and the sharp drop of Chinese demand – overall down by €441 million (a decline of 23.5%).
Boussard draws attention to some encouraging news that saw French exports starting to rise again in December 2020 which was up compared to the year earlier, partly due to optimism/hope for the 2021 year ahead and partly due to the taxes recently imposed on Australian wines imported to China. Boussard also notes that while Champagne, Bordeaux and Cognac have seen the worst effects of 2020, some appellations are surviving better such as Provence and Burgundy.
For the top end (investment grade and classified wines) of the Bordeaux wine industry demand has been stable and, in some cases, increased. Also, we have observed Bordeaux vineyards that have strong business to consumer (B to C) networks having done well during 2020. Very inexpensive French government loans have supported all industries in France including vineyard owners and wine trading businesses through the worst of recent months. This has underwritten employment, jobs and incomes. Similar economic support has been in view across most major wine consuming markets of the world which has had a stabilizing effect. No one is popping the Champagne yet, but it is reasonable to expect that global consumption will return in the months ahead and in our view, the result of this last year will be to further shake up the outdated Bordeaux distribution system and encourage more “disruptors” willing to invest in direct to customer sales.
Written by Michael Baynes