June 23, 2009 / 4:16 PM / in 8 years

French wine courts India and China

BORDEAUX (Reuters Life!) - Caught napping by a consumer crisis after a series of record years, the French wine trade is lusting after the potentially huge markets of China and India as an outlet for Old World wine sales.

But this may not prevent a restructuring of the cozy grand family-oriented traditional wine industry with its myriad of chateaux still on show at the opening day of the twice-a-year Vinexpo world wine and spirits industry fair.

While such European winemakers are eager to export their wares to China, where sales are still small but growing fast, Chinese capital appears keener on buying into Bordeaux.

That message was clear from the announcement that Hong Kong firm A&A International was taking a majority stake in Chateau Richelieu in Fronsac.

Fronsac is a well-known French wine area which does not carry the same reputation as Medoc, but includes such wines as Pauillac, Margeaux, Saint-Estephe and others.

The current owner is former Dutch airline pilot Arjen Pen. For the ”in-crowd’ of the Bordelais wine families, Chateau Richelieu, one of the eldest, had already fallen into foreign hands and was no longer in the ownership of a “dynasty.”

But then many of the local dynasties have had foreign infusions, be it in blood or capital, as the Rothschild families or the Suntory group can testify.

Simon Bradford, export director at traders Ballade & Meneret said the crisis will cut Bordeaux prices down to a level that will make them attractive to more consumers, but might also be the final, impassable obstacle for houses with shaky finances.

“It is not a big disaster for the Bordeaux sector, but for some houses with stretched finances it could be the last straw,” he told Reuters.

The top names in Bordeaux and Burgundy, and in Italy or Spain for that matter, will be able to weather the storm. But smaller firms in the lower price ranges have found an urgent need to associate themselves with partners and underline their “unique selling point” in a world that is awash with wine.

There were many examples present at the Vinexpo fair, where the number of visitors was noticeably lower than in 2007, such as the Alienors grouping of 12 female wine growers.

With unity comes strength and shared costs, even though they produce different wines. At a group tasting there were several Chinese professionals interested in, for example, the Entre-Deux Mers white wine from Veronique Barthe.

“No. no, I do not give discounts for big volume, I produce for quality not for volume,” she told a potential female Chinese buyer, while drinks were poured for the assembled visitors. “And no, I cannot give you exclusivity for all of the mainland.”

Another way to catch the eye of the buyers is by playing the sustainable development card such as the Val d‘Orbieu brand which is based in Narbonne in southern France.

“We wanted to act now and not wait until the climate changes are irreversible, and it applies to all what we do,” export director Roland Olvers said.

PARTY POOPER

At the other end of the price segment, the crisis is felt somewhat differently but not without leaving some bruises.

Philippe Casteja, the president of the association of Grand Crus of the 1855 classification, noted some deep price cuts for the 2008 “primeurs’ at the annual options market earlier this year and called these steps ”courageous’.

But he said the lower current exchange rates of the dollar and pound, the general economic slump and increasing unwillingness by banks to finance projects was a problem even for the bigger names in the trade.

Prince Robert of Luxembourg is owner of the Haut Brion and Mission de Brion chateaux in the Graves area and he hosted a gala dinner on Saturday.

The descendant of the Dillon investment banking family said the wine industry still seemed to be in better repute than the banking world even though he was preparing to keep more stocks of unsold wines than he has for the last few years.

”My family originally went into the wine business as a “folly’ next to our staid banking business, but nowadays it looks like the wine business is more solid,” he joked.

At another dinner in the monumental wine cellar of Chateau-Lafitte Rothschild, a circular temple-like underground construction designed by Ricardo Bofill, Baron Eric de Rothschild upset some colleagues by giving a speech in English.

But he defended the Bordeaux model.

While some critics blame the ”primeurs’ sale unique to Bordeaux as the main reason for inflated prices, and thus for the current fall, de Rothschild said that, like democracy, the system was not perfect but the best available. Toasting several hundred guests he said that in times of crisis, one needed to cherish friends even more than before.

It was not Lafitte Rothschild’s turn to host the international media dinner. But Chateau Latour, owned by the Pinault family that controls retail and luxury group PPR, pulled out just a few weeks before Vinexpo. A sumptuous dinner in the family wine house at a time of redundancies at their listed company might not have gone down well.

Editing by Paul Casciato

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