In France, Bordeaux wineries respond to economic downturn

One French winery has called the 2008 Bordeaux vintage the “crash of the century instead of the vintage of the century,” according to Michael Apstein’s San Francisco Chronicle article of May 10, 2009. The article goes on to describe how French wine producers in Bordeaux have had to adapt to current market conditions for wine. Many of them have begun setting prices in advance of Robert Parker’s reviews and in some cases cutting prices to half of 2007 prices.

The biggest brands in Bordeaux like Haut-Brion, Lafite Rothchild, Latour, Margaux, and Mouton –Rothschild have cut their 2008 prices dramatically. Ironically, many people think that the 2008 vintage will produce better wine than the 2007 vintage. As a result, retailers and brokers who purchased earlier vintages, including futures not yet delivered, will probably have to reduce their prices on vintages from 2007 and earlier to sell this wine.

These developments could be a blessing or a curse for California wineries. Cheaper French Bordeaux will put California wines under additional price pressure, particularly at the high end, where the French price moves have been most dramatic. The cost to brokers, retailers, and distributors who are long in French Bordeaux will increase frustration around Bordeaux futures and potentially reduce futures purchases. This will create an opportunity for other wine growing regions to sell their products. Brokers, retailers, and distributors can be expected to shop more carefully for wines, looking for great value and attempting to minimize their inventory risks.

The smart wineries, both in California and elsewhere, will respond to this situation with a clearly thought out, logical plan that addresses both their challenges and their opportunities. They will modify the appropriate parts of their sales and marketing strategies, including potentially their brands, their price points, and their “go to market” approach. They will simultaneously address the price compression in the category and the increased willingness of the channel and the consumer to substitute other wines for wines grown in Bordeaux. They will find ways to minimize the risks that buyers perceive in their products. The wineries that do not respond in some way risk further deterioration of their business.