Bordeaux Provides American Wine Regions With a Very Scary Lesson

It’s quite possibly the most consequentially negative headline I’ve read about wine in 30 years:

BOTTOM FALLS OUT OF BORDEAUX PRICES

It comes from a February 1, 2020 article by Wine-Searcher written by, “Wine-Searcher Staff”. It describes exactly what it says: “the price of bulk Bordeaux had fallen to less than a euro a liter, with a fair possibility that prices could crash even lower.”

What does this mean for many of the producers of Bordeaux wine? “At this price, you don’t live and you don’t even cover the costs. Below €1000, it’s difficult to even pay yourself a salary,” said Olivier Lavie, a wine trade accountant.

So, why? I have to quote again from the Wine-Searcher article because this particular explanation describes what happens to an over-regulated, Old World wine region when it faces continually increasing competition from New World wines that are not subject to arcane, centuries-old regulations:

” ‘At these prices, wine is cheaper than water,’ he told Wine-Searcher. ‘It’s the result of INAO and CIVB policies these past 15 years – like the infamous ‘typicity’ rules enacted in 2009 in the appellations’ technical requirements. This simplification of the taste was advocated by the CIVB, which spends €7 million telling the world that Bordeaux is ‘Many châteaux, one style’. It’s the negation of the specificity of place, the negation of ‘climat’. And you can easily foresee that the arrival of hybrids will finish this imposition of a ‘typical’ wine, an industrial wine. It’s the death sentence of Bordeaux, signed by our own institutions’ .” —Loïc Pasquet of Liber Pater

The incentive in Bordeaux due to the regulations that require certain grapes be used, certain growing techniques be employed and certain styles are duplicated year after year don’t provide Bordeaux producers with the flexibility to respond to new market realities and new competition. This is a huge problem for Bordeaux producers and other producers in Old World appellations that require similar adherence to old, arcane wine-producing and appellation-related regulations.

This is a lesson for American producers of wine and to those who represent the interests of the various AVAs across the country. Be very, very careful of the kind of restrictive rules you think are necessary to put in place in order to protect your appellation. Tie the hands of your producers enough and you will find the same producers have not nearly enough options when the time comes to make changes in response to a changing market.

 

Posted In: Oregon, Wine Business

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5 Responses

  1. Jim Bernau - February 3, 2020

    There are benefits from using sought-after AVA designations to selling wine. At times, these financial benefits can lead to over production relative to the market demand (and even flagrant misrepresentation). In my view, the short term benefits of lessening standards do not offset the long term “brand equity” value the AVA’s producers have built adhering to high standards. Oregon has only a few key higher standards. An AVA representation requires 95% content vs the federal standard of 85%. Stating a cool climate variety like Pinot Noir requires 90% vs the federal standard of 75%. Stating the State designation -Oregon, like California, requires 100% of the grape content be grown in that state. These few high standards are worth defending, otherwise the consumer may be confused by an Oregon Pinot Noir that tastes more like a California Syrah. Our geographic brand equities allow small producers to flourish in Oregon as the higher prices consumers are willing to pay for these distinctive wines support the higher per unit volume of costs we must bear.

  2. Matt - February 3, 2020

    While you make a good point, I think you’re missing the larger message which is:

    The model you’re following in Oregon is working for now…just as it worked for Bordeaux for a long time too.

  3. Tom Wark - February 3, 2020

    Jim,

    I largely agree with you on this. However, the likelihood of American AVA creating the kind of highly restrictive regulations is very low…it’s just not the American way.

  4. Richard - February 4, 2020

    Think the threat in California, but in particular Napa and increasingly Sonoma, is over regulation by local and county governments who are generally caving to pressure from local NIMBY and neo-prohibitionists who see wine as evil. This seems to be happening with more frequency in Napa with the Board trying to please everyone and pleasing nobody…

  5. Tom Wark - February 4, 2020

    Richard,
    I agree with your assessment. The threat in CA IS over regulations of permits and events. I don’t see a coming problem with increased regs on what a winery must do to put an AVA on the label. However, the circumstances in Bordeaux remind us f the folly of that approach.

    Tom…


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