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Regional Analysis |
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With exports down 19% in the past six years, many French vintners stand with their backs to the wall. Everyone admires their finest growths, but fewer are drinking the simple wines that have kept rural France - today still 844.000 hectares of vine, but 6% smaller than a decade ago - alive for centuries. In the wake of European proposals to curb distillation subsidies and grub out unneeded vineyards, France is beginning to wake up to reality. Although unwilling to follow the Spanish - and likely Portuguese - example of creating a vin de France, they are nonetheless starting to look for solutions that will enliven the future without erasing the past.
If French wines have any worthwhile message to transmit, then they must learn first to define and then to sell it. Demand is changing, competition is increasing and the retailers have power today that they did not in the past, pushing the industry to consolidate. Passing these gatekeepers is an increasing challenge because, unlike Champagne, the table wine sector has no real must-stock brands - and even though the power of brands is growing, brand loyalty is falling.
The overarching power of the appellation structure that prevents dynamic French producers from simply opting out, as Angelo Gaja and others have done in Italy, has created a situation in which regions have to perform as brands. Unfortunately, they are ill-suited to achieve this goal because there are too many of them, new ones are being created all the time and they tend to be made up of individuals with diverse views of what their region - or brand - should be.
If modern consumers want regionality at all - and there is ample evidence in many countries that at lower price points they increasingly don\'t care where a wine is from - it is limited to number of strong regions with well-defined characters, such as Chablis, Sancerre or, to a lesser extent, the Côtes-du-Rhône. Smaller, ill-defined regions have little place in the market, whether they are in the New or Old Worlds - as many wineries in under-performing Australian areas would ruefully agree. Following the lead of Grands Chais de France with JP Chenet and Gallo with Red Bicyclette, Chamarré is the most ambitious new French wine project to hit the market in years. The brand is owned by Opera Vins & Spiriteux and produced by cooperative growers from around France who have, with government support, agreed to pay to be part of the game, with Beaujolais and the Rhône being the latest regions to be signed up.
The brand\'s first successes - fuelled, it is rumoured, bygenerous listings fees - were with Morrisons, Somerfield,Threshers and Co-op earlier this year in the United Kingdom. Export director Vincent Norguet plans to move 1.5 million bottles in that market by the end of 2006. On the 1st of July the group opened a subsidiary in United States and has ambitiousplans to become one of the top three French brands sold there. Articles in both the New York Times and the Herald Tribune |
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Regional Analysis |
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have created buyer interest, but it is too early to measure that impact. So far the only other important market is Scandinavia; but even French chains have also shown interest, with listings being discussed at both Le Clerc and Monoprix.
French brands are not for the French
Vincent Norguet\'s admission that the brand was not designed for the French consumer reveals one of the essential characteristics of the French market. With few exceptions, the key French brands are either consumed only in France – Vieux Papes, Listel or La Villageoise - or entirely exported, such as Grand Sud, Barton & Guestier and Piat d\'Or. Only a rare few, such as Cellier des Dauphins or Mouton Cadet, have achieved a state of equilibrium between domestic recognition and export success. This balance is not quintessential for the success of a brand - Taylor\'s port and Mateus rosé have never been nearly as strong in Portugal as they have been overseas, and there are several American brands that are rarely if ever seen in other markets; but these brands were all created specifically to suit the markets at which they are aimed. In France, this market-driven attitude is still generally an anathema - which helps to explain why so few of the brands are truly strong either at home or abroad.
The top dozen French brands today account for 265 million bottles, only about 4% of total production; but just one of these brands, and one of the youngest, JP Chenet, produces a third of that total: 83m bottles. Even so, it ranks only 11th on the Adams Wine Handbooks 2005 list of the world\'s leading wine brands. It terms of domestic consumption, those same twelve brands muster only slightly more than 100m bottles, hardly a drop in the French throat. It is true that France has been hard hit by tougher drink-drive laws, which have had an impact on wine sales in restaurants, but these cannot be blamed for poor export figures. Nor can the often decried 1991 "Loi Evin" that restricted alcohol advertising. Most of those screaming loudly against the restrictions had neither the will nor the means to promote their wines in this way before the law was passed and would probably not do so today if they could.
Strength of distribution
With few exceptions France\'s table wine producers have never learned to promote themselves. Many of the high-end brands became what they are today through the distributional strength of their importers in Great Britain or America. Louis Jadot, under the guidance of Kobrand, and Georges Duboeuf, thanks to New York-based Bill Deutsch, are good examples. Traditionally, there was an innate belief that if you made your wine like your forefathers did, there would be someone there to buy it - or a government that would pay for the privilege of turning it into industrial alcohol. France\'s more dynamic, larger companies increasingly realize that there is more to selling wine today than telling the traditional |
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Regional Analysis |
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French story in a way that appeals to modern consumers. It involves taking risks, investing in consumer research, getting the product and packaging right and backing the brand with promotional budgets.
These realists, however, do not yet have any real influence over their industry. Bordeaux is about to spend $7m on an advertising campaign to promote red wines whose dry, tannic style is out of tune with modern consumer tastes. Although red Bordeaux may legally have only 2 grammes of residual sugar, one of Bordeaux\'s leading negociants freely admits that the figure should be 5 grammes. One of his competitors has taken the bull by the horns and launched a high profile branded Bordeaux rouge with 4.9 grammes. It will be interesting to see whether the French authorities turn a blind eye to this - effectively allow others to do likewise.
At the same time, France also appears to be preparing for a fight with the European Commission, which views crisis distillation only as a short term solution to Europe\'s chronic oversupply of wine. While Europe has agreed to pay French producers 1.9 Euro per degree and per hectolitre for table wine and 3 for quality wine, up to a total of 1.5m hl, French agriculture minister Dominique Bussereau has hinted that the government will offer an additional Euro for table wines and 0.35 for appellations. If it does so, the move will certainly be challenged by Brussels.
Similarly, the director general of the Conseil Interprofessionnel des Vins du Languedoc, Axel de Woillemon, opposes the European Commission\'s proposals to rip out 400,000 hectares of vineyards in Europe over the next five years, claiming that uprooting vines to balance supply and demand is not along-term solution. Instead, he would like to see more support for commercial development; but France plans to sell Sopexa. With the planned introduction in 2007 of the new appellation Languedoc his region is becoming one of the most conceptionally advanced and least restrictive regions of France, in terms of both marketing and wine production, but it still suffers from the same difficulties as other areas in selling its wines at a viable price. The new region will have a potential production of two million hectolitres. This will enable producers to achieve the critical mass a brand needs. Nevertheless, within a few years of its arrival, the new appellation will have to compete with an all-Spanish and, most likely, an all-Portuguese denomination, not to mention the all-Europe appellation proposed by the European community.
One model other parts of France could usefully follow is the South-West Regional Partnership - a collaborative effort between a wide range of institutions and wine growers spearheaded by the dynamic André Dubosc of Producteurs Plaimont Cooperative. Although the region remains a mosaic of individual regions, "it is important to highlight their common characteristics – and communicate this to the consumer". Dubosc regrets, however, that the |
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Regional Analysis |
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producers have opted to focus on promoting the varietals, not the characteristics of the region. The Burgundians interestingly are trying to have their cake and eat it, by promoting both their individual terroirs and the fact that their region is the birthplace of Chardonnay and Pinot Noir.
In other prestigious regions change has been difficult. In Bordeaux, which passed from 69.000 hectares in 1975 to slightly over 120.000 hectares last year, stock levels are high – and prices, with the exception of the finest growths, under pressure. As the level of subsidies paid to winemakers has increased to750 Euro ($ 965) a tonneau - or 900 litres - for red wine, about100 Euro more than last year, the amount of Bordeaux headed for crisis distillation nearly doubled this year, according to the Conseil Interprofessionnel du Vin de Bordeaux. That amounts to almost 370,000 hectolitres. This is no solution.
Nonetheless, change is coming. Although possession of French vineyards is still quite dispersed, the country is moving ineluctably towards more manageable holdings. In little over ten years total production has dropped from 65 to 50 million hectolitres. More importantly, the number of harvest declarations has dropped from 494,000 in 1989 to 183,000 last year, putting the statistical average at 4.6 hectares per vigneron. Holdings of that size in the finest Burgundian vineyards would permit a family to live reasonably well, but not in Corbières or the Côtes de-Gascogne, which is why almost half of each years harvest is crushed in one of the 850 cooperative cellars. Large vineyard holdings by an estate or company are rare - and the state has done much to insure that things do not change too fast.
France\'s biggest handicap remains that, while it loves Champagne brands, there is a residual folk memory of the poor quality branded table wines of the 1920s. The rest of France could learn a lot from Champagne, a region that has increased its vineyards and raised its prices at a time when Bordeaux is having to do the opposite. It is interesting to contemplate what LVMH might achieve in generic Burgundy or Côtes-de-Rhône. Revealingly, the luxury goods giant\'s table wine investments have so far all been in the New World.
French wines in export
Although France exports 13.8 million hectolitres of wine each year, few realize that it also imports an impressive 5.4, principally from Spain and Italy. Much of this wine is subsequently re-exported as components of "European Table Wine" blends. However, while French exports represent 5.59 billion Euro in turnover, imports amount to only 0.45 billion. With this, wine, and of course spirits, are with perfume, the third largest export industry for France, after automobiles and aerospace.In certain emerging markets such as Singapore, Spain or Australia, average value remains high; but in more mature drinking countries pressure on pricing has become intense. And, while there are hopes |
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Regional Analysis |
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of sales growth in Russia and China, so far, not much money is being made in these markets.
France in England
The British are France\'s most important export client, accounting for 22% of total exports and paying an average of Euro 4.13 ($3.22) per litre, or about Euro 5.50 ($4.30) per bottle ex cellars! The French share of the on-trade market, over 80% of all wine sales, is dropping sharply, however -down in volume from 18.9% in 2004 to 15.9% in June 2006,and down in value over the same period from 19.9% to 17.3%.The average retail price of £4.11, up from £4.05 in 2005, is higher than the average of £3.86, but lower than Australia\'s£4.28 despite the heavy discounts that are applied to Australian wines. Worryingly for France, its share of the important £5-7 retail sector - 7.6% of the market, 87% in which is sold at under £5 - is just 15.3%. The Australian slice of this price sector is well over twice as large, at38.1%. One explanation for France\'s poor price performance is that a large proportion of its wine is vin de pays, vin de table and common appellations sold under retailers\' own brands.
Even when French branded wines do feature among the big sellers, they are often brands that have been created in and for the United Kindom. This is true of three of the top ten sellers - Piat d\'Or, French Connection and Good French. Most observers expect another such brand, Renaissance, created by Brand Phoenix and Sichel, to climb the charts (helped by£3-off-trade price point and half-price promotions), along with E&J Gallo\'s Red Bicyclette which has yet to feature on the radar. The mostly widely sold French label at present is JP Chenet, which only captures 11th place on the overall AC Nielsen statistics - and the number 10 on the French roster, Baron Philippe de Rothschild, limps in at 106th on the overall chart. Revealingly, while the French-owned Pernod Ricard has a big seller with its Jacob\'s Creek Australian brand, this increasingly global spirits and wine company has no plans to launch a French wine brand. The Australian Fosters Group which does have two French brands in the shape of Herrick and Belle Terrasse, acquired as part of the takeover of Southcorp, is seeking to sell both. Noticeably absent from the list is Castel, France\'s largest wine company.
Across the board, Grands Chais de France is the clear winner among the French brands. The newly-launched Chamarré may make a difference, but it\'s not on the charts yet. They reportedly paid high listings fees, and, with the help of sizeable government grants, are investing heavily in their ambitious target of being one of France\'s top export brands. It follows in the tracks of Blason deBourgogne, another example of what can be done when cooperatives band together and are represented by a good agent.
The Top 10 French brands in England are:
1. JP Chenet
2. |
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Regional Analysis |
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Piat d\'Or
3. French Connection
4. La Chasse du Pape
5. Calvet
6. Louis Jadot
7. Blason de Bourgogne
8. Good French
9. Ancien Comte
10. Baron Philippe de Rothschild
France in Germany
Bernd Siebdrat, managing director of Wein Wolf, complains that "many buyers are reducing their shelf commitment to France because the numbers no longer stack up". With Mouton Cadet he has had more luck, but as he says, "this has little to do with France, people are buying the name." Mouton Cadet from Bordeaux and Cellier des Dauphins from the Côtes-du-Rhône are the only two brands from appellations to have much an impact on the market. The rest - and five of the ten top brands listed below belong to their German importer - are predominately varietals sold as vins de pays, principally from the Languedoc, that together account for almost two thirds of total volume, but only one third of the value. Champagne, on the other hand, also a branded product, has only 3,7% market share, but almost a quarter of the value. The specialized retailers fare on the whole better with French wines, but, where Italy and Spain have an avid herd of followers, there are few French specialists. Burgundy has become too expensive, Beaujolais is out of fashion and the Rhône has never really etched itself onto the German conscious.
The top 10 French brands in Germany are:
1. Grand Sud Merlot
2. Medinet
3. J.P. Chenet
4. Le Filou
5. Blanchet
6. Collection de Chantré
7. Bongeronde
8. Mouton Cadet
9. Colombelle
10. La Cuvée Mythique
France in the United States
The American market remains one of the few rays of sun light for French exports, which grew by 3.8% in volume and6.3% in value last year - and with an average export price ofEuro11.85 ($15.20) per bottle the United States remains an extremely profitable market for French goods as well. If it were not for the American market, France might well already be in dire straits - and it is worth noting that French exports were significantly helped in 2005 by Red Bicyclette, a brand invented by E&J Gallo.
It is also worth noting that in on-premise sales, which not only account for over 20% of all wine moved in the market, but are also critical for building brand reputation, France lags far behind Italy and Australia, which bodes poorly for the future. Only 4 French labels made Wiegand & Boblitt\'s annual list of the top 100 on-premise brands, and only two of these - Georges Duboeuf (81st) and Louis Jadot (87th) were table wine brands. The other two were Champagnes: Moet & Chandon (46th), Veuve Clicquot (68th). All but Veuve Clicquot, which grew by 11%, stumbled significantly
compared to 2004.
France in Japan
Although down from its most recent peaks |
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Regional Analysis |
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in 2002 and1998, Japan remains an important export market for French wine. The volume is still only a fraction of that sold in other countries, but the average export price of Euro 7.80 ($ 9.95)per bottle - second only to the United States among the major export destinations - makes it an attractive market for high-end producers. Although overall exports fell slightly in 2005, French growth in the 5,000 to 10,000 Yen retail category grew by 34% and at above 10.000 Yen (Euro 67, $ 85) an impressive 27%.The Japanese, who drink only two litres per annum, are sentimentally attached to France as a country and their wine market has long been dominated by French wine. With a market share of 40% the French outpace the Italians with 20% and the Americans with 10%, a feat seldom achieved in mature markets. Over the past year the Australians have been promoting themselves aggressively and saw their sales rise quickly, but after growing 23% in 2005 with the introduction of Yellow Tail by Sapporo Beer, they have lost 33% in the first half of 2006. Complacency would be an error for the French, though, for it is uncertain whether the younger generation of Japanese wine drinkers will share their parent\'s devotion.
Interestingly, although it has lost share in other markets, Beaujolais Nouveau, over 10% of all French wine imports, is still an important item in Japan, which will import approximately1 million cases in 2006 by air. With a shelf price of 2,300 Yen(Euro15.50, $19.90) it is very nearly a luxury good. However, it will be interesting to see whether the recent difficulties Georges Duboeuf has had with the French authorities have any impact on sales this November. Duboeuf is a major player in the Japanese market, and the Japanese have a history of taking these stories seriously.
The Top 5 French players in Japan:
1. Castel
2. Albert Bichot
3. Georges Duboeuf
4. Piat
5. CVBG
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