Too Much Of A Good Thing

The sun is setting as Alfred Tesseron finishes his tour of the Château Pontet-Canet, which is perched on a hill above the legendary Bordeaux wine village of Pauillac. He has talked proudly about how his father bought the château 30 years ago. He has driven his electric cart along the neat rows of vines and pointed out some of his big recent investments: the state-of-the-art water recycling[an error occurred while processing this directive] system, the new storage and bottling barn and the twin rows of conical fermentation vats. Now comes the moment of truth. Standing in his refurbished tasting room, he picks up a glass of the 2005 vintage, sniffs, sips and sucks the wine noisily through his teeth before spitting it out into a gleaming ceramic basin. He looks up quizzically, but he already knows the answer. It's good. It's so good, in fact, that long before he'll start to bottle it, the wine is already being traded in Bordeaux for more than €50 per bottle. That's double the price his 2004 wine fetched, and 75% higher than the spectacular 2000 vintage, the best in recent memory. "If you have a wine that's in demand, you can sell it," he shrugs.

In the village of Margueron an hour's drive away to the east, at Jean Charles' winery just behind the medieval church, the picture couldn't be more different. Charles usually sells his entire wine output to a local merchant, who bottles and markets it for him. But this year, for the first time, the merchant is refusing to take any of it. The stainless-steel vats in Charles' shed are filled with tens of thousands of liters of Cabernet Sauvignon and Merlot from last year's harvest that he's now frantic to sell at any price to make room for this year's crop. Charles, 58, stands in his courtyard, surrounded by clucking hens, and struggles for words to describe his predicament. "It's never happened before," he says, gripping a wrench. "This year's a complete catastrophe."

The contrasting fortunes of both men are two sides of the same story: a long-awaited — and long-overdue — shakeout in the cosseted world of French winemaking. France is the superpower of the wine world, the largest producer and, measured by per capita consumption, the heaviest drinker. But for more than a decade, it has been sleepwalking as globalization transformed the business, bringing with it new markets, new consumers and new competitors. Producers from Australia, New Zealand, California, South Africa, Chile and elsewhere have launched massive — and often brilliantly executed — campaigns to promote their wines across the planet. They have ramped up production, introduced a new generation of consumers to inexpensive, fruity wines with labels that are easy to understand, and, in the process, run off with a colossal amount of business. A decade ago, France exported three times as much wine as all the so-called New World producers put together; today it has been overtaken, and now sells about 15% less than they do. The pummeling is especially bruising on its home turf: Europe as a whole now imports almost as much wine as it exports, something that would have been unthinkable a decade ago. In Britain alone, one of the biggest and most competitive markets anywhere, the Australians have gone from exotic afterthought to undisputed market leader in a few years.

The French barely reacted to these seismic shifts, largely because global wine consumption has been growing, up about 10% in the last decade to 240 million hL. But now so many people have got into the winemaking business that the world is awash in far too much of the stuff. In 2004, worldwide production hit its highest level in 20 years, almost 300 million hL, or 15% higher than the previous year. And it's not just producers like Jean Charles who are hurting. The glut is hitting producers everywhere, particularly in Australia, where a local success story has quickly soured. According to estimates by the Australian Wine and Brandy Corporation (AWBC), the government body that oversees the wine industry, the country now has surplus wine stocks that exceed an entire year of exports, and many grape growers simply left this year's crop on the vine rather than harvest it.

In France, a massive support system subsidizes producers who can't sell their wine, and it is cushioning the impact somewhat. Even so, revenues and incomes overall have been dropping since 2002 — the first decline in decades — and many French producers are under pressure. The result is a growing stratification: good winemakers are investing heavily to get better; bad winemakers are facing the prospect of being squeezed out; and the rest, the vast majority of producers caught in the middle, are scrambling to build a better future — or selling up. "The crisis is having a salutary effect," says Christian Delpeuch, managing director of Ginestet, one of the biggest trading houses in Bordeaux and former head of the region's wine-industry lobby group.