The Big Spill

The sun is setting behind Château Pontet-Canet as Alfred Tesseron finishes his tour of the property, perched above the legendary Bordeaux wine village of Pauillac. He has talked proudly about how his father bought the château 30 years ago, but points out some of his recent investments: a water-recycling 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 starts to bottle it, the wine is already being traded for more than $60 a 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 to the east, at Jean Charles' winery just behind the medieval church, the picture couldn't be more different. Charles usually sells his entire output to a local merchant, who bottles and markets it for him. But this year, for the first time, the merchant won't touch the stuff. Stainless-steel vats are filled with thousands of gallons of Cabernet Sauvignon and Merlot from last year's harvest that Charles is 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-overdue shakeout in the cosseted world of French winemaking. France is the superpower of wine, the largest producer and heaviest drinker. But for more than a decade, it has sleepwalked as globalization transformed the business, bringing with it new markets 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 and 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 combined. Today France has been overtaken and sells about 15% less than they do. The pummeling is especially bruising on home turf: Europe now imports almost as much wine as it exports. In Britain alone--one of the biggest markets anywhere--the Australians have gone from exotic afterthought to undisputed market leader in a few years. In the U.S., the Australians outsell the French 3 to 1 and have put some California wineries to the sword too.