The Big Spill

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Marie Courselle knows all too well what he means. Château Thieuley, which her grandfather bought in the 1950s and which she now runs with her younger sister Sylvie, used to sell about 30% of its output to big French retailers. Then, two years ago, it received a blunt message: Cut your prices, or we'll cut back on purchases. The Courselles refused, and their hypermarket sales halved. They are now trying to build up a commercial network of their own. That means relying on a handful of merchants to sell into major markets and doing the rest themselves. When they are not harvesting or tending their vines, Sylvie, 28, and Marie, 30, are touting their wares in Luxembourg, Canada and elsewhere, looking for new sales.

The wine glut's impact is worldwide. In California some wineries have gone bankrupt, including the Legacy Estate Group that owned prestigious brands, including Arrowood, Byron and Freemark Abbey. (The group was sold last month to Kendall-Jackson.) In South Africa grape prices have dropped about 30% this year, prompting a hunt by producers for new markets. In the Friuli region of northern Italy, which specializes in Pinot Grigio and other whites, winemakers' cellars are filling with unsold bottles.

Most dramatic of all is the perilous situation in Australia. Its output doubled in a decade, and the country is flooded with unsold wine. And unlike France, which pays for unsold wine to be distilled into industrial alcohol, Australia has no government-subsidized buyer to bail wineries out. Mark McKenzie, executive director of the wine-grape growers trade group, says incomes for some growers have fallen 60% in the past two years. "It's as bad as I've seen it in 46 years," says Brian McGuigan, an industry veteran and founder of McGuigan Simeon Wines, the nation's second largest firm.

Viewed from Australia, the French measures seem timid and slow. Australia's 20 biggest winemakers account for 85% of the market, and they have reacted quickly, cutting prices and taking the financial hit early by writing down the value of their stock. Some grape growers are pruning back vines or switching to citrus or almonds. Even so, Sam Tolley, chief executive of the Australian Wine and Brandy Corporation, the government body that oversees the wine industry, reckons it will take at least an additional two years before supply and demand get back in line.

Some of the Old Guard in Bordeaux shudder at those tough measures, but the region is racing to better compete. Taking a page from the Aussie book, they are trying to simplify the branding by consolidating some of the 57 separate appellations that are now marketed. Five big areas--Côtes de Blaye, Côtes de Bourg, Côtes de Castillon, Côtes de Francs and Côtes de Bordeaux--are planning to combine into a single, expanded Côtes de Bordeaux label. And the Interprofessional Bordeaux Wine Council, the main industry group, recently scrapped 1990s regulations that forbade vintners from making vin ordinaire from their lesser grapes. Get ready for Vin de Pays de l'Atlantique. This year marks the first harvest for it, and 65 winemakers have already signed up.