Devil's Advocate - Bordeaux, Where the Rich Get Richer and the Poor Uproot Their Vines

Robert Joseph looks beyond the financially attractive top Grands Crus Classés, at the far less successful mass of Bordeaux and its sub-appellations where large swathes of vines are due to be uprooted.

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Robert Joseph - the Devil's Advocate
Robert Joseph - the Devil's Advocate

An American billionaire has just bought Château Lascombes, and similar purchases are to be expected from other US investors, as we report elsewhere this week. The price of a hectare of Pessac-Léognan vines has risen from €166,000 in 1991 to €600,000 in 2020. Pomerol has gone up in value more dramatically - from €378,000 to €2,000,000 while Pauillac has rocketed by a heady 1,161%. If you wanted to purchase a hectare of land in that appellation now - and could find some to buy - it would set you back €2.8m.

 

"The Winners"
Winners: Bordeaux appellations whose land value has risen between 1991-2020. The left of each chart shows what the land should be worth if it had simply kept up with French inflation. On the right, there is the rise in value in euros per hectare, showing how good an investment these parts of Bordeaux have been. (Source SAFER/Meininger's)

Better Wine

Bordeaux is making better wine than ever before, even at the lower end of the price scale. Thanks to a combination of climate change and improved viticulture and winemaking, with the exception of vintages like 2013, the chances of getting an unripe, leafy green glass of red or white have plummeted. 

Bordeaux is, however, also a financial disaster zone. According to an anonymous broker quoted in Vitisphere, around half of Bordeaux’s vineyards are now being farmed at a loss - of up to 20-30% in some cases.

In 2004, the region’s growers marched in Paris to demand a minimum price of €1,000 per 900 litre tonneau for the 40% of the total harvest that is still sold in bulk by growers and cooperatives. With inflation, the figure the protesters were asking for then should have gone up to at least €1,250. Last spring, eighteen years later, tonneaux of the - small, frost-hit - 2021 harvest were reportedly being sold for €850. 

Worse still, many producers now have up to three vintages sitting in tank waiting for customers, many of whom apparently seem to be more interested in buying similarly priced wine from Languedoc.
 

Disappearing Châteaux

The situation in Bordeaux illustrates the dysfunctionality of the wine industry. In the 1980s, there were 20,000 individual Bordeaux chateaux. Today, as estates swallow their neighbours, the figure is probably around 5,000. But that’s still far too many, especially when you consider that even members of the London wine-focused club, 67 Pall Mall, would - I was told - often struggle to name more than a dozen.

The ones they could recall - Lafite, Lynch Bages, Latour, Léoville Las Cases and so on, are all highly successful brands, just like Pol Roger, Penfolds and Pingus. And there aren’t enough Bordeaux estates with the kind of resonance enjoyed by those stars.

Brands, but not as you Know Them

In places like Napa, Priorat and even the vineyards of England, starry wines give lustre to their regions and help turn those corners of the map into brands too. Not classic brands with identifiable owners and accounts showing an annual profit or loss, but brands in the heads of the people who recognise their names, seek them out and quite possibly pay a premium for them.

When things go well, the relationship between what one might call wine-brands and appellation-brands is highly symbiotic. A few pioneering producers draw attention to, say, Etna, Margaret River or the Douro, which, in turn attracts inward investment in new estates and helps to build the fame of other high quality wineries in the region. With that fame come higher prices for both the wine and the land from which it is produced. This helps to fund further investment and promotion allowing, and ideally encouraging, everyone beneath the appellation umbrella to focus on maintaining the quality for which it is now known.

This doesn’t always work, of course - there has to be a critical mass of starry producers to create the momentum for any region, a limit to its size, and a certain amount of collective effort - but I’d argue that the principle generally applies - to the successes.

Looking at the over 800 appellations in France, Italy and Spain, however, successes are rare exceptions.

Bordeaux and its sub-appellations offer a particularly fine illustration of both sides of this coin.

Bordeaux: Growing Inequality

While owners of Pomerol, Pauillac and Pessac-Léognan vines have become wealthier over the last quarter of a century - at least in terms of their landholding - many of their neighbours - judged by the same standards  - are significantly poorer. In Moulis, a short drive from Margaux, according to official figures, in 2020, a hectare cost the same €80,000 as it did three decades earlier, over €50,000 less than it should, just to keep up with inflation. One in Listrac, next door, fell from €72,000 to €65,000 and, at €40,000, Médoc vineyards were, and almost certainly still are, a third cheaper than they were in 1990 - without taking inflation into account. 

"The Losers"
The losers: the Bordeaux regions where land values have not only failed to keep up with inflation; in most cases they've fallen.

 

Back then, Fronsac, one of the oldest parts of Bordeaux was worth €75,000/ha. In today’s money, it ought to fetch around €125,000. In fact, the current figure of €28,000 is less than a quarter of that sum.

There is lots of very good wine produced every year in Moulis, Listrac and Fronsac, but there are no real star chateaux and, outside Aquitaine, few wine drinkers other than very keen Bordeaux buffs or MW students, would reach for a wine from any of them in the way they might for a St Emilion (where the land has doubled in value to nearly €300,000).
 

Another Protest

On December 6th, the growers and/or their sons and daughters are protesting again - this time in Bordeaux. They are unhappy with the French government which has refused to pay them €10,000 per hectare to rip up around 15,000 ha of their region's 110,000 ha of vines.

But the people they should be angry with are themselves and the negociants, for failing to show the skill their Champagne counterparts have in creating the brand value their wines deserve. If Bordeaux had a few big brands doing the job Moët & Chandon and Veuve Clicquot et al have done for their region, Bordeaux as a whole would be in a far better state financially than it is today.

Brand v Land

Whenever I refer to brands and marketing in the context of wine, I get responses from Europeans, principally, who like to associate those terms with the New World (and Champagne) rather than with terroir. Indeed the gulf between the two was illustrated at one Wine2Wine conference in Verona where I was asked to speak on ‘Brand v Land’. 

Well, like Château Palmer, alongside which it would like to sit, Lascombes is undeniably a brand with some great land, that benefits from being in the appellation-brand of Margaux. Its value is now set to rise following its acquisition by a clever businessman who will improve the quality of its wines and ensure that they are appreciated by customers willing and able to pay the higher prices he is sure to ask.

Those who are not so willing or able still have plenty of delicious Bordeaux bargains to choose from amongst the less successfully branded estates and appellations. But this situation won’t last forever. The 15,000 ha that are to be ripped up now may be just the beginning. No businesses - in wine or any other sector - can go on running at a loss or marginal profit for ever.

A small change was made to this piece shortly after publication, correcting the location of the December 6 protest.

 

 

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