Bordeaux wines are losing steam in its most profitable market in China. With 2019 En Primeur campaign failing to generate much interest for the Chinese, Bordeaux Wine Council (CIVB) is calling for a pivot to more affordable Bordeaux wines, while cautioning the futures selling system is increasingly bordering on turning into a luxury business.
For the first time in recent years, Bordeaux, the most known wine region in China, experienced its Waterloo.
Years of blistering growth slowed in 2018, with exports dropping in both volume and value, according to figures released by the wine trade organisation CIVB. The tepid performance of Bordeaux, which is often regarded as a bellwether for market demand, led to a softer demand for French wines in general. As a result, for the first time this year Australia usurped France as China’s biggest wine supplier by value.
The drop happens at a time when China’s overall economic growth slowed down amid ongoing US-China trade war. What compounded the problem for Bordeaux is the shortage of wines in the market from the 2017 vintage also led to limited wines available in the Asian market, according to CIVB.
Bordeaux’s wine production in 2017 shrank to 3.5 million hl, down by 40% from the usual 5.1 million hl, due to a series of adverse climate challenges including frost, says Christophe Chateau, communication director of CIVB, when interviewed by Vino-joy.com in Bordeaux. “Of course we have less wines to sell, and this is one of the reasons why Bordeaux sales in China decreased last year,” he explains.
Bordeaux wine exports to China in 2018 alone dropped by 31.02% in volume and another 21.64% in value, according to official figures released by Business France.
“For 2018 we have a normal harvest, 5.1 million hl, but the market was lost because of the high price of 2017. Now we have good volume, but we have lost the market,” he utters in regret.
He notes that figures from the second quarter of this year suggested that the decline has slowed. “The volume was down 20%. That shows us the new harvest of 2018 is arriving and sales are going up again,” he argues.
At the same time, margins for the futures are getting smaller for traders, which also deterred wine merchants from parking their money in the futures when there’s ample supply of older vintages in the market.
“What’s happening is maybe 20 years ago, they were selling low prices to merchants, and they were making high margins. In the meanwhile, brands are getting stronger and stronger because luxury market is getting better. Even if the economy is not doing well, luxury is increasing, so margins are not as good as before,” he admits.
The market demand for ultra premium Bordeaux wines regardless of price is bullish, he added, citing Petrus as an example. “Petrus’ [En Primeur] price this year €1600 per bottle but on the market it’s gonna be €3000 or €4000… Like DRC, people will buy it. That’s not wine business. That’s luxury business. It’s another business. I am not into luxury business and more on wine business,” he expands.
According to the trade official, only 1% of Bordeaux wines are sold through En Primeur system, and classified Bordeaux wines in total only constitute 3% of Bordeaux overall sales volume. Yet the noise surrounding classified wines is even bigger to the extent that the trade official ventured it dis-proportionally made up of 40% of the image for Bordeaux.
What’s being overlooked according to the trade official is the large repertoire of mid-range, good value wines.
The sweet spot for good value Bordeaux are what he considers wines priced between €3 and €10 a bottle, calling it “the best range” such as wines from Cru Bourgeois and Côtes de Bordeaux。
“These mid-range wines are in my point of view, high quality and not known. Best range. this is what we call everyday Bordeaux,” he details. A few Chinese companies including Chinese baijiu producer Kweichow Moutai has purchased Cru Bourgeois estates. The Chinese company bought the 17th century Château Loudenne in Haut-Médoc in 2013.
Despite its Chinese ownership and Moutai’s distribution network in China, only 10% of its wines are sold back to China, something the estate manager Philippe de Poyferré is looking to expand in the coming years, he reveals.
A consumer-focused Everyday Bordeaux campaign was also launched by CIVB in China to drive this category’s growth. Value, as it seems might be the key to rejuvenate Bordeaux.