French Wine Exports Surge, But Uncertainty Lingers - 22/11/2010

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French wine exports have rebounded “at a very good rhythm,” according to a leading French industry group, but the long-term outlook is not all rosy,

Over the past 12 months, French wine sales abroad jumped 12.3% in volume, and 9.6% in value, according to a new report from the Federation of Wine and Spirit Exporters of France Encouraging as these numbers may be, they haven’t completely assuaged concerns over a market whose immediate future remains uncertain. The final three months of 2010 will determine if the rise in sales can be attributed to anything other than importers looking to replenish their stocks, and if producers can expect sustained consumption. “The first indicators from the United States are not very good, even if it’s still our biggest market,” the Federation explains.

Exports of wines from Burgundy well outperformed those from Bordeaux, which had initially taken off at a higher rate. From Oct. 1, 2009 to the end of September 2010, Burgundy exports leapt 19.3% in volume, and 23.3% in value. Sales of Bordeaux, on the other hand, rose only 6.6% in volume, and 1.8% in value. The most impressive performance, however, belonged to Chablis, with its exports skyrocketing 48% in volume.

Producers from some other regions, meanwhile, have been slower to profit from this industry-wide surge in sales. Exports of Languedoc-Roussillon, for example, fell by 2.4%, while exports of Côtes du Rhônes remained stable in volume, but rose in price.

French exporters have benefited not only from improved economic circumstances, but from a noticeable drop in global wine production, as well. According to estimates from the International Organization of Vineyards and Wines (OIV), global production of wine should stabilize at 260 million hectoliters in 2010—a drop of 4% since 2009. In Europe, 2010 marks the fourth consecutive year of weak harvests.

This decrease can be largely attributed to the recent international focus on quality over quantity. The impact has been especially significant in the four wine powerhouses of Europe—France, Italy, Spain and Portugal. “We drink less, but better,” explains the president of OIV president Yves Bénard.

Wines from the “New World” have seen their international progress slow, due both to the global financial crisis, and irregular climate patterns. In the US, wine production dropped by more than 9%, while Southern hemisphere wine producers have seen similar drops. Notable exceptions include both Argentina, where production has risen by 33% and Chile, where the market has steadily grown.

“In the medium and long term, global wine production should stabilize,” says Bénard. The ultimate question for wine producers, however, is whether they can expect consumption to sustain in the wake of the financial crisis. “Today’s slight overproduction is absorbed by the manufacturing of eaux-de-vie and brandies, resulting in a balanced market,” Bénard explains. If the demand were to grow, “one could see a period of prolonged price tension for the next four or five years,” the OIV president adds.

But the real opportunity could come from the East. Top producers are eager to see new numbers on the Chinese market, which until now has registered an annual rate of a half-bottle of wine consumed per resident.

MARIE-JOSEE COUGARD, LES ECHOS