Burgundy wine industry representatives say that a lower-than-average harvest in 2016 will result in more expensive wines for many appellations – and they wonder if key markets will accept the price increases.
Record-breaking frost in late April that killed many buds in vineyards throughout much of Burgundy – combined with devastating hail in Chablis – means that the overall harvest will be some 30% less in volume than average, said Louis-Fabrice Latour, president of the Bureau Interprofessionnel des Vins de Bourgogne, speaking at a press conference held in Beaune.
High demand, low supply
While both 2014 and 2015 replenished supplies after several low-volume vintages, demand has kept prices increasing for many appellations, he said. “It is no secret that we will see price increases in 2016 on already expensive wines, although not for all appellations,” he added.
The difficult harvest, combined with economic and political uncertainty, puts pressure on recent positive sales data for Burgundy’s top two export markets: the US and the UK.
Figures for the first seven months of 2016 indicate a 17.7% increase in volume and a 13.6% increase in value of Burgundy wine exported to the UK over the same period last year, while the US saw increases over the same period of 3.5% by volume and 3.8% by value. But July alone saw negative export numbers, and Latour sees a worrying trend for the US and the UK.
External political pressures
“The US elections are playing an important role for uncertainty,” Latour said. “People are eating out less because of this, and while we do not take an official position on Trump versus Clinton, we are for liberal markets and free trade – and against protectionism,” he stressed.
Latour cited recent news reports about rising protectionist rhetoric during the US election. “We are not worried in that sense with the UK, but what worries us is a return to economic policies to protect, for example, sales of California against foreign competition.”
The falling value of the pound because of Brexit “certainly worries us for the UK market,” he added.
Latour explained that the UK is a vital market for Chablis (including Petit Chablis), which accounts for over 14% of all white Burgundy sold there. And even more for Mâcon, which represents over one-quarter in volume (and nearly 30% in value) of all white Burgundy sold in the UK.
A combination of price increases and a weaker pound could result in “untenable” pricing, he said: “The psychological barrier of £10.00 ($12.43) per bottle for Macon wines has already been crossed, and we are not sure if we can go any higher.”
The good news is that the southern region of Macon saw a normal harvest in 2016, which should not see price increases compared to last year, Latour explained. But because of hail, Chablis will produce about half of a normal harvest volume in 2016, adding more upward price pressure to wines from that famous northern Burgundy region.
Other key markets
Wine exports to key European markets were mixed compared to last year. The Netherlands, for example, imported more Burgundy in the first seven months of 2016 as compared to the same period last year – 13.5% more by volume and over 9% by value. But both Belgium – the largest market for Burgundy on the continent – and Germany imported dramatically less in both volume and value of Burgundy wines.
Germany imported more than 14% less of Burgundy wine by volume and nearly 12% less in value in the first seven months of 2016 compared to the same period last year; Belgium imported over 20% less by volume and over 12% less in value.
Sales in Asia were mixed as well, with increases in Taiwan and Hong Kong, but decreases of exports to Mainland China, Japan and Thailand.
Latour, who runs one of Burgundy’s most famous négociant houses, Maison Louis Latour, said that négociants should consider lowering their sales margins on the 2016 vintage, to ensure as much price stability as possible.
A representative for Bouchard Père & Fils, another famous Burgundian négociant, agreed. “We need to think seriously about any price increases, because prices are already high, and we cannot afford to lose more clients to competition,” said Bouchard’s external relations manager Mathilde Pepay-Cazenave.
