BORDEAUX: An Iconic Region Battles to Sustain Market Share - Part 1

(WB) - Bordeaux is arguably the most famous of all French wine regions and has had an immeasurable impact on the world of wine. Bordeaux has been an active wine exporter since the early 14th century. No other region can match this French icon in terms of commercial longevity and influence. The wines of Bordeaux have had such allure for centuries that grape varieties of Bordeaux origin—led by Cabernet Sauvignon and Merlot—have been planted in countless places, and the “Bordeaux blend” is a universal concept.

But leaders rarely remain unchallenged; at some point, they face new competitors and suffer internal stresses. General Motors was once unassailable but European, Japanese and, now, Korean, carmakers present strong competitive threats even in GM’s home market. Challengers may develop and perfect products consumers find more appealing or simply easier to understand. So it is with soft, well-endowed New World wines bearing the straightforward language of grape variety rather than one of 60 appellations of Bordeaux. Evolving consumption patterns can as well undermine a seemingly unshakeable franchise. For Bordeaux, this includes a dramatic decline in wine drinking in France over several decades.

Critics say Bordeaux tends to be insular and skeptical of criticism from the outside. Complacency and rigidity, they argue, present barriers to needed change. Fortunately, there is another side to Bordeaux: one that is dynamic, energetic and relatively open-minded. The region is more susceptible to change than most outsiders are inclined to believe. Even if the will exists, however, adjusting to new market conditions is liable to confront structural obstacles. Try as it may, Bordeaux cannot control larger market forces, and disruptive changes are being imposed on the region. Many small growers in modest appellations will have to adapt or perish; in fact, this process has already begun.

Many people do not realize the scale of wine production in Bordeaux. Consider that its output of 5.5 million hectoliters or 61 million 9-liter cases on average in recent vintages (leaving aside the atypically small 2013 crop) equals roughly half the entire production of Chile or Australia. Yet, this enormous region with an incredible history claims far less than one percent of the U.S. market. Moreover, that share is declining as total U.S. consumption grows and Bordeaux shipments remain within the same small volume range. How and why has this happened, and what is the future likely to hold for Bordeaux, particularly in the U.S. market?