“Evolution of the wine trade and its impact on small owners”.
For those of you who don’t know me, my name is Christopher Cannan and I’ve been in the wine business since 1970. Over a period of 43 years I’ve seen a lot of changes, almost all of which have had an impact on today’s topic.
I’ll start with a little anecdote:
Before starting work in 1970 and thanks to a friend of my father’s, a wine importer and Master of Wine, I undertook a series of internships throughout the vineyards of Europe including Bordeaux, Champagne, Germany, Burgundy, Jerez and Porto, among others.
During a visit to Armagnac, I had the good fortune to meet Léon Lafitte, one of the most renowned producers. He gave me a list of producers in several regions specializing in quality estate-bottled products. There were far fewer of them at the time.
One of the producers on the list was Doctor André Parcé from Banyuls, so I paid him a visit. I informed him of my intention to visit my brother, who was studying in Lausanne, the following weekend. He said I should take the opportunity to meet Monsieur Constant Bourquin, the founder of the Academy, in his village of Chandolin, one of the highest in the Valais. So I climbed into my old Volkswagen and, while we enjoyed an excellent Swiss wine, he explained his philosophy on wine and the virtues of wines that are produced naturally, yet are of high quality and remain true representatives of their origin. I was so impressed that I have adhered to this philosophy throughout my wine career.
HISTORY AND DEVELOPMENT OF THE WINE TRADE SINCE 1970
In the early 70s, wine merchants continued the tradition of exporting wines in casks to European markets, including the Grands Crus Classés de Bordeaux.
Very few estates practiced estate bottling, so the wine trade was largely in the hands of merchants. Some wines were even exported in casks to England without any control of origin. For years, we saw Nuits St. Georges without an AOC on wine maps. Georges without an AOC on wine lists in England!
Only certain more mature European markets bought estate-bottled wines. These were mainly Burgundy, some Bordeaux, and Châteauneuf-du-Pape, a pioneer in the practice of estate bottling. Markets in Asia were practically non-existent.
In the U.S.A., large quantities of Bordeaux, Pouilly Fuissé and Beaujolais wines of rather mediocre quality were shipped in bottles by Bordeaux and Burgundy merchants.
Despite this situation, change was in the air. From 1973 I worked for an American importer, Frederick Wildman & Sons in New York. Since the end of Prohibition, this company had pioneered the selection and importation of Burgundies bottled at the Domaine, including such great names as La Romanée Conti, Leroy, Leflaive, Rousseau, Dujac Château Fuissé and others. But with the oil crisis in 1973, even these wines were difficult to sell in the U.S. My task was to sell Wildman’s allocations in Europe, with the owners’ agreement of course. Despite the economic situation, European importers were delighted to be able to buy these great wines.
At the same time, I was in charge of European sales for J. Moreau et Fils in Chablis. Wildman owned 50% of this business, which was very prestigious at the time. It was a revelation to importers who realized that it made more sense to buy Chablis wines in bottle in Chablis instead of in barrel and bottle in Beaune.
In 1978, on the strength of my experience at Wildman, I left that company to found Europvin in Bordeaux, specializing in the selection and export of top-quality estate wines to all regions of France, and later to Spain, Italy and Portugal.
The global economy was improving, and there was growing interest in estate-bottled wines, especially in Europe and North America.
In the early ’80s, the trade press began to have more and more influence on consumers. At the same time, the US dollar was very strong against the French franc, and American wine lovers wanted to take advantage of this. With little knowledge and the excitement surrounding the 1982 vintage in Bordeaux, Robert Parker entered the scene! Overnight, his little review focused on the Baltimore region became the Bible for American consumers. His timing was perfect!
At the same time, other regions of France were beginning to benefit from the dollar and enthusiasm around Bordeaux. New estates were opening up in Burgundy, as well as in the Loire and Rhône Valleys.
At that time, I teamed up with Becky Wasserman, an American broker based in Burgundy. We created Cannan & Wasserman for the American market. Cannan specialized in Bordeaux, Loire and Rhône, and Wasserman in Burgundy and Champagne. We quickly established a network of importers across the US and spent a few increasingly successful years exporting large quantities of high-quality estate wines from all regions of France and then Spain. Our regular tastings with Robert Parker have enabled new estates and small producers to quickly gain notoriety.
Also in the early ’80s, Japan was becoming increasingly prosperous and was looking for top-of-the-range French wines. Another Academy-related anecdote: around 1986, I went to Japan with Jean Meyer, a valued member of the Academy. The samples for the trip didn’t arrive on time. We only had two bottles that Jean had packed in his suitcases. Nevertheless, in a short space of time we created a market of several thousand cases. Even to the point of becoming the number one exporter of Alsace wines to Japan at one point. The success lasted until 1989, when the Japanese economy took a nosedive. After that, Japanese purchases continued, but with a focus on lower-priced wines.
Other markets were beginning to open up at this time, including Australia and Brazil. In Singapore, there was a single importer for all the major labels, Escoffier, ahead of its time.
In Europe, estate wines continued to grow, with a trend towards buying direct from the producer. This prompted Europvin to focus primarily on major export markets, where the company could provide a service to both importers and producers. For importers, a logistics and wine selection service that is often hard to find. For producers, a network, market knowledge and regulations for each country.
The late 80s and early 90s were a period of consolidation and slower growth in the U.S., partly due to unfavorable exchange rates and also to a polarization towards high-scoring wines. Parker reviews are increasingly becoming a means of selling wine. Retailers and wine merchants are no longer fulfilling their role as wine selectors for their customers.
During this period we witnessed rapid growth in emerging markets such as Taiwan, Thailand and South Korea, especially for Bordeaux Grands Crus Classés. Countries such as Hong Kong, Singapore and Brazil were rapidly becoming more mature. The Asian economic crisis of 1998 brought this trend to an abrupt halt in some countries, with substantial increases in taxes and customs duties.
Interest in estate wines continued to grow, especially when the press was positive. Parker’s enthusiasm for the Rhône and Bordeaux was followed by growing interest in wines from the Loire, Languedoc and South-West.
Italian wines were increasingly successful, with improved quality and a host of new appellations. Spain was also gaining ground, thanks to better quality and reasonable prices.
The decade following 2000 saw a slowdown after September 1, but picked up again after 2003. Consumption of fine wines continues to grow despite economic difficulties. In the U.S.A., the unfavorable exchange rate didn’t help, but European wines maintained their presence due to the high prices of high-end California wines.
In Asia, Taiwan, Thailand and South Korea have never recovered the euphoria of the 90s, due to high import taxes and excess inventory. Japan continues to suffer from economic stagnation, with a focus on lower-priced wines, apart from demand for the great Burgundies from prestigious estates. Hong Kong and Singapore have seen strong growth, especially for Bordeaux but also for all wines with speculative value. The elimination of taxes on wine imports in Hong Kong has created a hub for the whole of Asia. Finally, the emergence of China, where the potential is limitless, remains the great hope for the future. For the time being, however, patience is required, as taxes are still high and knowledge of wines is still poorly developed; not to mention the problems of fraudulent bottles, of which there are many.
Other developments include the high Australian dollar, the ups and downs of Brazil’s economy, and the continued growth of monopoly countries such as Canada and Scandinavia thanks to a clever strategy to keep the system popular with consumers.
On the other hand, a number of excellent vintages, especially in Bordeaux, Burgundy and the Rhône, perhaps thanks to global warming, have continued to stimulate interest in quality wines. On the other hand, the high prices of great Bordeaux wines give an elitist image and the impression that all French wines are expensive.
STATEGIE FOR SMALL OWNERS
In 1997 I bought a small vineyard, Clos Figueras, in the Priorat region, not far from Barcelona. This enabled me to see the world of wine from another angle, and to better understand the difficulties faced by small owners in today’s environment.
To be honest, commercially it’s a struggle and a challenge in a very competitive market. More and more new wines appear on the market every day. New wineries, especially in Spain and the New World, are appearing with astonishing regularity. There is an excess of stock almost everywhere, offered with short-term strategies to secure sales, often at any price. This situation has been exacerbated by the economic chaos since 2008 and, consequently, the problems with the banks.
Another difficulty for small producers is the consolidation of distribution, especially in the U.S., where the most powerful importers have such large product portfolios that the wines of small proprietors are lost in the shuffle and stocks remain unsold. What’s more, the distributor waits for the owner to come to market to support sales of their wines. This can be very costly for a small or medium-sized estate. A large number of importers in the U.S., and increasingly in other countries, tend to focus on big brands with large marketing budgets and sales staff living permanently on site.
Despite this negative image, all is not lost for the small producer! Rapid changes in modern communications favor them. It’s becoming increasingly fashionable to buy products direct from the producer. Sales can be made via a website or through companies specializing in online sales. Consumer information is available via websites, Facebook, Twitter and blogs. Online communication is a new phenomenon bridging the gap between producer and consumer.
Taking advantage of good press is also a valid strategy, especially for Internet communications. Even if we don’t agree with the influence of the press, some markets, such as the monopolies in Canada and Scandinavia, and especially in Asia, are heavily influenced by ratings. Major brands are likely to suffer more in the future because of supermarket pressure on prices. In some countries, supermarkets account for 80% of the market.
Consumers are becoming increasingly connoisseurs in more mature markets. They are often willing to pay a good price for a different or special wine, and unlike some products like washing powder, they want to know the origin and the producer. The movement towards estates practicing ecological and biodynamic viticulture is gaining momentum. The dynamics of natural wines representing their origin are evolving more rapidly, making Constant Bourquin’s crusade even more of a reality.
A new generation of sommeliers, more interested in their careers than in the past, are happy and proud to present their “discoveries” to their customers in restaurants. At the same time, food and wine pairings are becoming more topical. A subject the trade press has tended to ignore in the past. With more and more opportunities to travel, tourists and business travellers are demanding more attractive and eclectic wine lists. All of which is good news for small producers.
Finally, there’s wine tourism. Europe is just beginning to learn a few lessons from Napa Valley, the most visited place in the U.S. after Disney World. Small producers should not underestimate the importance and impact of receiving visitors in the right conditions. It’s even better if they can offer meals or accommodation.
The advantages of being able to sell with higher-than-normal margins and immediate payment are complemented by closer contact with customers. Thanks to these visits, a customer database can evolve to keep in touch with the customer and send offers and information.
In Clos Figueras, in the heart of the impressive Priorat landscape, we bought the building that extends from our winery. It used to be a restaurant. We’ve continued the business, serving simple, high-quality cuisine with local ingredients to complement our wines. We even use produce from our vegetable garden and chickens. Before meals, we offer tastings and visits to the winery and vineyard. With a large garden we can rent out the space for family events such as weddings, christenings etc.
It’s only been two years since we made the purchase. The success has been remarkable. The sale of our wines through the restaurant already represents over 10% of all our sales, with the aim of reaching 25% in two years’ time. In California, many wineries sell their entire production in this way.
In conclusion, as most of Europe’s vineyards are located in beautiful, tourist-attractive locations, the wine tourism option is likely to have a major impact on the business strategy of small producers. We’re already starting to see a rapid evolution in this direction.
Welcome to Priorat and thank you for listening!