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Dez 25

The global downturn and France

Tag: Allgemeines,Ländersigi.hiss @ 09:40

by Jane Anson – As the world’s second biggest wine producer, the French wine industry is undoubtedly vulnerable to the global financial crisis. France exported €9.43bn ($11.7bn) of wines and spirits in 2007, up almost 7% on 2006. The UK and US were the leading importers, with a combined value of €2.54bn, according to Ubifrance, the French export development agency. However, in the first eight months of 2008, exports dropped by almost 10% in volume.

The value was up 7% over the same period to €4.2bn, largely due to the highly priced 2005 Bordeaux vintage, but the positive figures are not expected to last through into 2009 – due not only to the financial crisis, but also the strong euro in relation to other major currencies.

The euro currency is in fact both a weakness and a strength – trading within the euro zone can continue without worries about fluctuation, but the strength of the euro against the dollar and the pound is a problem for exporting wine to two of the world’s biggest fine wine markets.

Some things work in the country’s favour. For a start, the French banking system has been less affected than perhaps some others, due to its inherent conservatism. President Sarkozy injected €10.5bn into the system, compared to £50bn in the UK, a country with approximately the same population, reflecting the relative underlying strength of the French banks. This in theory, according to Philippe Casteja, former head of the FEVS, means that banks may be continue to lend to small business such as negociants, who rely on bank advances for their cash flow. He also says that the product itself can withstand the crisis: „Wines may be less affected than other products because it is not a heavy investment vehicles such as a car or a house. People can choose to still buy wine, but to trade down the price they spend.“

Equally, much of France’s production is consumed within the country itself, giving it some protection against a world financial crisis. The regions that are most at risk, inevitably, are those with the highest priced wines, and those who export heavily; namely Champagne (which exported a record 150m bottles exported in 2007, around 50% of production), Cognac (96% export) and Bordeaux (around 40% export, but the classified growths are closer to 70%). Already to date this year, Cognac sales are down 7.6% in volume and 4.4% in value.

Allan Sichel, the president of Bordeaux’s Negociants‘ Union, is being level headed but realistic. „We are anticipating difficult times, yes, but most negociants will be well placed to weather the storm. The bigger problem is for smaller winemakers due to the small volume of crop in the 2008 vintage, which will be coupled with low prices. They could sustain the low values of their wines if they had good volumes, but this year they don’t have the volumes and they can’t get the backing from banks – that is going to make life difficult for a lot of small properties.“

This is one of a series of articles about how the downturn is affecting the global wine industry. For the full series, which looks at 17 countries, see the latest edition of Meininger’s Wine Business International. Further articles in this series will be posted over the Christmas and New Year break.

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