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Burgundy Drinkers Will Pay More as 2012 Production Drops

Despite losing as much as 40 percent of their grapes for the 2012 harvest, the vintners and merchants of Burgundy are smiling.

In Burgundy, whose wines compose only about 3 percent of France’s total production, the wineries sell just about every drop they make, even in abundant years, though that hasn’t happened since 2009.

Pascal Arnoux of Domaine Arnoux Pere et Fils in Chorey-le-Beaune. At Domaine Arnoux Pere et Fils in Chorey-le-Beaune in France, owner Pascal Arnoux lost 40 percent of his grapes in 2012. Photographer: John Mariani/Bloomberg

In 2010 quantity fell 40 percent, and in 2011 it was down 15 percent. This year winter’s frost, combined with mildew and hail, destroyed more than half the crop in prestigious vineyards like Chateau de Pommard.

At the charity wine auction at the Hospices de Beaune held each November in the city of Beaune since 1851, Burgundian officials, vignerons and negociants described the situation with a curious mix of regret and bonhomie.

“The damage of up to 50 percent in the Cote de Beaune was a disaster,” moaned Michel Baldassini, president delege and acting chairman of the Bureau Interprofessionnel des Vins de Bourgogne (BIVB), who then brightened with the declaration that “the highlight in 2012, however, is that the reds have fantastic concentration with silky, powerful tannins.”

Pierre-Henry Gagey, president and chairman of the BIVB, was positively buoyant, saying: “Prices are always a question of supply and demand, and Burgundy is selling very well these days. Prices will definitely be higher for the 2012s, but if we get a big harvest in 2013, it may dampen the consumers’ shock.”

Strong Dollar

Louis-Fabrice Latour, president and chairman of the Federation des Negociants-Eleveurs de Grande Bourgogne, joined the joyful chorus noting that “Burgundy has been recession proof the last two years. The U.S., our biggest market, was up 10 percent for 2011, and is our biggest priority right now because the dollar is getting stronger.”

Exports to Japan are up 35 percent in value for 2011, and it soon could surpass the U.K. as Burgundy’s second largest market, he said. Canada is number three, followed by China, where all the wine goes through Hong Kong.

Latour also said higher prices were inevitable and warned, “There just won’t be any burgundies available at under $10 a bottle.”

Back at the wineries around Beaune, I found a more guarded degree of optimism, since farmers hate more than anything to lose crops, especially three years in a row. “In the last 20 years we have tried to educate the vines to grow less grapes but of better quality,” said Marie-Andree Mugneret, who owns Domaine Georges Mugneret-Gibourg in the Vosne-Romanee region with her sister Marie-Christine.

Less Wine

“Still, we weren’t expecting to lose nearly half our production,” she said, pointing to two stacks of aging wine barrels, which in a good year would nearly touch the ceiling. “Last year, we made 85 barrels; this year we have only 68.”

Mugneret knows she easily can sell her wines for more money, and the 2010s will begin appearing in the market next year. “I am relieved that the higher prices will help blunt the lower supply,” she said, “but I’m skeptical that Burgundy prices can just keep rising so much with demand. We may price ourselves out of the market at some point.”

At Domaine Arnoux Pere et Fils in Chorey-les-Beaune, owner Pascal Arnoux told me, “the last good year for both volume and quality was 2009. That was ideal and helped keep prices at a reasonable level. This year my volume is down 40 percent, but I think the wines will turn out to be excellent.”

Fruit, Spice

He asked if I wanted to be the first American journalist to taste the wines out of the barrel, and I was fortunate to sample most of the 15 wines Arnoux makes. I found the Aloxe-Corton the most advanced — for a wine made from grapes picked less than two months ago — and overall the wines had lots of fruit and spice.

“I like my wines with lots of fruit because we drink burgundy younger now,” said Arnoux. “Do I know, really, what these wines will develop into? No, but I’m meeting this afternoon with my colleagues to discuss the new vintage. I’m optimistic about the quality.”

In any other luxury industry, the impetus to increase holdings to boost sales is basic business sense. But in Burgundy, where simply buying more land, even an adjacent acre, does not guarantee quality, the pride of maintaining distinctive excellence is the driving force.

“My sister and I have been asked many times if we are interested in buying other lots to add to ours, which have been in our family since 1933,” said Mugneret. “But I don’t want more and more land or money. Through good and bad times, my quality of life has no price.”