Record year for French wine industry

PARIS (AP) - February 20, 2008 France sent nearly 9.4 billion euros, or about $13.8 billion, worth of wines and spirits abroad in 2007, an increase of nearly 7 percent year-on-year, the French Federation of Wine and Spirits Exporters announced Wednesday.

Growth in China more than doubled to nearly 247 million euros ($364 million) worth of alcohol. The country of 1.3 billion people, and a growing middle class discovering a taste for wine and already fond of cognac, was the 11th-largest market by value for French wines and spirits in 2007. Barely a decade ago, wine buyers' choices outside of the poshest hotels, restaurants or stores were mostly limited to Chinese-made rot-gut.

The growth in sales of French cognac and other spirits to China was equally explosive last year: Also more than doubling year-on-year by value, making China the third-largest market, trailing only the United States and Singapore.

French Champagne had a cork-popping year, too, with more than 147 million bottles exported in 2007, a nearly 5 percent increase from 2006. By value, Champagne's performance was even more impressive: the leading French wine-producing region, its exports were worth 2.36 billion euros ($3.48 billion), a bubbly 10.4 percent surge year-on-year. Bourgogne, with a 21.5 percent leap in export value, Cotes du Rhone, with 10.1 percent, and Bordeaux, with 8.8 percent, also had reason to cheer. Beaujolais, however, left a sour taste, tumbling nearly 9 percent.

But 2008 may not be so rosy. The strength of the euro compared to the U.S. dollar makes French wines and spirits more expensive in the United States, still France's largest market by value despite an estimated 3 percent year-on-year decline in exports across the Atlantic in 2007. The toughening economic climate in the United States could further dent sales in 2008, the exporters' federation said.

Champagne exports to the United States already fell by nearly 7 percent in value and nearly 6 percent in volume in 2007.

The good overall export performance also masks a broader crisis for France's wine industry. While Champagne and fine Bordeaux find overseas markets, lower-quality wines and lesser-known wine regions have struggled against competitors from New World countries such as Australia, Chile and the United States.

The French also drink less wine than they used to, and have been forced toward moderation by tough campaigns against drunk-driving in recent years.

Chronic overproduction has also hurt, forcing European producers - and not just those making cheap plonk - who can't sell their wine at decent prices to distill billions of bottles of perfectly drinkable wine into pure alcohol for use in disinfectants, cleaning products or gasoline additives.

The European Union agreed in December on a massive overhaul of the industry, including tearing up swaths of vineyards, doing away with overly intricate labeling and reaching out to consumers around the world instead of relying on age-old reputations.

China is among the regions where France's wine reputation still carries clout, and Chinese investors are following in the footsteps of those from Japan and the United States in starting to buy French vineyards.

A company from Qingdao, a port city on China's eastern seaboard that is famed for its beer, reportedly paid close to $3 million in January for a Bordeaux-producing chateau, outbidding a countess from Luxembourg and other potential buyers from Malta and Belgium.

The seller of the Chateau Latour-Laguens, Serge Laguens, told Le Figaro daily that his two children weren't interested in keeping the vineyards that had been in their family for two generations.

Proud of its new purchase, the Chinese company now calls itself "Latu-Lagan" in Chinese, and says some of the Bordeaux it produces will go to China. It won't reveal how much it paid for the chateau but said it plans to hire winemakers and experts to improve the wine, currently an ordinary Bordeaux.

"Chinese consumers have an increasingly clear awareness of wine," the firm, Latour-Laguens (Qingdao) International Wine Co. Ltd., said in an e-mailed response to questions from The Associated Press. "We bought the chateau to introduce genuine French chateau wine to China and spread the culture of wine."