A crisis transforms the Southern Rhône

Falling sales. Vines uprooted. Growers leaving their land. Felicity Carter finds out how one French region rejuvenated itself.

Etienne Maffre, chairman, Syndicat des Négociant; Côtes du Rhône opens up a wine bar during the Avignon Festival
Etienne Maffre, chairman, Syndicat des Négociant; Côtes du Rhône opens up a wine bar during the Avignon Festival

At the beginning of the 21st century, producers in the Southern Rhône found themselves in crisis. The prices their wines were earning were so low, the future looked dark. Grape growers began to withdraw from the industry, either because they were ready to retire and their children didn't want to take over, or because they had to turn to more profitable crops. 

“The balance between production and commercialisation was not reached,” explains Thomas Giubbi, director general of the Côtes du Rhône AOC. “In addition, we had a poor quality vintage in 2002 because of a lot of rain during the harvest. All of this combined – high prices, not enough commercialisation, and bad quality – led us to a crisis.” 

The region lost so many vineyards after 2002 that its production has since fallen by half a million litres. And then a combination of factors worked to turn things around.

Three-pronged approach

“Since 2010 we have seen three big phenomena,” says Giubbi. “One is that producers are becoming wine merchants to distribute on a wider scale. Second, merchants are investing in vines and being producers.” And the third is that the co-operatives have invested heavily in production and brand building. “The idea of a co-op is very noble, but they were often seen as the provider of private brands.”

Over the past five years, the co-operatives have invested in brand creation, seeking to create more value. One goal is to earn more so they can pay grape growers more as insurance against losing them. 

The strategy worked. “Over eight years, from 2010 to 2017, the prices of the AOC went up fifty per cent,” says Etienne Maffre, speaking through a translator. He added that not only did prices rise, but the value of exports did as well. Maffre is chairman of the Rhône négociants, the merchants responsible for selling wine. There are four different types of négociants in the Rhône , he explains: the merchant/winemaker; the bulk négociants who don’t necessarily sell bottles; the négociants eleveur, who bottle and mature the wines; and the négociant producers. A decade ago, producers and négociants came together to create a 10-year plan for the future. “They started with the target price level – what is the minimum level we should have for wineries to be sustainable?” The producers needed to be able to make money from the wine, while the négociants needed to know that the wine would be high enough quality to compete on the markets. “If you combine these, you get the trading level required,” says Maffre.

Everyone realised they had to leave the entry level and upscale the product on offer. Maffre says it was true even in his own company, Maison Gabriel Meffre. “We have a strong brand called Chass that was about £4.50 ($5.00) a bottle. We realised it had to be around £6.00. It lost market share in the UK, but gained the price in the US.”

The process was not, however, easy. Convincing everybody to get on board with raising both quality and price was fraught – nobody wanted to risk what they had. And there were losses. “We have lost about ten per cent of the produced volumes, though it’s more the yields.” Maffre added that the average yield for AOC wine is about 20% less than Bordeaux. “The mature markets were very sensitive to price and we dropped a few market shares,” he admitted. “We had lesser volumes sold on these markets. On the contrary, in the fast developing markets, like Asia and the United States – where they would accept higher prices – volumes went up.” 

The French appellation system turned out to be an advantage, because producers could show the market cru wines, instead of village wines. “In some markets, the upscaling relied on going up the hierarchy of the appellation.” Producers were able to do this because the Rhône has appellation names that are so strong, they function as brands in their own right. Even so, some wineries had to launch new brands. Still, nothing about the change was easy. “It’s a big risk and it takes some time to convince the market that the price should be changed.” Maffre says, however, that the region had no choice but to take hard decisions. “There was no future if we didn’t change the prices, since we were not able to keep the same amount of production without investing in our own companies.” He says, simply, that it was “a matter of life and death”.

Entry level Rhône wines still exist, because “you still have consumers wanting to buy entry-level wines”. The difference now is that these wines are sold as IGPs or Vin de Pays instead, to protect the appellation names.

Rhône Valley appellation production in HL, Sales of AOC wines by distribution channel 2017, Top three export markets 2017

More work to do

Maffre and his team are also spearheading a modernisation of the region, as is Inter Rhône, the overarching organisation that co-ordinates the activities of all of the region’s AOC wines. In order to modernise, they all need better data but there isn’t much, unfortunately. This is not just a Rhône problem – the wine industry struggles to compile good financial and economic data, because the majority of wineries are family owned and unwilling to share sensitive profit and loss information. While it’s understandable at an individual level, the overall effect is that it’s hard to make the kind of economic and volume forecasts that are typical for other industries. Maffre says that when he became chairman, one of the first things he realised is that the organisation was making “collective decisions without having full information about the economics”.

The solution is a trial programme called an economic dashboard, through which  economic and sale indicators will be gathered, with the goal of following “the traceability from the production to the trade. The idea is to see how and where there is creation of value.” The tool has been created by their economic department under the direction of the wineries, and the idea is to work with several appellations to try and populate the system with data. 

Of course, getting the data will be no easy task. “We have to say, the most reluctant to participate were the négociants,” says Maffre. But since the négociants were the ones who had been loudest about the need for better information, they were the ones who most needed to supply it. “The appellations that will be in the pilot are volunteers,” says Maffre. The goal will be to get enough data to show the value of a modelling system, and to use that to convince other appellations and stakeholders to come on board. The head of the economics department will carry out the work, alongside the chair of a family producer and the head of a négociants. The team are hoping that if it works out, they can call in a consultant to work with them in 2019. “They had a study trip last year in Champagne, where a bunch of producers and négociants realised what was possible.”

The white wine plan

With the exception of Condrieu, famous for its Viognier, the Rhône Valley—both north and south—regions are famous for their red wines. It has not gone unnoticed, however, that there is a growing demand worldwide for white wines. “We’ve recruited a new technical head of department who is going to be in charge of research and development, and of removing alcohol degrees,” says Maffre. “We see on the consumer markets that if the alcohol is above fourteen per cent it’s harder to sell the wines.” Developing wine tourism is also on the agenda.

Inter Rhône is itself a strikingly modern organisation, with a number of staff drawn from data backgrounds. One thing everyone is clear on, though, is that the region will succeed or not, based on whether they can “convince a new generation to stay in the region”.

Every wine region in France is facing the same issue – can the region become economically viable enough to keep people on the land? A tour through southern Rhône, in the company of Inter Rhône, suggests that the efforts of the past five years are working, offering hope for the future.

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