THE WINE MARKET STAGNATES :

Transactions have slowed to a halt since October.

"The Bordeaux wine market is eerily calm at the moment but market operators can't play the waiting game too long," explains a broker specialised in contractual relations between producers and merchants. This profession is often described as the beating heart of the Bordeaux wine business.
The market's pulse is definately on the slow side this season : transactions are rare between producers and merchants, most of whom have a year's stock ahead of them and are not in any hurry to re-order, despite a historically low yield in 2008. On the production side, growers refuse to lower their prices and quotations are not budging. To add to the difficulties, banks are hesitant about granting loans to finance stocks....As a result business is grinding to a halt, a situation which could well continue throughout the semester.

The wines will have to be sold at some stage to finance the coming season. There is hope for an increase in sales in the Spring....For the moment however, the market is so paralysed that Saint Gobain, the major regional glass bottle manufacturer, has already stopped production from one of it's ovens in the company's factory based in Charente....

The grand cru wines are also in a difficult position. The 2007 vintage prices were expensive and merchants still have a considerable number of unsold bottles in stock. Moreover, the practically non-existant futures campaign in the Spring did little to move stocks.

Pension funds, which had invested in the wine business for speculation purposes, have suffered the effects of the financial crisis and are consequently putting wines on the market at drastically cut prices...and in doing so are brutally re-adjusting the market.

Author:

César Compadre

doc@sudouest.com


S.O. 09/01/09
Translated by Maxine Colas.

RISE IN TAXATION HITS WINE & SPIRITS

From January 1st, taxation on wines and spirits increases in France as the French government seeks ways to fill the void of the social security deficit.
In the past, increase in tax on alcoholic beverages was voted in conjunction with finance laws. Now it will be indexed on annual inflation figures and so be revised every January based on the previous year's inflation percentage.

It is important to know that, each time the consumer buys a bottle of wine or spirits in France, he or she is paying a specific tax (in addition to VAT). This "circulation" tax or "accises" in French is then paid by producers to the State. This is one of the most "controlled" areas of the wine and spirit industry as considerable sums of money are involved (several millions of euros...).

With 1,5% inflation in 2007, the tax on wines of less than 15° increases in January from 2,55 to 2,58 euro cents per 75 cl bottle :
a minimal rise. However, liqueur wines such as Pineau des Charentes or Floc de Gasgogne, and spirits will have, in addition to the indexed tax, another 'social security' tax specific to this range of alcoholic drinks.
On buying a bottle of Cognac for example, you will now be paying 5,24 euros (in addition to VAT) as opposed to 4,97 euros previous to January 1st : 27 euros cents more.

Pineau producer Christian Baudry, who is president of the French Federation of Liqueur Wines, feels that these types of wines are being unfairly prejudiced by this additional taxation.
"We are being milked like dairy cows!"he exclaims. A bottle of Pineau will now be taxed 1,63 euros as opposed to 1,60 previously. If one adds VAT, this totals 3 euros on top of a bottle which sells for an average of 7 euros....

Author:

César Compadre

doc@sudouest.com


S.O. 06/01/09
Translated by Maxine Colas.