Burgundy in Context w/ William Kelley, The Wine Advocate

As the wine reviewer for Burgundy for The Wine Advocate and a small producer of Burgundy himself, William Kelley has a deep and insightful perspective on Burgundy.  We discuss how Burgundy became “without substitute” and why “all roads lead to Burgundy,” the rapid escalation of both vineyard and wine prices, and how what was once very contracting landholdings are now consolidating again.  History, economics, geology, and terroir all come together in this episode of XChateau! 

Detailed Show Notes: 

• Listen to the beginning of Episode 62 for background information on William
• Burgundy as vignerons vs Bordelais châteaux
  • William believes this is an illusion - historically, Burgundy vineyards were owned by the nobility and the church
  • Today - LVMH, AXA, and rich, wealthy people own many of the domaines and vineyards
  • Bordeaux outside the Cru Classe are much more modest in nature
  • The French land reforms of 1792 (during the French Revolution) broke up large tracts of land -> led to a “morcellation of parcels”
    • Led to emphasis on each small parcel of land and its impact
    • Created the ability to see the human element of winemaking (two people making the wine from the same vineyard) and the human impact on terroir
  • Metayage system - born in Beaujolais, a form of “sharecropping” where people take half the fruit in exchange for farming the land, popular in Burgundy where people own small parcels of land and often don’t live there
  • High death/inheritance taxes, which are assessed based on the value of the land lead to more vineyard sales and end up with more consolidation of land holdings, particularly into businesses that don’t have to pay death taxes
• Burgundy as the top global winegrowing region
  • The wines are good/high quality
  • They pair well with a lot of food and are very versatile (vs. the Medoc)
  • Are a social signifier - wine collectors can “one-up” others by mastering the complexities of Burgundy more than Bordeaux or any other region
  • Grand Cru vineyards are tiny and limited - sends the prices skyrocketing (e.g., Domaine d’Auvenay Aligote now sells for $2,500 / bottle)
  • Bordeaux mismanaged the emerging market of China with the 2010 en primeur pricing, similar to what Hennessy and Cognac did in China, destroying the market
• Value of Burgundy land
  • High prices partially driven by tax write-offs for any losses, owners get the wine lifestyle “for free”
  • Believes land prices and wine prices will continue to escalate
  • Disconnection between land and wine prices
  • In the 17th century, there used to be a saying that the value of a vineyard should equal 3 years of production - this is way different today
  • E.g., a famous Chablis producer’s Les Clos magnum sells at €80 from the domaine, but $2,000 in the US -> lots of other people making money on the wine outside of the winery
  • “No end in sight” to price increases for Burgundy, wine is still a relatively inexpensive luxury good (vs. cars, watches, etc.…)
• Climate change
  • Not as bad as some people think, bad weather events also occurred in the 19th century
  • Today there are more viticultural techniques to combat climate change (e.g., canopy management, etc..)
  • Price increases also more than offset the volume decreases
• The Micro-negociant
  • Purchasing fruit is expensive - ~€3-5,000 per barrel for village wines, €550-600 for Chiroubles 
  • If some negociants get the attention of investors, they can acquire land and become domaines
  • More expensive to produce negociant wine vs. domaine wine
  • Growers in Burgundy take the yield risk (the classic arrangement is negociants buy the fruit by the barrel)
  • A seller’s market - need good relationships with growers, hard for outsiders to get good fruit 
  • Negociants have the ability to make lower appellations/vineyards more popular - e.g., Arnoud Ente Meursault La Seve du Clos is a lesser site, but Ente has elevated it
• Domaine vs. Maison
  • Consumers still put a lot of stock by it, but boundaries are blurring
  • E.g., PYCM - started as negociant, rolled in family vineyards, but don’t state “Domaine” anywhere, the idea being that all wines are worthy of the brand
  • Price should be driven by quality, not hierarchy (e.g., some Aligote more expensive than Grand Cru Puligny)
  • Brand expansions can’t be diluted because of the vineyard hierarchy - the Grand Crus are still high quality and drive brand reputation
• The Future of Burgundy
  • Viticulture - would like to see every site in Burgundy farmed like a Grand Cru.  William wants to break glass ceilings in every appellation
  • Winemaking - people extracting less and less, flirting with natural wine movement, lighter, softer styles of red Burgundy more popular, longer elevage is getting more fashionable (and is rooted in history - used to do 2-3 years elevage because it was the only way to clarify the wine)
  • Price escalation impacts on other wine regions - “there is no substitute (for Burgundy),” people will look further afield, but “all roads lead to Burgundy”
  • Insular nature of Burgundy changing - the new generation of owners are from New York, Macau, Shanghai, and Hong Kong
  • Advice to the new generation of producers - taste the great wines of the world, including older benchmark wines
  • Changing leadership of domaines - though marketed as a good thing, there’s a lot of pressure for the next generation of a famous domain, and that tends towards being more conservative and listening to consultants vs. trying something new
  • M&A - “everyone wants to buy as much land as they can”; don’t see a lot of people wanting to go global, there’s still ample price escalation in Burgundy

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