The Bordeaux wine trade ¨C Intellectual Property even the Chinese can¡¯t replicate

Market commentary from Nick Hood, Head of External Affairs for Company Watch

China imported 33.5 million bottles of Bordeaux wines worth $475m in 2010. No wonder the price of an average 2008 Grand Cru Class¨¦ at a small St Emilion merchant¡¯s tasting outlet defies current European economic logic at an eye watering €49 a bottle. With the nouveau riche from India and Russia adding to the upward price pressure, Bordeaux can afford at least for the moment to ignore the complaints of budget-conscious developed-world wine buffs that claret is no longer affordable. The world still drinks 14 bottles of the stuff every second.

Of course the wine and the weather bring a parallel bounty ¨C tourists, eager to photograph the immaculate ranks of vines marching ever onwards across the picturesque countryside and take home as much of Bordeaux¡¯s billion bottle annual production as they can transport. The city itself is a visitor¡¯s paradise, a cornucopia of caf¨¦s, restaurants, quirky shops, culture and attractions, all made into a joy by the abundance of friendly and welcoming waiters, shop assistants and other locals.

But away from the obvious engines of the economy, Bordeaux benefits from being one of Europe¡¯s major aeronautical centres, employing over 20,000 people and ranking as France¡¯s fifth largest region for R&D expenditure.

The university has 100,000 students, or around 10 percent of the population of the city and its suburbs. Bordeaux has strong links to St Petersburg following 20 years of trade visits between the two.

So how do these obvious positives for Bordeaux sit alongside France¡¯s constrained post-recessionary growth? Independent economic forecasts are predicting a rise of only 1.4 percent in GDP this year, well below the government¡¯s more robust estimate of 2.5 percent. Things may not get much better in 2012. The economy is being hit by two main adverse factors, most notably soaring commodity prices feeding through into inflation for businesses and consumers alike. But like almost all of Europe, it is grappling with a stubborn budget deficit and excessive sovereign debt.

The National Auditors¡¯ June report commented on the risk that the general government deficit could reach 100 percent of GDP by 2016, rising from the 2010 figure of 76 percent. The EU Commission¡¯s deadline to get its deficit under control is looming in 2013 and the threat is of more public spending cuts and additional taxation, neither likely to be good for sustained growth, any more than will be sustained unemployment levels above 9 percent.

Unsurprisingly, none of this seemed remotely relevant to the upbeat mood in late June in the Place St Pierre in steamy 40c temperatures and 55 percent humidity as concerned waiters chilled their customers¡¯ bottles of deep crimson delight to keep them drinkable and served endless pots of moules et frites, or surprisingly tender faux filet to the throngs of diners occupying every single seat in the square¡¯s restaurants.

Not much seemed wrong with the world, except of course the threat that the inevitable thunderstorms might deliver hail to strip leaves and shred the young grapes in the nearby vineyards or that the woes of Greece are set to deliver heavy financial blows to the fragile French banking system.

Nick Hood is Head of External Affairs for Company Watch. He can be contacted on +44 (0) 20 7721 8440 or by email: nhood@companywatch.net.