Freak Grape-Razing Hail Crushes Burgundy Winemakers’ Dreams

Hail the size of ping-pong balls brought William Rouxel’s future as a Burgundy winemaker crashing down along with his grapes.

With a season’s work destroyed by the summer hailstorm that trashed a 10-kilometer (6.2-mile) swath of Burgundy vineyards producing some of France’s most-prized wine, the 35-year-old says he can’t risk another year like it. He’s calling it quits.

“At this point I need to win the lottery, and I’m not a gambler,” said Rouxel, smoking a cigarette at a round metal table in the stone courtyard of his house in Beaune, in the center of Burgundy’s Cote d’Or, or Golden Slope. “I’m tired.”

As grape harvests get under way this week, the damage caused by a single hailstorm that pummeled the area around 4 p.m. on July 23 has ruined the likes of Rouxel and hit sections of France’s 8 billion-euro ($10.9 billion) wine industry hard. Some choice wines from Pommard and Volnay will be in short supply starting next year in a region that already can’t produce enough to meet global demand.

Multiple smaller hailstorms last year cut the volume of Burgundy’s 2012 vintage to 1.26 million hectoliters, equivalent to 168 million bottles, from 1.51 million hectoliters in 2011, according to the region’s wine board. It estimates this year’s production at between 1.35 million and 1.4 million hectoliters.

Burgundy’s wine properties shipped 1.43 million hectoliters in the 2012-13 season, meaning they’re depleting stocks, which the board estimates are down as much as 15 percent.

‘Rock Bottom’

“Demand is still there but the wine isn’t,” said Thiebault Huber, who runs the Huber-Verdereau estate in Volnay, a 10-minute drive southwest of Beaune. “I can’t afford to take on new export clients. I already can’t supply my existing ones. The dynamic that was there is lost.”

Several years of losses may also force consolidation in a wine region known for its patchwork of 1,247 named plots dating back centuries, called climats and a candidate for the United Nations’ World Heritage list.

“People’s spirits are really starting to hit rock bottom,” said Huber. “I’m afraid that this winter there’ll be a lot of vines for sale.”

Huber, who’s got the backing of private investors, may be a buyer should vines come up for sale near his estate.

He said the Volnay growers have asked the local government for help “to prevent banks from forcing winemakers to sell their vines.” They’ve also asked for exemption from social charges for their workers, with no result so far.

Freak Hailstorm

The hailstorm all but wiped out Rouxel. The winemaker, who rents his vines, will have no 2013 vintage. He’s selling his grapes and says he won’t harvest in Pommard after hail destroyed 95 percent of the grapes there.

In nearby Savigny-les-Beaune, the hail was like nothing in living memory, with some plots entirely denuded of grapes, said Caroline Chenu, 40, as she was labeling the last bottles of her 2011 Bourgogne.

The July hailstorm moved along the wine slopes of Aloxe-Corton and Savigy to Meursault in the south, rather than its typical path perpendicular to the slopes that localizes damage, said Burgundy Wine Board President Pierre-Henry Gagey.

“Apparently there was a worse disaster in 1945, but our dad has never seen anything like this,” Chenu said.

For the village’s growers, about 25 of them, two years in a row of grape-destroying hail means all investments are on hold, and winemakers are asking banks for credit extensions, Chenu said. No new barrels, no new tractors, no winery expansion.

Bitter Growers

“What’s really making winemakers bitter is that this is not considered an agricultural disaster, because it’s insurable,” Chenu said. “We’re insured, but it won’t cover our costs.”

Burgundy wines spend 12 to 18 months in the barrel before being bottled, meaning the full effect of the 2012 and 2013 hail damage won’t start to be felt for about a year and a half, according to Chenu.

She said crunch time for the Louis Chenu estate she runs with her sister Juliette will be in 2015, when it will be too early to sell the 2014 vintage and no stocks will remain.

“We’ll spend a year in anguish, waiting for the 2014 harvest,” Chenu said. “I hope to continue this work, but the situation is critical. If in 2014 there’s again no wine, we’re going to seriously have to think about doing something else.”

Huber is in better shape. He says he raised the price on his 2011 premier crus from Volnay and Pommard to 28 euros a bottle from 23 euros after positive reviews, and he’ll price the 2012 vintage at about 30 euros.

Some Spared

With harvest starting this week, Huber says he hopes to produce 20,000 bottles, compared with the normal volume of 50,000 to 54,000 bottles. His estate turned out the equivalent of 18,000 bottles last year.

With a Burgundy from Savigny selling for about 8 euros a bottle, adding 4 euros to recoup losses would leave the wines unsellable, Chenu said.

“In Savigny our margins are a lot smaller, we sell our wines for a lot less than Volnay,” Chenu said. Production at the estate fell 50 percent in 2012 from the usual 25,000 to 30,000 bottles, and 2013 will be worse, she said.

Down the road from Savigny and Volnay, past expanses of vines showing hints of autumn colors, Jean-Michel Chartron is in the middle of picking his chardonnay grapes in the village of Puligny-Montrachet. Some will be used to produce the Jean Chartron estate’s 450-euro a bottle Montrachet grand cru.

His vineyards were spared this year after hail cut output to 30,000 bottles in 2012, less than the usual 80,000, said Chartron, the fifth generation of winemakers.

Chapter Closing

“We were lucky,” said Chartron, who expects a normal level of sales of around 2 million euros from the 2013 vintage. “We had a July, August and September that were just great, and kept the vineyards healthy.”

For Rouxel, the hail brought with it the end of a dream. Rouxel, who’s originally from the Paris region and set up his estate in 2008, hasn’t got investor backing or a family rooted in wine to fall back on. He estimates he can quit now with less than 20,000 euros in debt, or face another failed year and risk seeing that rise to 100,000 euros.

“That’d be shooting myself in the foot,” he said. “It’s important to be able to end my estate, everything I’ve built up, with my head held high. The Rouxel-Segaut estate shuts its doors on July 31, 2014.”

Rouxel says he’s been working seven days a week to tend his vines, build up his sales network in Paris and find buyers in New York, while not seeing a whole lot of his wife and his four-year-old daughter. Yet he can’t help a smile as he sniffs and tastes a glass of his 2011 Aloxe Corton red.

“It was a dream to build up an estate,” he said. “It’s been a really good experience. It’s mother nature who’s taking my business away from me -- two years of bad luck.”

Before it's here, it's on the Bloomberg Terminal.