After the recent purchase of Château Gevrey-Chambertin by Macao businessman Louis Ng, some Burgundians and conservative French groups voiced discontent over foreign investment in the region's vineyards. The controversy surrounding the sale may be overblown, however, it does shed light on several looming issues facing the region.
First and foremost, the business of buying and selling vineyards in Burgundy has changed. What once passed between families and neighbors is now the realm of corporations and investors, whether they are French, American, Canadian, European or Asian. Americans have invested in land in Burgundy since the 1950s, but are increasingly involved in recent transactions there.
What's happening in Burgundy has happened in other regions, such as Bordeaux and Champagne and other countries, for example the United States (California, Oregon), Argentina and Chile. Like it or not, Burgundy wines command a global market and this will attract the attention of investors worldwide.
This latest group is primarily collectors, like Ng, who develop relationships with their favorite growers by buying Burgundy over the years. In most cases, the land is leased to a grower and the resulting wine shared by the parties involved.
The fact that these investors are well-heeled, with money to spend, means that these deals have become more expensive. The problem for most vintners in Burgundy is that it puts the cost of vineyards out of reach. Even if land becomes available, a grower or négociant must put together a group of investors in order to purchase the land. The most recent example prior to the sale of Château de Gevrey-Chambertin was the purchase of Château de Puligny-Montrachet by Etienne de Montille with the help of a group of investors from the United States, Asia and Europe.
In the case of Château de Gevrey-Chambertin, the price may have increased because a group of Gevrey-based vignerons was also trying to buy the property. At any rate, the higher the cost of land, the higher the taxes, whether it's wealth taxes or estate taxes. Thus, it is understandable that Burgundian producers are increasingly upset and frustrated that on one hand they can't afford to purchase vineyards and on the other, their own taxes may potentially increase.
Furthermore, most of these deals are done secretly and even vintners from a neighboring village will be unaware until the news is public. Ownership by multiple family members, lease agreements and the relationship between land holding companies and farming companies and French laws make these deals extremely complicated. This has often been the nature of the sale of vineyards in the region, but is even more significant now.
The Société d'Aménagement Foncier et d'Établissement Rural (SAFER), the regulatory body that oversees agricultural transactions in France, can, and often does, influence vineyard sales. They set prices, though sources from Burgundy suggest SAFER's pricing of vineyard holdings are well below market value; nonetheless, they seem to be the standard by which parcels are judged. Using SAFER's going price of about 50,000 euros per ouvrée (0.043 hectares, or 0.1 acres), the vineyard holdings of Château de Gevrey-Chambertin were valued at 2.674 million euros ($3.448 million). But of course there was the château, too, which brought an assessment up to $4.4 million. Yet thanks to the bidding war between Ng and his Burgundian competitors, the final sale price was a reported $10 million.
According to my sources and Jean-Michel Guillon, owner of Domaine Guillon et Fils, president of the Gevrey-Chambertin wine syndicate and leader of the Gevrey group that attempted to buy the estate, SAFER did not need to approve this deal because the purchaser was a corporate entity—Ng formed a company with some friends who are minority investors in the deal.
The uproar may lead to changes in the agency's authority, allowing it to intervene in sales of land between corporations as well as individuals.
Ng told Wine Spectator that he has leased most of the the land to Eric Rousseau of Domaine Armand Rousseau, a top grower in Gevrey-Chambertin whose wines are prized around the world. Ng has also hired acclaimed French architects Christian Laporte and Regis Grima to renovate the château.
Ng's plan sounds promising and he has the necessary resources to carry it out. The French should give Ng the opportunity to restore the property. The château needs work and the vineyards, mostly village-level, are in bad shape. He has the necessary money to improve quality, which would benefit Gevrey-Chambertin and Burgundy overall.
Peter Hellman — New York — September 13, 2012 1:50pm ET
Sips & Tips | Wine & Healthy Living
Video Theater | Collecting & Auctions