France's Broken Winemaking Families
By Per-Henrik Mansson, senior editor
France could learn a few things from America. For instance, America doesn't pillory rich families. It equates wealth with success. If others can make it big, so can we. That's the American dream in a sound bite.
How different things are in France. Money is perceived as dirty, wealth as evil, and success, talent and fame as things to envy, not to admire. It's a culture that has spawned punishing taxes on wealth, income and inheritance that play havoc in France's vineyard regions.
To understand the upheavals now taking place in French winemaking families, you need look no further than these taxes. They drive a wedge between family members, who inevitably end up with opposite interests. So they bicker, sue each other, make slanderous attacks in the media. Brothers oppose brothers, parents oppose children, cousins oppose other relations. To these people, originally all united in the common pursuit of making fine wine from fine vineyards, the experience is sad and painful.
It got much worse for the winemaking families in the early 1980s, after France passed one of Europe's heaviest wealth taxes on individuals. Meanwhile, publicly held corporations and their leaders got attractive tax breaks.
As wine consumers, we like to identify wines with the families that have put their wineries on the map. But at the rate things are going, the traditional proprietors will soon be history in France.
One after another, families that have long been associated with famous châteaus and domaines are breaking up and selling out to billionaire tycoons, insurance companies and multinationals.
Examples abound. The majority of the family that has owned Château d'Yquem for 400 years has agreed to sell out to LVMH Moët-Hennessy Louis Vuitton. Château Cheval-Blanc, in St.-Emilion, was sold to billionaire industrialist Bernard Arnault and his multimillionaire financier friend Albert Frère of Belgium. Château Pichon-Longueville-Baron, a Pauillac second-growth, was sold to the AXA insurance group by the Bouteiller family.
In Burgundy, domaines are constantly subdivided or sold because the children can't afford inheritance taxes, which get higher when vineyard values do. Champagne houses are sold to multinationals or institutional investors, or raise capital by going public, a trend now studied by a few Burgundian négociants.
All economic sectors in France are affected, and brilliant French people flee the country. But for wine lovers, the most shocking example is Bruno Prats of the successful, family-owned second-growth Château Cos-d'Estournel in St.-Estèphe. Prats, 54, is emigrating to Switzerland. "He's the richness of our country, and the country is chasing away people like that," says one Bordelais vintner.
Return on capital, as defined by the value of a winery, is low. French vintners such as Prats must pay as much as 70 percent of their château's yearly gross revenues in corporate and personal income taxes. Then they must save enough money to pass on the château to their children, because the succession tax is at least 20 percent of the value of the property, and can reach 40 percent.
As long as they work actively, in some capacity, for the winery, the owners don't have to pay the yearly wealth tax of about 1.5 percent of the value of the estate. But if a sibling, parent or cousin leaves the estate or pursues a career elsewhere, he'll be hit with the tax. And therein lies much trouble.
Prats' brother and Cos co-owner, Jean-Marie, wanted to retire at age 60. By leaving Cos-d'Estournel, he was suddenly faced with a yearly wealth-tax bill of more than half a million dollars, or two-thirds of his yearly dividends from the château. So the Prats brothers sold Cos for about $115 million.
Yes, Bruno Prats made lots of money, and nobody should feel sorry for him. But that's beside the point. The point is what these laws do to France, its winemaking families and their ability to make top wines. For now, the taxes hang like the sword of Damocles over their heads.
Prats was an ambassador for Bordeaux and French wines. He respected the consumers and made the best wine he possibly could. That someone with his talent is no longer plying his magic in Bordeaux is France's loss. But also ours.
This column, Unfiltered, Unfined, features the opinionated inside scoop on the latest and greatest in the world of wine, brought to you each Monday by a different Wine Spectator editor. This week we hear from senior editor Per-Henrik Mansson, in a column also appearing in the January 31 issue of Wine Spectator magazine. To read past Unfiltered, Unfined columns, go to the archives. And for an archive of senior editor James Laube's columns, visit Laube on Wine.
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