Burgundy taxed to death?

The joy of visiting Burgundy, tasting the individual Burgundy estates and loving Burgundy as a region is all about the personal relations and links to the vignerons and their families.

The Burgundy we know is however being threatened by inheritance taxes on estates and vineyards transferred to the next generation.

It is virtually impossible for a normal Burgundian family to finance the taxes that would be due if the prominent vineyards were passed on via a normal generation-to-generation inheritance.

This means that quite a few vineyards are being sold to wealthy and big owners or to different investors who in part have acquired quite a large part of some of the top Crus of Burgundy. This is done to finance the inheritance tax.

The Burgundian’s answer is to organise domaine and vineyard ownership via companies and sometimes even in connection with different investors. This is not the scope of competencies of the vigneron, but rather, a group of consultants and accountants that will only make the transition more complex and most importantly, more expensive. Bureaucracy … and more bureaucracy! Next year more legal complexity … more advisors … it will never end!

And aditionally these complex financial constructions introduces investors of the more dodgy kind … financing vineyards is not for innocent and enthusiastic wine lovers.

Few collectors know that an important share of the top vineyards of some of the famous estates are in fact already owned by French or foreign investors. Some of these investors are private people, but others are very wealthy investors and companies.

This is not new, but is expanding … and I have yet to see anyone that can give me an overview of these constructions – this is often quite complex financial engineering. The question is … who owns Burgundy?

People like to criticise LVMH and Artemis but at least this is done in the open. However, if a mainland Chinese owner buys Grand Cru via the right channels very few will notice or even hear about it!

The risk – larger estates and units

Burgundy used to be a lot of small estates … a mixture of very small with below 5 ha, medium size: 5 to 10 ha and then larger estates: 10 to 15 ha. Finally, we have a few historic estates with 15 ha or more, which is another part of the Burgundian culture and tradition.

The small and medium-sized estates are the core of the Burgundian tradition, where the vigneron takes care of the estate herself/himself and more importantly make the wines herself/himself.

This could also be the case with the larger estates, but here, we also see employees doing vinification and viticulture … hence, the idea of the traditional family estate is gradually lost.

The old core of family estates is what we as collectors and Burgundy lovers adore and cherish when we visit and collect the precious bottles. A lot of different estates and vinification styles and principles that makes Burgundy diverse and exciting.

To cope with the tax and the business conditions, a lot of vignerons have also started to expand the domains with lesser wines from the Hautes Côtes … making more wine … good wines … but nevertheless not wines that have the quality of the core wines of the estate.

Too many cuvées = lower quality

The issue here is the quality of the wines produced – if the number of cuvées of these expanding estates grows beyond 12 to 15, as this is more than one winemaker can produce in a very high quality – I know this is my claim, but tasting estates producing 30, 50, 75 or even 100 vines show that there is a limit to what one man can handle and optimize.

Yes, some wines attend more focus, but in reality, we get some good but often less interesting wines … far from Vin d’émotion and the hedonistic grace we are looking for.

We have accepted this in the big négociant houses in Beaune where quality is good but rarely match the quality of the best small estates … but this tendency is not what Burgundy enthusiasts are looking for in the rest of Burgundy!

The full story

There are a lot of other consequences of the high taxes on Burgundy vineyards, and one is the upward pressure on the grape and wine prices that faces the vignerons who rent the vineyards from needy or greedy owners.

I have seen plots where the prices tripled in one year rendering the vigneron unable to continue making this wine.

So, it is not only the owners that are hit by the taxes. It’s also vignerons that rent vineyards and buy the grapes.

The goal should be to have the best vigneron for the vineyard plot, not the richest or the one with the best financial advisors!

More about this in the next part of Burgundy taxed to death

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