LONDON _ On his way home from work recently, Stephen Freeston stopped at his favorite wine shop just outside London to stock up.

He tasted several varieties offered at the shop in the village of Theale, and scanned the shelves for new possibilities and old favorites. Bypassing French wines that once would have interested him, the 37-year-old information technology manager left with three cases of Australian wine, for which he paid just over $300.

"I can't remember the last time I bought a bottle of French," he said.

"With Australian, you can get a reasonably priced wine with fuller flavor that doesn't have to be cellared as long."

Trend-setting young wine drinkers like Freeston _ who estimates that he and his wife consume four or five bottles a week _ have France's legendary, world-dominating wine industry running scared.

With 40 percent of the global wine market, the country remains the world's largest wine producer. But lately, non-European countries have mounted an unprecedented challenge to its preeminent position.

Its wine exports increased only 26 percent from 1990 to 2000, compared with 68.3 percent for wine exports worldwide during the same period, largely on the strength of an explosion in production from Australia, California, South Africa, Argentina and Chile. The setback has been especially acute for France's two largest foreign wine markets: Sales dropped 4.6 percent in the United States in the last year and 6 percent in Britain in 2000, compared with respective rises of 22 percent and 25 percent for Australian wine during the same periods.

Producers in areas such as Burgundy are confident that demand for their finest labels _ their grand cru and premier cru wines _ will hold firm. But they are concerned about their less expensive wines for everyday drinking.

"We are not losing the market in fine wine. But on the basic wine, we are really losing the market," said Philippe Senard, a seventh-generation producer in the Burgundy village of Aloxe-Corton.

In Burgundy, worldwide exports of lower-priced regional wines were down 5 percent last year and Chablis exports to the United States were down 11 percent. The problem is even worse for the thousands of vineyards that sprawl throughout the Bordeaux, Languedoc and Rhone regions to the south. Those vineyards produce comparatively larger volumes of $5-and-under generic and table wines, categories in which massive non-European wine producers have become adept rivals.

With alarm bells ringing across the country, France's agriculture ministry issued an 80-page report last August that criticized its wine industry for haughtiness and complacency, and compared its predicament to France's disastrous defeat against the British at Agincourt in 1415.

"Until recent years, wine was us," the report said. "We were the center, the unavoidable reference point. Today, the barbarians are at our gates."

In February, France's strategic planning group for the wine industry said it would develop a response to the competitive threat posed by non-European wines. No doubt some French vintners hope the plan will contain generous government subsidies. In the hard-hit southern Rhone and Languedoc regions, disgruntled wine producers have responded to past industry reports by rioting, smashing train signal boxes, and attacking cellars containing non-French wines with baseball bats.

But government grants, other industry insiders argue, only perpetuate inefficient production. Instead, they say, French wine makers should improve quality, boost marketing efforts as their rivals have done, and seek to level the playing field with competitors in less-regulated countries.

"At the moment, in the face of competition, we have two possibilities: make more wine, which is not a choice since we lack land, or improve quality," said Denis Duveau, a wine dealer with the 144-member Burgundy Wine Dealers' Union . As the so-called barbarians gather at the chateaux gates, Paul Boutinot Agencies, which exports French wines to Britain, has recently introduced sassy Aussie-style names such as "Old Git" to a Cotes du Ventoux red table wine. Lacheteau in the Loire Valley christened a new $6 sauvignon blanc as "Kiwi Cuvee," selling 360,000 bottles in the first two years. A producer in Aude dubbed his Shiraz "Wild Pig." The delicious irony of these earthy Anglicisms is not lost on wine experts, who have watched lawyers for French producers fiercely chase after non-European growers who take prized French names and slap them on bottles of cheap wine.

To make products stand out on store shelves, Burgundy's local wine promotion board has just hired a marketing officer, Frederic Dupray. He noted that U.S. and Australian producers spend almost $1 producing a bottle of wine and almost $1 marketing it, perhaps 30 times as much as the French spend on marketing a similar bottle of wine.

"Until I came, we were not doing a lot to combat it," Dupray said. "We spent nothing on marketing. We will raise it, but not a lot. The problem is a lot of countries have discovered wine."

Among other changes ahead is possible overhaul of France's strict rules governing production and labeling, which forbid irrigation, dictate the amount of wine that can be produced based on a vineyard plot's size, and establish the date on which grape harvests begin. In an industry where such rules have been held sacred since they were first implemented in the southern Rhone in 1929, purists view talk of change as heresy.

"What makes the French system so original is the rules," said Christophe Tupinier, editor of the wine magazine Burgundy Today. "It's not possible to banish those rules. This would mean the end of the heart and soul of French production." ___ (c) 2002, The Philadelphia Inquirer. Visit Philadelphia Online, the Inquirer's World Wide Web site, at http://www.philly.com/ Distributed by Knight Ridder/Tribune Information Services. _____ ARCHIVE PHOTOS on KRT Direct (from KRT Photo Service, 202-383-6099): Frenchvineyards