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11.09.2007

Money Alone Will Not Save European Wine

The European wine industry, especially the French wine industry, needs a serious shot in the arm. It has needed one for more than a decade. A few days ago, the European Union tried to give it one, but thanks to the characteristic myopia of international politics, it might as well have just taken a few hundred million dollars and flushed it down the toilet.

The EU recognized, correctly, that European wine isn't particularly competitive (read: doesn't sell) on the world market once you get outside of the luxury price range ($25 and above). Unfortunately, the majority of European wine made falls below this price range, which means that tens of thousands of people who make their living off of such wine as winegrowers, vineyard workers, winemakers, and winery owners are in serious financial straits.

But like the parent of a rebellious teenager who decides that their kid will settle down if they buy them a really nice sports car, the EU mistakenly seems to think that they can spend their way out of the existing crisis. Or perhaps a better analogy might be the the bozos in Washington, D.C. who think that they can fix the problems with Medicare by increasing the subsidies for prescription drugs for the elderly.

"Improving the quality of the wine we produce is a top priority if we are to fend off the challenge posed by New World wine producers," EU Farm Commissioner Mariann Fischer Boel is quoted as saying in a recent article in the International Herald Tribune.

This most certainly is true, but those improvements are not going to come from spending $750,000,000 to help farmers replace current rootstocks with newer ones, which is essentially what the EU managed to get through it's committees for this year. The real reforms, like changing labeling laws, marketing laws, and appellation regulations are going to have to wait until next year, apparently.

Which, if you'll permit just a slight bit of cynicism on my part, means basically forever. It's all too easy to just throw money around because constituents always re-elect people who pay their bills. It's hard to do the right thing and completely rethink a broken system.

Here's hoping that the politicians actually mean what they say. What are the chances of that?

Read the full story.

Comments (8)

Jim Gordon wrote:
11.09.07 at 7:19 PM

Alder: Yes, it's bad parenting, just like when the US govt supported tobacco for years and corn and other crops that were dragging down the economy, but yet are part of the American psyche, like wine grapes are for the French. I think it's the same nostalgia for the good old days -- whether it was grandpa's farm in Ohio or granpere's vineyard in Entre-deux-Mers -- that makes politicians unable to resist the requests for prop-up funding to "preserve the family farm."

ryan wrote:
11.11.07 at 4:58 AM

I think it is very pertinent to French wines, and maybe Italian. But Here in Spain we see the under 25$ wine market exploding! Then again we allow for more variation in our labeling. Which is a big deal.

This by the way is the funniest line: "Improving the quality of the wine we produce is a top priority if we are to fend off the challenge posed by New World wine producers," said EU Farm Commissioner Mariann Fischer Boel

WHAAA? Quality? We have the quality...we just need the marketing!

Eric Lecours wrote:
11.11.07 at 1:30 PM

Alder, allow me to be the contrarian. The following is not a continuation of the cheering section above:

Certainly the interventionist policies in Europe are often a bit ridiculous and futile. However, European wine doesn't need saving. Just as Europeans need not worry about growers in California's Central Valley and South East Australia, non-Europeans need not fret about equivalent growers in Europe, let alone overtly revel in their challenges and their government's misguided efforts in restructuring supply. The market will take its course and correct as necessary regardless of EU intervention.

What is the fascination in reveling in the plight of 3-5 euro a bottle wine producers? The same consumers who hold this fascination have no awareness or interest in the growers of the Central Valley. There must be a name for this complex-maybe...Oedipus Borolus?

European wines would certainly be doing better if they had access to on-demand, illegal labor with no benefits and no rights who lived in sub-standard housing but were all the same grateful for the employment. They would enjoy a competitive advantage just as Chinese, Vietnamese and Philippine manufacturers in their respective industries do. In the case of wine, this wouldn't be an advantage however; it would just level the playing field.

This year there were police in force in France. There were inspections in the fields. Police could be regularly found on the roads between Nuits-St-Georges and Vosne. It's simple, the laws are enforced. They are at a competitive disadvantage as they don't have the right to choose the laws they follow.

How would Prum, Leroy, Lafite, Conterno take to the notion that they (Europe) needed saving? Laughable, probably. Imagine what Lalou would think of a wine of 15% alcohol, four tons an acre, 2,500 vines per hectare and water additions. She couldn't even label such a product "Bourgogne".

This year Richebourg fruit, with two weeks of extra hang-time, came in at 13.4 % potential alcohol and pH of 3.3. There is only one place in the world where that happens.

11.12.07 at 9:04 AM

Speaking just of the U.S. market, Italian and Spanish wines have been very competitive under $15, and French wines are not doing badly in the $10-20 market if you look outside the grocery channel (big if). There is no consumer research evidence that quality is a major problem for most of the European wines that make it to our shores. Sales difficulties for French wines stem mostly from the very fragmented nature of their producers, which makes it harder to market the under $15 wines in the "big box" retailers.

Anonymous wrote:
11.22.07 at 6:48 PM

Your comments are well received and yes there needs to be alternatives; however, you must realize that even in poor economic times a Benz and a Krug are a regular purchase for those that have and can. And these folks will and can keep the industry alive. Do you really want the EU to enforce laws that make all French wine the same - do we need to see the varietal breakdown of a great Margaux? The folks that can and want to buy the wine already know what they are getting- )!
Cheers!

Alder wrote:
11.23.07 at 4:23 PM

Anonymous,

I'm not an economist, nor do I know a ton about the wine industry, but last I heard around 80% of the revenues and 95% of the volume of consumption in most wine markets comes from wine under $25 in price. To suggest that since the highest end of the market has no problem selling their wine, everyone else will be fine seems either naive or elitist, or both.

john wrote:
12.05.07 at 9:51 AM

I haven't been a big drinker of french as I my palate generally sides with the variety of Italians and some Spanish.
But I have been drinking the 2005 du-pape and Bourdeux under $25 and I don't think there has been a better deal on the market in years. We did a taste off of 4 $10-13 wines the other night that worked perfect with a few tastey items. I don't get the story unless all other years have been terrible.
This sounds more like a general political rant that wine induced.

Alder wrote:
12.05.07 at 11:49 AM

John, thanks for the comments. The point isn't that there aren't decent or even good wines from Europe under $25 -- there are lots of great wines in that price range available to US consumers.

This rant must be taken in context of millions and millions of gallons of unsold French wine that no one can figure out what to do with. The acres and acres of vines that go un-harvested or the grapes that sit around and rot because no one wants to buy the wines that they produce. The hundreds of winemakers who, because of plummeting prices for grapes due to lack of demand for wines, are blowing up buildings, setting fire to tankers, and throwing bricks through the windows of wine importers and distributors.

Here in America we don't feel the symptoms of the malaise.

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