Problems in the French Wine Industry

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1 Problems faced by the French Wine Industry with special reference to Bordeaux
- 1.1 The effects on France
- 1.2 The effects on Bordeaux
2 Sources

[edit] Problems faced by the French Wine Industry with special reference to Bordeaux

In France, more than 900,000 hectares of land are devoted to the wine-growing industry, of which, Bordeaux counts for 200,000. Nationally, the number of people working in this sector has been estimated at 500,000, of which an estimated 120,000 are from the Bordeaux region. Given this fact, it is clear to see how important the province of Bordeaux is to the French wine industry as a whole.

Despite having a good reputation for producing many quality wines, Bordeaux wine sales are decreasing, and jobs are being lost. Many individuals in the industry blame the French government for their stringent laws, and others blame the industry itself. French culture has been condemned by some of the new generation of wine growers, whilst the industry abroad appears to be benefiting from it.

The large United Kingdom market now imports more wine from Australia than from France. Similarly, imports of Bordeaux wines by volume into the large United States market were down 9 percent between 1994 and 2004, during which time American consumption of wine increased over 50 percent. This represents a serious erosion of Bordeaux's market share in the United States [1].

"Bordeaux's red wines have a reputation for being brutally bitter when young, and more acidic and less fruity than American wines. Wine writers extol the longevity of Bordeaux reds and routinely discourage people from drinking them until the wines are at least 10 years old. No wonder Americans looking for a bottle with tonight's dinner don't buy Bordeaux" [2]. This is true of consumers in other countries as well.

[edit] The effects on France

Over the past five years, France has seen major changes in the winemaking industry. New production methods are being used; there is increasing competition from countries in the New World; and the tastes of wine-drinkers have changed.

With nearly 663 million cases, France accounts for 22% of the world’s wine production, but although a formidable percentage, French wine exports have declined by 10% since 2003, whilst domestic sales fell by almost 5%. The decline in this annual period mirrors those of the previous years, where compared to 5 years ago (1999), sales have slumped by nearly 24%.[http://72.14.209.104/search?q=cache:Hwvg38Y2IE0J:www.sfgate.com/cgi-bin/article.cgi%3Ff%3D/c/a/2005/04/28/WIGV8CDIGV1.DTL+French+wine+problems&hl=en&gl=us&ct=clnk&cd=24 ]

After an increase in the number of road-related deaths, the government imposed the Loi Évin alcohol policy law in 1991 in an attempt to reduce drink driving, to decrease public alcohol abuse, and to comply with European Court of Justice mandates. It specifies the conditions under which advertising for alcoholic beverages is permitted in the press, the messages and images, and importantly the obligation to include the statement ‘l’abus d’alcool est dangereux pour la santé – consommer avec modération’ on every advertisement.

Many key figures in the wine industry have criticised the government, declaring that consumers are being discouraged to drink wine and therefore are directly affecting their trade. Many wine sellers believe that the public are listening to these warnings, and are now drinking less alcohol on the government’s recommendations.

It is certainly true that the French public are drinking less than they previously did before the Loi Évin was introduced. Statistics from 1991 show that on average 61.3 litres of wine were drunk per head in France, compared to 57.8 litres per head in 2001, and the percentage of those who class themselves as regular drinkers, has fallen from 30% to 24%. [http://72.14.209.104/search?q=cache:Hwvg38Y2IE0J:www.sfgate.com/cgi-bin/article.cgi%3Ff%3D/c/a/2005/04/28/WIGV8CDIGV1.DTL+French+wine+problems&hl=en&gl=us&ct=clnk&cd=24 ]

It seems from these figures that the government objective of regulating alcohol consumption has been successful. However, the results of a survey showed that 88% of those asked were not deterred by the government warnings, coincidently 80% of this sample smoke and feel the same way about smoking warnings.

The Loi Évin however, is not the only directive affecting wine production in France. Wine laws have been established in nearly all of the world's wine producing countries to help protect established traditions and practices, to provide the consumer with a system of checks and balances against fraudulent activity and greed, and to protect the economic interests of those in the wine industry. France was an early leader in establishing laws that govern winemaking and wine labelling practices. In 1973 the INAO was created to regulate the classification of wines and to examine winemaking procedures in accordance with the law.

Whilst traditional methods were used to cultivate the vines and extract the liquid from the grapes, these laws were having little effect on the winemakers. But as technology advanced and trade equipment revolutionised, the laws became a restraint on the industry. Robert M. Parker, Jr. the distinguished wine critic believes that these laws are causing the downfall in the French wine market and until they are removed, the industry can not compete with the new world wines.

The term ‘New World wines’ is one that is used very frequently when referring to the current status of the wine industry on a global scale. This refers to the countries whose wine production has rapidly increased over the past few years allowing them to enter into the global market. The whole process has happened within the last 10 years, and has completely altered the face of the industry and the globalization of wine.

Between 1994 and 2000, 184,000 hectares of vine has been planted throughout the world. These countries include Argentina, Chile, Australia, South Africa and the USA. Because these countries do not have the history of winemaking, their laws are very relaxed and allow modernised production techniques to be used. The governments of these new world countries saw wine making as a profitable investment and thus, aided these new entrepreneurs in constructing their businesses. Financial support was offered in order to buy state of the art machinery and in countries such as Bulgaria, the old laws that controlled wine production were abolished.

The advantages of having such flexible laws means that farmers are more-or-less free to make wine in whichever way they want. This includes the use of additives. Under the French laws governing AOC classified wines, farmers are not allowed to irrigate their land, whereas in the new wine producing countries, this is entirely legal. The result of using additives and irrigation in wine production means that there is no influence from the weather, and each bottle produced has the same taste, year after year. This, therefore defeats the object of putting the year of production on the label, and in the opinion of many French viticulteurs, has ruined the ideology behind winemaking. [http://72.14.209.104/search?q=cache:2E0HYEivvwIJ:www.businessweek.com/innovate/content/sep2005/id20050908_153265.htm+French+wine+problems&hl=en&gl=us&ct=clnk&cd=4 ]

Others however, are grateful of France's strict wine laws. Some believe that the characteristics of the final product are far greater when the wine has been AOC classified. Blind taste tests, however, often fail to support this view.

It is over this debate that we see a true conflict of opinion between the traditional viticulteurs, whose feelings are deep-rooted in the long established winemaking procedures and the young generation, whose ideas are new and innovative. It is evident from speaking to several older French viticulteurs, that winemaking is not just a business to them, but they feel an ethical commitment in cultivating vines. The younger generation however, have in most cases inherited a family business and although dedicated to the operations of the château, have a broader view of the market and their company potentials on the global market.

Despite allegations that the French government are restricting the expansion of its wine industry, it is clearer now that this may only be part of the problem. The traditional and perhaps out-dated views of the older generation seem to be hindering France’s abilities.

Some critics argue that, as a result of Robert M. Parker, Jr.'s influence, Bordeaux wines today tend to be too fruit forward and are shorter-lived than those of the past. However, Parker argues that Bordeaux wines of today tend to be much better than those of the past "when (1) less than one fourth of the most renowned estates made wine proportional to their official pedigree, (2) dirty, unclean aromas were justified as part of the terroir character, (3) disappointingly emaciated, austere, excessively tannic wines from classified-growths were labeled 'classic' by a subservient wine press that existed at the largesse of the wine industry, and (4) wines were made from underripe grapes that were too high in acidity and tannin to ever become harmonious" (Echikson, p. 286). Even today "some Bordeaux wines are still rustic, bitter and smell like a horse stable that needs shoveling"[3]. The latter is often described as a desirable "wet horse blanket" reflection of the terroir.

The problem of vineyard devaluation is one that is currently being assessed by the European Commission.

On a Global scale, the United States is the biggest importer of wine in the world. The American Institute of Wine and Food (AIWF) recently published their findings from a survey that they had conducted regarding world wines. It is evident from the results that many Americans are not attracted to the names or locations of the wines they drink, but a consistency in the flavour is much more important. Many, especially younger consumers, are put off by what they see as pretentious wine labels picturing chateaux.

One of the biggest concerning factors to the French wine industry is the exchange rate. As seen in 2003, when the dollar was low and the euro high, the price of a bottle of French wine soared to around 140% of the 2002 cost.

Despite particularly good vintages, U.S. sales of French wine declined more than 10 percent last year in both volume and dollar value, according to Information Resources International. If the French public are drinking less on a whole, then the producers and negocients in France need to find a way to sell abroad. With Britain and America enjoying the consistent tastes of the New World without having to spend too much, it seems that France has little options left.

Being trapped in this corner, the industry is looking to the state for support and financial aid. But whilst the laws created decades ago still govern winemaking procedures today, it seems that the government are in no hurry to change them.

[edit] The effects on Bordeaux

As discussed in the previous section, there are many regulations governing the way in which wine can be made. When previously analysing this, it may have seemed unfair that these outmoded laws are holding back the full potential of French wine. It is clear that the viticulteurs blame only one party, the government. The purpose of the march was to demand compensation for the loss in sales, apparently caused by the Loi Évin and AOC directives.

As indicated earlier, the public were generally unaffected by the Loi Évin and its advertising regulations. When questioning a winemakers at the demonstration regarding their stance against the Loi Évin, it seemed clear that many did not understand the law, and often confused it with the AOC directives.

It now becomes a possibility that the Loi Évin is not to blame at all, and it is in fact the Appellation d’Origine Controlée (AOC) laws of 1936, which have been mistaken. In an attempt to prove this, a representative of the Vinothèque de Bordeaux, confirmed that the Loi Évin had little effect on his customers, and that the AOC laws played a far greater part in the decline of the French industry. The AOC is very confusing and "even the French consumer is baffled by this complicated system [4].

Compared to France, California winemaking techniques are not so different. Both are grown in fields where the climate and conditions of the terroir affect the quality of the vine and all grapes are hand picked and then stored in oak casks. So one asks, why are the AOC laws hindering the winemaking process if another country implements the same techniques?

The absence of a seal on a bottle of quality wine does not concern the new American entrepreneurs. Their modern outlook sees through the AOC label and concentrates more on branding its wine and making it more marketable. With a more business-like approach and less focus on culture and tradition, the North-American market share increased by 11.6% between 1998 - 2001.

One common theory between the French viticulteurs is voiced in the 2004 documentary film, Mondovino. One winemaker speaks in opposition to the companies who have turned wine into a "brand market." His cultured beliefs are that by producing wine he is cultivating a place and a feeling or origin, but by producing a brand, referring to it as the "Anglo-Saxon way," the wine will be forgotten over time, just as brands are.

As a desperate measure to compete with the new world market, some French viticulteurs are using illegal additives in their AOC approved wines. A now infamous laboratory test on 48 AOC wines, carried out in 1995 by the French consumer magazine Que Choisir, who concluded that 31 had been heavily, though legally, chaptalized—meaning that sugar had been added during fermentation to increase the alcohol content and flavour.

It is sometimes suggested that winemakers in Bordeaux are unduly influenced by the influential American wine critic, Robert M. Parker, Jr. A bad review from Parker can make a wine very difficult to sell while a good one can boost sales dramatically. Some critics believe that his influence is so strong that winemakers create wines to please Parker's palate, a process called Parkerization of wine. Some critics argue that this can lead to homogenization of wines and there have even been suggestions that it leads to illegal practices, such as adding chemicals to intensify the color of red wine.

There are 466 AOC classified châteaux in the vinoble de Bordeaux. Appellation d’Origin Controlée is the highest quality status a wine can achieve and this takes years for the château to work its way up the ladder of classifications and gain the reputation associated with this label. One way to avoid AOC laws, although completely hypothetically, is to become disassociated with the system. This of course, has never been done and to lose such a distinguished title would be to undo decades of hard work.

However, this is the freedom that is being seen in the Languedoc region in the south of France. Entrepreneurs there are in the département with the most relaxed winemaking laws. Unlike most of the national directives, the Languedoc region closely resembles the new foreign regulations. Some of these allow the business to use innovations in their manufacturing process. This means that they have money to spend on creating their image and market themselves better on the global wine market. There are many factors that allow such business opportunities, of which one needs to be explained in depth.

The standard Bordeaux wine barrel, or "barrique", holds 225 litres (59.5 gallons, approximately 300 bottles of wine). This is usually made from Oak, and is used in the maturing process to store and ferment the wine. While the wine is maturing in these barrels, it is inheriting the qualities and tastes of the wood. Being matured in these Fûts de Chênes gives the wine a taste of oak and sometimes smoked flavour; this has become the typical Bordeaux style.

In the Bordeaux region this process is compulsory but also expensive, with each barrel costing over $650, the viticulteurs are forced to reuse them. This is not the case abroad and also in the Languedoc. The process that replaces barrel aging is a relatively new technique called chipping. This is where the wine is stored in huge metal vats, which unlike barrels are cheap to buy, easy to maintain and will not loose flavour every year. Added to these vats are wood chips, made from the same oak that a barrel would be, only a lot less expensive. Compared to the illegal method of adding chemicals and the costly way of buying barrels, adding wood chips is proven to be a cost-effective way of creating the desired Bordeaux style oak wine.

Implementing this process saves money giving the company the funds to create a global marketing campaign. One of the first wines created using this technique has entered European supermarkets with a low price tag; this is Piat D’Or, now the second most exported wine in France. Although an obvious favourite with British wine drinkers, the Piat d’Or company was rated number 9 in the "10 Firms that rob us all" chart compiled by www.socialistworker.co.uk in 2000. Another British favourite is Australia's Jacob’s Creek brand of wine which broke into the EU market in the mid-1990s and had difficulty meeting customer demand.

If these "new world wines" are so popular throughout the global market, it is strange that they are not offered in many of the French supermarkets. From a a survey of wine buyers in Casino, a large store in Bordeaux, it was apparent that the French preferred wine produced in their own country. Some of the interviewees had never tried foreign wines and most of them stated that they were not interesting in drinking New World wines.

One of the qualities of the French is their love for indigenous products, and the support they give to the local community. Local retailers stock only native products and most of the time they are produced in the surrounding areas. On one hand, this is a supporting the culture and traditions of the country, but on the other, it can be viewed as naïve and egotistical. Even though a foreign wine can be imported and purchased from a Bordeaux supermarket, at a cheaper price than a French wine can be grown locally, the demand is not enough that the supermarkets do this. The opinion of the non-French people interviewed, was that the French should expose themselves to the global market and try what the world has to offer. One added that the "narcissistic" way of the French meant that they could never accept as better or equal, that which they have not produced themselves.

Bordeaux Grand Crus wines are classed as among the finest in the world and whilst the exportation of wine from Bordeaux has declined by 4.5% between 2003 and 2004, exportation of the Premiers Crus de Bordeaux have increased. La Revue du vin de France warned its readers to expect a decline in the amount of wine produced from the Bordeaux area. This action has been decided by an assembly of the smaller vineyards in the region who believe that the rarer their produce, the more popular it will be. These small producers are thought to have lowered their wholesale prices by 30 percent or more, yet still cannot move enough bottles to justify their actions.

Dominique Bussereau, France’s minister of agriculture has assembled representatives from the wine industry to fight the side of the viticulteurs against the government. These arguments will be heard in 2005, in a "conseil de moderation" when the state will decide whether to supply aid to the farmers involved in the crisis. However, Mr. Bussereau was quoted as saying that if monetary support was given to the farmers, it would cause many financial problems for the government. He also stated at Vin-expo (the world wine exhibition hosted by Bordeaux) that what is needed to resolve the crisis is flexibility in the law, allowing wine makers all over France to operate their châteaux in any way they chose.

Dominique Bussereau has pledged that he will put pressure on the government to release the maximum amount of financial support it can. This may lead to major problems in the industry. If financial aid is received from the state, are the winemakers likely to disregard their culture and modernise the way in which they work, or is it more likely that they will continue to use traditional methods and bank the money? Whilst wine sales are at the lowest they have been since before the 1960s and exportation follows the same pattern, the French public are drinking less, and the rest of the world are producing more wine than ever before. To survive, winegrowers in France may need to adapt their business to cater for it, even if this means disregarding some of the long-established and more cultural procedures.

As a rule, it is mainly the Bordeaux AOC classified institutions who are the longest running châteaux and who can afford to compete internationally, whereas the smaller unrecognised labels are only able to market their product domestically.

Since the first indication that the Bordeaux wine market was declining, the French agriculturists held demonstrations to protest against the government. The demonstration held on the 8th December 2004, was typical of those held all over France over the last 10 years.

At all of these protests there are two groups of winemakers campaigning for different things. As a rule they are divided into the following two categories.

Firstly, the older generation of winegrowers who demand compensation for their loss in sales and protest for the abolishment of the Loi Évin. Although content in accepting financial reimbursement from the government, the majority of these winemakers do not want to spend the money on modernising their production line, but instead continue to make wine the way their families have done for centuries.

Secondly, there is the younger generation of winegrowers in France. This group however, rally and petition against their government, to aid them in lowering production costs and to loosen AOC laws allowing modernisation of their equipment. These businessmen are willing to make changes to their customs in order to become competitive and sell wine to a global market.

It is the opinion of many that the future of the French wine industry lies in the hands of the second group. These are the people who have a wider view of the market, and are not so culturally attached to tradition. This makes it easier to modernise the methods and machinery for producing wine. The younger generation understand that the crisis may force 1,000 wineries out of business, and are not willing to become part of this group.

In February 2005, the French government announced its plans to hand over €70 million to its declining wine industry. Dominique Bussereau said €11.5 million would be paid out to winemakers in extra grants and tax breaks, along with €55 million in loans to producers and cooperatives in financial difficulty. The government agreed to pay for 500 vintners to take early retirement in 2005.

Although the government have not issued any plans for the redesigning of the AOC laws yet, they have additionally asked the European Union to approve a crisis plan to distil 250 million litres of wine into alcohol. Three quarters of this wine would be AOC certified and therefore usually illegal to sell as any other wine. However, if the EU approves this plan, it will be the first time that AOC wine has been declassified.

If the AOC marque is undermined in this way, will the true AOC certified wines still be respected in the usual manner? And, will the AOC viticulteurs be motivated to modernise their machinery to stand out about the rest of the market?

Whilst the Grand Crus have enjoyed a 9.4% increase in exports , competition from New World countries such as Australia, Argentina, Chile, South Africa and the US is strong, and getting stronger. It is evident that the world no longer desires a natural wine with varying taste and high price. Instead, it is focussed on those wines which can guarantee a consistency in flavour from every bottle made, no matter which year it was produced. Globalisation has meant that it is no longer solely the upper class who can enjoy wines from the other side of the world, but supermarket chains throughout most countries stock inexpensive bottles from all over the globe.

Because of this, millions of jobs have been created worldwide and the economy of some developing countries such as Romania and Bulgaria are benefiting from their exportation of wine.

Both France winemakers and the government have largely chosen to retain traditional approaches to winegrowing and mnarketing. What the future holds for the wine industry in France is unknown. However, it appears that without change it may become overshadowed by the ever-growing new global wine industry.

As stated in Metro newspaper in December 2004, ‘il faut maintenant entrer dans le temps de l’action.’ It is clear from this that the public are aware of the problem. Plan Bordeaux, which proposes programs to reduce overproduction, promote modernization, and promote effective packaging and marketing, may be the first step to revitalizing the Bordeaux wine industry.