Examination of Witnesses (Questions 400
- 420)
THURSDAY 8 MARCH 2007
MR LUIGI POLIZZI
Q400 Lord Cameron of Dillington:
It probably is important but there is no reason why, if you have
freedom of labelling, the growers cannot keep their Geographical
Indication, that they get together and they say "This is
a club and this is how we want to do it". We are trying to
ensure that the most sustainable way to keep the wine sector going
is to encourage enterprise and marketing flair and so on. If you
do not have freedom of labelling, that is going to stop that.
I just wonder whether you are trying to control your industry
from the centre too much and in the end it is going to fail because
you have not got new ideas and new blood coming in, and labelling
is part of that.
Mr Polizzi: I understand your question and also
your opinion behind this question, but I think it is important
that the European wine sector model is safeguarded. The current
system is based on the Geographical Indications. You know the
proposal for the possibility of using the must from the grapes
from third countries. You eventually allow the use of new oenological
practices, so then it is possible to make wine everywhere with
labelling which gives consumers the characteristics of this wine.
But it is also important to maintain our model, that this wine
is linked to some geographical area.
Q401 Lord Cameron of Dillington:
I agree, but you can do that without Brussels telling you what
you can and cannot do.
Mr Polizzi: We are open to discussion because
the situation in Italy is different from in France. France has
a lot on the label because they are talking about cru, chateau,
and so for the Italian consumer it is very difficult. For me I
know that very well but what is the difference between that and
Italian wine? I discover that the difference is that in one region
the farmer says "chateau" and in another region he says
"cru" but it is concerning an area, so it is linked
to the different regions in France. In Italy the situation is
different because we have the name of the main varieties that
are known in the world—Barolo, Chianti, Grenache, Sassicaia.
Sassicaia is one of the most important wines. This is the main
export wine in the world but, when you buy a bottle of this wine,
you are sure that it has come from a specific area with a specific
tradition. We would like to maintain in the future that the wine
sector is identified in this system or we need another system
in parallel. What do we want in the future? Taking account of
our tradition, we would like the European model of marketing wine
to be maintained. Of course, it is important to take account of
the fact that the world has changed, consumers have changed, their
behaviour has changed. But it is important to follow these changes
without completely changing the current system. In any case, with
regard to the question of freedom on labelling, it is mainly for
table wine.
Q402 Chairman:
The growing markets within Europe are largely in the north of
Europe, such as the UK?
Mr Polizzi: Yes.
Q403 Chairman:
In those countries most of the wine reaches consumers through
large supermarkets. Large supermarkets are going to have a problem
coping with hundreds of different small packages, so they are
naturally going to look outside the Community for New World-type
wine of a consistent quality which they can buy over a large volume.
When you say you want to become more competitive, those are the
people with whom you have to compete. So how are you going to
become more competitive while you retain this sort of diverse
and varied system?
Mr Polizzi: You think that we are not competitive
in quality?
Q404 Chairman:
You might be competitive in quality.
Mr Polizzi: We are competitive in quality.
Q405 Lord Cameron of Dillington:
But not in marketing.
Mr Polizzi: But not in marketing. This is another
thing.
Q406 Chairman:
It is what the consumer buys that determines whether you are competitive.
Mr Polizzi: I agree with you that it is the
consumer that determines it; that is clear. This was also the
reason for the success of the wine imported from elsewhere, from
Chile and other countries. First of all, I cannot say that it
is not good quality. It is good quality too, but it is immediately
identified with a variety—Chardonnay, Cabernet, because
it is just one variety, no more. You know exactly the area where
it is produced, so the labelling is a simple communication with
the consumer, but also the price is lower than for European wine.
As I said before, Italy can continue to compete with this wine
because we have a rational price and the quality is very good
for this product, because high quality wine would have difficulty
competing with this wine. It is impossible for Barolo or Chianti
to be competitive. Of course, we have Chianti for the cafés
and hotels but it is difficult for good wine to be competitive
with this wine. Personally, I do not have any difficulty discussing
how labelling could be used to improve the marketing of our wine
but we have to take into account that we would like to modify
completely the European model linked to the Geographical Indications.
You have a table wine that indicates the variety and also the
year, so consumers at the end will be confused because the wine
linked to a Geographical Indication has the same information.
So I think it would be useful to put the producer and the Geographical
Indication in order to be more competitive with the other wines,
to show that the wine is different. This is the request of the
Commission, just to put on table wine the variety and the year,
but we know that table wine is made from several varieties, not
just one. In Italy, and also in other countries, 50% of our production
comes from producer associations, co-operatives and so on. That
means that they put all their grapes together and they produce
wine, but it is impossible to give a name to indicate exactly
what the varieties are, because it is a mix, because in that area
we have different varieties. We are open to discussion and to
finding a solution in order to make our wines more competitive.
Lord Cameron of Dillington: I bet you
a businessman, given freedom, would find a solution to the problems
that you have described, but you have to give him the freedom.
Q407 Viscount Ullswater:
May I turn to wine-making methods? You said earlier that you wanted
to adopt modern oenological practices. I would be interested to
know what they are. The Commission have said that they wish to
do away with aid for grape must and also to ban the use of sugar.
I would like to hear your views on that. And do you think the
OIV should be the authority on what the proper wine-making practices
should be and that should be adopted by the EU?
Mr Polizzi: Concerning the linkage between the
use of sucrose and aid for must, you know that our position is
very strong because the current proposal in this Communication
by the Commission is to eliminate the use of sucrose and we completely
agree with that. But at the same time, if this is the outcome,
we should move also to eliminate aid for must concentrate. The
Italian Government's position is that, if we maintain the use
of sucrose, we need to maintain aid for must concentrate. We talk
about quality. We have a different opinion, because a lot of people
say that the use of sugar does not change the quality of the wine.
But we consider it is better to use sugar which comes from wine
by-products, so we also made efforts during the work in Parliament
to change the relationship in the report. In the first report
from the Agricultural Commission this was not clear, but in the
outcome of the Plenary this linkage between the elimination of
the use of sucrose and the elimination of the aid for must was
introduced. If we maintain the use of sucrose, because a lot of
Member States use sucrose, we consider that also this contributes
to maintaining the quantity of the wine on the market, because
without sugar maybe this wine will not be very good. We would
like to consider that, if we maintain the use of sucrose, we maintain
aid for must—maybe reduce it but we would like to maintain
it. Secondly, Italy last year was the Delegation that asked the
Commission to introduce the use of wood chips as an oenological
practice, because we consider that for some categories of wine
this is one of the tools which gives more competitiveness compared
to the new countries. We come back to what the consumer says,
and the consumer wants a wine with a taste of the wood, so for
us the wood is by the barrique. I take into account the
fact that this is what the consumer wants and that this is also
one of the reasons for the success of wine imported from other
countries. And I also take into account that this is authorised
by the OIV, so why not? Also, during the last five years Italy
has asked, as a pilot project, to use wood chips and the outcome
was good. So why do we not introduce this new oenological practice
at Community level? We are open to discussing all the oenological
practices that the OIV has already authorised or which are not
considered harmful for consumers and are good practice. But other
practices we are against because we have some practices that completely
split the characteristics of the wine, so that you could prepare
another wine. So we would like to use, for example, filtration,
ionic resin. In the United States this was a derogation they used
each year, and this was completely resolved with a new agreement
with the United States. The OIV authorised all the oenological
practices that we derogated but we are open to discussing the
new oenological practices authorised by the OIV. We have a pragmatic
approach on this.
Q408 Baroness Jones of Whitchurch:
If I may move on to rural development and the possible use of
Pillar 2, one of the expressions that the Commission used in their
report was this idea of "Profound Reform", that there
was major reform needed in the wine sector. I have been listening
carefully to what you have been saying and you have not really
given me a sense that you think that in Italy there needs to be
that major reform. You say that there needs to be an increase
in quality, and we understand that. But there is not a sense from
you of the need to really change radically the way that production
is organised or to deal with the issue of the significant amount
of table wine that you are still producing, or even to do something
quite substantial in terms of rural development, bringing in new
industries or whatever. I just wonder if you have a sense of that
need for that big change. Or are you expecting everybody else
to change and you more or less to carry on as you are?
Mr Polizzi: This is a good question. First of
all, I would like just to wish the women around this table all
the best because today is your day, International Women's Day.
Chairman: You will try anything, will
you not?
Q409 Lord Plumb:
He is Italian!
Mr Polizzi: My question is, why change? What
do we need to change? I do not know if you have visited Italy.
All the landscape from the north to the south of Italy is characterised
by the presence of vineyards, and we have some areas where it
is difficult to change completely the structural investment in
these areas. It is important eventually to modify the processes
of the sector, maybe in the organisation and management of marketing
and promotion. In Italy we would like more resources for promotion
because it is important to inform the consumer, especially the
new consumer, about the value of the wine, not only the taste
but also the impacts of this product on health. Concerning rural
development, we have worked a lot on the rural development area
and all the measures concerning, for example, restructuring and
diversification. In some regions the current rural development
programmes have a lot of measures in the wine sector to improve
the structural situation, but what do we change? It is very difficult
to say. Rural development could contribute to the situation of
employers in the rural areas but it depends also on the choices
of producers in the future. It means that all the producers could
be grubbing up their vines. What will be the choice in the future?
Q410 Baroness Jones of Whitchurch:
But you could give some leadership in providing alternatives?
Mr Polizzi: Yes.
Q411 Baroness Jones of Whitchurch:
And when you say, "Why change?", it is for exactly the
reasons that we have been rehearsing—over-production, lack
of a market, competition from third countries.
Mr Polizzi: At the moment we do not have any
particular crisis in our wine sector, but we can see what has
happened in the sugar sector, for example. This was a radical
reform, where we invited all the farmers to go out of the market
or to modify and change. And now we have the situation that out
of 19 sugar farms we have reduced to six, so we have completely
eliminated 13 farms. This has had a huge socio-economic impact
on the area where these farms exist, and we have made a lot of
efforts to find a good solution for the future, what we do in
the future. Now everybody is talking about biofuels and energy
crops and so on, so we are moving in this direction. The same
thing will also happen maybe for the wine farmers, that they go
out and change to other sectors. But, of course, the wine sector
is a labour-intensive sector, so it is different from the sugar
sector. You have a lot of people working during the production
of the grapes and then you have a lot of other people who work
in the processing of these grapes into wine. So the impact will
be more important than for sugar or other sectors. In any case,
it will be difficult to have rural development measures. We have
some compensation for employment in the rural areas, because we
consider, for example, that if we maintain the analysis that I
presented before concerning the possibility of 148,000 hectares
being grubbed up, we will have lost 70,000 employers in the sector.
So it will be difficult to say that they will be compensated by
the rural development measures first of all because this depends
on the choice of the producer. Once the farmer is in the Single
Payment System, it will be completely his choice what to produce
and, if he chooses cereal or energy crops, the level is completely
different. The impact at the social level will be huge, so I do
not know if the measures foreseen by the Rural Development Programme
will be enough to deal with this situation.
Q412 Chairman:
When we have been talking to people over the past few days, there
is clearly a view held by quite a number of people that what you
have to do in the European wine sector is improve quality and
then deal with this horrible person called the consumer, who has
got it terribly wrong at the moment. Either they are not drinking
enough wine or they are drinking wine from the wrong countries,
and the way to deal with that is to have something called promotion.
The problem is that you can promote as much as you like but, if
customers do not like the product, they are not going to drink
it; and, if you cannot supply the product they want, they are
not going to drink it; they will continue to drink wine from the
wrong countries. How do we get over that? That seems to me to
be a difficulty. The other thing is that, if we have got a profound
crisis in the wine sector and that crisis has as a significant
component over-production, then at the end of the day surely to
tackle it you need to reduce supply? Do you agree with that or
not?
Mr Polizzi: In regard to profound crisis, if
you see what kind of product in France was destined for distillation,
this was quality wine; it was Bordeaux. The problem for that is
the price, not the quality. The problem is the price for some,
because the consumer's behaviour has changed. There is also the
economic situation. We have to take into account that in different
areas of the European Union, Italy—for example—in
the last few years we have had an economic crisis. This, of course,
has an impact on the market for wine. A trader in wine told me
that in the past people of higher classes bought a lot of the
wine each year, good wine—Bordeaux or Chianti—and
put it in their cellars. He told me that during the last two to
three years they have started to drink the bottles in their cellars
because of the difficulties. This is one of the main elements
of the success of other producers in the New World, the price,
and the price is linked to the quality. I think that the consumer
now is more educated about drinking wine. They know exactly what
they want to drink because they know whether it is a good wine
or it is not a good wine. But at the same time they want to buy
cheaper wine. I agree with you, because if we improve the quality,
if we launch all the promotional campaigns or whatever, it is
important to have a supply first of all and also a good supply.
This is your proposal?
Chairman: I am just saying that it seems
to me that there is a general reluctance to face up to the problem
of over-supply.
Q413 Baroness Jones of Whitchurch:
Quite a high proportion of the Italian wine that is produced currently
is table wine. Are you selling that table wine? Or is it just
stacked up somewhere?
Mr Polizzi: In the last years the proportion
between high quality and table wine has changed because now we
produce more quality wine than table wine, so it is 60/40.
Q414 Baroness Jones of Whitchurch:
OK, but have you got a market for that 40%? Do people buy it?
Mr Polizzi: Yes, there is a market.
Q415 Baroness Jones of Whitchurch:
So it is all being sold?
Mr Polizzi: No. In some areas of Italy, mainly
in southern Italy but also in some regions in the north, people
go directly to the cellar with a bottle and buy it there. Even
people close to the rural areas go directly to buy olive oil,
for example, and also wine. All the table wine has a market, but
not all the market at the end of the year will be served, so it
is important that the production that remains in the other areas
is used for other things, for example, biofuel. We have a market
for table wine and now we also have changed the packaging. I do
not know if you watch TV, but now we have wine in tetrapaks. This
is completely different than the traditional glass bottle, but
it is mainly because you can have five litres or two litres that
you put in your house and you can take your glass to the wine
there, so the way of presenting the product has also changed and
also the use of the product. The world has started to change but
we have to take into account what consumers want.
Q416 Baroness Miller of Chilthorne Domer:
Obviously, your consumers and your producers are very different
in the north of Italy than they are in the south. Would you agree
with that? I know that is a fairly general statement, but is there
likely to be a substantial difference in the reaction to the Commission's
proposals between the north and the south? Are there elements
that the north prefers in the proposal but the south would not
countenance?
Mr Polizzi: No, I do not think we have any difference
between north and south. The tradition is different because the
varieties of wine are different in different regions. This is
linked also to the meals of the region. In the north you use rice,
you use different kinds of meat. In the south of Italy you use
more fruit and vegetables, so the use of wine is linked to the
meal and the cooking tradition. The only difference is in the
size of the farm. In the north we have larger farms than in the
south but in the south we have some traditional farms. For example,
in Sicily we have Corvo di Cella Paruta, Tasca del Merita or Rallo.
That is a big extension of the farms, and I can say also that
big producers in the north have moved to the south of Italy just
to make investments and this is the situation. We do not have
any tension or any problem between north and south, and also the
wine produced in the south of Italy is more for the internal market.
The north is for the external market—Chianti, Barolo.
Q417 Viscount Brookeborough:
Italy is the second largest wine producer but even in Italy the
consumption of wine is going down. First of all, do you recognise
that? And, secondly, we have been given the impression that the
consumption of wine has gone down among the social groups which
might have drunk it every day out in the countryside during a
normal day's work—and therefore that is very local wine
where the labelling perhaps does not have much effect on them
because it is local wine that they are drinking. However, in casual
conversation with somebody in the Commission yesterday he suggested
that wine had become more alcoholic over recent years and that
this was partly because of the use of must and the aid involved
and the use of sugar. If that is so, and accepting that the reduction
in wine drinking is taking place at that level, do you think that
that reduction may be partly due to wines being stronger and people
going for milder drinks, such as beer? This is a vast quantity
of table wine that is not being drunk, table wine that used to
be consumed at a very local level, but the alcohol content has
gone up and a lot of the wines are now up to 12, 13, 14%, whereas,
as I understand it, the minimum level used to be about 8.5%.
Mr Polizzi: Consumption at the moment in Italy
has been at the same level during the last two or three years.
Q418 Viscount Brookeborough:
We were told that throughout the European Union consumption levels
of wine had gone down and that they had only gone up in the United
Kingdom over the past number of years but last year it was level,
so in fact it looks as if it is beginning to go down in every
nation.
Mr Polizzi: Concerning consumption, my expert
told me that during the last two or three years it has been at
the same level. We have had in the past a bigger decrease in consumption
because in the past young people substituted wine for beer, but
now also young people are close to the wine sector and wine has
become an occasion to drink in a group during the evening, so
now the habits of young people have also changed. I do not know
the practical aspect of what you say about an increase in the
alcohol content. I do not know if this is the general situation.
I do not have an answer to this. I could say that in Sicily now
we have good wine. If you drink Nero d'Avola it is 40o, but I
recognise that the habit of consumers has changed. Also, among
my friends, when we go to the restaurant and we request just a
glass of red wine, we ask what the variety is. Before you would
request a red wine and it was not important to the customer, but
now I ask personally what it is, and I also have friends who asked
before, "What is Montepulciano?". So Consumers pay more
attention now to exactly what they are drinking, so I think it
is important to promote the quality of the wine. For this reason
I think consumption in the future could move in a positive way.
This is my aim.
Q419 Chairman:
Fine. Thank you very much indeed. You have been extremely generous
with your time and very patient with us as well and extremely
eloquent.
Mr Polizzi: It was a good opportunity to speak
with you because we have to take into account that you are a consumer
country more than a producer.
Q420 Chairman:
We will try and do our best to maintain consumption!
Mr Polizzi: You are the first market in Europe
concerning the consumption of wine, so it is important from our
side to explain what is the situation in Italy, as this will be
a complex reform with grubbing-up, investment, labelling, oenological
practices. It will be complex, and I hope that today I have contributed
to telling you what is the position and the situation in Italy.
Chairman: Thank you very much indeed.
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