Select Committee on European Union Minutes of Evidence

Memorandum by Wine Intelligence


  Wine as a category does have several distinguishing characteristics and one particularly that differentiates it from other food and non-food FMCG categories. This is "sense of place"—the concept that all wine is made by a vigneron on an identifiable piece of land in a distinctive area of countryside. Consuming wine is very much about the emotional imagery of sun-splashed vineyards and traditional wine farmers—neither of which is conjured up when choosing and consuming most other food and drink categories. While most of the 23.5 million UK adult regular wine drinkers have low levels of objective knowledge about geographic origin, the concept of "place" is one of their five important choosing cues, helping them decide which wine for which occasion or which is best value for their current needs at a specific price range among the dauntingly-large selection of wines on offer (biggest supermarkets: 800+ different wines; up to 2000 bottle facings).

  Thus, while "place"—or Geographical Indication—was historically a producer measure to protect origin, it is now an essential consumer instrument of recognition and assurance. For the consumer, "GI" is often a proxy for quality, and always an indicator of style. Relatively well-regulated geographic wine regions such as Chablis, Rioja and Chianti are outstanding examples how the concept works effectively in the interests of both producers and consumers.


  The current issue is not one of the fundamental relevance of a GI system. However, there are two serious issues which need to be addressed:

    (i)  Some GI's are increasingly unable to find profitable markets for all their volume.

    (ii)  Traditional rules about what can be produced in each region now urgently need structural reform.

  These rules were created mainly in the 19th and early 20th centuries to protect the rights and opportunities of small producers or grape-growers, by defining what varietals could and could not be used, how they should be labelled, and whether irrigation could be used. Much of this regulation revolved around the co-operative structure, with the objective of ensuring payment to and a level playing field for all producers rather than making wine that consumers wanted. Certainly not a market-driven system suitable for dynamics of the 21st century global wine market.

  Reform must address over-production and quality in areas where current volumes and styles are unable to find profitable markets.


  No. Over the last 30 years, wine sources outside the EU—the so-called New World wine regions—have come to market with a different production model, based on much larger units of winegrowing (100's of hectares versus as little as one or two within in the EU) and wine making and, most importantly, styles and value propositions that set new standards for consumers. The New World also adopted simple labelling and marketing approaches which, effectively, democratised wine and created a much bigger consumer market. "Accessibility" is the much-used phrase to describe what differentiates New World offer from traditional EU producer approaches to market.


  No, or very slowly. Protectionism is strong in many EU wine areas—both versus other and often neighbouring EU wine areas, and versus non-EU sources. Subsidies and incentives to grub up are the mechanisms to bring order to the supply-demand balance, but they are expensive and politically unacceptable to elected representatives from some of the most seriously-threatened areas.


  Grubbing-up is a necessary 1-time measure to reduce supply in producer areas that will never be able to compete structurally or in quality/value terms. However, the EU and more importantly the wine regions themselves must invest effectively and durably in demand-generation imperatives that will enable globally competitive wine to be brought to market:

    —  Consistent quality.

    —  21st century styles of wines.

    —  Label descriptors that inform and engage consumers.

    —  Production and supply-chain efficiencies.


  Yes, selectively, but only as a transitional measure where a wine area is in the process of upgrading its capabilities as above. Removing production capability in commercially non-viable areas is the only solution, however painful to some local families (no more so than removal of fishing licenses).


  None, beyond transitional distillation.


  Potential impact varies widely. Chablis, for example, will survive and continue to flourish as a distinctive wine region. Parts of southern France and central Italy will not.


  New approaches to labelling are an imperative, as defined above. Much of the labelling regulation within EU wine regions is consumer-unfriendly and thus a significant factor in loss of market share to New World sources. Labelling must achieve 3 essential tasks to engage consumers and generate demand:

    —  Explain what the wine will taste like—or what the regional style offers.

    —  Indicate clearly where the wine comes from and who made it.

    —  Suggest what sort of wine drinking occasion it is best for—casual drink; informal/formal meal settings; type of foods; etc.

  And labelling needs to be a smart market-led combination of front and back labelling. Many EU wines have no back label, or are often only in the language of the producer country.


  Enormous! From articulate wine makers coming to the UK to enthusiastically hand-sell their wines, to large company running sophisticated multi-channel marketing programmes from UK-based offices. However, we should not attribute marketplace success solely to great marketing. The wine is:

    —  Consumer-friendly in style.

    —  Suits without- and with-food occasions.

    —  Perceived by consumers as good value and very frequently heavily discounted.

    —  Of consistent quality.


  Many lessons can be applied, including matching and clearly exceeding in front of the consumer the winning factors identified above.

  However, the solution is not simply to produce wines that look like New World wines. Retaining regional character is vital, and a latent strength that even many Australians would like to emulate. Long-term, the biggest learnings are about production and distribution structure, and adopting producer business models that support globally competitive scale and reach.

February 2007

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