Examination of Witnesses (Questions 560
- 579)
WEDNESDAY 21 MARCH 2007
MR ROBERT BEARDSMORE, MR ROBERT LINDO, MR MICHAEL
ROBERTS AND MR OWEN ELIAS
Q560 Lord Palmer:
Roughly?
Mr Roberts: I would suggest that it is something
approaching 1000 people. To put it in perspective, this change
to sparkling wine has caught everybody's imagination, because
we have been establishing recognition throughout the world for
our sparkling wines, with huge requirements for production demands—the
demand far exceeds supply—from overseas and from within
the UK. But, to put it in perspective, as a nation what we would
like to make sure that we can hang on to is the fact that we are
able to produce world-class world-beating sparkling wines. And
yes, we are the largest importer of sparkling wines in the world;
we actually import 100 million bottles into the UK of a combination
of champagne and sparkling wine; 40 million of those are champagne
itself and 60 million are sparkling wine, particularly from the
New World. It is a large market of which, if you took a very low
average price, the retail value would be about £1 billion
a year. You can see sparkling wine production of about four million
bottles that we have here. We would still be representing a very
small proportion of the whole, plenty of opportunity still existing
let alone the demand from overseas. But it would indicate that
we would be aiding the UK economy quite substantially as well
with the production in the UK. It is interesting—and why
it has been so attractive, I think, to the farming community—that
more recently, whereas I said there were 330 vineyards with 760
hectares (or 1800 acres), new vineyards are going in and they
are going in at multiples of sometimes 100s of acres; they are
bigger and they are going to be, and are, more productive; they
are going to be capable of generating better economies. So we
are seeing perhaps a diminution in the number of vineyards but
an increase in the overall acreage.
Q561 Lord Greaves:
Who is doing the investment in this?
Mr Roberts: I can cite several examples at the
moment that I am particularly involved with. We have someone who
grows a very significant amount of salad crop. He wants to diversify
from salad crop and he has gone to grapes, and he is going to
end up planting 200 acres.
Q562 Lord Greaves:
So the investment is taking place by existing farmers?
Mr Roberts: Yes.
Q563 Lord Greaves:
And not by some outside group going in?
Mr Roberts: No.
Mr Lindo: There is some new money as well—
Mr Roberts: Yes, that is true.
Mr Lindo:—with entrepreneurs who sense
an opportunity, and it is entrepreneurs at the moment who are
doing that.
Mr Roberts: An orchard and asparagus grower
and a potato grower are planting, and they are planting, by historical
standards, very large proportions of land. And they are doing
it because, when they look at the end results, they look at the
finished goods value per acre; we are talking about £22,000
an acre—that is at the finished level. So there is production
involved in that and there is the selling side of it, of course,
and this is because it is sparkling wine. The area that we have
in southern England is not dissimilar to Champagne; it is at the
extreme of wine-growing but because of that it produces a quintessential
sparkling wine. It is also in a very high-cost area and, by virtue
of its wine-growing conditions, it is a generally low volume area.
Champagne is on the doorstep of Paris, it is high-cost and they
concentrate on making a very high added-value product but, correspondingly,
have enough resources to market the product and we see that it
is one of the best-marketed products, to sustain a profitable
investment. We can see that happening, and certainly from my own
company's point of view—we only make sparkling wine—we
have been profitable since we were able to get the vineyards into
production, which we started in 1994, and by 2000 were able to
start selling the wine. So we were able then to generate a sustainable
business, which is expanding very substantially. So I hope that
paints a bit of a scenario: a great increase in interest. And
we do also know, of course, that we have had the eagle eyes of
the Champenoise themselves actually looking at some of the parcels
of land. Obviously a lot of that is hearsay, but I can say from
direct evidence that I have been visited on two occasions by champagne
houses to talk about the land and what we produce and how we produce
it and the quality and so on. So they certainly have expressed
interest, I know that for a fact—that is not hearsay.
Q564 Chairman:
Can I just ask about the average side of commercial holdings?
Put the hobbyist to one side, what would be the average acreage,
hectareage, of commercial vineyards?
Mr Roberts: It is changing so much at the moment,
but I would say that you are talking about 35 acres or something
like that at the moment; but it is going upwards and will probably
end up at about the 100-acre mark.
Q565 Chairman:
Which is vast in terms of—
Mr Roberts: In terms of what we have been doing.
Mr Lindo: It is vast for the EU but it is small
compared to places like Australia, where it is generally thought
(in Australia) that 150 acres is the minimum size to make a profit
because they are making a low-priced product.
Mr Roberts: Of course, in Champagne many of
the holdings are very small because it is the nature of Champagne
where the growers, because of the breaking-up of the land, there
are small accumulations, but the people who are making the wine,
the negociants, are an accumulation of many, many hectares—several
hundred.
Chairman: Lord Ullswater. Planting bans.
Q566 Viscount Ullswater:
If we can get to some of the EU restrictions, I think you have
told us that by the year 2010 you will reach the limit of the
de minimis restrictions at the moment which you enjoy,
allowing you to plant virtually unrestricted.
Mr Roberts: Can I just say that it would be
fair to say that I think we have to achieve that in a five-year
moving average on that basis, so there will be a time period to
get to that.
Q567 Viscount Ullswater:
What I am trying to elicit from you is whether you believe that
the ban should be removed in 2010. There seems to be word that
it may be that some countries are pressing for it to be extended
to 2013. I understand that you sell all your domestic product
within the market place, so you are not producing surpluses. I
can imagine that you would see any further ban being a tremendous
disincentive to investment in the industry because it would restrict
what you could do, and again you pointed out that present production
is very much lower than the consumption in this country. Would
you consider, perhaps, that the restriction, if it is extended,
should only be extended to those countries which are in surplus?
Mr Roberts: I think that would be a fair answer
to it. We would prefer to get rid of the planting ban when it
actually runs out in 2010 and not to extend it on for this compromise
proposal to 2013. There are some specific disadvantages of continuing
the ban in any form because it precipitates planting; it makes
people want to plant quicker and not miss the gravy train, if
I may put it that way, whereas in fact there should be controlled
planting of acreages so that we can cope with and digest the new
quantities as we go along. I think the planting ban is negative
because even inside areas—and we will use France as an example—there
are pockets who would dearly love to expand but expansion, because
of the planting ban, the purchase of quotas, effectively makes
it actually more expensive. The planting ban reduces competitiveness.
So in reality I would prefer to see being led by the consumer
as being what causes the planting ban—"I will not plant
any more because I cannot sell any more"—that is the
real answer to it.
Mr Lindo: It is probably the only answer.
Q568 Viscount Brookeborough:
Presumably, if you lifted the planting ban on its own, that would
not work either because you would have more people producing table
wines for crisis distillation, so it would have to be hand in
hand with other things?
Mr Lindo: Crisis distillation, I think, is the
cause of most of the problem really.
Q569 Viscount Brookeborough:
Yes, but if you remove the planting ban, you have to do something
about of the other things.
Mr Lindo: Absolutely, yes; that is right.
Mr Beardsmore: If it is going to be removed,
the market support measures have to go at the same time.
Q570 Chairman:
Yes, just let the market deal with that. Is there a case for some
crisis distillation for real crisis situations?
Mr Lindo: Not in our view, not at all really;
I do not see that as a solution even in the short-term or the
medium term, particularly not the long-term. The EU cannot operate
in isolation from the world market, somebody will fill every gap.
Whether you are distilling it or grubbing up, trying to control
supply is not the answer to sorting out the economic well-being
of farmers anyway.
Q571 Chairman:
I will have some difficulty with this but I will try and put an
argument together. Because of the nature of wine being a multi
annual crop, that you will get a harvest every now and then which
over-supplies the market. If you do not have crisis distillation,
a number of producers, who would normally stay in business, would
be driven out?
Mr Lindo: I think the thing is that you do not
have to pick every grape; you only have to pick the grapes that
can make wine that you can sell. So in a big year it is not mandatory
to pick every grape and make wine out of every grape, you can
leave them there or take them off, green harvest or whatever,
to control the size of your crop. That is what we do; we control
the size of our crop. There is a vineyard model really where people
can sell a certain amount and what they cannot sell they will
sell to another producer, another wine maker, and he will make
wine out of that pretty much the same as in New Zealand. It regulates
the market by people only having to sell wine that they can sell;
they do not have to try and sell it and therefore drive the price
down. So I do not think it applies even then.
Chairman: Well done! Lord Bach, Deregulation.
Q572 Lord Bach:
What you said in your written evidence about deregulation to us
is music to some of our ears—maybe not to everyone but to
some of us. If you take the small but flourishing English and
Welsh wine industry, it has made excellent progress despite—not
because—of EU regulations. Although you do not answer with
a "yes" or "no" the question what is the nature
of the case for having a wine regime at all, am I right in reading
your real answer as being that you do not see any case for having
a wine regime at all?
Mr Beardsmore: I think we want to see things
consumer-led and in that context there does not really need to
be a wine regime—there obviously still has to be some regulation
in the food and drink sector to protect consumers from anything
that might harm public health. So the only areas that we really
see there needing to be any regulation is obviously issues that
protect people from harm—making sure that wines are analysed
before they go on the market and that type of element, and also
to prevent fraud in labelling. We do not really want constraints
on what you can put on the label, as long as it is accurate, so
that buyers are buying what they think they are buying. But beyond
that it is difficult to make the case for anything that is actually
aimed at regulating the market, the way the market actually works.
We have seen the results of that in the last two or three decades,
and that element does not work. So, do you need an actual wine
regime? Possibly not, in as much as the Food Standards Agency
and agencies like that will deal with food issues. But, though
there maybe some that are wine specific. But, no, we are not keen
on seeing the market regulated in terms of how it is sold and
is allowed to sell and constraining producers in that way.
Q573 Lord Bach:
Do you think it is a practical proposition that there should not
effectively be a wine regime at all after these discussions and
negotiations? Do you think that is a realistic position to take,
given the vested interests that there are just a few kilometres
across the Channel, and elsewhere in Europe too? Can I just ask
this question combined with it? You are obviously a success story.
But will the time come when you are such a success story that
you yourselves, or your successors, may find yourselves rather
attracted by the idea of regulation and protection?
Mr Lindo: In our own business we are planning
for it. I would not like to say we laugh, we say that we are enjoying
the current market conditions. But we are planning for angora
goats to return! You probably all know that there was a boom in
angora goats a few years ago, and then that disappeared, and the
next thing was ostriches. So we are not assuming that these conditions
will last forever, but we are running our business to allow for
a downturn in prices and to become more efficient and all the
other things. And in the last resort we do another business—if
it stopped being profitable, we would do another business before
we got to say that we could not afford to. I think that is just
ordinary, prudent running of a business really.
Mr Roberts: You are almost inviting us to say
that we would like to restrict, to keep our competitiveness, and
I think we really do have to see what happened in the rest of
the world while Europe watched over the last 12 years. The rest
of the world took the wine business by storm and they really went
to town, looking for the consumer, taking the rough with the smooth—and
many people in Australia, New Zealand and California have gone
out of business as well as coming into business. They have done
it and they have reacted accordingly. The last thing they have
had to help them is any form of restrictive practices, and I think
it is the restrictive practices which would be the death knell.
If we required them, we would no longer be a healthy industry.
Mr Elias: At the moment because we are a new
industry, there is no history of what we can or cannot produce.
So we have quite a range of stuff, and we need to allow that flexibility
to stay, we need to be able to plant new varieties; if global
warming is happening, maybe Sauvignon Blanc is next. We have to
keep moving and not restrict and say this is what we do and this
is the only way to do it.
Q574 Lord Bach:
So the regulation you argue for is absolutely minimal?
Mr Roberts: Yes.
Q575 Lord Bach:
Have I understood that right?
Mr Roberts: Yes, correct.
Mr Beardsmore: If I could just make a point,
you asked—is it feasible to go down a minimal regulation
route?
Q576 Lord Bach:
In the real world?
Mr Beardsmore: Given what we have, yes, on the
continent. I think it is worth making the point that we have a
surplus in Europe as a whole—obviously some would be able
to produce more and others are producing a product that nobody
wants. But, whereas in a lot of industries the market falls away,
so the people who are at the wrong end of this sort of thing happening
could lose their businesses and the effects that that has, this
situation is slightly different. There is a huge wine market and
they are losing out on the continent competitively with the New
World; but they are not actually losing out like you would in
many industries, with a developing country, with a low cost base—they
are losing out to Australia and California. So, whilst we accept
that there may need to be some provisions and it would affect
the transfer to a different way of regulating in some measure
or another, there is actually an opportunity there. Yes, some
people may fail. But, if you can increase, if you can innovate,
if you can actually meet the mark, the same as places like Australia
have, basically there is still a big market there—it is
not that the market is disappearing. It is not that we are just
in a completely different cost scenario, because Europe is up
against a lot of New World countries, which are western economies
with similar cost bases to Europe.
Q577 Lord Palmer:
You mentioned in your opening remarks that some people were stopping
growing salads and converting them into vines. Is that the norm?
Or does quite a lot of the expansion come from a pure arable farmer?
Mr Roberts: There certainly has been. There
are two places I can recall—and I am talking personally.
We are very un-industrialised as an industry; we do not have a
massive collection system for data and so on, so we have talked
from our own personal experience, and we probably are small enough
to be able to know what is happening. There are two growers that
I can think of who have replaced cereal growing with vines—but
there are probably far more than that. Every farmer seems to be
looking at his land and making sure that he is diversifying his
mix of crops and is looking to see how he can blend and get, presumably,
a safer situation. The salad one, in particular, is a very successful
salad grower but it is extraordinarily difficult to compete with
Spain and places like that, and he finds it hard work. It is all
sold through supermarkets; he is successful at it but it is hard
and he would like to have an alternative crop. As an addition,
I should say that the 200 acres that he has ended up planting
is 200 out of 1450, so it is a proportion and a significant one,
but not as if he is getting out of salad crops.
Q578 Viscount Brookeborough:
Could I just ask very quickly, does it affect his Single Farm
Payment by changing to vines?
Mr Roberts: I think it does actually.
Mr Lindo: It does from grassland. To answer
that part of your question, ours was grass and it has gone into
vines and you just lose that thing that we do not really care
about very much, about £20 an acre.
Q579 Viscount Brookeborough:
Still eligible but not claimed.
Mr Lindo: It is not eligible; apple trees are
eligible but vine trees are not, as it happens. If an animal can
wander around freely underneath an apple tree, I think you can
still keep it in the scheme.
| 
