Examination of Witnesses (Questions 746
- 759)
MONDAY 21 MAY 2007
MR CLAUDE MAGNIER, MR BERNARD CLARIMONT AND MR JEAN
FRANÇOIS SOLERE
Q746 Chairman:
Good morning, gentlemen.
Mr Magnier: (Through an interpreter) Welcome
to the Languedoc/Roussillon region. I have heard that it is your
first visit to this region and it is a great pleasure to welcome
you here. I have had very little contact with Mrs Harris prior
to your visit, so I would like a little more information about
your objectives here and the framework of your questions, if possible.
Q747 Chairman:
First of all, Mr Magnier, can I thank you very much for finding
time to see us. Although it is true that this is the first time
this particular sub-committee has visited Languedoc, it is not
true that it is the first time as individuals that we have visited.
But, unfortunately, this time we have to do some work. Can I very
briefly explain what we are about. We are a sub-committee of the
European Union Select Committee of the House of Lords and our
job is to scrutinise proposals coming from the European Union
and to scrutinise the response of our own Government. Every year
we identify about three or four topics that we want to look at
in greater detail. For example, recently we have looked at nuclear
safety and nuclear waste and at, biofuels, and now we are looking
at the reform of the wine regime; and in the near future we will
be looking at the CAP Health Check. We chose the reform of the
wine regime, not because of Britain's great and glorious wine
industry, but really for three main reasons. One, obviously it
is a regime which takes up a great deal of resource. Secondly,
it is an area where the industry is undergoing considerable challenges
and adaptation in the face of declining consumption and greater
competition from outside the EU. Thirdly, because in some areas
of the EU the whole social and economic fabric of regions is very
heavily influenced by the growing of vines and the production
of wine. I hope that gives you a rough idea of where we are coming
from and our interest.
Mr Magnier: Thank you for those details. I am
the Regional Director of Agriculture and Forestry. I am accompanied
by Mr Solere and Mr Clarimont, who is the Head of Department notably
for questions relating to wine. I will give you a brief explanation
about the DRAF, the Regional Directorate of Agriculture and Forestry.
This is a decentralised service of the Ministry of Agriculture
which is responsible for applying the state policies, national
policies, and for developing these policies on a regional basis
in collaboration notably with the Regional Council. It has the
role of co-ordinating the five departmental directorates of the
Agriculture and Forestry Commission, a role of orientation, analysis
and looking ahead to the future. It also has an authoritative
role for controlling public aid and controlling the application
of public policies. There are six departments within this structure.
Agricultural economy and the foodstuffs industry is the first
department, which contains the wine making industry. The second
is the territorial and rural development sector. Vegetable protection
is the third. Agricultural training for a school level is number
four. A regulatory department for labour is number five; and,
finally, agricultural statistics and a global administration department.
There are roughly 100 officials working within the entire structure.
A brief word about the region, seeing as you have come here for
the first time as a sub-committee. You are in a very beautiful
region, which has five departments—four departments along
the coast, along the Mediterranean, and one more northerly department
away from the sea, which is La Loze"re, which is a mountainous
department, a highly contrasted region where we go from zero metres
altitude to 2,000 metres. A very high demographic expansion characterises
the region at the moment. It is a very attractive region for people
coming to live here: the sun, the sea, the mountains, and some
stunning countryside and landscapes. There is a very high level
of population flow, especially in the summer period. The population
level is increasing in the region by 25,000 to 30,000 inhabitants
per year. There are obviously consequences of this, firstly relative
to property and land, a very high proportion of land being sacrificed
from agriculture, a very high cost of the land now. And there
are obviously relative threats to the environment, quality of
water for example, and there is a need to preserve the natural
environment. There are many major programmes relative to infrastructure
on the previous basis, for example relative to water treatment
to handle the new populations. There are two highly dominant sectors
with regard to agriculture in this region: wine making, which
we will go into in more detail in a minute and, which represents
60% of the agricultural product in this region; and, secondly,
we have fruit and vegetables, which represents 15% of the regional
production. Those are two sectors which are undergoing serious
difficulties at present, wine making and fruit and vegetables.
Finally, there is a mountainous sector in the hinterland dedicated
to cattle and sheep farming. There are also cereals, for example
wheat, and rice in the Camargue. The Gard, which is the neighbouring
department to the north, is France's leading rice producing county.
That is a brief overview of the Languedoc/Roussillon region. My
colleague is now going to present the regional wine producing
sector.
Mr Clarimont: I am going to present the key
points relative to the wine making sector in the region. There
are 25 estates and 72% of all the agricultural estates in the
region make wine. 44,500 people work in the wine industry, which
represents 6% of the regional employment but only 30% of the potential
wine making area, the regional SAU, the useable agricultural surface,
is actually used because there is a highly intensive cattle and
sheep rearing activity in the mountainous zones. Firstly, there
are two slides representing the history of wine production in
the Languedoc/Roussillon.
Mr Magnier: We will give you copies of these
slides afterwards.
Mr Clarimont: You will see here that in 1980
there were roughly 400,000 hectares of vines planted in the Languedoc/Roussillon.
Today we only have 260,00 hectares remaining. The production volume
has also declined. We have gone down from 35 million hectolitres
in 1980 to 16 million hectolitres roughly at present. This is
due in parallel to a drop in the surface area cultivated and also
a drop in yields. The drop in yield is due to an improvement policy
relative to the types of grape varieties planted and improvement
in the way they are produced. You can see here a history of the
grubbing-up policy in Languedoc/Roussillon and you can see a very
high level of grubbing-up after the Dublin Accord. For the last
two years you will see the increase where the grubbing-up policy
has started up again. Here is the background of the planting subsidised
by the European Union. You will see the trend over the past 10
years of between 6,000 and 8,000 hectares being planted a year.
The wine producers in Languedoc/Roussillon are organised on a
co-operative basis. Two-thirds of wine is produced in co-operatives
in Languedoc/Roussillon, and producer groups, whether these be
groups of private producers or co-operative groups, represent
80% of the vineyards in the Languedoc/Roussillon. The regional
syndicates today are becoming more federated and the four remaining
inter-professional syndicates are being federated at present into
the single syndicate you see at the bottom, Intersud de France.
A brief look at the current levels of production. There are roughly
three million hectolitres of AOC wine, the first category, 10
million hectolitres of Vin de Pays, which from the Community
point of view is table wine, and three million hectolitres of
standard table wine, grape juice and must. The production at present
is still orientated towards the AOC and quality wines. This is
a document from a study which took place five years ago but which
is still pertinent. The market is broken up into segments here
and the Languedoc/Roussillon wines are primarily based in the
first two segments, the widest segments. This is independent of
the regulatory categories we saw earlier about AOC, table wine,
et cetera. This segmentation is uniquely based on pricing. This
is the underlying weakness of the Languedoc/Roussillon wines.
It relates to the fact that we have not been able to create an
identity to bring them up into the higher pricing segments of
wine. There has been a great amount of effort in improving the
quality of grape varieties, as I said earlier. Nearly 60% of the
entire Languedoc/Roussillon vineyard has been replanted for the
purposes of quality improvement. There have been very high levels
of investment in wine making companies. For example, in 2006 in
the co-operative sector there was €300 million of investment
just in terms of wine making equipment. If we look at the evolution
of the regional wine pricing, the two bottom curves, which represent
the table wine and the Vin de Pays de Département,
the other table wine, which are red and black, we see that the
two curves are pretty much identical which means that the Vin
de Pays from the department have not been able to create a
differentiation on the market between the Vin de Pays de
Département and table wines. The blue line is perfectly
parallel to the two others but €20 higher This is the Vin
de Pays d'Oc, which are in reality single variety wines, mostly
sold to export, which are mostly sold in bulk, and we see that
they have not been able to differentiate themselves either from
the pricing fluctuation affecting the table wines. The two lines
are very much linked. These curves are very important for understanding
and getting a picture of the wine-making situation at present
in Languedoc/Roussillon. The Vin de Pays d'Oc represent
roughly four million hectolitres sold annually. These are in direct
competition with New World wines. The dotted line above is an
AOC wine from the Corbie"res region to show that the prices
of quality AOC wines are relatively linked to these two curves
affecting the table wines. The AOC wines are produced mainly in
difficult areas with very, very low yields. The AOC wines, like
the Corbie"res we see here, have yields of roughly between
40 and 50 hectolitres per hectare. The Vin de Pays d'Oc
wines can go up to 80 hectolitres per hectare in terms of yield.
So you see the income generated by the producer for these two
products is very different. The AOC—producing regions are
in a very, very delicate economic and financial situation and
are very sensitive to grubbing-up policies and arguments. We are
in a very difficult agricultural environment where there is no
substitute product for the vines. We will talk about this in more
detail when we talk about restructuring the Languedoc/Roussillon
wine industry. This slide, which you may well know, is the relative
price of red table wine in Italy, France and Spain. You will see
that over the past four seasons the price of table wine in Spain
has stabilised around the 2.60/2.70 mark, and after a certain
level of fluctuation the French and Italian prices also have stabilised
at this level. There is a global effect which causes a direct
effect on the pricing levels of wine. As we see here, the pricing
levels are tending to merge together to a market wide standard.
These are the curves relative to the AOC wines in the region.
There are two types of curves you can see here. On the top, the
grey curve, is the Côtes du Rhône which have a certain
level of market awareness. There were difficulties after 2003
because of a bad harvest but you can see the curve for the Côtes
du Rhône is starting to climb back up towards the €90
to €100 per hectolitres level. All the other AOC wines from
Languedoc/Roussillon, the three varieties given here, Côteaux
du Languedoc, Corbie"res and Côtes du Roussillon, are
currently fluctuating around the €60 per hectolitre level.
Here is a group of graphs which represent the change in the incomes
of our producers over the previous harvest years. The top right
graph represents a global view of the revenues for producers in
Languedoc/Roussillon. This is a break down of the top graph. The
middle blue graph is table wine. The yellow graph in the middle
is an illustration of the prices of wines and the volumes sold,
not produced. Therefore, this is the income generated by the volumes
sold. These are bulk wine sales. In 1999 there were revenues of
roughly €260 million. In 2002-03 we were around the €200
million to €210 million level and in 2006 below €100
million. Therefore, there has been a very violent and fast drop
of income and revenue for our producers. Departmental Vin de
Pays—this is from the two curves that were matching
each other on the previous slide—you see here the revenues
are being reduced slightly but are relatively stable compared
to the above graph. Even though we have prices which are based
on the table wine pricing, we have not got the drop in production
in terms of volume as we have for the table wines. In spite of
all of these conditions the label of departmental table wine has
ensured a certain level of market awareness which has helped us
avoid the serious drop of the other table wines. I am talking
about access to the market, which we do not have with the standard
table wines at present. The market is mostly national, French
therefore, for the standard table wines, a market which is currently
totally collapsing because the people who consume these types
of wines is a relatively elderly population and this population
is declining. This market is declining in France at a level of
between 800,000 to one million hectolitres per year and this reducing
market is supplied to a level of 75% by the Languedoc/Roussillon.
So the market for local Languedoc/Roussillon wine is shrinking
by 500,000 to 600,000 hectolitres per year. Here is the Vin
de Pays d'Oc, which was the blue line on the other graph which
was parallel to the others but a little higher in price. On this
market, even though there are difficulties relative to the price
of the products, the volumes being sold are increasing, so the
global revenues of the producers in this sector are stable or
improving slightly. This is the sector which has ensured a certain
level of stability in the regional wine producing sector. Vin
de Pays is a small zone table wine, there are little production
areas, and we will not talk about these because they are relatively
insignificant in the overall figures. This may have a very local
importance in certain areas from time to time but in the global
picture they are insignificant. In the light of this crisis I
will talk about the measures put forward for the coming years.
The first measure is to place the accent on early retirement for
the producers. They have added value to the early retirement package
bringing it up to €7,000 per year. This is not the European
ceiling but is €1,500 better than what was previously on
offer. Another element of the pre-retirement package is to invite
the producers to grub-up their vines and take part in a programme
for restructuring the land use. Producers who take early retirement,
grub-up their vines and take part in the restructuring programme
are given €240 per hectare grubbed-up and restructured up
to a level of 10 hectares per estate. This is a variable element
of the early retirement package to incite people to work towards
the restructuring of land use. The restructuring is a key challenge
for two reasons. Firstly, wine making estates are generally very
modest smallholdings. A standard professional wine-making estate
working with a co-operative represents between 12 and 15 hectares.
Secondly, the average surface area of a wine-making parcel is
roughly half a hectare in the Languedoc/Roussillon. You will see
that with the size of the estates and the size of each parcel
making up the estate, after the grubbing-up procedure there is
not a lot of potential for conversion of the land even when the
former estate is located in a high potential agricultural environment.
These are not dimensions which make it possible, for example,
to produce wheat and cereals. In zones where irrigation is possible
conversion towards fruit and vegetable production is also very
limited. For example, it is a totally different profession, you
cannot turn a wine maker into a fruit producer, it requires different
skills. Secondly, the fruit and vegetable sector is also currently
in difficulty. There are cereal co-operatives in the area who
wish to increase their production but, as we said earlier, the
size of the estates and the fact that these estates are broken
down into small parcels of half a hectare is an obstacle to their
use for cereal production. The other sector is the agro-environmental
measures, which is currently being established. As we said earlier,
there are many parcels after grubbing-up which do not offer a
viable agricultural alternative. Notably this concerns the lower
mountain zones which are very dry, which are generally AOC production
areas. These zones after grubbing-up present a high level of environmental
risk with regard to drying up and, therefore, forest fires, which
is why they have to be maintained for the purposes of the environment.
The third element with regard to wine-making estates is an incentive
to property exchange. This does not necessarily concern people
who are on the early retirement plan, this concerns all wine producers.
Notably this will be deployed by the local authorities, the regional
and departmental councils. The first section was about the smallholdings
and the wine-making estates, now I will move on to the companies.
There is a major challenge relative to restructuring the co-operative
sector of wine making. As we said earlier, there are roughly 300
co-operative wineries in the area. These co-operatives will be
severely affected by grubbing-up policies. Mechanical grubbing-up
leads to an increase in fixed charges per hectolitre produced.
We have provided supported mergers between co-operative wineries
and this level of support is relative to help with investment
further to a merger between co-operative wineries. These are the
key elements of the forward looking policies and, if you have
any questions, you are more than welcome to ask them.
Chairman: Thank you very much indeed.
Q748 Viscount Ullswater:
You explained on the graph how the prices had gone down, but I
am wondering how many people went out of business because the
prices were no longer sufficient for a livelihood.
Mr Clarimont: My colleague has the figures.
Mr Solere: This is a study that was carried
out in 2005 about the number of wine estates which highlighted
an acceleration in the reduction of the number of wine-making
estates. We are more concerned with the acceleration in the reduction
of the number of wine-making estates. In 2000 there were 31,000
wine-making estates in the region and in 2005 there were 25,000
wine-making estates remaining. This was a structural inquiry based
on the number of wine-making estates in business. In terms of
employment in the wine making sector, we estimate that 3,500 jobs
have been lost in the same period.
Mr Magnier: Over the past 15 years, in terms
of surface area we are in a negative balance of 120,000 hectares
that have been lost.
Q749 Chairman:
You made the important distinction between wine produced and wine
sold. Could you give us those two figures. What happens to the
wine that is produced and not sold?
Mr Clarimont: There are two elements. After
a production year, after a harvest, there is an automatic increase
in stocks for the year and also we make use of distillation to
evacuate a certain element of the production.
Q750 Viscount Ullswater:
Is this ordinary distillation or crisis distillation?
Mr Solere: With regards to Languedoc/Roussillon
and its potential in terms of table wine, the highest levels of
distillation have been recorded since 2005. Under Article 29,
therefore, standard potable alcohol distillation in 2005 and 2006
was one million in both years and under Article 30, crisis distillation,
900,000 hectolitres in 2005 and the same again in 2006.
Mr Magnier: Roughly 10% of the production, therefore.
Q751 Lord Plumb:
Could I ask a question about the producer groups. You said that
80% of the producers are members of a producer group. Are those
groups also dealing with the processing of the wine? Is that part
of the whole co-operative set-up? Or is that a separate entity
from the producer group itself? Secondly, the Director said there
is an increase in the population in the Languedoc region of 25,000
to 30,000 people each year, and that is quite a lot of people
coming into a region like this. Are they not wine consumers? Could
I just add to that—does the Languedoc region import New
World wine, because it seems to be a big problem that New World
wines are coming into various regions and obviously affecting
consumption?
Mr Solere: We come back to the producer groups.
Most of the producer groups are active in the marketing sector
and they organise bulk sales. Some groups also take care of packaging
and the sale of bottled wines. The actual vinification procedure
is run by the co-operative itself and not the producer group.
Mr Clarimont: Or the wine producer himself as
an independent wine maker.
Mr Solere: On the distillation side, the groups
are not involved in that, it is based on the co-operatives themselves
or the independent wine makers themselves. Relative to the New
World wines, the main competition is, in fact, on the export markets
so, for example, they are in high competition against New World
wines on the northern European markets. The 80,000 hectolitres
of Vin de Pays table wine produced are generally sold in
bulk and are based on the entry-level pricing to the market, we
have not developed any significant branding which would enable
us to access higher pricing levels.
Q752 Lord Plumb:
That was really my question, I think.
Mr Solere: It is difficult to evaluate the market
share of New World wines in Languedoc/Roussillon because we have
a different approach in terms of evaluating the market. We evaluate
production locally and the market in terms of consumption in the
country. Most of the wine in Languedoc/Roussillon is sold in bulk.
Q753 Viscount Brookeborough:
What proportion of the producers of grapes are part-time farmers?
Mr Clarimont: That is a good question. The proportion
is quite high, in fact, and very difficult to identify sometimes.
Many people in Languedoc/Roussillon have a behaviour that is more
of a landowner than that of a wine producer. People who have inherited
a vineyard, for example, keep the vines alive because they consider
it part of their inheritance, part of their patrimony.
Q754 Viscount Brookeborough:
So what is their other employment? If they are part-time farmers
and we are talking about the fact that it is difficult for them
to diversify or change, what is their other employment that sustains
them in business?
Mr Solere: First, I will give you the figures
and then answer your question. Out of 26,000 estates there are
11,450 that are considered as professional estates.
Mr Clarimont: For the part-time producers and
their other activity outside wine making, as I said earlier these
are people who have often inherited the estates and these are
generally people who simply have another standard job or are shop
owners or things like this who keep their few hectares alive producing
grapes and delivering their grapes to the co-operative.
Q755 Viscount Brookeborough:
This is to do with the competition of New World wines. You mentioned
that you have a problem with your identity and yet you have been
producing wine for many hundreds of years and the New World has
only just started. The New World wines have a totally different
method of labelling and identifying themselves. Do you feel that
you are constrained by the restrictions that are placed on your
label to do with grape varieties in Vin de Table and Vin
de Pays?
Mr Solere: One of the key problems is access
to the market. As we said before, the main part of production
is bulk production. Wine merchants who come to this region to
buy wine, be they national or international wine merchants, are
interested in large volume purchases. These large volumes are
then taken out of the region and packaged in the country of consumption.
The first restriction we are subject to is the pressure of the
purchase price of the wines and we feel the competition here.
With the varietal wines, which are on an international level in
terms of quality, we have seen there is a very high level of demand
but given the rigidities felt within the markets the prices are
subject to a significant drop, which was why I raised the question
of competitiveness. I come back to your question, what can we
do to increase the competitiveness of the wines. We are working
on the production side of things whereas the competition is very
much targeting the market side of things.
Mr Clarimont: We consider ourselves producers
or raw material but we have not been able to develop brand networks
and, therefore, we have a very weak footing at the wine merchant
level of trading.
Q756 Viscount Brookeborough:
So your wine merchants are not marketing your goods properly?
Mr Solere: That is a good question!
Mr Clarimont: When we compare Languedoc/Roussillon
to other wine-producing areas in France, we note that the trading
level is very, very weak. We have not been able to identify an
image or identity to create any significant margins, which has
ensured that the wine trade in Languedoc/Roussillon has remained
very weak.
Q757 Chairman:
If we can, I would like us to focus on the Commission's Communication
towards a sustainable European wine sector. To start that off,
I would like to ask you how you see that Communication, if it
is carried forward into definite proposals, affecting the region?
In particular, have you anything to say about the three policy
areas of stopping crisis distillation, the continuation of grubbing-up
and the ban on new plantings?
Mr Magnier: We have taken a lot of time to think
about the CMO proposals and a lot of thought has come from the
professionals in the sector. The first sector we are considering
is the production potential in the region, notably in terms of
Vin de Pays table wines. Everybody agrees with the statement
that we have to grub-up surface areas of vines. The forecast over
the coming years is roughly 50,000 hectares to be grubbed-up over
the coming five years. The objective is to retain the quality
potential present in the region. This is totally in sequence with
the programme that was presented earlier, the land use question
and how to use the grubbed-up land in the future. Another question
is the aspect of temporary grubbing-up. This temporary grubbing-up
procedure already exists in the region, which is known as deferred
quality conversion, where lower quality varieties of grapes are
grubbed-up and three to five years later these are replaced by
higher quality varieties. There are subsidies for grubbing-up
the vines and there are also loss of earnings subsidies for the
parcels that have been grubbed-up. The second element is the desire
to control market production conditions, keep control of crisis
management situations or levers, notably crisis distillation.
Keeping in mind this desire to keep control of crisis distillation,
on this basis we are looking for new outlets for the distilled
product, for example biofuels and things like this. That is also
accompanied by other preventative measures, such as green harvesting
or viticulture of fallow land. With regards to enriching the must,
the desire is that the must does not come from third party countries
outside the European Union but is produced in the region. The
third element is sale of products from the vines. In terms of
aid we want to move towards less aid for grubbing-up vines towards
more aid for marketing and restructuring the co-operative structures,
as I said earlier. The fourth element, which is very much held
in the heart of the regional authorities, is defending the local
territory and developing the regional territorial identity. The
professionals are very much attached to the idea of a production
basin, a production region, and a regional brand has just been
developed and launched, which is Sud de France, South of
France. There is a very high demand for a certain level of regional
branding. Those are the four elements.
Q758 Chairman:
That regional branding, which segment of the market is it aimed
at?
Mr Magnier: All segments of the market but mostly
Vin de Pays and AOC wines too.
Q759 Viscount Ullswater:
Could I ask a bit about the grubbing-up. You say that you will
contemplate grubbing-up 50,000 hectares over the next five years.
How will that be distributed in the region? Will it be according
to the wishes of the farmers, bearing in mind some of the areas
that you are concerned about with the fire risk in the lower mountain
regions? Or will it be controlled from the centre?
Mr Magnier: As we said earlier, the average
age of wine producers is quite high, 30% are over the age of 50.
The central theme here with regard to this question is based on
early retirement, so the grubbing-up aid is especially directed
and applied to the early retirement scheme. With regards to the
grubbing-up policy, that is also linked to the early retirement
scheme.
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