Examination of Witnesses (Questions 806
- 819)
TUESDAY 22 MAY 2007
MR ALAIN VIRONNEAU, MR DENIS JOHNSTON AND MR PHILIPPE
CASTEJA
Q806 Chairman:
First of all, could I start by saying, even on the record, thank
you for this absolutely magnificent meal and for the conversation.
Mr Vironneau: (Through an interpreter) Thank
you for coming.
Q807 Chairman:
I usually have to start off these sessions in a very dreary committee
room in the House of Lords and tell the people who are giving
evidence that we are web casting, broadcasting the proceedings,
and that there is the possibility that someone who cannot sleep
might actually be listening to what is being said. I have never
actually found there is anybody who listens to what we say but
it is a theoretical possibility. At least today it is not even
a theoretical possibility. I wonder if I could start by asking
a general question. We have had the Communication from the Commissioner
and we are waiting for the proposals in July. As far as you can
see, how do you react to those proposals for the reform of the
wine regime? Are they sensible? Are they reasonable? Do they direct
a way forward? Or is there some underlying major criticism that
you would like to make? If I could, I would ask you to answer
in terms of both Bordeaux and also the wider French wine interest
as well if there is a distinction.
Mr Vironneau: We were fortunate in Bordeaux
to have already met with Mrs Fischer Boel and Mr Milton who works
closely with her from his home in Serres. What we are looking
for, and I have already made a declaration to this extent in the
European Parliament and Strasbourg, is a winning attitude from
Europe, a conquering attitude. What do we mean by a conquering
attitude? First of all, to take on board that we have now reached
cruising speed on globalisation and Europe needs to have the same
facilities and tools as the rest of the competition and to give
the French economy the capacity to face international competition
outside. We want to see that this European reform takes on board
and integrates the organisation from the Community of markets,
the OCM. One of the insufficiencies is that the wine producer
is a producer, out there with his vines, he is somewhat removed
from the world of consumption. Trends and tastes change every
six or seven years and we are still not in there, therefore Europe
has to take on board the realities and create a situation whereby
there are genuine criteria adapted to the change in consumption
and not just pinned to the producer and his vines. That is where
in Bordeaux we are very attentive to the reform. We expect a lot
from the reform insofar as Europe should give an opportunity to
the wine industry and to growers to be able to pursue a conquering
attitude and gain market share, so that the 125,000 hectares under
vines has a club in the market. That is why we are attentive and
expectant. Very much along the same lines as regions such as Champagne,
we have here in Bordeaux a very real capacity for development
to go out and gain market share.
Q808 Viscount Ullswater:
Could I perhaps ask a question on that. Why is it that the New
World wines have managed to penetrate the market quite so successfully?
Mr Vironneau: 95% of consumers have not got
a clue about wine. For a long time wine was very much like cereals
and meat, a consumer product, because the majority of wine consumption
around the world was by occasional wine drinkers. We will leave
aside the icons, the Grand Cru and the top 5%; they have held
their market share and recognition for donkey's years and increasingly,
whether it be France, Spain, Italy, Hungary or even California,
we are moving into a market segment of so-called premium wines.
We are moving to a situation where we will only have a two-tier
situation of premium wines and the icon wines, the super-premium.
The New World wines started by copying the old world wines by
identification through the grape varieties and their bottling
and labelling techniques. We have seen the appearance on the market
of very standardised products with labels that are easy to pronounce,
for example Merlot, Cabernet Sauvignon, et cetera.
Q809 Viscount Ullswater:
Chardonnay.
Mr Vironneau: Whereas in Bordeaux, literally
for centuries, producers have been producing Merlot, Cabernet
Sauvignon, Cabernet Franc, but we are not allowed to put it on
the label. Whilst it is not allowed in Bordeaux to be written
on it, in an equal and free market, having put Merlot and Cabernet
in the bottle, We should put it on the label. Why should it not
be allowed to do so?
Q810 Viscount Brookeborough:
We were told yesterday in Languedoc by the independent producers
that they would like reforms along that line, but they say that
they cannot get them through. If Bordeaux also would like to do
it, what on earth is stopping these reforms?
Mr Casteja: Maybe I can add something about
the New World and the so-called Old World. At the start you must
remember that the French, Italian and Spanish wine offers are
very confusing for new markets. In fact, the offer was addressed
to people who knew their way around wines. We are facing, and
have been facing over the last 25 years, new consumers. These
new consumers did not have a clue what it was about and wanted
something simple. They wanted a product that they could easily
understand. That is why the answer has been—excuse me for
thinking it is the French influence—that they have taken
the Merlot, the Cabernet Sauvignon or Shiraz for the United States
in order to use words which were known to make the offer easy.
When we say in the "Old World", French or Bordeaux people
in general, about New World wine coming on the market and being
so strong, let us face it, if you take our market, if you take
our volumes, 30 years ago and today, our volumes today are far
larger than they were 30 years ago. The New World is an answer
to new consumers and the market finds its balance over time. For
example, in 2006 French wines gained 2% of the market in the United
States and the Australians lost 1% and Chile 2%, so things are
not the same forever. It depends on the way you present it, the
bottle can be half empty or half full. We speak of wine! Now I
think we are adapting our production to these new consumers. This
is why, coming to your last question, we are introducing the grape
varietals on the back labels mainly to give some information to
the public. As I and the President have said, the public nowadays
is not a connoisseur type of public and they need the information,
the back label, which says we put some Merlot, Cabernet Sauvignon
and Shiraz which is aged in the barrel and so on.
Q811 Viscount Brookeborough:
But I understood your President to say that there were restrictions
on what you could put on the front label.
Mr Casteja: The rules were that it was not possible
until two or three years ago. The French rules, together with
the European rules, have made it more open to use the grape varietals.
Grape varietals in general for France and Germany were used for
the German Cepage or the Alsatian Cepage for some specific type
of wines and it was not possible for the blended areas, such as
Bordeaux. Where the blend was compulsory, for example in Bordeaux,
the law said that, if you wanted to put the blend, you must put
the exact blend with the exact percentages, which is very difficult
to fulfil. For this reason nowadays information is possible thanks
to the European rules and the French have changed their rules
themselves.
Q812 Viscount Brookeborough:
So you have no problem with labelling?
Mr Casteja: We have less problems but I believe
we will get through these problems in the very near future. It
is not such a key issue as it was three or five years ago.
Q813 Chairman:
On labelling, economic liberals—and I would not necessarily
say that I am a total economic liberal—would say that you
could put anything on the label so long as it is true. What is
wrong with that?
Mr Johnston: When you put the name on the bottle,
say Merlot, you have to put 100% of Merlot in the bottle.
Mr Casteja: That was the French way.
Mr Roberts: Just to make things crystal clear,
the problem is—this may be obvious—what makes Bordeaux
into a Bordeaux is that it is made up of Merlot grapes and Cabernet
Sauvignon grapes.
Q814 Chairman:
I appreciate that.
Mr Casteja: The French rules, the AOC rule,
was 100%. For example, the United States, and California to be
more particular, has a rule of 25%/75% and nowadays the European
law is 85%/15%. On top of that the European law rules out the
French way, that is to say we must accept the European law that
is, if we put Merlot on our label, for example, we only have to
be sure of having 85%, we have to fulfil the European law, not
the French law. That means all the French system has to change
a bit to match the European laws. It is a bit difficult.
Q815 Viscount Ullswater:
It has got to be.
Mr Vironneau: One of the weaknesses of the French
wine trade is that you have a lot of criteria on competition.
You have the European laws, you have European moves to help the
criteria on competition but because of subsidiarity you have the
national law which can introduce criteria which are even more
stringent than the criteria accepted and laid down by Europe which
does not help the competition of the Member State. I have a dream:
let us dream that Bordeaux can adopt the European criteria, why
not?
Mr Johnston: Because we are in France!
Mr Vironneau: That is dreamland.
Q816 Chairman:
Can we go back to this business that you have got Bordeaux, the
Premier Cru, the icon wines, the sophisticated consumer, and at
the top end of the market you can sell whatever basically. There
are these poor people we have been seeing in Languedoc/Roussillon
who really do not have that marketing strength. So how does the
French industry respond to consumers in the middle range, where
at the moment the New World is dominant? You most likely do not
have to do that but there are a lot of your compatriots who will
either succeed or fail depending upon whether they can capture
that market.
Mr Vironneau: That is a key issue when one realises
that within the next five years your middle range of wines costing
between $5 and $25 a bottle is going to account for 95% of the
wine market. We have a big part of the wines produced in Bordeaux
which fall within that segment and that is why there is going
to be a communication campaign to try and put over the message
worldwide with distributors, importers, wine merchants and wine
waiters holding a glass of the Bordeaux wine saying, "This
is value for money, you can afford it". There are the Lamborghinis
and the Rolls-Royces, we have got them. But we have also got the
Ford Pop, if I may stretch a point. 95% is Ford Pop. There is
a 95% segment out there of people who want to drink Bordeaux wine
who would like to think that every time they open a bottle in
the middle segment they are opening Chateau Petrus but, of course,
they are not going to. Everyone in Bordeaux is aware of the challenges
and the issues. There are 10,000 growers, 400 wine merchants and
they work in perfect understanding on the economic, social and
political planes. There is a joint determination to push through
the reforms both nationally and on the European plane to maintain
the activity of that industry. In addition to economics and politics,
wine is a cultural thing. Wine is symbolic of sharing, it is a
symbol of peace and it is very rewarding for our chairman to see
British parliamentarians and you from the House of Lords, who
have not got the tradition of a wine-producing country, coming
over here to talk to us on the social, political and economic
aspects for the reorganisation of a universal culture for recognition
by Europe of what is the wine culture based on the sharing of
values and peace and conviviality. I am quite convinced that,
because you are here, you will fight the good fight for wine.
Q817 Chairman:
We will indeed. It is interesting that we are not a wine-producing
country but we are increasingly a wine-consuming country. What
worries me as a European is that Europe is getting a declining
share of that consumption and in your own country consumption
of wine is declining.
Mr Vironneau: Why is consumption going down
in England and in France? Because of a repressive policy against
wine consumption and against alcohol generally. There is publicity
to drink in moderation. Why has nobody followed the example of
Canada, where many people have said that moderate wine consumption
is good for your health? Why has nobody followed up on the French
paradox? Why has nobody followed up on medical research saying
that wine consumption is beneficial, particularly for cardiovascular
disease? Why has Europe not benefited from all of that drive showing
the beneficial effects of wine?
Mr Casteja: I just want to add something on
why consumption has gone down in France. It is because we have
come from a country that was drinking wine like water to drinking
for pleasure, and you must remember that. The way of living now
means we can drink tap water.
Q818 Viscount Brookeborough:
Do you think that the strength of alcohol has anything at all
to do with it, when wine has perhaps been becoming slightly stronger
and people are turning to recreational drinks which are of a much
lower alcohol level, like cider and other things?
Mr Vironneau: On the world scene wine consumption
is going up from one year to the next by 2% on average. World
production is more or less stable at around 270 million to 280
million hectolitres. World consumption in round figures is 240,000
hectolitres, which means that you have 30,000 hectolitres worldwide
which are generally distilled for the pharmaceutical industry,
cosmetics and chemicals. You are left with 30,000 hectolitres
which weighs on worldwide consumption and production. I was in
the States recently in the Napa Valley, where I tasted some Californian
wines with an alcohol content of 16.7%. Similarly, in Australia
where you find wines produced, for example in Hunter Valley where
rainfall is 200 millimetres a year, you can imagine what effect
that has, compared to, on average, 1,100 or 1,200 millimetres
of rainfall in Bordeaux. We are way down on the alcoholic content
compared with Napa Valley and Australia. That is related to the
whole set of climatic, hydrological and geological factors involved.
When you have a very dry, hot climate, you are going to have very
small grapes. When you have red wine, you can see it is red because
of the colour which comes from the ripeness of the grape, which
means that your alcoholic content is automatically going to be
lower than tiny grapes that I have seen in Australia and the States
compared with the Merlot that is three or four times the size
because of the temperate climate and rainfall and the fight for
the vines for survival; where you automatically get much lower
alcoholic content in a glass, you are going to have a red wine
and not a claret. We must not forget also that we are talking
about 95% of consumers who know nothing about wine; they are coming
from sweet non-alcoholic beverages, soft drinks. Because of the
ripeness of the grapes in the Bordeaux region there is a degree
of sweetness that is found in the wine to attract the consumer
who is coming from sweet, soft drinks.
Mr Casteja: May I just add something. I think
you are right when you say the consumer is maybe looking for a
low alcohol product. We see it today on a number of Bordeaux wines,
a number of consumers of New World wines who are coming back to
European wines, to our Bordeaux wines in general if they are lighter
in alcohol and are not jammy in taste, they want things that can
be drunk. The consumer will certainly turn away from these products
which will be too heavy.
Chairman: I think we are having an absolutely
fascinating discussion about wine generally and Bordeaux in particular,
but I think we have got to remind ourselves, as my predecessor
always used to say, we are an EU Committee focusing on the possibility
of the reform of the wine regime. So we ought to try and focus
on what the Commission is saying and the likely direction of the
reform.
Q819 Lord Plumb:
Can I say, first of all, I am very much a wine consumer. I enjoy
a good wine. I am not as worried as some of my colleagues about
the alcohol content and I particularly like red wine. I realise
today that we have been fortunate to sample some of the king of
wines and we are among experts, and this is great. I wonder if
you would take us a little further into your dream world because
we are here to study the whole of the wine regime, to make representations
to the whole of the House of Lords as we make our report. We want
to make sure that we are presenting a report that is meaningful
and will, as far as possible, make sure that there is still a
strong wine industry in the whole of Europe. We have got to look
at it as a whole. I wonder if, in taking us a little further into
that dream, you might just reflect and think that one of the major
concerns of the European Union, one of the major concerns of the
Council of Ministers of the European Union, is the cost. We understand
the cost of the whole of the wine regime to be somewhere in the
region of €1.5 billion a year. If, as you take us further,
you reflect on that, how would you see the regime as it moves
forward? If I understood you correctly, you said that within your
dream you saw the possibility of France adopting a European regime
which was a meaningful regime which would then be acceptable to
all. How would you change that? What would you do and, therefore,
how would you reflect this, bearing in mind that we as a group,
I think, have come to the conclusion that the demand is there
and you have got to consider the possibility of the waste of resources,
if you like, in the way that sometimes this is viewed in supporting
a regime or an organisation that is not necessarily satisfying
either the producer or the consumer at the end of the day.
Mr Vironneau: First of all, may I say to you
that you have opposite you at the table three gentlemen who represent
Bordeaux; they are not the voice of France. We are here as representatives
of the region of Bordeaux, of 125,000 hectares, which has its
own economic club. France has other production regions with an
autonomy of management and production. We are the voice of Bordeaux.
There are three main thrusts for the realisation of my dream:
firstly, access to criteria of competition to compete on an equal
footing; secondly, freedom of management and of the economics
of production; thirdly, as far as Europe is concerned, and this
may be the most important one for you, a question of communication,
marketing and promotion of the product. Instead of using European
funds to subsidise destruction and pulling up vineyards, could
they not be re-geared and re-streamed on the same constant budget
to create better communication for the marketing and promotion
of wines. This brings us back to a general picture of the whole
policy and political issues of agriculture in Europe with the
WTO. I will give you an example: at Cancun, the meeting of the
WTO, the northern countries were very severely criticised by the
countries of the southern hemisphere for their subsidising of
agricultural production, which more or less doomed the farmers
of the south to disappear. A concrete example is the production
of rice between the USA and Korea. Rice produced in the USA and
delivered to Korea is sold for less than the price of rice produced
by the Koreans, so rice producers in Korea are going bust. The
whole question is one of competition in agriculture and, therefore,
of viticulture and wine growing. The wine grower is not the delinquent,
he is there to be attentive and contribute to what Europe can
do to ensure competition of viticulture within the general framework
of agriculture. The basic question is—do we want in Europe
to have a competitive viticulture and competitive agriculture
on a par with the competitiveness of industry, such as aerospace,
and other industries that are competitive on a European footing?
Do we want a competitive industry within wine and agriculture
that has freedom of management, that meets the criteria of competition
with support from Europe? Yes or no, is that what we want or not?
Chairman: I think that is a very powerful
statement.
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