Examination of Witnesses (Questions 862
- 879)
WEDNESDAY 23 MAY 2007
MR CLAUDE MAILLEAU AND MR JACKY BONOTAUX
Q862 Chairman:
Can I, first of all, thank you very much for finding the time
to come and meet us; we do greatly appreciate that. As you have
heard, we have had a very rewarding and interesting time in France,
both in Languedoc and now in Bordeaux. As you know, the focus
of our work is on the Commission's Communication indicating possible
proposals for the reform of the wine regime. Our interest is clearly
how that will affect the European wine industry. That may be thought
a bit strange coming from a country that does not have a history
of wine production, but there are three things to be said: first
of all, we have a history of wine consumption; secondly, the regime
at the moment costs a great deal of money, €1.5 billion,
and it sits a little bit oddly with the way other aspects of the
CAP have been reformed; and, thirdly, we do have a very small
but growing wine industry ourselves. I wonder if we could start
by asking you to give your view of the current situation of the
wine industry in Bordeaux, its strengths and the challenges it
faces. Then perhaps you could consider the Commission's proposals
and how they are likely to impact on the wine industry, with particular
reference to the areas of the possible end of crisis distillation,
the new grubbing-up proposals and the view to abolishing the plan
on new planting rights.
Mr Mailleau: (Through an interpreter) First
of all, my Lords, please accept our apologies for the absence
of our Regional Director, Mr Bova, who was very recently appointed
on 18 May as Agricultural Adviser to the Prime Minister.
Q863 Chairman:
Give him our best wishes and good luck!
Mr Mailleau: You are going to have a duo with
us. Jacky is the economic specialist, so he will field all your
questions on the economic aspects of the wine industry. I am the
County Director, not the Regional Director, and I will field your
questions on technical aspects. I have just one quick clarification.
I will not give my personal view on the proposals of the Commission
but the viewpoint of the Ministry of Agriculture. As you know,
Bordeaux and its vineyards are known throughout the world and
it has considerable weight in the economy both of the Gironde
and of the region of Aquitaine as a whole. It is linked very much
to the whole of the organisation of the wine industry across France.
It is structured on a national basis. Essentially you have two
main sectors: a bureau that handles all the economic aspects that
is directly attached to the Ministry of Agriculture; and, secondly,
the institute you have already heard of, the INAO, the National
Institute for Appellations d' Origine, which covers all
the agricultural and technical aspects of the appellations.
There are those two key sectors. As you know, you have professional
bodies such as the CIVB, which is composed of three forms of membership:
growers, brokers and wine merchants. Their role is to ensure the
development and the promotion of the products of the vineyards.
They are not there for policy-making; policy-making is on a national
scale. One of the main features is that Bordeaux and its vineyards
are almost exclusively AOC wines. We have a total of 57. That
forms a triangle, in decreasing order of prestige and reputation,
from the top six, like Saint-Emilion and Margaux, down to the
bottom of the triangle, the simple appellation of Bordeaux.
Within that you have the wine syndicates, or wine guilds, whose
job it is to define and propose particular levels of yield, the
number of hectolitres per hectare for each harvest, which is then
ratified by the INAO. That gives you some idea of the complexity
of the structure, it being a profession that is essentially driven
by those involved within the profession, the growers, but under
the control of the relevant ministries. The definition of strategy,
whether it be local or national, is often a complex issue leading
to contradictions both within those who are the professionals
and between the profession and the ministries. I will now hand
over to Jacky Bonotaux who will give you a breakdown of the strengths,
weaknesses and challenges on the economic plane.
Mr Bonotaux: I will take this in three stages:
first, an introduction to the vineyards in Aquitaine within the
context of agriculture; secondly, in comparison and contrast to
the rest of France and other French wine-producing regions, before
looking at its potential development and strengths and weaknesses.
If you take the surface area of the Gironde, it is one million
hectares. Half of that is forest, so we take the other half and
we divide that into two: 250,000 hectares consist of roads and
urban development and 250,000 hectares are given over to agriculture
in the widest sense of the term. Therefore, you take the last
quarter of the 250,000 hectares under agriculture and half of
that, 125,000 hectares, is planted with vines. It is 12.5% of
the total surface area of the region. Although it only accounts
for 50% of the surface area from agriculture, it accounts for
90% of the GNP of agriculture. If we extend that to the level
of the region, wine growing amounts for 40% of the agricultural
GNP of Aquitaine. That gives you some idea of its economic weight.
There has been a complete change over the last 10 years from 1998-2005,
going from agricultural farming to wine farming. If you compare
wineries in Gironde with the rest of France, the average size
of a winery in Gironde is twice that of the average in France.
One of the results of that specialisation, from being a wine farm
to a wine entity, is that the producers in Gironde have become
specialised wine producers, wine growers, whereas wine farms in
other parts of France will do a little bit of stock breeding or
mixed farming. But here once they are into wine they focus only
on wine. One of the other contrasts between Gironde and the rest
of France is that there has been a move from family estates to
corporate entities. Corporate entities now account for 70% of
the wine-producing vineyards, the exact opposite of what happens
in the rest of France, where it is still 70% family. The other
striking contrast is the people who are employed in the vineyards.
In the rest of France it is essentially family, therefore they
are family members rather than proper employees, whereas here
it is employees from the outside that account for one employee
out of four within the agricultural sector as a whole, whereas
the surface area is only 7%. They account for 25% of the employees
on 7% of the surface area. Another striking contrast is when you
look at vinification. In the rest of France, and we will leave
aside Champagne, half of the wine is produced in co-operatives:
in Gironde 75% is produced by private wine entities. In the rest
of France the majority of the wine is sold in bulk, in Gironde
it is practically all in bottles. They grow it, they ferment it,
they bottle it and they sell it. That is not, in any sense of
the term, to denigrate or deny the importance of the co-operatives
in Gironde because, of the six million hectolitres produced, the
co-operatives account for 1.5 million. The co-operatives alone
represent as much as, if not slightly more than, the second most
important wine-producing region in France, the Vaucluse, which
produces 1.4 million hectolitres. Gironde co-operatives produce
1.5 million. To sum up, Gironde is the biggest wine-producing
area in France. It is number one for production. It is number
one for employment and represents €1 billion positive input
to the balance of payments. One of the shortcomings is the disappearance
of agricultural activity in the county. A strong point is an accent
on the environmental assets within the industry, particularly
when you look at the co-operatives and the treatment of effluents.
As far as people and employment are concerned, we are one of the
leading areas for agricultural colleges and wine colleges for
the training of people moving into the industry, and it can be
rightly considered that the growers in the Gironde are probably
amongst the best informed and the best trained.
Mr Mailleau: In a couple of words, the strong
points are the impact on the economy, the impact on employment
and also the quality and reputation that goes hand-in-hand with
Bordeaux and its vineyards. There are two weaknesses: the fragmentation
of the commercial organisation and the difficulty of reorienting
the product to adapt to market requirements, tastes. Do you have
any questions, having been bombarded with a lot of statistics?
Q864 Chairman:
That is extremely useful. I will ask my colleagues if they have
any questions on the context-setting session. What sort of economic
activity, other than agriculture, is taking place that absorbs
people who were formerly employed in agriculture?
Mr Bonotaux: What happens is that you get people
who were in agriculture who have gone to wine-growing but not
the other way round.
Q865 Lord Cameron of Dillington:
What is the economic activity in the small towns?
Mr Mailleau: I will try to answer your question.
The immediate other agricultural activity that springs to mind
is forestry but, if you take forestry in the whole of the Aquitaine
region, that accounts for as many people as are employed in wine
just in Gironde,—35,000 people in both. As for the other
activities, they are rural activities which are essentially linked
to the wealth being created by vineyard activity: the presence
of shopkeepers, the presence of craftsmen. When you go to the
southern part of the area where there is more traditional rural
activity, such as stock-rearing, you find a much lower density
of activities revolving around those rural activities. The magnet
is definitely the wine. If you take a straight comparison of 100
hectares, in cereal growing you are employing two people, in wine
growing you are employing 27.
Mr Bonotaux: In comparison with the rest of
France, it is 27 in the Gironde and 15 in the rest of France because
they grow it, they vinify it, they bottle it and they sell it.
Q866 Lord Plumb:
Relative to the economy, could I ask what the situation with employment
is. Are young people leaving the area and going into other industries.
Or are they staying in agriculture and in viticulture? What is
the average age of those who are in the business now? Are they
taking the retirement pension which is available to them as they
retire from the farming industry?
Mr Mailleau: Up to 2000 there was a steady growth
in the wine industry, with a development both in the planted area
and also in the job opportunities and employment, which meant
that young people were attracted to the industry. But with the
crisis that growth curve flattened and came to a dead stop.
Q867 Chairman:
What is the crisis?
Mr Bonotaux: The general trend, given the health-giving
properties of Bordeaux wine and the impact on boosting your cardiovascular
attributes, means that people retire much later, they stay on
their properties and continue in their activity far longer than
in other parts of France.
Q868 Lord Plumb:
So we have got to keep drinking Bordeaux wine!
Mr Mailleau: That is linked to the increase
in the planted surface area. Between 1998 and 2000 we went from
110,000 to 125,000 hectares under vines. That was accompanied
by an increase in production totalling 6.5 million hectolitres
per year but the marketing, the sales, did not follow and topped
out at 5.5 million hectolitres per year and prices went through
the floor.
Q869 Chairman:
What was the response of the industry to that?
Mr Mailleau: The response came in three ways.
First of all, a restructuring of the vineyards, ie in the medium
term, a programme for grubbing-up of the vineyards to a total
of 10,000 hectares. That was the first response. The second response
was to try to level out to adjust the difference between production
and sales, 6.5 and 5.5, by using distillation. Thirdly, to develop
quality and to boost sales by making the product better suited
to the market. Obviously there was a fourth concomitant one on
quality, by a restriction and limitation on the yields per hectare
in the vineyards.
Q870 Chairman:
Have you got any figures on how many people left the industry
as a result of restructuring?
Mr Mailleau: Obviously it is very difficult
to give you a precise figure. It is even difficult to estimate.
There were relatively few people who gave up altogether. Of the
8,000-odd growers, maybe 100 stopped and abandoned the whole thing.
The others said, "We will just have to weather the storm.
How do we weather the storm?" Depending on their situation
they found various solutions to try to maintain their activity.
One of the solutions was to sell land. They had land which was
not under vines, so they sold it for building purposes. They sold
equity or they arranged short-term loans with their suppliers.
They tried to find different financial solutions to weather the
storm but very few actually gave up the ghost.
Q871 Viscount Ullswater:
The 10,000 hectares which went into grubbing-up, was that a temporary
grubbing-up scheme and could they then replant vines within a
number of years?
Mr Mailleau: It is permanent.
Q872 Chairman:
Could I ask about the level of distillation. How much went into
distillation—crisis distillation.
Mr Mailleau: In 2005 300,000 hectolitres and
in 2006 500,000 hectolitres.
Q873 Viscount Brookeborough:
We have heard from various people that there is a crisis, and
yet only maybe 100 people went out of the business. Agriculture
as a whole throughout Europe has changed a lot and in most sectors
in the United Kingdom many more people have gone out. It would
appear that, if you are speaking for Bordeaux as opposed to Languedoc,
things are getting a bit tight as opposed to being in absolute
crisis. At present this is without deregulation or without getting
rid of crisis distillation, without getting rid of the planting
ban and without grubbing-up. To a certain extent it appears that
the crisis is not as big as people talk about in Bordeaux?
Mr Bonotaux: Just two indicators which would
flash up a red light on the dashboard: if you compare the price
of a barrel of wine, 900 litres of wine (called a tonnelet)
between 1998 and today, in 1998 it was €2,200 for a 900—litre
barrel of wine and today it is €950, less than half. If you
take the price of land over exactly the same period, in 1998 a
hectare in Bordeaux appellation, (we are not talking about
the top of the tree, we are talking about the grass roots), €35,000
per hectare in 1998 and €18,000 in 2007. So somebody who
bought a hectare in 1998 and paid €35,000 was expecting €2,200
for a barrel, and now that product has lost 50% of value and so
has land.
Q874 Lord Cameron of Dillington:
Almost all the producers we have met are telling us, "Why
not leave us to manage our markets and succeed and fail according
to our own ability to produce for the marketplace". In other
words, all the controls that politicians put on them only get
in the way. It seems to me that for Bordeaux—it is not quite
the same for Languedoc/Roussillon—the best thing that could
happen would be for politicians to say, "OK, you are on your
own for the whole of Europe".
Mr Mailleau: There is a shady zone there. They
have their own organisation, as was explained to you at the beginning
of the session, and the State does not get so much in their hair.
But, since they have run into difficulties, there has been an
increasing number of growers who are going back to the Government
asking for help.
Q875 Lord Cameron of Dillington:
But why does the Government give it?
Mr Mailleau: The message you are hearing is
perhaps not quite as cut and dried, it is a complex and sometimes
contradictory situation even within the industry. Do not just
take one side of it, even within themselves it is complex and
sometimes even contradictory.
Q876 Viscount Brookeborough:
Do you see the new proposals from Brussels as being a way of solving
your crisis?
Mr Mailleau: This is not my personal opinion;
this is the view of the Ministry.
Q877 Chairman:
We appreciate that.
Mr Mailleau: The Ministry's opinion is that
it is not logical to grub-up vines and then to liberate planting
rights. If you liberate planting, that could again lead to the
imbalance between the area of production (and the actual level
of production) and sales, leading to a drop in price and increased
difficulties for all of those involved. Somewhere along the line
there is the impression that the proposals of the Commission would
lead to a situation of "may the best man win", but those
who are in difficulty at the moment are essentially the growers
who have invested, who have a drive for quality and a respect
for the environment. Those who seem to be sailing through the
crisis are those who have not worried so much about respect for
the environment, who have not invested so much and who are not
that bothered about the quality.
Q878 Viscount Brookeborough:
Yesterday we did hear the same opinion but, yet again, it was
cherry-picking certain parts of the proposals, in that it was
talking about the ban on planting and the grubbing-up without
taking into consideration the third leg, which is crisis distillation.
If that is not there, then you will not get over-planting because
it will be uneconomic and, therefore, you do not need a ban on
planting.
Mr Mailleau: We did not talk about distillation.
The current wish of the French Government is to maintain distillation
to have that safety net.
Q879 Chairman:
That will mean that the more uneconomic, lower-quality producers
will survive?
Mr Bonotaux: Obviously, when we were talking
about distillation, that was across the whole of France.
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