Select Committee on European Union Thirty-Ninth Report


CHAPTER 2: THE EU WINE INDUSTRY—SOME UNDERLYING PROBLEMS

38.  In this chapter we look at some of the features of the EU wine industry which have come to our attention in the course of our inquiry and which seem to us to lie at the heart of the problem of over-production and declining market share. Our purpose in doing so is not to be critical of the EU wine sector so much as to highlight aspects of the industry which must change if the regulatory reforms proposed by the Commission are to have any chance of succeeding. Legislative reform is certainly necessary, but it is not the whole story: the mind-set which pervades much of the sector must change too.

Wine and the Consumer

39.  The last 30 years have seen a noticeable change in attitudes to wine drinking. Until the 1970s wine tended to be regarded in Britain as either a product for connoisseurs (whether to collect or to drink) or a beverage to be enjoyed on special occasions, such as weddings, or—though the practice was not widespread—a drink to accompany meals. On the other hand, within many of the main wine-producing countries wine was regarded not only as a drink for connoisseurs but also as an everyday beverage for ordinary families at mealtimes. According to Philippe Casteja, former President of the Inter-Professional Council of Bordeaux Wine Makers (CIVB), the widespread consumption of non-high-quality wine derived historically from the variable quality of tap water in some Member States (Q 817)[13]. The result has been a dichotomy between wine for the specialist and wine for everyday use, which is to a large extent reflected in the current formal division of EU wines into quality and table wines.

40.  Across Europe, as well as many other parts of the world, the situation today is very different. Dan Jago, Wine Buyer for the Tesco supermarket chain, put it this way:

"We have seen an increasing switch of customers' use of wine from what was regarded as a slightly ethereal, heavy—if you like, snobbish—area of interest … to a much more mainstream product, and I think the fact is that wine is fundamentally an alcoholic beverage made from grapes that works extremely well with food, and customers are beginning to realise this" (Q 644).

Julian Dyer, Senior Wine Buyer for Sainsburys, agreed. "Wine is no longer just about special occasions", he told us, "it is about everyday consumption" (Q 654). Luigi Polizzi, Italian SCA[14] representative, said much the same thing: "Wine has become an occasion to drink in a group during the evening, so now the habits of young people have also changed" (Q 418).

41.  This change has affected both the amount and type of wine being drunk. In Languedoc/Roussillon we were told by Bernard Clarimont, an official of the Regional Directorate of the French Ministry of Agriculture, that the market for table wines in France was falling by between 800,000 and a million hectolitres a year. "The people who consume these types of wine", he said, "are a relatively elderly population and this population is declining" (Q 747). In other words, the kind of ordinary vin de table which was once drunk with meals instead of water is in declining demand as a new generation comes along with new wine-drinking habits. Small wonder therefore that there are surpluses of such wines.

42.  The character of wine being sought has also changed. There will always be a niche market for high-quality wines produced in particular locations or with specific characteristics. Mass consumer demand, however, is for something else. Today's mass consumer has more money to spend than before but he does not buy wine in order to lay it down as an investment or to enjoy it as an art form but rather to drink it with meals or on social occasions with family or friends. He is not interested in the cheapest wine but equally he has no wish to pay a high price for a wine whose incremental value is not apparent. Alain Vironneau, President of CIVB, told us in Bordeaux that "within the next five years your middle range of wines costing between $5 and $25 a bottle is going to account for 95 per cent of the wine market". He continued:

"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 per cent is Ford Pop. There is a 95 per cent 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" (Q 816).

43.  A crucial factor in all this has been the rise of the supermarket. Michael Paul, Chairman of the Consultancy Wine Intelligence, was clear about this when speaking of the situation in the UK: "If it had not been for the supermarkets embracing wine and making it a destination category, wine would not be in the position it is now, having grown at 5 per cent a year for the last 10 years" (Q 515). Julian Dyer told us that supermarket purchases accounted for some two thirds of all UK wine sales. Continuing, he said: "The growth in wine over this period has come about as a result of the supermarkets making wine more accessible … easier to get hold of, easier to understand—and they have been merchandised in a way with which customers are familiar" (Q 651). The self-service character of supermarkets makes it easier for consumers to experiment with a commodity of which they know little and it has encouraged them to look for recognisable brand labels and special offers.

44.  This process of demystification has been helped by the entry into the market of New World wines, which in many respects are produced and marketed in a different way from EU wines. New World wine producers have recognised that they are dealing with a new type of consumer, who is not—and does not want to become—a wine connoisseur but who wants to be able to acquire good-tasting wine at a reasonable price. They have therefore marketed their wines by using reference points, such as grape variety and brand name, which can be easily recognised rather than by following the European model of defining good wine by reference to a myriad of geographical indications. Luigi Polizzi, Italian SCA representative, agreed that this was a key area in which New World producers had scored. "The marketing is really well organised in these countries", he told us, "and they use easy communication with the consumer because they use four or five international varieties. In Italy we have different varieties in each region. It is really difficult to put that information in one line" (Q 382). Philippe Casteja agreed. He suggested to us that French, Italian and Spanish wines were difficult for the new consumer to get to grips with and that they were "addressed to people who knew their way around wines". He continued:

"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 … The New World is an answer to new consumers … The public nowadays is not a connoisseur type of public" (Q 810).

45.  Where does this change in consumer habits leave the EU wine industry? In some difficulty, we would suggest. The problem seems to be that the industry has been slow to respond to the change—or in some cases even to recognise that it has taken place. There is undoubtedly a cultural factor at work here. Eva Corral, Head of the Wine Sector Division at COPA-COGECA[15], illustrated this when she referred to wine as "a product that is alive" (Q 234) and to the close linkage of wine production in the EU with locality or terroir (Q 242). Whatever the merits or demerits of this concept, it is but a short step from there to regarding wine production as more of a cultural craft in which the producer knows what is best than a straightforward commercial activity in which the customer is dominant. In Michael Paul's view, "the profit motive, which is what drives business fundamentally, does not exist in wine to the same extent that it exists in other categories" (Q 536).

46.  The Wine CMO, with its strict linkage of quality with geographical indications, reflects and reinforces this mind-set. Nor, as we have observed in Chapter One, do we believe that the Commission's latest proposals will do much to correct it. The fundamental weakness is the continuing division of EU wines into 'sheep' and 'goats' (quality and table wines), which will remain even under the regime proposed by the Commission. Yet it is here where New World producers have found their main entry into the European market: they have exploited a wide gap in the market which has opened up between top-class GI-based wines, which are of interest to those who understand and appreciate them, and cheaper but appealing wines which are not officially regarded within the Community as being wines of quality. They have been able to do this because they have been responsive to changes in wine-drinking habits and consumer preferences.

47.  New World producers also blend their wines to give consistency of taste. Jean-Louis Alaux, President of the Federation of Wine Producers of the Aude region of Languedoc-Roussillon (FVIA) referred to this difference between EU and New World wine-making:

"If there is a difference in flavour, taste or aroma from one year to the next in other countries, they can inject this aroma. If there is a little bit of sun missing in California, they can inject an aroma to replace the missing sun, and we cannot do this in France … Because we [FVIA] are avant-garde, we are looking to the future; we have been asking for a long time to have the same opportunities in these terms as our competitors." (Q 787)

We had already heard from Michael Paul on the need for consistency of taste to appeal to the mass market. "If you are a purist and very seriously into wine", he told us, "the idea of vintage variation appeals—because wine becomes almost a lifelong study, and therefore vintage variation is something that is attractive … If you are the average consumer, the last thing they want is vintage variation" (Q 516). And Luigi Polizzi took the view that "blending allows the wine maker to perform" (Q 534).

48.  It is clear from the evidence we have received that many wine producers within Member States are alive to this fundamental change which has taken place in wine-drinking habits and in the attitudes of consumers towards wine. We are not however convinced that the reforms which the Commission has proposed will have any serious effect in reorienting the industry towards this changed market. The Commission states, in its Legislative Proposal, that "the concept of EU quality wines is based on a geographical origin approach" and that "the EU wants to confirm, adapt, promote and enhance this concept worldwide"[16]. The trouble is that increasingly the global market does not see it that way. In our view a more radical approach is needed—namely, to break the connection between quality and geography and to allow all EU wines to compete on their merits as viewed by consumers.

49.  We do not wish to be misunderstood. As we have said in our earlier report, we have no difficulty at all with EU wines being produced and marketed under PGI or PDO arrangements: if a thriving market for such wines can be found, fair and good. We also fully recognise that the owners of recognised PGIs or PDOs must be given regulatory protection against impersonation of their products by others. Our quarrel is with the notion that only PGI or PDO wines can be considered to be quality wines and with the Commission's proposal[17] that the producers of such wines should be given increased control over the marketing of wines in their areas. Such attempts to swim against the tide of consumer choice risk sabotaging the recovery of the industry and its ability to compete with wines from outside the Community.

Structure of the Industry

50.  The EU wine industry displays three features which in our view are impeding its competitiveness—it is fragmented, it is producer-dominated and there is a lack of connectivity between those who grow and produce wine and those who market and drink it. We deal with each of these in turn.

FRAGMENTATION

51.  According to Eva Corral of COPA-COGCA, 71 per cent of EU vineyards have an average surface area of 5 hectares (Q 218). "The characteristic of the European wine industry", she observed, "is that, contrary to third countries, there are not really big companies in Europe. Most of the wine is produced by the producers and marketed by their cooperatives" (Q 224). Ms Corral went on to pose the question: "Because of the structure of production in the European Union, is it logical to think we can fully compete with Australia, where they have an average of 50 hectares against 5 hectares in the European Union?" (Q 233)

52.  This overall picture, however, masks a number of national and regional variations. According to Jacky Bonotaux, Economic Specialist at the French Agriculture Ministry's Regional Office in Bordeaux, wine growing in the Gironde region of France has seen a move away from family estates to corporate entities. "Corporate entities now account for 70 per cent of the wine-producing vineyards", he told us, "the exact opposite of what happens in the rest of France, where it is still 70 per cent family" (Q 863). The UK's own wine industry, though small, is growing rapidly and in a manner which is different from much of the EU. We were told by the UK Vineyards Association that the average size of a commercial vineyard in Britain was already around 35 acres[18] and that the figure was increasing towards 100 acres[19]. Robert Lindo, the Association's Chairman, described the average UK holding as "vast for the EU but small compared to places like Australia", where (he suggested) 150 acres was thought to be the minimum viable size for a commercial operation (QQ 563-564).

53.  Much of the situation in Continental Europe derives from historical factors, in particular the handing down of vineyards from one generation to the next as distinct from vineyards being taken over progressively by larger enterprises. Michael Paul believed that this was a factor of the industry's lack of competitiveness. "If you are a family company", he commented, "your main objective is maybe to hand this over to your son or it may be that you just want to make great wine. The idea of making a return on investment and having a business plan … actually does not exist" (Q 536). Jean-Louis Alaux, in Languedoc-Roussillon, saw another problem. "In generations past", he told us, "children have inherited their family estates but this inheritance does not necessarily mean that the skills have been learned along with the inheritance" (Q 767).

54.  According to Michael Paul, the Wine CMO itself could be compounding the problems of an industry which is fragmented into thousands of small producers. Commenting on the difference in scale of Australian and EU vineyards, he observed: "The whole culture and ethos of wine-making is going to be different if you have an almost infinite amount of land to expand into. You could be a very, very go-ahead producer of Burgundy, but actually there is not much you can do other than, perhaps, make better and better wine, if you cannot get more land" (Q 518). While Mr Paul's statement may seem at first sight to be self-evident, it assumes a deeper significance when viewed against the Commission's proposal to extend the ban on new plantings from 2010 to 2013, not to mention the pressure from some quarters to have it extended still further. We have already argued that, with the ending of subsidised distillation, there is no need for a ban on new plantings and that such a prohibition will serve only to protect inefficient wine producers and to keep more enterprising growers out of the market. It will also help to reinforce the fragmented nature of the European wine industry and hinder its ability to compete with imports from New World countries.

PRODUCER DOMINATION

55.  Philip Gregan, Chief Executive Officer of New Zealand Winegrowers, took the view that the focus of the EU wine industry was on production. "It is not about the market", he told us. "It is saying: 'This is how we are going to produce wine, these are the controls we are going to put in place, and then you, the market, you have to take what we give you'. The market has not liked it; it has moved away" (Q 737).

56.  Are such scathing criticisms well founded? During our visit to Bordeaux, we took evidence from Claude Mailleau, Area Director of the French Ministry of Agriculture. Mr Mailleau described to us how 'quality' wine growing in the Bordeaux region was managed:

"Bordeaux and its vineyards are almost exclusively AOC[20] wines. We have a total of fifty seven. That forms a triangle, in decreasing order of prestige and reputation, from the top six—like St-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 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[21]. 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" (Q 863).

57.  How, we wondered, was the market involved in the process? Mr Mailleau drew our attention to the CIVB, whose role he described to us as being "to ensure the development and the promotion of the vineyards" and whose evidence to us suggests that it is well seized of the need for reform of the wine sector. But, said Mr Mailleau, CIVB "are not there for policy-making; policy-making is on a national scale" (Q 863). It would be difficult to find a better illustration of what is wrong with the industry: it exists primarily for its producers.

58.  Nor in our view do the Commission's proposals hold out much hope for change. We acknowledge that the removal of subsidies for distillation will act as a spur to competitiveness and we are clear that, without this particular change, reform of the wine sector would be doomed. Nonetheless there are a number of aspects of the Commission's proposals which seem to us to perpetuate the existing producer focus of the Wine CMO. The proposals include, for example, the right of Member States to "classify which wine grape varieties may be planted, replanted or grafted on their territories" and a requirement on Member States not to allow specified grape varieties to be grown within their borders[22]. Member States are also to be given "competences" to restrict new plantings, even after the lifting of the current planting ban, in areas producing PGI ore PDO wines[23]. While we recognise that arguments might be advanced to justify such proposals individually, we are concerned about the mind-set which underlies many of them—that the industry should be regulated by administrative fiat rather than be left to respond to market pressures.

59.  Philip Gregan believed that "what Europe has to do is to move from basing its regulatory model on assisting producers to a regulatory model which is based on facilitating a comprehensive market place" (Q 744). Alain Vironneau, President of CIVB, said much the same thing. During our visit to Bordeaux he told us that "Europe needs to have the same facilities and tools as the rest of the competition … [It] 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" (Q 806).

CONNECTIVITY

60.  Lars Hoelgaard, Deputy Director-General for Agriculture at the European Commission, saw the need for "more integration between producers and the selling of the product, which is one of the areas where many of our stakeholders are saying there is a lack of integration, a lack of coherence, and there is a need to reinforce the whole chain" (Q 309). Lene Naesager, the Member of the Agriculture Commissioner's cabinet with responsibility for wine reform, put it rather more directly. There was a need, she said:

"to become more competitive and to start thinking differently, so that they do not think: 'Now I am producing the wine because I like to produce my wine like that'. They need to think about what does the consumer outside France—for example, in Denmark or in the UK—want to drink. They really lack awareness, the wine producers today. They are only thinking about producing their own wines. They do not think: 'How do I really sell my wine? How do I persuade people that they should drink my wine?'" (Q 345)

61.  This is not, however, just a matter of producer conservatism. Part of the problem lies in the fragmented nature of the industry which makes it difficult for the thousands of small EU producers to get a clear vision of what the market wants and to form robust links with wine retailers. Julian Dyer, for Sainsburys, referred to the smaller supply base with which he had to deal in Australia and California in contrast to the complexity of the EU wine industry (Q 650). Dan Jago, speaking for Tesco, told us:

"The European market is pretty much family and dynastic: the New World is corporate and large and, therefore, has found the ability to deal with retailers on a much more professional level perhaps than some relationship-driven styles of the Older World" (Q 671).

62.  It is here where there needs to be better coordination between what the industry can provide and what the market can sell. It is not so much that producers are not interested in making wine which is marketable as that many of them appear to be unaware of what the consumer is willing to buy. The problem is perhaps most acute among those small-scale producers who grow grapes and deliver them to cooperatives—and who, as Alain Vironneau told us in Bordeaux, have no contact with the market (Q 796). There is a clear role here for wine trade associations and cooperatives to explore the market and to feed back the intelligence they acquire to the producer in the vineyard. Eva Corral, of COPA-COGECA, recognised this need and wished to see a "market observatory" established to monitor changes in consumer demand and communicate these to growers. And Julian Dyer too was clear about the important role of trade groups. "Some of the trade bodies from the New World", he said, "have been extremely dynamic and unified in terms of uniting industry to understand what the customers want and assisting the producers to develop that" (Q 667).

63.  The Commission is proposing that around a tenth of the current Wine CMO budget should be devoted to 'promotion'. Its Explanatory Memorandum refers to "making the consumer better informed about European wines"[24]. This in our view is a most telling phrase. While we applaud the Commission's objective—to increase the sale of EU-produced wines—we believe that the strategy which is proposed needs to be turned on its head. We should be thinking in terms of making the EU producer better informed about consumers' tastes rather than making consumers better informed of what the industry has to offer. In a word, the starting point for any campaign of promotion should be the consumer, not the producer.

Impact of Reform

64.  In the course of our inquiry we have encountered a number of concerns about the impact of reform of the EU wine sector. There is concern about the effect of some of the proposed measures, in particular the withdrawal of distillation subsidies and the grubbing-up of vineyards, on the social and economic fabric of wine-producing regions. There is also concern, sometimes overt in relation to the Commission's proposals on wine-making practices but latent in other areas, lest the introduction of a more commercial approach to wine production might undermine the culture of the industry and result in EU wine becoming just another beverage with mass consumer appeal. And we have encountered some concern over the possible environmental impact of a reduction of wine-growing in some regions of the Community. These are understandable concerns on the part of an old-established industry which is being brought face to face with the hard realities of a global market. In this section we attempt to explore them and to assess how justified they are.

SOCIAL AND ECONOMIC IMPACT

65.  Eva Corral emphasised to us the labour-intensive nature of much of the EU wine industry. She believed that two and a half million jobs were linked to the harvesting of grapes and suggested to us that a large part of the economy of wine-producing areas depended on wine. "We have to be very careful", Ms Corral concluded, "about the way we do our reform" (Q 218). Reforming the wine sector, particularly the proposed withdrawal of subsidies for distillation, is bound to have an impact which will affect not only wine producers themselves but also other parts of the rural economy. Claude Mailleau reminded us that in the Bordeaux region there was much rural activity, including tourism, shops and crafts, which revolved around the wine sector (QQ 864, 884). All this has to be taken into account in assessing the impact of reform on local communities.

66.  Care must be taken, however, not to exaggerate the effects of reform. We have drawn attention in our earlier report[25] to evidence given to us by the French Agriculture Ministry that a high proportion of wine-growing concerns in Languedoc-Roussillon were run by people who had other jobs and who were keeping alive small inherited vineyards as a sideline activity. French wine-growers are not unique in this respect. Zoltan Somogyi, Hungarian SCA spokesman, told us that, though there were 130,000 registered wine growers in Hungary, only 12,000 of them were producing wine for the market. Many of them worked at their vines as a hobby: Mr Somogyi gave us the example of a railway employee who tended his vineyard after work. He did not believe that giving up wine growing would have a significant impact on the everyday lives of many of those concerned (QQ 364, 377). The picture is not, of course, a homogeneous one across the Community. As we have already remarked, there are areas—such as the Gironde region of France—where substantial consolidation of vineyards has taken place and where those who produce wine do so as their sole or main activity (QQ 824, 862, 864). Nonetheless, it is fair to say that the crude numbers of people involved in wine-growing do not by any means tell the whole story: it is necessary to consider the structure of the industry as well.

67.  It is also necessary to take a medium-to-long term view of wine sector reform rather than to focus exclusively on its short-term impact. Distillation subsidies and other market intervention measures address the symptoms rather than deal with the underlying cause of the malaise, which is the inadequate market focus and lack of competitiveness of much of the wine sector. It seems to us that the industry is in many respects in an analogous position to a patient whose symptoms are being relieved by palliatives but who is reluctant to undergo surgery to remove the cause of the illness. As with the sick patient, the wine sector will undoubtedly experience short-term pain when curing the malady replaces palliation of its symptoms. But in the longer term the industry will be stronger and, as it begins to attract new markets, it will be able to expand again.

68.  For these reasons we are in no doubt that the Commission's proposals, considered as a package, are sound and that, if they are accepted, they could well set the industry, after a period of recovery, on the road to greater vitality and growth. We fully understand the reluctance of some parts of the industry to undergo the prescribed treatment, but we are convinced that it is necessary and that the measures proposed by the Commission to ease the pain of the transition to a new Wine CMO will be sufficient to alleviate the upheaval and hardship which some may suffer. There are generous retirement grants on offer to those who cease wine growing, compensation for vines which are grubbed up, aid for restructuring of existing enterprises and rural development funding to help diversify employment in wine-growing regions. As a result this is a relatively pain-free package. If it is not accepted, the position of the industry vis-à-vis its non-EU competitors will only worsen and the impact of postponed reform will only be more severe.

CULTURAL IMPACT

69.  We turn now to a wider issue—the impact of reform on the culture of European wine production. There are some strands to this issue on which we have already commented, including the proposed EU-wide recognition of oenological practices endorsed by the Organisation Internationale Des Vins, the use of sucrose to enrich wine and the blending of wine to produce consistency of taste from one year to the next. Underlying all of them, however, is a concern lest reform of the wine sector should lead to an old-established craft industry being turned into a vehicle of mass production.

70.  Eva Corral was concerned that reform, while necessary, should not lead to EU wine producers simply copying New World business and oenological methods and having "a product that has no identity" (QQ 241, 242). That identity, she believed, was bound up closely with the definition of wine as a natural product. "It is made by producers", she said, "it is regulated by the Common Agricultural Policy, so it is an agricultural product" (Q 232). On these grounds Ms Corral did not favour the blending of wines to achieve year-on-year consistency of taste:

"The case now is that we have big companies that have vines in a number of continents and they put them together and mix them, so that they can get the same flavour every year and have a standard product, whereas our concept of the product and its characteristics is that we cannot do that" (Q 235).

71.  Lars Hoelgaard, of the European Commission, underlined these concerns when he drew our attention to concerns that EU oenological techniques should not be undermined by bilateral agreements with third countries. He told us that there was a desire in some quarters that the wine which was consumed in the EU should be made on the basis of "good, old, traditional practices". He added:

"There is very little of that approach in non-producing, wine-consuming Member States, like the UK, Denmark, Norway, Sweden, Ireland and others, who have no particular adherence to the culture compared to those who come from wine-producing countries, who have a very strong relation to that" (Q 311).

72.  David Statham, of the UK Food Standards Agency (FSA), drew a parallel, in the context of wine enrichment, between the production of wine and milk. "We used to have a situation", he said, "where you could not adjust the fat content and the water content of milk; you had to have a specific level, because that is what naturally came from the cow". The Wine CMO's attitude to wine enrichment was, he believed, similar. "What it is … saying is that we can only produce wine in the natural way as opposed to producing wine in a way that has the alcohol level correctly worked out … There is only one traditional way of doing this, in the way that there probably was only one traditional way of milking your cow" (Q 104). Sarah Appleby, of the FSA, summed it up with the question: "What makes a wine a wine? Is it because it has gone through a traditional process? Or is it a composite product with the addition of alcohol to some fruit base" (Q 106).

73.  In our earlier report we quoted Philip Gregan as saying that the EU attitude to wine production, and in particular the linking of wine quality with the concept of terroir, contained "flawed theology" (Q 707). These may perhaps seem harsh words. But it is fair to say that, in taking evidence during our inquiry, we have found that attitudes to reform of the EU wine sector sometimes migrate from the socio-economic and take on a cultural flavour, as if reform is associated by some with advancing philistinism. While we understand the concerns which are felt in some quarters, we do not believe that reform will have the dire consequences which appear to be foreseen. We concur with the view of New Zealand Winegrowers that "being consumer-led does not mean that wine will inevitably become a commodity catering to the lowest common denominator. In fact, the international wine market is highly sophisticated and there is strong consumer demand for products at all quality levels"[26].

74.  The Commission is not, in any case, suggesting that traditional wine-making practices should be abandoned. Indeed, while it is proposed that some oenological techniques which are approved by the OIV but currently banned within the EU should be allowed, other proposals—for example, on the use of sucrose—are more restrictive than the status quo. EU wine-makers who wish to continue to use traditional practices will be free to do so and, if they can find a market for wines produced in this way, they will no doubt continue as they have done. Perhaps the real cause of concern, however, is that, with distillation subsidies removed, traditional wine-makers who cannot find a market for their products may have to modify their products, by adapting them to consumer demand, in order to do so. Understandable as such concerns may be, the current regime, with its heavy reliance on distillation subsidies and its over-restrictive network of regulations, cannot be allowed to continue.

ENVIRONMENTAL IMPACT

75.  Finally, we turn to the environmental impact of reform. Giuseppe Castiglione, the Member of the European Parliament designated as Rapporteur for the Commission's Proposal, suggested to us that "in many parts of Europe, if there were no more vineyards, from the environmental point of view it would be a real catastrophe" (Q 266). On the other hand, Emmanuel Jacquin, Head of the Wine Reform Unit at the European Commission, told us that there were environmental drawbacks as well as advantages from wine-growing, stemming from the use of pesticides and erosion. Dietrich Guth, German SCA representative, underlined these problems. "Maybe the effect [of reducing wine growing] on the environment will be even better", he suggested, "because we are using a huge amount of pesticides in those regions or, if you look at wine production in Germany in the valleys and the hills, there we have a problem of soil erosion" (Q 463).

76.  The Commission's plan is to use the Single Farm Payment to safeguard the environment where vineyards are grubbed up. In Emmanuel Jacquin's words:

"We want to improve the positive side of the environmental benefits brought by vineyards by introducing environmental conditions and by using cross-compliance more and more … When the vineyards ask to be grubbed up, we can check whether this will cause environmental damage and we can oblige the farmers to respect a certain number of conditions to ensure that we take care of the soil. The main instrument that we will use for this is to grant a Single Farm Payment to the grubbed-up area so that it will become automatically subject to cross-compliance for the whole farm, even if the farmer has only grubbed up one hectare" (Q 321).

Moreover, the Commission's proposal states that, "to avoid social and/or environmental problems, Member States will be allowed to limit grubbing-up in mountains and steep slopes vineyards as well as in regions under specific environmental constraints"[27]. And the proposed transfer of funds from Pillar I (Wine CMO) to Pillar II (Rural Development) includes "agri-environment support to cover additional costs and income foregone in providing and maintaining vinescapes/cultural landscapes"[28].

77.  Against this background we do not believe that there need be serious cause for concern as regards the environmental consequences of reform, although the practical impact of cross compliance measures will need to be monitored closely.


13   References in this chapter are to the evidence published as HL 144, Part II Back

14   The Special Committee on Agriculture is an official level committee in Brussels which prepares the work of the Council of Agriculture Ministers Back

15   COPA-COGECA is the EU-wide representative organisation of wine producers and cooperatives Back

16   COM(2007)372 Final, Section 3.1 Back

17   COM(2007)372 Final, Section 3.1 Back

18   Equivalent to 14 hectares Back

19   Equivalent to 40 hectares Back

20   Appellation d'Origine Controllee Back

21   Institut Nationale d'Appellations d'Origine Back

22   COM(2007)372 Final, Article 18 Back

23   COM(2007)372 Final, Section 3.1 Back

24   COM(2007)372 Final, Section 3.4 Back

25   See HL 144, Part I, Paragraph 80 Back

26   HL 144, Part II, Page 174 Back

27   COM(2007)372 Final, Section 3.6 Back

28   COM(2007)372 Final, Section 3.3 Back


 
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