Archive for August, 2007


European wine ebb & flow

Friday 3 August, 2007

Few wine merchants saw the ominous signs when Bordeaux produced a magnificent harvest in 1995, sending the prices for some of France’s most prestigious wines spiraling upward. Surely, the famously oenophile Europeans would continue to flock to French cellars. But for French wines, the excellent vintage also held the seeds of a curse. “When the 1995 Bordeaux came onto the market two years later, it was very expensive, often double in price. People were shocked looking at the price tag,” said Willy Goorden, who runs a wine shop outside Brussels.

“It was a turning point. People started thinking differently and, as prices remained high the coming years, they were ready for alternatives.” Traditional European winemakers are in rut, facing overcapacity, tough markets and wine drinkers with taste buds tickled by new horizons.

On Wednesday, the European Union executive office will propose a total overhaul of the bloated sector, which now spends well over $700 million a year just turning unwanted, unsellable wine into distillation for industrial alcohol. It calls for grubbing up excess vines, cutting subsidies and changing deep-rooted traditions that go back generations. “I want the money to be spent better, on things that will build the sector up, not as a crutch,” said EU Farm Commissioner Mariann Fischer Boel. Excessive subsidies have often been blamed for overproduction and a decline in quality of non-premium wines.

mm comment: It appears as if there are a couple of different forces at work here. The 1st was the record harvest of 1995 which spiked prices. European producers seem not to have brought prices back down when succeeding harvests didn’t fare as well. It appears as if since then, (or probably all along), subsidies have hampered the productivity of European wine-producers. My point is market forces (a good harvest) & non-market forces (govt. subsidies) both impact the industry & it’s difficult to separate the effects of each, especially when they’re working simultaneously. It’s not surprising high prices push European consumers towards lower-priced alternatives. EU government should have reined back subsidies when the French wine-makers were in the dough, but I doubt that happened. So both private & public entities are at fault for letting this sector slip.

It is in the less expensive sector that the New World wines have made their biggest impact. Imports into the EU have risen by 10 percent each year since 1996, pushing low- to mid-range homegrown wines to the side. Countries such as Chile and Australia have more than doubled their exports this decade. French exports slumped from about 380 million gallons in 1999 to 340 gallons in 2004. For Italy, another tradition-bound wine producer in Europe, it declined from about 460 million gallons to less than 320 million gallons over the same period.-AP