French Wine Industry

THE CRISIS IN THE FRENCH WINE INDUSTRY

Introduction

The production of French wine dates back to the 6^th century BC at the time of colonization of Southern Gaul by the Greek who settle and soon founded the Viticulture in the region of Marseille. Many of the regions in France were later licensed to the Roman Empire to produce wine especially in the southern parts of the country. This development conceded with the spread of Christianity which came with widespread growth of vines. However during the time of French revolution, many of ht vineyards were confiscated from the church are other owners. Most of the wine at that time was consumed locally and little was exported from Bordeaux. (Donald and Petie, 2001)

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However since the end of the Second World War the wine industry in France has undergone a lot of changes notable the introduction of quality of French wine which was passed in 1935. Since then the industry has developed to become the second largest exporter of wine in the world behind Spain. It has curve a niche in the market to compete with other countries like Italy which are traditionally known as wine house. Since the end of the Second World War, the industry has undergone several changes to become one of the leading industries in the France and an identity for the country. France is still considered to be one of the best producers of wines in the world.

The Bordeaux region ahs since then developed to be one of the leading wine producing regions of the world. Wine producers from the region have traveled to the regions of the world including Rioja in Spain and have been able to carry out culturing of vines to make Bordeaux vines some of the leading and the best vine in the world. Since the need of he second world war, French wine industry has seen the establishment of hundred of vineyards owned by multination company. (MacNeil, 2001)

The remarkable development of French wine industry has been the emphasis on the quality of wine produced. This has been though the development of the appellation system which classify French wine into quality. The Appellaion d’Origine Controlee system is governed by a powering national bound which ensures that all the wine that it produced in the region is of quality. France is produce of owning the oldest world appellation system that has helped it to have some of the world renowned quality wine brand. With time the industry has become more specific with various companies specializing in production of different white and red wines and other wine varieties. French has provided the modeling appellation system on quality which is being used by the EU to come up with a wine assessment framework along that to France. (Desmond, 1999)

But in the recent past, the industry has been hit by several crises ranging from competition from the new vine grower region like Australia and America to a decrease in local consumption of wine. This paper will discuss the crisis that the industry is facing currently and the solution that have been proposed to address the issue in order to revive the industry to its former self.

The nature and magnitude of the crisis facing the French wine industry

Traditionally, France has been a wide consumer of wine produced in the country. This made many producer of wine in the region to rely on the domestic market alone since all the wine produced was consumed in the country and only a small percentage was exported especially that produced in the Bordeaux wine region by multinational companies which we involved in large scale production of wines. However data shows that the consumptions of wine in the county have reduced drastically in the last 40 years. In the 1990s alone, per capital consumption of wine is recorded to have dropped by more that 20 percent. This has made wine producers in France to rely more on the foreign market where the competition is still stiff. (Parker, 2008)

The reduction in consumption of wine in the domestic market has resulted to what is being termed as wine lake or continuing wine glut. This has led to distillation of wine into industrial alcohol as well as the government has come up with programs to pay farmer to pull up some of the grape vines in what has been called vine pull scheme.

This has been due to increased production of wine more than the market can consume. Since the foreign market is already saturated, French wine makers have been having a hard time to control the stock in their warehouse as well as the ripe grapes that are being harvested and made to new wine. (Hines, 2004)

It has been recorded that French wine exports plummeted about 10% last year and at the same time the domestic sale were down by about 5 %. This has been a cause of worry to many manufactures who do not know what to do with the stocked wine already in their warehouse. The collected date shows that the consumption of wine in French restaurant has at the same time reduced by more that 15 percent in less than one year period according to the wine board in Bordeaux. This has been a matter of concern for all the industrial players and some have even started providing restaurant with doggy boxes son the diner can take home the unfinished wine bottles.

The magnitude of the crisis has been couple with the taking of country of Bordeaux and Burgundy wine by the National Association for Prevention of Alcoholism for advertising campaign using slogans which apparently give the consumer a message of drinking less but better. Although the advertisements were meant to advertise the quality of their wines, they have been accused of having an influence on the consumption of wine in the country. Hence we can see that the magnitude of French wine is more deep that the superficially seen reduction in consumption of wine. It has turned to a legal battle between the board and wine producers.

The troubled industry has been hit by other problem stemming from other factor like the emergency of a strong Euro which has apparently decreased the sales for wine exporters. The industry has also lost a lot of market share of its wines in the foreign market to other producers like US due to some anti-French sentiments. The emergence of a strong Euro and the effect it has had on the industry is considered to be one of the reasons why the country has been opposing some of the EU policies and constitution. But the problem does not lay with the Euro alone but also by stiff competition that it being faced from new wine house like Australian, New Zealand, South Africa and others.

The causes of the crisis

Apparently the crisis in the wine industry has been caused by many factors some of which are internal while other has been seen as external. The combination of the two aspect of the problem has made it difficult for the industry to come up with long term solution to the problem.

The greatest cause of the crisis has been the decline in consumption in the domestic market. Although there have been many market research data that have been carried out to try and address the root cause of the issue, there have not been any conclusive data the gives the real cause of the problem. Having relied on the domestic market for along time, the French wine industry has faced saturation due to the declining consumption in the domestic market. (Cooperage, 2007)

One of the internal problems that have led to the crisis has been seen as overproduction of vines. One of the major contributions to this problem has been highlight as Languedoc-Roussillin which produces one third of all the grapes used in France. Overproduce of wine has been attributed to saturation of wine in the domestic market. Apparently there has not been a monitoring system that can help in regulating the producing of wine in order to suit the domestic production and the export market. This has led to the emergency of vine pull scheme which aimed at reducing the number of vines in order to reduce the amount of grapes that is being produced. The process known as arrachage in French was initiated by the EU in 1988 which was meant to protect the quantity of wine and price of the product due to its commercial significance. It was supposed to address the problem of wine lake glut from overproduction and declining demand of wine. Under the program growers are paid to destroy thousand of acreage of grapes. (Frank and Macle, 2007)

The other cause of the crisis in the France has been the French government advertising laws on alcohol which the wine maker believes that they are unfairly applied on wine. The advertisement laws have been accused of being biased to wines and are encouraging low consumption of the wines.

The other domestic product has been what has been termed by the new wine makers as an over stay in the industry by the old wine produces. Most of the old producers have been unwilling to retire and give room to new producers. This has seen the emergence of more wine producers in the market and the subsequent saturation of the country with wine.

The external cause of the crises has been a decline in consumption in the exporting regions like Italy and others. Like the domestic market, French wine exporters have been faced by the same nightmare of reduced consumption in the external market where they have been exporting their wine.

The industry has also been faced with stiff competition from new wine industries in other countries. For a long time the industry has not been able to come up with new methods of addressing the competition and it has been caught unaware on the issue. The new wine producers have come up with new brands which have been considered to the traditional French wine brands. This has led to change of preference by many of the customers who have been loyal to French wines.

The reforms proposed to address the crisis

The earlier reforms that had been proposed in the industry has been the pull vine scheme in which grapes producers were paid by the government in order destroy thousands of acreage of vines to address the problem of overproduction. The initial phase of the problem saw both Italy and France destroy 320,000 hectares of vineyard which was estimated to be close to the vineyard of the untied states. (Jancis, 1999)

The recent proposals have been the change of law in advertising in order to target people behavior rather the product itself. Strict advertisement laws have made it difficult for the wine producers to advertise their products since they cannot encourage the public to consume more of their product. This proposal is expected to see the change in laws of the national board in order to enable the producers to advertise to the public their products which are likely to raise the level of consumption.

There have master plans that have been proposed in order to resuscitate the industry and prevent it from collapsing. The plan integrates a number of measures that are supposed to address the issue very well. These include a number of short term and long term measures. Short term measures that have been proposed include the exemption of certain taxes on the industry. This will help many of the struggling industry to service since some of them are almost bankrupt. If some of the produces are exempted of some taxes, they will be able to lower their production in order to avoid over saturation since most of the producer have been using the capitals theory of more production for more profit without necessary thinking about the market demand of wines.

The other short terms measure that has been proposed has been putting a fixed minimum wine price for six months. This is one of the power the have conferred by the law especially in time of crisis. This will help companies to sell their wine at recommended prices and prevent the possible fall in value of wine in the country. Due to over production and market crisis, some producers may result to selling their wine at a very low price in order to beat their competition which may have an effect of reducing the quality of wine in terms of price. (Mercer, 2005)

There is also a proposal to make distillation semi- obligatory for wine firms in trouble. This will help them to regulating their production in order to suit the demand in the market.

The long term proposals have been proposed in line with the need to change the European Unions common market laws on wine. This would be in line with helping the wineries rip more vines and at the same time replace them with vines that are more palatable to the taste of consumers. This would help the industry to compete well with the new wine house in other countries. This has been proposed to last for a period of eight years.

There have also been calls for more market funds by the EU in order to address the common agriculture policy. This should include money needed in order to market the wine industry in and out of the EU. France would benefit from such fund as it would help it to market its wines. This has been in line with calls to reorganize the French wine industry in some issue like the hierarch of the industry and the Appellation Controlee (AOC). This if appealed and changed would help the industry to produce products which are specific to the consumer demands. (Lichfied, 2006)

Conclusion and personal commentary

It is clear that French wine industry is one of the oldest in the world and hence one of the most stable. It has evolved over time to achieve its current status but it has been so rigid due to the control exerted by the state and the regulatory bodies. The industry has not been able to act flexibly in order to keep up with the changes that have been taking place in the market.

Although the French wine industry is troubled, there is future hope for the industry. French wine are still considered some of the best in the world and it is just a matter of time before the industry gets back to its feet. What is needed is an urgency to address some of the issue that would help to redevelop the industry to its former self.

There should be systematic efforts which are aimed at reorganizing the industry again in order to make it more competitive to be able to face the new wine producers. The government should look at some of the law on advertisement and taxes on the industry in order to help the struggling industry. Once these issues are addressed, the industry is likely to come back to its feet.

Reference

Cooperage, K. (2007). ONEO S. A. Retrieved on 20^th March 2008 from, http://www.referenceforbusiness.com/history/Oe-Pa/OENEO-S-A.html

Desmond. S. (1999). Monks and Wine. London: Mitchell Publishers

Donald, K. Petie, K. (2001). Wine and War: The French, the Nazis. New York: Broadways Books

Frank, M. & Macle, D. (2007). Europe plan to pull up vines. The Wine Spectator, September 2007

Hines, S. (2004). Grapes of Wrath: Wine crises in France. The Dominion Issue 24, December 2004

Jancis, R. (1999). Vine Pull. Oxford: Oxford University Press

Lichfied, J. (2006). Does French Wines still deserve its reputation as the best in the world? The Independent May 2006

MacNeil, K. (2001). The wine Bible. Workman Publishing

Mercer, C. (2005). French wine industry launches battle plan, CRAV attacks again. Retrieved on 20^th March 2008 from, http://www.foodproductiondaily.com/news/ng.asp?n=64329-crav-french-wine-wine-sector

Parker, R. M. (2008). French wine in crises. Retrieved on 20^th March 2008 from, http://www.wineanorak.com/frenchwineincrisis.htm