In the same week, French wine farmers take to the streets in violent protests while the EU announces a deal allowing South Africa to import more wine into Europe. Strangely, the latter was not the catalyst for the former but the two events are inextricably linked. Ben Cooper reports.

The ugly riots in southern France are not the first time French farmers have taken to the streets to protest about their treatment at the hands of their own government, the EU and what they perceive as unfair competition. Interestingly, the demonstrations came just before a deal was announced allowing more South African wine to be imported into the EU.

This, however, was not the cause of the riots which were thankfully short-lived and concentrated in the south, the region most badly affected by the double whammy of over-production and increased competition in the market place.

The farmers were angry that the French government had not introduced emergency measures to deal with over-production but their difficulties stem equally from the vastly increased competition they face in their major markets from New World wines.

"What is sure is that French wine producers and particularly those in the south are experiencing difficulties with over-production and commercially in the market place," said Jean-Luc Dairien, director-general of the French wine trade association, ONIVINS. "The situation had improved for them in recent years but this improvement has stopped and wine growers are worried about the future."

While Dairien is among the many who support some government or EU intervention to help alleviate the current situation, this is not a call for protectionism. In fact, he is at pains to point out that the way forward for the French wine industry is to adapt to the new market conditions, take on the new competitors and, of course, beat them.

"There is more competition in the market place and there is a problem regarding the adaptation of some of our products to the new market conditions," he told just-drinks.com. "What is important is that the producers see the new challenges which are now in the market place and do what is necessary to communicate to consumers what French wines have to offer. It is above all a question of commercial 'savoir faire'."

While Dairien calls for a distillation programme to deal with over-production and more aid from the EU to help its producers compete in terms of communication and marketing, he believes it is ultimately a question of adaptation. "In the long run, what is needed on adaptation by the producers."

It is in the major wine-importing markets of Europe that French wine has come under most pressure from New World wines and the recent deal between the EU and South Africa will not have been welcomed by the beleaguered wine producers.

Under the deal, South Africa will be allowed to export 420,000 hls of wine duty free to the EU annually, an increase in its tariff-free quota of 100,000 hls. It was the final component of a free trade agreement originally signed in October 1999. This will inevitably lead to increased South African exports to the EU, as South African trade and industry minister, Alistair Ruiters, said when he signed the agreement. "Access becomes cheaper for South African wines and the drop in price means that we are given a greater market share."

South Africa's wine exports to the EU have risen from 7 million litres in 1994 to some 114 million litres in 2000. In 1999, South African wine imports into the UK were worth some EUR201 million against exports to South Africa of just EUR11 million. However, in spirits the ratio is virtually reversed, with exports of EUR90 million against EUR4 million of imports.

In turn, South Africa has undertaken to stop using European geographical names of origin, such as Champagne and Sherry, not to mention countless spirits categories, for locally produced similar products. Greater protection of what are in effect the EU's "brands" is seen as an extremely high priority.

With some EUR15million of aid to the South African wine industry also included in the agreement, some believe South Africa comes off better in this deal, but for Nicolas Ozanam, deputy director general at the French wine and spirit exporters' association, FEVS, the breakthrough on geographical identities (GIs) was extremely significant.

Expert Analysis

World Alcohol - The Changing Face of the Global Wine Industry
This unique 253 page report provides Actual data 1996-2000 and forecasts 2001-2005 are provided for each country : Regions covered include Africe/MiddleEast, Americas, Asia-Pacific, Ewast Europe, West Europe

Wines & Spirits in France 2001
Exclusive Canadean country report covers consumption trends in spirits and wine categories, brands and foreign trade. It also provides an executive summary of market developments, taxation information, specimen retail prices and a detailed appendix of agents and available brands. (South Africa country report also available)

 

"In the short term SA gets a better deal out of this but I think in the long term it was strategically important for the EU to make some progress on GIs," Ozanam said. "It was a key issue for the EU to get something on GIs. The question is will it be enough to use that base for improved protection of GIs in the WTO."

Dairien was also sanguine about the deal stressing the benefits to French wine producers.  "It was an agreement we already knew about. South African wines will enter the EU markets more easily but I think we will adapt. It'll protect better EU product-names from copying and it may improve a little the fairness of competition and it's good for our AOCs and Vins de Pays. Beside European countries, in the world market the US and Australian wines are our main competitors."

There is no arguing with that point. While Californian, Chilean and South African wines have taken market share from the Old World producers it is the Australians which have plundered France's traditional markets, particularly the UK, with abandon. And the news that Australia is expecting a bumper harvest was probably the last thing French wine producers will have wanted to hear.

However, Dairien believes French wine producers can cope with the Australian competition too, provided they can adapt. "There is a real strategy of export development in Australia but they are looking to develop in main wine markets where France is already established. Competition is a good thing. We are the leaders and we have the ability to adapt our offer to remain the leader but in today's market it is more difficult, more demanding and more expensive to stay in that position."