Organic wine faces "decimation" from US sulphur law
From prohibition to punitive distribution laws, the wine producers of the USA are used to fighting American bureaucratic prejudice against the wine industry. However, even the most lobby-hardened California vintners are shocked by the latest proposals to hit the negotiating table concerning the production of organic wine.
Under the cloak of the National Organic Program, the US Department of Agriculture has proposed plans to ban the use of sulphur dioxide in any wine with the word "organic" on the label. It also plans to eliminate the use of the phrase "made from organically grown grapes", closing off the loophole that currently allows California growers to claim organic origins while using SO2.
"If one wanted to decimate a fledgling industry, one couldn't come up with a better strategy," says Veronique Raskin of the Organic Wine Company. You may think this is an over dramatic response, but if you look more closely at the implications you see Raskin has a point.
Almost any winemaker you speak to will explain that it is extremely difficult, at best, to produce quality wine without the use of SO2 which is used as an anti-oxidant and anti-bacterial agent that promotes stability and shelf life in a wine. "The whole thing is a joke because you can't make quality wines without sulphur dioxide, its virtually impossible," explains Brett Fleming of Australia's BRL Hardy.
In a letter to the USDA, a copy of which has been given to just-drinks, Paul Chartrand of US company Chartrand Imports says: "Making wine without this anti-oxidant is difficult and risky. An overwhelming majority of wine customers and professionals agree that wine quality is higher and more consistent when sulphur is used. In addition, stability and shelf life are largely reduced without SO2. The realities of commercial winemaking and distribution and consumer expectations prohibit all but our smallest producers from even attempting this type of production."
The direction of the USDA, to create a uniform policy on what can and can't be classified as organic is both a necessary and noble aim, but the details, the industry is claiming, are misguided. Mark Keating, agriculture marketing specialist with the NOP could not comment on the specifics of the SO2 issue, other than to say: "I know the SO2 issue is at the forefront of the organic issue, I can't go any further than the official statement."
The statement, which acts as the UDSA's official line states: "Numerous commentators opposed the use of sulphur dioxide in organic wine because it produces sulphites, which are prohibited in the OFPA as a by-product. We concur with the commentators and further believe that the trend in the organic industry is to prohibit all uses of sulphur dioxide except in underground rodent control. Therefore we are proposing to prohibit its use as an ingredient in or processed food including the production of organic wine."
Despite the official line the USDA's logic behind the banning of sulphur and the term "organically grown grapes" has the industry confused. Raskin says: "We are completely baffled as it does not make a lot of sense. Theories as to what could make them do something which is so unfair go from the conspiracy theory to a lack of information. To state on the label how our grapes are grown is a fundamental commercial right. Furthermore the theoretical foundation of it is extraordinarily flimsy."
Whatever the logic the fact remains that if the proposal becomes law, which the USDA believes will happen by December, the US organic industry will be in chaos. For, having spent years marketing the word "organic" around 80% of the US's previously "organically grown wines" will no longer classify for any organic label because they use SO2. Furthermore this will then have a knock on affect in Europe and other wine growing countries.
Opponents of the proposals believe that the sector will be hit on three levels. Firstly and on the most basic level, organic sales will nose-dive. This will be both in real and unreal terms. In real terms because the only organic wine you will be able to buy will be of questionable quality as it contains no SO2 and will therefore put consumers off. And, unreal terms because obviously many of the wines previously sold as "organically grown" will no longer classify as such and merely become statistics within the non-organic sales.
However, there is a strong likelihood that sales of these wines will also fall as they lose their point of difference in marketing terms while remaining more expensive due to the specialist organic viticulture methods.
The second level is directly linked to this fall in demand and relates to the impact on those growers who produce organic grapes. Chartrand says: "Without the ability to label wine as organic or at least 'made from organic grapes' , very few current producers will continue to pay a premium for certified organic grapes or pay the increased costs of organic vineyard production and certification."
And the third level is again related to its predecessors and has to do with the future growth of the sector. "It would be devastating on the industry because it would be a major disincentive and deterrent for growers to grow organically," says Raskin. She also believes that there are many growers and producers waiting in the wings, studying the industry, who would be put off producing organically because it would no longer be financially viable.
On all of these levels there would be a major comeback on anyone already involved in organic growing. Bob Blue, the winemaker at the Fetzer-owned organic vineyards of Bonterra, says: "It certainly would hurt Bonterra but we are a big brand that is out there, it will be a major problem for smaller producers." And of course none of this takes into account the potentially huge negative effect there will be on the environment with producers turning away from sustainable farming methods.
Despite all these negative backlashes there is still a tendency, despite environmental worries, to say so what? After all the US organic industry is still very small in national terms let alone internationally. But here again the implications may be more far reaching than you first assume.
The EU and other wine-making regions all produce "wine made from organically grown grapes" and none of these would be allowed on the US market unless they contained no sulphur dioxide. Then there is the small matter of international standards.
"The US government think they will have the highest standards in the world and that this will lead to a world standard," says Blue. "It makes sense that government to government they will try to work things out. It would be the beginning of trade talks."
Green groups will also pressurise the EU to adopt the US policy, given its strict guidelines. "The overwhelming majority of European organic wineries do add sulphur dioxide," says Raskin. "Therefore, if Europeans were to adopt the US policy in an attempt to establish uniformity in the sector they would simply wipe themselves out of the market." Ominously she continues: "Uniformity would be reached all right, we would be uniform in our absence. There would be nothing left to discuss."
She does add, however: "I do not believe the Europeans would consider committing hara-kari and for no good reason at that."
If this is true the real impact to Europe will be the inability of its winemakers to sell their wines in the US. And this might spark further tension between the agricultural communities of the two powers - with each trying to persuade the other to convert to its definition of organic.
Chartrand says: "I have worked many years in the US to establish producer rules that would harmonise with other worldwide standards. These efforts would be seriously jeopardised by the proposed rule. Foreign producers would lose their US market for organic wine from these most restrictive rules that could be grounds for a GATT suit in the future.
"Our own industry would be hampered by regulations in conflict with those of other producing nations. The growing market for US organic wine will suffer from this potential trade conflict."
And, given the friction and ill-will that the terms Port, Sherry and Champagne have managed to create, it would be wise not to underestimate the power of such a growing and potentially lucrative sector as organic wine to engineer such destructive relations between the USA and Europe.
The Port industry is currently facing a period of considerable change and adjustment. Innovation and evolving a modern, viable industry structure are seen as vital if Port is to compete effectively in...
The imported premium vodka, Svedka, is without doubt a brand success story in the dynamic US premium vodka market. But its raunchy advertising has ridden roughshod over industry rules causing concern ...
Three Port shippers are for sale as consolidation continues to bite in the Douro Valley....
Cosentino Signature Wines is looking to raise over GBP10m from its impending stock market float....
Napa Valley's Cosentino Signature Wineries plans to raise US$30m by listing on London's AIM market this month....
UK off-licence retail group Unwins is planning to float its Phillips Newman subsidiary on the Aim stock market, and then plans to float itself on the Aim market, according to the Daily Telegraph....
The European Commission has opened a formal investigation into a planned €7.425m-subsidy package planned by the Dutch government into its country's malt sector. ...
The Swedish state-run alcohol retailer Systembolaget is to set up a subsidiary whose aim will be to cut alcohol consumption, the local press reported today (6 May)....
- Is Diageo on the Brink of a Brain Drain?
- Focus - Pernod's YTD Performance by Region
- Comment - Will We Understand the Language of Rum?
- Focus - Heineken's Q1 Performance by Region
- just The Preview - Pernod Ricard's Q3 & YTD
- Pernod Ricard unveils Havana Club ad campaign
- CFO of Diageo's United Spirits stands down
- Global Tequila market hits new highs in 2014
- Pernod Ricard sees YTD recover as sales increase
- Remy Cointreau US head to step down
- Global Tequila insights - market forecasts, product innovation and consumer trends research
- Global rum insights - market forecasts, product innovation and consumer trends research
- Diageo plc (DGE) - Financial and Strategic SWOT Analysis Review
- Bacardi Limited - Strategy and SWOT Report
- ALDI 2015: Radically transforming Anglo Saxon grocery markets