We’ve all had that customer. The one who wants to know wine, but is still hung up by the “Is Burgundy a grape or a region?” question. It’s easy to get frustrated at the simplicity of questions like these, but the central idea remains the same. The sheer memorization required to make sense of the modern wine world proves to be something of a Sisyphean task. Within the United States, this problem is complemented by our society’s monolingualism (bi- and trilingualism being more necessary in Europe as their language density is much higher). Put together, these factors make it quite difficult for any traditional European wine to deeply penetrate the American market. If these were the only issues with the European wine industry, the changes probably would have been gradual.
However, Europe had other problems.
Our story starts in Europe around the year 2000. Long heralded for their wine-consumption, countries like Italy and France were staring down a decade-long decline in wine consumption. In the mid-1900s, France averaged a heroic 117 liters of wine consumption per capita. Italy barely bested France in the 1970s averaging 120 liters of wine per person per annum. Several decades later, their consumption rates are far more modest. According to European Union statistics, France consumed 56.8 liters of wine per person in 2010, and Italy is slated to fall below 40 liters of wine per person per year by 2015. While these markets represented the two largest-consumption markets of the EU, the story was the same across the continent. Newer generations of consumers were drinking wine at far more moderate levels than preceding generations. Different economists cite different causes, from depressed economies to anti-alcohol advertising campaigns aimed at youth to stricter regulations about alcohol consumption. No matter the reason, the outcome was the same: Europe was drinking far less wine...alarmingly so. (1)
By 2000, Europe had been operating at a wine-production surplus for several years, because, as their domestic wine consumption was declining, their production was actually increasing. At first, it was a rather small surplus, but over time, it became a veritable lake of extra wine. It was estimated that, without intervention, the surplus would exceed 13 million hectoliters by 2015 (that’s 1.73 billion surplus bottles). (2) When the EU recognized this growing problem, it expanded an already-established program aimed at turning excess wine into usable, pure distilled alcohol. This was called the “Crisis Distillation Scheme,” and, to its credit, the program worked. It successfully curtailed the excess wine; however, it cost a fortune. With this safety net in place, many wineries expanded their production, and, thus, the cycle began anew. This time to head off the excess production, the EU increased the amount of excess wine that they destroyed (to prevent lasting damage to the environment, wine has to be systematically dismantled). Together, these distillation and destruction programs carried a €260 million price tag. Something had to be done. (3)
In contrast, across the Atlantic Ocean, the American, Canadian, Japanese, and Chinese wine markets were beginning to boom. In the 1990s, the United States’ wine consumption climbed from 1.74 gallons per person per year to 2.02 gallons by 1999. (4) In the 2000s, this climb continued, and by 2010, the average American was consuming 2.7 gallons of wine per year. (5) In July of 2011, a Gallup poll was released showing that Americans between the ages of 18 and 35 chose to drink wine as often as they chose to drink beer (and far more often than they chose to drink spirits). (6)
As the EU watched the American wine market continue to grow, European market share in the US market did not enjoy a proportionate increase. About 25% of Europe’s export volume (31% of its export value) normally found its way to the United States. With these figures, the United States was the world’s largest importer of EU wines; nevertheless, in the eyes of the EU, the United States was a resource which had not yet been fully-utilized. (7) In 2010, within the United States, domestic wines outsold imported wines by a ratio of about 3:1. All told, Europe estimated that it could quite quickly increase its American sales by 25 million liters. (8)
At the beginning of July 2007, the European Commissioner for Agriculture and Rural Development Mariann Fischer Boel outlined a plan to overhaul the European Union wine industry. As she addressed the Italian Senate, she said, “Drawing this line between past and present reminds me of a simple but important point: the concept “history” exists because, in life, things change.” (9) She cited a disproportionate import vs. export ratio, the growing lake of surplus wine, the difficulty for European wines to be understood in foreign markets, and the need to modernize the production chain in the face of globalization. To address these problems, she put forth a 10-point approach for the EU wine industry:
To further prevent this wine lake from growing, the Commission wants to phase out the crisis distillation and destruction schemes that many wineries saw as a safety-net. Again, discontinuing the programs which were effectively controlling the surplus seems counter-intuitive, but the logic is simple: Without a safety net, wineries are responsible for their own excesses which means they will be more hesitant to produce excess wine. In other words, these schemes are no longer paid for using other people’s money. The wineries must either deal with the excess (and, let’s be honest, no winery has enough storage space to hold all of its surplus production) or responsibly dispose of the excess. Because wineries must now foot the bill for the disposal of all excesses, they will probably become more reticent about their overproduction.
The Commission realized that many of the winemakers who had chosen to grub up relied on the, albeit modest, income from their vineyards. To offset that loss of income and put the winemakers on path of economic viability, the Commission introduced yet another program to subsidize plantings of new crops. This happened often in the La Mancha area of Spain when non-competitive vineyards were grubbed-up and replaced with olive trees, oranges, or various other crops. This program was called the “Single Payment Scheme,” and, combined with the grubbing-up scheme, it caused Europe to turn the corner on overproduction.
As with all government-introduced programs, the question was quickly asked, “How do you plan to pay for these?” To Commissioner Boel, the answer lay in the already-established National Envelope program. National Envelopes are an allocation of funding from the Common Market Organization for wine, based on the respective member states’ participation in various EU Wine Reform programs. These National Envelopes are aimed at financing the various reform programs in the Union’s wine-producing countries. Between 2009-2013, the lion’s share (38%) of these National Envelopes was aimed at restructuring and converting vineyards to make them more profitable in future vintages. Up to 50 percent of an individual member state’s National Envelope can be used to promote that country’s wines in a third-country market (e.g., the United States). Thus far, the EU has only averaged spending 16 percent of the total National Envelope allocation on third-country market promotion. (12) However, as the various countries complete different stages of implementation, it is logical to assume they will start spending more on international marketing campaigns. (13)
Changes to Labeling Requirements
The majority of the changes discussed thus far refer to the internal reforms made by the EU to simplify and modernize its wine industry. To many people in the outside world, the most recognizable changes that Europe made were to its labels. To this effect, the Commission saw two major international obstacles their wines had to overcome: 1.) It took a fair bit of memorization to know the locations of the various appellations, and 2.) It took even more memorization to know what grapes were synonymous with what appellations. ( For example, EU officials realized that people were far more apt to buy a bottle of wine that said “Pinot Noir” than one that said “Bourgogne Rouge.”) To address this issue, they allowed a varietal statement on a wine label. As long as the wine contains a minimum of 85 percent of the stated varietal, that wine may display the varietal. Thus, the bottle that previously only said “Bourgogne Rouge” could now say “Bourgogne Rouge, Pinot Noir,” or the wine that previously said “Chianti” could now say both “Chianti” and “Sangiovese” on the front label. While this doesn’t sound like a huge change, the CEEV (Comité Européen des Entreprises Vins) stated that between 2008-2010, EU wine exports rose by 22 percent. The committee cited the improved recognizability of the wines because of the wine reform laws as this export increase’s major cause.
The second change made to labeling requirements involved changes made to the quality hierarchies of different areas. Where we were accustomed to seeing Denominazione di Origine Controllata, we found ourselves one morning waking up to the see Denominazione di Origine Protetta! This small but noticeable change was part of an overarching change that the EU made to all forms of wine labeling. In April 2008, the Commission proposed that there be three official categories of wine recognized in the EU. These would be “Wine,” “Protected Geographic Indication,” and “Protected Designation of Origin” (Wine, PGI, and PDO respectively). Because the European Union does not recognize any one official language, each member state was free to translate these terms into their governmental language. The adaptations of these are outlined in the table below:
Geschützter Ursprungsbe-zeichnun(“Prädikatswein” in Germany, “Qualitätswein” in Austria)
Wines that fall under this classification level are produced without any specific Geographic Indication; however, producers are allowed to mention a country of origin (and, as with the classifications, these origins are allowed to be stated in the governmental language of the specific member state). For example, “Wine” from Germany would be “Deutscher Wein.” Wines in this classification can now mention both the varietal and the harvest year. This classification now encompasses all previous Table Wine categories.
PGI or Protected Geographic Indication
The lower level of the geographically-designated quality wines are referred to as having a Protected Geographic Indication. Wines in this classification level have considerably more restrictions than the “Wine” classification level. These restrictions include: (14)
PDO or Protected Designation of Origin
Of the wine-producing regions that have been approved to show a geographic indication, those perceived to be of higher-quality and that have followed more strict regulations during their production are labeled with a designation of origin. These wines are intended to embody the terroir of their respective regions and are referred to as having a Protected Designation of Origin. They must follow far more specific production rules, some of which are outlined below:
Prior to the wine reforms, the regulating bodies behind the various DOCGs, DOs, AOPs, etc., were defined by the governmental body responsible for wine regulation. For example, in Italy, consorzi regulated the production in each region, and if they wanted to add a DOCG, DOC, or IGT, they had to propose the addition to the Ministero delle Politiche Agricole Alimentari e Forestali. The proposal was then either approved or blocked by the Ministero. In Spain the various Consejo Reguladores made their recommendations to the Ministerio de Agricultura, Alimentación y Medio Ambiente. In France, the Conseils of the different regions processed their recommendations to the Institut National des Appellations d’Origines.
One piece of legislation in the EU wine reforms stipulated that the monitoring and controlling of all appellations must be executed by an “independent public body and/or an authorized third party.” This body has been empowered to take any recommendation of additional appellations or changes to regulations and, in turn, present it to the Commission (Commission for Agriculture and Rural Development). Ultimately, it is the Commission that will make all final decisions for approval or denial of new appellations. The Table below outlines the primary regulating bodies for the most major winemaking countries in Europe. (For a full list of competent authorities designated by Member States, look here: http://ec.europa.eu/agriculture/markets/wine/lists/21_en.pdf.)
Ratifying a new appellation
Essentially, these reforms added an extra step in the process of approving a new appellation. Take Spain for instance. If a remote region of La Mancha wants to apply to become a new DOP, it first needs to draft a proposal for the various regulations that it would like to see mandated in its proposed region. Affected producers would then pass the proposal on to the Autonomía government of La Mancha. Invariably, autonomía officials would want to change some things and the producers would have to agree with those changes, but eventually, these agreed-upon changes would be passed on to the Deputy-General of Quality Wine. The Deputy-General of Quality Wine, after making some changes (which would then require approval from the autonomía and the producers), would pass them on to the Commission which would vote on the proposal. If they voted to pass it, the region would become a new Spanish DOP.
All told, these changes have, at least so far, meant a headache for winemakers and lawmakers in the EU. Yet, the effect on the United States wine trade has been largely beneficial. International wines are slowly becoming more recognizable because of simpler appellation classifications and varietal statements on the label. The fact that 50 percent of a Member State’s National Envelope can be directed toward marketing in the United States and other international markets has resulted in huge marketing pushes. And, while the changes to the various appellations, classification systems, and political approval processes can seem both unnecessary and convoluted, it has, at least so far, resulted in some pretty positive sales numbers (as expressed by BIVB, CIVB, Valoritalia, CIVA, and Vinos de España).
So, that same customer earlier who was asking, “What’s in it?” might find the wine world a marginally simpler, less daunting place. Instead of staring at a bottle with a furrowed brow, maybe he can find answers to some of his simpler questions by reading the label. And maybe, due to the various and sundry programs aimed at raising the overall quality of wine, he can enjoy a better bottle of EU wine. If both of these statements come true, and cause him to buy more EU wine in the future, then the Commission would probably say that it accomplished its goal.
(1) “EU-27 Wine Annual Report and Statistics,” Baldi, Stefano; USDA Foreign Agriculture Service: GAIN Report. 3/1/2011.(2) Ibid.(3) Boel, Mariann Fischer; “Wine Reform: Speech to the Italian Senate.” Rome, 6/17/2007.(4) “Wine Consumption In The U.S.” The Wine Institute. http://www.wineinstitute.org/resources/statistics/article86. 4/19/2011.(5) “EU-27 Wine Annual Report and Statistics,” Baldi, Stefano; USDA Foreign Agriculture Service: GAIN Report. 3/1/2011. However, The Wine Institute disagrees with this statistic putting US consumption in 2010 at 2.54 gallons per person.(6) “Wine Matches Beer in U.S. Drinkers’ Preferences This Year,” Gallup, Inc. http://www.gallup.com/poll/148676/wine-matches-beer-drinkers-preferences-year.aspx. 3/6/2012.(7) The United States has almost 300 million inhabitants who average 2.7 liters per person per year which results in 810 million liters consumed annually. If consumption could grow to 3.0 liters per person per year, this would net a growth of 90 million liters annually.(8) Previously-postulated consumption statistics applied to import statistics.(9) Boel, Mariann Fischer; “Wine Reform: Speech to the Italian Senate.” Rome, 6/17/2007. (10) Ibid.(11) “Reform of the EU Wine Sector” http://ec.europa.eu/agriculture/capreform/wine/index3_en.htm. 3/6/2012(12) “Wine CMO: First Submission of Financial Table of the National Support Programme.” European Union, June 2008.(13) In June of 2012, the Commission voted to allow a portion of these National Envelopes to be paid directly to the various wineries of a country through “direct payments.” Every EU country wishing to take advantage of this allowance must submit a proposal to the Commission outlining a need for additional National Envelope allocations. (“CAP Reform: Direct Payments for Wine Growers.” http://www.herbert-dorfmann.eu/en/press/press-releases/75-cap-reform-directs-payments-for-wine-growers.html. 6/20/2012.)(14) “EU Council Regulation NO 479/2008;” Official Journal of the European Union, 6/6/2008. (15) Ibid. (16) Ibid.(17) Ibid.
About the author: I grew up the son of two dedicated wine aficionados in northeastern Indiana before moving to Spain in 2006. It was there that I discovered a love for wine and food, so, as soon as I came back to the United States, I began a two-year culinary apprenticeship. My stagiaire and college classes finished the same week and I began work as a chef sommelier. Following that job, I was hired to be a retail wine store manager in Indiana. That pushed me further down my wine-stained career path as I then became the wine director for a well-known store in New Jersey. In September of 2011, I was hired by Winebow, Inc. into the Wine Education Department which I now manage.
Nice job, Barrett. Thanks!
Thank you Barrett, excellent article.
Excellent article! Any steps to make the wine world easier to understand is a good move.
Great article. Thank you.