The BBC, The Guardian as well as most of the wine trade titles have reported France’s low grape harvest for 2016 on the back of communications from the French Ministry of Agriculture’s (Agreste).
It’s true the 2016 vintage (harvest) looks like it is going to be well down according to Agreste’s estimate (as that is all it can be when grapes are only just harvested) to around 42.9M Hl (hectolitres 100xlitres) from 47.8M Hl. In our language that is down from 6.3Bn 75cl bottles to 5.72Bn bottles – more than I can drink in a lunchtime. But more seriously what does this mean for the UK Hospitality and Catering trade and why release this story now?
I have been looking at some historical numbers and situations, and how that relates to the emergence into the 21st century of EU policy and their progression from the post 2nd World War EU principles around protecting growers and producing as much as it can.
Further, from a hospitality point of view if we understand a little of what is driving the back of house then we can understand our own organisation’s position better. In turn this allows us to negotiate better and ensure that what we give our customers is the best that is available.
The first situation to note is that back in 2008 the EU signed an agreement which limited the production of wine much more rigorously than before. Simply put, previously excess wine production went to distillation, which created a floor price for grapes, thereby artificially inflating prices. Growers’ incomes, therefore, became protected and the incentive to produce as much as possible, maximises income.
The 2008 EU reform set the wine production market, dominated by France, Italy and Spain who produce 81% of EU wine, to become more competitive. The waste to the EU purse was too much to bear and, for those of us old enough to remember, the repetition of wine lakes is not repeated.
And the results have been very effective by their own measure. An EU report in July 2015 says that ‘between 2007 and 2014 the average production of wine must has evolved from 173MHL to 166 M Hl’. In 2012 they reported one of the lowest ever harvests at 152MHL with Spain needing to import Chilean wine to fulfil demand.
The French harvest has reduced roughly in line with these EU figures, reducing by 5.27% (OIV & EU report), whereas the overall is 4% and reducing by 15.3% since 2000.
This 2016 harvest may be down by 10% (8.9% according to my own calculations but let’s not quibble about a % point) on last year, but up 3.3% on the previous year.
So let’s just think about this, why report 10% down on last year but not 3.3% up on the previous year – any leverage there do you think? You don’t suppose that the French government is trying to lever prices at the early stage of the vintage campaign, garnering sympathy for their poor struggling French wine farmers?
Well before I get the Kleenex out let’s have a look at prices for wine across the EU.
Price is critical in the equation of trading and before drawing any conclusions we should take it into account. After all if there incomes are seriously suffering then maybe they have some reason to be so urgent in drawing our attention to such dramatic volume declines.
Source – EU Report Jul2015 Directorate-Generale Agriculture and Rural Development
The bulk French wine price, that is the price per litre between wineries for containers that are not bottles (usually tanker quantities of many ‘000s of litres) for red and white wines is up between 8% and 10%. Whereas Italy and Spain are suffering in major ways, albeit that these 2014 figures reflect a time of shortage in those countries and have now returned to more normal levels.
Source – EU Report Jul2015 Directorate-Generale Agriculture and Rural Development
As we can see from these EU published statistics and graph, from a price perspective French wine is doing very well, in fact well ahead of its counterparts in Italy and Spain.
Furthermore when it comes to export trade the EU has a big focus. As the dominant world producer, it makes around 60% of the world’s wine. In 2013 exports out of the EU reached 20M HL (2.6Bn 75cl bottles) and nearly 9BnEuros. Make no mistake wine is a valuable contributor to the EU trade balance and France is doing very well from this.
Its wine exports to EU member states have increased by 26.5% in volume and 26.4% in value and outside or Extra EU by somewhere between 40& 60%. Much of this has been driven by this change of structure since 2008.
So when faced with French suppliers and producers claiming poverty and destitution, it might be worth reflecting on these numbers and seeing what they have to say. Not every producer is going to have felt the improvement of trading to member states and global exports but some certainly have, and possibly a majority.
Not only have they done well in exporting, they have done well in comparison to their competing producing member states.
That is not to say that wine is a commodity and it is just about price. Wines have a wide variety of quality hooks and when negotiating the feelings and emotional attachment of your customers and business will need to be taken into consideration.
I suspect that the reality of French wine suppliers crying ‘disastre’ is their lack of security from the harsh truths of the real world trading. Harsh realities that other countries like Australia, Chile, Argentina and many others have not had the luxury of for generations as the French have.
As a lover of French wine I am sorry to see Chablis as a small example have such a hard time, but overall it is time for France and the EU to wake up and get with the actualities of world trading, if they are to thrive and prosper for generations to come.
One vintage (harvest) does not make for a disaster make, the French industry has lots to be proud of and to celebrate, so feeling sorry for itself and crying ‘wolf’ does not show its best side.
Alistair Morrell
Hospitality & Catering News, Wine Content Executive