GP Short Notes

GP Short Notes # 819, 29 February 2024

Challenges faced by the French wine industry
Alka Bala

EM Daily Focus
By Alka Bala
Challenges faced by French wine industry: Protests, oversupply and low prices

The French wine industry finds itself unsustainable as it faces the challenges of oversupply, poor prices, strict environmental regulations coupled with the phenomena of the decreased consumption of wine. Distressed farmers protested and held demonstrations across the French regions, blocking highways, disrupting transport and dumping manure in front of government buildings. The French government and the EU have advanced actions to deal with these concerns, promising ease in regulation complexities and financial difficulties.

Why are the French wine growers protesting?
As a wave of farmers' protests spread through Europe, wine growers in Bordeaux held demonstrations against government regulations and taxation as they grappled with increased production costs. Backed by public support, French farmers voiced their concerns regarding the need for government intervention in establishing a minimum price for bulk wine, which would allow them to procure back a certain level of the incurred amount. The protests carried out on 29 January also strongly opposed government plans to eliminate subsidies on agricultural diesel and initiated demands for lowering the fees paid to the Bordeaux Wine Council. Farmers suffer from high production costs due to expensive tractor fuel, and electricity expenses and find themselves entangled in bureaucratic maze of French and EU regulations. Vincent Bougès, president of the Young Farmers of Gironde said “Certain costs are no longer sustainable, and we would also like our products to be valued—to sell at the right price.” Earlier in October 2023, wine producers in South France had resorted to radical methods such as hijacking trucks carrying Spanish wine cava and attacking merchant premises as they called for actions to resolve their financial difficulties. 

A survey conducted by Gironde’s Chamber of Agriculture in 2023 indicated that one-third of the wine producers in the region faced economic challenges, coupled with the overproduction of wine has caused the industry’s downfall. In 2023, the annual overproduction of wine was estimated to be  300,000 hl (40m bottles).

What caused the oversupply and decreasing prices?
France is the world’s largest producer and the second-largest consumer of wine in the world, however, the figures reflect a declining trend in this consumption. According to CNIV, the trade association for appellation wine marketing boards, a drop of 70 per cent has been indicated in wine consumption between 1960 and 2020. Based on the EU predictions, France is expected to have a 15 per cent drop in consumption every year. Despite the decline in consumption, wine production in the EU increased by four per cent causing oversupply and sinking prices. Rising inflation due to the ongoing Russia-Ukraine war resulted in an increase of 13.7 per cent in food prices in France, as compared to 2022. Figures also indicated a change in consumer preference towards alcoholic drinks, as some prefer beer and other alcoholic drinks compared to wine. The sale of wines at low prices by supermarket chains has also made the industry unsustainable. Regional disparities and the extent of challenges faced differ as the French region of Champagne reached its pre-covid sales levels in 2023, Burgundy remained largely unaffected whereas other regions such as Bordeaux, Languedoc and Rhone Valley struggled with oversupply. French farmers face the EU’s strict regulations on the use of agricultural chemicals and maintaining environmental standards. In light of such regulations, the EU’s plans to expand free-trade agreements with Mercosur countries (The Latin American Southern Common  Market) that are not faced with the same set of regulations appear hypocritical and sparked violent protests from French farmers.

What measures have been adopted by the French Government and the EU?
The agenda for the alcohol price floor has been initiated by Isaac Sibille, a French MP of the MoDem party as part of the ​​2024 Social Security Financing Bill. This would ensure a fixed minimum price for alcohol, safeguarding public health and reviving the wine industry. The series of protests in January urged PM Gabriel Attal to introduce measures on simplifying red-tapism, eliminate the increasing tax on agricultural diesel, and remain opposed to signing the Mercosur free trade deal. The strategic plan introduced in December 2023 to the France AgriMer wine council by Vin & Société and the CNIV focused on increasing innovation in winemaking and viticulture, while also expanding export markets. A deal between the French government and the Bordeaux farmers aimed to remove roughly 10 per cent of their vines, around 9,500 hectares out of a total of 108,000 hectares. The 57 million euro deal would be partly funded by the government with 38 million euros, whereas the rest would be financed by CIVB. The EU pledged 160 million euros to pull out existing vineyards in the region and undergo a ‘Restructuring’ of the wine industry and replace it with industrial alcohol to sustain the wine industry. Earlier in November 2023, the French Agricultural Ministry announced an emergency support fund of 20 million euros to aid winemakers who struggling with economic challenges. These measures reflect an encouraging start to deal with the agricultural challenges faced in France, although the farmers doubt the extent of simplification that could be availed in these proposed measures.

Louise Hurren, “Troubled times for French wine,” Meninger’s, 02 February 2024
Suzanne Mustacich, “
Bordeaux Winegrowers Join Fellow French Farmers on the Barricades,” Wine Spectator, 29 January 2024
Amber Louise Bryce, “
Grapes of wrath: French winemakers protest government minimum pricing proposal,” Euronews, 27 November 2023
Suzanne Mustacich, “
The Existential Crisis of Bordeaux's Small Grapegrowers,” Wine Spectator, 27 December 2023
Nacho Doce and Gus Trompiz, “
France drops plan to decrease farmers' diesel discount but protests to continue,” Reuters, 27 January 2024
Samantha Cole-Johnson, “
French farmers protest, Saudis sell wine and other wine news,” Jancis Robinson, 30 January 2024

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