Sunday, April 20, 2014

The rise of the Algerian Wine Industry

In his otherwise excellent history of wine (Reinventing Wine), Paul Lukacs failed to mention that 1960s Algeria was the world's largest wine exporter and its fourth largest producer. Further, while he described his version of the formulation of the French appellation system at great length, he did not mention the catalytic role of the Algerian wine industry in its development. These two points, along with many others, are detailed in a new Journal of Wine Economics paper (The Rise and Fall of the World's Largest Wine Exporter -- And its Institutional Legacy, Vol 9 (1), 2014) written by economists Giulia Meloni and Johan Swinnen of the LICOS Centre for Institutions and Economic Performance located in Leuvin, Belgium.

The French conquered Algeria in 1830 and managed it as a colony until granting it independence in 1962.


With French colonization, Algerian viticulture began to grow, with settler and colonists alike drinking the beverage because of its perceived safety and medicinal benefits. The country's warm temperature retarded development, however, and it was not until the introduction of the "cold fermentation" technique (allowing complete fermentation of the harvested grape) that serious commercial viticulture could be undertaken.

The introduction of cold fermentation, coupled with the devastation of French vineyards by the Phylloxera louse, lit a fuse under the nascent Algerian wine industry. Phylloxera caused a 70% decline in French wine production but this loss of capacity did not result in a diminishing of the French consumer's demand for wine. The combination of lost capacity and continued high product demand resulted in the following state of affairs:

  • Increased demand for Algerian wine as France filled its 15 million hl demand shortfall with imports and adulteration. Imports increased from 1.2 million hl in the 1865-1869 period to 10.6 million hl in the 1875-1879 period.
  • 50,000 French families emigrated to Algeria and took control of 700,000 ha, much of it destined to become vineyards
  • An exponential increase in the level and amount of winemaking skills now resident in Algeria.

The Bank of Algeria was also a key enabler in the expansion of Algerian wine production as, in this timeframe, it overcame its previous reluctance to provide capital to the industry.

Initially, France's European neighbors also benefitted from its demand gap but as Algerian production ramped up, their fortunes fell off. While Algerian exports to France rose to 5 million hl in 1905, it was almost zero from Italy (down from 1.5 million hl in the late 1880s) and 2 million hl from Spain (down from 7 million hl in the same timeframe). For Algeria, by the turn of the century, 1/3 of its GDP, and 50% of its exports, revolved around wine production. By 1933, that export percentage had risen to 63%.

The charts below show production and export of Algerian wine and the area under vine. The details behind the charts will be discussed in a later post but the take-away here is the massive increase in all three measures from the starting point in the late 1800s.

Production (blue) and export (rust) data for the Algerain wine
Selected data points from Meloni and Swinnen time series

Selected data points from Meloni and Swinnen time series
I will cover the issues surrounding the fall of the Algerian wine industry in a subsequent post.

©Wine -- Mise en abyme

No comments:

Post a Comment