In dialogue with @GrapeConviction following his reading of my post on Generational Roles in the Demise of the French Wine Drinking Culture, two questions were raised: (i) did I expect to see continuing declines in French wine consumption? and (ii) what steps could producers take to mitigate this problem? I will address these two questions over the course of my next two posts, this one inclusive.
First, as regards future consumption, French National Institute for Agricultural Research (INRA) and Viniflhor projections (in Comité national des conseillers du commerce exterieurs de la France (CCE), "Wine in the world as we approach 2050: the 21st century market challenges," September 2009) show that, in a market of 51 million wine drinkers: regular drinkers will decline from 20% in 2005 to 17% in 2010 and 13% in 2015; non-consumers will represent 39%, 41%, and 43% of the market, respectively, in the same years; and occasional drinkers will rise from a base of 41% in 2005 to 43% over the forecast period. The projected decline in regular drinkers, and the increase in occasional drinkers, signals further erosion in consumption as, according to INRA (CCE), occasional drinkers consume five to six times less wine than does a regular consumer.
The CCE report has identified two fronts on which the French wine industry should battle the decline in wine consumption: (i) seek growth in international markets to offset the declines at home and (ii) target the large, and growing, occasional and non-wine-drinking segments. To these I will add the options of (i) exiting the market completely (available only to individual producers) and (ii) seeking to increase the amount of wine drunk by foreign tourists while in France (At this time it is not clear how tourist consumption maps into the overall domestic consumption figures.).
Initiatives focused on combating the consumption problem can be broadly categorized as being at the institutional or producer level. In this post I will cover institutional initiatives.
Initially the European Union saw declining consumption as a supply problem and sought to address it by mandating the grubbing up of vineyards and reducing subsidies to farmers. In its August 2000 Common Market Organization (CMO) for wine, the EU began to take a broader view of the problem. The 2000 CMO sought to (i) enhance quality, (ii) protect quality wines produced in specified geographic areas, (iii) increase industry market orientation, and (iv) subsidize renewal of old vineyards. As the data have shown, this initiative did not solve the declining-consumption problem. This then led to the August 2009 CMO for wine.
The August 2009 CMO sees improving wine producer competitiveness as both a foil against foreign wines in the domestic market as well as a tool for helping to win business in foreign markets. One of the significant aspects of the CMA is its simplification of the quality level scheme (to essentially three levels: AOP, IGT, and Vin de Table; the German sweet wine levels is retained) with the option of using varietal names at the Vin de Table level. In this scheme, a producer who wants to use a varietal name can do so providing the wine is labeled VdT, regardless of actual quality level. This initiative seeks to protect the domestic market by protecting place names (something the local consumer would, ostensibly, be familiar with) while giving the local producer the flexibility of using varietal names where that is the preferred mode for communicating the contents of the bottle.
It may be a statement of the obvious but the French wine industry is important to France. According to CCE, the industry: is responsible for 350,000 upstream and downstream jobs; is a key part of France's heritage; is, in some rural areas, the only economic activity; and is a key contributor to the country's balance of payments. Given the industry's importance, one would expect the French government to seek a role in addressing the declining-consumption problem. And it has. As a direct offshoot of the 2009 CMO, the French wine authorities have launched a 5-year program to modernize French viticulture. In addition, the Inspector General of French agriculture has been charged with developing programs aimed at improving industry promotional activity in international markets.
These initiatives by themselves will not solve the problem (assuming it is soluble). They are, instead, designed to create an environment wherein producers and marketers can apply creative solutions. The task is daunting, however, as they attempt to change course in the face of implacable competitors, unenthusiastic consumers, and tepidly religious marketers and producers. My next post will focus in on this area.
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