France has too much wine, so it’s paying millions to get rid of it

French has too much wine, so it is getting rid of it
French has too much wine, so it is getting rid of it

France is about to destroy enough wine to fill more than 100 Olympic-size swimming pools. And it’s going to cost the nation about US$216 million (NZ$365m).

Ruining so much wine may sound ludicrous, but there’s a straightforward economic reason this is happening: Making wine is getting more expensive due in part to recent world events, and people are drinking less of it. That’s left some producers with a surplus that they can’t price low enough to make a profit. Now, some of France’s most famous wine-producing regions, like Bordeaux, are struggling.

In June, the European Union initially gave France about US$172m to destroy nearly 80 million gallons of wine, and the French government announced additional funds this week. Producers will use the funds to distil their wine into pure alcohol to be used for other products, like cleaning supplies or perfume.

Agriculture Minister Marc Fesneau told reporters that the money was “aimed at stopping prices collapsing and so that winemakers can find sources of revenue again”, according to Agence France-Presse.

The decline in wine consumption is not new, according to Olivier Gergaud, a professor of economics at France’s Kedge Business School who researches food and wine.

Wine consumption in France has been plummeting since its peak in 1926, when the average French citizen drank about 136 litres per year. Today, that number is closer to 40 litres, The Washington Post previously reported. Consumers are also inundated with beverage choices now, and they’re choosing wine less and less.

“We have an underlying issue of, ‘How do we better engage with the consumer and make wine more relevant, make wine a relevant choice for consumers that have a lot of options?'” said Stephen Rannekleiv, the global sector strategist for beverages at Rabobank, a Dutch financial firm specialising in agribusiness.

As consumption has taken a nosedive, production costs have increased and inflation has tightened budgets around the world. That’s especially true since the Covid-19 pandemic, which shuttered bars, restaurants and wineries, driving up prices. The war in Ukraine also influenced the industry by disrupting shipments of products essential to winemaking, like fertiliser and bottles. And on top of the pandemic and war, climate change is forcing growers to adapt to new harvest schedules and reckon with more extreme weather.

Costs are so high and demand is so low that some producers can’t turn a profit.

While this year’s subsidy is getting a lot of attention, the French government intervention is not a new phenomenon, according to Elizabeth Carter, a professor of political science at the University of New Hampshire who has studied the French wine market.

“I am not vaguely at all surprised that France is looking to destroy surplus and prop up prices by limiting quantity, because this is something that they’ve actually been struggling with since the 19th century, wine overproduction,” Carter said.

She said there’s been an internal push-and-pull in France for decades as producers grapple with what quantity of grapes to grow and how much wine is too much. The nation has long regulated the wine market intensely, in some cases telling producers how many vines they can grow and how far apart they have to be, in an effort to prevent the market from being flooded.

So while this buyback program isn’t totally new, Gergaud said, he hopes the industry takes this moment to consider longer-term solutions.

“We need to think in terms of, you know, long-run adaptation to these changing conditions,” he said. “We need to help this market to transition to a better future, maybe with more wines that would respect the environment. Adaptation to climate change is a real challenge.”

And regardless of its current woes, wine is too strong a part of France’s identity for the market to go anywhere. It’s certainly in the government’s best interest to keep the industry happy: French President Emmanuel Macron has even said that a meal without wine “is a bit sad”.

Minimum Unit Pricing on Alcohol – what is it and what will it mean for me?

The (Irish) Government has agreed to introduce minimum unit pricing on alcohol from the start of January 2022.

In New Zealand, the governement imposes two types of taxes. The Good and Services Tax (GST) @ 15% and a alcohol excise tax of 14% to 37% for wine and beer, and 50% for spirits.

hse.ie | 25 May 2021

Price before MUP
Price before MUP

The Government has agreed to introduce minimum unit pricing on alcohol from 4 January 2022. It sets a minimum price for a gram of alcohol, meaning it cannot be sold for less than that price. It doesn’t matter where the alcohol is sold – off license, supermarket, bar or restaurant – the minimum price stays the same.

Why is minimum unit pricing being introduced?

Alcohol is a major cause of illness and disease, hospitalisations, self-harm, and violence in Ireland. It’s better for everyone if, as a country, we cut back.

Price after MUP
Price after MUP

In 2019, on average, every person in Ireland aged 15 and over drank 10.8 litres of pure alcohol a year – the equivalent of either 40 bottles of vodka, 113 bottles of wine or 436 pints of beer.

Research by the Sheffield Alcohol Research Group found that when minimum unit pricing on alcohol is introduced in Ireland, alcohol consumption is expected to reduce by almost 9% overall.

The heaviest drinkers are expected to reduce their alcohol consumption by 15%, while people who already drink within the low-risk alcohol guidelines are expected to drink 3% less.

The heaviest drinkers buy the cheapest alcohol. Minimum unit pricing on alcohol targets these drinkers, reducing its affordability so that less alcohol is purchased. This will reduce the harm that alcohol causes them and others.

This should result in around 200 fewer alcohol-related deaths and 6,000 fewer hospital admissions per year.

Minimum unit pricing is being introduced as part of the Public Health (Alcohol) Act 2018. It is one of a number of public health measures being introduced under this legislation, all aimed at reducing the harm that alcohol causes to our society.

What is the minimum unit price?

One standard drink in Ireland contains 10 grammes of alcohol. The minimum price for one standard drink will now be €1. Most alcoholic drinks are already above this, especially in pubs, clubs and restaurants.

Some examples of a standard drink are a pub measure of spirits (35.5mls), a small glass of wine (12.5% volume), and a half pint of normal beer.

For example, a 12.5% bottle of wine has 7.4 standard drinks and from 4 January 2022, cannot be sold for less than €7.40.

Minimum unit pricing on alcohol prevents strong alcohol from being sold at low prices.

How do we know it will work?

In 2018, Scotland became the first country in the EU to bring in minimum unit pricing on alcohol. Alcohol purchases in Scotland reduced by 7.6% in the year after it was introduced. This is the lowest level of alcohol sales since records began in the early 1990s.

Research has also shown that moderate drinkers were affected very little; it has had the greatest impact on harmful drinkers. It is estimated that it will save more than 2,000 lives in Scotland over 20 years.

Research on minimum unit pricing in Canada has also shown that it reduces alcohol consumption and alcohol-related harm, including alcohol-related diseases, deaths, crime, and health service use.

Why not use a tax instead?

People drink more alcohol if it is cheap. Increasing the price of alcohol will reduce the amount of alcohol that is purchased and this will improve our health. There are different approaches to increasing the price of alcohol, such as through tax. If you raise taxes for alcohol, you are raising the cost of alcohol for everyone. A minimum unit price only targets cheapest alcohol. For low-risk drinkers, like those who are already drinking within the low-risk alcohol guidelines, the change will largely go unnoticed.

Who will it affect the most?

Minimum unit pricing most impacts people who are drinking alcohol harmfully. It is designed to target the heaviest drinkers who seek the cheapest alcohol, which means it will have the greatest effect among those who experience the most harm. These drinkers also suffer greater harm from alcohol and therefore stand to gain more in terms of health as a result of reductions in drinking.

But what is a heavy drinker?

A heavy drinker is someone who regularly drinks more than weekly low-risk alcohol guidelines. These are 11 standard drinks for women and 17 standard drinks for men, spread out over the week and with at least 2 to 3 alcohol free days per week. A heavy drinker is also someone who regularly drinks more than 6 standard drinks on one occasion.

An opportunity to reflect on our alcohol use

The changing price of alcohol is an opportunity for us to reflect on our alcohol use. Get tips on drinking less when out or at home.

If you are a heavy drinker and reducing or stopping your alcohol use, contact your GP so that you can cut back safely and avoid withdrawal symptoms.

NZ wine exports hit record high driven by strong US sales

The beer and wine aisle of a 365 by Whole Foods Market grocery store is pictured ahead of its opening day in Los Angeles. New Zealand sauvignon blanc has found a ready market in the US.
The beer and wine aisle of a 365 by Whole Foods Market grocery store is pictured ahead of its opening day in Los Angeles. New Zealand sauvignon blanc has found a ready market in the US.

New Zealand’s wine export values continue to rise thanks to strong United States demand, reaching $1.66 billion for the year, up 6 per cent on the year before.

While the percentage increase is lower than the average yearly growth of 17 per cent for the last 20 years, the industry was still on track to reach $2b worth of exports by 2020, chairman of New Zealand Winegrowers Steve Green said.

The latest NZ Winegrowers annual report shows to the end of June this year, the US market is worth $517 million, up 12 per cent. New Zealand wine became the third most valuable wine import into the US, behind only France and Italy.

NZ wine, a 2017 snapshot.
NZ wine, a 2017 snapshot.

Green forecast next year’s export volumes would be “more muted” because of the smaller harvest of 396,000 tonnes, down 9 per cent on 2016, but wineries were confident quality would remain high.

While the US provided the best returns, more litres of wine (74 million) were exported to the United Kingdom for a much smaller return of $389m. Traditionally more bulk wine has been sent into the UK market. Behind the US and the UK came Australia, Canada, the Netherlands and China.

Former US ambassador to New Zealand Mark Gilbert, along with many of his countrymen, has a nose for a good wine. He attended a tasting of New Zealand and French pinot noir last year.
Former US ambassador to New Zealand Mark Gilbert, along with many of his countrymen, has a nose for a good wine. He attended a tasting of New Zealand and French pinot noir last year.

The most exported variety was sauvignon blanc, followed by pinot noir and chardonnay.

The recently passed Geographical Indications (Wine and Spirits) Registration Act would offer improved protection of New Zealand’s regional identities. The industry had also launched the sustainable winegrowing New Zealand continuous improvement extension programme to enhance the reputation of wines.

Of a total growing area of 37,129 hectares, sauvignon dominates at 22,085 ha, an increase of 685 ha from the year before. The second most popular variety was pinot noir, with 5653 ha, followed by chardonnay at 3203 ha and pinot gris (2469 ha).

Marlborough is overwhelmingly the largest region with 25,135 ha planted in vines, followed by Hawke’s Bay (4694 ha), Central Otago (1896 ha) and Canterbury/Waipara (1425 ha).

The number of wineries was 677; they reached a peak of 703 in 2012.

New Zealanders drank 40 million litres of imported wine during the past year, most of it Australian (29m litres), with the next two most popular French and Chilean.

The November Kaikoura earthquake damaged an estimated 20 per cent of Marlborough’s tank capacity, but by harvest time all of the lost capacity had been restored or replaced.

Green said the industry consulted with members on possible changes to export tasting requirements, with responses suggesting a rethink of export requirements was needed.

“We continue to believe more needs to be done in our export legislation to ensure that the same standards apply to every bottle of New Zealand wine, no matter where it is bottled,” Green said.

NZ Winegrowers were concerned at the Ministry for Primary Industries’ plan to take part of New Zealand Winegrowers’ wine export certification service contract in-house.

“We fought hard to retain the status quo, which has served our members well, and are disappointed with the level of industry consultation in MPI’s decision making process. If the service changes, we will be seeking guarantees from the government that the current speedy issuance of export eligibility statements will be protected, at no additional cost to members,” Green said.

In June the New Zealand Grape Growers Council and the Wine Institute of New Zealand finished as entities, replaced by a unified New Zealand Winegrowers.

New Zealand is now the only major wine producing nation with a single industry body, representing and advocating for the interests of its entire grape and wine industry.

The industry and the Government are working through a Primary Growth Partnership on research into lighter wine production and marketing. Last year retail sales reached $33.5m. The programme runs through to 2021, by which time $16.97m would have been spent on the partnership.

Organic wine production continues to flourish with more than 60 New Zealand wineries now making fully certified organic wines, and more still in the organic conversion process.

Wine is New Zealand’s fifth largest goods export.