European Commission

Wine seminar

“Challenges and opportunities for European wines"

Brussels

16 February 2006

Conclusions

The European Commission held a seminar on 16 February 2006 on “Challenges and opportunities for European Wines” where more than one hundred participants representing a wide range of stakeholders had the opportunity to express and share their views. The work focused on the strengths and weaknesses of the European wine sector and how the EU wine policy should look in the future. From the rich and fruitful debate, the Commission is comforted in its ongoing analysis of the current situation and forecasts for the European wine sector. Furthermore, there was a large consensus on the need to keep aspecific Common Market Organisation for Wine but to reform it.

1.The EU wine policy should be reformed

The current Common Organisation of the Wine market (CMO), provides some instruments to improve the competitiveness of the sector. However, those measures have become unsatisfactory in the new global market. The basic problems identified are:

  • The current unbalanced market between supply and demand in the Community. Recent harvests have increased stocks significantly, followed by a decrease in price levels and a new pressure for expensive intervention measures. In the Community, this takes place in a context of a decline in consumption and of a continuing increase in imports, combined with only a modest increase in exports over the last years while, at the same time world consumption is increasing. These elements point towards a market imbalance of a structural nature and render the present intervention policy unsustainable in the long term.
  • The wine CMO contains rules governing oenological practices, definitions of wine, notably quality wine produced in a specific region, table wine with a geographical indication and processing and labelling of wine. These rules need to be refined and updated to take into account the shrinking and changing consumer demand. They should also be developed to combine the strong elements of Europeanwine tradition with the necessary flexibility to adapt rapidly to new production techniques, labelling and marketing methods and consumer demand.

2.The objectives of the reform should be to ensure supply is driven by market demand, competitiveness and sustainability

  • To meet the requirements and preferences of consumers.
  • To improve the competitiveness of European produced wine by focusing all the processes of wine making on an appropriate improvement of its quality and marketing to reflect the requirements of the consumer ; this should allow a better balance between supply and demand.
  • To ensure that wine production in Europe is sustainable in economic, cultural, social and environmental terms taking into account the important role of wine production for employment in certain rural areas
  • To create added value, to be shared in a fair manner.
  • To achieve a modern European wine industry while preserving the authenticity and character of the product and to safeguard the main characteristics of the European vine landscapes that give them their typical features.
  • To develop instruments to obtain a better knowledge and monitoring of the market in order to increase transparency and consequently acceptability by consumers and taxpayers.
  • To fully respect our international obligations.
  • To ensure fair access to our export markets, in order to comfort the leader position of the EU.
  • To make legislation clearer allowing for a more simple, effective and flexible framework of rules for production and labelling.
  • To set up an EU wine policy, which takes into consideration wider society concerns, such health and consumer protection.

3.Basic principles

  • The economic operators (vine growers, wine producers, traders, retailers) are primarily responsible for the adaptation of EU wine production to consumer requirements, in both quantitative and qualitative terms. The wine CMO should provide the regulatory framework to facilitate their action, while preserving the specificity of the product. This should allow the development of a modern and dynamic European wine industry that would be in a position to efficiently market European wines on the internal, as well as on the world market.
  • In order to use budgetary funds more effectively, the future wine CMO should provide for a new system that would allow substantial and adequate restructuring of the European wine sector.
  • A structural adjustment of the sector is required in the next few years, including a reduction of the production potential where necessary.
  • The structural adjustment of the sector should also include a further quantitative and qualitative adaptation of the vineyards to market demand.
  • The wine reform should take into account the accomplishments of the CAP reform initiated in 2003, in particular its market orientation, its horizontal approach and cross-compliance. However a general system of decoupled payments in the wine sector would probably not be the right solution.
  • The wine CMO should encourage consistency in the sectoral (vertical) development of the sector. Policy instruments dealing with plantings, grape processing, wine production, definition of categories of wine, labelling and marketing should act in synergy to promote the competitiveness and sustainability of the sector.
  • A higher degree of subsidiarity should be reached, leaving to Member States as much scope for national decisions as possible with an adequate envelope and allowing Community action whenever the objectives cannot be sufficiently achieved by Member States. This should enable MemberStates and wine regions also, to adapt the measures available at Community level to their precise conditions and to their needs.
  • In vine-growing regions, wine cannot be seen in isolation from the other agricultural products and from the rest of the economy. Consistentwith the future wine CMO instruments, vine-growing regions and economic actors should make full use of the recently enhanced rural development measures, in order to strengthen the competitiveness of their wine production, to enhance the positive impacts of vine-growing on the environment and the rural landscapes (in particular vineyards on slopes) and to diversify their local economies.

The stakeholders ask the Commission to fully take into account these conclusions, in view of the adoption of its communication to the Council and the Parliament by mid-2006.

Workshop 1

How to strengthen European wine’s competitiveness in the EU and worldwide?

Chairman:Mr. L. Hoelgaard (Deputy Director General DG AGRI)

Rapporteur:Mr. M. Sánchez Brunete (Chairman of the Advisory Group “Wine”)

Assistant:Mme. M. Driessen (DGAGRI/C.3)

  • The workshop 1 indicated that the economic operators (vine growers, wine producers, traders, retailers) are primarily responsible for the adaptation of EU wine production to consumer requirements, in both quantitative and qualitative terms. The wine CMO should provide the regulatory framework to facilitate their action, while preserving the specificity of the product and the wine model for the European wine sector (employment, differentiated products, large diversity and environment safeguard). The new CMO has to constitute a global wine policy including aspects such as protection and information of consumers. This should allow the development of a modern and dynamic European wine industry that would be in a position to efficiently market European wines on the internal, as well as on the world market
  • A structural adjustment of the sector is required in the next few years.
  • The wine CMO should encourage consistency in the sectorial (vertical) development of the sector. Policy instruments dealing with plantings, grape processing, wine production, definition of categories of wine, labelling and marketing should act in synergy to promote the competitiveness and sustainability of the sector.
  • The EU is the world leader in the sector and must maintain this position in defending its interests at the international level (OIV, WTO), its model and its Geographical Indications.
  1. Which degree of subsidiary and simplification could or should be achieved? How to better manage the CMO?
  • Due to the high degree of diversity there was an agreement that a higher degree of subsidiarity should be reached, leaving to Member States as much scope for national decisions as possible with an adequate envelope and allowing Community action whenever the objectives cannot be sufficiently achieved by Member States. This should enable MemberStates and wine regions also, to adapt the measures available at Community level to their precise conditions and to their needs. But the Common policy should guarantee a high degree of equity.
  1. Do you agree withthe analysis of the Commission (market situation and the problems identified)?
  • As far as the market analysis is concerned opinions diverge: The producers’ representatives underlined that the European problem does not rely on the production level but more at the marketing stage and that this prevents to take opportunities from a possible growing consumption on European Market. According to them, European model is good and a proof of that is that it is copied. Nevertheless many things could be modernized. Traders and academics fully agree with the Commission.
  1. Do you agree with theobjectives identified by the Commission?
  • There was a board agreement on the objectives of the Commission. However, Producers’ organisationsunderlined that within the objectives listed, the improvement of competitiveness is much more a tool than an objective.
  1. How to meet the requirements and preferences of consumers?
    How to increase European wine’s competitiveness at producer, processor, trader and retailer level?
  • The stakeholders stated,on a large consensus, the need to know evolution of the consumers’ requirements and preferences better and to modify Community legislation on wine classification and labelling in order to have a more flexible legal framework and adapt more easily offer to demand. Consumer information and protection, including health protection, should be reinforced through the designation and labelling. The policy of quality wines produced in specified regions should be reviewed to ensure a high degree of quality, transparency and protection. Some thinks that labelling rules should be simplified.
  • The Community framework could help these efforts in strengthening permanent external promotion, some mentioned the introduction of EU logo, education, research, training and innovation.
  • Academics underlined that there is not enough management skills and too much individualism. Afair share of the value added should be promoted. It is necessary to promote synergies in the sector.
  • New world wines are winning market shares because of a combination of positive production, processing and marketing conditions achieving the right marketing mix. They are supported by large marketing campaigns. Due to the large production and processing structures, they benefit from significant economies of scales and can provide large volumes to the retailers on a regular basis. Finally, as far as the prices are concerned, these wines are perceived as good value for money.
  • Many European wines should still make progress on these elements. The Community framework could help these efforts in strengthening promotion and allowing more flexibility in wine labelling.
  • Producers’ organizations and vertical policy may be encouraged. This would have positive effects throughout the chain.
  1. What European policy initiatives in the wine sector could concretely be takento address those problems?

Which market tools should be kept? How to increase their coherence?

Should the restructuring funds also be used further downstream (coops, processors…)?

  • As far as the planting rights management and the ban on new plantings are concerned, opinions diverge. Some stakeholders believe these restrictions put on some wines hinder the European wines competitiveness in imposing additional costs and limiting the development of marketable production when some others believe that they avoid increasing surpluses and pressure on market. In any case, the lackofavailability of planting rights in a given region should not constitute a brake on production when a market outlet exists. The transfers are currently burdensome and should be simplified.
  • As far the conversion and restructuring programme is concerned, it is seen as a good tool to adapt to consumer demand and could be even more efficient if consistency with the investments of the downstream sector is ensured in order to improve the processing and marketing of the wines produced on the restructured areas.
  • According to traders, policy instruments should put less emphasis on market intervention (which may encourage surpluses) and more on adapting and modernising the sector to meet evolving demand and ensuring a fair income to producers. Many should be deleted but the potable alcohol distillation and musts aid which have its markets should be kept as well as private storage.
  • As far as decoupling is concerned, opinions diverge: Producers’ organisations are against after en in-depth analysis but some other thinks that this needs an in depth expertise before being in a position to have a judgement on it. The relevant question here is: with which budget?
  • However some elements from the CAP reform could be taken on board in the reformed CMO and wine production and processing will have to fully respect environment and social requirements.
  • It was also stated that it was relevant, due to all the specificities of the sector to keep a specific CMO.
  • Innovation on new processing and new products should be encouraged.

On Oenological practices, the need for a commune approach is underlined and the OIV role should be strengthened.

Workshop 2

How to achieve a sustainable European wine policy?

The contribution of European vineyards now and in the future.

Chairman:Mr. A. Constantinou (Director DG AGRI)

Rapporteur:Mr. M. R. Muth (1st Vice-Chairman AREV)

Assistant:Mr. A. D’Avino (DGAGRI/C.3)

  1. Do you agree with the analysis of the Commission (market situation and the problems identified)?
  • The participants of the Workshop 2 in general agree with the analysis of the Commission on the market situation and the problems of the sector.
  • Nevertheless, some participants indicate that market forecasts should be taken with caution, since past evaluationshave not been always accurate. They believe that they appear somewhat pessimistic and too much focused on macroeconomic aspects.
  • Some participants also mention the importance of the interprofessional organisation of the “filière“.
  1. Do you agree with theobjectives identified by the Commission?

Do you agree that the current CMO does not allow meeting these objectives and has to be fundamentally reformed?

Which degree of subsidiary and simplification could or should be achieved? How to better manage the CMO?

Which degree of possible integration of the wine policy in the reformed CAP is possible in order to achieve the objectives of this new CAP and those of the Lisbon strategy? What degree of specificity has to be maintained? How to introduce CAP style cross compliance?

  • Most participants agree with the objectives identified by the Commission and believe that they were not met within the current CMO; therefore the CMO needs to be reformed. Some of them indicate the income of wine farmers as a central additional objective of the policy and the need to provide farmers with incentives to adjust production to market demand. Other emphasise the need to improve competitiveness and to better tap the potential of various markets by being forward looking and proactive.
  • The reform needs to keep a strong specificity of the wine sector and introduce more simplification and rational subsidiarity.
  • Most of the participants insist on the maintaining of a specific wine CMO and generally reject the integration of the sector in the general decoupled scheme, which would not fit to the characteristics of the sector.
  1. Should the ban on new plantings be prolonged beyond 2010? Should definitive grubbing up be encouraged? What are the viable alternatives to vine growing and wine production in the various wine regions?
  • Most of the participants are against a complete liberalisation of the sector, and demand instead more effective controls on irregular plantings. However, some participants regret that the ban on new plantations might hamper the growth of the wine farms, growth which was possible in third countries (Australia, etc.)
  • It has been suggested that planting rights should be made more flexible in order to accommodate the interests of those who want to leave the sector and those who want to expand or to enter into the business (in particular young farmers).
  • Concerning the measures of the CMO, the participants agree on the big importance of measures of structural nature, and in particular indicate the success of the restructuring scheme, which should be prolonged in future, and perhaps extended to improve the facilities of winemaking and marketing of wine.
  • Participants are not against a possibility of grubbing-up, even under the form of a temporary abandonment, on the condition that it is voluntary and linked to other restructuring measures.
  1. Which market tools should be kept? How to increase their coherence?
  • On the side of the market measures, the majority of participants agree that an instrument to regulate the variable wine production should be kept (crisis management); a numberof participants also express the opinion that even other distillation measures (like potable alcohol) should be kept and improved, and in particular by-product distillation (for their effect on wine quality and on the environment).
  1. How to ensure that wine production in Europe is sustainable in economic, cultural, social and environmental terms taking into account the important role of wine production for employment in rural areas?

How to safeguard the main characteristics of the European vines landscapes. What European policy initiatives in the wine sector could concretely address those issues?

  • Within the general objective of competitiveness, policy instruments should promote the preservation of vineyards in sensitive areas (less favoured areas, mountain regions, islands, etc.), where wine production is subject to higher production costs, but at the same time plays an important role in terms of protection of the environment, landscape and employment in rural areas.
  • Importance should be also given to the aspects of wine which are linked to the development of tourism in vine-growing areas (wine roads).

The EU wine quality is an absolute asset of the sector and should be preserved with all means. Some participants propose initiatives to make the quality of EU wines more visible, for example through a specific distinctive label.