Destroying wine and vineyards is common in France – 08/30/2023 – Red or White

The idea of ​​millions of liters of French wine turning into alcohol for cleaning and vineyards being uprooted in the beautiful fields of Bordeaux is revolting – especially when we know that the government and producers prefer this to selling cheaper. Us paying so much for a bottle of wine, and them preferring to throw it away rather than lower the price… It’s maddening! Whether it provokes hatred, heartache or just curiosity, the news of the announcement that the French government will allocate 200 million euros (more than R$ 1 billion) to distill wine and help producers to replace vineyards with other crops, such as olive trees, has been all over the internet since last week.

The regulation of stocks and prices through the destruction of commodities, however, is almost as old as capitalism. Remember the Law of Supply and Demand? This spontaneous phenomenon that governs the markets causes prices to drop when the stock of a particular product rises too much, whether due to excess production, a drop in sales or both. When these prices fall below production costs, it is common for governments to create subsidies and invent ways to avoid a general crash in this or that sector. In the case of wine, the most common solutions are turning wine into alcohol and uprooting vines.

“It is a very common practice, especially in France and Italy”, says Rodrigo Lanari, from Winext consultancy. “We don’t talk about it, because it takes away the glamour, but wine is a very commoditized market. Of course, we are talking about more current wines, for day-to-day use”. The wines that turn into alcohol are wines so cheap that they barely arrive in Brazil or, when they arrive, appear in these opportunity purchases (flash sales) of some ecommerces. No one is going to distill wine or pluck vines from a grand cru. “Bordeaux is one of the hardest hit regions, but expensive wines are not only produced there, there is also volume production.”

The tanks of these companies that produce volume do not have space to accommodate the 2023 crop that is starting to be harvested. They are filled with wines from past vintages. A number of factors led to this overstock: the drop in tourism and restaurant closures across Europe during the pandemic years, an increase in the cost of living and a financial crisis brought on by the pandemic and the war in Ukraine, lower consumption of alcoholic beverages by the younger population and the drastic drop in imports from China. According to data from the International Organization of Vine and Wine (OIV), imports of wine by China fell from 8 million hectoliters, in May 2018, to 3.4 million hectoliters, in December 2022. In euros, this drop represented a decrease of 1.2 billion.

For Lanari, however, this crisis is not fleeting. “It’s structural,” she says. OIV data on wine consumption and production in the world from 1996 to 2021 show a constant lag, with production always far above consumption. The curve varies according to the productivity of each harvest, but consumption is always far below production (with the exception of 2017). .
Faced with this gap, in the past decade, the European Union, governments and associations of producers in Europe invested heavily in promoting their wines in different countries outside Europe and in new markets. “In 2017, it seemed that the equation was equalized, with production and consumption almost equal, but there was a super harvest and then the pandemic. The fact is that more is produced than consumed and governments are artificially guaranteeing the balance. desperate to see how new wineries have emerged in Brazil, for example. People plant without knowing if they have anyone to sell to.”

At the moment, according to the Institute of Management, Planning and Development of Winemaking in the State of Rio Grande do Sul (Consevitis-RS), where most of the production is concentrated, the Brazilian wine sector does not need to resort to waste. Inventories are at the desired level. However, it was not always like this. “Currently, we have regulated inventories”, says Adriano Miolo, superintendent of Grupo Miolo, about the experience in his companies. “Our production is in line with sales. We only have a small regular stock that allows us to cope with small fluctuations in crops, but in 2015 we had very high stocks. It was very difficult to accommodate the 2015 harvest, but in the end it was good We have large stocks because in 2016 there was one of the worst late frosts in history, which caused a drop of more than 60% in the production of vineyards in Rio Grande do Sul. Having stocks allowed us to meet the demand of our consumers and we were even able to negotiate these stocks with other wineries. Since then, stocks have remained regular.”

Adriano recalls that, unlike Brazil, the planting of vineyards in the European Union is controlled by the state. You need a license to plant a vineyard. “This is one more way to regulate stocks”, he says. “They only allow planting a new vineyard when there is demand. When it happens like now, they first promote distillation. If that’s not enough, they resort to an uprooting campaign to regulate the market.”

That is, do not cry over spilled wine and give up paying a bargain price for wine from desperate winegrowers.

PRESENT LINK: Did you like this text? Subscriber can release five free hits of any link per day. Just click the blue F below.