EU aims to shake up wine industry with root-and-branch reform

(BRUSSELS) - The European Commission on Wednesday proposed uprooting excess vineyards and launching an overseas marketing blitz under a new wine industry strategy aimed at soaking up glut and countering New World producers.

Farm Commissioner Mariann Fischer-Boel warned that the European Union's annual wine budget of 1.3 billion euros (1.8 billion dollars) was currently spent in "a very inefficient way" despite huge challenges facing the sector.

"We are now actually losing market share to dynamic producers in other parts of the world, consumption is falling and imports are increasing by about 10 percent," Fischer-Boel told journalists.

With 500 million euros currently spent each year getting rid of unsold wine, her proposed solution focused on abolishing measures used to dispose of excess wine and paying farmers to uproot uncompetitive vineyards.

"The proposals aim first of all to boost the competitiveness of the European wine producers, try to win back markets, drain the infamous wine lakes and of course make things more simple," she said.

Although Europe remains by far the biggest wine producer and exporter, it faces growing competition from so-called New World competitors, notably Australia, the US state of California, Chile and South Africa.

In Europe, wine heavyweights such as France, Italy and Spain are increasingly feeling the squeeze as consumption falls at home and they lose market share to New World imports in traditionally large markets like Britain and Germany.

Under the root-and-branch reform, the distillation of excess wine, aid for private storage and export refunds would all be abolished while incentives would be increased to encourage farmers to uproot a targeted 200,000 hectares (494,000 acres) under vines.

The Commission also wants a budget of 120 million euros per year, funded partially by the EU and partially by national sources, for a marketing campaign to gain market share abroad.

At the same time, the European Union's executive arm proposed loosening currently strict but "confusing" rules on bottle labelling to win back lost market share in Europe.

"I think we shoot ourselves in the foot with rules that are indeed illogical," Fischer-Boel said.

"For example, we propose for the first time that all EU wines would be allowed to indicate the vintage and the wine variety on the label," she added.

The reform, which still has to be backed by member states, won a mixed reaction from the wine sector, with farmers up in arms and traders pleased with the shake-up.

"The Commission's reform wants to introduce the New World's agro-industry model in the EU and do away with the age-old European model of traditional vineyards," said Jean-Louis Piton, an official with the Copa-Cogeca farmers association.

During its drafting, the reform fired up many farmers especially over the uprooting plans, causing the Commission to slash by half the number of hectares it targeted from 400,000 originally.

"I'm not naive, I realise that the wine sector is very emotional and that many will obviously have objections to my ideas but this should not distract us from the fact that a reform is crucial," Fischer-Boel said.

While farmers gave a cool reaction to the proposals, the CEEV wine trade association welcomed the reform.

"If we wish to remain world leader, we need a market-oriented (approach) allowing the companies and the European wines to be more competitive both in the internal market and in the external markets," said CEEV head Lamberto Vallarino Gancia.

Reform of the EU wine market - details of the proposal