A Change of Regulations: The Champagne Example
April 3, 2008, by Henrich Brunke and Rolf A.E. Mueller, (University of Kiel, Germany)
When asking just about anyone to name a French wine region,
For more than eight decades, French laws have permitted the Champagne name to be used only in connection with grapes grown from specifically designated plots in 319 villages covering 15,000 vineyards across 33,500 hectares that make up the “Appellation d’Origine Controlee” (AOC). Producers from outside this exclusive area may only use the mundane expression “sparkling wine” for wine of the same type.
Proponents of the AOC system argue that a delimited production area is an indispensable strength of a wine appellation, because it guarantees a consistent quality of the wine produced. Proponents also often employ this consistent quality argument when wanting to put a cap on the quantity produced per hectare, a practice that is widespread among AOCs. Wine growers in the
Moreover, only one year after raising the cap on production, 
If it is true that yield reductions and AOC limitations improve quality, one would expect a significant drop in the quality of
It appears that the argument that maximum yields and strictly delimited areas guarantee good quality champagne is difficult to maintain. Other forces must be at work and what really appears to be happening becomes obvious when looking at the steep increase in French wine sales in recent years. In 2007, exports of French wine and spirits soared to a record high and about 9.4 billion Euros worth of wines and spirits were sent abroad. The year was further characterized by triple-digit surges in
So, as the current example shows, a consistent increase in demand may be used as the justification within an industry group to modify its otherwise so stringent laws and extend its borders to include new industry members for the sake of increasing output. The justification of a regulation as guaranteeing good quality champagne can simply be overturned under the right supply and demand conditions. In this instance, the law for revenue dominated over the saintly ideals of quality. And perhaps the original AOC regulations regarding yield caps and area limitations were similarly motivated: it has been known for some time that lower yield and smaller area reduce supply, which increases prices, which may increase revenue.
Needless to say, the new area for production of
The alternative hypothesis, buried at the bottom, deserves more attention:
"And perhaps the original AOC regulations regarding yield caps and area limitations were similarly motivated: it has been known for some time that lower yield and smaller area reduce supply, which increases prices, which may increase revenue."
Indeed, producers of many stripes (but especially agricultural producers) strive to use government regulation (or government-sanctioned private regulation) to restrict output. Inevitably, they argue that regulation is needed to preserve and protect consumers. The incidental fact that regulation excludes new entrants and raises producer profits is not often acknowledged.
So there are competing hypotheses:
[1] The AOC regulation protects consumers. It ensures that minimum quality standards are met, and consumers benefit because when they purchase Champagne they are assured that the product meets these standards.
[2] The AOC regulation benefits producers. It excludes competitors, restricts output, and raises profits for incumbents.
Increasing allowable yield probably reduces quality on average, which conflicts with the consumer protection hypothesis. A caveat: technological changes in winemaking could have increased producers' quality such that they can maintain the previous quality standard despite higher yields. However, Champagne makers are a notoriously traditional lot, so this seems unlikely
Expanding the size of the AOC also conflicts with the consumer protection hypothesis if in fact Champagne is superior to other sparkling wine. (It's certainly possible that it is not, and in particular, that nearby producers make a superior product such that allowing them into the cartel raises average quality. This counter-hypothesis is testable.)
But it's also inconsistent with the producer protection hypothesis. Allowing new entrants reduces the monopoly profits of the incumbents. Are they making so much money that they don't care? Did new entrants pay an "admission fee" to gain access to the cartel?
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An interesting article, but you are being too simplistic in your assessment of the merits and failures of delimited areas and yield caps. Particularly in the case of Champagne.
Yes, the timing of Champagne's proposed territorial expansion sucks and reeks of demand-based, not quality-based decision making. But the picture is more complex than you allow.
Whilst you mention that the number of proposed villages within the appellation is going up (actually the proposal is for 40 new villages), you fail to mention two are slated to be removed - apparently to improve quality.
You also discuss the rises in permitted yield. But many wine authorities would argue that the relationship between yield and quality is a very complex one. For a start, maximum yields in Champagne are already twice those of most French wine regions because sparkling wines can tolerate very high yields and produce excellent wines. Meanwhile within appellations the best years are often the highest yielding. Also, you fail to mention the role of the 'reserve individuelle' in yield rises in Champagne, allowing growers to build up their reserves to allow the region to maintain 300+million bottle production, even in very low yielding years like 2003.
Importantly the implementation of these changes will be far, far slower than you imply. There will be public inquiries about both the villages proposed for inclusion (the final number may possibly be higher) as well as the specific plots within those villages that may be used for viticulture. This suggest that the increase in Champagne's growing area may take over a decade, (remember, they still have to plant the vines) and far longer than the two years you suggest.
Even then the scale of that increase may well be considerably lower than you suggest, with perhaps as little as 1,200ha of new vineyards. There are two public inquiries, a five person technical committee, the INAO, CIVC and of course those involved before any final decisions are made and planting can begin.
The relationship between yield and perceived and actual quality is a fascinating, but incredibly complex one. Whilst you ask some interesting questions, your conclusions are too definitive for the evidence you present.
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I enjoyed your article, especially reading the statistics on increased Chinese consumption. This got me thinking about the quality issue, not so much in relation to yield, but more in relation to the "brand name" of Champagne. It would be interesting to do a blind taste test of Champagne vs. other French sparkling wines (such as the Loire for instance). In my experience, the other regions are often as good if not better tasting. Could this be because they have to perform better to overcome the disadvantage of lacking a brand name? I know that most of the new global consumers (such as Chinese) will limit themselves to the Champagne "brand", whether or not the taste is good, given that they are simply looking to signal status. Those of us looking to maximize our enjoyment may want to consider looking outside of Champagne.
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Interesting comments. A few more comments perhaps:
It is unlikely that the land in the "new" communes are planted with vines already so it will take substantially longer than until 2008 to increase the production as discussed (33%). (As a matter of fact, the exact plots are not yet defined I believe.)
You also underestimate the land prices in Champagne (AOC land) that can reach the million (of euros) for the best land. But perhaps the to-be-classified land will be considered as not prime so it might be a bit cheaper.
Looking at it historically it is striking to see how yield has changed in Champagne, from 7500 kg/ha initially to 15,500 kg/ha. (as we mention here http://www.bkwine.com/blog/2007/12/brief-history-of-champagne-yields-or.html)
Or even more according to Tom Stevenson who argue that the real yield is even 40% more than that! (http://www.bkwine.com/blog/2008/01/bad-timing-to-expand-champagne-says.html)
This is in striking contrast with other districts in France (and elsewhere) where it is often argued that to increase quality you have to decrease yields. It is quite difficult to understand how this is argued in Champagne.
At the same time one has to note too that Champagne is the only wine district in France (and perhaps in the world) that is really flourishing today!
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