THE RISE AND FALL OF THE WORLD’S

LARGEST WINE EXPORTER

– AND ITS INSTITUTIONAL LEGACY– AND ITS INSTITUTIONAL LEGACY

Giulia Meloni and Jo Swinnen

LICOS Centre for Institutions and Economic Performance,

KU Leuven, Belgium

Brainteaser

Name the world’s largest wine exporter in 1960

France? Italy? Spain? Australia? Chile?

Wine production in Algeria, 1860-2010

(in million hectoliters)

Source: Insee (1935; 1966), Birebent (2007) and FAO (2012).

I.

The Growth of the Wine Industry

in Algeria in the late 19th century

Harvesting 1909 — Oran, Algeria

The rise of the Algerian Wine Industry

• The first attempts to produce wine in Algeria

were unsuccessful

• In 50 years (1880-1930) Algerian wine

production grew dramaticallyproduction grew dramatically

1. Scientific progress in Algeria

2. Spread of a disease in France

1. Technological progress in wine

production

From 1830 to 1860: production of undrinkable

Algerian wines (in hot climate, yeast cells die

and fermentation stops)and fermentation stops)

Refrigeration technology («cold fermentation»)

to control the temperature in the tanks

2. Devastation of French vineyards

1863: Invasion of vine disease (Phylloxera)

European vine species were not resistant to it

1/3 of the total vine area was destroyed +

wine production declined by ≈ 70%

While Growers searched for

solutions to Phylloxera …

• « Chemists »:

Chemicals/flooding…

• « Americanists »:

Grafting (European vines inserted

on to the roots of the American

vine species) or Hybrids (crossing 2

… Merchants searched for

new sources of supply

• New markets

Spain, Italy and Algeria

vine species) or Hybrids (crossing 2

varieties of different vine species)

French Imports and Exports of wine and Algerian wine production,

1860-1920 (in million hectoliters)

1st consequence:

France became a wine importing country

Source: Insee (1935; 1966), Birebent (2007).

2nd consequence: "Quality" problems

• Adulterations: production of

"non-natural" wines (dried grape

wines, sugar wines, harmfulwines, sugar wines, harmful

chemicals…)

• Label frauds: imitations of

brand-name wines (Bordeaux, …)

1907 poster: "Long live tothe natural wine", "downwith sugar" and "down withcheaters".

II.

Recovery of French Production

and Government Regulations

Harvesting 1930s — Algeria

Wine production in France, 1860-2010

(in million hectoliters)

Source: Insee (1935; 1966), Birebent (2007) and FAO (2012).

Recovery of French Wine Production

• End of 19th/beginning of the 20th century:

- ↑French wine production (grafting and hybrids)

- ↓ wine prices (wine prices in 1905 were 1/3 of

those in 1880)those in 1880)

French wine producers lobbied the government to:

1) limit imports (raising import tariffs)

2) limit wine "adulterations" (wine regulations)

French wine imports by major exporting countries

(in million hectoliters)

1. Raising import tariffs

Source: Pinilla and Ayuda (2002).

Not enough… The 1907 Winegrower's

Revolt in Midi

Ernest Ferroul and Marcellin Albert addressing a crowd in 1907, Narbonne

Auckland Star (New Zealand),

— June, 1907

"No more patience" — Narbonne, June 1907

2. The introduction of French

"quality regulations"

To counter the "Quality" problems…

French wine producers lobbied the government toFrench wine producers lobbied the government to

introduce several "quality regulations" in the early 20th

century

Appellations d’Origine Contrôlées (AOC) laws (areas’

delimitation + specific production criteria as grape

varieties/max yields…)

III.

Further Expansion in Algeria and

More Regulations in France

A winery in Bouareou, Bône department — Algeria

The increase in plantings in the 1930s …

Source: Birebent (2007).

… lead to a rapid increase in Algerian wine

production and exports

Oran — Quai du Sénégal — Algeria

Algerian wines shipped to France

Sète Harbor — France 1930s

French advertisement from mid-1930 which

contains one of Pasteur's most famous sentence:

"Wine is the healthiest and most hygienic of

drinks"

and few more French ‘statistics’ of this period:

French wine slogans

and few more French ‘statistics’ of this period:

"Give the preference to restaurants that

include wine in the price of the meal"

"Human Average Life: 59 years for a water

drinker against 65 years for a wine drinker"

"87 % of the centenarian are wine drinkers"

"Wine is the milk of the elder"

More regulation in France and Algeria

Producers of table wines (southern France, Midi)

lobbied the French government

Statut Viticole (1931-1935) was introduced

(storage, distillation, ban on planting new vines,

grubbing-up …)

Halted the expansion of Algerian vineyards and

wine production

IV.

The Fall of the Wine Industry in

Algeria

A winery in Hennaya — Algeria

1962: Algerian political independence

Despite all the French-imposed regulations, in 1961

Algeria was still the 4th largest producer (after Italy/

France/Spain) and the world’s largest wine exporter.

In 30 years: The Algerian wine industry collapsedIn 30 years: The Algerian wine industry collapsed

- Loss of skilled labor (900,000 European-Algerians

fled to France)

- Total dependence on France for its wine sales

- Poor management after the nationalization of the

wine sector (uproot vineyards)

A winery in Aïn Kihal — Algeria A winery in Aïn Youcef — Algeria

IV.

The Institutional Legacy of

Algerian Wine

Dellys, Algeria — 2006

European Integration and the

Creation of the EU Wine Policy

• Italy & France produced 96% of the total wine supply

• France’s wine market was highly regulated while

Italy had a more liberal policy regimeItaly had a more liberal policy regime

European integration required the integration of both

policy regimes in one Wine Policy (CMO for wine) →

1970 CMO was a compromise between the positions of

Ita and Fr: no planting rights restrictions/grubbing-up

Wine War

• The 1970 Wine Policy did not solve the problems ofoversupply of French wine

• 1974: Wine War, French growers blocked Italian wineimportsimports

• EEC Council of Ministers in 1976 decided to reformthe Wine Policy (introducing planting rightsrestrictions and subsidies for grubbing-up) → Frenchwine policy as the official European wine policy

The Institutional Legacy

of Algerian Wine

Many elements of the French wine regulations

(triggered by the Algerian wine industry’s spectacular

growth) are still present in the EU Wine Policy today.

• The ban on planting new vines (i.e. the system of

"planting rights" for vineyards) is a core element of

the EU policy to control the EU wine supply.

• The French "quality regulations" form the basis of

today’s well-known Appellations (AOC, DOC…).

Conclusions

• Until 50 years ago Algeria was the largest exporter of

wine in the world and the 4th largest producer.

• Between 1880 and 1930 Algerian wine production

grew dramatically. Equally spectacular is the declinegrew dramatically. Equally spectacular is the decline

of Algerian wine production.

• There was an important bi-directional impact

between developments of the Algerian wine sector

and French regulations.

• Important elements of these regulations are still

present in the European Wine Policy today.

Algerian wine posters, 1830–1962

Source: ENGIVAL (2011).

Main wine Producers and Exporters

Table 1: Main wine Producers and Exporters Production (average annual) 1865-75 1910-14 1961-65 2000-04 1865-75 1910-14 1961-65 2000-04 Million hectoliters Percentage of world production France 55.4 47.5 62.4 53.5 48.8 33.3 23.8 19.3 Italy - 42.3 62.3 49.6 - 29.6 23.7 17.9 Spain 17.1 13.6 26.1 38.4 15.1 9.5 10 13.8 Algeria 0.2 8.1 13.1 0.6 0.2 5.7 5 0.2 World Tot 113.5 142.8 261.9 277.8 100 100 100 100

Exports (average annual) 1909-13 1934-38 1961-65 2000-04 1909-13 1934-38 1961-65 2000-04 Million hectoliters Percentage of world exports France 1.9 0.8 3.7 15.0 12.0 4.3 14.2 22.0 Italy 1.5 1.3 1.7 14.5 9.4 7.0 6.6 21.2 Spain 3.1 0.6 1.9 10.2 18.8 3.0 7.1 15.0 Algeria 6.8 12.9 10.6 0.03 40.9 67.0 40.6 0.1 World Tot 16.5 19.2 26.1 68.2 100 100 100 100

Source: Insee (1951:413*); Pinilla and Ayuda (2002); FAO (2012).

CPI-deflated Wine Prices in France, 1865-1959 (in ancient Francs per hectoliter)

Source: Insee (1935; 1966); Consumer Price Index (1914=100) from Mitchell (1998).