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Evaluation of the CAP measures applicable to the sector

Case study report: – -Roussillon

Written by Agrosynergie EEIG Agrosynergie November – 2018 Groupement Européen d’Intérêt Economique AGRICULTURE AND RURAL DEVELOPMENT

EUROPEAN COMMISSION Directorate-General for Agriculture and Rural Development Directorate C – Strategy, simplification and policy analysis Unit C.4 – Monitoring and Evaluation

E-mail: [email protected]

European Commission B-1049 Brussels

EUROPEAN COMMISSION

Evaluation of the CAP measures applicable to the wine sector Case study report: France – Languedoc-Roussilon

Directorate-General for Agriculture and Rural Development 2018 EN

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LEGAL NOTICE The information and views set out in this report are those of the author(s) and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may be made of the information contained therein.

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Luxembourg: Publications Office of the European Union, 2019

Catalogue number: KF-04-18-986-EN-N ISBN: 978-92-79-97415-1 doi: 10.2762/609285

© European Union, 2018 Reproduction is authorised provided the source is acknowledged.

Images © Agrosynergie, 2018

EEIG AGROSYNERGIE is formed by the following companies:

ORÉADE-BRÈCHE Sarl & COGEA S.r.l. 64 Chemin del prat Via Po 102 31320, Auzeville FRANCE 00198 Roma ITALIE Tel. : + 33 5 61 73 62 62 Tel. : + 39 6 853 73 518 Fax : + 33 5 61 73 62 90 Fax : + 39 6 855 78 65 Email: [email protected] Email: [email protected] Represented by: Represented by: Thierry CLEMENT Francesca ANTILICI

This case study was carried out by the following Oréade-Brèche experts: Alice Devot, Laurence Menet, Juliette Augier, Pierre Milliard, Juliane Papuchon, Alexandre Lyse and Benjamin Berizzi

Table of contents

1. DESCRIPTION OF THE WINE SECTOR IN LANGUEDOC ROUSSILLON ...... 1 1.1 BACKGROUND INFORMATION ...... 1 1.2 STRUCTURE OF THE SECTOR ...... 3 1.3 STATISTICS AT CASE STUDY LEVEL ...... 4

2. THEME 1: NATIONAL SUPPORT PROGRAMMES ...... 7 2.2 EFFECTS ON THE NSP AT THE LEVEL OF GROWERS ...... 10 2.3 EFFECTS OF THE NSP AT THE LEVEL OF PRODUCERS AND PRODUCTS ...... 17 2.4 EFFECTS OF THE PROMOTION MEASURE ...... 26 2.5 EFFECTS OF THE INFORMATION MEASURE ...... 32 2.6 EFFICIENCY OF THE MANAGEMENT OF THE NSP ...... 34 2.7 COHERENCE OF THE NSP ...... 40 2.8 RELEVANCE OF THE NSP ...... 45 2.9 EU ADDED VALUE AND SUBSIDIARITY ...... 49

3. THEME 2: SCHEME OF AUTHORISATIONS OF VINE PLANTINGS ...... 51 3.1 SYNTHESIS OF THE INTERVIEWS ...... 51 3.2 CONCLUSION OF THE EXPERTS ...... 51

4. THEME 3: WINE PRODUCTS DEFINITION, RESTRICTIONS ON OENOLOGICAL PRACTICES AND AUTHORISED WINE VARIETIES ...... 53 4.1 DETAILED DESCRIPTION OF THE IMPLEMENTATION AT MEMBER STATE AND REGIONAL LEVEL ...... 53 4.2 COMPETITIVENESS DISTORTIONS DUE TO SPECIFIC RULES ON OENOLOGICAL PRACTICES ...... 54 4.3 SYNTHESIS OF THE INTERVIEWS ...... 55 4.4 COMMENTS AND CONCLUSIONS OF THE EXPERT ...... 59

5. THEME 4: EU RULES ON LABELLING AND PRESENTATION ...... 60 5.1 DESCRIPTION OF THE LABELLING RULES APPLIED AT MEMBER STATE AND LOCAL LEVEL ...... 60 5.2 EXISTING NATIONAL DATA ON NON-COMPLIANCE WITH LABELLING RULES ...... 61 5.3 SYNTHESIS OF THE INTERVIEWS ...... 62

6. THEME 5: CERTIFICATION PROCEDURES, MONITORING AND CHECKS ...... 66 6.1 DESCRIPTION OF THE LOCAL IMPLEMENTATION OF THE RULES ...... 66 6.2 EXISTING NATIONAL DATA ON NON-COMPLIANCE AND WORKLOAD ...... 70 6.3 SYNTHESIS OF THE INTERVIEWS ...... 70

7. LIST OF THE LITERATURE AND INTERVIEWS ...... 73

ANNEX 1 – DESCRIPTION OF THE NSP MEASURES ...... 75

AGROSYNERGIE – Case study report: France – Languedoc-Roussillon Evaluation of the impact of the CAP measures applicable to the wine sector i

List of tables Table 1: Market shares of wine produced in Languedoc-Roussillon (2016) ...... 4 Table 2: Area in and production in FRANCE ...... 4 Table 3: Area in vineyard and production in LANGUEDOC ROUSSILLON ...... 4 Table 4: Number of wine growers in Languedoc-Roussillon ...... 4 Table 5: Area by (ha) in Languedoc-Roussillon ...... 5 Table 6: Planting rights...... 5 Table 7: Budget allocation per measure on the first three years of the 2014-2018 NSP ...... 7 Table 8: Implementation choices on the promotion measure ...... 7 Table 9: Implementation choices on the restructuring and conversion measure ...... 8 Table 10: Implementation choices on the investment measure ...... 9 Table 11: Wine product covered by the legislation ...... 10 Table 12: Implementation choices on the “by product distillation” measure ...... 10 Table 13: Amount of aid granted per action in France ...... 11 Table 14: List of varieties eligible under the individual restructuring measure ...... 11 Table 15: List of varieties eligible under the collective restructuring plan established in Languedoc- Roussillon ...... 11 Table 16: Volume of wine exported by type of wine products in 2017 ...... 27 Table 17: Value of wine exported by type of wine products in 2017 ...... 27 Table 18: Rate of achievement of the foreseen expenditures per measures ...... 34 Table 19: Quantified objectives set in the draft NSP and monitoring in the implementation report 2016 ...... 34 Table 20: Main criteria/procedure(s) ensuring the relevance of the selected applications ...... 35 Table 21: SWOT analysis of the wine sector in France...... 45 Table 22: SWOT analysis of the LR wine sector ...... 46 Table 23: List of quotas reached for specific Languedoc Roussillon PDO/PGI areas ...... 48 Table 24: Change in production costs of competing between 2008 and 2015 ...... 55 Table 26: National DGCCRF monitoring and checks on wine sector in 2017 ...... 62 Table 25: Types of controls performed by public authorities ...... 68 Table 26: National DGCCRF monitoring and checks on wine sector in 2017 ...... 70 Table 27 : National specific investigation on imported in France, in 2016 and 2017 ...... 70 Table 30: Description of the measures eligible under the National Support Programmes ...... 75

List of figures Figure 1: PDO of the Languedoc and location ...... 2 Figure 2: PGI of the Languedoc and location ...... 2 Figure 3: Evolution of the volume of PDO/PGI wine and overall production in Occitanie ...... 3 Figure 4: Restructured vineyard over the total vineyard area (1977-2017) ...... 12 Figure 5: Type of operations carried out under the collective plans for the two campaigns 2013-2015 in France...... 13 Figure 6: Exports of non PDO/PGI wines ...... 24 Figure 7: Distribution of the support granted for the different types of promotional operations by destination country ...... 29 Figure 8: Example of visual edited by the CIVL under its “Happy Languedoc” campaign ...... 33 Figure 9: Amount of support granted under the restructuring measure...... 39

AGROSYNERGIE – Case study report: France – Languedoc-Roussillon Evaluation of the impact of the CAP measures applicable to the wine sector ii

Glossary

CAP Common Agricultural Policy COMTRADE United Nations International Trade Statistics Database CMEF Common Monitoring and Evaluation Framework CMO Common Market Organisation CN Combined Nomenclature CTR Criterion EAGF European Agricultural Guarantee Fund EAFRD European Agricultural Fund for Rural Development EAV European Union added value EC European Commission EEA European Environment Agency EEC European Economic Community EEIG European economic interest group EQ Evaluation question EU European Union EUROSTAT Statistical Office of the European Commission FADN Farm Accountancy Data Network FAO Food and Agriculture Organization of the United Nations FNVA Farm net value added GATT General Agreement on Tariffs and Trade MIO Million € MS Member State NGO Non-Governmental Organization NSP National Support Programmes OIV International Organisation of Vine and Wine PDO/PGI Protected Designations of Origin (PDO) and Protected Geographical Indications (PGI) PO Producer Organisation PPS Purchasing Power Standard RD Rural Development RDP Rural Development Program RDR Rural Development Regulation SDG Sustainable Development Goals SME Small and Medium Enterprises SO Standard Output SPS Single Payment Scheme SSG Special Agriculture Safeguard SWOT Strengths, Weaknesses, Opportunities, Threats TEU Treaty on the European Union TFEU Treaty on the Functioning of the European Union UAA Utilised Agricultural Area USA United States of America USDA United States Department of Agriculture VAT Value Added Taxes WTO World Trade Organisation

AGROSYNERGIE – Case study report: France – Languedoc-Roussillon Evaluation of the impact of the CAP measures applicable to the wine sector iii

1. DESCRIPTION OF THE WINE SECTOR IN LANGUEDOC ROUSSILLON

1.1 Background information

1.1.1 sector

The French wine sector is very heterogeneous. The numerous stakeholders face different issues given their size, the level of integration of the wine making-process, the region, the type of wine produced. Therefore, the sector is fragmented. There are 21 regional interbranch organisations that represent the different wine- producing regions and are in charge of managing the specifications for the production of PDO/PGI wines from their regions. In France, wine with PDO/PGI represents 95% of the wine production. The national interbranch organisation ANIVIN represents the producers of wine without PDO/PGI. The administrations involved in the sector are: . INAO (National institute for Geographical Indications): it manages the policy of the Ministry as Agriculture as regards quality. It is characterised by its governance composed of both public authorities and professionals. Its missions are to monitor, control, and inform on the PDO/PGI delivrance, to delineate the production area, to promote international cooperation. The regional delegations (National Institute of Origin and Quality) works with ODG (Defence and Management Organisations) in charge of the management, monitoring, control and promotion of the local PGOs/PGIs. . FranceAgriMer: this organisation is in charge of the management of specific agricultural sectors including wine, fruits and fishing. It is governed by a council of representatives of the producers. FranceAgriMer is in charge, by a delegation of the French Ministry of Agriculture, of the design, administration and payment of the NSP as well as of the management of authorisations of plantings (including the granting of authorisation of new planting). FranceAgriMer also has regional delegations, in charge in particular of the management of the investments measure at local level, as well as of the information of local applicants . DGCCRF and DIRECCTE: those services of the ministry of economy (at national and regional level respectively) are in charge of the labelling conformity verification to ensure a clear and sufficient information to the consumers. It has for the litigation management regarding non-complying products as well on the domestic market as the foreign one. The “wine and spirits Brigade” serves that purposes and gives to this actor executive power and allow it to seize the judicial authorities to intervene. The different types of stakeholders of the wine supply chain are also represented under different organisations (the winegrowers, the wine-producers and the brokers). In France, the half of the wine production is made by cooperative. The wholesalers market 60% of the production.

1.1.2 Languedoc-Roussillon

The Languedoc-Roussillon region is located in wine-growing zone C II according to the Appendix I of Regulation (EU) No 1308/2013. In 2016, Languedoc-Roussillon is the first wine region in terms of area (223 700 ha). It represents 33% of the national production. 1 The agriculture in Languedoc-Roussillon is very specific. By comparison to the national average, the distribution of the Utilised Agricultural Area shows the following attributes2: . Permanent crops are 700% higher than the national average ; . Grasslands and fallows are 50 % higher than the national average ; . Other types of crops are far below the national average. In 2015, the share of vineyard represents 26% of the Utilised Agricultural Area3 in the region (233 069 ha over the 882 995 ha of UAA). National average is 4% in 2013.4

1 Les chiffres de la filière viti-vinicole 2006/2016, Données et bilans, Données et bilans de FranceAgriMer, Octobre 2017 2 http://www.stats.environnement.developpement-durable.gouv.fr/portraits/NN_Agriculture_REG91.pdf 3 http://agreste.agriculture.gouv.fr/IMG/pdf/R9115C02.pdf

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 1

1.1.2.1 List of the regional PDO/PGI The following maps represent the different PDO/PGI of the Languedoc. Figure 1: PDO of the Languedoc and location

Figure 2: PGI of the Languedoc and location

4 Nombre d’exploitations, superficie agricole utilisée, volume de travail en UTA et production brute standard en France métropolitaine en 2013, Agreste

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 2

The production of PGI wine is superior to the production of PDO wine in Languedoc Roussillon. Wine without PDO/PGI is not significant. Another specificity of this region is the fact that wine growers produce both PDO and PGI on the same holding. Figure 3: Evolution of the volume of PDO/PGI wine and overall production in Occitanie5

Languedoc-Roussillon offers a multitude of conditions and benefiting from favorable weather conditions. An important restructuring over the last 30 years has fostered a development of Mediterranean grape varieties such as , Mourvèdre or . The vineyard consists of the following grape varieties6:  Red grapes (77% of the vineyard) : Syrah (21%), Grenache (20%), (15%), (15%), (9%), (6%), Mourvedre (3%), (2%).  White grapes : (28%), Sauvignon (15%), à petits grains (10%), Grenache (8%), (8%), Muscat d’Alexandrie (5%), (3%), Macabeu (3%), (3%), (3%) The diversity of and varieties that can be found in Languedoc is also found for the geographical denominations. This part of France thus counts twelve different protected designation of origin knowing that their number varies quickly with the creation of new PDO as well as the modification of others. Among these PDO, those that stand out most structurally and economically are:  PDO Languedoc, formerly Coteaux du Languedoc (PDO since 1985), that includes different denominations.  PDO Corbières (designation since 1985) which is the first in the region in terms of volume in 2015 and surfaces with nearly 132 khl produced (5% of the production of Languedoc PDO).  Faugères PDO is the most valued with a price of € 526.4 / hl in 2015. However, as shown in Figure 3: Evolution of the volume of PDO/PGI wine and overall production in Occitanie, the volume of wine under PGI is more important, notably because of the large volume engaged under the Pays d’Oc protected geographical designation. Pays d’Oc is the 1st French PGI exported and the 1st French PGO sold in France. Its vineyard extends on 120 000 hectares and involves 20 000 winegrowers, that make wine either on their holdings or sell their grapes to cooperatives. PGI wines from Pays d’Oc are mainly wines, made from 58 different varieties7.

5 Occitanie is the new administrative region composed of Midi-Pyrenees and Languedoc-Roussillon. Source : http://www.occitanie.chambre- agriculture.fr/fileadmin/user_upload/National/FAL_commun/publications/Occitanie/agriscopie2016_viticultur ep19.pdf 6 DGDDI extraction CVI 02/2017 7 Extracted the 23/08/18 from https://www.paysdoc-wines.com

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 3

1.2 Structure of the sector

Languedoc Roussillon is the first wine region in France with 19 752 exploitations and 192 286 ha (27% of the total vineyard) in 20108, of which 20 000 ha are irrigated. 9 Table 1: Market shares of wine produced in Languedoc-Roussillon (2016)

2012 2013 2014 2015 Volume 9.9% 9.7% 10.9% 10.9% PDO Value 4.2% 4.3% 5.2% 5.3% Volume 73% 73% 77% 75% PGI Value 73% 72% 76% 74% Source : Customs data

1.3 Statistics at Case study level

Area in vineyard and volume produced In Languedoc-Roussillon, the overall area in vineyard represents 223 651 ha in 2016, of which 63% is dedicated to the PGI (141 754 ha) and 32% to the PDO wine production (70 671 ha). The PGI areas have been increasing between 2012 and 2016, to the detriment of areas without PDO/PGI. The volume produced is stable over the 2012-2016 period. Only the volume under PGI varied from one year to another, between 8.6 and 9.4 million hL. Table 2: Area in vineyard and production in FRANCE 2012 2013 2014 2015 2016 Total Vineyard area (ha) 754 853 755 249 752 199 747 507 754 473 Production (000 hl) 34 300 33 829 37 351 37 429 36 752 PDO Vineyard area (ha) 447 744 447 162 444 111 441 200 446 588 Production (000 hl) 19 754 18 764 22 012 21 453 21 264 PGI Vineyard area (ha) 191 626 192 470 193 284 195 280 196 749 Production (000 hl) 12 077 12 589 12 730 13 212 12 818 Wine without PDO/PGI Vineyard area (ha) 40 488 40 491 39 455 35 631 35 433 Production (000 hl) 2 469 2 476 2 447 2 573 2 474 *For production: since April 2016, wine industries are taken into account in addition to harvesting . Sources: French customs (DGDDI)

Table 3: Area in vineyard and production in LANGUEDOC ROUSSILLON 2012 2013 2014 2015 2016 Total Vineyard area (ha) 221 779 223 049 222 264 223 978 223 651 Production ( 000 hl) 12 056 13 305 12 443 13 339 12 105 PDO Vineyard area (ha) 70 565 70 143 69 348 69 775 70 671 Production ( 000 hl) 2 555 2 545 2 706 2 763 2 577 PGI Vineyard area (ha) 137 066 135 581 137 665 140 764 141 754 Production (000 hl) 8 617 9 303 8 660 9 417 8 735 Wine without PDO/PGI Vineyard area (ha) 14 159 17 325 15 252 13 440 11 226 Production ( 000 hl) 883 1 456 1 077 1 159 794 *For production: since April 2016, wine industries are taken into account in addition to harvesting wineries. Sources: French customs (DGDDI)

Number of grower and producers

8 FranceAgriMer, SSP_RA_2010 9 http://draaf.occitanie.agriculture.gouv.fr/L-irrigation-contribue-a-18-de-la,2575

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 4

In Languedoc-Roussillon, the number of growers has registered fluctuations from one year to another according to the Eurostat data. It was 18 190 in 2010 (of which 13 621 growing wine under PGI), reached a peak in 2015 with 20 304 and then decrease to 16 630 in 2016.

Table 4: Number of wine growers in Languedoc-Roussillon 2010 2013 2014 2015 2016 Total 18190 16440 n.a 20304 16630 Of which PDO 7129 n.a n.a 11847 n.a Of which PGI 13621 n.a n.a 18629 n.a Sources: Eurostat Area by variety The area per variety is available since 2014. In Languedoc-Roussillon, the four main varieties grown are red grapes: Syrah, Grenache, Carignan and Merlot. It is interesting to notice that almost all varieties have registered a decrease in area in 2015 that was fully recovered in 2016. In most of the cases, the area in 2016 was even higher than it was in 2014. Syrah, Grenache, Merlot, Cinsault and Marselan registered an increase in area between 2014 and 2016. White grapes are cultivated to a smaller extent. International varieties such as Chardonnay and Sauvignon are those with the largest areas. They have registered an increase in areas, notably the Chardonnay. Other white grapes in expansion are Vermentino and Colombard, although cultivated on very limited areas. Table 5: Area by variety (ha) in Languedoc-Roussillon 2012 2013 2014 2015 2016 Syrah N n.a n.a 40105 38892 41471 + Grenache N n.a n.a 38360 36824 40539 ++ Carignan N n.a n.a 29947 24988 29997 / Merlot N n.a n.a 28183 27691 29712 + Cabernet Sauvignon N n.a n.a 16474 15771 16866 / Cinsault N n.a n.a 10263 9785 11957 + Mourvedre N n.a n.a 5135 4990 5295 / Marselan N n.a n.a 3226 3592 4466 + Chardonnay B n.a n.a 14405 14733 16683 ++ Sauvignon B n.a n.a 8483 8490 9080 + Muscat a petits grains B n.a n.a 5764 5551 5993 / Grenache B n.a n.a 4102 3934 4654 + Viognier B n.a n.a 4123 4241 4530 + Muscat d’Alexandrie B n.a n.a 2599 2510 2692 + Vermentino B n.a n.a 1647 1742 2012 ++ Macabeu B n.a n.a 1974 1696 1991 / Piquepoul B n.a n.a 1623 1649 1774 + Colombard B n.a n.a 1257 1329 1609 ++ Sources: DGDDI & Eurostat

Authorisations of new plantings In Languedoc-Roussillon, the demands for authorisations of new plantings did not reach the limitation set at regional level. The winegrowers are not looking for additional areas. They are rather focusing on how to restructure their vineyard to adapt their production to the market demand. Table 6: Planting rights Number of Area converted to Area in 2017 beneficiaries authorisation of new planting PDO 101 95 983 PGI 234 382 1639

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 5

Number of Area converted to Area in 2017 beneficiaries authorisation of new planting Wine without GI 12 11 36 Sources: DG Agri, based on data from FranceAgriMer

Industry structure in Languedoc-Roussillon10 The wine production in Languedoc-Roussillon has been historically made by large cooperatives that provided the market with significant volume of wine. However, the decrease of the consumption and the increasing demand for quality wine have led the sector to restructure. Consequently, the volume produced dropped, from 30 Mhl in the 70’s to 10 Mhl today. At the same time, the sector became more concentrate: producing facilities gathered and their number decreased. Currently, despite the trend of producers investing in wine-making units to produce their own wine on their holding, two types of cooperatives remain in Languedoc-Roussillon: - Large structures focusing on the volume produced, to provide significant customers in France and abroad. - Smaller structures with higher flexibility and capacity to innovate, able to produce wine with different features and to offer specific products adapted to the various market segments.

10 Information collected from the interview with the representative of a significant PGI of the region.

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 6

2. THEME 1: NATIONAL SUPPORT PROGRAMMES

2.1.1 Financial allocation

On the 20014-2018 programming period, France has implemented 6 measures: Information, Promotion, Restructuration, Investment, By-product distillation. Table 7: Budget allocation per measure on the first three years of the 2014-2018 NSP

Measure 2013-2014 2014-2015 2015-2016

Restructuring and conversion of (Art. 46) 102 100.6 106.9

Promotion (Art. 45) 45.3 45 41.4

Investment (Art. 50) 106.3 102.5 103.3

Information (Art. 72) - - 0.7

By product distillation (Art. 52) 29.1 34.3 33.2 Source : FranceAgriMer

2.1.2 Promotion on third countries measure

This measure is a part of the aid program. The general objectives pursued: improve competitiveness of French wines, and quality and notoriety image development. To achieve this goal, specific objectives aim to consolidate and improve French wines, Protected Designation of Origin, Protected Geographical Indication or the non PDO/PGI wines with variety mention, in the third countries and to allow French beneficiaries - company or interbranch - to improve their knowledge of the third countries market. To this purpose, operational objectives are targeted on the development of public relation events and media relations, promotion, advertising, international exhibition and trade fairs participation realised by French beneficiaries at international level, besides European Union as well as economical information, techniques and marketing acquisition on export market and evaluation of the action of promotion and information. It is a question to intervening on a sufficient number of third countries disposing of export opportunities and to consolidate or increase wine exportation toward those countries. Table 8: Implementation choices on the promotion measure

Expenditures of less than € 100 are not eligible, except for expenses related to travel expenses, personnel costs and valuated samples. And the total amount of the estimated expenses composing the assisted Type of aid and rate of operation must be greater than € 10,000 excluding tax. support European participation does not exceed 50% of the amount of eligible expenditure. The rate can be adjusted downwards according to the envelope of the call for projects and priority criteria. - Private companies mainly operating in the wine sector, - professional organisations, Beneficiaries - wine producer’s organisations, wine producer’s organisation associations, - temporary or permanent wine producer’s associations or interbranch organisation of the wine sector. - the operations and their constituent actions are clearly defined: they describe the promotional activities, the mention of the products concerned by the action including the estimated amount of the corresponding costs - the assurance that the proposed cost of the action is not higher than the normal price of the market; - the assurance that beneficiaries have sufficient technical capacity to cope with the specific constraints of trade with third countries, as well as the resources needed to ensure that action Eligibility and selection is implemented in the most effective way possible; criteria - the beneficiaries demonstrate that the availability of products, in both quality and quantity, will be sufficient to meet long-term market demand after the end of the promotion; - the consistency of the proposed strategies with the objectives set and the foreseeable impact on the growth of the demand for the products concerned. Public law bodies are not eligible for the present measure. To be eligible, an operation must present all the information necessary to evaluate its eligibility. Failure to meet one of the five eligibility criteria leads to rejection of the transaction. Transactions are carried out between January 1st and December 31st of the year following that of the aid Implementation period application. Each operation covers a period of one year. Aid for an operation can be extended once for a maximum of two years or twice for a maximum of one year for each extension.

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 7

Priority criteria Respective weighting Recipients unaided in the past 2 Beneficiaries helped in the past and proposing a new country 2 Information regarding the Beneficiaries assisted in the past proposing the continuation of their 1 management of the operation for the same country measure At the end of the closing of the call for projects, FranceAgriMer examines all the aid applications against the eligibility criteria. At the time of this instruction, FranceAgriMer carries out a rating of the operations with regard to the priority criteria to establish a classification of the requests for aid.

2.1.3 Restructuring and conversion measure

The general objective pursued in the scope of this measure is to improve competitiveness of French wine producers. To achieve this goal, specific objectives aimed to facilitate tool production adaption to the market expectations and to competition conditions, in particular at international level. The measure must enable the structure, grape varieties planting, or the driving mode to change, with a declension of the measure for each vineyard area. For this purpose, the operational objectives are declined as: . Vineyard adaptation to specifications - in particular with Geographical Indication – implementation of product quality improvement or as an answer to sellers. . Vineyard replanting enabling to supply wines matching the market demand identified by producers. . Wine competitive factors improvement, in particular cost production reduction and adaptation to climate change effects. To achieve those goals are particularly encourage: . Vineyard collective restructuration, since it spurs the sector to continue its organisation efforts on the collective strategies definition. It is realised by wine growers around a collective structure proposing a collective plan orientation for a vineyard area. Each plan develops a strategy and is subject to validation at the given vineyard area level. The collective restructuration plan is pluriannual and compels the wine grower to commit in terms of surface to restructure on a duration of three campaigns (with an estimated distribution by year) . Vineyard restructuration by young wine growers installing or applicant of less than 40 years old who previously benefited of the support to installation support to ensure the continuation of those holdings. Table 9: Implementation choices on the restructuring and conversion measure

The total amount of aid may not exceed 50% of the actual costs of the restructuring and 100% of the lost Type of aid and rate of revenue. support The amount of the aid for the costs involved in the restructuring is calculated on the basis of a standard scale of unit costs established following a study carried out by an independent body of FranceAgriMer. Beneficiaries The wine growers as natural or legal person enrolled to the computerized vineyard register. - the detailed description of the proposed actions; - the proposed deadlines for the implementation of the actions: except in case of force majeure, Eligibility and selection the actions must be carried out during the wine year1 N-1 / N or during the wine-growing year criteria N / N + 1 for grubbing-up whose prior application was filed in the N-1 / N campaign; - the areas concerned for each operation. The operations are carried out during the viticultural campaign of the aid request. Each operation covers a Implementation period period of one year (call for projects in autumn and realization in the following spring).

No priority criterion within the meaning of the Delegated Regulation is retained. The request for restructuring aid is submitted by teleprocedure to the FranceAgriMer training services by the beneficiary at the end of the N-1 year. Information regarding the management of the Whatever the chosen restructuring modality (collective or individual), the application submitted for the measure restructuring assistance campaign N-1 / N must contain the information necessary to instruct: - the eligibility of the beneficiary; - eligibility criteria; - the eligibility of the costs presented.

AGROSYNERGIE - Case study report: France – Languedoc-Roussillon Evaluation study of the impact of the CAP measures applicable to the wine sector 8

2.1.4 Investment measure

The objective of this measure is to enable the wine sector companies face competition on the global markets through tool production optimisation and elaboration conditions and wines market entry, and supply adaptation to match market demand. Besides priority is given to operations: . Carried out in favour of environment . Enhancing new vine growers’ installation . Presenting a specific economic impact on the sector . Participating to the restructuring of the sector. Table 10: Implementation choices on the investment measure

Type of aid and rate of The aid is granted in the form of a grant. In the general case, the aid rate is 30% maximum of the eligible support expenditure (15% for intermediate companies and 7.5% for large companies). - wine-growing enterprises regardless of their legal form (individual or company) producing or marketing the products referred to in Annex VII, Part II of Council Regulation (EU) No 1308/2013, (cf. Table 11 below) Beneficiaries - wine producer organizations, - associations producers or interbranch organizations, carrying out a production, processing, packaging or marketing operation in the wine sector. - the operations and actions constituting them are clearly defined; they describe the investment actions, including the estimated amount of the corresponding costs; - the request ensures that the costs of the proposed action do not exceed the normal market price; - the application ensures that the beneficiaries have access to sufficient technical and financial resources to ensure that the operation is implemented effectively and that the company which Eligibility and selection has submitted an aid application is not in difficulty within the meaning of the third criteria subparagraph of Article 50 (2) of Regulation (EU) No 1308/2013; - the application makes it possible to analyze the consistency of the proposed strategies with the objectives set and the foreseeable impact in terms of improving the overall performance of the processing and marketing facilities, their adaptation to market demands, and increasing their competitiveness. The transaction must present all the information required to assess eligibility. Failure to meet one of the four eligibility criteria leads to rejection of the transaction. The measure operates by periods of opening calls for projects, with an allocated budget, within the Implementation period framework of a mandatory teleprocedure. To guarantee the reasonable costs of expenses reimbursed on the basis of supporting documents, the eligible expenses are subject to a ceiling, a comparison on the basis of a reference grid, or the submission of several quotes.

Priority criteria Weighting on 20 Investments that can have positive effects in terms of energy savings, 12 overall energy efficiency and environmentally sustainable processes. Information regarding the New installed 3 management of the Material with specific economic impact for the sector 4 measure Collective operation, restructuring of the company, creation of a union 1 or operation with a village exit When the beneficiary has carried out one of the following operations in the 12 months preceding the submission of the aid application, he obtains a point of priority. Transactions are rated on 20 points according to priority criteria mentioned above. They are then ranked according to the total score obtained and are selected in descending order of note until the allocated envelope is exhausted.

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Table 11: Wine product covered by the legislation

Source: REGULATION (EC) No 1234/2007

2.1.5 By product distillation

The general objective of the support for the distillation of by-products of is to preserve the quality of the wines by avoiding the overpressure of the grapes and to limit the environmental pressure which would result from the spreading of by-products. Ultimately, the success of the measure is based on the maintenance of distillation tools near the winemaking centers. The measure therefore has the operational objective of preserving the distilleries network by offsetting the costs borne by the distillers for carrying out this service of general interest. Table 12: Implementation choices on the “by product distillation” measure

The aid consists of two components: an amount to offset the costs of by-product collection and an amount to offset the costs of processing the by-products. When the by-products are delivered by the producer, the Type of aid and rate of amount intended for collection is returned to the producer; support The maximum authorised rate of aid is paid to the distiller as: - Collection and transformation of pomaces: 1.1 €/%vol/hl - Collection and transformation of lees: 1.1 €/% vol/hl - Distillers processing the by-products of vinification delivered for distillation into crude alcohol with an alcoholic strength of not less than 92% vol and which may be used exclusively for Beneficiaries industrial or energy purposes. - Distillers who wish to benefit from this aid must be certified by FranceAgriMer before any distillation operation. Aid applications are eligible when they meet the following objectives: Eligibility and selection - the aid is paid for alcohol derived from the distillation of wine-by-products and having an criteria alcoholic strength of not less than 92% vol; - the products of distillation are used exclusively for industrial or energy purposes. Implementation period For operations of up to 5 million euros in aid and benefiting from an advance, the beneficiary must send to Information regarding the FranceAgriMer by 15 November of the year in which an advance has been paid, a summary statement of management of the the invoices paid on 15 October of the year in question, in accordance with the model of the payment measure request (template available on the FranceAgriMer website) and signed by the beneficiary.

2.2 Effects on the NSP at the level of growers

2.2.1 Information on the implementation of the restructuring and conversion measure

The following table shows the detailed implementation data at national level. Table 13: Amount of aid granted per action in France

Collective restructuration Individual restructuration Action Individual restructuration collective (collective plan) for young growers (YG) included YG

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Collective restructuration Individual restructuration Action Individual restructuration collective (collective plan) for young growers (YG) included YG

Plantation 4 800 4 800 4 800

Grubbing up 300 300 300

Trellising 1 900 1 900 1 900

Irrigation device Installation 800 800 800

Compensation for loss of earnings 1 000 2 000 4 500

Maximum total amount 8 800 9 800 12 300 (in euros/ha) Source: FranceAgriMer, 2018

However, it is important to precise that the eligible for support differ from a wine basin to another. Moreover, the list also varies if the beneficiary applies under a collective plan or individually. The following list describes the grape varieties that can be planted and are eligible under the individual restructuring measure at regional level. Table 14: List of varieties eligible under the individual restructuring measure

Grey grape grape White grape varieties Red Grape varieties varieties varieties ; Alvarinho; Aranel; Arriloba; Alicante henri bouschet ; Arinarnoa ; ; Arvine; ; Carignan Blanc ; Brun argenté ; Carbernet franc ; Carbernet- ; Chardonnay ; ; Chenin ; sauvignon ; Cabestrel; Calabrese; ; Carignan; Clairette ; Clarin ; Colombard ; Carmenère; Castets ; Chenanson ; Cinsault ; Cot ; ; ; Counoise ; Couston ; ; Egiodola ; Ekigaina; Liliorila ; Bacabeu ; ; Grenache Gris Gewurztraminer, ; Ferradou ; Gamaret ; de bouze ; Gamay ; Muscat à petits grains ; Mauzac rose, de chaudenay; gamay; Ganson ; Gramon ; Grenache ; muscat d’Alexandrie ; Sauvignon Gris, muscat à petit Jurançon Noir ; ; Lledoner pelut ; Marselan ; ; parrellada ; perdea ; ; Rivairenc gris, grains ; Merlot ; Mondeuse ; Monerac ; Morrastel ; ; piquepoul blanc ; gris Mourvèdre ; Muscat de Hambourg ; Négrette ; ; Rivairenc blanc ; ; ; ; ; ; sauvignon ; Semillon ; sylvaner ; Piquepoul Noir ; Plant de Brunel ; Portan; Primitivo ; ; ; ugni blanc ; Rivairenc ; ; Segalin ; Semebat ; Syrah ; ; vermentino ; viognier ; ; ;

Source : INTV-GPASV-2017-2811 The following list refers to the grape varieties eligible under the collective restructuring plan established in Languedoc-Roussillon. Table 15: List of varieties eligible under the collective restructuring plan established in Languedoc-Roussillon

White grape varieties Red grape varieties Cabernet Sauvignon Chardonnay Cinsault Grenache Blanc Cot Marsanne Grenache Gris Muscat à petit grains Grenache Noir Roussanne Marselan Merlot Vermentino Mourvèdre Viognier Niellucio Pinot Noir Syrah Source : INTV-GPASV-2015-5712

11 Décision relative aux modalités d’octroi de l’aide à la restructuration et à la reconversion du vignoble pour la campagne 2016-2017 en application du programme d'aide national de l’OCM vitivinicole 2014-2018

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In Languedoc-Roussillon, an important share of the vineyard has undergone a restructuring. The figure hereunder shows that, when the overall vineyard surface were decreasing, the restructuring share was progressively increasing. In 2017, 212 000 ha had been restructured, over 233 000 ha of vineyard, i.e. 90% of the vineyard. Figure 4: Restructured vineyard over the total vineyard area (1977-2017)

Source: FranceAgriMer

2.2.2 Information from the literature

The implementation report 2016 presents a lot of information on the implementation of the restructuring and conversion measure. Specific information was collected through a survey to all the beneficiaries of the 2013-14 and 2014-15 campaigns. The information collected covers in particular: - The type of operation supported - The main objectives pursued by beneficiaries in mobilizing the support - Repartition by region - The repartition of the support by type of operation in the PDO area and outside of this area: in the PDO area, a change of density and tillage are the mains supported actions, followed by conversion. Out of those area, conversion is the most frequent type of operation supported, followed change of density. Besides irrigation is most often implemented in those area.

In France, during the first two campaigns of the national aid program, the plantations under the collective plans represent an accumulated area of 18 414 hectares (nearly 70% of the areas assisted under the restructuring measure). 9 624 hectares were restructured as part of collective operations during the 2013/2014 campaign and 8 790 hectares during the 2014/2015 campaign. During both campaigns, the collective restructuring actions are distributed as shown in the figure below. For each campaign, the restructuring operations with an objective of improving the management techniques in the vineyard represent 57 to 58 % of the total areas engaged under the restructuring measure. Then, varietal reconversion to adapt the vineyard to the market demand represents 35 to 36 % of these areas.

12 Décision relative aux agréments du plan collectif de restructuration du vignoble du bassin viticole Languedoc-Roussillon et de son porteur de projet et aux critères d’éligibilité et de priorité pour ce plan déposé en application du programme d’aide national de l’OCM vitivinicole 2014-2018 pour les campagnes 2015-2016 à 2017-2018.

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Figure 5: Type of operations carried out under the collective plans for the two campaigns 2013-2015 in France

Source: Implementation report of the French National Support Programme, 2016

2.2.3 Synthesis of the interviews

IQ 1.1 To what extent did the restructuring and conversion operations supported by the NSP impact the production potential of vineyards, in terms of quantity? In terms of quality? at the level of the region / of the Member State? . At national level The NSP management services at national level mentioned that the restructuring measure supported in particular the installation of irrigation systems which may have impacted the production potential, but the impact on production haven’t been quantified. Regarding conversion, the measure supported conversion toward a large range of varieties, including both low and highly productive varieties. Hence they have no evidence that the operation supported under the NSP have increased production potential in terms of quantity. Regarding quality, from the administrators’ point of view, the operations supported by the measure generally did not result in a change from non PDO-PGI vineyards to certified vineyards. The main objective of conversion has actually been to adapt to the demand of the market (see IQ1.5). . At regional level The grubbing-up scheme in force until 2011 has resulted in a significant decrease of the vineyard area in Languedoc-Roussillon. One of the issues of wine growing is to maintain the above a minimum threshold in order to ensure the profitability of the production. The restructuring measure can help to overcome this issue by ensuring a minimum yield and profitability of the production, notably through the introduction of the irrigation. Thus, the restructuring measure might have an impact on the quantity produced. The restructuring of the vineyard might also have an effect on quantity through the introduction of trellis systems that increase the productivity through the use of agricultural machineries. Moreover, this measure, via planting adapted grape varieties to climate change, indirectly allow an increase of the volume of grape produced. Then, the volume produced is fostered by the restructuring of the sector. Indeed, the regional managing authority indicated that the volume produced for varietal wines were achieved thanks to the restructuring measure. This is particularly important for the region since the main PGI Pays d’Oc is mainly known for its volume of production that reaches 6 million of hectolitres. It is the larger PGI in the world. In terms of quality, the restructuring measure has mainly been used across the years to plant international trending grape varieties, to adapt to consumer’s demand. Hence, in Languedoc Roussillon, this measure has been used to plant Grenache, Syrah, Cabernet Sauvignon, Merlot, Chardonnay. N.B: and according to the regional managing unit, had different strategic approaches developing their local grape varieties. Traditional grape varieties (Cinsault and Carignan) were also planted back as they are of quality and adapted to climate change. Then, in order to develop new wine products and extend their offer, the producers implemented the restructuring measure in synergy with the investment measure allowing the producers to adapt their production unit to white wines and rosé of better quality. Investment measure was used to modernize the production chain of wine allowing the development of cooling systems and other specific equipment necessary for the production of these wines.

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IQ 1.2 Did the NSP measures intend to support changes in the vineyard management practices or foster specific practices (i.e. organic agriculture, low mechanised systems, etc.)? . At national level From the point of view the managers of the NSP at national level, the measure had no objective to foster any specific practice. While the environmental aspect have been a priority criteria for the selection of application from support to investments (Measure 3), this aspect haven’t been taken into account in the selection of applications for restructuring and conversion. However, environmental compliance (e.g. Water directive, cross- compliance, etc.) are checked by other administrations. . At regional level At regional level, the managing authority indicates that the management practices have been evolving and it is important to enable the vineyard to adapt to these changes. The restructuring measure enables the producers to change their practices by changing the density of vineyard, tying up vines and install irrigation system. Indeed, in Languedoc-Roussillon, the lack of water is a growing issue that different areas must face: Pyrénées- Orientales, Corbières and Minervois. Then, to strengthen the wine growers and adapt the vineyards to the threat of climate change, the restructuring measure supports the introduction of Spanish, Greek and Portugese varieties that are more resistant. However, it is possible for wine growers to introduce these varieties only for production without PDO. Premium are granted for the use of such varieties. The managing authority also inform that the restructuring measure enabled to introduce varieties that enable to reduce the use of pesticides by 80%. These varieties are eligible to the restructuring support and contribute to reach environmental and economic objectives, since the reduction of treatments also reduces the costs of production.

IQ 1.3 To what extent did the NSP resulted in changes in the management practices of vineyards? Which practices were introduced/abandoned? Did those changes have an impact at national or regional level (e.g. acting as role model)? Given that support to investments have been focused on production, no direct effect of the NSP on the management practices of vineyards was observed. Nevertheless: . At national level The NSP management services mentioned that the restructuring measure have to a certain extent facilitated the adaptation of the vineyard structure to better manage problems related to disease or to the drought (e.g. management enabling a better aeration / protection of the vineyard, cover crop). It was also mentioned by the administration and one representative of the sector that the introduction of grape varieties resistant to diseases and/or drought may be expected to contribute to a reduction of the use of pesticides and water. The Ministry of Agriculture confirmed that an interesting share of the projects of restructuring & conversion include an environmental objective. . At regional level No specific mention of management practices introduced or abandoned were mentioned during the interview. The NSP had an impact on the type of grape varieties produced, however, the management practices mainly rely on the AOP/IGP specifications. The restructuring measure supported the implementation of trellis systems allowing the use of agricultural machineries. One can deduce that support under this measure may have had an effect on the management practices. One growers explained that theoretically, the restructuring measure supports wine growers to set up an irrigation system. However, this operation is supported only if winegrowers have a water collection point nearby. One of the main issues in the Languedoc-Roussillon is the water scarcity. Very few wine-growers could benefit from this operation. The Restructuring measure did not have a significant impact on the management practices of vineyards and was mainly used to plant more adapted grape varieties and/or to adapt the density to the specifications of PDO/PGIs. As opposed to the statement of the managing authority, another producer highlights that the varieties eligible to the restructuring aid are not those requiring no phytosanitary treatments that could contribute to climate change mitigation reducing the management practices to basic seasonal practices on the vines and land.

IQ.1.4 Have the NSP measures impacted the costs of production?

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. At national level The NSP management services consider that the programme have had a very positive impact on the cost of production as well as on the revenue of growers. . At regional level The managing authorities at regional level think that the restructuring measure can impact significantly the yield and enable the winegrowers to optimise their production system, adapting the density to enable the use of machinery. These changes must positively impact the production costs. However, one producer underlines that the main cost is the labour. The specifications from the PDO/PGI are very constraining and induces the employment of specialised workers for certain tasks. The NSP measures won’t impact labour costs. IQ.1.5 Have the NSP measures resulted in a better adaptation of the vineyards structure and management practices to market demands? E.g. in terms of variety, quality. . At national level The NSP managing authority explained that the general objective of the conversion measure is to support a better adaptation of the vineyard to the market demands without targeting any specific variety, in order to “support the diversity” of varieties and products in the Member State. Hence the impact in terms of quality cannot be assessed. . At regional level According to the regional unit of the managing authority, one of the objective of the restructuring and conversion measure is to enable the conversion of vineyards by plantings different varieties adapted to the different markets. Market demand is directly taken into account to set up the list of grape varieties eligible for vineyards restructuring. The LR region used to produce great quantity of wine of little quality in the middle of the 20th century. Since 70’s, the main goal of the sector in the region was to produce less quantity of better quality to adapt to market demand. That’s why the grubbing-up premiums were widely used to reduce the areas planted in vines whereas the restructuring measure helped to remove traditional grape varieties such as Cinsault and Carignan to plant Merlot, Cabernet Sauvignon and other international grape varieties more trending and renowned by that time. The collective restructuring plan implemented in the region aims at supporting varieties addressed to mass market that may be less profitable, that is why the premium granted to the producers is higher under the collective restructuring plan than the individual measure. The regional collective plans are set up by committee composed of producers, cooperatives and other regional stakeholders that draw the strategy to be implemented in their region. This scheme enables cooperation and coordination of the restructuring operations implemented in the region. The Languedoc-Roussillon region is very typical as regards the extent of the grape varieties cultivated, which is significant. The diversity of and the large number of producers contribute to the capacity of the region to offer a large category of products to answer the demand of the different market segments. Notably, specific varieties have been planted to access export markets. The varietal conversion is of two types in the region: - One aims at targeting international market by planting Grenache, Syrah, Cabernet-Sauvignon, Cinsault. This strategy is generally implemented by producers under the PGI “Pays d’Oc” in low lands and low hills. It represents 50% of the production and international varieties occupy up to 60% of the areas. - The other looks at reintroducing traditional varieties that are very specific of the region and better adapted to the climatic conditions, such as Carignan and Cinsault. Currently, 30% of the vineyard is cultivated with PDO. The specifications required for this type of production don’t allow the producers to be innovative. On the opposite, the PGI gives more flexibility and allows the producers to plant more resistant varieties. Used together, the investments and restructuring supports contributed to raise the international reputation of white and rosé wines produced in Languedoc-Roussillon, as quality products. Notably, the “Chardonnet du Languedoc” has seen its notoriety growing on global market. The share of white varieties has been increasing due to the progress achieved in the equipment, mainly thanks to the investment support. Investments made really enabled to improve the quality of wine by improving the technology, the aeration and investing in quality vats. According to winegrowers and producers, the NSP is a necessary tool to adapt the vineyards structure and management practices to market demand. However, all interviewees pointed out the high level of complexity in the application process. Moreover, some stakeholders did not understand why some supporting documents were required.

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IQ 1.6 Have the NSP measures had an impact on the income of wine growers? The following answers concern the effect of the NSP as a whole. The simple effect of the restructuring and conversion measure on growers could not be distinguished. . At national level The NSP is generally perceived as positive. See IQ 1.4. . At regional level According to the managing authority at regional level, there is a minimum price to be perceived by the wine growers producing PGI and Pays d’Oc, for the production to be profitable: it is 4000€/ha. However, it is not possible to assess to what extent the restructuring measure helped the producers to achieve this threshold. Then, the NSP has allowed the winegrowers to adapt to market demand and hence had an impact on the income of wine growers. However, it is important to understand that the NSP was conceived as a tool to support the winegrowers’ development plans and not a vital support for the survival of the activity in the region. As regards the beneficiaries, they think that the NSP support is a substantial amount of money that can help to develop their projects, but it is not considered as an additional income.

2.2.4 Conclusion of the expert

Crossing the information collected in the interviews, please provide your conclusion on the: . Impact of the NSP on the production potential in terms of quantity and quality In terms of quality, the NSP has a great impact on the grape varieties cultivated in the region. According to the stakeholders, the grubbing-up of traditional grape varieties to plant international trending ones was consequent in the region. Thanks to the NSP, investments in cooling machineries allowed growers to produce rosé and white wines of great quality that wouldn’t be if they had not invested in these machineries. In terms of quantity, the NSP had no impact on the production potential. Indeed, the quantity produced on the field greatly depends on the AOP and IGP specifications that are quite restrictive concerning the density of vines per hectare, the number of vine shoots remaining after , etc.

. Impact of the NSP on the vineyard management practices The NSP encourages the introduction of improved vineyard management practices. The main changes in management practices consisted in changing gobelet-trained vines into trellis-trained vines, allowing access to agricultural machineries. There were opposite views between the managing authority and the winegrowers as regards the eligibility of resistant varieties that would encourage a reduction of the chemicals inputs used. Whereas the managing authority explained that such varieties have been made available in the frame of the reconversion support to enable changes in management practices and adaptation to climate changes (these varieties being more resistant to the drought), the producers interviewed often regretted that the resistant varieties they were willing to grow were not eligible.

. Impact of the NSP on the competitiveness of wine growers The NSP support had an impact on the competitiveness of wine growers helping them to grow grape varieties internationally renowned and to invest in machineries for a production of a better wine quality. Theoretically, the implementation of irrigation systems or the introduction of machineries should have contributed to the improvement of the managing practices, however it was not possible to assess whether this has really led to a reduction in production costs. However, all the wine growers complained of the over control of the activities supported by the NSP. There are too many controls made by too many different bodies. Several winegrowers mentioned that the control bodies were going too far in the control procedures and were only trying to find a mistake to take back the money granted. Winegrowers do not understand the multiple controls due to few scammers. Moreover, controls are carried out by different stakeholders having different objectives and calculating the areas engaged differently. For efficiency purposes, harmonisation in the controls and the methods of calculation should be carried out.

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2.3 Effects of the NSP at the level of producers and products

2.3.1 Effects on the competitiveness key factors of wine producers

2.3.1.1 Synthesis of the interviews IQ 1.7 Could you please explain what are the current issues encountered by the wine sector in your Member States /region and describe the strategies implemented by the wine producers to address them? . At national level: According to the national authorities, the wine market is experiencing increasing competition and globalisation. Many changes are happening, relating to the number of consumers, the markets structure, the consumers’ taste, etc. The issue for EU wine producers is to secure their place on global market, while keeping opening new markets abroad. This is why the promotion support is important: without support for 5 years, an operator may lose a market due to all these changes. The objective of the NSP is to improve the competitiveness of French wine producers on domestic markets and to enable them to cope with the challenges of exports development. That is why the NSP support investment to improve the production, thus reducing the production costs and/or increasing the quality. Indeed, to increase their competitiveness, the operators need to decrease their prices or increase their margin. The decrease of production costs is particularly strategic in the case of PDO/PGI winegrowers that prevent growers to benefit from higher yields. To improve the quality, the issue is to introduce technical changes to the vineyards’ practices (trellising, irrigation system, etc.). This will also help producers to better cope with climatic issues (i.e. drought). Therefore, it is important for a producer to know its market(s) and understand the expectations of the consumers, so as to valorise its products. However, when winegrowers/producers sell to a cooperative or a broker exclusively, they don’t have access to the end consumers and this may hinder their knowledge of the market. The investment measure has enabled winegrowers to produce wine on their holding by investing in wine-making equipment. This is positive from the point of view of national authorities since it enabled them to better valorise their production. Similarly, some wine traders invested in wine-making units, notably in Burgundy and Bordelais. These large operators are important for the wine sector because their large size allow them to conquer new markets. Finally, the authorities also mentioned that the risk of frauds in the wine sector is significant. This is particularly true given the importance of the sector for the exports (the wine products are the second main important exportations in France, just after the aircraft industry). The foreign importing countries are requiring certificates and guarantees (USA and notably). Their already were cases of frauds, to supply foreign demand for French wines of high notoriety when the production was particularly low for climatic reasons. According to the representatives of the sector, the wine producers and traders have to face high costs for the marketing of their products on foreign markets (distribution and listing costs). Indeed, given the decrease in the consumption of wine in France (-70% over 60 years), the potential for growth is on global market, especially in North America and Asia (China and South-East Asia). Costs to sell abroad are high: they represent up to 50% of the costs for a famous brand of (Moet & Chandon). As a result, only producers able to invest in these costs can conquer foreign markets, and it is pointless to support small companies that could not face them over the 5-years period of support. Only the companies that have spontaneously decided to conquer foreign markets because they can “afford” it should be supported. The increasing demand for green, pesticide-free wine products is another issue. This in particularly true in . However, it is difficult at this stage to produce wine without chemical inputs. Winegrowers are already trying to reduce pesticides, but it is not possible yet to produce without using fungicides. Then, the adaptation to the demand raises several issues, e.g. adapting the product to demand for darker or lighter rosé wine according to the markets. Also, the vineyards must be adapted to the demand, by planting the right varieties of grape. However, the investments to adapt the vineyards are heavy and the results is to be expected on the long-run. Producers must also find a way to decrease the level of alcohol content, which kept increasing. The olfactory/gustative balance is indeed optimised in wines with lower alcohol content. In France, it is also important to develop mi-range products, because the producers must be able to provide a full range of products, not only top range products, to their customers. Finally, another issue in France, especially in the wine sector, is the distribution of the value-added along the supply chain, more specifically, between winegrowers/producers and traders. Indeed, few large traders use to call for a certain volume of grapes/wine (thousands of HL) from specific varieties at a given price, so the winegrowers are notable to negotiate.

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. At regional level: According to the managing authority at regional level, there is a deficit of the supply in wine on French and EU markets. French operators must import wine from Italy and Spain. This is associated to a decrease in yield of 30 %. This is important because the yield is the principal driver of competitiveness and it has decrease due to the climate change (increase need for irrigation to maintain the yield), the use of clones that are less productive than previous plants, the lower density. Wine produced with PGI/Pays d’Oc have average yields of 60 hl/ha, whereas competitors in Chili, which are not subject to the same constraints, achieved yield of 100hl/ha for the same grape varieties. The strategy implemented now by the operators in the region is to emphasize a denomination rather than a variety and to increase its notoriety on markets. This was the case of the Pays d’Oc PGI that has become more and more well-known abroad. Then, there was a strong need in Languedoc Roussillon to access and modernize wine processing units and adapt them to the international standards. The cooperatives, which represent 69% of the wine produced in the region, have important needs but their profitability is lower. For this type of operator, the support rate is limited to 40%, thus the investment is heavy and risky. The complexity and administrative burden associated with the management of application forms is a major issue in France and in the region. The fact that some NSP measures are managed at regional level and other such as the Promotion measure are managed at national level, makes the management of the application form for the Management Authorities and the applicants very complex: . It was stated that the investment measure was complicated to manage at regional level because of the broad range of eligible operations that can be supported and changing rules from one year to another that made it very complicated for the applicants and control bodies to understand what conditions have to be checked. . The promotion measure was mentioned as a complex measure that should be dealt at regional level. Indeed, a lot of interested applicants called the regional authorities to ask for details and insight but the regional authority could not give them an appropriate answer considering the fact that it was a measure dealt at national level. The beneficiaries had to call the central team in Paris to reach someone that could provide them with the intelligence they needed. In the case of the promotion measure, the current issues come from the French ministry and is not because of EU regulation whatsoever. The representative of the main PGI of the Languedoc Roussillon region mentioned as main issues the decrease of the wine consumption in France and the continuous changing trends on the international market of varietal wines, which is very tense. To address these issues, the PGI has developed a strategy on two axes which consists in: . Democratising the wine consumption toward the new generation of consumers with the development of wine products in bag-in-box. . Facilitating the access to wine consumption by mentioning the grape variety on the bottle (increased legibility of the supply for consumers). This strategy has enabled the PGI to register a steady growth on the French market over the last 15 years, despite the decreasing trend in wine consumption. Another issue is the access to resistant grape varieties that need less phytosanitary treatment. This is a real issue because more and more people are setting-up near the vineyards and the pollution caused by the phytosanitary treatments are more and more documented. There is a growing demand from the society to reduce the use of phytosanitary products in vines. There are resistant varieties developed in Italy but they are not authorised in France. This is not fair because other European producers in , Italy and can use these varieties and their wine products are sold on the same market than the French wine products. Another challenge considered by the wine producers/traders is to keep increasing the exports via promoting regional wines on export market (notably rosé and bio). The Languedoc Roussillon wine has recovered from its historic bad reputation of highly alcoholic wine of poor quality. Its increasing quality contributed to improve its reputation across the world and led to increased exports. In 2017, the new region Occitanie with LR included represents 1/3 of total French wine exported in 2017 with 3.8 Mhl exported (+5.12% compared to 2016) with a turnover of 983.55 million € (+5.39% compared to 2016).13 Rosé from the LR region has increased in sales in the last 5 years (+ 50% for rosé from PDO Languedoc and 53% for PGI). There were different dynamics in the selling

13 draaf.occitanie.agriculture.gouv.fr/Exportations-de-vins-produits-en

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price of French wine and Languedoc Roussillon’s PDO wine. Indeed, it was noted a global price repositioning of the regional PDO wines, with an ex-cellar price increase (in €/bottle) in the main export markets while we observe a global decrease of the ex-cellar price of French wine on international markets. The promotion of oenotourism will contribute to enhance the reputation of regional territories. It is important to convince tourists of the quality of regional wines so that they become ambassadors of our wines in their country. It is also important to answer to the market expectations by promoting . The Occitanie region (with mainly Languedoc Roussillon) is the first region in France (in terms of hectares dedicated to organic vineyards) to produce organic wine, with more than 25 000 hectares dedicated to the production, which represents 35% of France’s organic production. The Languedoc Roussillon is the fastest growing organic area in France with an increase of 4% per year and a total of 1600 organic wineries.

IQ 1.8 Did the actions undertaken by the wine producers with the support of the NSP contribute to improve the competitiveness key factors of EU wine products? Please explain how. . At national level: According to the national authorities, the NSP helped supporting actions with the following effects on the competitiveness key factors: . Upgrading of the wine-making industry Despite disparities between regions, the investments measure globally increased the organoleptic, sanitary and environmental quality of the wine products, notably through the modernisation of the whole supply chain. The producers have invested in wine-making tools more accurate to produce a better wine, with less negative impact on the environment. Progress achieved are huge. The investments made with the support of the NSP mainly intended to rationalise the processing of into wine: work simplification, functionality of buildings (possibility of entering tractors inside the buildings, gathering of all the processing steps in one building), reduced environmental impact through lower water and energy consumption, etc. Their objective was to improve the quality and reduce costs of production. As an example, the cooperative Heraclès in Languedoc-Roussillon, which produces organic wine products, used the investments support to construct sustainable buildings. . Adaptation of the vineyards to the market’s constraints The restructuring measure enabled a rapid adaptation of the vineyards to maintain a good balance between the different types of wine (white / red / rosé), to plant resistant varieties to diseases and climatic conditions, to organise rows of vines, etc. The collective restructuring plans implemented in several production areas ensured a good coherence and dynamism that benefit to the sector. Indeed, it guaranteed an efficient management of the production potential. 75% of the projects that benefited from the restructuring measure were part of a collective plan. . Evolution of the wine offer According to the national authority in charge of the implementation of the NSP, there was a clear will of the profession to go for a segmentation of the offer. Thanks to the restructuring and the investments measures, the producers are developing different products, in reduced quantities, to be positioned on specific segments of the wine market. . Positive effects on the marketing of wine products Investments also enabled to develop sales on the farm, e.g. with the construction of tasting cellars. Oeno- tourism also increased and enabled producers to valorise their production and get additional income. Access to foreign markets was supported through the promotion measure. As a result, the French wines are better known abroad. Whereas only few types of famous PDO were known before (Champagne, and Cognac), the promotion operations implemented have enabled other PDO/PGI to penetrate foreign markets. The promotion support was implemented to answer to the needs of the sector, which was requesting support for the marketing of the products. Only support to the promotion was in compliance with the WTO rules. It helps producers/traders to go on these markets with high entrance barriers. However, it must be noted that, given the difficulties to access foreign markets, it is necessary to reach a minimum threshold in terms of volume of products and/or to gather the individual initiatives. In France, several producers have understand that it was pointless for them to go on foreign markets, and decided to focus on one single market.

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According to the representatives of the sector, the NSP measures achieved significant positive results for the wine sector, notably in terms of competitiveness, quality upgrade and access to foreign markets. . Results of the NSP on the competitiveness of producers, in specific regions The financial support granted through the NSP has favoured the development of the sector. It has improved the know-how and the productive capacity, thus improving the quality of the wines produced. This was achieved through the implementation of the oenological practices, a better training of farmers and investments support (especially as regards the investments in temperature-controlled vats). The restructuring support strengthened the competitiveness and quality of wine products, notably in Languedoc-Roussillon, Bordeaux region or Rhone valley. . Capability enhancement to conquer new markets According to interbranch organisations, the promotion support is very important to access foreign markets. It is necessary to empower French producers to face the competition of countries like , with strong federation among producers that are “all together” and share significant resources. Indeed, in France, there is a historical competition between the regions and this diminishes the strength to conquer foreign markets. For all these reasons, it is necessary that the support for promotional operations on a given market is granted for at least 5 years, because it is a minimum time to ensure a positioning on a foreign markets, especially in such a highly competitive environment. . Side-effects associated to the NSP However, side-effects were also mentioned. First, the complexity induced by the regulation reduces the gain in competitiveness of the sector. Second, the fragmentation of the offer created by the setting-up of independent wineries prevents to reach sufficient volume of wine to be competitive on international markets.

. At regional level: In terms of organisational structure of the supply chain, the wine producers met mentioned the difficulties to be in a cooperative structure, as opposed to the advantages of being an independent grower. Indeed, several winegrowers interviewed were part of a cooperative structure and decided to leave it to continue on their own. The investment support granted under the NSP enable them to construct their own cellar and vats and became free to set up their own strategic plan. Apart for one producer, the others associate their increase in competitiveness to the investments made with the NSP support that helped them to increase their range of product and improve their quality. The last producer benefited from the restructuration measure but didn’t consider the NSP as a contribution to improve the competitiveness of his products. Indeed, this producer has developed his own brand and products from different grape varieties, notably ones not eligible for support. The winegrower stated that his goal was to separate from subventions of the EU that required too much administrative burden and risk of penalty.

IQ 1.9 What was the impact of the NSP measures on your supplies, in terms of quality, volume and origin? The producers interviewed grow their own grapes on their holding. They don’t get supplied from other winegrowers. However, the NSP support had an impact on the type of grapes grown and the quality of wine produced. One producer pulls out 4-5 hectares each year to plant other grape varieties. This measure allows him to adapt his production to market demand. Other producers improved the quality of the wine produced by investing in winemaking tools and machineries. Volume, may have been indirectly affected by the potential of production of new grape varieties planted, but would be marginal. The PDO PGI specifications set a maximum threshold of volume produced. According to a local interbranch organisation, the choice of grape varieties eligible for support under restructuring measure is very limited. Some clones resistant to pest and/or drought allowed in Italy are forbidden in France, even if there were accepted at the EU level. Indeed, the national authorities think that allowing the use of these foreign grape varieties will undermine the work of the French research institutes currently working on the development of similar varieties. The producers of Languedoc-Roussillon would need such varieties to improve their competitiveness.

IQ 1.10 Did the actions undertaken by the wine producers with the support of the NSP contribute to changes as regard the organisation and coordination of the operators in the supply chain? Please explain how. . At national level:

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A part from the collective restructuring plans, the national authorities stated that the NSP measures did not bring the producers to gather to implement a collective project. Even if the investments and the promotion measures were to be granted in priority to associations of producers, this was difficult to implement because: - Collective investment can only be implemented by a specific legal entity. That is why, except in the case of cooperatives, collective investments (e.g. for storage) are not frequent. - Promotional operations are often implemented to enhance one producer’s brands. It is not interesting for producers to launch collective actions of promotions. Collective restructuring plans are thus a good example of coordination of actions between producers and wine growers at the scale of a territory. It favours discussions between the stakeholders and a gain of efficiency. Then, the investments support, by enabling winegrowers to set processing unit on their farms, contributed to change the organisation of the supply chain. By knowing their customers (through direct sales / short circuits), the wine producers can also improve and better valorise their wine products. Eventually, traders in Bordeaux and Burgundy regions also invested in processing units to make their wines. There was thus a phenomenon of downstream and upstream vertical integration through the investments support.

. At regional level: There is a decreasing trend in the number of cooperative cellars across the year, even if today, the cooperative structure still represents 70% of the wine produced in the region and 9 out of 10 winegrowers deliver their to a cooperative cellar. 14 The winegrowers interviewed have used the NSP to produce their own wine after having left the cooperative cellar. In this sense, the NSP programme could have been a tool to integrate the downstream sector to the production part. As mentioned by the national authorities, it was stated by producers that the volume of wine is sold at a lower price in a cooperative cellar than when you have your own cellar. If the is the main source of income for the winegrower, selling to a cooperative cellar is a less profitable solution. Leaving the cooperative cellar allowed growers to better adapt their supply given the annual harvest. For a great harvest during a year, it will be possible to store wine in provision of a possible low harvest the following years. In a cooperative , the is costly and the non-sale has a direct impact on the income of several members of the cooperative structure.

2.3.2 Effects on the capacity of operators to adapt to customers’ expectations

2.3.2.1 Synthesis of the interviews IQ 1.11 Did the NSP measures contribute to the capacity of operators to adapt to customers’ expectations, using innovative integrated approach? . At national level: According to the national authorities, it is mainly the restructuring measure that has played a positive role in the adaptation of the production to customers’ expectations. Indeed, the measure allowed the winegrowers to adapt the varieties of grapes cultivated to the market demand, notably by the planting of ancient traditional varieties and/or “international” ones. The vineyard was also transformed according to the demand for red/white or rosé wines. However, the investment measure was also used by winegrowers to install wine-making unit on their farm. These little wineries have direct contact with their customers and can easily answer to the expectations of their customers by adapting their production to the demand. Also, the modernisation of the production tools made it possible to produce wines of higher quality, thus answering the demand for safer products, of the best quality at the best price. . At regional level: According to all stakeholders interviewed and as already explained, the adaptation to the demand through the reconversion of the vineyard and the development of new products, was the main effect of the NSP. The restructuring and investments measure really provide the operators with the capacity to adapt their supply. IQ 1.12 What types of supported investment were made to adapt to the evolving demand?

14 DRAAF Occitanie, panorama 2014.

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. At national level: The investments made contributed to answer to the market demand for higher quality products. Indeed, the consumption of wine has been divided by two over the last 50 years. Consumers drink less wine but are more demanding as regards the quality of the wine products they buy. Thus, the improvement of the quality really matches with the evolution of the market. According to the implementation report, support was granted for the acquisition of (a) new machinery and equipment and (b) immovable properties, e.g. processing facilities or infrastructure. 47% of the investments were related to machinery and equipment, 30% to construction or renovation of buildings and 30 % of the investments were related to both machinery and buildings’ construction. Then, the investments supported have been classified according to their objective(s): - 89 % of the amounts invested are related to “downstream – marketing development” (77% of the files) - 81 % of the amounts invested are related to the “adaptation of the processing tools” (68 %) - 65 % to “quality / traceability” (64 %) - 17 % to “water and energy savings, waste management and reduction of the noise” (14 %) - 12 % to “innovative process” (11 %) Burgundy appears as a region with a majority of investments for the construction of buildings. Languedoc- Roussillon is a region where the investments made are similar to the breakdown introduced here above. The investments in processing facilities mainly concern the construction / renovation of winery, cellar and other infrastructures, with significant effects in terms of agro-tourism, environmental image with high environmental quality or passive buildings. The investments in machinery concern the wine-making process (fermenting/storage vats, assembly, packaging, and draining of grapes) and especially the equipment to ensure the control of temperatures during the process of wine-making. . At regional level: The managing authority indicates that investments were made in order to develop the production of white and rosé wines. Indeed, the demand for rosé wines was increasing and the operators needed to adapt their processing chain to answer the demand. The investment made were done to improve the quality of such products, by improving the technology, the aeration and using quality vats. The representatives of the wine exporters underline that many investments led to the installation of winery facilities on farm. From their point of view, this encourages the competitiveness at the level of the producer, not at the global level of the French wine sector. The main types of investment made by wine producers from the large ones to the smallest are investments for the bottling, energy savings and renewal of wine cellars. However, despite the investments made to integrate the entire process of wine-making, some winegrowers are not able to manage the whole supply chain by themselves. In Languedoc-Roussillon, the investments made aimed at producing the different colours of wine. Indeed, the is traditionally produced in this region. The white and rosé wines need more constraining production conditions, that is why the producers invested in specific equipment that ensure the maintenance of cool temperatures along the process of wine-making, e.g. thermos regulated machineries are compulsory to manage a proper production of rosé and of quality. Another producer constructed its wine making unit thanks to the support provided under the investment measure and is producing now half of its product under PDO and the other half under PGI mainly sold in hotels cafes and restaurants in France. The NSP support contributed directly to improve the competitiveness of his wine.

IQ 1.13 Did the promotion measure was used to support studies of new markets to identify consumers’ preferences? At national level, the promotion measure was designed to provide support for operations aiming at expanding sales opportunities: - Expertise and marketing consulting, - Pre-test for new products’ validation, - Brand launch pre-validation, - Focus groups, consumer panel.

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However, the details of the operations supported is not provided in the implementation report transmitted by the managing authority to the EC. At regional level, when interrogating the winegrowers/producers, the promotion measure was used to find contacts on foreign markets but very often, the stakeholders reported that this measure was mishandled by FranceAgriMer and that information concerning the operation eligible and the supporting documents compulsory to benefit from the support were not clear. Hence, most of the winegrowers interviewed stated that they will have to pay back the upfront payment given by FranceAgriMer.

2.3.3 Effects of other factors on the competiveness and overall performance of wine producers

2.3.3.1 Synthesis of the interviews IQ 1.14 How did the market shares evolved for your major wine products? on intra and extra EU markets? What are the main factors explaining these changes? . At national level: According to the authorities, it is difficult to identify the effects of the different NSP measures on the competitiveness of wine producers. Some beneficiaries benefited from both investments and promotions measures which may have contributed to the evolution of the market shares on intra and extra EU markets. Moreover, the last years were favourable for the exports of French wine producers. However, it must be noted that every tools that can support wine exports are important, since they help to access new markets or maintain existing ones. For example, France does not have any commercial agreement with China but the promotion measure helped French producers to overcome this “weakness” and gain market shares on Chinese markets, facing other wine producing countries with more favourable access conditions. The Managing authority of the NSP underlines that French wines did expand the range of products sold on existing export markets. Indeed, the French wine products sold on export markets were limited to Champagne, and Cognac. Now, other geographical indications are sold and/or new producers in the “traditional” geographical indications have accessed the export markets. The limitation introduced by the new regulation (2016) states that producers can be supported for promotion operations of 5 years max. on a given market. The term “market” must then be defined by the Member state. In France, market is understand as a “country”. For this reason, the new rule will prevent the operators to access the main export markets after five years. This can lead the producers to implement promotion operation on non-relevant markets such as the Maldives. Moreover, it must be noted that 10 years are barely sufficient to establish a strategic positioning on a foreign market such as China. Thus, only small producers will export toward the main foreign markets if the limitation to 5 years is implemented. According to the Fraud prevention authority (DGCCRF), the commercial partner are demanding of guarantees. In France, the export certificate (Certex) guarantees that the exporting operators have been controlled. It is build according to the Codex Alimentarius Standards and delivered by the Fraud prevention authority. It is built in two parts: the first part relative to the batch of wine products is signed by the operator, the second part relative to the operator is signed by the Fraud prevention authority. Indeed, this Certex guarantees the compliance of the operator, which in turn guarantees the compliance of the products. However, the Certex is not always recognised by the foreign partners. E.g. China- Food Safety Law requires a sanitary compliance certificate for each product imported in China. This would induce a lot of work and a loss of time for the French producers. The DG Trade is currently negotiating with China to postpone the entry into force of the law, or find an agreement for the use of dematerialised certification. According to the representative of the exporters, French wines have always been exported abroad, however the volumes of exports have been increased strongly in a short time frame. The challenge now is to maintain the market shares and to expand them. However, French producers face extremely aggressive competitors that have made them lose market shares. Also, the markets are changing quickly, even inside the country. You cannot invest a market in a “one shot” operation. You always need to reinvent yourself. It is not really possible to identify the effects of the promotion measure in this general evolving context. In France, the French producers have lost market shares because of wine imported from Spain. It is not relevant to set limitation to vine plantings and at the same time imports from other countries to meet the demand. According to the representative of wine without PDO/PGI, the non-PDO/PGI wines have significantly contributed to the competitiveness of the French wine sector. First, non PDO/PGI wines are important to provide foreign markets with strategic mid-range products. Indeed, this positioning is strategic for the overall

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French wine sector that can offer a large range of wine products, with various level of prices/quality. Another strategic advantage provided by non PDO/PGI wines is the design freedom associated with the absence of technical specifications (as opposed to PDO/PGI wines). This is particularly useful to design wine product suitable for the export markets (especially under the name “Wine from France”, since France is the only origin authorised on the label in case of non PDO/PGI wines). Thus, French non PDO/PGI wines represent 15% of French wine exports (in volume) and exports of non PDO/PGI wines keep increasing by 10% each year (in value and volume). These good results have made traditional Burgundy winehouses and main wine producers to develop a range of non PDO/PGI products, sold at mid-range prices to complement their global offer. Figure 6: Exports of non PDO/PGI wines

Source: Anivin

Another competitive advantage associated with the non-PDO/PGI wines is the clarity of labels. Labels are easy to understand for the customers, since only three mentions appear on the label: “wine” + “grape variety” + “France”. Brands developed by the wine operators to market non PDO/PGI wines can also be an asset: the brand is a guarantee of quality and taste for the consumers (consistency). Wine-designers can also offer original products adapted to customers’ taste (blended wines). . At regional level: The growing production of rosé and white wines comes from a growing demand on international market, both intra and extra EU. The restructuring and investments measures enabled the producers to increase the quality of rosé and white wine, supporting the local production reputation and also contributing to an increase in exportations. The representative of the main PGI of Languedoc-Roussillon indicates that the exports of PGI wines represent 75% of the regional production of wine. 65% of the volume exported is sent toward EU Member States and the remaining part is sent toward China and the United States. Importing Member States have changed: the United Kingdom used to be the first importer but it is now the 4th. The top-ranked importers are Germany, the Netherlands, Belgium, the United-Kingdom, China, the USA, , Canada and . To position the PGI products abroad, the organisation relies on few big wine producers, either private companies or cooperatives, that conquer the foreign markets and contribute to the positive reputation of the PGI. These big players also contribute to educate the consumers to a specific category of wine products, highlighting the grape variety and the origin of the wine, which are the characteristics of the PGI. One producer interviewed has decided to produce exclusively organic wine since he left the cooperative cellar 12 years ago, noticing the growing demand on foreign and French market for organic production. Another one has been very inventive in developing new wine products. He pays a particular attention to the organoleptic taste and quantity produced via the new grape varieties introduced regardless of the promotion of a particular PDO or PGI. He uses his brand to commercialise his products.

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IQ 1.15 What are the other factors that could have had an impact on the competitiveness, product quality and market orientation of the EU wine sector (e.g. evolving demand, increased competition, climate change, etc.)? . At national level: Minimum threshold: According to the managing authority, the access to foreign markets is extremely costly. Therefore, it is only possible for operators with a significant volume of products to access foreign markets. The capacity of operators to gather their volume and share the costs is also a strategic factor to increase the performance of the wine sector. For this reason, small operators have realised that it was pointless to export toward foreign markets and more strategic to focus on one market. Climatic conditions: climatic events such as frost and hail have significantly reduced the capacity of operators to invest and therefore the applications for investments support. Non-tariff barriers: the access to foreign market is an essential prerequisite to develop the sales abroad. According to the OIV, some oenological practices and additives used by the French/EU producers don’t comply with international standards and are forbidden on significant export markets. The representative of wine exporters explained that the promotion measure was relevant and useful only on markets that are accessible. It enables the operators to position their products and adapt their offer in order to increase and maintain on these markets. Rigidity of the PDO/PGI system: According to the National Committee of Interbranch organisation, the PDO/PGI system is extremely rigid and do not allow the producers to adapt to the market (as opposed to the non PDO/PGI wines). . The labelling rules are too restrictive for PDO/PGI wines and do not allow producers to create fun and attractive labels for their products. . The respect of constraints fixed by producers’ representatives for the management of the vineyard and the production prevent the producers to adopt innovative practices to reduce the alcohol content in wines. . The limited yields increase the production costs per hectare. However, it is not sure that the increase in quality induced by the limitation will result in a price increase sufficient to absorb the extra-costs. However, according to the French public body responsible for quality and origin marks relating to food products, the PDO/PGI system is important to maintain the competitiveness of French producers that can valorise small volumes on local markets or become niche players. Reputation of French wine: According to the representative of non PDO/PGI wines, the reputation of France abroad is a selling point. Therefore, non PDO/PGI wines, qualified as “Wines from France”, benefit from the French notoriety and can compete against competitors from the “” on foreign markets. Bilateral trade agreements: Tariff barriers hinder the competitiveness of EU wine products. E.g. on Japan market, French wines prices are three times higher than those from Chile or Australia because these latter have negotiated preferential trade agreements. Scheme of authorisation of vine plantings: The representative of non PDO/PGI wines claims that the limitation for vine plantings is not relevant. “We need to plant!” According to its director, it is more competitive to plant large areas outside the PDO/PGI geographical areas, not limited in terms of yield. It is not true that limited yields improve the quality grapes/wine. The development of national quality labels: The label “Terra “ guarantees agricultural practices that protect the environment. It emphasizes the need to integrate environmental and social concerns in the requirements specifications. The label “High environmental value” has been adopted by 700 farmers (not exclusively wine growers). This label promotes the , the biodiversity and landscapes protection. . At regional level: The managing authority explained that the different phytosanitary regulations applied in the Member States prevent fair competition between wine growers of different countries. Some phytosanitary treatments available in Member States, are not authorised in other MS. Particularly, the different conditions of production in Spain are more favourable than the French ones, according to the authority, because of cheap labour, irrigation system well spread, cheap inputs and access to phytosanitary treatments not allowed in France. The representative of a famous PGI in Languedoc-Roussillon underlines the distortion arising from the restriction to use certain varieties in France. The producers require the right to grow grape varieties authorised in other Member States (IT, HU, AT), because the wine produced from these varieties is sold on the same market than the French wines. Indeed, because of climate change, the current debates around the wine sector is on finding grape varieties adapted to climate change, i.e. increased temperature, drought, less water

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consuming and resistant to pests that come along with the changing conditions. The deal is to find grape varieties producing wine grapes of quality that come up with consumer’s expectations.

2.3.4 Conclusion of the expert on the effects of NSP measures on the competiveness and overall performance of wine producers

The competitiveness and overall performance of the wine producers arise from a set of factors, either internal or external. However, according to the interviews carried out, it is obvious that the NSP contributed to a large extent to improve the competitiveness factors of the wine producers. The interviews highlighted the effects of the restructuring and investments measures on (1) the improvement of the quality of the wine products and (2) the development of the supply. These changes were carried out by the wine producers, with the support of the NSP, to adapt the products to the market demand. Consequently, the producers have introduced new grape varieties and adapt their processing unit to offer quality sparkling, red, white and rosé wines. The collective restructuring plan allows a maximum of efficiency and effectiveness given that it addresses the specific needs of a region and encourages the stakeholders to coordinate their efforts and implement similar strategy. The competitiveness was also fostered by the optimisation of the management practices through the introduction of new techniques in the vineyard and investments in modern equipment and machineries for wine-making. The promotion measure was also mentioned as very strategic to give the financial means to producers to conquer new markets and face competitors that can be very offensive in their commercial approach. It is also very useful to overcome tariffs barriers and other costs associated with the entrance of the wine products into the foreign markets. However, at the regional level, its implementation was complicated and the producers did not rely on it. However, there are also side-effects that could be addressed to achieve even more performance. From the point of view of traders/wholesalers/exporters, fragmentation of the offer created by the setting-up of independent wineries prevents to reach sufficient volume of wine to be competitive on international markets. Distortions between Member States must be avoided: different varieties available, different conditions of production or different phytosanitary regulations between EU producers should not occurred given that their products are sold on the same market(s). Then, the complexity associated to the application for NSP support should be reduced because it hinders the performance of producers. Indeed, the winegrowers have to complete a considerable amount of documents every year to complete an application while the management authorities could use information they already gathered from the past years. The conditions to apply and the control procedures can change from one campaign to another and it becomes very complicated for the applicants to understand what conditions have to be checked. The beneficiaries are often lost and decide to outsource the administrative procedures to apply for support.

2.4 Effects of the promotion measure

2.4.1 Effects of the promotion measure on the recovery/capture of foreign markets

2.4.1.1 Evolution of the market shares of national wines on the main foreign markets Evolution of French wine exports According to the FEVS (Wine and Spirits Exporters’ Federation), the exports of wine are increasing again. This did not happen since 2012. In 2017, the volume of wine exported reaches 13 million of hl (+ 733 300 hl as compared to 2016).

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Table 16: Volume of wine exported by type of wine products in 2017

Source: FEVS, dossier de presse- Exportations de Vins et Spiritueux, 2017 It is interesting to note that the amount of PGI exported is to a large extent driven by the PGI Pays d’Oc which is produced in Languedoc-Roussillon and is a success out of France. By comparison, the PDO produced in the region reaches lower volume of exports. Indeed, the exports of wines with the PGI of Pays d’Oc register very high score, superior to those of the famous PDO Bordeaux. Exports of PGI Pays d’Oc represent 18 % of the total volume of French wine exported. This result can also reflect the demand for rosé wine in other Member States and third countries. Indeed, the rosé is mainly produced in Languedoc–Roussillon and , of which the PDO registered a strong increase in 2017 (+35.4 %). Another famous product with increasing reputation on the foreign market is the white wine chardonnay from the Languedoc. The value of wine exported reaches 8.7 billion euros in 2017, i.e. 756 million € more than in 2016 Table 17: Value of wine exported by type of wine products in 2017

Source: FEVS, dossier de presse- Exportations de Vins et Spiritueux, 2017 Here again, the evolution has been strong for the wine from the South of France, i.e. Provence PDO (36.8 %), Languedoc-Roussillon PDO (11.9 %) and Pays d’Oc PGI (3.2 %).

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Evolution of market shares of French wines on foreign markets: Table 17: Shares of French wines on total wine imports of extra-EU countries 2005 2010 2016 Volume Value Volume Value Volume Value USA 16% 29% 10% 23% 13% 29% Russian Federation 9% 14% 12% 22% 9% 18% China 12% 29% 26% 46% 31% 42% Canada 23% 27% 17% 22% 14% 21% Japan 38% 64% 30% 56% 22% 52% Hong Kong 30% 38% 31% 36% 22% 25% Switzerland 30% 40% 23% 34% 21% 31% Source: Comtrade The share of French wine in the total volume and value of wine imported in China has been increasing from 2005 to 2016. France remains the main exporters toward the Chinese market, followed by Chile. The share of French wine has been quite stable in the USA and the Russian Federation. However, the following markets have decrease the share of French wine imported as compared to wine products from other countries: Canada, Japan, Hong-Kong and Switzerland.

2.4.1.2 Information collected in the implementation reports At national level The 2016 implementation report provides detailed information on the support granted for promotion, the targeted destination markets, the types of operation supported, etc. based on a sample of 50 individual grant files (one file corresponding to 1 beneficiary and 1 year, with possibly several types of operation) and 16 files of interbranch organisations. The main conclusions are the following: . The United States and China together account for nearly 50% of the budget allocated to the promotion operations supported. Canada and Japan account for between 11 and 13% of the global budget. Then come Brazil, Switzerland, Norway, South Korea, Hong Kong and Taiwan. . Public relations/merchandising/advertising are the most common types of operation conducted (81% of the total budget). The following graph shows the repartition of the different types of action, carried out both by individual beneficiaries and by interbranch organisations. Participation in fairs come as the second most common type of operation, representing 15% of the budget. . SMEs represented 50% of the beneficiary companies (in number of files) followed by the very small companies which represent 36% of the beneficiaries. Large companies represent only 2% of the cases. . 79% of the supported promotional actions in the sample concerned wines with PDO, 19% PGI and 2% wines without PDO/PGI.

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Figure 7: Distribution of the support granted for the different types of promotional operations by destination country

Source: implementation report According to the national authorities, it is difficult to isolate the results of the promotion operations carried out. A large share of the beneficiaries of the promotion measure also benefited from the investments measure. Moreover, the last years were propitious to the competitiveness of the wine operators. However, it is important to underline the necessity of such a tool, because it is very strategic to gather any possible to support wine exports. It definitely contributes to the opening of new markets and the maintenance on existing ones. E.g. the promotion measure contributed to a large extent to the maintenance of the French market shares in China, despite the tariff barriers to access the market.

2.4.2 Effects of the promotion measure on the reputation of EU wines

2.4.2.1 Synthesis of the interviews IQ 3.1 What are the EU wine products benefiting from the best reputation abroad? Please specify: o Their origin (France/Italy/Spain/etc.) o Their category (red/white/sparkling/etc.) o Their quality (PDO/PGI/wine variety) France is seen as a famous wine producing country abroad. The continuous improvement of its products quality is in line with the international customers’ expectations. Specific regions of France have an international reputation: Bordeaux, Champagne, Cognac, Bourgogne. This notoriety will make the customers buy your products. It is important to support the operators that are implementing a structured strategy to export their products. The national authority needs to support the structuring of a supply chain specialised in exports to enable other producers to export their products abroad. The PGI Pays d’Oc is famous abroad. It is known for being able to sell large volume of wine. Its reputation is increasing, as well as the quality of the wine produced.

IQ 3.2 Did the promotion measure contribute to strengthen the reputation of the national wines? At national level:

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The managing authority of the NSP has launched an impact study in 2011 to assess the impact of the promotion measure on the reputation of French wines. At that time, France was perceived as a small country with a broad influence and a high-end image benefiting from the French historical and cultural heritage (luxury, castle, traditions, refinement etc.)15. However, it is hard to isolate the effects of the promotion measure. At regional level: According to the national representative of the interbranch organisation, it is not possible to assess to which extent the promotion measure contributed to the reputation of the French wines abroad. The major part of the operations were implemented in Asia and America. However, if the promotional operations implemented had no impact, it is sure that the operators would stop to implement them, since they bear 50% of the costs. The fact that the operators keep implementing promotional operations demonstrates that the measure is useful. According to the representative of the main PGI of Languedoc-Roussillon, the promotion support is essential to enable the operators to conquer export markets such as China or the USA. The support acts as a leverage to multiply their financial means. Indeed, it is extremely costly to access these markets, especially in the USA where the operators must deal with a local intermediary specialised in import. The representative of independent winegrowers producing their own wine stated that the eligibility criteria were not clearly set and led to the rejection of numerous applications. As a result, a very limited share of the budget originally intended was spent.

IQ 3.3 Apart from the NSP, were there any other factors that could have impacted the reputation of national wine products abroad? At national level According to the representative of the wine and spirits exporters, the main factor which impacted the exports growth is the entrepreneurship of companies. Indeed, the spirits sector that did not benefit from the promotion support also registered a high growth because of the strength of producers. Another factors can be the opening of the Corean market (-15% of tariff barriers), which led to a strong development of the wine market. This is very favourable to the French wine exports.

2.4.3 Effects of the promotion measure on wine companies’ income

2.4.3.1 Synthesis of the interviews IQ 3.4 Are there spill-over effects of the promotion support on wine producers’ income? According to the stakeholders interviewed, it is not possible to assess the spill-over effects of the promotion measure. At regional level, the spill over effects of promotion support were even more difficult to assess considering the fact that very few beneficiaries benefited from the promotion measure, and many of them had to pay back the upfront payment made by the Managing Authorities. Many wine producers will avoid to apply to this measure considering the requirement level in terms of supporting documents to provide. The president of a local management body of a PDO stated that he recommended the winegrowers not to apply to the promotion measure because of the risk of paying back incurred.

IQ 3.5 Were there any other factors that could have impacted the wine producers’ income? The producers’ income are impacted by the volume sold and the prices charged. Other factors influencing the demand for the products offered will impact the income of the producers. For example, the organisation “Sud de France Developpement” is likely to play a role on wine producers’ income. It is a public limited company financed by the region and represents the gateway to export for companies in the Occitanie Region. This company cannot benefit from the promotion measure, because it is

15 http://www.franceagrimer.fr/content/download/6328/34238/file/Synt-impact-promo-vinfran%C3%A7ais-042011.pdf

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already financed by public budget. In the wine sector, the primary goal of the organisation is to promote the wine from Occitanie region under the same brand “Sud de France”. All the subscribers to the brand will benefit from promoting operations. Each year, the organization supports between 700 and 1,000 producers and conducts 120 operations in 15 privileged markets divided into four zones (Americas zone, Asia zone, Europe zone and World zone). The organisation helps to:  Structure the approach of producers to exports  Conquer new markets  Develop sales and the distribution channels  Amplify their marketing action by a collective dynamic  Benefit from international expertise and networks Moreover, climate change also impacted the quantity of wine produced and consequently wine producers’ income. Indeed, water scarcity and increase of extreme events have great impact on annual harvest. For example, in 2016: “Climatic conditions (water stress, wind, etc.) have limited the development of berries. In some sectors, yield losses amount to 30% on irrigated plots and 50% or more on non-irrigated plots. With a harvest of 12.9 Mhl, the Languedoc-Roussillon basin showed a drop in production of 0.6 Mhl. The decrease in farm product per farm will have an impact on farmers' incomes and the 2016 harvest is likely to impact the recapitalization and investment in viticulture that has been revived since the serious crisis of 2005 to 2010.”16

2.4.4 Additional benefits or negative effects in third countries generated by the support for promotion

2.4.4.1 Synthesis of the interviews IQ 3.6 Are there any additional benefits or negative effects arising from the promotion operations implemented in third countries? According to the representative of wine exporters, the promotion measure hinders the flexibility of the supply chain because it requires to establish annual budget by country at the time of the application. Then, the successive controls are burdensome. The major part of wine producers being small and medium enterprises, they use to export to one market abroad only, using an intermediary there as marketer. The situation is particular since this intermediary is actually customer of the wine operator. It is thus difficult to ask him for documentation of all the operations implemented. French wine operators are afraid of losing their customer- partner and would rather refuse the aid than requiring their customer-partner to attest of its compliance with the EC requirements. According to the representative of the non PDO/PGI wines, it is a major issue that only varietal wine can be supported by the promotion measure. Indeed, promoting a varietal wine in the major export market of the USA is extremely complicated. The mention of the variety is regulated: the American authorities require that all the varieties used are mentioned on the label, not only the most used. The composition displayed on the label must be really accurate. There are controls that check the composition and any mistake in the percentage of varieties displayed is sanctioned. This constraint scares the wine operators that do not dare to mention the variety for exports to the US anymore.

2.4.5 Conclusion of the expert on the effects of the promotion measure

It is interesting to notice that the promotion operations supported under the NSP target principally the countries that are the main importers of French wines. Especially, half of the budget is oriented toward the United States and china, which are the only countries were the market shares of French products increase. Whereas the effects of the promotion measure in the recovery/capture of foreign market or on the reputation of the wine produced cannot be clearly demonstrated, the stakeholders all explained that they need maximum support to conquer foreign markets in this highly competitive environment. They also mentioned that the time lapse to position a product on a foreign market is above 5 years, which is the new limitation introduced by the regulation to support promotional operations on a given market.

16 Agri’scopie Occitanie, La viticulture, Chambre d’agriculture Occitanie, edition 2017

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The promotion measure in Languedoc Roussillon has been incorrectly implemented and many beneficiaries have to pay back the Paying Agency because of the non-compliance with the compulsory requirements under the promotion measure. According to the interviewees, the responsibility can be attributed to FranceAgriMer, the Managing Authority of the NSP in France, that decided to implement this measure at national level, as opposed to the investments and restructuring measures managed by the regional services.

2.5 Effects of the information measure

2.5.1 Effects of the information measure on responsible consumption of wine

In France, the Ministry of Health did not authorise the implementation of operations on responsible consumption of wine under the information measure. For this reason, the information measure was only used to improve consumers’ knowledge on EU quality scheme.

2.5.2 Effects of the information measure on consumers’ knowledge of EU quality scheme

2.5.2.1 Synthesis of the interviews IQ 4.3 In your Member States, did the operations implemented under the information measure contribute to enhance the knowledge of EU quality schemes? Please be specific on the results achieved. According to the managing authority, over the 2015-2016 period, the information measure was not widely used. The budget granted reached 1 million €/year. The main applicants have been the bodies in charge of the PDO/PGI management. Independent producers have not been interested by this measure. The supported operations mainly consisted in participation to international fair or events. To be eligible, the operation must be intended for the general public, either directly or indirectly. Therefore, operations targeting “advisors” such as journalists, restaurateurs, etc. Despite the limited use of this support, the few operations carried out have been effective. The campaigns are attractive and useful. In the case of participation to fair, it is difficult to assess the number of visitors having seen the campaign / the stand and how their level of knowledge has evolved.

2.5.3 Conclusion of the expert of the effects of the information measure

Different operations were implemented under the information measure by the regional interbranch organisation:  The Interbranch organisation of Languedoc wines (CIVL) has implemented promotional operations in cellars and bars under the name ‘Happy Languedoc” and “Printemps du Languedoc”.  The interbranch organisation of Bergerac and wines (IVBD) organised tastings in supermarkets and distributed the IVBD magazine to the customers. A competition was organised and stickers were put on BIBs and bottles’ collars to inform customers.  The Interbranch of South-West wines (IVSO) will run this summer a campaign on “ de Gascogne” PGI in cellars and will insert an ad’ in a cooking magazine “Cuisines et vins de france”.  The Interbranch of the Jura wines (CIVJ) have undertaken public relations with the journalists, inviting them on the production sites, to press luncheon in Paris where they were taught how to accommodate food and wine. A press agency also ensures the editing of two blogs articles per months on www.blog-jura-vins.com. Finally, a new visual identity was created for all Jura wines and a guide for wine tourism was edited. All these actions were implemented in France (and Belgium for the IVBD). Only the CIVL realised actions in different MS (DE, UK, NL, BE).

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Figure 8: Example of visual edited by the CIVL under its “Happy Languedoc” campaign

Source: CIVL It is difficult to assess the results of the information campaign carried out. In the frame of the evaluation, a survey has been launched to assess (among other things) (1) the reach of the operations supported and (2) their impact on the consumers’ knowledge. In France, the consumers were asked whether they had witnessed the information campaign implemented targeting the consumers at large (other operations consisting in public relations actions, e.g. press lunch or edition of wine touristic guides by the CIVJ). As a result, 17 % of the French consumers surveyed stated that they had already seen the visuals of the campaigns carried out at the level of the country. However, this rate is considered as satisfactory, given the targeting of the operations focused on specialist distribution channels, i.e. wine shop / wine bar. Specific questions of the survey were asked to measure the level of knowledge of consumers in areas targeted by the information campaigns supported. In France, the survey encompassed a list of the PDO/PGI denominations promoted by the CIVJ, IVBD and CIVJ to verify their notoriety among consumers. The PDO/PGI denominations known by the French consumers are the following:

Monbazillac 76% Bergerac 70% Languedoc 68% Corbières 63% Limoux 52% Côtes du Jura 51% Minervois 47% Côtes de Gascogne 43% Fitou 42% Saint Chinian 37% 36% Picpoul de Pinet 21% Faugères 20% Pic Saint Loup 18% Pécharmant 18% Duras 18% Montravel 16% Saussignac 10% Rosette 8% None of them 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percentage of consumers knowing the name

Source: Survey carried out by Agrosynergie

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2.6 Efficiency of the management of the NSP

2.6.1 Achievement of the technical targets of the NSP

Table 18: Rate of achievement of the foreseen expenditures per measures 2013 2014 2015 2016 2017 Promotion 105% 86% 89% 107% 110% Restructuring & conversion 97% 102% 99% 100% 101% Investment 99% 96% 100% 96% 99% By product distillation 116% 144% 123% 107% 90% Source: DG Agri, March 2018 The budget allocated to each measure was very close to the expenditure, for each measure and on each year of the implementation of the programme since 2013. According to the national authorities and to the managers of the programme at national and regional level, this situation shows that the allocated budgets correspond to the needs and absorption capacities of the sector. They explain this good matching by 2 main factors: - The fact that the sector plays an important role in the design and in the management of the programme. - The benefit of hindsight on the needs and capacity of the sector, similar measures having been implemented for 10 years. Within this general background, the small annual variation in the expenditures rely mostly on situational factors, (e.g. less investments can be made in bad years).

The draft NSP also set quantified objectives, with annual targets. For the first years of implementation, it seems that about half of the objectives have been achieved. However, we noted that most of the indicators that were defined to measure the achieved of the objectives have not been monitored, or their value is not cleary provided in the implementation report. Table 19: Quantified objectives set in the draft NSP and monitoring in the implementation report 2016 Achievement in 2016 (source: Implementation Quantified objectives report) 4 projects per year Achieved: 4 to 10 projects per year. 20% of the supported operations concerning several Information in The IR do not provide sufficient information to member States the EU monitor the achievement of the other quantified 80% concerning several PDO/PGI objectives (e.g. … Min 150 benef. (in 2014) / 7200 targeted companies = 5% of the wine companies supported each year 2% .In total, 615 companies on 3 years = 8% of

penetration 20 new beneficiaries per year Promotion No information provided in the IR 30 beneficiaries for new markets per year Results: + 7% in Volume and +15% in value exported to the Achieved: Evol. 2013-15/10/12: +7% in V and +20% in targeted third countries (China, US, Canada, Japan, val. Norway, Switzerland) 70% of the replanted area apply for support Not monitored 30 different varieties supported per year Achieved: a total of 133 varieties 50% of the supported area concern change of variety Mentioned as achieved but no detailed figure 3000 ha per year supported for trellising only Achieved 1500 ha per year supported for irrigation only Achieved Restructuration 8 collective plan every 3 years No information provided in the IR 49% in 2014, 42% in 2015. In part C: 70% mentioned 50% of the area supported each year via collective plan but this is not coherent with the results presented in the first part. 20 applications of young farmers each year Not monitored 2000 operations per years Achieved 1000 operation per yr with a environnemetal aspect and 20% of the expenditures fostering the env. 200 operations per yr concerning young farmers No information: no coherence between the Investments 60 operations per yr concerning alternatives to enrichment information provided in the IR and the objectives set by rectified musts in the draft NSP. 5 operations per yr concerning collective projects The market share of French wines in supermarkets is 80% The price of French wines (all segments) in supermarkets

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Achievement in 2016 (source: Implementation Quantified objectives report) remains 50% higher than the average price of imported wines 80% of the must distilated each yr. 80% of the producers concerned by the requirement to eliminate their by-product delivered to a distillery each yr. By-product The indicators are fully monitored and all the targets 45 distillery supported distilation are achieved in 2014 and 2015. 85% of the total V of alcohol are produced by distilleries 55% of the total V of alcohol from must and lies are produced with the NSP support Source: Draft NSP (Annex 1) and Implementation report 2016 (Annex 3)

2.6.2 Selectiveness of the management procedures

The following table summarize the main criteria and procedure that have been identified by the interviewed stakeholders as ensuring the relevance of the projects that were supported by the NSP. Table 20: Main criteria/procedure(s) ensuring the relevance of the selected applications Information in the EU This measure was implemented to a very limited extent. Very complex to manage for the beneficiaries requiring specific human resource and not very adapted to the reality of the work on export. The beneficiaries at local level explained that this aspect played a Promotion in third countries key role in the applications being limited to new markets, where operations of promotion are not profitable at the beginning. Supported rate of 50%, which implies a substantial investment for the beneficiaries. 75% of the operations are implementation through regional restructuration plans, which set specific criteria at the level of areas of production, corresponding to the local development and marketing Restructuring & conversion strategy. This ensure the relevance of the supported operation, but also the coherence of the overall process of restructuring of the vineyard. The rate of support is of max 30%, divided by 2 for medium-sized companies, and divided by 4% for Investment large companies: those limited rates of support ensure that the measure is intensive but not taken as an opportunity to carry out operations without a clear strategy. By product distillation No information was provided on this measure Source: interviews at national and regional level

2.6.3 Description of the management procedures of application files

The management procedures differs from one measure to another. We will describe here the management procedures of the three main measures in Languedoc Roussillon: the promotion measure, the investment measure and the restructuring and conversion measure: . Promotion measure in LR: the date of closure of call for tenders remains the same every year. After submitting the application form, an upfront payment is automatically delivered to the applicant, before examination of the case. After examination of the case and analysis of the eligibility of the applicant’s operations, the Managing Authorities either confirm the payment or ask the applicant to return the money. Once an applicant benefits from support under the measure, he must provide documents supporting the operation’s expenditure. . Investment measure: Until 2016 the same procedures were observed for the investment measure, only the upfront payment was automatic only for applicant planning to invest more than 200 000€. The upfront payment was 50% of the total support. In that case, the beneficiary had two years to spend half of the total amount planned to be invested and had to provide supporting documents. If the beneficiary did not respect these terms, he had to return the upfront payment with a surcharge of 10% of it. Now the upfront payment is not automatic anymore and applicants must ask for it. Support for investment is only granted after examination of the case. The eligibility criteria changed before and after 2016, notably environmental priority criteria were introduced. Hence, pluri-annual programmes are particularly difficult to manage when the rules change within the period, because the control carried out annually must consider the rules in force at the time of the application. The introduction of new rules in 2016 added instability for the potential applicants. . For the restructuration measure: before pulling out and replanting vines, the applicant must detain one or several authorizations for replanting, or must have converted his old planting rights into new authorizations for planting on the software “Vitiplantation”. The second step will consist of declaring to the customs service the intention to pull out vines. A preliminary control will then be performed. Meanwhile,

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the applicant must ask for support under the software “Vitirestructuration”. The applicant creates a request for support for each plot concerned. The requests are gathered into a single grant file called “dossier unique” per applicant. Each request for support allows the applicant to describe the restructuration operations planned and assess the eligibility. It is compulsory to submit the requests for support by teleprocedure. The grant file is automatically examined and the answer will correspond to the notification of authorization of the project. After pulling out the vines, the applicant must declare the intention to plant and deliver after planting a declaration of completion of work to the customs service. After the deadline to submit grant files, an upfront payment can occur during the summer to help the beneficiaries in their operations. Once the declaration of completion of work and the grant file delivered, only then, the applicant can formulate a request for payment.

Old management procedure (until 2016/2017 campaign) Current management procedure (2017/2018 campaign)  Only one deadline to deliver the application form  2 steps for submitting the application  Possibility to make late modifications  Automatic instruction and immediate analysis of  Difficulty to guarantee the eligibility of the eligibility of the operations. Eligibility tests are restructuring operations before planting. possible before planting and help the applicant to Ineligibility of operations is only known at the secure his demand. balance payment.  Need to declare the parcels online via a software in  Obligation to wait the inspection of the area order to allow “screen controls” instead of control planned to be pulled out before taking action. on the field.

2.6.4 Synthesis of the interviews

2.6.4.1 Questions related to the effects of the financial parameters IT 2.5 Compared to a budget that would have been manage on a 5 years period, have the yearly management of the NSP’s budget fostered an orderly implementation of the measures on all the duration of the programme? At national level: All the authorities represented the yearly budgetary limit as an important constraint for the management of the programme. From their point of view, it did not contribute in an orderly implementation of the programme. On the contrary, it creates incoherence and a problem of timing because there is a large gap between the time the applications are validated and the payment are made. Advance payments can reduce the gap between the engagement and the payment each year: for 2 year advances payments were obligatory for support to investments, but the European Commission did not allow this management practice. At regional level: According to the beneficiaries, the management of application forms to apply for support represent a major issue. It was considered absurd by all the winegrowers and the organisation, the need to complete every year the same papers with the same information to apply for the same support as last years. The winegrowers have to complete a considerable amount of documents every year to complete an application while the management authorities could use information they already gathered from the past years. The delay for payment was often mentioned as a great issue for winegrowers. Many of the winegrowers applying for support under the NSP programme cannot afford to pay upfront for machineries and expecting to be refunded the next year. The beneficiaries stated that some of them had to wait more than a year to receive the support. IT 2.7 Have the yearly management of the NSP’s budget fostered/hindered the selection of the more relevant applications? Have it been an obstacle to the support of multiannual projects or structuring projects? At national level: The managing authorities and the representatives of the sector at national level did not perceived any relation between the yearly management and the relevance of the selected projects. The limited budget on each call for project did not appear as a factor in ensuring the relevance of the selected projects. At regional level: In Languedoc-Roussillon, one of the beneficiary cooperative cellar explained that , because of the complexity of controls related to the investment measure, it build up grant files for operations that can be performed in the

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year in order to avoid overlaps of the controls related to different projects. In that case, the yearly management of the NSP led to a change in the operations supported and the management of the equipment and structure of the cooperative cellar. The yearly management of the NSP has been an obstacle to the support of multiannual projects and structuring projects. IT 2.9 Have the yearly budgetary limits created a specific workload, related in particular to the need to close the budget each year? At national level: The management services of the programme at national level explained that yearly management do not create extra work load but generate a specific pressure on the services. It also requires to take of lot of account of the timing between engagement and payment, and to integrate a “rate of erosion” between applications and payments. At regional level: According to the cooperative cellar interviewed, it was stated that their investment plan was directly related to the yearly budgetary limits of the NSP programme. Indeed, when applying for investment support, their plan is to start and finish their plan before applying for the next campaign. This way, they have less pressure concerning controls and supporting documents for the budget spent. Indeed, longer investment plan, i.e. over 2 or 3 years involve a greater amount of money and greater control over supporting documents or over upfront payment when asked by the beneficiary. Because the beneficiary do not want to take the risk of not complying with the requirements, he decided to perform smaller investments, that ends over the year, and are easier to justify to the controlling authorities. IQ 2.6 Have the absence of obligatory co-financing facilitated the access to support for beneficiaries? Please give details per measure IQ 2.10 Have the absence of obligatory national co-financing facilitated the management of the funds at the level of the managing authorities? IQ 2.8 Did the absence of obligatory national co-financing encourage the Member State to reach the EU budgetary limit, financing sometimes less relevant operations? At national level: The management services of the programmes consider that the absence of co-financing is facilitating because it limit the steps for validation and payment of the support. From the point of view of the persons in charge of the wine unit in the Ministry in charge of agriculture, even if there is no national co-financing, there is an important co-financing by the beneficiaries themselves. The programme could be compared to the programme of support to the fruits and vegetables sector, in which there is a co-financing by the sector. Another positive aspect of the absence of co-financing is that it enables a quicker adaptation to the sector needs and more innovation in the management and in the supported operations, given that national co-funders are often difficult to convince of the need to finance certain innovative operations.

2.6.4.2 Questions related to the overall effectiveness of the programme IQ 8.1 Have the traceability of the expenses been improved compared to the previous programming period? If so, how? The problems concern mostly the support to promotion in third countries: . According to the management services of the programme at national and regional level, it is very difficult for the beneficiaries to get detailed invoices from local importer, who often join several operations on a single invoice. It is very difficult for beneficiaries to ask for more detailed justifications, given that the importers are also their clients. . The regional unit of the managing authority explained that complexity associated to the promotion measure has discouraged the operators to ask for the support in Languedoc Roussillon because in too many cases, they had to give back the money granted for not being able to attest of each expenses made. At regional level, the opinions about the investments measure are the following: . First before talking about traceability of the expenses, the allocation of support has been improved for the 2018 campaign. Indeed, for the new campaign starting in 2018, the applicant has to apply online. The teleprocedure becomes compulsory to apply requiring a high level of details for the investment plan.

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. The grant rate depends on the size of the company applying. For very small/small companies, the grant rate is 30% while for intermediary companies and large companies, the grant level is respectively 15% and 7.5%.17 This grant rate difference allows for a more efficient use of the EU support between applicants. . There is a ceiling support for construction of 600€/m2 for production buildings, tasting rooms and cellar (with a specific eligible area defined for each) and a ceiling of 250€/m2 for building renovation. . For the purchase of equipment and machineries, the rule of reasonable costs is applied based on price referentials and multiple quotes. . All investment applications require quotes and plans, tax files, tax certificate and many other papers. Once the grant file validated and instructed by FranceAgriMer, a support notification is delivered to the applicant. On-field controls are performed after the works to control the operations performed, the machineries bought and to analyse coherence with the supporting documents. . The traceability of the expenses is effective however, could be more efficient. According to interbranch organisations and winegrowers, the managing authority requires too much information and too many details on the operation performed via the NSP support. The controls are numerous. There is a global feeling of over-controls. According to these stakeholders, it seems the main objective of control bodies is to find any inconsistency at any costs without trying to understand the winegrowers. IQ 8.2 How do beneficiaries demonstrate their actual need of EU support, and that normal operating costs are not financed by the EU budget? Please detail per measure if needed. At national level, the management services explained that there is no specific procedure to ensure the actual need of support of the beneficiaries. However, each application files is examined by the instructors individually to check the eligibility of the expenditures. Regarding promotion: the complexity of the support limited deadweight effect. Regarding investments: the rate of support limited deadweight effect. Furthermore a survey to 134 beneficiaries showed that: - around 14% of the beneficiaries would have done the same investment without the support. - 10% wouldn’t have been able to invest at all without the support - For 46% of the beneficiaries, the support enabled to invest earlier than what would have been possible without the support - For 30%, the support enable to carry out more interesting projects. Concerning the Investment measure, the Member State must implement the eligibility and priority criteria set up by the European Union in order to select the beneficiaries. However, the rules stipulate that if the total of grant files do not exceed the annual budgetary limit, the priority rules don’t apply. Thus, for the year 2017, the priority criteria had no impact on the type and number of beneficiaries that were supported. Indeed, all applicants beneficiated from the investment support. The managing authorities would rather help support every applicant at a lower rate than select some beneficiaries. At regional level, beneficiaries mentioned that the threshold for renovation is considerably lower than for building constructions (250€/m2 compared to 600€/m2). However, many stakeholders do not need to rebuild to improve performance of an equipment/building/machinery. Sometimes, renovating is just enough, but because of the investment requirements, winegrowers/producers will perform unnecessary operations such as rebuilding from scratch buildings to benefit from the investment support. Another example relates to the type of equipment eligible for investment measure. It was mentioned that on- field machineries contributing to improving the quality of harvest were not eligible for support, such as the harvest sorter. The machineries used on field aren’t eligible. The harvest sorter can be eligible for support as long as it remains on the production site. However, it was mentioned that it wasn’t enough to clean a harvest, and too many residuals remained after transiting through the machinery. Another harvest sorter on the grape harvester would have led to cleaner products before the wine press. However, because it is not eligible for support, the winegrower did not buy one. According to the cooperative cellar, the operations supported under the investment support is too restrictive, and many machineries and operations that seem important for the cooperative cellar were not taken into account such as renovation. The director of the cooperative cellar stated that many renovation operations would have been performed if supported by the NSP programme.

17 Bilan 2017 et évolution du dispositif en 2018, FAM

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IQ 8.3 Do you think that the measures have supported actions that would have been carried out anyway (without the EU support)? Please detail per measure if needed. According to the regional authorities, it is hard to determine whether the operations would have been performed without the NSP support. Some of the operations are essential for the winegrowers/producers, thus, maybe they would have been performed without support. However one can deduce that applicant filling a grant file for investment of considerable amount, exceeding 500 K€ wouldn’t have performed the operations without support from the NSP. Moreover, many winegrowers/producers need a loan from the bank to perform their operations, even if they have NSP support. The requirement for these banks to sign a loan is the approval of the grant file from the Managing Authority (FranceAgriMer). Thus, for some winegrowers/producers needing a loan, it wouldn’t have been possible to perform some activities without NSP support. According to winegrowers interviewed, the setting up of a wine production site wouldn’t have been possible in such a time if they had not received support from the NSP programme. Several interviewees mentioned that without NSP support, maybe the operations would have been performed, but it would have taken many more years, to reach this stage. Thus, the NSP programme was of great impact allowing winegrowers/producers to perform the activities they planned in a shorter time period. In a fast-changing sector, becoming more competitive every year, the importance of acting quickly to the international competing countries, is essential to maintain France as a leader in the wine sector. Thus the NSP programme helps it. IQ 8.4 How do you make sure that the costs of the supported operations correspond to the market prices for similar operations? Please detail per measure if relevant. According to the managing authority, the fact that operations are conducted at market prices relies on the national standard scale set for all operations. This scale, which is frequently revised, is satisfactory in ensuring that operations are conducted at market prices. However, two stakeholders mentioned that the support resulted in an increase of the prices of suppliers. Concerning the investment measure, for construction and renovation of buildings, there is a maximum threshold of 600€/m2. For the equipment support, the managing authority uses standard references on the basis of the equipment manufacturers’ rates and previous grant files. Moreover, several quotes are required by the managing authorities as well. Concerning the promotion measure, the Managing Authorities set up a list of reasonable expenditures. For operations that aren’t on the list, the managing authorities use competitive procedures (based on call for proposal) and require three quotes for each expenditure exceeding 20 000€. Concerning the restructuring measure, for replanting operations, the support is proportionate to the area planted. The total amount of support cannot exceed 50% of the real costs of the restructuring and 100% of the revenue losses. The support level for the restructuring costs is calculated on a flat rate basis which takes into account the actual costs recorded by a survey carried out on a sample of vineyard holdings and updated every two years. Depending on the outcome of the survey, the amounts for support according to the operations may be adjusted upwards or downwards, by decision of the Chief Executive Officer of FranceAgriMer. For the 2016-2017 individual restructuring campaign and health restructuring campaign as well as the 2015- 2016 to 2017-2018 collective restructuring plans, the amounts are as follows: Figure 9: Amount of support granted under the restructuring measure

Source: French NSP 2014-2018

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2.6.5 Opinion of the expert

. Effects of the financial parameters The obligation of yearly management is perceived as very constraining. As a matter of fact, it is well managed thanks to the history of the programmes, in France all the stakeholders we met agreed that some flexibility would lower the administrative burden related to the implementation of the programme. The absence of obligatory national definitely facilitated the implementation of the programme, in particular in the context of a quite new approach to support the sector.

POSITIVE EFFECTS NEGATIVE EFFECTS

 Yearly budgetary limits come with annual  Excessive administrative papers related to the campaign, that is to say, a beneficiary can filling of application forms every year. The apply every year for different projects, managing authorities kept requiring the same Yearly regardless of the ones from the previous information from one year to another, and had budgetary years. no record limits  The national budget allocated to the  Comes with multiple controls with different investment measure is entirely spent control procedures. Leads to excessive control every year, and priority criteria not used procedures. Discourages thee beneficiaries to because the budget was higher than the apply for measures. grant requested

. Relevance of the selected application and risk of deadweight It is complicated to measure the potential deadweight effects in the wine sector related to support under NSP measures. For example, many of the applicants apply for support under a measure because they need to perform the operations they apply for. Many of the winegrowers/producers, will perform the operations regardless of the result of their application form, because they cannot do otherwise. The list of eligible grape varieties eligible under replanting operations had a direct impact on the grape variety cultivated by the winegrowers. Indeed, few are the winegrowers that decided to plant grape varieties that weren’t eligible. The winegrowers that do so are those that already have found a specific market and consumers requesting a specific wine. Many winegrowers stated that there were not enough eligible machineries and operations under the investment measures, while the regional managing authority thought the contrary. The opinion of the regional managing authority was that it would be more efficient if less operations were eligible with a higher support rate. They stated that many applicants applied for operations that weren’t eligible because of the wide range of eligible operations. The fact that many operations are eligible makes the control and the analysis of the eligibility complicated for the managing authority. Hence the approval of a grant file requires a thorough analysis of the application file.

. Good practices set at Member State and/or regional level ensuring the justifiability of the expenditures: The following practices ensure that the expenditures supported are justified:  teleprocedures becoming compulsory since 2017 for some measures (e.g. investment measure) and since 2018 for others such as restructuring measure  multiple quotes required for justifying the amount of support eligible  competitive procedures (call for proposals) to use minimum required support  maximum threshold for some operations, e.g. construction, plantings  priority criteria to prioritize more deserving projects (however, they weren’t applied in the past years).

2.7 Coherence of the NSP

2.7.1 Coherence of the objectives of the NSP with other EU/CAP objectives

2.7.1.1 Synthesis of the interviews IQ 12.1 According to you, are the objectives of the NSP coherent with: - the EU overall objective of environmental sustainability? - the EU overall objective as regards public health and prevention of harmful alcoholic use?

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- the EU overall objective of balanced territorial development?

Coherence with the EU overall objective of environmental sustainability At national level For the national authorities, the support to restructuring and investments addressed first the competitiveness of the sector, but had also environmental benefits, e.g.: - Concerning restructuring, through the use of varieties and/or management practices that can reduced the use of pesticides - Concerning investments, through the priority given to project with an environmental aspect. The EU regulation has imposed environmental selection criteria as from 2017 to favour projects aiming at reducing water and energy consumption, noise, etc. However, when the number of applications for investment supports are low due to reduced capacity to invest, there is no need to apply the selection criteria. The managing authority is less positive. Very few applications were focused on sanitary issues. There is however a real concern from the operators on how to diminish the use of pesticides: they applied for support on this aspect but their applications were not selected. There is currently no tool identified to accompany the operators toward new agricultural practices that would reduce the use of PPPs. In addition the technical tools to protect the winegrowers from hail and frost are not eligible to the restructuring measure. For this reason, it is not possible to say that the restructuring measure contributes to the adaptation to climate change. In France, 20% of the vineyard is covered by the harvest insurance of the 2nd pillar. Then, the NSP support the wine sector which shows important environmental issues. Indeed, it is very difficult to grow wine without chemicals inputs. The objective in France is to reduce by 50% the volume on inputs used for vine growing. However, this objective will be difficult to achieve: the abandonment of herbicide will increase the production costs, and there is no alternative to fungicide for now. At regional level The Languedoc Roussillon is a region that faces directly the consequences of climate change with water scarcity. The great deal is to find grape variety clones tolerant to climate change, less water consuming and resistant to pests and diseases. Moreover, some grape varieties may require less inputs to be productive. For now, these kinds of grape varieties aren’t explicitly promoted in the NSP programme. However, the regional managing authorities stated that the use of Spanish, Greek and Portuguese varieties is encouraged by the individual restructuring plan, with the granting of premium to operators willing to plant them. From the expert’s point of view, it is important to specify that the wine policy serves very little the sustainable and eco-friendly production.

Coherence with the EU overall objective as regards public health and prevention of harmful alcoholic use The French Ministry of Health did not allow operations of prevention of harmful alcoholic use to be conducted by representatives of the wine sector. There is an important difference of opinions between the representatives of the sector and the Ministry of Health. The Ministry of Health do not want to exchange with the wine sector operators. In terms of public health and prevention of harmful alcoholic use, the association of interbranch organisations indicates that the organisation “Vin & Société” is funded by the interbranch organisations and organises “responsible wine parties”. At regional level, the interbranch organisation found the required information on the product sold informative enough, with the logo of the pregnant woman and the degree of alcohol.

Coherence on the EU overall objective of balanced territorial development At national level For the Ministry of Agriculture, the programme contributes to rural development by supporting companies located in rural areas and contributing to the competitiveness of growers. Concerning restructuration, the fact that most of the operations are included in collective plans ensure the coherence and relevance of the operation toward the strategy for the development of the sector set at regional level. The managing authority underlines that the suppliers of materials and agricultural machinery and tools also benefited from the investments measure. These stakeholders even used to complain when the applications for

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the measures are running late, since it impacts their economic results. It is very likely that the measure had positive spill-over effects on the maintenance/increase of employment in rural areas where these suppliers are located. According to the national representative of the interbranch organisations, the NSP plays an important role in the social life of the rural areas. Indeed, the wine economy is very important in some villages, especially in the Corbières. It also contributes to the maintenance of landscapes. The investments measure is particularly important to foster individual project and enhance individual success. The repression of frauds states that the wine sector represents 500 000 direct and indirect jobs. The National Institute for Designations of Origin is consulted on what regards land-use planning management. For every infrastructure project planned on the land of Designation of Origin, it intervenes to verify if the project complies with the objective of land protection. At regional level According to the regional managing authority, the fact that the investments measure targets different types of operators is positive, since it allows to reach even the producers that are in less favoured areas or facing difficulties. This contributed to prevent the decline of vineyards in remote/challenging areas. The OCM regulation with the premiums for grubbing up vines had great impact on land use and led to a decrease of vineyard areas in Languedoc Roussillon of more than a third of the total area under vines in 30 years.18 From an almost monocropping system, the premium for permanent abandonment of wine-growing led to a diversification of the agriculture in the region. However, since the last campaign of grubbing up in 2011, it was observed a stabilisation of the area under vines in the region. (see Figure 4: Restructured vineyard over the total vineyard area (1977-2017). The wine sector in the Languedoc Roussillon faces an ageing population with winegrower’s holdings that aren’t taken over by young farmers. The absence of young wine growers willing to take over holdings is a topical issue already pointed out by the French government. Hence, priority criteria towards young winegrowers and producers were established under the restructuring measure. However, the winegrowers interviewed explained that the aid does not allow young producers to set up, because of significantly high land purchase prices, and the region and France still face great difficulty to attract young farmers in the wine sector.

2.7.2 Coherence and complementarity of the NSP measures with corresponding measures

2.7.2.1 RDR measures with similar objectives The RD measures implemented by the Rural Development Programme in France can provide support to wine growers with objectives close to those of the NSP. Many measures were identified as complementary when overlapping is avoided.

Measure Measure Content Support for information and promotion M 03 – Quality Sub-measure 3.2 – Type of operation 3.2 - activities promoting the features of PDO/PGI scheme applicable Information and Promotion for certified products. to agricultural promotion activities quality products products Organic Wine producers’ organisations are eligible Investments support for protection equipment against climatic events, e.g. antifreeze tower. Small tangible investments for new farmers – Sub-measure 4.1 – Type of operation 4.1.1 Support is granted for the acquisition of M 04 – Physical Support of of the RDP – equipment lower than 15 000 € necessary to investments investments in Investments in holdings the setting up of new farmers. New agriculture holdings winegrowers can be eligible to the support. Support for new plantings of vine that cannot benefit from the restructuring measure.

18 Que deviennent les anciennes parcelles de vigne suite aux arrachages avec primes ? Résultats d’une enquête menée en 2012 (voir document papier)

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Measure Measure Content

New plantings of vine – Since 2016 and the Type of operation 4.1.1 introduction of the authorisation scheme, the of the RDP – Specific new plantings cannot benefit from the support scheme restructuring support anymore. To answer the dedicated to vine needs of new winegrowers to implement plantings by new competitive vineyards, the RDP of Languedoc winegrowers Roussillon provide support for new winegrowers

Type of operation 4.1.3 Support for the acquisition of equipment to of the RDP – reduce or stop the use of herbicides and/or Investments for phytosanitary products. effective quantitative Support for equipment to reduce the use of and qualitative water water: e.g. water-efficient watering system, resource management drip watering system.

Type of operation 4.2.1 Investments support for the construction, the modernisation and the arrangement of Sub-measure 4.2 – – Development of buildings. Support to agricultural holdings – investments for the Processing and Investments supported under the NSP are not processing, the marketing eligible. marketing and the development of agricultural Type of operation 4.2.2 products – Investments in Investments in wine cellars and wine-making processing and facilities are not eligible. marketing companies of agricultural products Under the Scheme for the Competitiveness and Adaptation of Agricultural Holdings, the wine M 06 – Type of operation 6.4.1– growers can benefit from the type of operation Development of Creation and 6.4.1 that grant support for the creation and agricultural Sub-measure 6.4 development of development of agritourism. The valorisation of holdings and agritourism activities PDO/PGI products is taken into account for the companies selection of the project. This support can help the wine producers to diversify their activity. Support is granted to innovative collective projects, notably within the frame of the Sub-measure 16.2 – European Innovation Partnerships (EIPs), that Support for pilot contribute to improve the competitiveness of projects and Type of operation 16.2.1 M 16 - agricultural sectors. Agricultural development development of - Support for collective Cooperation projects eligible are those focusing on varietal new products, innovating projects adaptation, implementation of new techniques, practices, processes products quality (processing and storage) that and technologies aim to improve the competitiveness of agricultural holdings. Source : RDP Languedoc Roussillon (version 1.2, 2015) Calls for projetcts: http://www.europe-en-occitanie.eu/web/Europe/4935-les-appels-a-projets-feader-du-pdr-languedoc- roussillon.php#.W46wzrgyWUk

2.7.2.2 Horizontal regulation for the promotion of agricultural products (Reg. (EU) No 1144/2014) Calls for proposals were launched in France to support promotion and information actions on agricultural products and their methods of production, implemented in and out of the EU. As for the NSP, the objective is

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to foster the competitiveness of the EU agricultural sector and increase the knowledge of EU consumers on the methods of production and the EU quality schemes and/or raise their awareness on responsible alcohol consumption. The eligible beneficiaries are interbranch organisations or producers’ associations. The 2018 work programme focuses on individual campaigns aimed at non-EU countries with the highest potential of growth. Within the EU itself, the EU will essentially co-finance campaigns designed to inform consumers about the various EU quality schemes and labels (organic, protected designation of Origin -PDO, protected geographical indication -PGI, traditional speciality guaranteed -TSG, product of EU's outermost regions). Actually, the measure was not used in France, except for a multi-countries programme on Granacha led by Spanish stakeholders. Promotion support under Reg. 1144/2014 is only granted to wine producers for specific actions, under specific conditions: - Operations targeting the EU market must promote wine in association with other agricultural products. - The message’s content must raise consumer’s awareness on risks associated with alcohol consumption or EU quality schemes. - Only producers’ associations or interbranch are eligible to the support. Individual holdings, companies or regions are not eligible. For these reasons, the measure has not been used by wine producers over the 2014-2018 period in France.

2.7.2.3 Synthesis of the interviews IQ 13.1 According to you, are there synergies/complementarities between the NSP measures and: - the corresponding measures in the RDP? Please explain. - the corresponding measures contained in the horizontal regulation on promotion measures of agricultural products? - the corresponding measures contained in other EU policies? Please explain. . At national level The national authorities indicate that the innovation measure of the NSP was not implemented. However, there is an innovation support in the RDR which can be used to support innovation in the wine sector (i.e. type of operation 16.2 to support innovative collective projects). Some regions would like to implement the financial instruments of the ESI funds to support innovation. This would however add complexity for the control and for the beneficiaries. . At regional level According to Regional authorities, the programming of the regional RDP is performed taking directly into account the measures and the operations supported via the CMO regulation in the wine sector. Public authorities working on the RDP have meetings with NSP Managing authorities to avoid double-financing. The NSP programme and RDP show more complementarities than overlaps. Indeed, while the NSP programme focus on restructuration and conversion of vineyards, the RDP programme focus more on the sustainable growing promoting organic production, the reduction of herbicides and phytosanitary products, the implementation of plant cover on the field, as many actions that aren’t supported by the NSP programme but are very relevant considering the winegrowers’ needs. The regional authorities also indicate that the restructuring measure fostered the development of the irrigation, which is a regional objective for the agricultural sector. It has been supported by the region and the NSP has contributed to develop irrigation in vineyards. Moreover, the possible investment supported by the RDP under measure 4 allow winegrowers to invest in different machineries than the one eligible under the NSP. Indeed, the machineries eligible under the RDP are for the reduction of the use of inputs, i.e. machineries for mechanic weeding.

IQ 13.2 Is the risk of overlapping avoided? . At national level According to the national authorities, the demarcation has been clearly established between the NSP and the EAFRD. Specifications were given at the level of each action or type of operation.

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The managing authority explains that in 2009, the NSP measure provided support for investments at each stage of the process, from the harvest to the bottling of wine. The investments for the transport and marketing were supported by the EAFRD. In 2013, the applications for investments support under the NSP were so important that the budget available was fully spent. Consequently, the measure was not opened in 2014. In 2015, the investments measure was reopened, but intangible investments were not eligible (e.g. marketing expenses) and support for buildings was capped (800€/m2). . At regional level The risk of overlapping is avoided during the conception of the RDP and NSP programs. The meetings, the coordination cooperation between the two bodies managing the two programmes seem effective. In order to avoid the risk of overlaps between the CMO regulation in the wine sector and the Rural Development Programme, in Languedoc Roussillon, the coordinator of the Rural Development Programme is instructed by the regional service of FranceAgriMer of the measures, the eligible operations and the potential beneficiaries of the NSP programme per measure. Moreover, a representative of the RDP unit from the RDP managing authority assists the meetings for the programming of the next campaign of the NSP programme.

IQ 13.3 Did you benefit from Rural Development Programme measures? If yes, which one(s)? The winegrowers in the region are not aware of the support available under the Rural Development Programme. Many of them think that the RDP is targeting other sectors.

2.7.3 Conclusion of the experts on the coherence of the NSP

The coherence of the NSP with other support scheme has been effectively managed. In particular, the NSP and the RDR together address the overall needs of the winegrowers. Whereas the NSP mostly helps to address the economic issues of the wine sector, the RDR grants supports to foster the environmental progress of the sector and fill the gap of the NSP. Indeed, specific measures of the Languedoc-Roussillon PDR specifically address the needs of the wine sector, not covered by the NSP. Notably, the PDR grants support for protection equipment against climatic events. Specific support is granted to vine plantings by new growers that cannot benefit from the restructuring support since 2016. Support is also available for investment in quantitative and qualitative water resources management tools. Then, whereas the innovation measure had not been implemented under the NSP in France, the PDR provides support for innovative collective projects to develop products / technologies and improve the competitiveness of the agricultural sectors. Therefore, the contribution of the NSP to the different CAP and EU objectives is mainly significant in what regards the economic objective of balanced territorial development. Indeed, the vines are often located in remote areas, or steep slopes where other agricultural activities are not possible. The measures of the NSP contributing to increase the competitiveness of the sector thus participated in maintaining the activity in rural areas, where wine economy is very important in the villages. The coherence of the NSP with environmental and health objectives is less obvious: the NSP does not provide specific tools to address the environmental issues faced by the wine sector and the information measures was not implemented in France to raise consumers’ awareness on the risks associated with alcohol consumption. The national authorities have indeed made the strategic choices to address these objectives using other support scheme.

2.8 Relevance of the NSP

2.8.1 Analysis of the needs of the sector

. At national level Table 21: SWOT analysis of the wine sector in France STRENGHS WEAKNESSES . France 1st position in the trade balance of wines In relation to market adaptation and spirits . Erosion of export market shares . International reputation of the French know- . Decrease of the national consumption how . Difficulty to adapt quickly to demand and markets, vines being a . Relation between wine and the representation permanent crop of France abroad . Gaps in marketing and communication, lack of sales forces, including . General quality of the wines and large variety of multilingual salespeople. The historical reputation of French wines is not

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wines products enough to face innovative and incisive competitors. . Capacity of some vineyards to generate high In relation to production income . Economic difficulties of some vineyards and a risk of disappearance of . Job-creating sector farms . Low weight of public aid in the sector's turnover . Generally limited margins on wine production. . Strong brands integrated into powerful groups . High and still rising production costs, in relation to the low productivity for Cognac and Champagne and to the constrained framework (regulations, PDO/PGI specifications) . Feeling of an unequal distribution of added value between producers and marketers In relation to the structure of the sector . Lack of vineyards specialized on specific productions . Difficulty for France to offer a complete range of wine products. . Difficulties in the passing on of holdings . Difficulty to innovate . Low readability (comprehension) of the system of geographical indications OPPORTUNITIES THREATS . Maintenance of the world consumption . Risk of an increasing competition between regions (compared to the . Increase of the demand in third countries competition between types of products) . Development of sparkling and rosé wines . Increasing competition of new producing countries (America, Oceania, . Development of the global exchanges of bulk etc.), but also European Union producing countries: Italy and Spain wine, an important remaining potential for . The likely effects of climate change development (7 countries today combine 60% . Sector-specific measures (wine CMO) questioned by future reforms? of global consumption). . Absence of ad hoc production for the entry-level segment . Significant growth of oeno-tourism Source: Plan filière Vin, 2017 (based on FranceAgriMer and Blézat) . At regional level Table 22: SWOT analysis of the LR wine sector STRENGHS WEAKNESSES

. Predominant wine sector in the region allows national attention and the introduction of specific resources and tool from public authorities . Victim of its old bad reputation. The region was renowned . Climate conditions and topography suitable for production a to produce poor quality wine in great quantity. good quality wine . Winegrowers in cooperative cellars that lack of guidance . Can benefit from the reputation of its country: France, a top . Not enough wine production sold in bottle. Predominance of leader country in the wine sector. bulk wine sold at lower price than the bottles. . Increasing reputation of the regional denominations at national level and abroad. OPPORTUNITIES THREATS

. Increasing demand for rosé wines

. Modernisation of the wine sector and introduction of new . Effects of climate change and lack of water for the irrigation equipment leading to an improvement of the production of vines along the value chain. Better quality . Increasing competition with third countries . Modernisation and introduction of new lines of products since the late 20th century: rosé and white wine Source: own elaboration, based on the interviews

The main needs of the sector are the following, in that order: 1. To access to adapted varieties that enable winegrowers to use less inputs and develop ‘green products’ that answer market expectations 2. To remove tariffs and non-tariffs barriers to facilitate the access to third countries’ market 3. To develop middle/low range products to offer a satisfying range of national products to buyers

2.8.2 Synthesis of the interviews

IQ 15.2. From your point of view, are the NSP measures suited/well designed to address the need of the wine sector at the EU level? national level? At regional level? . At national level

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All the interviewees insisted on the fact that having a program and budget specific to the wine sector is highly relevant. The management services and the representatives of the sector also insisted on the relevance of this approach compared to direct payment. From the point of view of the French Ministry of agriculture, the programme is very relevant to support the sector. The eligible types of operation are broad enough to answer the needs of the sector, and there has been no demand from the sector for other operations to support. The management service (FranceAgriMer) explained that the scope of the measures is already quite large. The main stakes for the wine sector at national level are to face the decrease of demand on the internal market, and the demand of higher quality wine. The promotion measure helps answering the first stakes by supporting the development of markets in third countries. At the same time, the restructuring and conversion and the investments measures enabled an increase in quality. The investment measure also contributed for some producers to development the logistics which is necessary to develop the selling in the third countries, such as bottling and labelling lines. Some stakeholders mentioned the opportunity to better support innovation and research. From the point of view of the Ministry, experimentation in France is carried out collectively and should be carried out by interbranch organisations, technical institutes, etc. which already get public support. The programme should better keep targeting economic aspects/investments. Besides support from the EAFRD is more interesting on some experimentation projects. . At regional level According to the regional managing unit, except for the promotion measure, the NSP is well-designed to address the needs of the sector: - The promotion measure is not suited to address the need of the wine sector. There is a specific French issue concerning this measure. The promotion measure is managed at national level. Thus helping, at local level, the operators to fill in their application forms becomes impossible for the regional service of managing authority. The regional service of FranceAgriMer suggested potential sources of improvement. The measure should be simpler, allowing less potential beneficiaries to apply to the measure and less eligible operations. - The fact that the investments measure targets different types of operators is positive, since it allows to reach even the producers that are in less favoured areas or facing difficulties. This contributed to prevent the decline of vineyards in challenging areas. The investments measure has also significantly contributed to the installation of young farmers setting-up “away from their family”. - The restructuring measure is relevant. For the 2015/2016 campaign, around 40% of the national budget was allocated to Languedoc Roussillon region, which represents the most important region for the restructuration measure. However, according to a producers’ organisation in Languedoc-Roussillon, the weaknesses related to the implementation of the NSP measures prevent to address the needs of the sector: - The NSP measures are very poorly designed, too complex to fill in an application form. - Lack of efficiency concerning the application procedure. No records of the past applications, need for the applicant to repeat the procedure every year instead of mentioning the things that have changed since the last campaign. - The support rate for the investment measure is too low. - The response of the regional authority takes too much time. When applying for a harvester, the delay cannot be too long otherwise, the applicant misses his harvest. - The promotion measure is very inadequately supervised. Many beneficiaries must reimburse the paying agency because they used the support for operations that weren’t eligible. Others must return the money because the supporting documents weren’t in order. As regard the restructuring measure, whose one of the objectives consists in encouraging the development of irrigation systems in vineyards, but the representative of the main geographical indication indicates that the issue is rather associated to the availability of water. According to it, only 18% of the vineyard in Languedoc Roussillon have access to the water. Then, winegrowers regret that the reconversion measure do not grant support for appropriate grape varieties: adapted to climate change, less water consuming. According to them, the list of the eligible varieties is too short. Concerning the investment measure, several winegrowers mentioned that the list of the eligible equipment is too restrictive and should expand to “movable” machineries, that can be used to sort the grapes on field. IQ 15.4. Are the budgets on each measure appropriate to address the needs of the sector?

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. At national level The national authorities think that the budget is well calibrate and corresponds to the absorption capacities of the sector. The involvement of representatives of the sector in the breakdown of the budget between measure is a factor which helps the good adaptation of the measures allocation budget, as well as the experience of the management services and their knowledge of the rates of erosions between applications and payments. . At regional level Concerning the promotion measure, it was mentioned by FranceAgriMer that the initial programmed budget for the coming 5 years was much higher than the current one. At the beginning of the reform, the promotion of French wine was identified as a key issue for improving the competitiveness of French wine and increasing the economic returns. However, because of an inefficient design and management of this measure, the budget was revised downwards even if the promotion of French wine remains a topical issue. As regards the investments measure, the rate of support is approximately the same for small or large investments and the operators might have difficulties in investing in too costly operations (this is especially the case for cooperatives in Languedoc-Roussillon), because of a lack of budget. In 2016, 51% of the grant files were for investments below 250K€ while only 19% of them were for investment of more than 750K€. It was stated by regional authorities that some cooperative cellars had chosen to invest large amount of money even if they had to make a considerable loan, because they could not do otherwise. According to a local producers’ organisations, there are a lot of winegrowers applying for the investments measure and the yearly budget is entirely spent. The organisation also reported the low support rate under the investments measure. They requested a higher support rate that could better help the winegrowers in desperate need of economic resources. The representative of the main PGI of the region highlighted that the measures’ budgets had not been saturated in France, due to the complexity induced by the French implementation of the NSP. IQ 15.5. From your point of view, can the NSP and the scheme of authorisation allow for the increase of the wine production and consumption? . At national level All the stakeholders are in the opinion that the NSP, in particular the support to promotion in the third countries, can contribute to increase the consumption of French wines in the third countries. This is highly needed given the trend toward a reduction of the consumption on the national market. . At regional level According to the managing authority, the new authorisations scheme does not meet the initial expectations. The new scheme was designed to create a same juridical basis in all EU Member States for new plantings and better control of the national supply to have appropriate balance between supply/demand. Thus, the new scheme would allow to control the access to lands to limit too much competition between stakeholders (French and foreign) that had the intention to buy lands to develop wine activity. In France, it was feared that foreign people would buy French lands to develop wine activities and as a result would destabilise the market stability. The implementation of the vine plantings authorisations scheme has not prevented the increase of production. On the opposite, the demand for new plantings was very limited in Languedoc Roussillon, and for the few PDO/PGI that implemented a quota, this quota has rarely been reached (2 out of 7 informed). Table 23: List of quotas reached for specific Languedoc Roussillon PDO/PGI areas PDO / PGI Quota reached or not reached Corbières Not reached Corbières Boutenac Confidential Cotes du Roussillon Not reached Fitou Confidential Sable de Camargue Not reached Limoux Reached Minervois Not reached Linervois la Livinière Not reached Saint Chinian Not reached Vacqueyras Reached

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Source: INAO (2018) As a result, little change occurred since the implementation of this scheme. The scheme of authorisations had very little (if no) effects on the Languedoc-Roussillon production. In Languedoc Roussillon, the surface under vines is globally stable since 2011 and the yields is continuously decreasing. A winegrower interviewed highlighted that the increase of the wine production particularly comes with the increase in areas under vines. If it is possible for winegrowers already settled to buy neighbouring lands, it is very complicated for new farmers to settle or take over a holding if they have little experience. With the observed aging population in the wine sector, the abandonment of vineyards will have a direct impact on the decrease of production.

2.8.3 Opinion of the expert

Globally, the NSP is an adequate scheme to address the need of the wine sector for more competitiveness. The NSP is supporting well the restructuration of vineyards in the Languedoc Roussillon. The region gathers around 40% of the national yearly budget. However, the need considering the climate change is to find appropriate grape varieties tolerant to high temperature, dryness, and pests/diseases that come along with these changing climate conditions. It seems that the list of grape varieties eligible under the restructuration measure, both for collective and individual plans, does not adequately adapt to these needs presented above. (see also Theme 3: restrictions on grape varieties). The investment measure seems to work well. However, the eligible operations should be reviewed. Indeed, while the managing authorities state that there are too much eligible investments, the beneficiaries on the contrary state that other operations should be eligible. A need poorly covered, that was highlighted by winegrowers, is the support of new young farmers to settle in the wine sector. They mentioned the lack of support for the purchase of lands and that it was almost impossible for a new winegrower to earn a revenue from the activity the first years if not helped more than in the investments made. The NSP does not address adequately the need to promote French wine on international markets for several reasons: the management at national level is not efficient and the control procedures are complex. Notably, it is often not possible for the beneficiaries to provide all the documents requested. The promotion of Languedoc Roussillon wines is the major issue in the region, and this measure could have a great impact if better managed. Currently the budget spent under this measure does not reflect the actual need of the sector.

2.9 EU added value and subsidiarity

2.9.1 Synthesis of the interviewes

IQ 17.1. In your opinion, what would have been done (/how would have the wine sector been supported) at national or local level, in the absence of the EU NSP? According to all stakeholders, the absence of the EU NSP would have resulted in less investments in the sector. Indeed, from their point of view the NSP measures allowed to invest in project more important (in size, in cost) e.g. bottling lines, temperature regulator into winery, etc. The NSP measures enabled them to widen their prospects. IQ 17.2. From your point of view, did the fact that the support was provided to the wine sector in the framework of EU regulation create an added value? i.e. - it results in more effectiveness than if actions would have been carried out at national level only? - it is more efficient than actions that would have been carried out at national level only? - it creates more synergies between instruments and policies than actions that would have been carried out at national level only? According to the regional managing authority, it is very relevant to implement a harmonised scheme at the EU level to ensure a level playing field between the sector of the Members States. The subsidiarity is however necessary to allow Member States to adapt the EU scheme to the national context and specificities. However, according to local producers’ organisations the fact that the support for the wine sector is provided by EU framework make administrative procedures more numerous/important. It is observed a discouragement of winegrowers to apply for EU measures given the degree of details required to be supported.

IQ 17.3. Do you know of any specific cases in which a lack of flexibility in the EU framework has hindered the added value of the programme?

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According to winegrowers and representatives, the declaration of the area under vines involved in the grant file can be a problem. Indeed, the control bodies and managing authorities have different way of measuring an area and sometimes the winegrowers do not know exactly how much hectares he has as to inform in the application form. It is complicated to understand where the lack of flexibility comes from. In many cases, the lack of flexibility comes from the national application/interpretation of EU regulation.

IQ 17.4. Would you have any proposal of improvement in the sharing of responsibilities between EU and Member States:  Regarding the design of the measure?  Regarding the implementation of the programmes? Please specify which measure is concerned. At national and local level, the major request was about the flexibility on controls. All the administrations are in favour of an implementation through a risk analysis in order to better adapt the level of risk of fraud and to the money at stake. Other proposals concerned the sharing of duties between the national and the local/regional level.

2.9.2 Conclusion of the expert

According to the stakeholders interviewed, it is very relevant to implement a harmonised scheme at the EU level to ensure a level playing field between the sector of the Members States. The subsidiarity is however necessary to allow Member States to adapt the EU scheme to the national context and specificities. It is however unfortunate to note that, despite the EU framework, distortions of competition still arise from the different varieties / inputs available between farmers in the different MS. Then, harmonisation is still needed as regards the registration system on vineyards and the monitoring information transmitted by the MS to the EU to enable a proper assessment of the NSP scheme at the EU level. This would significatively help to assess the NSP effects in the different MS and highlight the positive effects of the scheme at the EU level.

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3. THEME 2: SCHEME OF AUTHORISATIONS OF VINE PLANTINGS

3.1 Synthesis of the interviews

IT 11.1 Do you assume that the new scheme of authorisations will impact the structure of the vineyard (in terms of distribution of varieties, type of wine, size of holdings, age structure of the vineyard), at regional level? at national level? Are there already evidences of such effects? . At national level The stakeholders had no opinions on how the new scheme of authorisations will impact the structure of the vineyard, given the short implementation period. Broadly speaking, the representatives of the PDO/PGI are afraid the new plantings could create distortion of competition. On the opposite, representatives of sellers and of producers of wines without PDO/PGI consider that the new system is not liberal and flexible enough to have a real impact on the production potential. . At regional level At regional level, according to the managing authority of the new scheme of authorisations of vine plantings, this scheme has little effect on the structure of the vineyard. In the Languedoc-Roussillon the area under vines is stable since 2011 with even a decrease between 2016 and 2017 after the application of the new planting scheme. (263 000 ha in 2017 against 268 300 ha in 2016).19 In Languedoc Roussillon, in terms of distribution of varieties cultivated and types of wine, it would have had a potential effect if quota were set at the level of PDO/PGI area. However, very few PDO/PGI managing bodies decided to implement quotas and the demand for authorisations exceeded the quota in few specific PDO/PGI areas only. Thus, the new scheme had little effects on the grape variety distribution, the type of wine, the size of holdings and the age structure of the vineyard.

IT 11.2 If so, do you assume that the new scheme of authorisations will result in a vineyard structure that will be better adapted to the markets expectations? Are there already evidences of such an effect? . At national level The new scheme is generally perceived as more complicated and less flexible than the regime of planting rights to adapt to the demand. In particular, the stakeholders at national and local level explained that the new scheme do not enable a precise monitoring of the authorisations of planting: for instance, the authorisation do not specify the type of wine to be produced on the plot, so that local producers’ organisations can less precisely pilot the evolution of the vineyard than before.

IT 11.3 Do you assume that the new scheme of authorisations will impact the economic value of vineyards? Are there already evidences of such an effect? . At national level Some stakeholders consider that the new system will limit the speculation on lands in vineyards. . At regional level In Languedoc Roussillon, the new scheme of authorisations will not impact the economic value of vineyards for the moment, because of little demands for new plantings. According to the regional authority, the previous scheme of plantings rights enabled the producers to make profits by selling their rights. It is not the case anymore. There is a common fear that Chinese investors would come and buy hundreds of hectares of vineyards.

3.2 Conclusion of the experts

Effects on the production potential: On one hand, it seems that the PDO/PGI managing bodies in France set strong limitations on areas available for plantings in their areas, to control the supply of wines produced under their denominations. On the other

19 Agroscopie, DRAAF Occitanie 2016-2017

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hand, for the majority of the areas considered, the demand for authorisations of plantings remains under the quotas. The quotas are under-consumed and there are still room for expansion at national/regional level. This is the case in Languedoc-Roussillon, where the new scheme of authorisations had no effect on the production potential. Very few winegrowers decided to expand their area under vines, almost all of the winegrowers rather had pull out old vines to plant new ones. The demand for authorisations exceeded the quota set in specific PDO/PGI areas only (e.g. Limoux).

Effects on the balance between demand and supply: As regards the quantity produced, the new scheme has little effect compared to the old system. In Languedoc- Roussillon, few applicants expanded their area under vines up to the limit set by the authorisation scheme. The major brake for the development of the supply is not the limitations set on plantings, but rather the maximum yield imposed by the PDO/PGI management bodies or the lack of water. As regard the quality (types of products), winegrowers adapted their production to market demand via the restructuring measure that allows them to plant new grapes varieties more adapted than the old one to the current consumers’ trend.

Effects on the competitiveness of winegrowers: The new scheme of authorisations did not impact the production volume or quality. It did not prevent neither winegrowers to make strategic choices to increase their competitiveness.

Limitations regarding the regional implementation of the scheme: A perverse effect was reported: to expand their vineyard area in other regions, some producers from Charente20 bought vineyards in Languedoc-Roussillon, grubbed-up the vines and replant vines in Charente, benefiting from the authorisations acquired.

20 Region where Cognac is produced

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4. THEME 3: WINE PRODUCTS DEFINITION, RESTRICTIONS ON OENOLOGICAL PRACTICES AND AUTHORISED WINE GRAPE VARIETIES

4.1 Detailed description of the implementation at Member State and regional level

4.1.1 Oenological practices

In France there are no additional restrictions at the national level concerning authorized oenological practices.

As specified in the regulation, France has defined the modalities of use of several substances, the modalities of authorization of enrichment methods and the modalities of notification of several practices: . As specified in the Annex I, Appendix 5 of Regulation (EC) N°606/2009, France has defined the modalities of use of Potassium ferrocyanide, Calcium Phytate and DL Tartaric acid in the article 18 of the decree n° 2012-655. . In addition, in the article 19 of the decree n° 2012-655, France defined that after a proposal from the wine producers organisations, INAO and FranceAgriMer, in the authorised wine growing areas (defined in the Appendix I of regulation (EU) No 1308/2013) when climatic conditions make it necessary, the enrichment by addition of sucrose could be authorised by order of the Prefect of the Region. This decree taken by the Prefect defined the limits of the authorized enrichment. For the vineyards localized in the French departments under jurisdiction of the courts of appeal of Aix en Provence, Nîmes, Montpellier, Toulouse, Agen, Pau, Bordeaux and Bastia, enrichment by dry sugaring is forbidden. However, it may be authorised by the French authorities as an exception in the abovementioned Departments, and France shall notify the Commission and the other member states forthwith of any such authorisations.

4.1.2 Wine grape varieties

In France, the authorised wine grape varieties that can be planted are determined at national level, and indicated in the Official Catalogue of grape varieties. This catalogue is the reference for grape varieties which can be cultivated in France. There are no regional specificities. However, it is important to specify that, under the restructuration and reconversion measure, not all the authorised wine grape varieties can be supported under the replanting activities and restrictions regarding the possible grape variety cultivated are provided by the PDO and PGI specifications. Registrations in the Official Catalog are made by order of the Ministry of Agriculture, following the expert opinion of the vine section of the Permanent Technical Committee for the Selection of Cultivated Plants (CTPS) 21. FranceAgriMer provides the technical secretariat for the vine section of the CTPS. To be authorised to propagate vine plant material, the grape variety must be registered in the National Official Catalog or the catalog of another Member State of the European Union. The Official Catalog of grape varieties include three different lists: - List A1 of vine varieties whose plants can be marketed within the European Union and which are eligible for the wine classification in France. - List A2 vine varieties whose plants can be marketed within the European Union but which are not eligible for the wine classification in France. - List B vine varieties whose propagating material can be produced in France only for export to third countries. To be admitted in the list B, the varieties have to respect the UE requirement laid down in article 81 of the Reg 1308/2013: to belong to the species or come from a cross between the species Vitis Vinifera and other species of the genre Vitis and is none of the following: Noah, Othello, Isabelle, Jacquez, and Herbemont. In addition, the varieties must fulfill the following conditions: to be recognize distinct, homogeneous and stable and to present an agronomic, technical and environmental interest. All these conditions are laid down in the French ministerial decree of the 9 of May 2016, modified by the decree of the 7 of March 2018.

21 http://www.franceagrimer.fr/filiere-vin-et-cidriculture/Vin/Appui-a-la-filiere/Normalisation-et-qualite/Bois-et-plants-de- vigne/Catalogue-officiel-des-varietes-de-vigne

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To submit a proposition of a new grape variety in the French catalog, the variety must meet the following conditions:  To be recognized as DHS (distinct, homogeneous and stable) through a standardized examination protocol conducted or on the basis of scientifically validated ampelographic description elements.  Be designated by a name meeting specific criteria, in accordance with the relevant rules.  A variety to be registered must also demonstrate a minimum of technical skills and performance, passing Assessments of agronomic and technological skills. The agronomic and technological skills assessments (VATE) are adapted to the type of use of the varieties and carried out in specialized experimentation centers or within production vineyards. These tests involving controls and repetitions are conducted at least on two representative sites, with distinct agro-climatic characteristics. In addition to agronomic and technological data, the characteristics to be evaluated are as follows:  the ability for vegetative propagation,  resistance to and for varieties intended for use,  resistance to disease (mildew and oidum) if the applicant claims such resistance.2223 The registration of a new grape variety in the “official national catalog of authorised grape varieties may require a complete set of experimental tests that may take time to perform. When data on experimental tests is lacking, the grape variety can be on a so-called “temporary ranking list” that allows the operators to provide the last experiments required to be on the “permanent ranking list”. While the grape variety is on a “temporary ranking” wine producers are allowed to commercialize the wine from the grape variety under wine without PDO/PGI.

4.2 Competitiveness distortions due to specific rules on oenological practices

4.2.1 Description of competing wines

At regional level, in the Languedoc Roussillon it is difficult to identify specific wines competing the LR wines. In the EU, Spain is the Member State competing the most with the Languedoc Roussillon region and more precisely the region of Castilla la Mancha. Their varietal wines are competing regional varietal wines but also French PGI wines such as PGI “Pays d’Oc” putting forward the grape variety on the wine product label. Climate conditions in Spain and South of France are similar and the production costs are lower in Spain, due to less costly phytosanitary products and less restrictions on the use of water. Among the main competing third countries are Australia and Chile on Asian markets, such as China and Japan, but also on EU markets such as United Kingdom. For these two countries, no specific PDO or PGI were mentioned as they do not value as much as the EU Member States the PDO/PGI quality scheme but focus more on promoting regional typicity (such as Adelaine, McLaren Vale, Clare Valley etc.) . “The sector has traditionally been opposed to any form of ‘’ system largely due to a misunderstanding of that term” associated to overly bureaucratic, non-competitive European appellation system which imposed strict quality controls.24 The concept of PDO was antithetical to the market-based philosophies that predominated policy formulation in Australia when its GI system was established.25 In Australia, the main difference in terms of production process concerns widespread use of irrigation and soil conditioning and not oenological practises.

22 https://www.geves.fr/expertises-varietes-semences/vignes/inscription-des-varietes/ 23 http://www.franceagrimer.fr/filiere-vin-et-cidriculture/Vin/Appui-a-la-filiere/Normalisation-et-qualite/Bois-et-plants-de- vigne/Catalogue-officiel-des-varietes-de-vigne 24 The Next steps forward for protecting australia’s wine regions, Vicki Waye and Stephen Stern, 2017 25 The Next steps forward for protecting australia’s wine regions, Vicki Waye and Stephen Stern, 2017

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https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Wine%20Annual_Canberra_Australia_2-27-2015.pdf

4.2.2 Datasets on competitiveness indicators

Table 24: Change in production costs of competing wines between 2008 and 2015 2008 2012 2015 2017 Varietal wines from Low Low Mid Mid Castilla la Mancha (but still lower than LR wines) Australian wines Low Mid (but still lower than LR wines) Great use of irrigation

Chilean wines Low Low Low Mid (but still lower than LR wines) Great use of irrigation and soil conditioning Sources: Based on interviews with regional stakeholders, the Global Agricultural Information Network (2015 Wine Annual) The production costs for Spanish wines are lower than the ones of French wine because of the widespread use of irrigation and soil conditioning with less costly inputs. The same observation can be done concerning Australian and Chile wines.

4.3 Synthesis of the interviews

4.3.1 Effects of oenological practices on marketing conditions for producers and traders

5.10 Did oenological practices as applied in your Member State/region/PDO-PGI territory help to improve the marketing conditions of concerned wines? . National authorities: According to national authorities, the main competition is on marketing and consumer perception, not oenological practices. The producers decide the contents of the specifications, in a concerted manner, without informing the consumers. However, some national authorities consider that all the EU rules have effects on the competitiveness because the consumer wants to know how is produced the wine. The EU frame, stable and recognized, is a strength because it’s a factor of insurance facilitating commercial relations and exports. . National representatives of the wine sector: For national representatives of the wine sector, the PDO/PGI system is to rigid and slows the adaptation to the market. For example, the specifications limit the use of some practices to reduce the alcoholic strength of wine products. Also, the EC has decided to integrate the aging in barrel in the rules on oenological practices, whereas nobody asks for it or rather people are against it, which makes no sense for the operators and bothers them. The clay eggs work the same way without being regulated. . Local producers’ organisations / interbranch organisations:

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The oenological practices applied in the Languedoc Roussillon are globally the same as in the regions of France, except for the enrichment practises. The increase of the sugar content is only allowed by adding rectified concentrated grape must. This question was considered not relevant by the local producers organisations.

IQ 5.11 Were oenological practices as applied in your Member State/region/PDO-PGI area more or less constraining than for main competing wines? . National authorities: At regional level, the fraud control services stated that the oenological practises were standard and the only exception was the enrichment with rectified concentrated grape must. Derogations were possible to authorize the use of sucrose, as long as the regional authorities approved it and the other Member States are informed. . Local producers’ organisations / interbranch organisations: According to national interbranch organisation, some practices should be authorised to reduce the alcoholic strength because it corresponds to the consumer demand. It has to be authorised through the OIV, it will be illogical to override the OIV. The Pays d’OC organization found it more restrictive to enrich the wine with concentrated grape must instead of sucrose and could lead to competition distortion. . Wine industries / wine growers cooperatives / wineries: No winegrowers mentioned too constraining oenological practices compared to other regions. The enrichment with rectified concentrated grape must was not explicitly mentioned as a more constraining practise than the adding of sucrose.

IQ 5.12 Are the decisions of the EC concerning the changes in marketing standards taken in a timely manner? Can you provide examples? . National authorities National authorities consider that the most important issue isn’t the frequency of the changes in marketing standards but the readability of the regulation which is separated in various parts (delegated, implementation...), with some modifications and recently without the correspondence table. In addition, the fact that the CLMO Regulation concerns other sectors too doesn’t help for the understanding of the authorities and the producers. . National representatives of the wine sector: The EC has decided to integrate the aging in barrel in the rules on oenological practices, whereas nobody asks for it or rather people are against it, which makes no sense for the operators and bothers them. The clay eggs work the same way without being regulated.

4.3.2 Effect of oenological practices on the safety and quality of the products

IQ 5.1 How do EU rules on oenological practices contribute to the safety of EU wine products? . National authorities According to national authorities, the restrictions of oenological practices, and in particular the use of additives and auxiliaries, permits to have wine products without toxic components. However, residual molecules from cultural practices aren’t controlled and could lead to safety issues. The safety is mainly ensured by the system of control around production processes.

IQ 5.2 Was there any major safety issue related to EU wine products in your Member State during the last 10 years? . National authorities According to national authorities, there was no major safety issue in France during the last 10 years. The fraud control services mentioned a safety issue pointed out by China, concerning plastic products and the risk of spread of phthalates. It was an international issue dealt with the OIV institution. Otherwise, the fraud control services state that the wine is a stable product and there was little risk of contamination. It is globally a safe product by its chemical composition with very little anomalies.

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IQ 5.3 How do EU rules on oenological practices contribute to offering a standard degree of quality for EU wine products? . National authorities According to national authorities, the French system of monitoring, control and certification ensures that each « category » of wine has the same level of quality all over the French territory (for example, for all PDO « grands crus » and all PDO « Premiers crus »).

4.3.3 Relevance and added value of specific oenological practices and restrictions on varieties

IQ 14.2 For what reasons were restrictions regarding varieties initially set up? According to a CTPS committee member, the initial goal of restrictions on grape varieties was mainly to ensure quality production.

IQ 14.3 Are the initial justifications for restrictions still relevant today? . Local producers’ organisations / interbranch organisations According to PDO/PGI interbranch, some initial justifications for restrictions may be still relevant today but some new justifications for restrictions are not: national authorities refuse to allow the inclusion to the national catalog of some wine grape varieties that are adapted to climate change, that require less chemical inputs and that are registered in the official catalog of other EU Member States. The reason of the ban of these grape varieties, according to the PDO/PGI interbranch, was to favour French research over foreign ones. . Wine growers: According to a winegrower, the quality of production remains on the top priority goals of French producers that must deal with an increased competition with international producers. IQ 14.4 Today, what are the issues at stake regarding the use of varieties in wine production? . National authorities FranceAgriMer mentioned that the pool of genetic resources for the production of grape varieties adapted to the regional conditions with a reduction of chemical inputs were ready to be commercialised.

. Local producers’ organisations / interbranch organisations Climate change: Some PDO/PGI unions reported several new characteristics regarding the varieties that should be used for wine production considering the new climate and social conditions in the Languedoc Roussillon region: - Increased temperature and dryness, - Water scarcity, - Increased risk of pest diseases, - Growing urban areas leading to land pressure. Because of these new conditions, it was reported essential to authorise new grape varieties that will be tolerant to increased temperature, resistant to the diseases that come along, less water consuming and requiring less quantity of chemical inputs. Competitiveness: Some local unions mentioned that national authorities decided to forbid some grape varieties that were authorised in other Member States (some grape varieties registered in the Italian Official Catalog). According the EU regulation, when a grape variety is registered on a National Catalog, other Member States are allowed to commercialise the grape variety. According to the union’s point of view, the reasons for France to forbid these kind of grape varieties is because of the consequences of allowing the commercialisation of such grape varieties for the French research. Because France does not have the patent rights on these grape varieties, they do not benefit from the commercialisation of the grape varieties. Since a lot of money was invested in French research to find new grape varieties adapted to climate change, if these new Italian grape varieties are authorized, the budget invested in French research would have been useless.

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. Wine growers : Some winegrowers mentioned the need to diversify their wine production by planting new original grape varieties to adapt to markets’ demand. In order to do so, some winegrowers mentioned the need to increase the number of wine grape varieties eligible for planting in the region under the restructuration measure.

IQ 16.4 What would be the consequences of applying strictly OIV definitions, rules on oenological practices and rules concerning authorised wine grape varieties in the EU? . National authorities According to the Union of wine trading companies, the European Commission tends to add more provisions regarding some oenological practises that are considered useless by operators. For example, according the Union, the European Commission decided to set unnecessary rules regarding the in barrels. For national authorities, there is no major objection to referring only to the OIV's recommendations as to the content (the authorities state that they do not pronounce themselves on the need or not to generalize the enrichment by addition of sugar). However, the EU Regulation provides obligations that are more effective than only recommendations, as provided by the OIV.

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4.4 Comments and conclusions of the expert

4.4.1 On the effectiveness of EU rules on competitiveness and quality

Today, the registration of a new grape variety in the “official national catalog of authorised grape varieties for french vitiviniculture” require a complete set of experimental tests that takes time to perform. It seems that because of lobbying pressure, some wine grape varieties cannot be used for wine production in France while they are registered on another Member State Official catalog for economic reasons. From the expert’s point of view, it is essential that grape varieties that address climate change issues can be cultivated by winegrowers for their wine productions. The oenological practises used in France and in Languedoc Roussillon are similar to the OIV practises. They aren’t considered too constraining or restrictive and aren’t an important driver of quality of wine produced. As mentioned by the fraud control services, the wine is a safe and stable product that is not subject to many risk of contamination. The EU rules concerning the safety of the products are adequate.

4.4.2 On the relevance of EU rules and their added value compared to OIV rules

EU rules are not fully relevant to the needs of the local sector regarding climate issues because they make possible for French authorities forbid the use of adapted varieties. EU rules have a low added value compared to the OIV ones, especially since Member States can apply stricter rules that do not appear relevant to the needs of the sector. For instance, in France, that does not allow some grape varieties to be used for wine production that are already used in other Member States.

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5. THEME 4: EU RULES ON LABELLING AND PRESENTATION

5.1 Description of the labelling rules applied at Member State and local level

5.1.1 Description of specific labelling rules applied in your Member State, region or main PDO/PGIs (including restrictions applied to wines without GI)

In France, in addition of the compulsory mandatory laid down in Regulation (EC) 607/2009, other specific labelling rules are applied in France, laid down in the decree 2012/655 : . the name of the bottler: in the case of sparkling wines, French term “producteur” can be replaced by “élaborateur” . Production methods : - Mention “aged in barrels”: a wine produced in France must have been fermented, and at least half of its volume must have been contained in these containers for a minimum of 6 months. . year and grape variety - Rule of 85/15: to be mentioned, the grape variety or the vintage must represent at least 15% of the volume (at least 1% in the EU regulation). Furthermore, 100% of the grapes must come from the PGI area (against 85% minimum in the EU regulation). - Mention of several grape varieties is authorized provided that the indicated grape varieties represent 100% of the volume. Grapes are indicated on the label in descending order of the proportion used and in characters of the same size. . Mention of vineyard competition awards: Only competition listed by the authorities can be mentioned and only on batches concerned by the award . Health mention: A health message for pregnant women, advocating the absence of alcohol consumption must be mentioned on the label. The regulation requires the appearance of either a pictogram or the following message: "The consumption of alcoholic beverages during pregnancy, even in small quantities, can have serious consequences on the health of the child"

In addition, some other optional requirement are authorised in France for PDO/PGI wines, detailed in the decree 2012/655 : . Name of an underlying designation of origin or geographical indication: Reference to an underlying designation is reserved to wines with PDO/PGI and under two conditions: - the wine must be produced exclusively from grapes harvested in this underlying designation; - this possibility is set in the PDO/PGI specifications. . References to an estate or other similar mentions: References to an estate (Château, Domaine, , Mas, etc.) are reserved for wines with PDO/PGI and under two conditions: - the wine must be produced exclusively from grapes harvested in the vineyards cultivated by the holding; - winemaking must be entirely carried out in this holding. - The mention “mis en bouteille à la propriété” can concern a PDO/PGI wine bottled in the holding or in the cooperative where the wine was vinified. - When two holdings were merged into a new one, the name of both can be labelled. . Restrictions applied to wines without GI: In France, National authorities chose to authorise operators to label on their wine products the vintage year and the grape varieties used. The use of these is subject to prior approval of the operator and certification of volumes marketed by FranceAgriMer. The approval of the operator must be requested to FranceAgriMer before any marketing. Authorized operators declare to FranceAgriMer before the start of each wine year the projected volumes to be marketed by grape variety or by vintage. These volumes are subject to certification and issuance of a certificate number. At the end of the campaign, the operator files a declaration of the volumes marketed during the campaign; these

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volumes are subject to the payment of accreditation and certification fees. In other words, the operators pay to label the vintage year and the grape varieties on their product. 26 Concerning the following varieties: Aligoté, Altesse, Clairette, Gewurztraminer, Gringet, Jacquère, Mondeuse, , , Riesling, , Sylvaner et Trousseau, when the address of the production area consists or contains a PDO/PGI, only the city postal code should be labelled.

5.1.2 Description of the system set up for controlling the labelling

The whole system of control of the wine supply-chain is detailed in the next theme of this report. Actors and procedures differ depending on the type of wine considered and it is difficult to separate the control of labelling from other steps in the supply-chain. Anyway some elements concerning labelling are presented below. The system varies depending if the quality of the wine (with or without PDO or PGI). Volumes under certification must be traceable from the production stage. If the authorized operator is not the direct producer of the volumes in question, he must nevertheless commit himself to control the traceability of his suppliers. As regards the control of non PDO/PGI wines with mention of grape or vintage, FranceAgriMer is the authority in charge of checking traceability, labelling and compliance with the regulatory conditions. Upstream controls of suppliers can also be implemented. The checks are randomly conducted by FranceAgriMer and concern between 5% and 20% of the authorized operators annually.27 Once wine is marketed, other control administrations (DGCCRF, DGDDI) may also be required to intervene according to their areas of expertise and exchange data to cross-check their information. Concerning the labelling, The DGCCRF, the fraud control service, may undertake controls, either following an annual control plan or after an alert given. The agents may control:  wines, at the distribution and export stage, to verify that they are certified and come from an approved operator;  professionals involved to verify if they do not substitute other wines for wines that have obtained certificates, or that they do not provide false documents. All of these checks aim at detecting fraudulent attempts to circumvent the certification scheme. According to interviews, special attention is given to deceptive marketing practices. A regular case is that an operator tries to sell a wine without IG with the appearance of a PDO/PGI wine. In case of breaches, the DGCCRF may demand the withdrawal from the market of wines presented under incorrect names of varietal or vintage. In the case of proven fraud, the findings, recorded in minutes, are transmitted to the judicial authorities for violation of the Consumption Code.28

5.2 Existing national data on non-compliance with labelling rules

The DGCCRF often carries out investigations to check the authenticity of the labels of origin on wine labeling to ensure fair information to the consumer. Even though the regulations are well respected (8% of non- compliance only), the investigators identified 110 cases of non-compliance, mainly labelling problems or even deceptive marketing practices. Conducted with the aim of meeting the wine sector control obligations provided for in Article 90 of Regulation (EU) No 1306/2013, the investigation confirms the need to complete checks on compliance with the specifications of the PDO and PGI specifications (controls carried out under the authority of the National Institute of Origin and Quality [INAO]) by the control of wines at the stages of production and marketing. Here are the main results: . Usurpations of Origin and - A litigation procedure for ‘deceptive marketing practices’ was initiated against a French merchant who had labelled more than 500,000 bottles of wine exported to China and that he presented as of French origin.

26http://www.franceagrimer.fr/filiere-vin-et-cidriculture/Vin/Appui-a-la-filiere/Normalisation-et-qualite/Vins-sans- indication-geographique-VSIG 27 https://www.economie.gouv.fr/files/files/directions_services/dgccrf/documentation/fiches_pratiques/fiches/vins-sans- indication-geographique.pdf

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- Aa "" was offered for sale on presentation media bearing the mention "Spanish champagne", in violation of the rules of protection of the appellation "champagne". . Mixtures of appellations and a substitution of vintage observed in several territorial departments - On several occasions, the investigators detected frauds, notably with mixtures of appellations misleading consumers on the origin of the products: PDO or PGI wines consisting of mixtures of several geographical indications (GI), or, in one case, incorporating wines without a geographical indication, or mixtures in different PDO barrels. - Fraud has also sometimes affected : for example, a professional substituted the 2010 vintage for the 2011, 2012 and 2013 vintages. . Dissembling surplus wine production under PDO - Excess production of wine under red PDO (118 hl) and white wine (44 hl) was marketed in red and rosé VSIG (by blending) by a special winery. - A cooperative cellar also concealed surplus production of white and rosé PDO in PGI.

Table 25: National DGCCRF monitoring and checks on wine sector in 2017

Operators controlled Control points Results

625 firms 1350 110 cases of non-compliance (8%)

Source : DGCCRF website29

5.3 Synthesis of the interviews

5.3.1 Effects of labelling and presentation rules on the adequate information of consumers

IQ 6.2 Do EU rules on labelling allow an adequate, clear and sufficient information on the products? . National authorities In terms of readability, the EC Regulation is ambiguous on the differentiation of PGIs and non-PDO/PGIs. For this reason, in France, it is forbidden to mention any geographical area or municipality name if it is protected, it is necessary to mention the postal code. One could imagine more flexibility with more consumer information. If the consumers were better informed on PDO/PGI schemes (logo, appellation), he would be able to make the difference with a wine without GI without risk of being misled by the place of production. EU rules on labelling are appropriately completed by the national Consumption code (based on the INCO Regulation) in terms of provisions to avoid confusion of consumers. According to the managing authority in Languedoc Roussillon, there is an issue associated to the mention of the country of origin of the wine product that could be made clearer on the label. For example, an entry-level wine sold under the brand “Vieux Pape” used to be made with French wine but finally came out by being made with Spanish wine: the change was not obvious for consumers. To see the indication of origin, the consumers have to turn down the bottle/bag-in-box. This case has been sanctioned as fraud but more generally, EU rules could require that the Member State of provenance appears more clearly on the label (with a minimum size for instance). . Representatives of the sector: Representatives of non-PDO/PGI wine producers argue that their labelling is much simpler than rules included in PDO/PGI specifications and thus much more understandable by consumers. For instance, the French consumer, who has a poor knowledge of varieties, often mixes up varieties and geographical origin. Indeed, the label is simplified with only three mentions: "Wine" + grape variety + "France", accompanied by a guarantee of constant quality provided by the brand (a mark = a taste). According to other PDO/PGI unions, allowing wines without GI to label the vintage year and the grape variety used for the production is unfair. Indeed, some PGI unions had invested in a strategy of a minimal label design

29 https://www.economie.gouv.fr/dgccrf/utilisation-des-indications-geographiques-aop-igp-secteur-vitivinicole

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highlighting the mention of the specific grape variety used, before rules allowed variety labelling to other wines. In that case, consumers might be misled if they buy the wine without GI thinking it is the PGI wine. IQ 6.3 Is the information provided sufficient as regards health warnings, alcohol content, calorie and nutritional aspects? . National authorities On the issue of nutritional information, the sector is getting organised to make a proposal, the authorities are not involved. The problem is mainly related to the inscription of the ingredients and the lack of transparency. However, mentioning ingredients would simplify other aspects such as chaptalisation: anyone could do what he wants as long as it is displayed. Furthermore, a specific French rule is implemented since 2006: it consists of a mandatory pictogram depicting a pregnant woman in a barred circle or in a message written as "the consumption of alcoholic beverages during pregnancy, even in small quantities, can have serious consequences on the health of the child ". This health message must be located close to the actual alcoholic strength30.

IQ 6.4 For foreign wines sold on the local market, do the languages used allow an adequate, clear and sufficient information on the products? No answer provided by interviewees given that this concerns only a minimal share of the total of wine products sold on the French market.

IQ 6.5 Is there any other type of information that would be necessary to add on the labels to ensure an adequate, clear and sufficient information on the products? . National authorities There is a growing concern of consumers about environmental and health impacts related to agricultural inputs. The only official label is the new “Haute Valeur Environnementale” (in English: High Environmental Value) label (assigned to farms based on the achievement of outcome indicators), but it concerns currently only 700 farmers. HVE label focuses on biodiversity and landscapes but it certifies the producer, and not the product. Organic production is increasing but it refers to inputs at the stage of grape production only. It was made a proposal to mention "natural" when vinified without input and with organic grapes. But the sector (PDOs) blocked the possibility. Some private labels also exist (like Terra Vitis a that brings together various practices that protects the environment). For the moment, in the EU regulation, there is no limit on residual pesticides remaining in the final wine product. There is currently strategic thinking underway in the sector because up to now, GI were not supposed to include environmental aspects. But a could win a dispute because it concerns the quality. There is currently a reflexion on an evolution of the French Rural Code. Finally, national authorities consider that the mention of the type of sucrose used for the enrichment of the wine could help the consumer in his choice.

IQ 9.1 To what extent do consumers understand the specificities of PDO/PGI labelling compared to non- PDO/PGI labelling? . National authorities: The consumer does understand that the PDO PGI wines have greater restrictions for production than wines without GI. However, in France, the EU PDO/PGI label is rarely used. The GI is indicated on the bottle in French.

IQ 9.2 Without labelling restrictions applied to PDO/PGI wines, to what extent would consumers be misled? . National authorities

30 https://www.economie.gouv.fr/dgccrf/Publications/Vie-pratique/Fiches-pratiques/Etiquetage-des-vins

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National authorities consider that operators producing wines without GI would try to valorise their products by any means possible in order to promote their wine. They would be tempted to add terms similar to the ones used for by PDO/PGIs or terms referring to type of holdings such as Château, Domaine, Clos, Mas. However, the PDO/PGI restrictions aren’t enough to avoid misleading practises. Indeed, many practises can be considered legal, according to the labelling rules set up in the Reg 1308/2013, but misleading the consumer. Thanks to the national consumption code based on the INCO Regulation 1169/2011, public authorities were allowed to report this kind of practises. An example of misleading practises not covered by the EU labelling rules is labelling the exact same picture than one of a specific PDO or PGI.

5.3.2 Effects of labelling and presentation rules on marketing conditions and fair competition between operators

IQ 6.6 Did the 2008 rules on labelling allow an increase in the quantity of production marketed/traded? . Representatives of the sector Non-PDO/PGI wines (self-called “”) represent 15% of French exports by volume. The change in rules has improved the competitiveness of EU wines for export. It is a category with + 10% in volume each year (although the total production is limited compared to the whole French wine sector). This is due to the creation of the ‘other wines’ category, previously known in France as ‘vin de table’ which had a negative connotation. The representative of “Vin de France” producers highlighted that this new category was allowing a high level of creativity compared to PDO/PGI wines: wine-designers know how to adapt the products to the taste of the consumers and the blending of from different regions offers creative possibilities to meet their expectations. As regards labelling and presentation rules, it also allows many innovations regarding the form of the label and of the bottle for instance. In comparison, the PDO sector can be considered as very traditional: specifications regarding labelling consist of a relatively strict framework that hinders market adaptation. But this is a voluntary choice of the producers.

IQ 6.7 Did the 2008 rules on labelling allow an increase in the value of production marketed/traded? . National authorities It created value according to the market. During the procedure requesting the recognition of the PDO, an economic impact analysis is requested. As regards the possibility of creating underlying geographical denominations, these are intended to become independent in the longer term. . Representatives of the sector In the opinion of the representative of non PDO/PGI wine producers, the guarantee of value from GIs is however not assured and value is mixed up with price by producers. GIs lead to lower volumes while the selling price does not necessarily increase. For that reason, the development of GIs might have led to a reduction in the income of wine growers. On the other hand, the creation of the ‘other wines’ category allowed strategic mid-range price positioning to complete the French offer. There are regions that have significantly switched toward non-PDO/PGI production, like or Languedoc, especially among independent producers. This has improved the competitiveness of EU wines for export. This category also witnesses + 10% value each year. Many traditional Burgundy houses now have mixed productions so as to be present in several segments. Large houses can play on both categories in a complementary way. Main assemblers in France are concerned: Castel, Vinadeis, GCF, Advini, LGI-Wines. However, it is difficult to obtain the actual number of producers of Vin de France because they officially produce grape for PDO/PGI wines (i. e. in the areas concerned). Grapes for PDO/PGI wines are finally transformed in Vins de France at the production stage. The name “Vins de France” is an element of international conquest (but also on intra-EU markets such as the Netherlands or the UK), when facing the competitors of the new world. However, France is efficient for the opening of new markets but loses shares thereafter vis-à-vis the new countries. On the Japanese market, French wines are 3 times more expensive than Chilean or Australian wines.

IQ 6.10 Do the 2008 rules contribute to ensure a fair competition between operators? . National authorities Even with new rules, it could still be observed deceptive marketing practices. The French consumption code complements the labelling rules.

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. Representatives of the sector Non PDI/PGI wines cannot be designated by their absence of GIs. Another labelling is necessary. Hence the decision to create the Vin de France appellation. Unfortunately, this name is not supported by any regulation. The battle is not semantic because within the VSIG, there are the wines of the Member States (MSW = Wines of Italy, wines of Spain, etc. and the wines of assembly of the European Union - EUW). The operators mark "Vin de France" because VSIG is not a consumer vocabulary. To present the category, they use the national denomination. The 11 prohibited varieties of labelling can be used anyway, without being mentioned. It is not really a problem because these 11 varieties represent fairly small market shares. IQ 6.11 In your opinion, what changes would be necessary in the labelling rules to ensure a fair competition between operators? . Representatives of the sector There is a need to requalify the VSIG category: a regulation is required which sets out the national names. According to regional PGI union, a change to ensure a fair competition between operators would be the refusal of the possibility to label grape varieties and vintage year on wine products without any mention to PDO or PGI. Indeed, some PGI union, have been promoting for decades the grape variety used for the wine production. Since wine without mention of PDO or PGI are now allowed to label the grape variety, the latter will directly compete with PGI wines. Moreover, the mention on the label of sugar added in wine should be essential according to the representative of a PGI of Languedoc-Roussillon. They even suggested to mention the list of ingredients in order to indicate clearly the different practices that can differ between the wine producers. The fact that producers of the South region of Bordeaux benefit from a derogation to add sugar into their wines has been quoted. Indeed, adding sugar is usually limited exclusively to Northern producers and given the reputation of Bordeaux wines, the consumers should know that they can contain sugar.

. Winegrowers For wine growers, it should be a more visible mention of the wine origin, in order to avoid any possible misunderstanding. The consumer that will buy a product should be fully aware that it is a French or a Spanish wine for example. IQ 6.8 Were the rules on labelling simple to implement? . Representatives of the sector Business structures vary a lot. It is a problem to include only the legal entity, the legal vision that does not take into account the evolution of the producing structure. . Operators: For operators, the labelling rules have been applied for decades now. One change in the rules leads to a recalibration of the labelling machine. Thus, the rules on labelling remain simple to implement for now.

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6. THEME 5: CERTIFICATION PROCEDURES, MONITORING AND CHECKS

6.1 Description of the local implementation of the rules

6.1.1 Description of certification procedures applied in your Member State and region

Certification of PDO/PGI wines

In France, the certificate is issued to the PDO/PGI managing organisation31 to operators who have identified themselves to the latter and who have obtained an accreditation issued by the certifying body. When operators require to file in an identification statement, the PDO/PGI managing organisation drafts an internal evaluation report including: - an identification sheet which specifies the identity, the activities and the cellar (s) of the operator, - a commitment to respect the provisions of the specification (s) and to accept the controls as well as to bear the control costs, - a description of the production tool, - an updated parcel survey. The accredited certifying body, chosen by the PDO/PGI managing organisation, analyses the compliance of the operators with the PDO/PGI specifications before issuing the accreditation. After reception of the Identification Declaration, and additional documents (including the internal evaluation report) sent by the PDO/PGI managing organisation, the certifying body carries out the necessary documentary and / or on-site verifications to issue the operator’s accreditation. In the event of major production modifications, a new accreditation procedure is initiated. Depending on the PDO/PGI, a new accreditation procedure may be initiated after a certain period of activity suspension by the operators.

Control of certified operations Once the accreditation is delivered to an operator, the latter is subject to control according to the PDO/PGI control plan. After consultation of the PDO/PGI managing organisation, the control plan is elaborated by the control body together with the PDO/PGI managing organisation and validated by the INAO. The control plan and the PDO/PGi specifications are provided at the same time before being approved by the INAO. Indeed, each PDO/PGI specification must be controllable. The proportion of operators subject to controls depends on the operation controlled. For several operations, only less than 10% of operators may be annually controlled, while for some operations, such as organoleptic tests on bulk wine to be exported, almost all the operators (if not all of them) are controlled. Thus, not all the operators under PDO PGI are annually checked.

Certification of wines without PDO/PGI Wine without PDO/PGI can mention the wine variety and the vintage on the label, only if the wine is certified. In France, this EU rule is framed by the decree n ° 2010-1327. The approval of the operator must be requested to FranceAgriMer before any marketing. Authorized operators declare to FranceAgriMer before the start of each wine year the projected volumes to be marketed by grape variety or by vintage. These volumes are subject to certification and issuance of a certificate number. At the end of the campaign, the operator files a declaration of the volumes actually marketed during the campaign; these volumes are subject to the payment of accreditation and certification fees.32

Export Accompanying documents In France, the export certificate ensures that exporting operators have been subject to controls matching the requirement of third countries. To avoid multiple certificate, public authorities designed a specific export

31 In France, these are known are Organimes de Défense et de Gestion (ODG). ODGs are set up for any PDO/PGI product, not only wine. 32http://www.franceagrimer.fr/filiere-vin-et-cidriculture/Vin/Appui-a-la-filiere/Normalisation-et-qualite/Vins-sans- indication-geographique-VSIG

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certificate called the “Certex” built on the “codex alimentarius” standard. It can only be completed if the public authorities from the country of destination of wine batches have proved that it is required. It cannot be issued to satisfy the sole commercial requirements of the customers. This certificate is issued by the fraud services (DGCCRF), regardless of the type of food product. The certificate is separated in two parts: - the first part, signed by the operator concerns the lot, - the second part, signed by the DGCCRF, concerns the operator.

By giving the permission to public authorities from third countries to ask for this specific export certificate, French operators feared that foreign public authority may require systematically this “Certex”. It would imply from the operators the provision of additional analyses and more time before emitting the wine batch to be exported.

6.1.2 Description of monitoring and checks procedures applied in your Member State and region

The risk of fraud exists at each step of the supply-chain (plantation, production, circulation): 1- Computerized vineyard register: first there is the obligation for the Member State to keep a computerized vineyard register (Casier Viticole Informatisé, CVI). Initially, any farm must report to DGDDI. The registration is done with the attribution of a number of CVI to each winegrower, paired with a firm number (known as SIRET in French). Depending on the characteristics of the operator registered, the latter must comply with different declarative obligations (co-operator or harvester, PDO/PGI, variety, …). In France the computerized vineyard register gathers the harvest, production, stock declarations and information on planting declarations, planting rights, new authorizations for plantings and grubbing-up declarations. 2- A declaration must be made for all grubbing up and plantings, then must be crossed with the level of credit of the winegrower’s plantation authorizations (requested on the site of FAM). All procedures for plantings and grubbing-up must be declared online on a specific website called “vitiplantation”. The information related to these operations are synchronized on the computerized vineyard register. Some declarations are still on paper, under certain conditions. 3- Once a year, the winemaker declares his production. The sector needs rather fine data, more than what is required by the EC framework, particularly in terms of stocks and oenological practices. Everything is performed online. 4- Finally, there are administrative and on-site controls: a control of the plantation complementary to the one performed by the FAM is carried out by the DGDDI since the criteria for measure the vineyard area are different between both services. The control related to plantations (performed by FAM), concerns vine + ½ inter rank. It is a more objective method and complies with EU regulations. While the cadastral area is the one used historically by the DGDDI (including the headlands in particular). The difference in measurements is a problem but it seems too complicated to rationalize because the yields per hectare set in the PDO/PGI specifications are calculated in relation to this cadastral area declared in the computerized vineyard register. 5- As concerns wine product movements: the computerized Excise Movement Control System (EMCS) facilitates the monitoring movements of excise goods under duty suspension within the EU. The transport of a wine must be accompanied by a computerized accompanying document. Any traffic carried out within this framework must be covered by an Electronic Accompanying Document, which must be subject to an electronic clearance at destination. France has chosen to use the same type of accompanying document for internal circulation as in the EU. The operator declares the product information (grape varieties, PDO, vintage, but not organic). The regulations use the Excise Directive to regulate the flow of wine. All wine imported into the Union must have a VI1 document with an analysis report made by an accredited laboratory and a certificate completed by the importer. This is the same approach as for production.

In France, the control system for wine products is undertaken mainly by two national authorities, depending on the step concerned: . The “Direction générale de la concurrence, de la consommation et de la répression des fraudes” (DGCCRF): its role is to contribute to the smooth operation and fairness of transactions, ensure economic protection and safety of consumers and compliance with legislation and regulations33.

33 https://www.economie.gouv.fr/dgccrf/dgccrf

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The DGCCRF has specific agents dedicated and specialised in the wine sector, which are in charge of : - administrative controls on labelling and registers - controls focused on practices, to identify fraudulent mixture (respecting PDO/PGI e.g.) or unauthorized oenological practices. It is organized at national (central administration), regional and departmental level: - The central level, in charge of national investigations coordinates the regional units, in charge of regional investigations, which coordinate the departmental works, dedicated to the control of operators (producers and distributors). This organisation guarantees the exchange of information between the central administration and the regional offices and between regional offices of different regions. - The regional level, called “Brigade for the investigation on wines and spirits” are defined per wine area and represent 47 full-time employment. Each regional office has a specific organization and competences according their local wine sector (Bourgogne Franche-Comté office is more specialized in PDO/PGI wines than the Languedoc Roussillon office). In case of very specific issue, one regional office can have the benefit of the specific skills of another region. The regional authorities are in charge of: - subsector analyses for all agri-food products, defined at national level, - controls after denunciation, - control on the market of commercialised products, following a risk analysis procedure: annual targets are outlined in the National Survey Program (PNE). The PNE specifies the risk analysis to apply to identify operators which have the more sensitive practices. This analysis takes account of the evolution of the sector and the regulation, the results of previous investigations, emerging issues and the expectations and concerns expressed by the stakeholder34. This risk analysis leads to the frequency of control of each operator identified o “High risk” : the operator will be controlled every year o “Average risk » : the operator will be controlled every 2 to 3 years o « Low risk » : the operator will be controlled every 5 years

Table 26: Types of controls performed by public authorities

Type of control Regional Office (Brigade for the investigation on wines and spirits)

Administrative control on registers Control of first placing on the market of the product (Vineyard Register, compulsory Controls after denunciation (depending of the fraud denounced) declarations, accompanying document) controls after denunciation (depending of the fraud denounced). The central team is in Administrative control on labelling charge of controlling national operators Control of products on markets In situ controls controls after warnings (depending of the fraud denounced) Organoleptic controls are performed according to PDO/PGI control plans, Organoleptic control And also by DGCCRF following their regional control plan every year, or after warning In case of doubts concerning oenological practices, usurpation of PDO/PGI Laboratory analysis Random samples taken during randon inspections Source: interviews For each investigation, the controlling agents base their analysis on a panel of evidences studying the coherency between the different registers and declarations, literature and laboratories analysis. The DGCCRF works together with the French custom services (DGDDI), the INAO and FranceAgriMer through regular meetings to face specific issues and a liaison sheet which permits to follow the evolution of the issue and to exchange pertinent information. . The Direction générale des douanes et droits indirects (DGDDI) : the custom services analyse the coherence in the compulsory declarations provided by the operators and exchange data with FranceAgriMer and the DGCCRF. The job of the DGDDI is to record all the information and then check them with checks, administrative and on the spot. The DGDDI controls at the parcel level while the wine production stage is rather supported by the DGCCRF but some points overlap. At the level of oenological practices, the DGDDI intervenes only on the question of enrichment, in partnership with the DGCCRF. The declarations of the are made online on the customs portal (Prodouane), because the DGDDI was the first to set up a dematerialised tool for reporting on control points. It was subsequently shared with the DGCCRF, INAO and FranceAgriMer (for non PDO/PGI

34 RÉSULTATS 2017 DE LA DGCCRF

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wines). Controls are then coordinated by information exchange between the different institutions as well as common field checks.

As concerns the information system, France has developed the information system “Prodouane” (https://pro.douane.gouv.fr). The prodou@ne portal centralizes almost all the declarations related to wine production. Since 2017, the on-line declarations below are mandatory:  Harvest and Production declarations for winegrowers and wineries (e-procedure « RECOLTE ») ;  Declaration of the Cooperative production (e-procedure « PROD COOP SV11 ») ;  Declaration of the wine house production (e-procedure « PROD NEGOC SV12 ») ;  Stocks declarations for producers and traders (e-procedure « STOCK ») ;  Declaration of oenological practices (e-procedure « OENO »). As of January 2016, all requests for vine plantings are now made on a single and dematerialized service, common to FranceAgriMer and INAO: Vitiplantation. This offers a valid authorization tracking service in addition to the services available on Prodouane. The two systems are linked together. This tool is the same for all of France.

Wine inspectors have the power of seizure and inspection, even if is rarely used. They have access to the vineyard register in Prodouane and also the register owned by each operator. It is efficiently used for wine control purposes.

Use of isotopic data In order to meet the EC requirements, France carries out, each year at the time of the harvest, a data survey intended to be used as a reference for isotopic analyzes of wine products. To elaborate this data bank, the DGCCRF, in coordination with the DGDDI, carries out grape sampling in all French production areas. Vinified in the laboratory, these samples are then analyzed to determine the isotopic ratios of certain elements (oxygen for example). The comparison between these reference values and those obtained for the wines sampled during inspections allow the detection of addition of water or illicit enrichment for example. Analytical reference data can also be used to investigate on suspicions of falsification of geographical origin or vintage year. Each Member State, wine producer, has a quota of grape samples to be taken (400 for France). In addition, samples of water and musts are taken from the same sample sites in order to better adjust the interpretation of the analytical results. In total, 412 grape samples were analyzed by the Joint Service of Laboratories (Bordeaux and Montpellier) of the DGCCRF, and the DGDDI, as well as 383 samples of water. France has thus fulfilled its Community obligation by carrying out more than 400 samples.35

collaboration between MS applied in practice in case of suspicion of or detected non-compliance (mutual assistance on request) In case of suspicion of or detected non-compliance, French national authorities (DGCCRF – 4C) call-upon the other administration concerned. At the opposite, France could be called upon by another Member state administration. The networking is essential. If there is a common investigation, technical officers or regional officers are requested. The success of cooperation between another member state depends on the local organisation. Some member states, wine producers ‘one, have a specific organisation for wine control (such as France), with specific technical officers. In this case it’s quite easy to work together. In the member state where there’s no wine specificity (wine consumer but not a producer country), this kind of fraud isn’t considering like a priority so it’s harder to work with. It’s more efficient to work with other wine specialised authority.

6.1.3 Description of the control system related to NSP implementation

35 La banque de données isotopiques des produits vitivinicoles, DGCCRF, 2016

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The control of the NSP measures is well performed in France. The organisation in charge of management of the NSP and the control of its implementation is FranceAgriMer. It possesses offices at national and regional level. The level and types of control vary from one measure to another: - The promotion measure is managed and controlled at national level, - The restructuration and reconversion measure is managed at national level via an online system, and controlled via regional control agents going on-field before and after completion of the supported operations - The investment measure is managed and controlled at regional level. All operation are subject to an administrative control and on-field control after completion of the operations.

6.2 Existing national data on non-compliance and workload

6.2.1 Existing data on fraudulent manipulation of wine

Table 27: National DGCCRF monitoring and checks on wine sector in 2017 Administrative or criminal Actions of control Notifications Injunctions Operators controlled report statement 5000 11600 1630 403 196 Source : DGCCRF (interview) Since 2015, French producers face strong competition from Spanish wines at the entry-level of wine market, especially among varietal wines. These are mainly imported by traders. Alerts by professionals denouncing frauds on the origin of these wines have led the DGCCRF to conduct a specific investigation. These controls were carried out throughout the national territory and at all stages of the chain: producers, importers, traders and distributors. The checks showed that the regulations were correctly applied in most cases. Serious deficiencies have however been noted, which may involve large volumes: - several cases of Spanish wines sold as "Vin de France" (so-called “francisation”), even by usurping a French IGP name, were noted, - deficiencies in the sales denomination on the invoices, which may lead to errors of mention of origin, particularly when wines are re-exported, - insufficient visibility of the mention of origin or misleading marketing practices (such as mentioning "bottled in France" or using symbols evoking France). Analyses of wine samples did not reveal any non-conformity related to the origin of the wines (grape variety, origin, vintage or use of pesticides forbidden in the EU). Table 28 : National specific investigation on Spanish wine imported in France, in 2016 and 2017

Year Number of visits Anomalies

2016 179 40 (22 % of operators visited)

2017 564 84 (15%) Source : DGCCRF website

6.3 Synthesis of the interviews

IQ 7.1 to 7.3 Is the certification procedure simple to apply? Please distinguish wines with PDO/PGI, wines without PDO/PGI and traded wines . National / regional authorities In France, there was no change in the procedure for accompanying documents due to the new 2018 Regulation. Generally, the regulations are too complex for wine growers even if guidelines are published to help them. Work is being done on administrative simplification, including: - no more declaration necessary when stocks or production are void - NSP support is not conditioned to declarations anymore, - simplification of the ‘AROC’ system in relation to the investment measure, The system remains very heavy for producers but this comes mainly PDO-PGI managing organisations themselves. Logically, PDO/PGI specifications lead to more important control steps. It is a deliberate choice of producer organisations to control production (through yield limits to be controlled).

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. National representatives of the wine sector The common opinion is that the certification procedure is simple to apply, even more with the online document which is time saving.

. Local producers’ organisations / interbranch organisations The representatives of the main PGI of the region has implemented a certification system very efficient. It relies on a control body that granted the certification in the best delays. Currently, the PGI management body takes in charge 80% of the controls, with the accreditation of the control body. 100% of the wine produced in tasted. This scheme of control is extremely efficient and reactive. It allows the certification of 500 to 600 000 hl each week. This is essential to position the PGI wines on the international market of varietal wines, which is very tense. Indeed, 48% of these PGI wines are sold on export markets.

IQ 7.4 When change occurred in the certification system, did it allow an increase in the quantity of wine marketed or exported? Nobody could answer this question since the certification system in France and in Languedoc Roussillon has remained the same for decades now.

IQ 10.1 Did you encounter any difficulties or problems in the implementation of monitoring and checks EU requirements? . National / regional authorities The regional authority indicates that control can be complicated to carry out as regards the investments measure. Indeed, in the case of investments relating to the construction of a building, it is not always possible to check whether the declared operations have been carried out (e.g. it is not possible to see whether the electricity has been realised once the concrete slab has been poured). Another difficulty mentioned by the regional authority arises from the changing rules. It is underlined that the rules have been changing each year36. It is necessary that the persons in charge of the controls know exactly when the file implementation has been done to check whether the specific conditions in force at that time are complied with. Many difficulties were also mentioned as regards the control of the promotion measure. The grant files are too complicated to control. For example, for events that the beneficiaries attended, it was mentioned that supporting documents were lacking. The promotion measure supports a too broad range of activities and make the control procedures complicated. . Local producers’ organisations / interbranch organisations As a whole, it was mentioned by the representative of a significant PGI that the authorities were overwhelmed with the number of files to control. This results in delays and lower quality of the administrative controls made.

IQ 10.2 Did you encounter any difficulties or problem in the implementation of the control system related to NSP implementation? . National / regional authorities The risk of fraud within the French wine sector is important since the sector recently became the 2nd French export sector after aeronautics. France is scrutinized by the trading partners (US & China), who ask for guarantees. The sector represents 500,000 direct and indirect jobs. For planting / grubbing up, control is relatively easy, both administrative and on-site. For the production fraud, it is more complicated because it is a question of identifying the possible excess of yields, production that the winegrower will try to cover up: the law says that the surplus must be destroyed, but in practice it is done by distillation or sold under another name. The introduction of risk analyses allows a more efficient control: a number of controls is not anymore fixed for each operator within a 5-year period, but controls are implemented according to a preliminary targeting. The use of sample analyses of the isotopic database gives no result (see part on fraud figures). Control is based on traceability. There is an administrative control (quantity / area), an on-site inventory control for 5% of

36 This would be mainly due to the introduction of the new implementing regulation in 2016 (Reg (EU) No 2016/1150.

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planted areas. By cross-checking the information, it is possible check the coherence of the declarations. This is why coordination between the various agencies is needed through information exchange and common on-site controls.

According to the regional authority, the penalties imposed to wine growers under the restructuring measures are disproportionate. Indeed, the amount to be paid is exceeding the difference between what has been declared and what has been actually done by the operators. It is a penalty that is conceived the same way as for penalties applied for other CAP supports. However, it must be noted that only 5% of the CAP beneficiaries are controlled, while 100% of beneficiaries of NSP measures are controlled. That’s why operators applying for the NSP measures shouldn’t be considered as fraud and the amount charged for reporting errors should only cover the difference between the support granted and what has been paid by the operator.

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7. LIST OF THE LITERATURE AND INTERVIEWS

List of the interviews

Organisation

MAAF, SERVICE DEVELOPPEMENT DES FILIERES ET DE L'EMPLOI (SDFE), Bureau Vin et autres boissons (BVAB) INAO FranceAgriMer FranceAgriMer FranceAgriMer FranceAgriMer FranceAgriMer OIV Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF)

Direction Générales des Douanes et Droits Indirects (DGDDI) ANIVIN CNIV Union des Maisons et marques de vins (UMVIN)

Direction Générales des Douanes et Droits Indirects (DGDDI) INTERVIEWS AT REGIONAL LEVEL FranceAgriMer FranceAgriMer FranceAgriMer FranceAgriMer INAO DIRECCTE – Division for competition, consumption, fraud control and metrology

DIRECCTE – Division for competition, consumption, fraud control and metrology Cave Puilacher Chateau Boisset Chateau Lascaux Mujolan PGI Pays d’Oc Sud de France Vignerons Indépendants Vignerons Indépendants ADASEA

Documents and reports collected Les chiffres de la filière viti-vinicole 2006/2016, Données et bilans, Données et bilans de FranceAgriMer, Octobre 2017 L’agriculture en région Languedoc-Roussillon - Portraits régionaux de l’environnement, Commissariat général au développement durable, Service de l’observation et des statistiques, Juillet 2015 - http://www.stats.environnement.developpement-durable.gouv.fr/portraits/NN_Agriculture_REG91.pdf Agreste, Memento de la statistiques agricole, Languedoc-Roussillon, Edition 2015, Novembre 2015 - http://agreste.agriculture.gouv.fr/IMG/pdf/R9115C02.pdf Agreste, enquête structure 2013 : Nombre d’exploitations, superficie agricole utilisée, volume de travail en UTA et production brute standard en France métropolitaine en 2013 - http://agreste.agriculture.gouv.fr/enquetes/structure-des-exploitations-964/enquete-structure-2013/ La viticulture, Agri’scopie Languedoc-Roussillon Midi-Pyrénées, CERFRANCE et Chambres d’Agriculture LRMP, 2016 - http://www.occitanie.chambre-

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agriculture.fr/fileadmin/user_upload/National/FAL_commun/publications/Occitanie/agriscopie2016_viticultur ep19.pdf Les chiffres de la filière viti-vinicole 2006/2016, Données et bilans de FranceAgriMer, Octobre 2017 Plan stratégique sur les perspectives de la filière vitivinicole à l’horizon 2025, FranceAgriMer, 16 juillet 2014 Bilan des marchés à la production 2016/17, Les synthèses de FranceAgrimer, VINS, N°48, Octobre 2017 Vins et spiritueux - commerce extérieur - bilan 2017, Les synthèses de FranceAgriMer, VINS, N°49, mars 2018 L’irrigation contribue à 18 % de la valeur de la production agricole en Occitanie, DRAAF website- http://draaf.occitanie.agriculture.gouv.fr/L-irrigation-contribue-a-18-de-la,2575 Exportations de vins produits en Languedoc-Roussillon – bilan 2015 : moins de volumes, mais mieux valorisés – DRAAF website - draaf.occitanie.agriculture.gouv.fr/Exportations-de-vins-produits-en Dossier de presse, Exportations de vins et spiritueux 2017, Fédération des Exportateurs de Vins et Spiritueux de France

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ANNEX 1 – DESCRIPTION OF THE NSP MEASURES

Table 29: Description of the measures eligible under the National Support Programmes Existing in Content of the Eligible measures Implementing conditions Type of aid the 2008 measure Wine CMO Support for information or Beneficiaries shall be professional organisations, wine producer promotion measures organisations, associations of wine producer organisations, concerning Union temporary or permanent associations of two or more producers, wines either (a) in MS inter-branch organisations or bodies governed by public law. Private to inform consumers companies are only eligible for Point (b) of the measure. about the responsible Support granted shall last no longer than 3 years for a given consumption of wine beneficiary and, for Measure (b), for a given third-country market it Max. 50% of the Promotion (Art. 45) and PDO/PGI or (b) in Yes can be extended for a maximum of two years if justified by the eligible expenditure third countries to effects of the operation. improve their competitiveness (in this Information in Member States: priority shall be given to operations case, only PDO/PGI concerning several MS / several administrative or wine regions / wines or wines with an several PDO and PGI. indication of the wine Promotion in third countries: priority shall be given to new grape varieties are beneficiaries or beneficiaries targeting a new third country. eligible). Support for MS that submitted the inventory of their Compensation up to production potential. Beneficiaries are wine growers, i.e. natural or legal person who farm 100% of the loss of Restructuring and Support can cover: an area planted with vines. revenue OR conversion of varietal conversion, contribution to 50% of Yes vineyards (Art. 46) relocation and Replanting of vineyard following a mandatory grubbing-up for health the costs incurred (75% replanting of vineyards or phytosanitary reasons shall be eligible under certain conditions. in less developed and improvements to regions) vineyards management techniques. Beneficiaries are wine growers, i.e. natural or legal persons who farm an area planted with vines. Support for total Areas concerned must be kept in good vegetative conditions and no destruction or removal negative impact on the environment shall result from the application Flat rate payment / ha of grape bunches still in Green harvesting of the measure. MS can restrict the measure according to timing of (not exceeding 50% of their immature stage, Yes (Art. 47) different varieties, environmental or phytosanitary risks, etc. the costs of removal reducing the yield of and loss of revenue) the relevant area to No support shall be granted in case of complete or partial damage of zero. the crops. Green harvesting support cannot apply to the same parcel for two consecutive years. Temporary degressive Mutual funds (Art. Support for the setting- Beneficiaries are wine growers or producers of wine products. aid covering the Yes 48) up of mutual funds Support period shall not exceed three years. administrative costs of the fund Financial contribution to the insurance premium, not Support for the exceeding 80% in case subscription of harvest Beneficiaries are wine growers. Member States may grant the of insurance against insurance safeguarding support through insurance companies as intermediaries under adverse climatic events producers’ incomes Harvest insurance certain conditions, but the amount of the support must be assimilated as natural after losses caused by Yes (Art. 49) transferred in full to the producer. disasters and 50% in natural disasters, other cases (insurance adverse climatic Member States must ensure that the support does not distort against losses caused events, diseases or competition in the insurance market. by any adverse climatic pest infestations. events / by animals, plant diseases or pest infestations).

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Existing in Content of the Eligible measures Implementing conditions Type of aid the 2008 measure Wine CMO Support for tangible and intangible Beneficiaries can be wine enterprises producing or marketing the investments in wine products, wine producer organisations, associations of two or Support dedicated to processing facilities more producers or interbranch organisations. small/medium-sized and winery Eligible actions are immovable property, new machinery and enterprises, with infrastructure, equipment, architect/engineer and consultation fees, feasibility maximum aid rate of marketing structures 40% of the eligible Investments (Art. studies, computer software and patents/licences/copyrights. and tools, intended to investment costs (50% Yes 50) Replacement investments are not eligible. improve the overall in less developed performance of the Support cannot be granted to operations benefiting from promotion regions, 75% in enterprise and its support. outermost regions, adaptation to market Priority must be given to operations likely to have positive effects in 65% in the smaller demands, as well as to terms of energy savings, global energy efficiency and environmentally Aegean islands) increase its sustainable processes. competitiveness. Beneficiaries can be wine enterprises producing or marketing wine Support for tangible or products, wine producer organisations and associations of two or intangible investments more producers. Research and development centres may participate Aid rate up to 40% of aimed at the and interbranch organisations may be associated with the operation. the eligible investment development of new Support is granted for tangible and intangible investments including Innovation in the costs (50% in less products, processes for knowledge-transfer for the development of new products, wine sector (Art. developed regions, No and technologies, processes and technologies, or other investments adding value at any 51) 75% in outermost intended to increase stage of the supply chain. regions, 65% in the the marketability and Priority must be given to operations likely to have positive effects in smaller Aegean islands) competitiveness of EU terms of energy savings, global energy efficiency and environmentally wine products. sustainable processes; including an element of knowledge transfer; and ensuring the participation of research and development centres. Aid paid to distillers that process by- Support for voluntary products into raw or obligatory alcohol of min. 92% by distillation of by- Beneficiaries are distillers that process the by-products delivered to volume. products of wine- distillation into alcohol with an alcoholic strength of at least 92% by By-product making. The alcohol A lump-sum amount volume, to be used exclusively for industry or energy purposes. Yes distillation (Art. 52) resulting from the covering the cost of supported distillation Support includes an amount to compensate the costs of collection, to collection of by- must be exclusively be transferred to the producer when relevant. product must be used for industrial or transferred from the energy purposes. distiller to the producer when relevant. Source: Agrosynergie based on regulations (EU) No 1308/2013, 2016/1149

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