The Pernod Ricard team were in London today (February 18) to flesh on the bones for their half year interim results which were announced last week.
Despite the positive headlines recently about Brazil becoming the sixth largest economy in the world and regular reports noting the importance of the BRICs in the expansion of the global wine market, foreign wine producers seeking to export to Brazil market face an uncertain few months.
Last Thursday, 15 March, the Brazilian Ministry of Development Industry and Foreign Trade (MDIC) publicly opened a consultation about the possibility of introducing "safeguarding" measures to protect national wine production from the waves of imported wine "attacking the Brazilian market" (Diário Oficial da União, Circular n° 9/2012, 15 março 2012, pp76-79).
The "safeguards" include a number of possible measures, all of which would have a detrimental effect on the market for imported wines:
• Raising the already high tariff on imported wines from 27% to 55% - a frightening, but possibly rather toothless proposition, given that the two biggest sources of imported wine, Argentina and Chile, would not be affected due to their membership or associate membership of the MERCOSUR economic community;
• Introducing country-by-country quotas (again excluding producers from MERCOSUR affiliated countries);
• Imposing a minimum price on imported wines;
• Making it compulsory to have a front-label in Portuguese on all bottles. With the exception of producers from Portugal, this effectively implies creating a label exclusively for the Brazilian market (something only feasible or worthwhile for larger foreign producers);
• Making it illegal to use such terms as "organic" or "biodynamic" on wine labels, even if these terms have been certified by an accredited international organisation, unless they have been certified by a Brazilian agency.
The circular has been lobbied by the Brazilian Wine Institute (IBRAVIN), the Brazilian Union of Vitiviniculturists (Uvibra), the Federation of Wine Cooperatives (Fecovinho) and the Wine Industry Syndicate of Rio Grande do Sul (Sindivinho) on behalf of large Brazilian producers and cooperatives such as Miolo, Salton, Aurora, Aliança, Don Giovanni, Garibaldi, Casa Valduga and Dal Pizzol.
The claims in the circular that imported wines "are causing serious damage to the national wine industry" are based on analyses of sales and production data covering the period January 2006 to December 2010. However, as the sources of data used in the circular are not stated, I am unable to verify the conclusions drawn or provide comparable analyses.
While some of the arguments made using this data may be factually true (the market for imported wines has indeed increased significantly in the last five years), the blinkered scope of the analysis does not take into consideration any positive knock-on effects that increased interest in imported wines may be having on the consumption of quality domestic wines, or the sometimes healthy influence that competition can provide. The wine world is full of examples where domestic production flourishes in the face of stronger imports. In New Zealand for example, the sizable influx of Australian red wines over the last thirty years has not prevented New Zealand from becoming a source of renowned Pinot Noirs. Nor has the strength of Champagne proved an insurmountable barrier for producers of English sparkling wine.