Creating Wine

The Emergence of a World Industry, 1840-1914

James Simpson

• Publisher: Princeton University Press
• Year: 2011
• ISBN:
  9781400838882
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Today's wine industry is characterized by regional differences not only in the wines themselves but also in the business models by which these wines are produced, marketed, and distributed. In Old World countries such as France, Spain, and Italy, small family vineyards and cooperative wineries abound. In New World regions like the United States and Australia, the industry is dominated by a handful of very large producers. This is the first book to trace the economic and historical forces that gave rise to very distinctive regional approaches to creating wine.
James Simpson shows how the wine industry was transformed in the decades leading up to the First World War. Population growth, rising wages, and the railways all contributed to soaring European consumption even as many vineyards were decimated by the vine disease phylloxera. At the same time, new technologies led to a major shift in production away from Europe's traditional winemaking regions. Small family producers in Europe developed institutions such as regional appellations and cooperatives to protect their commercial interests as large integrated companies built new markets in America and elsewhere. Simpson examines how Old and New World producers employed diverging strategies to adapt to the changing global wine industry. Creating Wine includes chapters on Europe's cheap commodity wine industry; the markets for sherry, port, claret, and champagne; and the new wine industries in California, Australia, and Argentina.

PART I

Technological and Organizational
Change in Europe, 1840–1914

FOR THOUSANDS OF YEARS wine has been widely produced and drunk in western Europe. Traditional preindustrial economies often had high levels of underemployment, which made the vine attractive as it provided considerable employment opportunities during “all seasons, to all ages and both sexes.”¹ According to the French historian Le Roy Ladurie, the “classic response of Mediterranean agriculture to a rise in population” was to “plant trees or vines on old or new assarts, thereby increasing the returns from agriculture by more intensive forms of land utilization.”² This essentially Malthusian vision assumes that output at best grew with population growth and implies little or no change in labor productivity that might have helped improve living standards.³ In fact, long before 1840 growers were also quick to extend their vines when grape prices increased and new opportunities to trade opened.⁴ Some of Europe’s most dynamic agricultural regions included Bordeaux and Champagne, which specialized in viticulture, and the key to their success, as the highly observant James Busby noted in the early 1830s, was the substitution of capital for land and labor. Yet in most regions prior to the railways during the second half of the nineteenth century, production remained labor-intensive, and the wine produced was very ordinary.

The production and marketing of wines in Europe were transformed beyond recognition in the period between 1840 and 1914. Improved production methods and declining transport costs led to more integrated markets, regional specialization, and a major increase in consumption in producer countries. The appearance of new vine diseases led to the need for cash payments for chemicals and pesticides. Wine shortages also increased farm gate prices, which encouraged the spread of commercial viticulture to new areas and stimulated a huge amount of scientific research on vine growing, leading in turn to higher yields. Unfortunately for wine producers, high prices also encouraged widespread adulteration, so that when domestic wine consumption recovered by the turn of the century, prices collapsed.

This part looks at the growth in output of cheap table wines in Europe, the impact of the vine disease phylloxera, and how the problems caused by overproduction and adulteration in domestic markets were resolved. The French market was central to events, as not only was it responsible for about a third of the world’s production in 1909–13, but it also accounted for 60 percent of world imports. The rapid spread of new vine diseases, such as oidium (powdery mildew), phylloxera, and downy mildew, was resolved mainly by French scientists, while the contributions of Chaptal and Pasteur marked the beginning of a proper understanding of fermentation and wine making. By the First World War a major distinction had developed between traditional and modern viticulture, with the former defined by growers using labor-intensive production methods and surplus labor to increase the size of their holdings, and the latter dependent on capital markets.

Chapter 1 looks at the nature of grape production and wine making on the eve of the railways. Chapter 2 examines the impact of phylloxera and the widespread changes in viticulture and wine-making technologies, while chapter 3 looks at the response of growers to overproduction, fraud, and declining wine prices at a time of rising labor costs. By 1914 French winegrowers had established a degree of political influence, which required the state to intervene at periodic intervals when adverse movements of supply and demand threatened growers’ livelihoods.

¹ Gasparin (1848, 4:595). In southern Spain in the 1920s, for example, cereals provided only 25 days employment a year, olives between 31 and 62 days, but viticulture between 44 and 237 days. The figures for cereals do not include land left fallow in alternative years. Extensive and intensive irrigation created 175 and 375 days employment, respectively (Carrión 1932/1975:324, 341–42).

² Le Roy Ladurie (1976:56–57).

³ Lewis (1978, chap. 8) argued that unlimited areas of suitable land and underemployed labor in the late nineteenth century resulted in the supply increasing without productivity changes, producing stagnant or declining living standards among producers of tropical farm commodities.

⁴ For example, the historian Pierre Vilar (1962), in his classic account of eighteenth-century Catalonia, argued that the expansion of local viticulture increased the demand for manufactured goods, helping to stimulate economic growth.

CHAPTER 1

European Wine on the Eve of the Railways

Wine-making is an art which is subject to important modifications each year.

—Nicolás de Bustamente, 1890:103

WINE WAS AN INTEGRAL PART of the population’s diet in much of southern Europe. In France on the eve of the railways, there were reportedly over one and a half million growers in a population of thirty-five million. High transport costs, taxation, and poor quality all reduced market size, and most wines were consumed close to the place of production. Volatile markets also forced most growers to combine viticulture with other economic activities. Alongside the production of cheap table wines, a small but highly dynamic sector existed that specialized in fine wines to be sold as luxury items in foreign markets. In particular, from the late seventeenth century foreign merchants and local growers combined to create a wide range of new drinks, primarily for the British market, and in the 1850s wine still accounted for about half of all Portugal’s exports, a quarter of Spain’s, and one-fifteenth of France’s.¹

The process of creating wine followed a well-determined sequence: grapes were produced in the vineyard; crushed, fermented, and sometimes matured in the winery; and blended (and perhaps matured further) in the merchant’s cellar; finally, the wine was drunk in a public place or at home. This chapter looks at the major decisions that economic agents faced when carrying out these activities. It examines the nature of wine and the economics of grape and wine production, market organization, and the development of fine wines for export before 1840.

WHAT IS WINE?

The Oxford Companion to Wine defines wine as an alcoholic beverage obtained from the fermentation of the juice of freshly gathered grapes.² Grapes are cut from the vine and crushed to release their sugars, which are then fermented into alcohol by the natural yeasts found on the grape’s skin. In expert hands and in favorable years, this simple process might produce an excellent wine, but until recently, quality in most years was often poor. Much of the wine produced was drunk with water, especially as this reduced the risks posed by water-borne diseases, which helps to explain the seemingly high levels of drinking in producer countries.³ In some regions resin, honey, or herbs were added to hide the deficiencies in wine making. There was also a long history of the use of more dangerous substances, such as lead and lead compounds, to balance the wines and give them a slightly sweet taste, but by the second half of the eighteenth century these additives had been correctly identified as the cause of severe abdominal pains (the colic of Poitou) and banned.⁴ Adulteration was carried out by any of several economic agents along the commodity chain wishing to gain financially from the illegal activity. For example, growers in the Douro on occasion used the skins of dried elderberries to give more color to port wine; the Midi wine producers added sugar and water to make “second” and “third” wines; Spanish wine merchants used industrial alcohol produced from potatoes to fortify their wines before exporting; and Paris retailers added water to increase volume.

A combination of urbanization, which implied that consumers no longer knew the origins of the wine that they drank; scientific progress, which had the negative externality of making it easier for would-be fraudsters; and greater consumer awareness brought about by the rapidly expanding local press led to the adulteration of food and beverages being a major issue in all countries by 1900. Therefore, although romantic poets appear never to have drunk a poor wine, one popular French saying of this time suggested that it took three to drink a bottle: one to hold the person, a second to pour it down his throat, and finally the victim himself. An Argentine joke had a wine merchant on his deathbed confessing to his son that wine could be produced “even” from grapes. National laws, such as France’s Griffe Law of 1889, might classify wine as being made from fresh grape juice, but additional legislation was used to control additives considered legitimate for the wine-making process, such as those required to increase sugar or acidic content, antiseptics such as sulfur dioxide, fining agents, or yeast cultures. Exactly what was permissible and what not varied both over time and between countries, and inevitably what was considered as adulteration depended on who did it and whether this information was made available to the consumer prior to purchase.

Wines are highly diverse and can be classified by their color (red, white, rosé); by alcohol content (table wines usually range from 9 to 15 percent alcohol); by sweetness; by age (young or old); as still or sparkling; or by whether alcohol has been added during the wine making (dessert wine such as port or sherry). For perhaps 95 percent of wine this type of classification is sufficient, but for fine wines the list is far too simple. The characteristics of a wine produced from a single grape variety such as cabernet sauvignon differ significantly according to the soil’s physical and chemical characteristics, hydrology, topography, micr...