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Cognac maintains course for new plantations
News , BNIC

Cognac maintains course for new plantations

Lifting the hood of the Interprofessional Business Plan, the representatives of the Charente vineyard intend to reassure on the new plantations envisaged. In particular with the trade's counterparties to share the risks of production.

In terms of the growth of the Charente vineyard, "there is a pilot in the plane. The risk is calculated. I believe that we are not mistaken" hammered Christophe Véral, president of the Union Générale des Viticulteurs pour l'AOC Cognac (UGVC), on 3 September at a public meeting in Mirambeau (Charente-Maritime). Between the fear of a turnaround in the markets and the desire to take advantage of current outlets, the winegrower audience is above all demonstrating the need to get to know the inter-professional tool which is the famous Business Plan. Until now, it has been a black box, with only a few figures coming out in dribs and drabs to justify a growth strategy. To answer the questions, the elected members of the UGVC are counting on transparency to convince of its strategy. Every three years, with each new presidency of the Bureau National Interprofessionnel de Cognac (BNIC), the Business Plan integrates the prospective agronomic and commercial elements provided by production and trade in order to match supply and demand in the medium and long term. Over three vintages, the tool calculates annual yields and adjustments to the planting area, with revisions along the way if "alert" parameters are reached. Due to export records, this operation currently results in the decision to achieve high yields (14.64 hectolitres of pure alcohol per hectare in 2019) and the planting of 10,000 hectares of vines by 2021 (an increase of +8% compared to the 76,243 hectares recorded in 2018).

331 million cols/year

Between climatic hazards, wood diseases and the environmental turn of the vineyard, such yields are only intended to compensate for the lack of current surface areas, specifies the UGVC. Its spokespersons are aiming for a yield of 12.5 hl AP/ha in the long term. This prospect is based on an envisaged annual growth of 3.1% of the Charente vineyard until 2033. This would bring the Cognac vineyard to 121,535 hectares to market 331 million bottles.

"Not a commitment"

"It's not a commitment to plant. Depending on the situation, we may not have to plant. If the alarms go off, we will adapt by running the Business Plan again. But without over-reacting" underlines Stéphane Roy, the UGVC Deputy Secretary General and Business Plan referent within the BNIC. Having worked for ten years to refine its prospective tool, the inter-professional association believes it offers a win-win system.

Counterparts of the trade

"In the French vineyard, there have always been two opposing strategies: either to make production scarce in order to increase prices, or not to try to limit it in order to make purchases more fluid and allow a maximum of large groups to invest in order to sell more and more expensively" explains Stéphane Roy. The UGVC is banking on the second approach, and its elected representative stresses that in return for this strategy, wine merchants must pass on their profits to the wine industry, without lowering prices. Without forgetting to support production in case of commercial difficulties.

In this regard, the UGVC has unveiled a measure to support trade which bears witness both to the relations of trust built up between the two Charente families and to the memory of the bitter discussions with other winegrowing areas on the 2019 quota for new plantings (vineyards worried about the risk of surpluses being spilled in the event of a Cognac crisis). Although operators in the Charente have a high rate of contractualization (more than 85% according to estimates), the challenge in the event of a commercial setback is not to reduce the annual yield set by the interprofession too much. As the trade tends to reduce it, this inflates the surpluses of the wine industry, which, due to a lack of cash, pours it into the white wine market.

The "rebound" mechanism

To limit this risk, the wine merchant undertakes to increase the yield calculated by the Business Plan from 1 to 1.5 hl AP/ha, in order to allow the vineyard to reduce part of its surplus and to be able to finance its production costs, but also its distillation costs for the climatic reserve. This measure should also make it possible to create a stock which will be mobilized as soon as the markets are once again in demand for Cognac. Called "rebound", the mechanism mentioned is only planned for a one-off crisis, as in 2008 with subprimes or 2012 with the Chinese anti-corruption law. This does not reassure winegrowers who have memories of the serious crisis of 1992-1997 on the Japanese market.

"We've learned the lessons of the past"

The current situation is not comparable to that of thirty years ago for UGVC spokespersons, who believe that markets are more diversified (China, United States...), while prospects are promising for many emerging countries (particularly in Africa), thanks to the involvement of large groups (investment in production and storage facilities, but also promotion on the markets). Without forgetting the argument of the Business Plan. "If we don't develop, we are sure to have a crisis. Just because we didn't succeed thirty years ago in expanding doesn't mean that we shouldn't do it now. We have learned the lessons of the past," emphasizes Stéphane Roy using the interprofessional tool. If there are pilots in the plane, maintaining its course will face many other practical challenges, the winegrowers fear. They cite the lack of trained manpower, the difficulty of access to land and the challenges of supplying plants as reasons for the success of the expansion.

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