LET’S TALK ABOUT ORGANIC WINES AND ITS DEMAND
As the world moves toward a more conscious society, eating and drinking healthy and environmental awareness have become a norm. While these concerns were first oriented towards environmental concerns only, a growing group of consumers have embraced wider ethical issues including fair trade, animal welfare, workers’ welfare and more globally carbon footprints.
To be classified as “Organic Wine” the grapes must be sourced from a vineyard that follows organic viticulture utilizing naturally occurring substances.
The idea is to take the 'prevention rather than cure' approach to grape growing; creating a healthy bio-diversity where soil is considered paramount. The question that was on everyone’s minds and continues until today was if being Organic would be a fad that would die away.
The answer to that is not clear yet but there is a growing interest in consumers in Organic Products. As more consumers look for quality organic wines, more producers, throughout the world, are eschewing chemical and technological advances and focusing on classic growth and production methods to produce organic, biodynamic, and natural wines teeming with genuine flavor.
During the 5th International Academy of Wine Business Research Conference in Auckland, studies comparing organic and conventional wine showed that the positive attitudes and buying intentions that consumers have about organic food in general do not seem to extend to organic wine. There are possible explanations for consumers’ resistance to purchasing organic wine. Specifically, they consider the role that hedonic consumption plays in altering consumers’ willingness to support organic agriculture: wine is associated with taste and pleasure in consumer’s mind, but organic wine is associated with bad taste and therefore less pleasure. Besides, most organic products are chosen because of their expected benefits on health and in the case of wine, pleasure is more important than health, which does not seem to be a motive for choice.
According to a study carried out by the International Organic Accreditation Service Letis, organic wine consumption in the world market still maintains its growth margin despite the recent years of economic downturn. The consulting firm also highlights Canada as the market with the greatest growth potential for this type of wine, which is made using organic agriculture. In addition, most European countries, and Brazil have all registered continuous growth in consumption.
Canada, with a growth rate in wine consumption of 20 percent per annum, is the country with the greatest potential for organic wine sales, representing a turnover of around $2 billion per year. Equally, ever since the US implemented its Organic Law in 2002 to accredit these products, organic wine consumption has also grown by 20 percent per year. However, although it saw this figure drop to 5 percent during the most difficult years of the crisis, analysts points to a return to firm and positive figures in the near future. In the US, organic wine sales represent close to $26 billion per year.
As for the European continent, most countries registered an increase in consumption of wines made using organic methods of between 5 and 15 percent per year. Sweden registered the highest growth rate at 18 percent per year, followed by Holland at 10 percent, Denmark at 8 percent, Italy and Switzerland at 7 percent, and France and Austria at 5 percent.
Germany, the first country to invest in organic wine production together with France and the UK is one of the countries that generates most profits from this type of product. The UK is also one of the few countries which registered a drop in organic wine consumption; in this case of 12 percent owing to the fact that supermarkets withdrew the product for fear that commercial centres would be unable to sell it.
As for Latin American countries, the Letis study highlights the initiatives being carried out in Brazil to heighten awareness and encourage organic wine consumption, although currently this type of consumption represents very low figures in the South American continent.
EU and U.S. are the main export markets for Argentine organic wines. According to a research produced by Senasa, in Argentina there are 55 wineries that hold organic certification and most of them are located in Mendoza.
Gustavo Caligiore, owner and winemaker of the Homonymous winery in Mendoza, Argentina, commented to the magazineWine Sur that “Approximately, the consumption of organic wines represents 1% to 2% of global consumption. It is still a market niche. Some countries boast greater development and maturity, especially those from the European bloc, with low annual growth rates of 2% to 3%. Up to 2011, United Sates as well as Canada registered a dynamic growth in the consumption of organic wines. In the US, some sources speak of a 15% annual average growth rate between 2006 and 2011, reaching an amount of almost USD 200 million in sales.”
Also interviewed by Wine Sur, Pablo Dessel of the Vinecol winery, underlined: Brazil is an attractive market for this sort of product. Consumption is growing fast, and many shops and supermarkets are including certified organic wines. Dessel explained that as the World Cup in 2014 and the Olympic Games in 2016 arrive in the country, hotels and restaurants will be obliged to have organic products. This is why many Argentine wineries are targeting this niche market, taking advantage of the potential and proximity of Brazil”.
We interviewed Facundo Bonamaizon who is responsible for the Organic Vineyards of Chakana Winery in Mendoza, Argentina.
“More developed countries like Canada, Germany, Japan and US tend to consume larger quantities of Organic Wines. It´s demand has been constant during the last years.”
Facundo doesn´t think that this is a trend. “Consumers are becoming increasingly conscious of what they eat or drink, they take care not only of their health but also the environment”.
The Organic product must have the same quality as the conventional one. Years ago being Organic allowed producers to decrease the quality of their products. For example, organic vineyards were full of weeds and diseases but not much importance was given to it because they were organic.
This caused the quality of organic wines to suffer because those vineyards were more sensitive to diseases. This resulted in wines that were worse in quality than a conventional one with the only difference that they were “Organic”. To Facundo, this wasn´t the fault of an organic production system but rather the responsibility of the team of professionals running the vineyard.
The production costs of organic wines are usually 15-25% more than that of conventional wines. “We have to pay attention to 2 important points related to production costs” mentioned Facundo. The first one is the organic “Certification”. Even though it is not obligatory for the product, it is a requirement for the label, the logo etc. It is an indication that you comply with organic procedures. The cost of certification is a percentage of what you produce and ranges from 1% to 1.5%. To that you have to add inspections, the cost of which is between ARG$10000 to ARG$20000 per year.
The second aspect is the Production Level. “This is a ‘hidden’ cost. Law puts limits to inputs and that impacts the yield. For example: a high-end vineyard costs ARG$20000 per hectare with a production of 80qq, this amounts to ARG$2.50 per kilo of grapes. If that is modified into organic an incremental cost of +25% can be considered. So, the cost would be ARG$25000 and the yield is not going to be lower.”
Finally, Facundo Bonamaizon said that when you export Organic Wines the retention tax is low.
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