The global wine crisis of falling demand is hitting hard in Europe, particularly France, where the government has launched a pay-out scheme to encourage wine makers simply to make less wine.
The EU-backed scheme, launched in January, hopes to see 32,500 hectares of vineyards uprooted by 2026. Backed by a budget of €130 million, the programme offers €4,000 per hectare to winegrowers who agree to permanently remove their vines.
“This is a global crisis,” said Mike Verseth, a retired economics professor at the University of Puget Sound in the US, who runs the blog The Wine Economist and has authored several books on the global wine industry.
“Falling demand is the real problem and there is not a single country or cause to blame for that. Different regions are reacting in different ways depending on local conditions, as you would expect,” he said.
In 2024, global wine consumption fell to a 60-year low according to the International Wine Observatory.
In Spain, without government incentives, the number of hectares of vineyards has been decreasing for years, at a rate of 1.5 per cent a year, according to COAG, one of the country’s principal agriculture syndicates.
In Castilla-La Mancha some vineyards are being replaced by crops offering more certain profits, such as pistachios.
The dip in global wine sales has increased longstanding tensions within the French wine industry and reignited anger towards imported Spanish wine. During farmer’s protests in 2023, French wine makers and grape-growers halted trucks at the border transporting Spanish wine and spilt it over the motorway.
“French winegrowers in the south have long struggled with falling domestic demand and rising imports that squeeze their margins, too,” Verseth said.
“The situation with all its tensions is magnified by the global wine crisis that is happening now. Wineries (in Europe and the USA) are closing, vineyards are being pulled out, and thousands of tons of grapes are being left on the vine. No wonder growers revolt.”
The French have a long history of importing stronger, cheaper wines to blend with French wines or to sell on their own due to the industry’s tight margins. Starting at the end of the 19th century, Algeria became France’s greatest supplier of cheap wine.
In the mid-20th century, the flow from Algeria to France was the biggest wine trade in the world. That ended when the former French colony gained its independence in 1962.
Since then, Spanish wine has to certain extent replaced Algerian wine as a low-cost option for French wine producers, Verseth said.
Oversupply has been the principal problem of the wine sector since the 1980s when overall wine consumption dropped just as European agriculture was producing excesses everywhere.
European Union policy has attempted to address the situation through a series of regulations and incentives – restrictions on new commercial vineyards and payments for distilling excess wine, or digging up vineyards. The policies aimed to realign the sector with the new reality and focus on producing quality wines over quantity.
Still, both France and Spain continue to rely on exports to absorb their excess production. Verseth told Brussels Signal that Spain increasingly relies on exports as domestic consumption has fallen far lower there than in either France, Italy, or Portugal.
Today, Spain exports as much as 60 per cent of its wine, most of it as bulk produce shipped out to other parts of Europe in tanks on trucks and sold at a bargain-basement price.
On average, Spanish wine sells for astonishingly low prices, considering its quality has come to rival that of France and Italy, even if it still lacks the international prestige of the world’s two most well-regarded wine-making countries.
In 2020, Spanish wine sold at an average price of €1.30 a litre compared to €5.50a litre in Italy, €4.71 in France and €2.80 for Portuguese wine.
A litre of Spanish bulk wine that cost the importer around €0.45 gets bottled in France and sold for €5.
France takes in around one third of Spain’s wine and other significant buyers include Germany.
Spanish wine experts consider Spain’s market position – low prices for relatively high quality – an “anomaly” but one that nevertheless comes with its advantages as it relies heavily on exports.
Spain can maintain this market position partly because it has lower wine production costs than France does.
“This is a global crisis and it is not very useful to point fingers at Spain or any other country as the cause of the problem,” Verseth said.
“Falling demand is the real problem and there is not a single country or cause to blame for that.”
