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Saturday, July 22, 2006

Fill Your Tank with Bordeaux?

Grape growers in many parts of the world are experiencing too much of a good thing. So much so that the European Union spends $624 million annually to convert wine into fuel alcohol for vehicles and factories. The term the EU uses for this is "crisis distillation," but it has become fairly routine. About one out every six bottles of European wine ends up being distilled. About a year's worth of wine is now in storage in Europe and likely headed for fuel distillation.

Europe's problem is not isolated. Encouraged by tax incentives and a growing world market for its brands, Australian farmers planted large amounts of vines. Now Australia vineyards are trying to get inventories back in line by sending non-branded wine to stores at the bargain basement price of $2 per bottle.

In the U.S. the grape supply is expected to be down 14 percent this year because of weather conditions around the country. Don't expect to see any shortages, but you may see some premium products go up in price slightly.

While a wine glut may give consumers some immediate price breaks, it causes headaches for winemakers and retailers. The challenge for the Europeans is multiplied by the fact that consumption in key domestic markets is down, while challenges from American, South American and Australian wineries continue to grow. The EU is pushing vineyards to make wine labels easier to read, similar to American labels, while they also push for vineyards to be plowed under. They are also encouraging vintners to make wines that are more accessible and less complex, pointing to the success of easy drinking wines from New World markets.

A recent report on the impact of global warming on traditional vineyard areas suggests that some of the problem could solve itself as hotter than normal growing conditions cut production totals. You could have fooled many non-U.S. vineyards that are swimming in juice.

Perhaps we all need to do our part to reduce the glut by cracking open an extra bottle of wine this week.

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