Cooperatives and Fair Trade Wine: Unraveling the Paradox

My previous blog entry (see below) presented a paradox. Fair Trade wine might be an effective “ethical consumption” good, I speculated, because wine is one of the few products where consumers routinely know something about production conditions (the who, what, where, when, how and why) and so might be motivated by ethical considerations, such as the equity of grower payments or environmental impacts.

But Fair Trade programs are typically organized through grower cooperatives and coops have a famously bad reputation for quality (see previous blog entry for details). So the paradox is that  while wine might be an ideal Fair Trade product from the consumer standpoint, the cooperative production model dooms it to failure because of low production quality.

Sad, if true.  But is it?

Re-Thinking Wine Cooperatives

It is time that we reconsidered wine cooperatives because the old stereotypes do not always hold. From a statistical standpoint, cooperatives are far more important than most of us suspect.  My guess is that more of the world’s wine is made by cooperatives than by the all the huge multinational wine corporations put together.

The Oxford Companion to Wine reports that over half of all French wine production is by cooperatives (caves coopératives).  About two-thirds of German growers are coop (winzeverein) members.  Italian cooperatives (cantina sociale — see the vintage wine poster above) are responsible for as much as 60% of total national output.  Similar high proportions are reported for Spain and Portugal.  That’s a lot of wine!

Since France, Italy and Spain are the largest wine producers by various measures, it follows that a huge proportion ( perhaps 25% to 30%) of the world’s wine  comes from cooperative cellars.  Gallo, by comparison, accounts for about three percent of world production, if the calculations I made a few years ago are correct.

Within this huge puddle of coop wine there is great diversity.  Certainly there is a lot of bad or mediocre wine. Reunite, the Italian cooperative famous for its sweet Lambrusco, is an easy target if only because it is so large and ubiquitous. Some people say that Reunite destroyed the reputation of  Italian wine in the United States in the 1970s with its low quality offerings.

But there are a lot of well-made cooperative products, too. A recent supplement to Decanter magazine, for example, highlighted a number of very successful Italian cooperatives, including San Michele Appiano and Cantina Terlano in Alto Adige and Produttori del Barbaresco in Piedmont. These cooperative make some of the finest wines in Italy, consistently receiving top marks (three glasses) from Gambero Rosso.

Ugly, Bad and Good

So why do some cooperatives produce fine wine and others make plonk — and which kind of wine will Fair Trade coops make?  There is no simple answer to this question because there are several different motives that drive cooperatives with correspondingly different results.

Sad to say, some European cooperatives find themselves organized around national and EU regulations that have until recently given special benefits to cooperatives.  These are subsidy cooperatives and they have had little incentive to quality produce wine because they have been insulated from market forces. Changes in EU wine rules should put these cooperatives on the endangered species list.

Then there the political cooperatives.  Many of the coops organized in the 1920s and 1930s were motivated more or less by socialist or communist political ideologies. Their desire to earn short run revenue, and to share it equitably, often conflicts with the long run need to protect quality and develop markets.  If solidarity requires that no member’s grapes be turned away, no matter how poor their condition, how can good wine result?

Market forces are forcing the political cooperatives to upgrade their standards, however.  Payments are generally no longer based on tonnage alone.  Now ripeness (potential alcohol) and other factors are also considered in many cases. It is a necessary step in the right direction.

Finally, there is a group that you might call the efficiency cooperatives. They are motivated by fundamental market factors rather than subsidies or grower solidarity.  This is a diverse group of winegrowers who share resources in order to be able to afford costly up-to-date technology, the services of skilled winemakers (including the controversial flying winemakers) and even marketing expertise.

The best of these wineries, like Produttori del Barbaresco, have created valuable brands that must be protected at all costs.  Quality wine is the objective, cooperation is mainly the means that allows small individual growers to reap some of the advantages of a large scale operation.

Back to Fair Trade Wine

So what kind of wine will Fair Trade cooperatives produce?  The answer is that some of it will likely be very good,  as I have reported earlier.  But just as there is no reason to believe that all cooperative wine will be bad, there is nothing to say that all Fair Trade cooperative wine will be good.  It will depend upon the motives and actions of the individual producers.  Fair Trade wine, in other words, will be like other wine. Or at least that is my guess.

And that’s too bad, because the advocates of Fair Trade products would love it if “Fair Trade” became a brand that consumers associated with quality (and perhaps it will be).  But being Fair Trade won’t be enough. This wine, like others, will have to earn a place on the table.

Note: Thanks to Martin Cubertafond at Sciences-Po in Paris for insightful correspondence on this topic.

3 responses

  1. My understanding is that alot of champagne is made by cooperatives. i’m not sure if this is the optimal structure but it works because champagne can only be produced in a limited geographical area. this prevents a race to the bottom because the price of entry is so high. i’m not familiar with the italian cooperatives you mentioned, but i suspect that they are in a similar situation. Do you think this will work in the ‘wild west’ where terroir is where you find it (or the marketing guys define it)?

  2. Thanks for the comment, Steve. I don’t know enough about the Champagne cooperatives. I think they quality key there might be the influence of the big houses that buy and blend the coop wines. More research required.

  3. that crashing sound you hear is the whole sickly crew of little winesnobs hurling their shoes, flutes and whatevertheydrinkfromthesedays at you for implying that the Big Houses have a positive influence on quality…

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