I. Introduction
It is hard to imagine in the twenty-first-century global wine economy, but in 1960—more than 50 years ago—Algeria was the largest exporter of wine in the world—and by a wide margin: it exported twice as much wine as the other three major exporters (France, Italy, and Spain) combined. Moreover, it was the fourth-largest producer of wine in the world. In the 50-year period between 1880 and 1930, Algerian wine production and exports grew dramatically, turning the industry from nonexistent into the world's largest exporter of wine.Footnote 1
What is as spectacular as the rise of Algerian wine production is its decline. The fortunes of Algerian wine have declined dramatically. Today, Algeria no longer produces or exports any wine. In fact, current Algerian wine production reflects the situation at the end of the nineteenth century, when wine production was virtually nonexistent. Hence, over the course of a century, Algeria went from producing almost no wine to the world's largest exporter to again producing very little wine (see Figure 1).
Wine Production in Algeria, 1860–2010 (in million hectoliters)
An analysis of the causes of growth and decline of such an important economic sector should be of interest to everyone interested in economic history and development. In this paper, we document the rise and the fall of the Algerian wine industry and explain how they were caused by a combination of factors, including technological advances, the spread of vine diseases, and the associated migration of investors and human capital. Developments in the Algerian wine industry were heavily influenced by its impact on the French wine market and French regulations. Free trade with France stimulated the growth of Algerian exports when high import tariffs blocked imports from Spain and Italy in the late nineteenth century. However, beginning in the 1930s, French wine regulations halted the expansion of Algerian wine production. After Algeria achieved independence in 1962, French import restrictions caused a decline in Algerian exports and, in combination with state intervention and poor management in Algeria, caused the collapse of the Algerian wine industry.
However, there is an additional story—and one with major implications for today's wine markets. The growth of the Algerian wine industry had a crucial impact on French wine regulations. Even if the Algerian wine industry has effectively disappeared from the world's wine market today, the institutional legacy of the Algerian wine industry continues in France and in the world. The growth of the Algerian wine industry triggered the introduction of important wine regulations in France at the beginning of the twentieth century and during the 1930s. These regulations formed the basis of other regulations, which today affect a large share of global wine production. In fact, important elements of the French wine regulations triggered by the Algerian wine industry's spectacular growth are still present in European wine policy.
II. The Growth of the Wine Industry in Algeria in the Late Nineteenth Century
When France annexed Algeria in 1830, no one could have predicted that Algeria would become the world's largest exporter of wine and the fourth-largest wine producer (see Table 1).Footnote 2 Although wild grapevines have been present in Algeria since the first millennium BCE, when the Phoenicians and CarthaginiansFootnote 3 traded huge quantities of wine (and transplanted grapevines) across the Mediterranean Sea, the cultivation of vines never took off at a substantial rate. The Romans used this region as a granary for their empire. Later, under Arab rule, viticulture was not encouraged, as the Koran forbade alcohol consumption (Barrows, Reference Barrows1982; Bourget, Reference Bourget1930; Carlà and Marcone, Reference Carlà and Marcone2011; McGovern, Reference McGovern2009).
Main Wine Producers and Exporters from 1865–2004
Sources: FAO (2012); Insee (1951, p. 413); Pinilla and Ayuda (Reference Pinilla and Ayuda2002) .
It was only after France began to colonize the region that Algerian viticulture developed. The French colonists and settlers consumed wine because it was considered the safest drink and a “cure” for certain epidemic diseases such as cholera (Birebent, Reference Birebent2007, p. 67). Yet it took some time for wine production to develop. The first attempts to produce wine in Algeria were unsuccessful, and the settlers imported wine from France (Isnard, Reference Isnard1947; Isnard and Labadie, Reference Isnard and Labadie1959; Leroy-Beaulieu, Reference Leroy-Beaulieu1887).Footnote 4 It was only after the 1880s that the Algerian wine industry took off in earnest (see Figure 1). The remarkable growth after 1890 was caused by a combination of scientific progress and the spread of a disease in France.
A. Technological Progress in Wine Production
From 1830 to 1860, French settlers tried to plant vinesFootnote 5 in Algeria's warm subtropical climate, but winegrowers did not have the technology to produce drinkable wines in a hot climate. The problem with fermentation in hot countries is the high temperature reached in the tanks. If the heat exceeds 40 °C, sugar cannot be converted into alcohol, and fermentation stops. Refrigeration is needed to control the temperature in the tanks during the fermentation process, but refrigeration technology was not available at the time (Dervin, Reference Dervin1902).
Scientific and technological innovations changed this by making wine production in hot climates possible. Pasteur's discoveries in the mid-nineteenth century of the role of yeast in alcoholic fermentation were the basis for winemaking in hot climates. In the presence of high temperatures, yeast cannot survive, and fermentation stops unintentionally, leading to wine spoilage and bad wine (Robinson, Reference Robinson2006, p. 565).Footnote 6 Pasteur's discoveries led to an innovation in wine production called “cold fermentation,” which allowed the production of better wine in warm climates such as that in Algeria (Johnson et al., Reference Johnson, Nye and Franck2010). Advanced refrigeration systems were introduced to control temperature during fermentation in the tanks.Footnote 7 For instance, by the 1890s, the Baudelot cooler (previously used for brewing) was used for wine. The machine consisted of metal tubes through which a chilling liquid flowed (Isnard, Reference Isnard1947). While this technological breakthrough was crucial for the production of Algerian wine,Footnote 8 it was not the only reason for the take-off in Algerian wine production.
B. Devastation of French Vineyards
Another major factor was the devastation of French vineyards caused by the Phylloxera infection beginning in 1863 (Augé-Laribé, Reference Augé-Laribé1950; Lachiver, Reference Lachiver1988). Between 1875 and 1889, one-third of the French vine area was destroyed, and the remaining (infected) vineyards produced little wine. French wine production declined by about 70% (see Figure 2). This had major consequences for Algerian wine: it induced an inflow of skills in wine-making through the migration to Algeria of many broke French winegrowers, and it caused an increase in the demand for Algerian wine.
Wine Production in France, 1860–2010 (in million hectoliters)
Initially, and without much success, wine production was started by the soldiers and people with little knowledge of wine-making.Footnote 9 However, the wine crisis in France changed this. The ruined French winegrowers who immigrated to Algeria brought with them their technical know-how and expertise. Between 1871 and 1900, 50,000 families, many of whom had been producing wine in France and were hurt by the Phylloxera outbreak, immigrated to Algeria and took possession of 700,000 hectares of land (Isnard and Labadie, Reference Isnard and Labadie1959).
By 1890, average annual production in France had fallen to 30 million hectoliters, while consumption remained at about 45 million hectoliters. To fill this gap, France had started to use wine “adulterations”Footnote 10 and to import wine. French wine imports increased tenfold in a ten-year period: from 1.2 million hectoliters in 1865–69 to 10.6 million in 1875–79 (see Table 2 and Figure 3). France also decided to accelerate wine production in its Algerian colony to limit imports from Spain or Italy.Footnote 11
French Imports and Exports of Wine and Algerian Wine Production, 1860–1920 (in million hectoliters)
French Imports of Bulk Wines by Major Exporting Countries (in average annual hectoliters and percentage of total imports)
Source: Pinilla and Ayuda (Reference Pinilla and Ayuda2002).
To resist Phylloxera, two different types of new vines had been developed. This shift to different varieties, however, reduced not only the quality of French wine but also the average alcohol content. The first type of new vines resulted from grafting,Footnote 12 which consisted of attaching European vines to the roots of the Phylloxera-resistant American vine species (Gale, Reference Gale2011; Paul, Reference Paul1996). Grafting was preferred by wealthier wine producers in the Bordeaux and Burgundy regions.
The second type—hybrids—consisted of crossing two or more varieties of different vine species. Hybrids were the result of genetic crosses either between American vine species (“American direct-production hybrids”)Footnote 13 or between European and American vine species (“French hybrids”). Hybrids were the preferred solution for producers in many other regions. However, hybrid vines produced wines with lower alcohol levels—no higher than 9% or 10% (Strachan, Reference Strachan2007). In order to increase the alcohol content of their wines (and enhance the quality), these wine producers had to either add sugar or blend their wines with Algerian wines that had a much higher alcohol level—from 13% to 16% (Gautier, Reference Gautier1930). This increased demand for Algerian wines to blend with French wine.
A final element was the increase in the supply of capital for investment in Algerian agriculture. Until 1880, the Bank of Algeria had refused to provide credit for long-term investment in agriculture. However, the Bank's charter was due to expire in 1880,Footnote 14 and the Algerian government agreed to renew this authorization if the Bank increased its loans for agricultural investment. As a result, the supply of bank credit for vineyard expansion increased after 1880 (Isnard, Reference Isnard1949).
C. Expansion of Algerian Wine Production and Exports
The combination of these factors had a major impact on Algerian wine production. In 1883, the Algerian Conseil Supérieur du Gouvernement (Supreme Council of Government)Footnote 15 perceptively asserted:
Now, certainly, the situation is favorable: the vineyards of France are partly devastated, Algerian producers have a safe market outlet and their products, even if of inferior quality, are sold at sufficiently remunerative prices. (Algérie, 1883)Footnote 16
Beginning in 1880, vine plantations expanded massively and vines quickly replaced wheat as the principal plant in cultivation in Algeria. Between 1880 and 1900, the area under vines increased from 20,000 to 150,000 hectares (see Figure 4).
Algerian Cultivated Vineyard Area and Labor Force, 1860–1960
Production of wine followed quickly thereafter (Figure 1). From about 25,000 hectoliters in 1854, Algerian production increased to 200,000 hectoliters in 1872, and to 400,000 hectoliters in 1880. By 1900 Algerian production had reached 5 million hectoliters per year, and by 1915 it doubled to 10 million hectoliters.
This dramatic increase in Algerian production had major implications for international wine markets. In contrast to other wine-producing countries, in Algeria most wine was exported because domestic consumption was limited. Algeria transformed from a wine importing to an exporting country. Exports grew quickly, and their main destination was France.Footnote 17 Before this period, most French wine imports came from Spain (see Table 2 and Figure 5): Spanish exports to France totaled almost 7 million hectoliters in the late 1880s, followed by Italy, with exports of 1.5 million hectoliters. However, from 1890 onwards, Algerian wine exports began to supplant Spanish and Italian wines on the French market. By 1900, Algeria had become the number one exporter to France, and in 1905, it was effectively the dominant exporter, with from 4 million to 6 million hectoliters per year, while Italian exports had almost disappeared and Spanish exports had fallen to below 2 million hectoliters.
French Imports of Bulk Wines by Major Exporting Countries (in million hectoliters)
The huge increase in wine exports had major implications for the economy as a whole. At the beginning of the twentieth century, half of Algerian exports were of wine, which contributed almost one-third of the gross domestic product (GDP). The maximum was reached in 1933, when wine exports represented 66% of Algerian exports (Isnard, Reference Isnard, Jourdan and Carbonel1956; Isnard and Labadie, Reference Isnard and Labadie1959).
III. Recovery of French Production and Government Regulations in the Early Twentieth Century
Il n'est guère que le vin d'Algérie à être un thème électoral dans les départements viticoles du Languedoc-Roussillon. (Meynier, Reference Meynier1981, p. 13)Footnote 18
The reasons behind the rapid growth of the Algerian wine industry did not last, an outcome foreseen by the Algerian Supreme Council of Government in 1883. In the same speech where it explained the great opportunity for Algerian wine, it also expressed some warning for excessive optimism:
But an increase in plantations will lead to an increase in competition between the sellers and the current prices may drop. … This decrease would be even more marked following the recovery of the vineyards of southern France because our wines can be compared with the wines from this region … for this reason we must be very cautious. (Algérie, 1883)Footnote 19
These words of caution turned out to be prescient. During the 1890s, French vineyards began to recover, with new plantings that used grafting and hybrid grape varieties. Production also increased, and by 1900 it had reached around 65 million hectoliters, the level of the pre-crisis years (see Figure 2). Hence, by the beginning of the twentieth century, French wine production had recovered.
This recovery was also reflected in the fall of wine prices (see Figure 6). From the peak in 1880, average wine prices fell by more than 60% over the course of the next 25 years. Wine prices in 1905 were approximately one-third those in 1880. The most dramatic decline was during the 1890s, when French production began to increase.
CPI-Deflated Wine Prices in France, 1865–1959 (in old francs per hectoliter)
The declining prices resulted in demands by French producers to limit imports and wine “adulteration.” While French consumers (and some of the French producers that used Algerian wine for blending) initially welcomed imports and wine “adulteration,” French producers increasingly lobbied and put pressure on the government to stop them. As wine prices continued to fall, the protests by winegrowers grew increasingly intense. The winegrowers’ revolts in various parts of France included street protests and even violence. Winegrowers resorted to expressing their opinions through so-called actions directes, which included “mutinies, pillages, burning down of city halls” (Bagnol, Reference Bagnol2007; Martin, Reference Martin1998; Wolikow, Reference Wolikow2009).
A. Raising Import Tariffs
The first response of the French government was to increase tariffs on wine imports. Tariffs on Italian wine were increased from 5% to almost 50% in the late 1880s, when a trade war began between France and Italy (Becuwe and Blancheton, Reference Becuwe and Blancheton2012).Footnote 20 A few years later, in 1892, France also increased the tax on the importation of Spanish wines and Greek raisins (Critz, Olmstead and Rhode, Reference Critz, Olmstead and Rhode1999; Pinilla and Ayuda, Reference Pinilla and Ayuda2002).Footnote 21Figure 7 shows that import tariffs increased from 5% in 1885 to more than 40% after 1892. This increase in French tariffs led to a dramatic decrease in Spanish and Italian wine exports (see Figure 5).Footnote 22
French Import Tariffs on Bulk Wine Imports, 1877–1934 (in %)
In contrast, because Algeria was considered part of France,Footnote 23 Algerian wine imports were not taxed. Tariffs on Algerian wine imports had been removed in 1867, and the French government continued to allow tariff-free entry of Algerian wineFootnote 24. The French government reduced imports while supporting French winegrowers ruined by Phylloxera who had emigrated to Algeria. Moreover, France still needed extra wine to meet domestic demand—average French annual production was 30 million to 40 million hectoliters in the 1890s, compared with its annual pre-Phylloxera average of 50 million hectoliters (see Figure 2).
The increase in import tariffs reduced total imports and caused a substitution of wine imports from Spain and Italy to Algeria. Figure 5 shows that imports fell from more than 10 million hectoliters in the late 1880s to 5 million hectoliters in the early 1900s, mostly as a consequence of the decline in Spanish imports. Over this period, the importation of Algerian wine more than tripled, partially offsetting the reduced imports from Spain and Italy. As Figure 3 illustrates, French wine imports equaled Algerian production during the first two decades of the twentieth century. Moreover, after 1905, further increases in Algerian imports (from 4 million hectoliters to 6 million hectoliters) caused total wine imports (which now consisted mostly of Algerian wine) to increase between 1905 and 1915. This caused wine prices in France to continue to decline during the first decade of the twentieth century (see Figure 6).
Not surprisingly, with increasing imports and falling prices, French wine producers now pressed the government to intervene and stop the inflow of Algerian wine and its impact on their revenues. However, French wine producers were not a homogeneous group. On the one hand, producers from Bordeaux, Champagne, and Burgundy were upset that the influx of cheap wine would affect their “high-quality” wine market. They tried to defend their export markets and to ensure their “brand” against possible imitators or lower-quality wines. For instance, producers in the Bordeaux region were worried that wine produced outside the Bordeaux region could be sold as “Bordeaux.” On the other hand, producers of table wines, such as those in southern France, competed directly with Algerian winegrowers as they both produced large quantities of the same types of wines sold in France.Footnote 25
Both groups pressured the government to constrain the inflow of Algerian wine, but used different strategies—with different degrees of success. The first group tried to persuade the government to enact regulation that would protect them from all (low-quality) table wine, not just from Algerian wine. These producers and winegrowers were members of associations that had a great deal of influence with the authorities. For instance, in the Champagne region, three powerful lobbying groups existed: the Fédération des Syndicats de la Champagne (now called the Syndicat Général des Vignerons de la Champagne, the trade organization representing Champagne's grape growers); the Syndicat du Commerce des Vins de Champagne (now called the Union of Champagne Houses); and the Association Viticole Champenoise (AVC, the local Champagne trade organisation) (Comité Interprofessionnel du Vin de Champagne, 2003; Wolikow, Reference Wolikow2009).
Wine producers in Algeria or other French regions organized only later. Winegrowers in southern France organized the Syndicat des Viticulteurs (Union of Winegrowers) in 1887Footnote 26 and the Confédération Générale des Vignerons du Midi (General Confederation of Midi Winemakers—CGVM) in 1907. In 1912, the French settlers organized as well in order to protect their common interests, forming the Confédération des Vignerons des Trois Départements Algériens (CVA, the Algerian Winegrowers Confederation). The French settlers were called pieds noirs (black feet). They owned around 97% of the Algerian vineyards and produced almost 99% of Algerian wine (Isnard, 1954, p. 424; Meynier, 1981, p. 145).Footnote 27
B. The Introduction of French “Quality Regulations”
Consommateur français bois ce vin français. (Algerian wine advertisement)Footnote 28
In the early twentieth century, producer organizations in Bordeaux, Champagne, and Burgundy were successful in lobbying the government to introduce several “quality regulations,”Footnote 29 because they were heavily supported by political representatives of these regions who held key positions in parliament.Footnote 30
Birebent (Reference Birebent2007) and Strachan (Reference Strachan2007) argue that a particular event involving Algerian wine, known as the “Leakey Affair,” played an important role in the political discussions. Because it faced a surplus on French wine markets, Algeria was searching for new markets and attempted to promote Algerian wines on the British market. In July 1905, Charles Jonnart, the French governor general of Algeria, entered into a contract with James Leakey, a businessman based in London, to sell 50,000 hectoliters of Algerian wine in Britain. In newspaper advertisements, Leakey promoted Algerian wine as French wine, reasoning that “Algeria is now an integral part of France.” The advertisements also drew parallels with renowned wine regions in France such as Bordeaux and Burgundy. When word of these advertisements spread to France, French wine producers protested and lobbied the French Ministry of Commerce. They accused Algerian producers of inciting the deception and of producing “non-natural,” artificial wines.
Only a month after the Leakey contract went into effect, the law of August 1, 1905, on “frauds and falsifications” was passed, indicating the conditions for the production of a “natural” wine. Article 4Footnote 31 required that the wine sold had to clearly indicate the wine's origin to avoid “misleading commercial practices.” Article 16 of 1905 law explicitly stated that the law also applied to Algeria (Mérignhac, Reference Mérignhac1912, p. 268).Footnote 32
Other laws were introduced to protect the interests of the producers of these regions by introducing an explicit link between the “quality” of the wine, the region where it is produced (the terroir), and the traditional method of producing wine. In this way, the regional boundaries of Bordeaux, Cognac, Armagnac, and Champagne wines were established between 1908 and 1912, referred to as appellations.
These regulations in response to Algerian wine imports and low prices turned out to have long-lasting impacts. Not long after they went into effect, a new law in 1919 specified that if an appellation was used by unauthorized producers, legal proceedings could be initiated against them. Later, the restrictions grew tighter: a 1927 law placed restrictions on grape varieties and methods of viticulture used for appellation wine (Loubère, Reference Loubère1990). Finally, a law in 1935 created the Appellations d'Origine Contrôlées (AOC), which combined several earlier regulations: it restricted production not only to specific regional origins (through delimitation of specific areas) but also to specific production criteria such as grape variety, minimum alcohol content, and maximum vineyard yields (Simpson, Reference Simpson2011; Stanziani, Reference Stanziani2004). The 1935 law formed the basis of the AOC and Denominazione di Origine Controllata (DOC) regulations, which play an important role in today's European Union (EU) wine markets.Footnote 33
IV. Further Expansion in Algeria and More Regulations in France
This is a law of a very exceptional nature. … We believe it is, since the French Revolution, the legislation with the largest government intervention in the economy. This is … a planned economy.
—Mr. Jean-Ch. Leroy, General Counsel of the Appellations of Origin (Société de législation comparée, 1932)Footnote 34
The “quality regulations” protected the French producers of the Bordeaux, Champagne, and Burgundy regions against Algerian imports, but did nothing to protect the other French producers. On the contrary: the regulations targeted not only Algerian wine but also wine from other French regions.Footnote 35 Southern French winegrowers lobbied the government to impose import tariffs and quotas to protect them against Algerian wine as well. However, the French government was not willing to impose tariffs on Algerian wines, as it would have hurt the interests of French citizens overseas and because it was inconsistent with the integration of Algeria as French territory (Barrows, Reference Barrows1982; Isnard and Labadie, Reference Isnard and Labadie1959).
World War I (1914–18) and the spread of Phylloxera in Algeria brought some relief in the Franco-Algerian wine conflict. Phylloxera reached Algeria at the end of the nineteenth century, and 63% of the vineyards were still infected in 1910.Footnote 36 However, the impact on Algeria's vineyards was limited because Algerian winegrowers benefited from the French experience with how to counter the disease.Footnote 37 They opted for the grafting solution (Isnard, Reference Isnard1954; Meynier, Reference Meynier1981).
The relief on French wine markets was brief. Algerian wine production and exports rapidly increased in the 1920s and the early 1930s. Production recovered, growing from its lowest point of 5 million hectoliters in 1922 to 10 million hectoliters by 1925. Over the next decade, it doubled again, reaching 20 million hectoliters by 1935. Part of the reason for the increased production was the higher productivity of replanted post-Phylloxera vineyards (average productivity in Algeria was 30%–40% higher than in France over this period—see Figure 8). However, the most important reason was strong growth in vineyards: the cultivated vine area in Algeria increased from 175,000 hectares in 1925 to 400,000 hectares by 1935. The increase in plantings in the 1930s was also based on borrowing—as the first phase of massive plantations 50 years earlier. In 1925, a law allowed agriculture credit banks to provide medium- and long-term loans. Again, European settlers borrowed substantial amounts of capital (Isnard, Reference Isnard1949). Moreover, wine prices in France were around 40% higher in the second half of the 1920s than in the first half. Figure 6 shows that in real terms (1914 prices), annual prices were 23 francs per hectoliter (in 1921–1925) and 32 francs per hectoliter (in 1926–1930). The growth in plantation led to increased output and exports to France and resulted in falling prices in the 1930s. Interestingly, vineyard plantings in Algeria did not slow down in the early 1930s. As Figure 4 illustrates, if anything, new plantings grew more quickly in the early 1930s. A crucial factor for this was the fear in Algeria that France would block planting of new vineyards there, a concern aroused by political discussions in Paris. In 1929, a suggested law—the “Castel proposal”—proposed to limit vine plantation (Isnard, Reference Isnard1949). The proposal was rejected in the parliament, but alerted Algerian wine producers that a prohibition on new plantings could become a reality. This, in turn, induced them to plant more vineyards.
Wine Yields in France and Algeria, 1860–1960 (in hectoliters per hectare)
The combination of postwar recovery in French production, increasing imports, and a fall in demand due to the Great Depression in 1929 caused another crisis in the French wine market. Between 1927 and 1935, real wine prices declined by 50% (see Figure 6). Again, winegrowers in southern France asked for import tariffs or quotas on Algerian wine. However, again the French government was unwilling to impose them, and in 1929 a proposed law to limit imports of Algerian wine to 8 million hectoliters was rejected (Birebent, Reference Birebent2007, p. 132).
During 1914–1925, Spanish table wines were allowed to enter France more easily because of the wine shortages during World War I. However, with the recovery of the Algerian and French wine industry and the wine overproduction crisis of the 1930s, France decided to raise again import tariffs on Spanish wines. Figure 7 shows that import tariffs were much lower during the earlier period but increased from around 30% in 1926 to more than 80% after 1930. As a consequence, Spanish wine imports fell from 2 million hectoliters in the 1920s to almost zero after 1935.
The CGVM then changed strategy. Instead of trying to limit Algerian imports, it lobbied the French government to halt the expansion of Algerian vineyards (Meynier, Reference Meynier1981, p. 129). Because almost all Algerian production was exported to France, a limit on vineyard expansion was equivalent to import constraints. This attempt was more successful, possibly because it led to regulations that (ostensibly) did not discriminate between French citizens (producers) in France and those in Algeria.
Between 1931 and 1935, a series of laws (Statut Viticole)Footnote 38 aimed at controlling the wine supply in France were introduced, including the following measures: an obligation to store part of the excess production (blocage),Footnote 39 obligatory distillation of surpluses,Footnote 40 and the establishment of a levy on large crops and yields, a ban on planting new vines, and premiums for grubbing up of “overproductive” vines (Gavignaud, Reference Gavignaud1988; Loubère, Reference Loubère1990).
New planting of vines was forbidden for ten years for producers who owned vineyards of more than 10 hectares or who produced more than 500 hectoliters of wine. Distillation was obligatory when the combined wine production in France and Algeria exceeded 65 million hectoliters and was imposed on winegrowers whose average yield (calculated over the three previous harvests) was more than 500 hectoliters or produced more than 80 hectoliters of wine per hectare (JORF, 1931; Lachiver, Reference Lachiver1988; Simpson, Reference Simpson2011). The regulations also imposed taxes on high yields.Footnote 41
The regulations applied to producers in both France and Algeria.Footnote 42 However, the policy was biased in favor of wine producers in France and hit Algerian producers much harder than French producers (Bagnol, Reference Bagnol2007; Isnard, Reference Isnard1947).Footnote 43 During the 1930–1935 period, the average vineyard for French winegrowers was around 1 hectare, whereas in Algeria it was around 22 hectares. Furthermore, the average yield in France was 38 hectoliters per hectare, whereas in Algeria it was almost 50 hectoliters per hectare (see Figure 8 and Tables 3, 4, and 5). Furthermore, due to the hot climate, the obligation to store part of the excess production was more difficult for Algerian wine producers.
Algerian Wine Production from 1900 to 1961
Source: Authors’ calculations based on Birebent (Reference Birebent2007, p. 222).
The Evolution of Algerian Vineyard Sizes, 1908–1948 (in hectares)
Source: Birebent (Reference Birebent2007, p. 223).
The laws did not immediately restrain total wine production. In each of these two years, 1934 and 1935, production in France and Algeria totaled almost 100 million hectoliters.Footnote 44 However, the Statut Viticole did immediately halt the increase in Algerian vineyard area (see Figure 4). Total vineyard area in Algeria never expanded beyond the level reached in the mid-1930s (400,000 hectares).
In the following years, the Statut Viticole caused a reduction in vineyards and production, dramatically so in 1939–1947 and during World War II (1939–45). The grubbing up of “overproductive” vines, which began in 1938, eliminated 73,000 hectares of vines in Algeria—from 398,000 hectares in 1938 to 325,000 hectares in 1946 (see Figure 4).
Starting in 1939, Algerian wine exports were paralyzed as the fighting in World War II seriously affected maritime trade and caused destruction or abandonment of many vineyards in France and Algeria, leading to a sharp fall in wine production. Algerian production declined from 12 million hectoliters in 1942 to 7 million in 1943 (Insee, 1935). As a result, the Statut Viticole was repealed.
After the conclusion of the war, both vine area and wine production recovered as vineyards were replanted, with production in Algeria doubling from 9 million hectoliters in 1945 to 18 million in 1953. In France, production recovered from around 40 million hectoliters during the war (1943/1944) to around 60 million hectoliters a decade later (1953/1954).
This led to new pressure for political intervention, as Algerian wines were once more competing with southern French wines (Isnard and Labadie, Reference Isnard and Labadie1959).Footnote 45 The Statut was reintroduced in 1953, under the name Code du Vin,Footnote 46 intended to block the expansion of Algerian vineyards and wine production. After Algeria gained its independence, this economic and regulatory interdependence between the Algerian and French wine sectors changed dramatically.
V. The Collapse of the Wine Industry in Algeria
In 1961, on the eve of its independence from France, despite all the French-imposed regulations, Algeria was still the world's fourth-largest producer of wine (after Italy, France, and Spain) (see Table 1). However, immediately after Algeria gained political independence in 1962, wine production started falling and, in the course of two decades, the Algerian wine industry collapsed (see Figure 1). The area under vines decreased from 366,000 hectares in 1962 to 100,000 hectares in the mid-1980s and fell further, to 25,000 hectares in 2005, the same as in 1880. Production dropped from 15 million hectoliters in 1962 to about 600,000 hectoliters in 2009 (the equivalent of production in 1882), of which only 3% was exported. Algerian exports decreased from 14.8 million hectoliters in 1962 to 17,000 in 2008 (FAO 2012; Ministère de la PME et de l'Artisanat, 2005).
The Algerian wine industry collapsed for two main reasons. The first reason was its total dependence on France for wine sales; the second was poor management after the wine sector was nationalized following independence.
A. Export Constraints After Independence
After independence, Algeria no longer enjoyed the same trade status with France. In fact, French producers used the independence of Algeria as a reason to (again) press their case to reduce Algerian wine imports. In 1964, a five-year agreement was reached between France and Algeria in which France committed to purchasing 39 million hectoliters of Algerian wine—between 7 million and 9 million hectoliters per year over the next five years, but in decreasing quantities.Footnote 47 This rate of imports was considerably lower than before independence (e.g., in 1961 Algeria exported 15 million hectoliters to France). However, under pressure from French winegrowers, the French government did not fulfill the agreement and forbade French traders to sell Algerian wine in France, effectively imposing a ban on Algerian imports. Although the ban was lifted after a few months, the French government continued to claim that the 1964 agreement should not be interpreted as an obligation or as automatic access to the French market but, rather, that the entire quota should be imported only if needed. During the last two years of the agreement, France imported only 6.2 million hectoliters instead of the agreed 14 million hectoliters (Isnard, Reference Isnard1966; Sutton, Reference Sutton1988). Consequently, Algerian wine exports to France fell by two-thirds in only a few years (see Table 6).
Algerian Exports to France (% of the total Algerian exports to France)
Source: Brandell (Reference Brandell1981).
France also tried to stop wine imports from Algeria by other means. It prohibited the blending of French wines with those of other countries, and this French prohibition was integrated into the 1970 European wine regulations, which extended this prohibition to the entire European Union.Footnote 48 The European law prohibited the blending of wines from member countries with those of nonmember countries (Article 26, Council Regulation (EEC) No 816/70).
Algeria tried to find other export markets for its wine. In 1969, Algeria signed a seven-year agreement with the Soviet Union in which it agreed to buy 5 million hectoliters of Algerian wine every year at a fixed price. The Soviet Union then became Algeria's principal wine export market (Sutton, Reference Sutton1988), which led to a brief surge in exports. In 1969 and 1970, wine exports increased to around 12 million hectoliters, but the recovery did not last. Exports to France continued to decline, and exports to the Soviet Union were not successful. The prices set by the Soviet government were lower than world market prices for wine, a price at which production was not profitable for Algeria (Brandell, Reference Brandell1981; Sutton, Reference Sutton1988).
B. Nationalization and Poor Management
In October 1962, the ruling political party (National Liberation Front) nationalized agricultural land, including vineyards and thus the entire wine sector. Vineyards were to be run by state organizations and governed by local politicians without much agricultural knowledge or wine-making skill (Birebent, Reference Birebent2007).
In 1968 two state institutions were created to manage the wine industry. The first institution was the Office National de Commercialisation des Produits Vitivinicoles (National Marketing Office for Viticulture Products, ONCV),Footnote 49 which has a virtual monopoly on wine production and marketing. Today it owns 42 wineries, thereby controlling 95% of Algerian wine production.Footnote 50 The second institution was the Institut de la Vigne et du Vin (IVV—Institute of Vine and Wine), which had the official aim of controlling wine production and establishing the equivalent of the French AOC system by delimitating the best areas of production and granting “quality” labels (Boudjellal, Reference Boudjellal1972; Isnard, Reference Isnard1969; Ministère de la PME et de l'Artisanat, 2005).Footnote 51 This closely resembles the role of the Institut National de l'Origine et de la Qualité (National Institute for Origin and Quality, INAO) and the French AOC regime.Footnote 52
The combination of poor domestic management of the wine sector after its nationalization (as in many other examples of state management of farms and the agrifood industry; see Rozelle and Swinnen [Reference Rozelle and Swinnen2004]) and French import constraints caused a dramatic reduction in exports. The state-managed system was unable to respond effectively to the changed international market situation and could not find alternative outlets or reposition Algerian wines for a growing global market. The state decided to uproot a large share of the vineyards in Algeria. Between 1970 and 1973, 20% of the total vineyards were uprooted, some 71,300 hectares of vine (Sutton, Reference Sutton1988). The fall of the Algerian wine industry continued through the rest of the twentieth century. By the early 1990s, 30 years after independence, the Algerian wine industry was restored to where it had been 120 years earlier, before its spectacular rise. From a global perspective, it has effectively disappeared. Production, vineyard surface, and exports have fallen back to negligible levels.
C. The Arab Spring and the Future of Algeria's Wine Industry
Because the established political parties are still in power, it is unlikely that the Arab Spring will lead to the privatization of vineyards and wineries or a major policy shift. The state-managed wine system is likely to remain in place.
In contrast to its neighbors (Tunisia and Egypt), where massive protests and riots overturned governments, Algeria has maintained political stability.Footnote 53 Through public spending programs and the redistribution of oil revenues,Footnote 54 Algeria eased public discontent due to high (youth) unemployment and food price inflation. With oil prices high, the Algerian government used its oil export revenues to create new public sector jobs, to increase wages to civil servants, and to decrease the price of staple foods (Achy, Reference Achy2012, Reference Achy2013; Chikhi and Parent, Reference Chikhi and Parent2011).
In the past decade, some attempts have been made to stimulate wine production and exports. Since the introduction of the Plan National de Développement Agricole (National Agricultural Development Plan, PNDA) in 2000 and the 10-year Plan National de Développement Agricole et Rurale (National Agricultural and Rural Development Plan, PNDAR) in 2004, increased attention has been focused on the wine industry. Public funds have been allocated for the modernization of wine production and wine cellars, for the replanting of vineyards, and for the planting of new grapes (more “noble ones” such as cabernet sauvignon, pinot noir, and merlot). Training programs in Bordeaux have been offered to increase wine knowledge and skills (Oxford Business Group, 2008, 2010; Wallis, Reference Wallis2005).
However, many problems remain despite the efforts at renovation and modernization. The winemaking methods date from the period under French colonization. The scarcity of vine varieties encourages blending, and the wineries and cellars are in poor condition (certain machinery and equipment date from the early twentieth century). Another key obstacle to the development of the sector is the ONCV, whose monopoly does not promote the growth of new technologies or the search for premium wines in the global market (Ilbert, Reference Ilbert2005).
In sum, it appears unlikely that Algeria will retake its position as a major wine producer and exporter in the near or medium term.
VI. The Institutional Legacy of Algerian Wine
As we documented in the previous sections, both the rise and the fall of Algerian wine production and exports were heavily influenced by developments in the French wine market and French regulations. Free trade with France stimulated the growth of Algerian exports when high import tariffs blocked imports from Spain and Italy in the late nineteenth century. However, beginning in the 1930s, French wine regulations (the Statut Viticole and, later, the Code du Vin) halted the expansion of Algerian vineyards and wine production. After Algeria's independence in 1962, French import restrictions caused a decline in Algerian exports and contributed to the collapse of the Algerian wine industry.
However, the reverse is also true. The growth of the Algerian wine industry had a crucial impact on the French wine industry. Even if the Algerian wine industry has effectively disappeared from the world's wine market today, the institutional legacy of the Algerian wine industry in France, and in the world, continues. The growth of the Algerian wine industry triggered the introduction of important wine regulations at the beginning of the twentieth century and during the 1930s that formed the basis of other regulations, which today affect a large share of the global wine production. Had wine production been less successful in Algeria, perhaps many regulations that shape today's wine industry, particularly in Europe, would not have been imposed. Somewhat paradoxically, the fact that Algeria had free trade with France while a colony, such that France could not impose import tariffs on Algerian wine, induced a series of regulations that arguably have a much longer-lasting impact than tariffs imposed on the exports of other countries, such as Spain and Italy.
Until the beginning of the twentieth century, the French state did not regulate and intervene in the wine market in a systematic way. This changed during the beginning of the twentieth century, when regulations were introduced in the French (and Algerian) wine markets to protect French wine growers. More regulations to protect French wine growers were introduced in the 1930s and 1950s.
The first regulations were introduced in the renowned wine regions in France, in regions such as Burgundy and Champagne, by introducing an explicit link between the “quality” of the wine, its production region (the terroir), and the traditional method of producing wine. In this way, the regional boundaries of Bordeaux, Cognac, Armagnac, and Champagne wines were established between 1908 and 1912 and referred to as appellations. Regulations tightened with another crisis caused by Algerian wine imports in the 1930s. A law created the Appellations d'Origine Contrôlées (AOC) and restricted production not only to regional specific origins (through areas’ delimitation) but also to specific production criteria as grape variety, minimum alcohol content, and maximum vineyards yields.
Protecting winegrowers of the Midi resulted in a different type of regulations. The 1930s’ Statut Viticole and the 1953 Code du Vin included an obligation to store part of the excess production (blocage), obligatory distillation and storage of surpluses, the establishment of a levy on large crops and yields, a ban on planting new vines, and premiums for grubbing-up of “overproductive” vines. It also created the viticultural land register.Footnote 55
The severity of these regulations and the dramatic change they caused in the wine markets is illustrated by a quotation from the General Counsel of the Appellations of Origin at the Ministry of Agriculture commenting on the introduction of the Statut Viticole who referred to the French wine sector as a “planned economy” (see note 30).
These French regulations later strongly influenced the EU Wine Policy. Economic integration required the integration of different policy regimes in one EU wine policy (the Common Market for wine). The most important producers, Italy and France, held different positions. France proposed its own, heavily regulated, model while Italy favored a more liberal system. The final version of the European Common Wine Policy, agreed on in 1970, was a compromise. However, the compromise did not last very long. Under pressure from French producers, in 1976 the European Council of Ministers introduced more regulations, including measures to control the supply of wine. New EU regulations introduced the French system of planting rights restrictions and subsidies for grubbing up existing vineyards. By 1979, the French wine policy with its extensive regulations and heavy government intervention in markets had become the official European wine policy (Meloni and Swinnen, Reference Meloni and Swinnen2013; Niederbacher, Reference Niederbacher1983).
Many elements of French wine regulations triggered by the Algerian wine industry's spectacular growth are still present in the European wine policy today.Footnote 56 The ban on planting new vines (i.e., the system of “planting rights” for vineyards) is a core element of the EU policy to control its wine supply. The French “quality regulations” form the basis of today's well-known AOC and DOC regulations that play an important role in today's EU wine markets. With the integration of other wine-producing countries in the EU, such as Greece in 1980, Spain and Portugal in 1986, Austria in 1995, and Slovakia, Hungary, Bulgaria, and Romania in 2006 and 2007, these regulations expanded to a vast wine-producing region. All these countries had to adjust their national policies in order to join the EU.
In summary, while Algerian wine production had effectively disappeared from the global wine markets by the 1990s, its institutional legacy continues until today – and likely will remain important for a large part of the global wine economy for many years to come.
