Regional Trademarks – Identity Theft?

Despite last September’s Wine Accord and continued pressure from the EU, there is no end in sight for the appropriation of European wine appellations by US producers. Giles Fallowfield reports

The “agreement” on trade in wine between the US and the EU, first announced last September, was widely hailed as a breakthrough. That was the spin put on it by politicians on both sides of the Atlantic. The few dissenting voices came mostly from Europe, particularly Champagne, Port and Sherry producers who have been at the forefront of the campaign to stop their names being used in the US on wines not made within their strictly defined European appellations.

Given the complexity of the issues involved, and the generally bullish response, perhaps we shouldn’t be surprised that few grasped the lack of real progress and the open-ended timescale for negotiations.

When the Office of the US Trade Representative (USTR) put out a news release saying, “The United States will curb the use of European geographic names such as ‘Chianti’ or ‘Burgundy’,” some might say it was being economical with the truth. There are certainly plenty of European wine producers who would dispute the statement by Rob Portman of the USTR that the agreement is “a win-win situation for US and EU winemakers”.

It is true that Californian winemakers, as represented by the Wine Institute, whose members export 95% of US wine, welcomed the agreement, which it said “expands opportunities for US producers in Europe”. Champagne, Port and Sherry producers were, however, extremely disappointed at the lack of progress in protecting their appellation names and felt their interests had been sacrificed by EU negotiators in order to safeguard overall EU wine exports to the US, worth $2.3 billion in 2004.

The dating game
“The skilful manipulation of the news relating to the Wine Accord by the EU Commission and others led sections of the press to falsely report that denominations of origin such as Champagne, Port and Jerez will be protected in the US,” says George Sandeman, who sits on the Inter-Professional Council of the Instituto dos Vinhos do Douro e Porto (IVDP). “And there was almost no mention of the fact that negotiations will only start 90 days after the ‘agreement’ is signed [it still isn’t in mid-January 2006] and that these negotiations have no fixed end date.”

Contrary to some reports, US producers didn’t agree to phase out the use of terms like Champagne, Chablis, Sherry, Port or Chianti, to name but five of the 17 European denominations that are mimicked in the US market by locally produced, and in some instances imported wines, like so-called Australian port. While Portman talks about curbing the use of European geographic names, the agreement as it stands won’t actually outlaw US producers from using such generic terms on their wines, even if it is ratified by the US Congress. It will only stop new brands from employing them.

Four months on and phase one is still not complete. No date is yet fixed, 90 days from which actual negotiations on the real contentious issues must begin. And while on December 20 a majority of EU Ministers in the European Council voted in favour of the agreement, the US and EU representatives still have to sign it, which is expected to take place in Davos in Switzerland in late January or early February.

That will fix the start but not the end-date of negotiations. And it’s hard to be optimistic about an early conclusion to these talks as all the difficult discussions on issues like “geographical indications”, “names of origin” and “traditional expressions” have been left until the second phase. 

This is not just a European perspective. In the US, Joseph Rollo, international director of the Wine Institute of California agrees that, “As with most negotiations, many of the hardest issues have been left for future discussion. In our case, the issue in Europe of tariffs, subsidies and export credits.” He doesn’t expect “any speedy conclusion to the next round of talks, given that the first phase took over 20 years”. But he predicts they could begin in early May.

While waiting for the real talking to start, Champagne, Port and Sherry producers continue to put their energy into the Center for Wine of Origins whose headquarters are in Washington. Jointly funded by the three appellations and EU grants, to the tune of just over e1.3m over three years, the center’s mission is “to educate Americans about the importance of location in wine decisions”. Its three-year campaign that began in October 2005 is aimed at “galvanizing growing interest on the part of US consumers in protecting

and appropriately representing a wine’s origin”.

Under the banner “Location Matters”, its advertisements try to underline the concept of misrepresenting location with a series of one-liners like Florida Oranges from Nebraska?

Napa Wines from China? Bordeaux from Australia? Wisconsin Cheese from New Mexico? Walla Walla Wines from Hong Kong? These are mixed in with the lines that reinforce the real message: Port Wine not from Portugal? Sherry not from Spain? Chianti not from Italy? and Champagne not from France?

But what are the chances of persuading the US wine producers to give up the generic terms they currently use on their labels. Not much, if the reactions of the Californian Wine Institute and major US sparkling wine producers like Korbel are anything
to go by.

Like Sherry, Champagne doesn’t really have any competitors using “champagne” on their labels in the same price bracket. Many of the best quality sparklers in California are made by subsidiaries of Champagne producers including Moët, Louis Roederer, Mumm and Taittinger and they would hardly be likely to score such an own goal.

Champagne Zinfandel
The largest producers of what is described on the label as “Californian champagne” are Constellation with its Cook’s brand and Gallo which markets André and Tott’s sparkling wine. Cook’s, produced by the charmat method, is the second largest selling sparkling wine brand in the US and has a suggested retail price of US$5.99 for a 75cl
bottle, according to Lisa Farrell, vice president of communications at Constellation Wines.  This is hardly a competitor to French Champagne from
a price point of view with US brand leader Moët White Star, priced in the region of US$22-$24 a bottle.

Nevertheless, on the Cook’s website even its White Zinfandel Sparkler is called “champagne”. Specifically questioned about this description of their sparklers
in the light of the as yet unratified Wine Accord and asked if US consumers
might be confused into thinking this Californian sparkling wine really is from the Champagne region in France, Farrell said, “We are referring all media enquiries on this topic to Joe Rollo at the Wine Institute in California.”

Name games
Rollo was more forthcoming: “The use of these terms with an adjacent appellation has been legal in the US for over 50 years and has been in use for over 150 years. Why upon signing of this agreement are there questions about consumer confusion? We obviously dispute your statement that use of these terms is ‘passing off’ the French Champagne or Portuguese Port. We believe that giving up the future use of semi-generics on new brands is a significant concession.”

In reality, although a smaller brand, Korbel, with over 14m bottles sold a year, is a closer competitor to Champagne than Cook’s, Tott’s or André because it’s sold in a higher price range, starting above US$10 and going up to over US$35, that’s close to the price
of Bollinger and Roederer non-vintage Champagne.

When we put the same questions to Gary B Heck, president and owner of Korbel Champagne Cellars, he didn’t attempt to hide behind the Wine Institute: ”Korbel has been legally producing ‘California champagne’ in the United States for over 123 years. Excellent méthode champenoise quality and solid marketing have propelled Korbel to annual sales of more than 1.2m cases.  In all likelihood, we [Korbel] have done more to promote the term ‘champagne’ in the United States than any producer from the Champagne region of France. Because our labels bear the appellation of origin – primarily California but occasionally Russian River Valley or Sonoma County – in direct conjunction with the word ‘champagne’ as prescribed by regulation and have done so since 1937 on our labels and since 1915 in our advertising, consumers know Korbel is made in the United States.  

”Korbel Champagne Cellars sells its ‘California champagne’ primarily within the United States: the small amount of wine it exports (mostly to US embassies) is made, bottled and labelled in strict accordance with the regulations of the importing country,” he continued. “Some of these foreign regulations are a hindrance to exports, but Korbel Champagne Cellars has not and will not pressure those countries for regulatory change, but instead competes in these markets solely on the merits of its products.

”We have trademarks such as ‘Korbel California Champagne®’, ‘Korbel Champagne Cellars®’, ‘For People Who Know Champagne®’ and the ‘Wine Lover’s Champagne®’, to name a few. Why should we jeopardise 123 years of selling our product by changing our name now?  The CIVC was founded in 1941 (but did not become an active organisation until 1945) and the EU was founded in 1973 – where were these people back in 1882?” concludes Heck.

Bruno Paillard, who heads the Comité Interprofessionnel du Vin de Champagne (CIVC) education committee whose main role is protecting Champagne’s name, clearly disagrees with this viewpoint. “Their wines have nothing in common with Champagne except the appearance,” he says.

“Real quality producers of sparkling wine in the US don’t do this, it’s only the low quality ones. Using terms like Chablis, Chianti, Port and Sherry is clearly dishonest, but it’s still legal. We have had support in the US from those who are attached to their own regional identities. The Napa Valley Vintners Association, for example, supports our campaign. They have had the same problem. I think we will find a solution, but I don’t know when. Politicians do not understand they create enemies for no good reason.”

Port exports to the US amounted to 421,000 cases worth e29.9m in 2004, putting it nearer Sherry in terms of volume and value than Champagne. While he agrees it is not a good situation, either for Sherry or Champagne, in the longer term George Sandeman feels that Port has the most to lose.

“I have no doubt that Port is the category most affected. If the US had accepted it as a DOC then the other domestic and imported ‘ports’, which compete with us in the same price range would have been stopped and our market base would have expanded. In addition, the cheap Californian junk labelled as ‘port’ would have been stopped, along with the erosion of image and infringement of intellectual property.”

Sandeman continues to put his faith in “the fight against both domestic and imported frauds abusing the use of the Port appellation in the US” in lobbying through the Center for Wine Origins. “This is a great project, inspired by the Champagne people. It will be the main weapon in the fight to prevent the infringement of intellectual property rights, educate the US consumer to understand that the origin of these wines is an essential element in their make-up and finally recover the appellations,” says Sandeman.

While it looks likely that the EU and US negotiators will start discussing the critical issues before the end of May, it’s a great deal harder to predict when they’ll end or what the outcome will be. The fact that the Center for Wine Origins in Washington has the funding for another 30 months suggests no-one is expecting it to satisfy the aggrieved European wine producers in Champagne, the Douro and Jerez.  db February 2006

CHAMPAGNE: US FACTS
Sales of sparkling wine and Champagne in the US are far higher than those of Sherry or Port and both sectors of the market are growing. According to the Wine Institute consumption of US-produced méthode champenoise sparkling wine in 2004 was 5.8m gallons, that’s equivalent to 29.5m 75cl bottles, up from 27.9m bottles in 2003. Total US consumption of US-produced sparkling wine in 2003 (the latest available figures) is put at 17.7m gallons or 89.6m bottles, while consumption of imported sparkling wines, including Champagne, is estimated at 10.4m gallons or 52.9m bottles. Out of these 52.9m bottles imported in 2003, 18.9m were Champagne.

The US remains Champagne’s second most important export market in terms of volume, and exports there rose by 6.8% in 2004 to just over 20m bottles. The market was worth over e351m and the average bottle price was high at e17.35. Average value was only higher in Italy and Japan in 2004 and both are still considerably smaller markets for Champagne.

SHERRY: FLOR-ING THE OPPOSITION
“The US is the largest market for Sherry outside the EU, with an annual volume of 3.4m bottles,” says César Saldaña, managing director of the Consejo Regulador de Jerez. “We estimate the total market of US fake ‘sherries’ is about 10m bottles.” However, in terms of pricing, the US products aren’t really in the same market. “Prices of real Sherry in the US range from US$7.99 to US$14.99 a bottle and there are also 20- and 30-year-old Sherries selling for between US$40-$50,” says Saldaña. “Californian ‘sherry’ can be bought for as little as US$3.99 a bottle.”

Although competitive products may be generally cheaper, the Consejo’s view of the agreement is not a positive one, says Saldaña. However, taking a pragmatic view and considering the long history of the problem, Saldaña believes, “We have never been in a better position as far as the protection of geographical indications in the US is concerned with a commitment to change the legal status of semi-generics and restrict their use exclusively to those producers with an approved label prior to the agreement. But certainly this is not enough.”

Putting on the pressure
“Our objective is to maintain pressure on our representatives in Brussels, so that the Americans stick to their commitments (change of legal status of the semi-generics) and to ensure phase two of the negotiations starts within 90 days of the agreement being formally signed.”

Like others involved, Saldaña doesn’t expect phase two to be quick or easy. “While phase 1 has concluded certain American producers – those with an approved COLA/certificate of label approval – being granted the use of our DO, our aim in phase two should be to define such use in the most restrictive terms possible and, at the end of the process, achieve the exclusive use of the term Sherry for the real products coming from Spain.”

He sees both the “legal” and the “economic” dimensions of the issues as common interests of Jerez, Champagne and Oporto, these three being the European DOs most severely affected by the Wine Accord.

“It is our intention to continue working together and in the most coordinated way so that the pressure on our negotiators remains high and in the right direction,” he says.

db February 2006