Sunday, May 01, 2005

I was right again...

In an earlier post I had speculated that the EU (Cognac specifically) was going to have problems ‘digesting’ the huge amount of raw brandy that would be produced from the mass distillation they were contemplating. I suggested that one alternative to stem a large impact on the Cognac producers was to use it for fuel or disinfectants.

Bloomberg now reports that the EU will be producing the alcohol for fuel & disinfectants (frankly, it’s the only option that really made sense anyway).
It’s also reported that the amount has risen from the original 1 million hl to 1.5 million hl for France, and an additional 0.4 million hl of Spanish table wine to be distilled as well.

From the Aussie perspective (Bloomberg):

Better branding and increased use of technology helped Australian companies win over consumers while Europe's system has discouraged innovation, according to Brian McGuigan, chief executive of McGuigan Simeon Wines Ltd., Australia's third- biggest publicly traded winemaker.

EU aid has “got to be bad for us, but it's also got to be bad for them because all it's doing is offering a subsidy where there isn't a basis for businesses to exist,” McGuigan said. Europe “should become more specific, it should get out of the bulk areas and concentrate on what it can do well.”

"...where there isn't a basis for businesses to exist..."

McGuigan sure nailed that one on the head.

Continued economic support of the system which produced their current problem –without modifying it first to avoid a repeat of the problem- is not that wise in the long run. Unfortunately, the EU has yet to truly define what the problem is, much less come up with a viable solution. Thus they are stuck for the short term just maintaining their current actions trying to buy time…

But with increasing discontent among producers, especially among the lower end producers in France, that time appears to be running out.


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