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How Champagne changed the global economy

Money, taste, and wine come together in an explosive combination when we consider Champagne. There are many reasons to love Champagne, and some to dislike it, and it is natural that different people will come down on different sides. But for me, the biggest factor is one that I haven’t yet mentioned but that I can no longer avoid. How you feel about Champagne may depend a bit about how you feel about the world—or at least the wine world.

Champagne has shaped the world of French wine, the world of wine, and … the world. Champagne the region wasn’t always the symbol of luxury that we know today. A crossroads of the north-south and east-west trade routes, it shipped its acidic pinkish Pinot Noir wines to Paris, the closest urban center. That market dried up when Fagon, King Louis XIV’s physician, diagnosed that the regent’s favorite wines from Champagne were the cause of his nervousness and gout. Fagon recommended he switch to the “pure” wines of Burgundy. It took a while, but the eventual development of the sparkling wine industry in Champagne more than made up for the loss of royal court business.

Wine became an industry in Champagne in the nineteenth century in part, I suppose, because the process is so very capital-intensive and in part because the wines were positioned as luxury goods, with the major houses vigorously promoting their private brands (Krug, Moet, and so on) and the collective brand of the region. High-fashion Paris and then fashionable consumers around the world became the target market driven by money, taste, and rising quality. Champagne reached its golden age in the mid-1900s. And then disaster struck—and struck again.

Phylloxera’s long, slow, devastating, vine-destroying march reached Champagne in 1890, causing production of the prestigious wine to plummet. The solution to the vineyard plague was known by this time after much trial and error in other regions—replanting French grapes on resistant American rootstocks—but the destruction and associated cost was still crippling. Unscrupulous businesses found an easy way to refill the nearly empty pipeline— they purchased grapes, juice, or wine from the south of France and passed the resulting bubbly product off as real Champagne. Fraudsters benefited, but at a high cost to everyone else because quality was compromised and the collective brand—Champagne—was debased. When the French government sought to shut down the illicit trade, first in 1906 with a weak antifraud law and then in 1907 with stronger geographic designation rules, there were riots in the south because the small growers there saw important if now illegal market opportunities drying up.

Geographical restrictions—wine called “Champagne” could only be made from grapes grown in the designated Champagne region—addressed one problem (fraud, assuming strict enforcement) and opened up another—who would draw the lines and where would they be? A vineyard located inside the wine line would be worth much more because of the Champagne designation than one just 100 meters away but beyond the designated border. There were riots again, and violence too, this time among the Champagne growers and merchants, when in 1911 it appeared that the lines would be drawn to include a great deal of territory, simultaneously protecting and diluting the brand. When the final lines were drawn and a new postphylloxera golden age appeared on the horizon, other events conspired to bring the house crashing down. The fall of the Tsarist regime in Russia dried up the big Champagne market there, and World War I did just what you would expect by destroying consumer demand and grape supply at the same time as war raged on and the vineyards became battlefields. Fraud temporarily fell from the public enemy list, but not for long.

Hard economic times in the interwar years brought back the issue of collective reputation. Fraudsters could no longer easily pass off wines from the south as precious Champagne, but that didn’t prevent the Champenois themselves from cutting their own throats by overcropping and otherwise undermining the quality of the wines they made at home. Each producer of substandard Champagne could gain a bit from higher quantity, but only at the expense of all of his or her neighbors, who found their reputation for quality correspondingly diluted. Left unchecked, the thinking went, quantity would certainly overtake quality in a rapid recession-fueled race to the bottom. Something had to be done to stop this and, because this is France, I suppose, the answer came in the form of public action.

Thus was formed in 1935 the INAO—the Institut National des Appellations d’Origine (now the Institut National de l’Origine et de la Qualite)—the government agency entrusted with setting and enforcing the rules of the game for Champagne, Bordeaux, and the rest of France’s wine appellations, and also ultimately for many other products of origin, including certain special types of chickens, eggs, and cheeses, that eventually sought refuge under its broad protective umbrella. The INAO currently regulates 5,151 different products, according to the database on their website, including 4,441 individual wines and 58 cheeses.

The appellation system was a defensive mechanism, meant to ward off foreign foes and domestic saboteurs, and it is perhaps not surprising how quickly the idea spread at a time when economic threats were seemingly numberless and promises of security particularly precious. And thus did the appellation system become the law of the land, first in France and then, eventually, everywhere. The INAO, with its definitions and rules became the model for policies of the EU that now protect the makers of Roquefort and feta cheeses, for example, from unfair competition from makers of similar cheeses in other countries. And then, because that is how these things happen, the EU’s products-of-origin system became part of the global trade regime of the World Trade Organization. The desperate defensive acts of rioting Champagne workers and merchants began a process that has led to regulations of global intellectual property rights. Nothing much stops people around the world from making wine that is like Champagne or cheese that is like Roquefort or ham that is like Prosciutto de Parma, for example. They just can’t call them by those names. That’s the law!

Perhaps because they were the first, the Champagne makers have been particularly diligent in enforcing their intellectual ownership of the name Champagne. Or perhaps it is the influence of luxury-goods multinationals that own some of the big Champagne houses—they have considerable experience in fending off those who trespass on their trademark rights. In any case, no one seems to work as hard as Champagne to protect its identity, and I can’t really fault them for this because it seems to pay off and because the idea that a local region can own both a product and its name is now firmly entrenched in both law and conventional wisdom. Even, as in a case brought against winemakers in the old town of Champagne, Switzerland, where the offending parties would seem to have a solid claim on their own patrimony. They may make sparking line in the Swiss Champagne, but Champagne it cannot be.

More to the point is the problem of protected versus generic designations. In Italy, “parmesan” cheese has a specific meaning because Parmigiano-Reggiano is a protected product. In the United States, however, parmesan cheese by long use has a generic meaning, and I doubt that many people would mistake the inexpensive Kraft “spaghetti” cheese called parmesan for the complex luxury good from Emilia Romagna. But rules are rules, and the Europeans, having invented this system, seem determined to rub out all traces of trademark infringement, causing the Economist magazine to wonder where it all might end. What will the Europeans stake a claim to next? French Fries? Italian Dressing? Hamburgers? Is Champagne-inspired world dominance a “feta accompli?” Ha!

I can understand the desire to protect a valuable brand, but I think that in the case of wine, perhaps excluding Champagne, the strategy may have backfired. Many New World wines once named themselves according to Old World regions, calling themselves Burgundy (for a lighter red), Chablis (for a drier white), or sweeter Rhine, for example, regardless of whether they contained any of the grapes associated with these regions and despite their lack of designated origin. This offended the Old World producers, but it didn’t bother the local consumers, most of whom would never taste the imported real thing. But the Old Worlders pursued their rights vigorously under international law—so vigorously that the New World producers have little choice but to find other ways to designate their wines. So they built powerful private brands and labeled their wines according to grape variety rather than geographic region. The simple, new system found an appreciative audience among the new world of wine drinkers that globalization has helped create. The resulting New World lingua franca was so successful that the Old World has struggled to compete with it on international markets and now has begun to adopt the new naming protocols itself.

Excerpted and adapted from Money, Taste & Wine—It’s Complicated! by Mike Veseth. Copyright © 2015 Rowman & Littlefield. Used by arrangement with the publisher. All rights reserved.