THE most striking thing about the wine shelves of the average supermarket is the sheer range and profusion of wines on offer. A big supermarket may provide a choice of 15 toothpastes and 30 beers, but sell hundreds of different wines made by a huge variety of producers. This proliferation reflects the highly fragmented nature of the wine industry. Even the world's largest wine company in terms of volume (although not of revenue), California's E&J Gallo, commands only just over 1% of world production. The fragmentation of the wine industry is most evident in the old world. Bordeaux, for example, has over 12,000 producers. Italy, by some counts, has over a million growers.

They do things differently in the new world. In Australia just four companies dominate 80% of the wine market. In the United States the five biggest producers have 62% of the market, and in Chile the top five command 50%.

Many wine enthusiasts are suspicious of big wine companies, or even horror-struck by them. Andrew Jefford, a British wine journalist, complains that big Australian labels such as Jacob's Creek and Nottage Hill are “becoming the equivalent of cans of lager; standardised, consistent, reliable, risk-free, challenge-free”. All this means that wine is in danger of becoming “increasingly industrial, increasingly monotonous”. Hugh Johnson, the doyen of British wine journalists, puts the same case, though with a more positive spin: “Why is wine so fascinating? Because there are so many different kinds, and every single one is different.”

Much of the romance of wine derives from the idea of individual producers working their own plots of land in their own idiosyncratic way. A variety of styles determined by country and region of origin, grower and grape variety keeps consumers interested. But domination of the wine industry by big companies need not inevitably stamp out diversity. Firms such as Australia's Southcorp, which produce wines right across the range, from top-quality (and top-dollar) to cheaper brands, have a vested interest in high quality and diversity. Their strategy is to get new consumers interested in the cheaper wines, then tempt them to trade up.

Traditionalists assume that the growth in market share of large new global wine companies is simply a depressing reflection of their large marketing budgets and their ability to supply wine in the quantities demanded by supermarkets. But there is another, more encouraging explanation: that companies such as Southcorp and Beringer in the United States are doing well because they are making good, consistent, keenly priced wine, carefully tailored to consumers' tastes. By contrast, the West European model of wine making is much more geared to the needs of producers. Traditional producers there tend to make wine more or less as they always have done, and then try to sell the end-product, often with the help of subsidies from the European Union.

The new-world companies may seem rather more prosaic than a Burgundian smallholder, but they are also more likely to be able to invest in technology and innovation. That allows them to produce a range of wine styles and ensure consistency. They aim to win the trust of consumers by maintaining the same quality, case after case. In that, nature is on their side: most of them operate in predictable climates that produce consistent harvests, so they suffer much less from the ups and downs of good and bad years, and there is little need to consult a vintage chart.

Back in the old world, wine buffs like to joke that it costs £200 ($320) to enjoy a great bottle of Burgundy—£20 for the good one, and £180 for the nine others that were not so good. Wild fluctuations in the quality of vintages, regions and even neighbouring producers is a noted, indeed celebrated aspect of wine culture in Western Europe. Many enthusiasts enjoy the search for the perfect bottle or the obscure producer, and accept that variability is part of the natural order of things. Certainly the weather in France's most famous areas—Burgundy, Bordeaux and Champagne—is much less predictable than in Australia or South Africa. But inconsistency also has man-made causes. Countries with a plethora of small producers and antiquated regulations find it harder to embrace new ideas and invest in technology, to control quality and to spread best practice.

In a recent lecture Michael Paul, the head of European operations for Southcorp, conjured up an imaginary region with a fragmented industry that sounded remarkably similar to many parts of Western Europe. Mr Paul's fictitious region had managed to overcome its inherent disadvantages by virtue of a strategy dreamed up by a marketing genius. This involved popularising the idea that wine was the product of the soil, the microclimate and the aspect of the vineyard rather than the wine maker. The punchline of the advertising campaign was “Only God knows what's in this bottle”, which Mr Paul suggested could be read less reverently as “God alone knows what's in this bottle”. The fictional marketing man's code name for the project was “SCAM, an acronym of Soil+Climate+Aspect=Mystique, but in public he used the word terroir, which sounded earthy and natural, and had the additional advantage that few people really knew what it meant but they all felt they had to pretend they did.”

Too many rules

Mr Paul was speaking with his tongue firmly in his cheek. But in poking fun at the French notion of terroir, he was taking on one of the most cherished notions in European wine making: that particular wine-producing regions and plots have their own distinct characteristics, reflecting the soil and the climate, which must be protected at all costs.

The need to protect regional identity has produced a plethora of wine laws, epitomised by France's appellation contrôlée (literally, “controlled name”) legislation, which has its counterparts in all the big wine-producing countries of Europe, including Spain, Germany and Italy. Appellation contrôlée regulations cover a whole host of variables, including the kinds of grapes that can be used in a particular regional blend, the way they are picked, the way the vines are planted, the strength of alcoholic content, and the kind of information that can be put on a wine label. Only those who comply with all these rules are allowed to call their product an AC wine.

The ideas behind the AC laws are simple, and laudable. They are to ensure that consumers know what they are getting, and to protect the good name and distinctive character of famous wine regions. If America had regulations of this sort, they would prevent big companies there such as the Wine Group and Canandaigua from sticking questionable labels such as “cabernet sauvignon with natural flavours” on their bottles, a practice that is currently causing controversy. The companies are exploiting a legal loophole in their country that allows them to name the grape variety on the label without necessarily putting much of it in the bottle, and without specifying what the “natural flavours” are (they are widely believed to be mainly alcohol and quite a lot of water). It may not make a great drink, but it keeps costs down.

The rise of cheap wines with deceptive labels is driving some observers of the American wine industry to despair. Jon Fredrikson, the leading authority on industry trends, says the practice started a couple of years ago, and may spread over the next six months to perhaps 20% of the table wine coming from California. He calls it “a cancer spreading throughout the industry”. The one consolation is that the damage to the international reputation of the Californian wine industry will be limited because these products are essentially unexportable, certainly to Europe. “They might try Paraguay,” muses Mr Fredrikson. Canandaigua's people argue that they are actually doing the wine industry a favour by making something that new consumers seem to like. Mr Fredrikson says they are misleading their customers by giving them less grape and more water.

The Europeans will see the row as a vindication of their strict rules on what can be put into wine and how it can be labelled. And so it is, up to a point. The trouble is that the AC laws in Europe are now much too strict, and are having some unfortunate side-effects. In France, where the first AC regulations were drawn up in the inter-war period, revising them has proved fiendishly hard because entrenched interests resist change. As a result, many French regions are unable to adapt to changing technology or consumer preferences. In varying degrees, the same goes for other European countries, where similar rules apply. The amounts that particular regions can produce are set centrally. So even if demand for Burgundy is buoyant, the scope for expanding output is strictly limited. Conversely, if demand slumps, the region cannot make different sorts of wine, because the kinds of grapes that can be grown in any region are determined by the AC rules.

The regulations reach deep into methods of production. For example, they limit the alcohol content of sauvignon blanc from Bordeaux to a maximum of 12.5%. This year, however, good weather has helped to produce a particularly powerful and fruity crop of sauvignon blanc grapes. If they were processed in the usual way, the natural alcohol content of the resulting wine would be over the 12.5% limit. The wine might well be delicious, but it would be illegal. So local producers will either have to break the law, or deliberately water down their wine.

Taste it and see

Other problems centre on irrigation (not permitted in France), the use of oak chips to flavour AC wine (ditto), and experiments with non-traditional kinds of grapes in AC wines (ditto). There were good reasons to outlaw irrigation in the 1930s, since over-irrigated vines could produce bloated and watery grapes. But with modern drip techniques, which can carefully regulate the amount of water getting to the vines, this can be avoided. Producers in the new world, who do use irrigation, have much more control over when their fruit ripens.

The use of oak is another bone of contention. It has long been known that ageing wine in oak barrels can add extra flavour. These days, no tour of a fancy new winery is complete without an inspection of the proud owner's new French oak barrels. But there is a cheaper way of getting that oaky taste: by simply dumping a load of oak chips into the steel barrel where the wine is fermenting. Even the most adventurous Australian technologist will acknowledge that the results are not as good as for wine aged in oak barrels. However, this cheaper method can be used to produce a less costly wine with its own respectable place in the market. Not in Europe, though, where the practice remains illegal.

Lastly, there is the vexed question of what kinds of grapes can be used. The AC laws dictate that a regional wine in Europe can contain only certain specified grapes. Red Burgundy is based on pinot noir, red Bordeaux on cabernet sauvignon and merlot. It would be illegal for a Bordeaux producer to produce an AC wine based on pinot noir or on syrah (shiraz), a popular grape in the Rhône and in Australia.

But this well-intentioned effort to protect the regional character of old-established wines has acted as a brake on innovation, experimentation and a proper response to changing consumer tastes. If a Bordeaux producer wanted to cash in on the craze for chardonnay wine, he would not be able to retain the AC label, which is Bordeaux's stamp of approval. And if a producer anywhere in Europe wanted to cash in on the consumer demand for varietal labelling stimulated by new-world producers—who usually specify the type of grape prominently on the front label—strictly speaking he would find himself up against the law, because Europeans are allowed to specify the grape only on the back label.

These restrictions have caused some bizarre contortions in the European wine industry. The regulations for basic table wine (vino da tavola in Italy, vin du pays in France) are not so strict, because such wines are thought to have less of a name to protect. This has meant that ambitious or innovative producers in Europe now often make their best or best-selling wines as ostensibly plain vin du pays. French producers in the Languedoc in southern France, keen to produce varietal wines for the world market, now often present them as vin du pays—in formal terms the lowest grade of wine from one of France's least prestigious areas. Similarly, many of the new breed of “super-Tuscan” wines which have helped to restore Italy's reputation for making top-quality wines have had to be sold as vino da tavola. Ingenious solutions have also been found for getting around the labelling restrictions. Some of the back labels of AC wines—where the rules allow grape variety to be specified—have become inordinately large and colourful. Since wine bottles are round, who is to say whether the consumer will look at the back or the front label first? Such dodges are a tribute to human ingenuity, but they also demonstrate the way in which the European wine industry is handicapped in its competition with the new world.

All this seems to suggest that Europe should relax its wine laws to allow its industry to take full advantage of modern technology, and to meet changing consumer tastes. But an articulate case for the status quo is put by Paul Pontallier, the chief wine maker at Château Margaux in Bordeaux—one of the revered top five “first growths”.

Mr Pontallier argues that the AC laws have not prevented technological advance, and points proudly to the computerised grape-crusher employed during the 1999 harvest at Margaux. But he advises caution. Experimentation that might be perfectly valid in California or Australia, he says, is not appropriate in a much older wine culture such as France's. In his view, the Australians and the Americans, with only 30 years of serious wine making behind them, are still feeling their way, trying out which grapes work best in which regions, and what practices in the vineyard are most appropriate in a particular setting.

France, by contrast, has been experimenting for centuries to arrive at best practice. According to Mr Pontallier, that tradition deserves to be codified and protected. He underlines his point with a political analogy tailored to British ears. “People ask the British why they are so reluctant to change their political system, to respond to new developments in Europe. Their response is that they have a system which has evolved over centuries and which has delivered success and stability. It's the same here in Bordeaux.”

History will judge Britain's attitude to Europe. The market is already delivering its verdict on France's attitude to wine making—and it is far from straightforward. At the bottom end of the market, the big wine-producing countries drink their own, and Britain, the biggest wine importer, gets its plonk from a variety of sources, including Eastern Europe, the EU and Latin America. In the mid-price category, the Europeans have already had to cede dominance to the Australians in Britain. But at the very top—where the Mr Pontalliers of this world operate—the old world still reigns supreme. In the big auction houses on both sides of the Atlantic, almost all the most highly prized trophy wines still come from France.