Book Review: From Demon to Darling

February 7, 2010

Richard Mendelson, From Demon to Darling: A Legal History of Wine in America. University of California Press, 2009.

There are many ways to tell the story of wine in America. Wine is a people story (Gallo and Mondavi, Parker and Vaynerchuck), a story of nature and terroir and even, at times, a tale of popular culture as indicated by Sideways, Bottle Shock and the rise of celebrity winemakers. Readers of this blog will know that I think wine is very much an economics story, too.

Richard Mendelson believes that wine is also a legal story and I think he makes a good case. Especially in America, I don’t think you can understand wine without an appreciation of its legal history. This is therefore a very timely and useful volume.

Wine, Bad Wine, and More of It

Changing social attitudes toward alcohol in general and wine in particular obvious affects the legal environment in which wine is made, sold and consumed. The law story is therefore also a social and political story with many unexpected twists and turns. I found many useful nuggets of history as I followed Mendelson’s historical narrative.

The discussion of wine during Prohibition is particularly memorable. Did you know that wine consumption in the United States increased during Prohibition? Commercial wine sales were restricted, of course, limited to a few categories such as medical wine and wine for use in religious ceremonies.  But households were allowed to make up to 200 gallons of “bathtub” wine each year for their own use, a significant loophole.

Vast quantities of poor quality homemade wine more than replaced the  better quality but now illegal commercial products. Winegrowers shifted from quality grapes to varieties that could best survive the long train ride to market. Supply and demand both deteriorated in terms of quality, but quantity actually improved.

Please, Sir. May I have More?

I guess I knew the basics of federal wine regulation and the AVA geographic designation system before I read this book, but I found the legal history very revealing. Now I understand why the early AVAs were so crude in terms of defining terroir — they were based, more or less, on the borders of local telephone services and aligned very poorly with winegrowing realities. No wonder there has been continuing pressure to expand, refine and redefine AVAs ever since.

I wish that Mendelson had gone into greater detail regarding today’s legal wine sale environment, the resulting patterns of wine regimes in the various states and the three-tier system that services them. His basic outline of the current situation is fine, but I’d appreciate more details and state-by-state breakdowns. But maybe that’s beyond the scope of this book.

One test of a good wine is that you want more of it. Who knew that a book on wine law would leave me begging for more? Highly recommended!

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NB: More and more books are being published without full reference “backmatter” to save printing costs, a practice that makes them less useful as research tools even if it does make them more accessible to cash-strapped readers. Joe Stiglitz’s new book on the economic crisis, Freefall: America, Free Markets and the Sinking of the World Economy, for example, has endnotes aplenty, but no bibliography and no index.

No index! Sure hope you caught all the important points the first time through because it will be hard to track them down again.

In this light, I want to commend the University of California Press for keeping up scholarly standards. This book has 190 pages of text followed by 68 pages of notes, ten pages of bibliography and a usefully detailed index.

Posted in wine history, wine law, wine markets, wine research | Leave a Comment »

Who Sells the Most Wine?

February 2, 2010

Who is the #1 retailer in the wine world?  The answer is Tesco, the British-based supermarket company.

Tesco sells more than 320 million bottles of wine each year in Britain alone (one of four bottles in this important market). It is a wine selling machine, using every available mechanism to market wine and build the brand.

Tesco stores feature attractive Wine Walls, for example, tailored according to the demographics of individual stores. Wine displays are strategically positioned near the fish, meat and cheese counters as you will appreciate from your own experience. Wine tastings and wine-related events are organized by the no-fee Tesco Wine Club, which boasts hundreds of thousands of members.

Wine, wine – everywhere.

Tesco takes the everywhere seriously, so their quest to sell wine doesn’t stop whey you leave the store. Internet wine sales are an important retail vector in Britain since nation-wide shipping and delivery is not a problem as it is in the United States, where jurisdictional issues complicate every aspect of interstate wine sales. The Tesco Wine by the Case website provides  consumers with a rather stunning array of wine selections that range from a heavily discounted mixed case of “mellow reds” for £28 to a Vosne Romanee Domaine Hidelot Noellat 2006 Red Burgundy for about the same price, but for just one bottle. Tesco has captured about a quarter of all internet wine sales in Britain.

Buyers earn Tesco ClubCard points both online and in the stores. The loyalty card system carefully tracks the purchases of each customer (and notes non-purchases, too, I suppose), providing data to guide store strategy and the opportunity to produce individualized checkout coupons to encourage wine drinkers to buy more or better wines or perhaps to try something different. Tesco was an early pioneer in loyalty cards and is thought to use this data very effectively.

By Land, Sea and even Phone

Tesco has goes to great lengths to reach British consumers whenever and wherever the urge to buy wine might hit them. Tesco and its UK competitors have established substantial wine stores in Calais, France just minutes from Hovercraft ferry and Eurostar train stations. British consumers have long crossed the English Channel in search of duty-free bargains and British duties still make the trip an attractive excursion for some. Wine can cost about 25 percent less in Tesco’s Calais store and online ordering makes stocking up quick and easy.

Tesco’s latest (as of this writing) innovation is a smart phone app for wine lovers. Enjoying a nice bottle of Chianti at your favorite Italian restaurant? Want to know where to buy it? Well launch the app and use your phone to take a photo of the label on the bottle in front of you. High tech label recognition software will identify the wine, provide maker information and tasting notes and even search through the Tesco online inventory so that you can order a case right now for immediate delivery. Tesco and wine are with you anytime, anywhere.

Tesco and the other British supermarkets use wine to make money and to change the way at least some British shoppers think about grocery stores and even how they think about themselves. In the process, of course, these retailers have acquired a certain amount of power. Indeed, Decanter’s 2009 “Power List” of the most influential people in the world of wine ranks Tesco’s wine director Dan Jago at number six – a few places behind Robert Sands, head of the world’s largest wine company, Constellation Brands, and wine critic Robert Parker but ahead of French President Nicholas Sarkozy and E&J Gallo President Joseph Gallo. This power is put to a surprising number of uses.

That Tesco would use its market muscle to reduced wine costs in not unexpected. Volume purchasing has always been an excuse to press for lower prices. Tesco goes further, however. The New World wines in the Tesco lineup are shipped to Britain in bulk, is 20-foot shipping containers that contain giant plastic bladders holding thousands of liters of wine. The bulk wine is bottled once it reaches Britain, eliminating the cost of hauling fragile bottles half way around the world. Tesco has even started moving the bulk wine to its bottling plant using Britain’s historic system of canals, saving the expense of tanker truck shipment and lower the wine’s carbon footprint.

New Bottles for New Wine

Tesco is very focused on innovation and uses its power to achieve it. Tesco has pressed its suppliers to switch from cork closures to screw caps, for example, in order to eliminate the three to five percent loss that is commonly experienced due to TCA cork taint. Anyone who wants to get wines into the Tesco pipe had better not show up with a corkscrew (iconic brands excepted, of course).

Recently, Tesco has introduced the world’s lightest wine bottle in an attempt to further reduce production and shipping costs and reduce environmental impacts. The new 300g bottles are 30 percent lighter than Tesco’s previous lightweight bottle  and much lighter, of course, than some of the heavyweight containers that one sometimes finds on the Wine Wall. Structural concerns require that the new bottle have a new shape – somewhere between the high shoulders of the classic Bordeaux and the soft silhouette of a Syrah or Burgundy. Tesco estimates that use of this special bottle will have 560 metric tons of glass that it uses to bottle the more than 10 million liters of wine that it imports each year and sells under its own label.

You don’t think of supermarkets as being especially innovative, but it is pretty clear that Tesco is using its market power to encourage innovation in the world of wine. Whether or not you shop at Tesco (or at its U.S. arm — the Fresh & Easy Neighborhood Markets in the American southwest) you are probably affected its activist wine policies.

Posted in Supply and Demand, Tesco, wine distibution, wine markets | 5 Comments »

Book Review: In Search of Bacchus

January 22, 2010

George M. Taber, In Search of Bacchus: Wanderings in the Wonderful World of Wine Tourism. Scribner, 2009.

While the Japanese are trying to wake up Bacchus through the Kami No Shizuku phenomenon I wrote about last week George M. Taber has been circling the globe tracking down the Roman god of wine. He reports on his adventures in this interesting new book, the third in a series that includes The Judgement of Paris (2005)and To Cork or Not to Cork? (2007).

Taber appears to be one of the luckiest wine enthusiasts on earth. He travels the world tasting wines, visiting wineries and then tells us all about it. It is understandable if we are a bit jealous and this book only makes matters worse.

The subtitle says that this is a book about wine tourism and I suppose it is. But sending a journalist like George Taber to study wine tourism is a bit like sending Alexis de Toqueville to study American prisons. You end up with a lot more than you expected (in de Toqueville’s case, of course, if was Democracy in America).

Taber spent the better half of a year traveling the world, visiting the most important wine-producing countries, talking with wine makers and doing some of the things that wine tourists do. He had to be selective in writing about his experiences, so he picked just one wine region in each country.

Chapters are devoted to Napa (but not Sonoma) Valley, California; Stellenbosch, South Africa; Mendoza, Argentina; Margaret River (but not Barossa), Australia; Central Otago (not Hawkes Bay or Marlborough), New Zealand; Rioja, Spain; Douro Valley, Portugal; Tuscany, Italy; Bordeaux (not Burgundy), France; Rheingau and Middle Mosel, Germany and Kakheti, Georgia.

Tourism is hard work, of course, and research is even harder, but Taber seems to have found ways to relax by reporting on typical wine tourist adventures in each spot. Thus he takes a cooking class in Tuscany, bikes along the Mosel, walks through Burgundy, goes wild game watching in South Africa, bungee jumping in New Zealand and so on.

Getting jealous? Yes, so am I. It seems like George Taber has stumbled upon the ultimate wine lover boondoggle.  He goes to great places, drinks good wine, does fun things –and we pay him to write about them!

But there’s more to this book than George Taber’s vacation slides, which is why I can recommend it enthusiastically.  Taber the hedonistic vacationer cannot shake off Taber the inquisitive journalist. Each chapter reveals some interesting and unexpected aspect of the wine, wine business or wine history of each region. The payoff goes much beyond wine tourism. Indeed, I think for me the wine tourism element is quite secondary.

I found the chapters on Georgia and Central Otago the most interesting. I know relatively little about Georgia’s wine industry and so every well-described detail about their practices is appreciated, especially since the traditional methods still in use are so completely different from anything I have encountered before. I know quite a bit about New Zealand wine, on the other hand, but I’ve never visiting Central Otago, so Taber’s history and report on the current status of the industry there usefully connected a lot of dots for me and in a very enjoyable way.

This book isn’t the last word on wine tourism and no one should view it as a textbook on wine tourism economics, but it is a very interesting examination of the wine world through a particular tourist’s sharp eyes. I’m looking forward to Taber’s next book to see where his search for Bacchus will take him next.

Posted in book reviews, wine tourism | 1 Comment »

Awaken, Bacchus!

January 16, 2010

I’ve spent the last two weeks watching a nine-part Japanese television miniseries that is based upon a 20+ volume Japanese manga (graphic novel) called Kami no Shizuku (Drops of God).

Have you heard of it? No? Then read on because Kami no Shizuku seems to be changing how millions of people are thinking about wine. Maybe it will change how you think about wine, too.

The Sideways Effect

Wine enthusiasts like to think of wine as a very serious subject, all vintages and terroir and malolactic fermentation and so on. It is hard for us to accept that something as sacred as wine could be influenced by popular culture.

But we know that it happens. The 2004 film Sideways, for example, is said to have set off the Pinot Noir boom in the United States and brought to an end a previous Merlot bubble. It also romanticized wine in a way that cannot have hurt wine sales overall.

No wonder wine tourists come to the Santa Barbara area to drink the same wines, eat the same foods and visit the same wineries as the film characters Miles and Jack (played by actors Paul Giamatti and Thomas Haden Church).

Tokyo Wine-Quake

Sideways had a big effect on the wine world. The Kami no Shizuku effect seems to be several orders of magnitude larger. The reason you may not have heard about it is that this wine-quake is centered in Tokyo, not New York, Los Angeles or London.

The on-going comic book series, written by Shin and Yuko Kibayashi, first appeared in 2004 and has sold more than half a million copies in Japan alone. The Nippon television series that I’ve been watching on DVD premiered in January 2009 and reached millions more.

The Kiyabashis were ranked number 50 in Decanter magazine’s July 2009 “Power List” of the wine industry’s individuals of influence. Kami no Shizuku is “arguably the most influential wine publication for the past 20 years,” according to Decanter.

Most influential in 20 years! Wow. You can get a feel for the phenomenon by reading this English translation of some of the graphic novel volumes.  (Note: click on the images to move to the next page. Don’t worry if it appears to be in Japanese — the English shows up once the story begins. Read the story panels from right to left on each page the way the Japanese do.)

Kami no Shizuku has set off a wine boom in Asia, where, much as with Sideways, enthusiasts rush to taste the fine wines (mainly from France, mostly Burgundies and Bordeaux) that are featured in each storyline. The rising sales of these iconic wines has been good for these particular  producers, but I think the bigger effect has been to draw millions of Asian consumers into the market and help them to develop a personal sense of wine.

The Da Vino Code

I’ve been trying to decide how to explain Kami no Shizuku and why I think it has had such a profound effect on wine is Asia and soon, perhaps, around the world. One reason is that it is a good story and that it always important. The Nippon TV series is pretty much a soap opera and you know how addictive those are!

But I think the real factor is that Kami no Shizuku presents a different idea of wine.  Wine is presented as a sort of mysterious but not impenetrable secret  society (think Da Vinci Code), with its own history, geography, rituals language and traditions. It is a mystery waiting to be solved.

The reward for mastering its intricacies is a sort of divine communication (hence “Drops of God”).  Wine can communicate a time and place, an emotion or experience.  Tasting wine even allows the living to talk with the dead, in a way that the story makes clear but I won’t reveal here.

A Hundred Flowers

You can get a small sense of this communication by watching the music video with scenes from the television series I have embedded into this post. Our young protagonist is upset with his wine-obsessed father for never leaving flowers on his mother’s grave. He always leaves wine — Domaine de la Romanée Conti Richebourg 1990, if you are interested — not flowers as a proper grieving husband/father should.

Later, as he begins to learn the language of wine and unlock its secrets, he discovers that this Burgundy is the truest expression of the love the flowers are meant to represent — not a dozen flowers, but a field of them.  Watch the video — you’ll get this point and more. And so the journey and the complex exchange of ideas, feelings and emotions begins.

Awaken, Bacchus

“Awaken, Bacchus,” he says, when he wants to move beyond the physical senses to taste the memories and emotions that lie hidden in the wine glass. Who wouldn’t want to have such a transformative experience? Who wouldn’t want to see what mysteries wine can be revealed?

Kami no Shizuku seems to have unleashed two forces in Japan and perhaps eventually around the world. One is the competition for status and self-esteem through the conspicuous consumption of the trophy wines featured in the comics and television series. This materialistic competition is even part of the plot! It is nothing new, although I’ll bet the French producers are thankful for it during this economic crisis.

The other is a different sort of quest — this one for meaning and fulfillment — with unruly Bacchus an unlikely guide. The competition here is more subtle and inward-looking, but the rewards are much greater (another lesson of the story).

Both quests are important from an economic standpoint, but it is only the second one that has the potential to awaken a new kind of audience for the pleasures of wine by waking up the Bacchus inside us all.

http://drama.watchanimeon.com/kami-no-shizuku/

Posted in popular culture | 5 Comments »

What [Wine] Women Want

January 10, 2010

I’m always interested in the questions my students ask about wine and so I look forward to their final papers, where they have pretty much free rein to pick the questions and search for answers. My Fall 2008 class seemed to be particularly concerned about what I think of as ethical questions – wine and the environment, for example, and fair trade wine. I wrote about their papers here.

My Fall 2009 group was very different in terms of their interests and “wine personalities” — and they were disproportionately female — and their choice of paper topics reflected these facts.

All in the Family

Three questions attracted more than one student’s interest and so are worth noting here. Marc and Isabelle both wrote on the future of family wineries. They are both business majors and interested in the fact that an unusual number of wineries, including very large ones like Gallo, Boisset and Yellow Tail, are family firms not private partnerships (The Wine Group) or public corporations (Constellation Brands).

Their papers examined the problems and limitations of family-owned businesses and what industry-specific advantages might account for the success of family wineries.

Wine, Women and their Health

Two students, Kelly and Libbie, decided to use their backgrounds in science to probe questions about wine and health in more detail than is typically seen. Kelly wrote on the chemistry of the “red wine paradox” while Libbie examined the question of whether pregnant women should drink wine. The conventional wisdom, of course, is that moderate wine consumption (2-3 glasses per day, especially red wine and especially with meals) provides positive health benefits except for pregnant women, who are specifically told to avoid any alcohol on government-mandated warning labels.

The research papers showed that the health issue is more complex than is generally appreciated and provided a surprising answer to the question, should expectant mothers drink wine? Although there are obvious problems with excessive alcohol consumption, research studies indicate that very modest wine consumption (in the range of one glass a couple of times a week, as I recall) can provide health benefits to both mother and baby.

It is obviously a delicate balance, however, and the fact of rising alcohol levels in wine (which I wrote about here) makes getting the balance right increasingly problematic.

What Do [Young] Women Really Want?

Two of my favorite papers were written by young women who wanted to know more about how wine companies tailor their marketing to their particular demographic. Elyse examined marketing to the so-called Millennial generation and Anna focused on wine brands designed to appeal to young women like herself. Women purchase more wine than men and young women are the key wine buyers of the future, so it makes sense that wine companies would try to target and develop this market.

Anna identified the wine brand pictured above as an example of marketing to young women. She noted that brand name, the choice of colors and several other factors made Bitch wine particularly attractive to young women wine buyers, especially those who are new to wine. Take a close look at the label and I think you’ll see what Anna is talking about. Pink label, sewing (female stereotype) imagery, Bitch rhymes with stitch, even the little hearts and crosses that suggest needlepoint.

Bitch Bitch Bitch

She called particular attention to the back label. Some wines use the back label to provide production details or tasting notes. Bitch wine, however, just says “Bitch bitch bitch bitch …” and so on.

Would Anna buy Bitch wine? Probably not. She found the packaging appealing, but the lack of more detailed information about the wine itself was a real negative. She might have tried it a few months ago, she said, but after taking our class she knew too much about wine (and asked too many questions) to respond positively to this marketing scheme even though the imagery attracted her.

Bitch seems to be wine for women who are beginners in wine, she said,  and Anna isn’t a beginner any more.

Posted in health, popular culture, wine brands, wine research | 1 Comment »

Australia: Back to Square One

January 4, 2010

I’ve written a lot about Australia’s wine crisis and for a long time I felt like Chicken Little. The sky is falling, I’d say, but Australia seemed somehow to muddle through.

There is a strong sense now, however that Australia’s crisis has arrived. (I was going to write something about Australia’s Chicken Littles coming home to roost, but it was too awful even for me.)

Sales of Australian wine are down here in the U.S., dragging down sales of Syrah/Shiraz from all places with it. It’s worse in Great Britain, Australia’s number one export market, I’m told.

Charles Gent’s article “The Writing on the Wall,” posted today on Inside Story, provides an excellent overview of the situation and is required reading for anyone interested in Australia’s wine future.

I find a number of parallels between the Australian wine crisis as explained in Gent’s article and the global financial crisis that I wrote about in my recent book Globaloney 2.0.

First, this isn’t the first wine crisis in Australia’s history. Gent writes that

Visiting an ageing Hunter Valley winery in the late 1950s, wine aficionado Max Lake was struck by a faded notice on the door, apparently dating from the Great Depression. Beneath the forbidding heading “Warning to Growers,” it read: “Owing to the dangerous position arising from Overproduction, Growers are warned against any further planting of Wine Grapes.” Beneath the text was the name of Herbert Kay, chairman of the Australian Wine Board.

Two months ago, the Wine Board’s modern equivalents slapped a similar notice on Australia’s wine producers. Issued jointly by the Winemakers’ Federation of Australia, Wine Grape Growers’ Australia, the Australian Wine and Brandy Corporation and the Grape and Wine Research and Development Corporation, the statement is more wordy than the 1930s edict, but equally blunt in its message. It states that Australia is producing twenty to forty million more cases of wine than it can sell each year, and that the current surplus stockpile, calculated at more than 100 million cases, will double in two years if current levels of production and demand persist.

A second feature is that the wine bubble (because that is what it was) had all the main features of a financial bubble including the fact that anyone who looked at it objectively would have recognized it as such. But these Chicken Littles could not compete with those with an interest in keeping the bubble growing.

The massive plantings were seen by many industry figures as a desirable and necessary corollary of the soaring offshore demand, and traditional grape growers who expressed misgivings about the rate of expansion got short shrift. As president of the Winemakers’ Federation in 1999, Brian Croser described their concerns as a “Luddite viewpoint” and called the tax scheme plantings “a great resource.”

Finally, to keep this post reasonably brief, it isn’t enough to just pull out a few vines and go back to business as usual. More fundamental reform is needed.

To go forward, it seems the industry first has to take a step backward. In other words, says Strahan, “We have to get rid of the oversupply as quickly as possible to start bringing some margin back into the business, and to start getting a connection with the consumer that is not defined by price.”

That’s not quite back to square one, but it’s close.

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Update 1/5/2010.

Decanter.com reports that Constellation Brands has cancelled 300 grower contracts in South Australia, another sign of the rapid consolidation of the wine industry down under. Decanter reports that …

Australia’s biggest buyer of wine grapes advised growers just before the New Year that they would see their contracts end after the 2012 vintage.

The company had previously given three years’ notice to more than 200 other contracted growers in December 2008.

The decision has come at a time when growers in the region are facing plummeting wine grape prices.

In some cases growers are being offered up to 50 per cent less for their grapes than in 2008, according to figures released by Constellation and other major wineries in December.

Posted in Australian wine, economic crisis | Leave a Comment »

The Elephant in the Room: Alcohol

December 31, 2009


I’m writing this post on New Year’s Eve, the night when many folks go out to celebrate, have a little too much to drink and end up “seeing pink elephants,” as the saying goes. It’s a good moment to think about alcohol in wine.

Pink Elephants

Alcohol is the [red, white or pink] elephant in the room for many wine enthusiasts. We know that wine contains alcohol and that alcohol levels having been rising in recent years (more about this later). We know that alcohol has lots of negative social and health effects. We know that anti-alcohol sentiments are rising around the world, even in France, where  wine is deeply embedded in the national culture. But, like the metaphorical pachyderm, we pretend we don’t see these facts and try to ignore them.

But maybe it’s time to sober up. Wine enthusiasts have for a long time been comforted by the French Paradox finding that moderate consumption (defined by health experts as 2-3 glasses a day) of red wine is beneficial to your health. We need to remember that the finding that wine can be good for you is actually the result of a delicate balancing act. The alcohol in wine has few positive and many negative health consequences. The resveratrol in wine and its antioxidant compounds generally have positive effects, especially when wine is consumed with food.

So it’s really a balancing act of pluses and minuses in terms of your health. And balance is the key, too, regarding wine’s social effects. Excess consumption of wine as for any alcoholic beverage is a real concern. Wine’s reputation as the drink of moderation has given us comfort in this regard. Wine drinkers aren’t as likely to go overboard as those who consume beer or spirits, we tell ourselves. Thus do we convince ourselves that wine doesn’t have an alcohol problem.

Zinfandel Rising

But maybe that is changing, both in terms of social attitudes towards wine (see France) and in terms of the wine itself.

Alcohol levels in wine, especially red wine, have been creeping up for many years. Twenty years ago the Zinfandels I bought averaged about 12 – 12.5 percent alcohol. Try to find one with less than 14 percent alcohol today. There are some out there, but most are 14.5  and even 15+ percent, which is about a 20 percent increase.

If you take the health issue seriously, this reduces your “moderate” consumption rate from 2-3 glasses to maybe 1-2 per day.

It also obviously affects the taste and texture of the wine and not always in a good way. The problem used to be that grapes were harvested too soon, so some European AOC rules provided more prestigious designations for wines with higher alcohol levels. Wines have to have at least 12 percent alcohol to gain the Chianti designation, for example, and 12.5 percent for Riserva. It isn’t the alcohol itself that is being encouraged here, but the higher quality riper grapes that produce it.

The 18.3 Percent Solution

This doesn’t seem to be as much of a problem today. By the time the grapes in many regions have fully developed flavors it seems that they have over-developed sugar levels that produce a lot of alcohol.

This fact struck me while I was reading Dr. Jay Miller’s review of 2008 Australian wines in the new issue of Wine Advocate. Australia had an awful year in 2008, with wildfires (that left some wines with smoke taint) and a heat wave — day after day of 100 degree plus weather that baked the vineyards and pushed sugar levels over the top.

The amount of alcohol that resulted is stunning (both figuratively and maybe literally, too). Dr. Miller reports that some reds from well regarded Marquis Phillips came in as high as 17.6% (for a Grenache) and even 18.3% (a Shiraz). Eighteen percent is fortified wine territory (and would be regulated as such in many U.S. states), but these are dry table wines. This pushes the limit for wine in all respects, don’t you think?

Adding Jesus Units

Interestingly, rising alcohol levels have appeared despite winemaker efforts to keep them low. The dirty little secret of California wine is that a great deal of it goes through some form of de-alcoholization, where at least part of each vintage has alcohol removed to bring down the overall level.

Another approach is to “just add water” to the fermenting must to literally water down the potential alcohol. A friend calls this technique “adding Jesus units” because water is turned into wine instantly; he says that it is a common practice, if not one that anybody admits using.

I think we might be at the tipping point in terms of alcohol in wine. Winemakers are surely aware of this fact and consumers need to sober up about it, too.

Wine critics have so far resisted reporting alcohol levels in their ratings and tasting notes except in exceptional cases. Maybe it’s time to change this practice so that we can begin to appreciate just how big our alcohol elephant has become.

Note: The “Elephants on Parade” sequence is from the 1941 Disney animated film Dumbo. It’s my New Year’s gift to all Wine Economist readers.


Posted in alcohol, health | Leave a Comment »

Can’t Buy Me Love

December 24, 2009

The discussion continues over on the American Association of Wine Economists’ blog about whether winemakers’ money (in the form of advertising) can buy love (in the form of higher scores from wine critics).

The discussion is provoked by an article recently published in the Journal of Wine Economics that tried to find out by analyzing Wine Spectator ratings of advertised versus unadvertised wines compared to the scores given by Robert Parker’s Wine Advocate, which does not accept advertising.

A Natural Experiment?

Economists are drawn to Freakonomics-style “natural experiments” like this one but there are several reasons why it would be difficult to prove systematic advertiser bias at Wine Spectator if it existed (and I don’t think it does).

First, you would need to have a set of ratings that would give you a “true” value for each wine that could be compared with the critic scores to reveal bias. However research published in the Journal of Wine Economics actually suggests that wine ratings are highly variable — different experts can give the same wine much different ratings and, indeed, the same wine judge can give the same wine different scores, too, in blind tastings.

I don’t think, based on this research, that  it is possible to assemble a set of objective, unbiased scores to serve as a “control” data set. Without that control, it is hard to prove anything, even with sophisticated statistical tools.

The Mondovino effect

Second, it is kind of ironic that Wine Advocate was used in this study as the control. Although WA doesn’t accept advertising and is presumably immune from advertiser influence, that doesn’t necessarily mean it is unbiased. Indeed, the scuttlebutt in the wine world (see Mondovino for example) is that Robert Parker has a very definite (you might say biased) idea of what wine should be and that his ratings very much reflect his particular palate.

Let me say that I am not how sure how true this is and, because I am not an expert wine taster, I am not the right person to judge it. I will say that I have tasted some very un-Parker wines (in terms of the style stereotype) that received high WA scores, so I am a somewhat of a Parker bias skeptic.

If, however, we accept for the sake of argument the conventional wisdom that certain types of wines are more likely to get high Parker scores than others, then it seems like WA ratings are a problematic control for this experiment. You would be comparing possibly-biased apples with oranges that could be biased in a different way.

The problem gets worse when you consider the accusation that is often heard that some winemakers tailor their wines to Parker’s palate in an attempt to get good ratings.  Some of these makers of “Parker wines” are probably more likely than others to advertise in WS and other publications.  It’s a messy situation, don’t you think? Hard to filter out an objective control with all the alleged “noise” in the data and even more difficult to track down potential bias.

Market Discipline

Finally, I’d like to suggest one more irony. The premise of the original study is that wine critics will cheat on their clients (the subscribers) when the benefits in terms of advertising revenue is high enough (so long as they can keep their bias secret).

I understand that subscribers don’t want to play if they think the game is fixed, but it seems to me that the same holds true for advertisers. Who would want to buy ads in a magazine if it looked like doing so was equivalent to paying “protection” to the mob? It seems to me that I’d run the other way. Wine critic publications both need to be unbiased and to appear unbiased in order to prevent the advertising equivalent of  “capital flight.”

And so the final irony is this. Because Wine Advocate does not accept advertising, it is not subject to this sort of “market discipline.” Robert Parker could in theory be as biased in his ratings as he wants and it would never cost him a single advertising dollar.

Does Parker exploit this freedom to promote particular interests? No, I don’t think so, but he could. Simply being ad-free is no guarantee of virtue (or objectivity) any more than selling ads is an indicator of vice.

Critics (and not just wine critics) live in a messy world of complex incentives and disincentives. We, the consumers of critic opinions, need to understand the situation and make our own subjective judgments.

Posted in wine ratings, wine research | 2 Comments »

Paul Samuelson: Wine Economist

December 14, 2009

OK , OK. I admit that I am not really sure that Paul Samuelson, who died yesterday at age 94, ever wrote anything about the economics of wine (except when he was analyzing Ricardo’s wine-for-wool comparative advantage story, of course).

But he sure wrote about everything else, as his full-page obituary in today’s New York Times makes clear. His influence infiltrated nearly every nook and cranny of contemporary economics so it is surely not wrong to say that he influenced wine economics, too.

Guns, Butter and Wine

I only met Samuelson once (at a party at George Horowitz’s house) but he influenced me and my work in many ways. I especially appreciated his wit. I have a copy of the 1948 first edition of his famous economics textbook and it always pleases me to note that when he draws the diagram for guns versus butter, he actually uses pictures of field artillery and tiny cubes of butter to make his abstract point concrete.

Most of all, however, I remember Samuelson for his bold focus on economic dynamics, which I discussed in the chapter seven of my 1998 book Selling Globalization. Samuelson saw economics as the study of change and the possibility of instability, not just static equilibrium (see the section called “unstable foundations” in the middle of the chapter).

That’s why I’ve chosen this photo from today’s Times. He’s sitting in front of a graph of the “cob-web” theory of a dynamic market. This model is most frequently applied to markets for agricultural products — like wine grapes (my wine economics hook) — and it was the graph that made me want to be an economist. (Click on the link above to view a short video about the cob-web theory.)

The idea is that agricultural markets aren’t always stable in the way we usually think about stability. They can be subject to various kinds of cycles and price surprises.

Here’s how it works. In normal markets, producers look at today’s price and decide how much to supply today. This often isn’t possible in agricultural markets because the supply decision was made in the past (when the crop was planted) based upon price information and expectations then.

Winegrower Cob-Webs

The result of this delayed grower response to today’s market information is that price seldom quickly settles into a comfortable equilibrium the way the textbooks teach.

Sometimes (as in the graph in the photo) price rises this year (encouraging growers to plant) and then falls next year (when the extra output hits the market, causing growers to cut back the next year) and then rises a little less the year after that (as the smaller crop pushes prices up again and makes growers optimistically increase plantings once again) and then falls a little less the year after that (due to the unintended surplus) and slowly converges on equilibrium by surrounding it (creating the cob-web shown here). Once at equilibrium, price holds steady until something inevitably shakes things up and starts the cob-web process again.

Winegrowers are certainly familiar with the market cob-web although theirs is more complicated because it takes longer for newly planted vines to bear marketable fruit. Even though the market may be stable in the theoretical long run, prices can fluctuate wildly in the short term, raising all sorts of havoc in the process.

Worse than this, however, is a second sort of cob-web (created by sometimes small differences in the slopes of the demand and supply curves) that causes  the price swings to grow larger and larger instead of converging until the market finally collapses in crisis.

Anyone who studies the history of commercial wine growing understands that this sort of cob-web is more than a theoretical possibility! Raise a glass and toast the life and work of a great economist, Paul Samuelson.

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Do Advertised Wines Get Higher Ratings?

December 12, 2009

That’s the question that Boston College economist Jonathan Reuter asks in a new article in the Journal of Wine Economics titled “Does Advertising Bias Product Reviews. An Analysis of Wine Ratings.”

The Answer is No

Using data from Wine Spectator (which sells advertising) and comparing them to ratings from ad-free Wine Advocate, Reuter fails to find significant systematic bias in favor of advertised wines. In fact, a comparison of the average scores given to advertised and non-advertised wines shows a slight difference the other way, with non-advertisers receiving higher average scores.

Wine Spectator advertisers = 87.50

Wine Spectator non-advertisers = 87.58

Wine Advocate (the control in this experiment) also rated the wines that weren’t advertised in WS slightly higher than those that were, although it also gave higher average scores to all wines in the data set and the gap between the two groups was larger.

Wine Advocate scores of WS advertisers = 88.15

Wine Advocate scores of WS non-advertisers = 88.65

Reuter concludes that

Overall, the tests for biased ratings and biased awards produce little consistent evidence that Wine Spectator favors advertisers. At worst, the tests for biased ratings suggest that Wine Spectator rates wines from advertisers almost one point higher than wines from nonadvertisers. However, selective retastings can explain at most half of this bias and only within the set of U.S. wines rated by both Wine Spectator and Wine Advocate. Given Wine Spectator’s claim that it rates wines blind, the remaining difference in ratings may simply reflect consistent differences in how the two publications rate quality. The fact that tests for biased awards provide no evidence of bias suggests that there is little bias overall. Therefore, despite the fact that Wine Spectator is dependent on advertising revenue, the long-run value of producing credible reviews appears to limit bias.

Reuter’s analysis obviously goes far beyond a simple comparison of means. Click on the link in the first paragraph to read the full article.

Dog Bites Man?

Most people are likely to see this as a classic  “dog bites man” non-story — the reason we pay attention to wine ratings is because we trust that they are unbiased, so it is not particularly newsworthy to discover that our trust is well placed.

But there is theoretical interest in the question because of the Principal-Agent problem. We the principals hire wine critics (by subscribing to their publications) to be our agents in evaluating wine quality. They have an interest in honoring this contract and assigning ratings with integrity in order to keep our business. On the other hand, however, they also have an incentive to act in their own narrow interests and exchange good ratings for advertising revenues.

Theory says agents will tend to cheat on our agreement if they can keep us from finding out. Hence we are suspicious of agents even as we put our trust in them. So you can see why economists might be surprised that wine critics, at least in this study, seem to put integrity first.

Reuter concludes that a reputation for honesty is worth more than potential gains from a pay-for-points regime. It is understandable that wine critics would be  offended that their life work is reduced to a simple balance of economic interests, but that’s how economists see the world.

Splitting Hairs

I appreciate the interest in wine rating scores — economists are attracted to data sets the way television-junkies go for reality shows. Since Wine Spectator rates the most wines of any publication it is unsurprising that we want to use them in our analysis.

I have always been uncomfortable with this. The temptation is to treat wine ratings as a consistent and reliable metric to measure quality (or at least perceived quality). But I’m not sure this is really a valid analytical technique.  I don’t rate wines, but I do rate students and I know that grades are not a perfect measure of the quality of student performance. Grades (even when given blind like the WS scores) are subject to any number of distorting factors. The scale is affected by context, of course, and changes over time.

I’m not saying that critics shouldn’t rate wines any more than I would advocate getting rid of student grades. I’m just saying that we ought to be very careful when we use wine scores (or student grades) in substantive research.

I know that comparing average grades for different types of classes taught by different professors at different times is problematic, so it is understandable that I think similar problems exist for wines ratings. I always take the conclusions  of empirical economic analysis based upon wine ratings — even when it is very good — with a grain of salt. To his credit, Reuter acknowledges the empirical limitations of his study.

How is Wine Spectator Different from Goldman Sachs?

Newspapers these days are full of stories of financial industry executives who are keen to raise cash and pay back TARP funds so that they are free to pay themselves generous bonuses. Although a closer investigation might make me alter my views, it sure seems to me that the collective interests of the principals (taxpayers, corporate shareholders) are being sacrificed in order to further the particular interests of the agents.

If Goldman Sachs does it, why should we think that Wine Spectator does not?  No wonder we are surprised by evidence that they don’t. Maybe the more interesting question, from an economic theory standpoint, is why Wine Spectator is different from Goldman Sachs when both face principal-agent problems in businesses where uncertainty and asymmetric information prevail? That would make a really interesting study!

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