UNESCO World Heritage Wine Regions: Benefits & Costs

Last week I talked about the rise of UNESCO World Heritage-designated wine regions. There are now more than a dozen wine regions that have received the UNESCO imprimatur — Champagne and Burgundy are the latest additions — and more than 30 with some wine connection (see list below) with more applications are in the pipeline.

I am not opposed to wine regions being highlighted this way — in fact I kind of like the idea — I just wonder how UNESCO designation fits into the already complicated geography of wine. I ended the column with a series of questions that I will try to answer this week.

What are the costs and benefits of World Heritage status?

A 2007 UK government report outlines the costs of and benefits from seeking UNESCO World Heritage Site designation (you can find a pdf of the report here). The costs, it concludes, can be substantial. The application process alone can be long and expensive (this is not a surprise to anyone in the U.S. who has been through our AVA application process lately).

A recent New York Times article about Burgundy’s UNESCO designation notes that the organizers assembled a team of 30 specialists to make their case and published a 600-page scientific and historical report in both English and French. Once approved, there are of course additional costs of managing the program. The UK study estimated that the costs (back in 2007) could be more than £100,000 to make the bid and possibly much more than this on a yearly basis for program management. Obviously someone has to come up with funds to finance all of this, so UNESCO designation is a major commitment.

What are the benefits? The UK study divides them into potential economic benefits and potential social benefits. From an economic standpoint, being a UNESCO site opens doors to partnerships with other organizations that might provide funding and support and is also a useful tool in promoting tourism. Being on the UNESCO list is like having an extra star in the tourist guidebook rating, I guess.

One of my university students reports that her thesis fieldwork on national parks in Southeast Asia reflected the UNESCO effect. UNESCO-designated parks had better facilities, more tourists and more government support (she also found them to be more commercialized) compared with national parks lacking the UNESCO imprimatur.

The non-economic benefits can be substantial, starting with conservation, regeneration and education benefits (which I think are the main aim of many of the programs) and moving to civic pride and social capital (“social unity and cohesion” according to the study), which are harder to measure but still important.

Interestingly, the New York Times article lists different principal benefits for Champagne and Burgundy. For Burgundy, we are told, the point is to make a statement that fine wine comes from specific terroirs, of which the newly protected Burgundian vineyard climats are among the world’s most famous.  For Champagne, on the other hand, the payoff comes in additional protection of intellectual property rights — the Champagne brand itself. To the extent that the climats are closely identified with Burgundy’s brand, I suppose the two cases are not so very different after all.

Why is there a need for an additional regional wine designation?

The first appellations in France were essentially defensive mechanisms. Defense first against wines from outside a region being passed off as a local product and then defense against local producers who were debasing the region’s collective brand through over-cropping, poor wine-making, etc.  Appellation regulations had economic value first and then provided social benefits.

Here in the U.S. we have watched AVAs proliferate to the point where most of them have little specific economic brand value. Most AVAs with a few exceptions are probably best understood as tools of regional identity not as valuable brands. They are expensive tools due to the high application costs, but they are worth something in today’s marketplace because for some consumers today the lack of a geographical designation puts a wine into a lower generic class. 

Seen in this economic light, the UNESCO designation creates a sort of super appellation that rises above the cluttered landscape while at the same  time potentially providing those conservation, regeneration and education benefits.

The creation of a super league of some sort might not be necessary, but perhaps it is inevitable (in the same way that the creation of the UEFA Champions League in soccer was probably inevitable).  The fact that the league might ultimately be based on UNESCO protocols that explicitly privilege history and culture as opposed to auction valuations or famous critic ratings, which focus on different factors, is what makes it really interesting to me.

Should your wine region look into this?

When I first read about the UNESCO designation I thought that Napa Valley was an obvious candidate. But if increased wine tourism is one of the benefits, then I wonder Napa really works. Seems like if Napa is having trouble working out a balance between wine tourism and what many see as conflicts with local lifestyles. The additional attention from UNESCO status might compound rather than resolve local tensions unless local pride somehow rose to bridge the tourism divide.

Ultimately, looking at the examples of Champagne and Burgundy, I think each region has to make its own evaluation of the costs and benefits and decide if gains in terms of profit, identity or philosophy are worth the obvious costs. It seems to me that the conservation and regeneration benefits (or lack thereof) may tip the balance one way to another. I’m interested in hearing what others have to say.

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Congratulations to those regions that have achieved UNESCO designation and to those who receive it in the future.  Despite my grinchy “dismal scientist” focus on costs and benefits, I am glad that UNESCO celebrates the natural and cultural wonders of the world and proud that wine regions are included on the list.

Here’s a list of vineyard-related World Heritage sites as tabulated by worldheritagesite.org

 

Butterfly Effect: How China’s Crisis Threatens the U.S. Wine Industry

china1“The Butterfly Effect” is a term coined by Edward Lorenz that describes the nature of a highly interconnected system such as the global environment or the global economy. A butterfly beats its wings in Brazil, the story goes, setting off a chain reaction that indirectly results in a tornado thousands of miles away in Texas.

The Butterfly Effect was on my mind last month when I spoke at the annual meeting of the California Association of Winegrape Growers in Napa, California. Part of my presentation outlined several indirect global threats to the California and U.S. wine industries. Two of these are in the news this week.

China Market Meltdown and Contagion

The financial crisis in China was one of the threats that I highlighted. “I know what you are thinking,” I told the group, “Mike, we don’t have a lot of money in the Chinese stock market and we don’t really sell too much wine in China, so I don’t see how falling Chinese stock prices are a threat to our business.” Well, they aren’t much of a direct threat, it’s that Butterfly Effect that you need to worry about.

Economists have a name for the Butterfly Effect of a financial crisis — we call it contagion and it takes several forms. Exchange rates are one way that economic effects are transmitted from country to country.  The Chinese crisis drives down raw material prices on global markets and this has pushed down the foreign currency values of many natural resource producing countries including Australia, New Zealand and Chile.

These three countries are important wine exporters to the U.S. and lower exchange rates for their currencies means increased competition for U.S. producers. When you find that a Chilean producer has undercut your price for bulk Cabernet Sauvignon, for example, there might be a Butterfly Effect at the root of the problem.

Oil is another potential contagion vector. As China slumps, oil prices do, too. This has a disproportionate impact on certain countries such as Russia, which relies on oil exports to China more than in the past due to the current international  sanction regime. When Russia also slumps due to falling oil sales wine producers in Spain, for example, find themselves stuck with excess stocks earmarked for the Russian market. If they try to sell them off here in the U.S. at a bargain price that’s another Butterfly Effect to consider.committee

The Contagion-Busters

Contagion occurs in other ways and I highlighted the group that I think of as  “The Committee to Save the World” (shown above) in my Napa talk (you might prefer to call them the Contagion-Busters). The “Committee’s” job is to stop contagion or at least minimize its effects and it is a difficult task. They have been focused on Greece in recent months, but now it is impossible for them to ignore China.

Hopefully they can prevent the Chinese crisis from having real impacts on other large economies. It is already clear that there have been substantial financial effects (the U.S. stock market “correction,” for example) but the real economy of jobs and output is slower to react and sometimes is less affected. Fingers crossed.

Certainly the Chinese crisis adds risk to the whole world economic system and puts constraints on policy. If the Federal Reserve now goes forward with its widely anticipated plan to raise interest rates in September, for example, the result is likely to be a big spike in the value of the U.S. dollar on foreign exchange markets, putting U.S. wine producers at a further competitive disadvantage. Another beat of the butterfly’s wings?

Keep an eye on China. The impacts could be both bigger and different than you otherwise expect.

The Rise of the UNESCO World Heritage Vineyard

“International Designation is Sweet Victory for Burgundy”  is the title of the August 17, 2015 New York Times article by Elaine Sciolino, which tells the story of how Burgundian vineyards received UNESCO World Heritage Site designation. “Burgundian terroir and climats” joins “Champagne Hillsides, Houses and Cellars” on the 2015 UNESCO induction list.

There seems to be a movement among some wine regions to seek the UNESCO designation in addition to their regional appellation.  During our visit to the Italian northeast last year we learned that Conegliano-Valdobbiadene had applied for UNESCO status for their dramatic and beautiful hillside vineyards. I saw that as a special case, bow I am starting to think that UNESCO-designation is a broader trend that deserves more attention.

A to Z: 1031 UNESCO World Heritage Sites

The UNESCO World Heritage Site program has grown and changed since it was initiated in 1978.  There are currently a total of 1031 UNESCO-designated properties in 163 countries around the world. About 80 percent are designated cultural sites and 20 percent are natural heritage locations.  Forty-eight are listed as “in danger.” Here is a list of the 1978 first group of UNESCO sites. You can see a strong preservation motive here.

Aachen Cathedral
City of Quito
Galápagos Islands
Historic Centre of Kraków
Island of Gorée
L’Anse aux Meadows National Historic Site
Mesa Verde National Park
Nahanni National Park
Rock-Hewn Churches, Lalibela
Simien National Park
Wieliczka and Bochnia Royal Salt Mines
Yellowstone National Park

and here are the locations on the 2015 list

Aqueduct of Padre Tembleque Hydraulic System
Arab-Norman Palermo and the Cathedral Churches of Cefalú and Monreale
Baekje Historic Areas
Baptism Site “Bethany Beyond the Jordan” (Al-Maghtas)
Blue and John Crow Mountains
Champagne Hillsides, Houses and Cellars
Christiansfeld, a Moravian Church Settlement
Climats, terroirs of Burgundy
Cultural Landscape of Maymand
Diyarbakır Fortress and Hevsel Gardens Cultural Landscape
Ephesus
Fray Bentos Industrial Landscape
Great Burkhan Khaldun Mountain and its surrounding sacred landscape
Necropolis of Bet She’arim: A Landmark of Jewish Renewal
Rjukan–Notodden Industrial Heritage Site
Rock Art in the Hail Region of Saudi Arabia
San Antonio Missions
Singapore Botanic Gardens
Sites of Japan’s Meiji Industrial Revolution: Iron and Steel, Shipbuilding and Coal Mining
Speicherstadt and Kontorhaus District with Chilehaus
Susa
The Forth Bridge
The par force hunting landscape in North Zealand
Tusi Sites

World Heritage Vineyards and Wine Regions

A surprising (to me) number of these sites have wine connections. Here’s a list of wine-related UNESCO properties and the year each was added to the list based on my quick survey of 1031 sites on the list. There may be some that I have over-looked — please use the Comments section below to let everyone know of additions to the list.

  • Burgundy terroir and climats (2015)
  • Champagne Hillsides, Houses and Cellars (2015)
  • Palestine: Land of Olives and Vines – Cultural Landscape of Southern Jerusalem, Battir (2014)
  • Vineyard Landscape of Piedmont: Langhe-Roero and Monferrato (2014)
  • Lavaux, Vineyard Terraces (2007)
  • Bordeaux, Port of the Moon (2007)
  • Landscape of the Pico Island Vineyard Culture (2004)
  • South Africa Cape Floral Region Protected Areas (2004)
  • Upper Middle Rhine Valley (2002)
  • Tokaj Wine Region Historic Cultural Landscape (2002)
  • Alto Douro Wine Region (2001)
  • The Loire Valley between Sully-sur-Loire and Chalonnes (2000)
  • Wachau Cultural Landscape (2000)
  • Historic Centre of Oporto (1996)

UNESCO and Wine: Some Unanswered Questions

The vineyards and wine regions on the UNESCO list so far are certainly important, but it is easy to think of other wine regions around the world that have special properties and that are not yet on the list.  I wonder where this movement will lead? The rise of the UNESCO World Heritage Vineyard project prompts a number of interesting questions.

What are the costs and benefits of World Heritage status?

Why, when wine has appellations, AVAs and Geographical Indicators galore, is there a need for an additional designation?

Should your wine region look into UNESCO designation?

Answers to these questions and more in the next Wine Economist column.

Lunch with the Financial Times: Bargain Wine-By-the-Glass?

Every Saturday the Financial Times  publishes a feature called “Lunch with the FT” where a correspondent takes a newsworthy person to lunch and reports on both the conversation and the meal itself.

Don’t tell anyone, but I am sometimes as interested in the details of the food and wine as I am in the serious conversations that they facilitate. The Financial Times insists on paying and over the years I have seen a wild variation in bills.

One blustery British billionaire ordered as if he were paying himself, including a bottle of Chateau Palmer 1983 for £580 (about $900). The total tab was over £750 for lunch for two. At other times the bill is zero — the person being interviewed insists on tea at home, for example, or lunch at the company dining room.

One of my favorite interviews involved Tyler Cowen author of An Economist Gets Lunch and expert on both globalization and the Washington D.C. ethnic dining scene. His goal was to have a wonderful lunch while spending as little as possible, just to demonstrate that the opportunity usually exists if you aren’t afraid to try new cuisines (African or Ethiopian in this case).

Here, for the record, is the bill for the meal for two. I think he succeeded pretty well, don’t you?

Kebericho, Deli Market, 3811c South George Mason Drive, Virginia

Kwanta firfir

Awaze tibs

Minchet abish

Kidfo $15.99

Double espresso $2.00

Total (incl service) $22.99

Incredibly, since the Financial Times picks up the tab whether it is big or small, many subjects pass on wine. I suppose it is about making a statement — my subject is too serious to let wine get in the way — but this seems just wrong in terms of both dining pleasure and the economic incentive that the FT is purposefully providing.

Which brings me to this week’s Lunch with the FT, which is now my favorite in the series. The interview subject is economist Mariana Mazzucato, author of The Entrepreneurial State and the discussion of the role of government in economic innovation is very interesting.

So is the meal. The restaurant is The Gilbert Scott, Euston Road, London and the cost is moderate by London standards with one exception that caught the FT host by surprise when the bill came. Can you pick out the unexpected charge?

Asparagus £10.50

Leek and Jersey Royal soup £7.00

Duck leg confit £19.00

Sea bream £19.00

Green salad £4.00

Spring greens £4.00

2 Macchiato £6.50

Sparkling water £3.75

2 Glasses of Pouilly-Fumé  £80.00

Cover charge £4.00

Total (including service) £177.50

Yes, you can imagine the shock of seeing this charge “2 Glasses of Pouilly-Fumé £80.00” (about $120) and having to explain it to the accountants back at the office. We only had two little glasses of white wine … honest!

Explanation? Well it seems that the wine was a 2006 Pouilly-Fumé Blanc de Fume by Didier Dagueneau — one of the world’s great white wines and something that any wine lover would want to try. Two glasses cost almost as much as the rest of the meal including service, but many would say it was money well spent! It might be a great bargain in the grand scheme of things, although that’s a matter of taste.

It seems that The Gilbert Scott always has a couple of stunning wines available by the glass along with a well-chosen and  fairly priced wine list in general. Single glasses of the house selection are as low as £5. But if you are willing to splurge …

I am now in awe of Mariana Mazzucato — well done, Professor! You really know your wine and you know how to take advantage of an opportunity in the best possible way. I wonder if I would have been bold enough to make that choice? Brava! I think I want to have lunch with you sometime (if we can just get someone else to pay).

Thus inspired, I sit here by the phone waiting for a call from the Financial Times …. Hello? Rats. Wrong number.

Here is a link to the Mariana Mazzucato interview. Warning: you may need a FT subscription to access the page. Do you have a good wine-by-the-glass story? If so, please use the Comments section below to tell me about it.

The “Big & Hot” Guide to Best-selling U.S. Wine Brands

wv082015The August 2015 issue of Wines & Vines magazine is full of interesting and useful information as usual. One article that caught my eye provides IRI off-premise wine sales data for the top 20 U.S. wine brands. What are the best-selling off-premise brands? What’s hot (and what’s not)?

Bigfoot Barefoot?

The best-selling brand in the IRI league table is Gallo’s Barefoot, which accounted for an incredible $622 million in sales in the 52 weeks ending on June 14, 2015. That’s 5% more than the previous year in value terms and a 7% increase in volume. Congratulations to Gallo on their great success with this popular-priced ($5.64 average) wine. It is commonplace to say today that the sub-$9 wine category is in a slump, but Barefoot is the obvious exception to the rule

Sutter Home from Trinchero Family Estates is #2, but a long way back at $356 million sales. The rule does apply here — value is down 2% on the year and volume is down 3%. The Wine Group’s Franzia Box is just behind with $325 million in sales on the year, flat in value terms and down 5% in volume.  Franzia’s average price per 750 ml equivalent is up 11 cents to $2.17 compared with Sutter Home’s $5.25.

Who are the other big players? Here are the remaining members of the top ten listed in  order: #4 Woodbridge by Robert Mondavi (Constellation), #5 Yellow Tail, #6 Kendall Jackson, #7 Beringer (Treasury), #8  Chateau Ste Michelle, #9 Cupcake (The Wine Group), and #10 Mènage à Trois (Trinchero).

The next ten largest brands includes four Gallo product lines (Gallo Family Vineyards, Apothic, Carlo Rossi and Livingston Cellars), four from Constellation Brands (Black Box, Clos Du Bois, Robert Mondavi Private Selection and Rex Goliath) plus 14 Hands from Ste Michelle and Bogle Vineyards.

Clearly the Big Three companies (Gallo, Constellation and The Wine Group) dominate the list, but note how Trinchero and Ste Michelle punch above their weight. Kudos to Bogle for their success, too.

Hot N Cold Brands

The biggest wine brands are not always the hottest brands and the IRI data reported in Wines & Vines bears this out. As noted above, many of the top brands are experiencing slower sales in value terms including Sutter Home (-2%), Yellow Tail (-5%), Gallo Family Vineyards (-2%), Carlo Rossi (-3%), Clos Du Bois (-2%), Mondavi Private Selection (-4%), Livingston Cellars (-5%) and Rex Goliath (-4%).

These declines are matched by some spectacular gains elsewhere on the wine wall, often at much higher price points. Mènage à Trois tops the Hot List with 24% growth in value and 23% increase in volume, continuing its incredible market run. Black Box is right behind with 23% value growth. Gallo’s Apothic is next 21% value growth.

Continuing down the Hot List (among the 20 largest brands) is 14 Hands (+17%), Bogle (+15%) and Chateau Ste Michelle (12% value growth).

When you’re hot you’re hot, I guess. While Beringer and Clos Du Bois  have experienced falling average prices according to IRI (-11 cents per bottle equivalent for Beringer and -27 cents for Clos Du Bois), Mènage à Trois has seen its average price rise by 10 cents while Apothic’s average price holds steady at $9.58.

Remember that these are data for off-premise sales only and all data sources have limitations, so draw conclusions cautiously. Thanks to Wines & Vines for publishing this interesting snapshot of the U.S. wine market in transition. What will the final picture look like? Stay tuned to find out.

Speaking of Hot N Cold …

Fortune Excerpt: How Champagne Changed the Global Economy

My new book Money, Taste, and Wine: It’s Complicated is finally out and Fortune.com did not waste any time in publishing an excerpt.

The Fortune editors couldn’t resist Chapter 10, which is called “Anything But Champagne” and published an excerpt under the heading “How Champagne changed the global economy.” I will paste the first couple of paragraphs of the excerpt below. Click on this link to zoom off the to Fortune.com  for the whole excerpt.

Anything But Champagne? What does that mean? Well, money, taste and Champagne have many sides, which I discuss in the chapter, but I end up concluding that Champagne has actually has had tremendous but under-appreciated impact on the global system. Could Anything But Champagne have changed the world so dramatically? I don’t think so! A toast to Champagne (and to Fortune and my new book, too).

(Editor’s note:  Amazon has now released the Kindle edition of Money, Taste, and Wine and implemented the “Look Inside” feature that lets you read the first pages of the book without buying.) Here’s how the Fortune excerpt begins …

In this excerpt from his book, Money, Taste & Wine—It’s Complicated!, Mike Veseth shows how vigilant vintners created the law of the land for regional food and wine.

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. …  Click here see the entire Fortune article.

I’ve created a page to house links to reviews of the excerpts from Money, Taste, and Wine as they appear. Click on the link to see what people are saying!

Thanks to the Fortune.com editors for making this excerpt possible. Cheers!

It’s Here at Last! Money, Taste & Wine: It’s Complicated!

Today is a big day here at The Wine Economist. August 4 is the official release date for my new book,  Money, Taste, and Wine: It’s Complicated!  

It’s Complicated!

I really enjoyed writing Money, Taste, and Wine and look forward to reader reactions to it. The early reviews have been very positive and the book even spent some time as #1 among pre-release books in its Amazon category.

Money, Taste and Wine started out as an attempt to write something that would help wine buyers make sense of the complicated wine wall that we all confront when we go to make a purchase. So many brands, so many regions, so many grape varieties. Yikes! No wonder people try to simplify and the common denominator they sometimes focus on is price. This leads to “The Wine Buyer’s Biggest Mistake,” which is the first chapter of the book.

The Wine Buyer’s Biggest Mistake

What’s the biggest mistake? Confusing price and quality, of course. We all know it is wrong. We’ve all fallen for the “higher price = higher quality” trap at one point or another. Having pointed out the big mistake, I offer a solution in a chapter called “Wine Drinker: Know Thyself.”

Once I got rolling I realized that there were dozens of different ways that money, taste and wine get mixed up — sometimes the result is divine and sometimes not so much. Before I knew it, I had a book! I will paste the table of contents below so that you can see what topics are covered.

You will find Money, Taste, and Wine at all the usual online and brick-and-mortar locations. Click on the Amazon, IndieBound, Powell’s or Barnes & Noble button to order your copy today (talk about Shameless Self-Promotion!).

It is a Mistake to Write a Book About Complicated Wine?

Is it a mistake to write a book about wine’s complicated nature in a world where many people are looking for “Wine for Dummies” simplicity? I hope not! Certainly this blog, The Wine Economist, seems to attract readers searching for a more complex understanding. Looking forward to hearing what you think of the latest effort. Cheers!

Money, Taste & Wine: It’s Complicated!

Table of Contents

Part I: Buyer Beware!

1. The Wine Buyer’s Biggest Mistake

2. Anatomy of a Complicated Relationship

3. Wine Drinker, Know Thyself

Part II: Get a Clue! Searching for Buried Treasures

4. Dump Bucket Wines

5. Treasure Island Wines

6. Bulk Up: Big Bag, Big Box Wines

7. Sometimes the Best Wine is a Beer (or a Cider!)

Part III: A Rosé is a Rosé? Money, Taste & Identity

8. More than Just a Label: Wine’s Identity Crisis?

9. Wine Snobs, Cheese Bores and the Globalization Paradox

10. Anything But Champagne

Part IV: What Money Can (and Can’t) Buy

11. Restaurant Wars

 12. Follow the Money

13. Invisible Cities, Imaginary Wines

 14. Groot Expectations

Acknowledgements

Selected References

 

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