Wine Wars Now Available as Audiobook

The audiobook version of Wine Wars has just be released by Audible.com.  Click on the book cover image to go to the Amazon.com page where you can listen to an excerpt, purchase the audiobook or get it free with a with a 30-day free trial of Audible.com.

Wine Wars is my first audiobook and I am interested to see how paper translates into an audio file.  It turns out that 261 pages of text take 8 hours and 31 minutes to read! Veteran narrator Clinton Wade is the reader and I think he does a great job.

Many of you who know me or have heard me speak have commented that you can almost hear my voice when you read the book, so I wonder if that holds up with the audiobook format?

If you have a chance, I’d appreciate it if you’d click on the image and listen to the audio sample for a few minutes. Use the comments section below to let me know if you think the book’s voice comes through effectively.

Plans are in the works for an audiobook edition of Extreme Wine, too. Watch this space for details.

Extreme Wine Experience: Bottled History at Seppeltsfield

P1060537Wine can be many things — geography, geology, culture, even poetry (according to Robert Lewis Stevenson). So it is no surprise that wine experiences — the real time, real life phenomena that leave such indelible impressions — can take many forms, too.

History in a Bottle

Wine is or can be bottled history, for example, and connect us not just with each other but with people and events from the past.  Sometimes this is purposeful as in collecting wines from particular years to commemorate marriages, births and other special events. But sometimes the historical narrative goes deeper. Wine as bottled history is what we sought when we visited Seppeltsfield winery in the Barossa valley and we found that and a good deal more.

The Seppeltsfield winery was founded in 1851, very early in the Australia’s wine history. The Seppelts were Silesian immigrants with ambitious plans to develop the region’s economy. Wine grapes and then a winery and a village and so on. A visit to Seppeltsfield today is an opportunity to experience this history in several ways.

Seppeltsfield wears its history proudly. The wooded picnic area by the car parks feels like it has been there for a long time, a sense that is reinforced as you walk into the winery complex, with old buildings decorated with elaborate ironwork grills that reminded Sue of New Orleans.

A Cascade of Wine

You can visit Seppeltsfield and just taste wines at the cellar door bar and the people we saw doing that were certainly having fun, but the programmed tours and tastings seem to be the way to go here. The Heritage Tour, for example, takes you through the restored family home where the Seppelts lived (tight quarters by modern standards, despite their wealth). A short walk across a creek-spanning bridge leads to old vineyards, warehouses (including one where a Master Chef episode was filmed) and — my favorite part of the trip — the old winery itself.

Built in 1888, the “gravity flow” winery cascades down a steep hillside. The grapes were delivered up top and the finished wine surged out the bottom with labor-saving gravity performing much of the hard work in between. Gravity flow wineries are always interesting but it is the scale of the this facility that got my attention — 120 big open top fermentation tanks reached from the bottom of the hill to the summit, connected by all manner of pipes and valves. At the time of its construction it was one of the world’s largest and most modern wineries! Now, over 125 years later, it remains an incredible sight.

The winery remained in use for a century (imagine that) until finally time and perhaps also deferred maintenance caused it to be shuttered. Restored and improved (the tanks are now lined with stainless steel) under the current ownership, the big wine plant is back in use, producing both the small quantity of Seppeltsfield still wines that are for sale at the winery and larger quantities of wine made under contract for other wineries. If the vineyard is the soul of a winery, the production facility is its heart and this heart is back at work pumping out both wine to fill the bottles and also revenues to finance the expensive plans to restore Seppeltsfield’s historical facilities.

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A Taste of History

The Heritage Tour let me see history, then we were offered a chance to taste it, too. Who could resist? Up the stairs we went to the second level where a barrel of fortified wine was kept for every year of the winery’s history since the 1880s. Many people don’t realize the quality and importance of Australia’s great fortified wines and this room with its deep aromas stressed the long history.

Would we like to have a tiny taste of wine from our birth years? Yes — who could resist — but Sue and I were born in the same year so we proposed to share a taste of our vintage and then to honor Sue’s father  back in Virginia by sampling his year — 1921. It was kinda of a scam to allow us to taste two vintages, I know, but it worked and we loved it. Wines this old are very different creatures as you might expect, but the taste of history was dark, rich, profound, moving. Quite an experience.

Seppeltsfield h0nors its own history by each year releasing a small amount of 100 year old fortified wine. We tasted 1913 (significant to economists like me as the year the Federal Reserve System was founded in the U.S.) and considered how much has changed and yet remained the same.  (Note: The Seppeltsfield website offers for sale a small quantity of 100 ml bottles of fortified wines dating  back to 1880. Not cheap, but probably priceless to the right person.)

We didn’t have time to sample all the experiences that Seppeltsfield offers. A tasting that features small plates paired with various styles of fortified wines was certainly tempting. And I’d love to return in the summer to enjoy the outdoor areas and the crowds that are drawn to them. But it is the history (and those great fortified wines) that I will always remember.

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Thanks to Chad Elson for showing us around Seppeltsfield during our visit and providing the historical context for all that we saw and tasted. Thanks to Kym Anderson for sending us to Seppeltsfield to learn about Australian wine history first hand.

Extreme Wine Experience: Barossa’s Rockford Wines

rockfordWine is about stories and relationships and the experience that wineries provide their clients — buyers, visitors and wine club members — is very important. Wine tourists, for example, provide direct economic benefits in the form of hotel occupancy, restaurant business and of course cellar door and wine club sales.

More than the sum

But wine tourists and club members are more than the sum of their direct sale parts. They can ideally also become brand ambassadors for individual wineries and their regional associations.

One of wine’s major advantages over other fashionable beverages is its ability to capture a real sense of time and place and to connect people, product and producer in personal ways. You can add the wine experience to the list of strategies that successful wineries actively manage.

One of the great aspects of my job is that it allows me to survey different approaches to wine experience in many countries (Sue and I are in South Africa this month, for example, being wine tourists for a while  before I speak at a conference here). Today’s column is the first in a short series on Extreme Wine Experiences based on fieldwork we did in Australia a few months ago.

The Rockford Experience

Our first stop is Rockford Wines on Krondorf Road near Tanunda in the Borossa Valley. The wines we tasted were extremely good (including the iconic Basket Press Shiraz, of course, and the much admired sparkling Black Shiraz), but that’s not what made this an extreme wine experience.

The winery itself has a sense of place, with the shady trees, rustic stonework, corrugated steel roofs and very much still in use pioneer-era vintage equipment in the shed and cellar. Very atmospheric both outside and in, where fireplaces were lit to take off the chill. There’s a comfortable personality to the place that reflects the personality of the founder and winemaker, Robert O’Callaghan, who was nice enough to spend some time with us.

The Stonewallers

The members of the Rockford wine club are called Stonewallers and the name is significant on several levels. The winery has plenty of rustic stone walls, which I suppose is the obvious reference. But the Stonewallers are more than parts of the scenery — they are meant to be and seem to feel themselves to be a part of a family or perhaps the solid foundation of the operation.

Membership is limited as it often is in such cases, and wines are allocated. But, as O’Callaghan explained to us, the point of the club is to reward long-time supporters of the winery and to cultivate a long term relationship rather than to cash in on short term sales. You need to purchase from the winery for a number of  years before you might be invited into the club and then it is the persistence of your commitment rather than the size of the transaction that is rewarded.

An Inherited Trait?

Some folks of relatively  modest means are members, for example. We were told of families who saved up a little at a time over the year so that they might splurge at Christmas on their allocated half-dozen bottles of festive sparkling Black Shiraz.  The club stood by members having temporary fiscal troubles. And, yes, there had been some talk about whether Stonewallers could bequeath their memberships to favored heirs.

We happened to visit on the afternoon of one of the regular Stonewaller lunches, where members are invited to dine (at their own expense) in the winery and to enjoy the wines, the food and the company of fellow members. Back at our vineyard bed and breakfast (Blickinstal, on Rifle Range Road in Bethany) that evening we found that the other guests had come some distance in the middle of the week for the specific purpose of attending that luncheon.  There was a very strong sense of belonging among these folks, with one couple — the newest Stonewaller initiates — still almost giddy at their good fortune.

You can just imagine what ambassadors they must be, with their insider tales and first person accounts, and how well they must represent the wines and the winery to others. The atmosphere thus created seems to extend to wines not on the allocation-only list.

The O’Callaghans seem to have created a destination winery in an unlikely location half way up a dusty road a few kilometers outside of Tanunda. The thing that makes it extreme is that everything — the place, the values, the commitment to long term relationships — is at once so perfectly calculated and so completely authentic.

This is a place that knows what it is and seems to draw together people who wish to share — through wine and fellowship — those characteristics. So that’s extreme wine experience lesson one: wine and family. What’s next? A history lesson.

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Thanks to the O’Callaghans for spending time with us. Thanks to Diana Phibbs for steering us to this fascinating experience.

Wine Economist World Tour Update

Sue and I are in Stellenbosch, South Africa today meeting with winemakers and tasting the great wines we have found here — look for a full report on our adventures in a few weeks.

The Wine Economist World Tour is picking up steam — here are details of some upcoming events.

From One Hemisphere to Another

On Thursday January 23 we will be at the Lord Charles Hotel in Somerset West, South Africa to speak at the Nedbank VinPro Information Day, which is the South Africa’s annual wine industry gathering. Click here for details. I’m really pleased to be back in South Africa and to be able to meet everyone and learn more about the wine industry here.

Fast forward to Tuesday, January 28 and we will be in Sacramento, California to speak at the Unified Wine and Grape Symposium, which is the biggest wine industry gathering in the Western Hemisphere. I am moderating the panel on “Using Data for Better Decision-Making” at 2 pm on Tuesday and then joining Nat DiBuduo and Jon Fredrikson in surveying “The State of the Industry” at 8:3o am on Wednesday January 29.

I’m also doing a book signing on Wednesday afternoon at 2pm at the Wine Appreciation Guild’s booth in the Unified’s trade show section.

Global + Local

I’ll be back at my home base in February, with several interesting local events on tap.

Join us in Seattle for a special wine talk and dinner sponsored by the World Affairs Council of Seattle on February 4, 2014. Click on this link for details.  Serafina and Cicchetti are the hosting restaurants, so you know the food will be extremely good. And we have chosen a global selection of “Extreme Wines” to go with it. Great food and wine, great fun and an opportunity to support the World Affairs Council and its programs. Hope to see you there!

Even closer to home, I’ll be speaking and signing books at the iconic King’s Books in Tacoma at 7 pm on the evening of February 13, 2014.

You can join us for another book talk and signing the following week at the University Place branch of the Pierce County Library at 7 pm on Thursday February 20, 2014.

Finally, we are looking forward to seeing all our east side friends at a wine and book event at the University Bookstore in Bellevue at 6 pm on Thursday March 13, 2014. Click on this link for details.

Hope to see you at one of these events or somewhere else down the wine road. Cheers!

Alternative Wine Packaging Update

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I can’t resist checking out what’s new on the wine wall when I’m out and about and so a trip to the QFC supermarket in Belfair, Washington necessarily evolved into wine economics fieldwork. QFC is a Pacific Northwest component of the vast Kroger supermarket chain, which was recently named wine retailer of the year by Wine Enthusiast magazine.

It is understand why. All the Kroger empire stores that I have been to in recent years feature extensive wine departments, each tailored logically to match local shopper demographics. QFC (for Quality Food Centers) seems to me to target an upscale customer base and the last remodel of this store expanded the wine wall and introduced a climate controlled walk-in wine cave where some relatively expensive bottles reside.

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It is always fun to look at the wine selection at this store and I noticed a little while ago that a special section has been carved out for “Alternative Packages.” This makes sense generally, I think, because wine has moved beyond the standard 750 ml and 1.5 l glass bottles to include many other containers. The fact that there is a separate wall of these wines suggests that the customer who comes shopping for alternatives is a bit different from the glass bottle buyer.

Probably true generally, but particularly for this store. Belfair sits on the edge of Hood Canal, a major salt water recreation destination with many hiking and biking trails in the surrounding hills. Alternative packages lend themselves to boating, backpacking and picnics. Economy is one driver in this segment, but not the only one. Convenience and the environment are also important.

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I was interested to see what was classified as an alternative package. Big bag-in-box wines, of course, both domestic and import, with prices ranging from economy to premium. Tetrapacks like French Rabbit and Bandit, too, in both 1 liter and smaller sizes were also present. Four-packs of mini-bottles were classified as “alternative” as well.

I don’t think I saw any cans of wine or pouches of wine, but perhaps they were located elsewhere int he store as I think I’ve spotted them here in the past. These are also convenient delivery systems that are getting more attention from consumers.

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I was interested to see the Stack wines, single serving plastic wine glasses sold in four-glass “stacks.” Just zip off the plastic wrapping, snap off the lid and you’re in business.

P1070275I don’t know anything about the Stack wines apart from what I found on their website, but I understand that this category is growing. Correspondence from the folks at Copa di Vino wine (which was not available at this particular store) reveals that their single-serving brand is selling 600,000 wine cups per month and is looking to expand.

I’m told that wine cups add to total sales for retailers rather than cannibalizing existing customers, which means it really is a different market, driven by different factors. I guess the folks at Kroger really know what they are doing in carving out a separate Alternative Packages category!

CSI Fine Wine Edition

  • Crime doesn’t pay.
  • The best way to make a small fortune in the wine business is to start with a big one.

What happens when you combine these two old sayings? Well, you would think that it would add up to the fact that if crime doesn’t pay, then wine crime really doesn’t pay. But that may not be true. How else can we explain the recent fine wine crime wave, which may well be just the tip of the iceberg.

Wine Crime Wave?

Most of the attention has been focused on Rudi Kurniawan’s recent conviction for wine fraud – the first federal criminal prosecution and conviction for wine counterfeiting. This dramatic crime and the revealing trial has really captured the public’s imagination in part, I think, because of the romance associated with rare wine and the “lifestyles of the rich and famous” environment of the crime, the criminal and the victims.

There’s also a bit of what you might call a “Lance Armstrong” effect. The crime went on for years along with accusations, defenses and denials. Then suddenly there was the trial, the conviction and the house of cards collapsed. Now we are left to wonder how widespread this sort of wine fraud might be and what wines are true and which are false. The conviction isn’t the end of the story, only the beginning of the next chapter in the mystery.

Thanksgiving Day Heist

The Thanksgiving Day wine heist in Seattle was a grittier affair but perhaps equally interesting to wine crime buffs. I’ve been trying to piece together what happened from published reports and private sources. The more I learn about it the more this crime reminds me of something from a television show — CSI or maybe Mission Impossible!

Here is what I think I know.

Two “common thieves” (plumbers by trade, according to the Seattle Police) broke into the wine storage facility operated by Esquin wine merchants in the SoDo neighborhood (SoDo stands for South of the Dome — the Kingdome sports stadium in this case, which was demolished by implosion in 2000). They ransacked 15 of the 450 private storage lockers in the climate-controlled facility and made off with more than 200 cases of wine valued at more than $600,000.

If you are doing the math, that’s an average of more than $3000 per case or more than $250 per bottle. I’m guessing that no Two Buck Chuck was taken!

The break-in was ingenious — the perpetrators apparently cut a hole through a wall and brought the wine out case by case. Police report that the crooks spent  13 hours selecting their wines and then driving the loot to another warehouse less than a mile away. Their SUV getaway vehicle had limited capacity, so they had to make 9 round trips. Although they blacked out all the security cameras that they could, apparently this was not completely successful and some images of the crooks and their SUV’s license plate were captured.

You would think that “common thieves” would not be terribly discriminating wine shoppers — after all I suspect that most of the bottles and cases at this storage facility were of some value. Why not just smash and grab? But that’s not what happened.

Making a List, Checking it Twice

The bad guys apparently worked from some sort of shopping list, taking specific wines and vintages and leaving the rest. I’m told that the only Washington State wines taken were Quilceda Creek and Corliss, for example. Leonetti and Andrew Will? Apparently not up the discerning crook’s standards! I understand that wine was not just stolen, but also moved around and mixed up during the extended shopping spree and a few of the victims are apparently having to sort out which wines are theirs and which belong to someone else as well as which bottles have gone missing.

A good old-fashioned paper trail of evidence helped solve the crime and now opens the door to other possible heists. The first criminal captured had apparently kept receipts from a home improvement store — great idea in case you need to return an item! — and police used the day/time information on the paper to access security camera footage showing the suspect and his accomplice buying  the hardware used in the criminal act.

According to the Seattle Times a second paper trail opens the door to an earlier wine crime.

A shipping label found in Harris’ wine-storage locker led detectives to a San Francisco wine consultant, who told police he purchased $100,000 of wine from Harris and another man in April or May, charging papers say. Through an online search, Detective Don Jones determined there had been a large wine theft in the Bay Area in March, the papers say.

Covering Their Tracks

KOMO news report added a another Mission Impossible-style detail about the carefully plotted plan to crack the wine storage facility.

New details from the charging documents filed Monday reveal police found a journal labeled “The Plan” in Harris’ SUV. The journal reportedly included a step-by-step guide to the crime, a list of needed equipment, steps to destroy any evidence, steps to ship the wine and how to leave the country.

In addition, police found a book titled “Thinking  About Crime,” as well as printed out documents called “Is it Accidental Fire or Arson?” and “How to Commit the Perfect Crime,” inside Harris’ house, according to the charging documents.

Where does the arson come in? Well, the thieves planned to cover their tracks in the most comprehensive possible way. They cut  gas lines and expected the building to blow up. Good fortune prevented any loss of life and good police work captured the criminals. Some of the victims are more upset about the idea of the flaming cover-up plan with its potentially tragic consequences than the actual robbery.

So case closed for now — the thieves in custody and a good chance that most of  the wine (minus one  empty Champagne bottle) has been recovered. But are these two common thieves the whole story? Or is there a criminal mastermind (not necessarily Rudi K) still at large making up a shopping lists for clients too smart to buy fakes but maybe not too smart to avoid stolen goods? Good question!

So welcome to the new era of wine crime where the questions a fine wine enthusiast needs to answer now range from red or white and Burgundy or Bordeaux all the way to real or fake, stolen or legit? Cheers!

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I can’t resist adding the opening credits from the Mission Impossible television show.

Wine Economist 2013 in Review

It’s the end of the year and time to take inventory. The Wine Economist blog has passed a number of milestones on its way to New Year’s Eve 2013.

  • Earlier this month we published the 400th post in our 6 years in residence at this address.
  • We blasted through the 800,000 total visit barrier with more than 200,00 visits in 2013. This is a tiny audience be the standards of the wine blogging icons (200,000 was probably a slow weekend’s total for Gary Vaynerchuck in his web wine video heyday), but it is quite a lot for a specialized wine business publication.
  • Email subscriptions have risen steadily to just under 1500 names.
  • The monthly number of visits has risen from just 92 in January 2008 to over 22,00 in January 2013, the current high.
  • 2013 also saw the publication of my new book Extreme Wine and research or speaking expeditions to Australia, California, Washington, Oregon, Idaho and Virginia. Great to see so many readers and meet so many nice folks!

Too Many Highlights!

There were too many personal and professional highlights to count this year, but one of my favorites was being interviewed by the journalist Christiane Amanpour! Click on the image below to view the video. You can see that we both had fun doing this piece!

Top Post Roadmap

Back to the blog — what did readers find most interesting? Well, most visitors headed straight for the website’s home page and so viewed the then-current post, but many (guided by emails, search engines or links on other web sites) clicked their ways to particular posts or pages. Here are the most visited specific pages this year. Gives you some idea of what brings people to this stop on the digital highway.

  1. Which Wine Magazine?
  2. Riesling: How Sweet It Is?
  3. Curse of the Blue Nun
  4. Wine’s Future: It’s in the Bag (in the Box)
  5. Costco and Global Wine
  6. Wine Wars
  7. Wine Distribution Bottleneck
  8. Extreme Wine
  9. New Year’s Resolution: De-Alcoholized Wine
  10. Blue Nun Gets a Makeover
  11. Mike Veseth
  12. Is Carmenere Chile’s Next Big Thing?
  13. Sizing Up Supermarket Wine
  14. [Yellow Tail] Tales
  15. No Wine Before Its Time
  16. Will Imports Take Half of the U.S. Wine Market in 2025?
 I’m looking forward to 2014 and passing the million visit milepost. Hope to see you there. Happy New Year, everyone!
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 I’d be remiss if I didn’t take this opportunity to thank everyone who contributed ideas for columns, left comments on the posts or helped in one way or another with this project. Special thanks to contributing editor Sue Veseth and to Mooch the Wine Economist cat.

Extreme Wines of the Year

Rebecca Gibb, my editor at Wine-Searcher.com, asked a few of us to nominate our “wines of the year” for 2013 and I was happy to add my voice to the chorus. My selection — the 2012 first vintage of Eroica Gold Riesling from the Columbia Valley, Washington — was complicated.

As you know, I don’t review individual wines or assign scores so, while sensory factors clearly matter, I decided to base my final choice on a wine’s potential to shape or shift the market, or at least a particular segment of it, as well as the obvious taste, aroma and texture aspects. (You can read all the Wine-Searcher selection here.)

A New Gold Standard?

That’s where Eroica Gold stands out for me. It is different from most of the other American Rieslings that are produced in sufficient volume to enjoy wide distribution and so represents a potential step forward in this rising marketplace.

Eroica Gold is made in the style of a German Gold Capsule Auslese Riesling. About a third of the grapes were Botrytis infected. Sweetness and acidity are nicely balanced and the orange marmalade aromas and luscious texture are memorable. This is Riesling for adults, that’s for sure, and my hope is that this joint venture between Chateau Ste Michelle and Dr. Loosen will open up a new market segment for Rieslings of this style.

Eroica Gold surprised me and working on the Wine-Searcher project got me thinking about other surprising or Extreme Wines (to engage in a bit of shameless self promotion for my new book of the same name). Herewith a quick accounting of some of the other wines that got my attention, focusing on Australia, which we visited back in September.

Head for the [Adelaide} Hills

The Adelaide Hills get less attention than some other Australian regions, but it provided three wines that made me stop and think. Two of them were made by Larry Jacobs at his Hahndorf Hills Winery. A medical doctor by training, Jacobs immigrated to Australia from South Africa where he founded Mulderbosch. He seems to think outside the box when it comes to wine — how else can you explain the Gruner Veltliner and Blaufrankisch (or Lemberger) that we tasted?

You might think that it was a simple typographic error (easy for auto-correct to mix up Austria and Australia), but it was obviously a carefully calculated move. The 2012 Gruner was in fact named the best wine of its type from outside Austria! Quite a distinction.

I love Rieslings and Pinot Noir and the Adelaide Hills boasts many fine examples of these wines (we especially enjoyed the wines of Ashton Hills). But it was an Adelaide Hills Shiraz that we tasted at Charles Melton in Barossa that made me stop and think. “Voice of Angels” it is called and it comes from a vineyard at Mt Pleasant.

A very cool site and a very distinctive wine made, I was told, by co-fermenting the Shiraz grapes with a bit of Riesling from the same vineyard.  Did I really hear that? Shiraz and Viognier, yes. Shiraz and Riesling? Maybe my memory is playing tricks on me, but in any case this was a wine to remember!

Big in Barossa

P1060519Sue and I were fortunate to be able to taste three of Australia’s most iconic Shiraz wines: Torbreck, Penfolds Grange and Henschke Hill of Grace. They were all memorable, but in different ways.

Our favorite Torbreck wine was a cool climate Eden Valley Shiraz called The Gask — just stunning — but I was stunned again by a sight not a taste when we toured the winery. There, hidden away, was a bin containing giant 18- and 27-liter bottles of The Laird (which sells for about $900 for 750 ml).

The idea of a 27 liter bottle of this wine — called a “Primat” according to one source and equivalent to 3 standard cases — floored me.  I think I was told that the glass bottle alone cost about $2000 and that once filled it might be worth as much as $40,000 to a collector. Quite a trophy! I’ve inserted Sue’s photo of the whale-sized bottles below.

Grange and Hill of Grace are particularly interesting to me because they are in some ways the ying and yang of top flight Australian Shiraz. Hill of Grace is a single vineyard wine and Grange is a multi-vineyard, multi-district blend. Year after year Hill of Grace comes from the same vines in the same valley (not a hill — the vineyard’s named for the church across the road) while Grange mixes things up a bit each vintage in the search for a particular style. Two different approaches to extreme wine-making.

Taste the Terroir

Listening to Stephen and Prue Henschke talk about their wine made me understand that while the Hill of Grace is a single vineyard in the way that we define these things, it is in fact a very complicated and varied site. The old vines there seem to be able to draw out the variations and the complex and distinctive blend results.

Both Grange and Hill of Grace were memorable, but I must admit to a preference for Hill of Grace. Maybe it is because I tasted more different vintages of this wine or perhaps it is because it comes from Eden Valley, a cool climate area.  Or maybe its the site and the power of those old vines. Can Australia produce terroir wines? No doubt about it!

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If I may permitted one more extreme wine for this column, I think it must be the Domaine A Cabernet Sauvignon from the Coal River Valley in Tasmania that we tasted with winemaker Peter Althaus on a drizzly foggy day. Tasmania is one Australian region that doesn’t have to worry about having a cool climate (at least for now). Althaus scoured the world for a chilly and distinctive site for his vineyard and moved here from Switzerland once he found it. Each of his wines breaks a barrier of some sort — the Pinot Noir perhaps most of all — and the Cabernet is quite an achievement. Another extreme and memorable experience! Can’t wait to see what 2014 has in store!

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Thanks to Kym and Bron Anderson for our tour of the Adelaide Hills. Thanks to Savour Australia for giving us the chance to taste so many vintages of so many extreme wines. Thanks to Dr Loosen and Chateau Ste Michelle for introducing us to Eroica Gold at Riesling Rendezvous. Thanks to Scott McDonald for the tasting and tour at Torbreck. Special thanks to Stephen and Prue Henschke for their hospitality in Adelaide.

Deconstructing and Disentangling the Disintermediation of the Wine Business

Disintermediation was a hot topic in financial economics a few years ago — I built an entire economics class around it — and it remains a powerful idea even if it may be an unfamiliar word.  I think we don’t use the term so much these days because the concept is now woven into the fabric of our daily lives! Time to untangle it and see how it works, especially in the wine business.

Disinter … what?

Disintermediation refers to the process of “cutting out the middle man” — reducing the number of links in the supply chain by eliminating certain functions. If you’ve ever tried to sell a home yourself rather than using a real estate agent “intermediary” or bought or sold anything on eBay or Craig’s List then you’ve been part of the disintermediation movement to a certain extent. As the video above suggests, the quotidian activity of buying an airline ticket was once upon a time a middleman business. Not so much any more!

Commercial banks were the main focus of financial disintermediation back in the day. Banks and other financial intermediaries provided valuable services (that’s how middlemen earn their pay), but the incentive to borrow or lend directly through “securitized” products was strong and that’s why financial disintermediation started to occur. Disintermediation increased the apparent efficiency of the financial markets but also probably increased risk and volatility because some of the functions of the intermediaries were lost and the bank-based regulatory structure found it difficult to cope with the “non-bank banks” and other institutions that evolved. Or at least that’s my take on how the process unfolded.

Disintermediation still goes on today, but it has become so commonplace that we don’t give it much attention — until we are the links cut out of the chain! The advent of “crowd-sourcing” or “crowd-funding” websites is a good example of disintermediation. There are all sorts of ways to shorten the supply chain, both when it is a good idea and when it is not (sometimes it turns out the missing link was really important).

How Does This Relate to Wine?

Which brings us (finally) to wine. A Wine Economist reader writes to suggest disintermediation as a topic for a column and I think it is a great idea.  There are a lot of big and little examples of disintermediation at work in the wine industry.

On the big end of the scale we have giant firms like Tesco who now often source bulk wines directly from around the world and bottle them under their own labels (sometimes in their own plants) and sell them under house brand labels.  The streamlined process shortens the chain and cuts cost.

Disintermediation was part of the story for one of American wine’s biggest success stories of recent years — Two Buck Chuck (a.k.a. the Charles Shaw wine sold at Trader Joe’s stores). Most wine in America goes through the three-tier distribution system with its built-in middleman structure. But Bronco Wine, which makes 5 million cases of Two Buck Chuck a year, and Trader Joe’s took advantage of a provision in California regulations that allowed companies like Bronco to deliver directly to the retailer, cutting out a link and making it possible to profitably sell a two dollar wine. A lot of factors contributed to Two Buck Chuck’s success and this disintermediation was one of them.

Disintermediation works for medium sized firms, too, such as Naked Wines, which uses an interesting crowd-funding and direct sales model — their “angel” investors finance wine production and become a built-in direct-to-consumer market for the final product — that’s double disintermediation in a way. My helpful reader drew my attention to a direct wine retailer called Fass Selections. which aims to cut out two links in the supply chain for their wines: importer and distributor. That’s disintermediation, all right! Disintermediation isn’t everywhere, but there’s a lot of it around (tasting rooms and cellar door sales?), even in places you wouldn’t think to look.

 Down Under Disintermediation

My favorite example of wine disintermediation was a discovery that Sue and I made while walking through the big Queen Victoria public market  in Melbourne during our visit to Australia in September. I couldn’t believe my eyes when I saw the big stack of wine barrels at the ReWine market stall.

refillers

The ReWine folks offer a carefully curated selection of wines that they have purchased in bulk from Australian producers. They sell them directly to consumers in the Queen Victoria and Preston markets — the bottles are filled from the barrel containers you see in the photos. Bring your bottle back to be refilled (like the wine “growlers” that are gaining popularity here in the U.S. where local law permits them) and you get a discount.

The wines range from basic dry red and dry white wines sold at a low price to some very interesting products on up the line including dry, sweet and fortified wines. There was a nice Pinot Noir from the Adelaide Hills on offer when we stopped by.

You get what you pay for in the basic range, we were told, as these wines are blends made for a particular price point like basic wines everywhere in the world, with more distinctive products at the higher price points. Something for everyone, I think especially for a wine economist like me!

These examples just scratch the surface of disintermediation in the wine industry. I visited with a  2500 case winery recently that seemed to build its entire distribution model around the concept of cutting out the middleman. Easy to see the incentive to do this and also to appreciate the risks.

Once you start to think about disintermediation you will begin to see it at work everyone, even in the world of wine. Keep your eyes open — it might not change everything, but it’s bound to have a big effect.

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Thanks to my economics-savvy reader for suggesting this topic. Thanks to Sue for the Melbourne photos.

American Wine Economists to Meet in Walla Walla — June 2014

The American Association of Wine Economists have announced a Call for Papers to be presented at their annual meeting, which will be held in Walla Walla, Washington this year.  Click on the links below for more details. Hope to see you in Walla Walla. Hope you enjoy this video, which is a good introduction to the Walla Walla wine story. Enjoy!
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The 8th Annual Conference of the  American Association of Wine Economists AAWE  will be held from
 
          June 22-25, 2014 
   in Walla Walla, Washington.
Check the website for more information.
Please send a 500-word abstract to   aawe@wine-economics.org.
The submission deadline is March 1, 2014.
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