Wine Spectator 100: North and South

The lists of the Top 100 wines have started to appear — just in time for holiday buying. Wine Spectator released their Top 100 last week and now Wine Enthusiast has followed suit. Other lists are showing up, too, such as Paul Gregutt’s list of the 100 best Washington wines.  Fun and informative, these lists provide wine lovers with endless opportunities to discuss, debate and of course pull corks. Gotta love ‘em.

But you’ve gotta hate ‘em, too. Top 100 lists are a mixed blessing on the supply side of the market. Although they do promote wine and wine drinking generally, they necessarily privilege some wines over others and this is always problematic given the thousands and thousands of good wines that are produced each year. Why this wine and not that one? It’s an inevitable question that matters because wines on the list get more attention than the wines that don’t for some reason make the cut.

Dancing in the Streets

Top 100 lists slice up the market in many ways and this year my email inbox has revealed a North-South divide. Here in Washington State we are very happy with the 2009 Wine Spectator league table. Nine Washington wines made the list — more than any previous year — including the #1 spot, which went to the 2005 Columbia Crest Reserve Cabernet Sauvignon (95 points, $27 dollars). Two Oregon wines were also listed, so altogether this was a banner year for the Pacific Northwest.

While they are dancing in the streets in Woodinville and Walla Walla, the mood is more sober down south in Mendoza.  Two Argentinian wines appear on the WS100, which is welcome recognition of course, but that’s down from four last year. This is really Argentina’s year to shine in the U.S. wine market, with overall sales surging by more than 40% in dollar value according to Nielsen ScanTrack data. But only half as many WS100 wines! You can’t blame members of the Argentinian industry for kinda hoping to see their success more enthusiastically celebrated in the Top 100 lists. Hmmm. Maybe next year.

A Nobel Prize for Wine?

It seems to me that these top 100 wine lists are a little bit like the Nobel Peace Prize. Highly publicized awards like the Nobel and the Top 100  end up being both reflections of excellence and opportunities for the judges to send a message (political, economic or otherwise). There are many worthy nominees for each award so the final choice is always arbitrary — and the opportunity to send a message is irresistible. Or at least I wouldn’t be able to resist it.

There are obviously many factors that go into a Top 100 wine list and a wine’s objective quality  is just one of them. This is easy to see if you take numerical ratings seriously. The WS100 #1 wine this year earned a 95 score, for example, but the #2 wine received a higher score (96) and the #8 wine’s score was even higher (99). A 100-point wine was placed in the 21st spot last year. This is a numbers game but not just a numbers game.

Don’t Cry for Argentina

Wine Spectator uses four criteria in making their list: quality (the score), value (the price), availability (the volume) and excitement (the X-factor). The Columbia Crest wines (both the Reserve that won this year and their other wines) generally do very well on the first three factors year in and year out. The X-factor this year, I believe, was the recession and the desire to inspire some excitement among American buyers by giving them a #1 wine they could find and afford. That $27 Columbia Crest wine says that American wine drinkers can enjoy truly excellent wines at relatively affordable prices. Time to start pulling those corks! A good message to send in this economic climate.

What about Argentina? Well, I understand their situation. No problem with quality, volume or availability. But I think the market excitement is already there and doesn’t need any help from the wine lists at this point (as much as the Argentinian makers would love to have it). The U.S. industry (like President Obama?) could use some encouragement right now, which may be a good enough reason to draw attention to its outstanding, good value wines like the Columbia Crest Reserve.

Note: Congratulations to Juan Manuel Muñoz Oca, the 34-year old Argentinian winemaker who made the #1 Columbia Crest Washington State wine. What a great North-South connection!

Wine as a Liberal Art

csm

David Rosenthal at Chateau Ste Michelle

I  teach a class called “The Idea of Wine” at the University of Puget Sound. It isn’t your typical wine class. It’s an examination of wine in the context of geography, history, science, business, politics, culture and globalization and how these various forces create different and sometimes conflicting “ideas of wine.”

I guess it is really about my idea of wine – that wine is a liberal art and a fascinating social mirror. The fact that it tastes so good is a wonderful bonus.

Wine isn’t usually included in the liberal arts curriculum, reflecting  America’s prejudice against anything that contains alcohol. But there is historical precedent. Symposium, in the original Greek useage, was a discussion over wine! Wine, as I think about it anyway, is certainly in the liberal arts tradition.

Chateau Warehouse sur Industrial Park

Part of my course involves fieldwork. In 2008 I took  the class to experience two ideas of wine that they wouldn’t get on a typical winery visit. Ken Avedisian at Cordon Selections wine distributors gave us a tour of his warehouse and explained how the distribution business works. We learned how Ken successfully balances his deep love for wine with the need to make a living selling it. Most of all, I think, we came away with an understanding that wine business is really a people business and that Ken is successful because he never forgets this fact.

Then we visited owner/winemaker Tim Narby at Nota Bene Cellars, where he makes spectacularly good red wines in an anonymous South Seattle industrial park. No fancy chateau here, just focused winemaking using exceptional fruit. We were fortunate to be there during crush, so my students got a clear sense of how wine develops by tasting at many stages from fresh juice to fermentation bin to barrel to finished product. The field trip popped some romantic visions of wine by revealing the reality of how it is made and marketed.

The Big and the Small of It

This year we headed to Woodinville, Washington, which is home to four or five dozen wineries that range from tiny family operations to the large and magnificent Chateau Ste. Michelle. The fruit comes from Eastern Washington, but the wines themselves are made and sold here, close to the market in a classic “cluster” of inter-related businesses. Our agenda was to compare and contrast big and small winemakers to see what we could learn from the experience.

We started the day at JM Cellars, a family winery that has in just a few years  expanded from a couple of barrels to 5000 case annual production. The setting is so spectacular – perched an a hillside next to a wetlands – that Wine Advocate praises the view almost as much as the wine.

Owner/winemaker John Bigelow took us through both the cozy winery and the hands-on production process (it was crush time once again) and I think everyone learned a lot about the art, craft and science of winemaking. It was easy to see that John enjoyed the opportunity to talk with a group that really wanted to learn about wine, not just swirl, sip, spit and move on. It was a great experience.

After an alcohol-free lunch at the Red Hook Brewery pub (I think this made some of my beer-loving students want to cry!) we headed to Chateau Ste. Michelle, which is Washington’s largest wine producer by a big margin. CSM and its sister wineries like Columbia Crest produce about three-quarters of all Washington wines. The beautiful Woodinville chateau-style facility makes nearly 2 million cases of white wine each year. The reds are made in Eastern Washington.

Enologist David Rosenthal took time out from the rush of crush to show us how a big winery works. Tanker trucks were arriving every few hours from the Eastern Washington vineyards full of fresh Riesling juice. We were able to taste the fresh juice and at several stages of the fermentation produces, with David drawing wine from the giant stainless steel fermentation tanks. Quite a difference in scale compared to JM!

The Little Winery Inside the Big One

One of the most interesting parts of the visit, for me at least, was to learn the extent to which CSM’s winemakers keep the lots of wine separate through fermentation and aging and, in the case of Chardonnay, make a point of experimenting with many different oak treatments. Instead of just making one big volume wine they actually make dozens and dozens of smaller lots, which can then be assembled in different ways that both reflect different geographic and geologic terroirs, different market ideas of wine (price points and so on, since CSM is in the wine business) and different aesthetic concepts of wine as well.

I’m impressed with CSM’s commitment to keeping wine small while making it big – I don’t know if there are many other wineries that pull off this trick quite so well. Maybe this is why Ted Baseler, CSM’s CEO, was recently name Wine Enthusiast’s Man of the Year. The citation reads

Ted Baseler is President/CEO of Ste. Michelle Wine Estates, the most prominent wine company in Washington State. Under his leadership, it has evolved into a high performance organization known for its top quality, world-class wines; for its strategic partnerships with leading wine producers in Italy and Germany; and for collaborating with fellow members of Washington’s wine industry to help raise the region’s profile, worldwide. For his vision, leadership, brand-building, team-building, and region-building accomplishments, Ted Baseler is Wine Enthusiast’s Man of the Year.

Sounds like Chateau Ste Michelle thinks big and global while acting small and local. Sounds like a contradiction, but it is an appealing idea of wine.

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Special thanks to Ken, Tim, John and David (and to Marci Clevenger at JM Cellars) for making time in their busy schedules for my students and several parents who came along on the trip. Thanks, as well, to the anonymous donor who established the Robert G. Albertson Professorship at the University of Puget Sound, which makes my class and this educational fieldwork possible.

Wine, Recession and Argentina

The global economic crisis has been bad news for Argentina, but good news so far for Argentinian wine. Will the wine part of the story have a happy ending or, like so many Argentinian economic booms, turn eventually to bust?

Bad News and Good

The Economist Intelligence Unit reports that Argentina’s economy has been hard hit by the economic crisis. The economic forecast is gloomy (see below) with the only good news being that inflation, while still high, is falling.

Given rapidly declining business and consumer confidence, the government’s fiscal stimulus measures will have a limited effect, and we expect the economy to contract by 3% in 2009, before only a mild recovery in 2010.

Unofficially measured inflation will ease to 10-15% in 2009, as private demand falls. The official rate will end 2009 at 6.8%, with a similar rate in 2010.

The peso will continue to depreciate in 2009 owing to weaker foreign-exchange inflows, before the pace of depreciation slows in 2010. The current-account position will weaken in 2009-10.

The Argentinian wine economy situation is sunnier.  The May 2009 issue of Wine Business Monthly includes two reports that paint a bright picture of Argentinian wine trends.

The first story is a competitive analysis of Argentina wine in the United States market.  It reports that U.S. imports of Argentinian wine have risen dramatically in recent years, from 2.6 million cases in 2006 to 4.3 million in 2008.  The total value of Argentinian wine in the U.S. rose from $75 million to $146 million in this period.

It is important to put this increase in perspective, however. Total Argentinian imports are roughly equal to the annual output of a single US winemaker, Washington State’s Chateau Ste. Michelle. So the Argentinian presence is rising, but from a modest base.

Molto Malbec

Unsurprisingly, Malbec is Argentina’s calling card in the U.S. market. Malbec’s share of Argentinian wine imports increased from 35% to 48% over 2006-2008 measured by volume and from 44% to 55% measured by dollar value. I was interested to learn that Argentina wine sales are rising at all price points, not just in the value brand segment as you might imagine.  But value is still important.  Argentinian wine prices are rising, but still relatively low.  The article reports that the average FOB price has increased from $29 to $33 per standard 9-liter case.

In the same issue the results of the Nielsen company wine market survey for the period ending 2/7/2009 are reported.  Argentinian table wine imports were up 40% by dollar value for most recent year.  This compares to a 10 percent increase for Chile, one percent for Italy and a one percent decline for Australia.  Overall growth in imported wines was 2.4 percent by dollar value for the most recent year.

The 40 % annual rise is spectacular, but  Argentinian wines account for just 1.4 percent of U.S. domestic wine volume compared with two percent for Chile, nine percent for Australia, almost 10 percent for Italy. This shows that Argentina either has a lot of room to grow in the U.S. market, as optimists will perceive, or a lot of work to do to escape niche player status.

American Exceptionalism

I think the Argentina producers were wise to focus on the U.S. wine market for their export surge.  Although the European Union is more important to Argentina in other major export sectors, the U.S. is the target wine market, and that’s a good thing in this economic environment.  EU wine consumption has long been in decline because of demographic and market shifts, for example, while wine sales have been rising in the U.S.

The recession is likely to depress wine sales growth in both the U.S. and the EU, but the impact will be less in the U.S., I believe, if only because I think the recession will be shorter here. My current thinking is that the U.S. economy will benefit from greater short term fiscal and monetary stimulus, compared with the EU, and more effective medium term structural adjustment.  That said, the recession is and will be very severe.

Early U.S. evidence suggests that wine sales have actually continued to rise during in the first year of the recession, when measured by case volume, although the dollar value of those sales has declined as consumers trade down.

Opportunities and Threats

Reading the latest articles on WineSur, a noteworthy Argentinian industry website,  it pretty clear that Argentina producers appreciate both the opportunities and threats inherent in the current situation.  The opportunities — to establish a market presence built around good value and the rising popularity of Malbec — are significant. But I think it must be hard for Argentinians to see silver linings without looking around for associated dark clouds — their country has suffered repeatedly from the global market booms and busts.

Some of the threats are strictly economic. Argentinian producers are currently benefiting from a falling peso value relative to the US dollar, for example, which helps their wine hit market-friendly price points in the US.  But the falling currency is in part a reflection of high domestic inflation rates, which ultimately lead to higher production costs. A lot will depend upon how the inflation (cost) and exchange rate (export price) factors balance out in the future.

Some of the threats relate more to the fickle nature of the wine market itself.  Malbec and Argentina are nearly synonymous today, but this could change as other wine regions adopt their signature varietal. A recent visit to the Walla Walla AVA, for example, found many producers experimenting (successfully, I think) with Malbec.  Argentina has the first mover advantage in Malbec and must capitalize on this because it will face more competition in the future.  This happened to New Zealand (Sauvignon Blanc) and Australia (Shiraz) and I do not think Argentina will be different.

In exploiting its Malbec lead Argentina will need to strike another difficult balance, between establishing a useful “house style” that will build market identity and letting this deteriorate into a stylistic “monoculture” that soon bores consumers.  It seems to me that Australian Shiraz is currently suffering from the “monoculture” curse, perhaps unfairly, while New Zealand still benefits from a popular “house style,” although I’m not sure how much longer it can ride the gooseberry wave, especially given the vast quantities of Sauvignon Blanc that need to be sold.

Argentina is at a crossroads at a critical moment and moving in the right direction.  Count me cautiously optimistic regarding the future of Argentinian wine.

Update: Just hours after I posted this piece about Argentina the following item appeared on the Decanter.com website.

Argentine wine harvest down 25%

May 1, 2009  / Jimmy Langman

Due to climatic conditions, this year’s wine harvest in Argentina will be down 25% as compared to last year.

According to Argentina’s National Wine Institute, hail in some provinces, and overall higher temperatures in February and March, are factors in the lower production output this year.

The lower production this year has occurred despite Argentina having a 12% increase in land under cultivation for wine grapes.

Guillermo Garcia, president of the National Wine Institute, said: ‘If there had not been an international crisis, we would not have been able to provide wine to countries with developed markets.’

Garcia added that Argentine wine companies need to begin keeping more than three months of stock on hand to make up for such production shortfalls.

Exequiel Barros of the Mendoza-based Caucasia Wine Thinking consultancy told decanter.com that many Argentine wineries are worried about their ability to supply medium-priced wines but added: ‘We need to see how the international outlook develops this year before we can dare to make any projections.’

In Chile, wine growing areas that are not irrigated, such as Cauquenes in the Maule Valley, are predicting a similarly low harvest, with an estimated drop in production from 30 to 40% because of higher temperatures and low rainfall.

Most wineries in Chile, however, are reporting a good harvest. ‘The lack of rain has been good for this year’s harvest. But wineries in the far south, such as in the Bio Bio, may experience changes to quality because of the higher temperatures,’ said Edmundo Bordeu, professor of oenology at Chile’s Catholic University.

Turning Water into Wine

The Bible tells us that Jesus turned water into wine (John 2:1-11) — a miracle!  Given the amount of water used in making wine today I think the miracle isn’t so much the conversion itself (no sacrilege intended) as the efficiency with which it was accomplished.  Jesus didn’t waste a drop.  Improving water use in winemaking is a serious issue today.

The End of Cheap Water

Readers of this blog know that water is important in wine production, but you may not appreciate just how much the wine industry depends upon cheap water supply.  I have written about the effects of the Australian drought on wine output there, for example, and how producers like Casella (Yellow Tail) are adjusting.  But water isn’t just an Australian wine problem, as everyone in the business knows, and the situation isn’t getting any better.

So the December 2008 issue of Wine Business Monthly is especially welcome.  WBM chooses a theme for the last issue of each year and this time it’s “The End of Cheap, Plentiful Water;” it is required reading for anyone interested in the economics of wine. Much of what follows is based on data from the WBM report.

Given all the attention that the Australian drought has received it would be easy to dismiss wine’s water woes as just another example of the challenge of global climate change.  And while this is undeniably true to some extent, I think it is more useful to think about the water problem in terms of supply and demand.

Winegrapes: Squeezed and Dried

The supply of water for wine production is limited by nature, of course, especially in the long run, but that’s the easy part (and the focus of the climate change discussion).  It is perhaps more realistic to consider that the supply of water for wine is limited by competing water needs. Water is valuable for environmental purposes, such as to maintain fish runs, for example.  Water is needed for residential and industrial uses, too.  And of course water is in very high demand for agricultural crops other than winegrapes.  About 80% of California’s annual non-environmental water “budget” goes to agriculture, including wine.  Residential and business use accounts for rest.  As population continues to grow, the squeeze will affect everyone.

Between competing uses and recent drought conditions, it is no wonder that the water supply for winegrape production is being squeezed.

All agriculture suffers when water becomes scarce and drought conditions force both a general reduction in farm output and also a shift away from the most water-intensive crops to those that use water more sparingly.  In Australia, for example, we have seen a decline in grape production in some areas due to drought and a shift from rice to grapes in other areas. 2001 data from the California Department of Water Resources estimates that grape growers in that state use an average of 2 acre-feet of water.  That’s about 25% more than used for grain crops, but much less than rice production (nearly 6 acre-feet of water) or corn and tomatoes (about 4 acre-feet).

Water use in winegrape production varies considerably.  Irrigation isn’t always necessary or even desirable, but high volume production is very water-dependent.  It takes 75 gallons of water in the vineyard to grow the grapes for one gallon of wine in the California North Coast area.  That seems pretty inefficient until you compare it with Central Valley production, where the ratio is 430 gallons in the vineyard to one gallon of wine! Water is also used in some areas for frost protection, which can adds to the total water bill.

Water use doesn’t end once the grapes have been harvested. On average it takes about six gallons of water in the cellar to make a gallon of wine. Barrel-washing and tank cleaning account for much of the water use, but everything in a wine cellar needs to be as clean as possible, and  water is often the most convenient tool.

The trick, as many wineries have discovered, is to conserve and recycle.  High pressure / low flow nozzles and barrel-cleaning rigs can do more with less.  Waste water can be collected and filtered for many uses from irrigation to flushing the toilets.  Erath Winery in Oregon employs a filtration process that allows it to reused 97 percent of winery processing water in one way or another. (Local ryegrass farmers use the rest as fertilizer.)  Snoqualmie Vineyards, like Erath part of the Ste. Michelle Wine Estates group, uses just 2.9 gallons of water in the cellar per gallon of wine, an indication of the sort of savings that are possible.

What’s Your Water Footprint?

article. It’s only a matter of time, I think, until we start worrying about our water footprint as well as our carbon footprint. You can learn more about the water footprint concept at WaterFootprint.com. Here are some estimates of water costs associated with various products as reported on their website.

Water Footprint Logo
  • One cup of tea: 30 litres of water
  • One slice of bread: 40 litres
  • One apple: 70 litres
  • One glass of beer: 75 litres
  • One glass of wine: 120 litres
  • One cup of coffee: 140 litres
  • One glass of milk: 200 litres
  • One liter of wine: 960 litres
  • One hamburger: 2400 litres

I have seen reports that a Big Mac’s water footprint is 5000 litres, a huge number but understandable when you consider that the production of beef and cheese are both very water-intensive (particularly when the cattle are raised on diets of irrigated grains instead of natural grasses).  I guess a kilo of beef requires  15,500 litres of water.  Amazing!

These figures are estimates of the total water use, including transportation and packaging, which is why the wine figures are so high.  I’m sure that it takes a lot of water to produce and clean wine bottles.  The labels (paper), closures and shipping boxes add to the water footprint.  It all adds up, for wine as for other products.

It Isn’t Easy Being Blue

The wine industry is in the vanguard of many important environmental movements.  Being green (and now blue, I suppose, to represent water) is good marketing for a lot of industries.

But it is good economics for the wine industry, too, because water is such a key resource that we need to manage well in the vineyard, in the cellar and throughout the production process.

[Thanks to Wine Business Monthly for the information in their December 2008 issue and to a former student, Jenna Silcott, for making me think about water resources once again.]

A Riesling Revival?

A hundred years ago the most treasured and expensive wines in the world were not the great reds from Burgundy and Bordeaux, they were wonderful Rieslings from Germany.  Since then Riesling has fallen on hard times in the market, although its status among wine critics and cult collectors has not wavered.  Now there is change in the air.  Have we entered a Riesling Renaissance?

Riesling Rendezvous

Woodinville, Washington was the center of the Riesling world for a few days in July when Chateau Ste Michelle and Dr. Loosen hosted a program called “Riesling Rendezvous” that brought together more than 200 producers, critics and industry representatives from around the world. (Chateau Ste Michelle let me attend to do research for my next book – thank you CSM for your support!).  This was the second Riesling Rendezvous conference and a third round is planned for 2010.

Chateau Ste Michelle is the largest Riesling producer in the United States – more than 700,000 cases of their Columbia Valley Riesling are released each year along with a number of other Riesling wines that range from a Dry Riesling all the way to a deliciously sticky Ice Wine.

Dr. Loosen is a famous Mosel producer that has a decade-long relationship with CSM – they jointly produce a Washington Riesling called Eroica and work together in other ways – so their Old World – New World partnership makes this event a natural.  Ernie Loosen (as everyone calls him) is a great ambassador for Riesling.  He reminds me of the glass artist Dale Chihuly – funny, flamboyant, affable and dead serious about his work.  We tasted a lot of wine at the event, including one that Ernie made in 1983 that still sings; quality Riesling is built to last.

The Curse of the Blue Nun

Riesling Rendezvous operated on at least two levels.  The top level was a celebration of Riesling in all its diverse forms.  The $50 ticket to the Grand Tasting on Sunday is one of the great values in the wine world, in my opinion, as dozens of producers poured their best wines on the Chateau grounds and the CSM chefs prepared finger foods to accompany them.  Each of the trade sessions I attended included tastings of great Rieslings brought from afar by the producers.  Honestly, no one could come away unimpressed with the state of Riesling wine today and the commitment that winemakers around the world have to this great varietal.

The state of the Riesling wine economy is another matter.  The Riesling market went all to hell in the 1970s when German producers pumped out lots of low quality wines to try to appeal to a mass market (a market defined here in the US, I suppose, by the big jugs of sweet California “Rhine” wine that filled the supermarket shelves).  They made the fatal mistake of devaluing their brand.  Riesling’s reputation suffered and it has been a long struggle to rebuild it.  Perhaps this is Riesling’s moment, now that everyone has grown tired by simple over-oaked Chardonnay and thin Pinot Grigio. Perhaps this is under-appreciated Riesling’s time to shine?  Certainly the sales numbers are trending up, although a relatively small segment of the market accounts for most of the sales.

But Riesling has an identity crisis and a lot of the discussions centered around this fact.  There is no one Riesling wine, as we learned through the tastings, because Riesling reflects it terroir so faithfully.  Wines from different vineyard areas (or subject to different cellar choices) taste very different.  This diversity is one of Riesling’s most appealing characteristics, but it makes it hard to sell to confused and uncertain buyers.

Consumers as a group tend to think of Rieslings in terms of a single characteristic: its sweetness. This is a shame because there is much more to wine than sweet versus dry, but it is Riesling’s particular burden, its  Blue Nun curse.

Rieslings are sweet, of course, but they also are dry.  I tasted wines that ranged from a few grams per liter of residual sugar (very dry) to perhaps fifty times that.  But the key to Riesling isn’t dry-sweet, as Pierre Trimbach said on the first day, it is balance – the balance of sugar and acid and the other critical elements of the wine.  The technical problem is to produce balanced wines of whatever degree of alcohol and residual sugar.  The economic problem is to communicate to consumers the characteristics of the wine so that they can buy it with confidence.  I would say that the Riesling Rendezvous showed that producers are closer to solving the technical problem than the economic one.

Riesling and Thai Food: How Many Stars?

Consumers want to know what’s inside the bottle and it is particularly hard to explain this with Riesling.  The nature of the wine isn’t as transparent to buyers as the glass bottle it comes in.  The German wine labeling rules classify wines by their sugar levels, which reveals something about the wine, but that isn’t as useful as you might think since two wines with similar residual sugar levels can have different tastes depending upon the acid balance, the type of sugar (some forms of sugar taste sweeter than others) and of course the myriad other factors associated with wine.  The German code gives some information, but it doesn’t solve the problem. In a way, in fact, it might define the problem because it defines Riesling by its sweetness.

New World labels aren’t much help either.  Only a few of them give technical data that would help a geek like me figure out what’s inside.  Some use vague descriptors (what does “off dry” mean and why is this one producer’s off dry so much sweeter than another’s?) but most just make you guess what style of wine you have before you.  Guess wrong three times in a row and I predict you will stop buying Riesling wine for a while.

A producer group, the International Riesling Foundation, is trying to address this problem by creating a clear and simple system that would tell consumers what to expect – something perhaps like the star system commonly used in Thai restaurants.  You know how it works: one star is mild, five stars is very very hot.  The star system makes people more comfortable ordering food at Asian restaurants, although there is obviously more to Thai food than just heat (and more to Riesling than residual sugar).  It’s worth a try, I suppose.  Even a trustworthy dry-to-sweet graphic index would probably help in the marketplace.  Sake producers (see below) are working on this problem, too, although I wouldn’t recommend their particular descriptors (a translation problem?).

This is how different styles of Sake are described on www.sake.com

This is how different styles of Sake are described on http://www.sake.com

I hope that Riesling producers can find a way to make the complex characteristics of their wines clearer and therefore more appealing to confused consumers.  Conferences like the Riesling Rendezvous are a useful way to get that conversation going. There is a natural tendency, however, for such gatherings to “preach to the choir” and focus on the well informed specialist market that already exists rather than the potential market of former Chardonnay drinkers looking for a more interesting wine, who could be drawn to Riesling if they understood it a bit better. I think this educational mission is the real challenge for Riesling Rendezvous III: thinking beyond today’s market to tomorrow’s.

I am hopeful that the International Riesling Foundation will make progress in this regard, but the collective action problem is significant here. It won’t be easy to get dozens of producers of differing size, style and market position to agree to standards and then implement them uniformly. It is more likely, I think, that a few of the big brands like CSM will lead the way and define the image of Riesling in consumer minds.  Others will follow or not and so the future of Riesling will unfold.

Taste the Washington Wine Market

Demand meets Supply in Seattle

Mike and Karen Wade of Fielding Hills Winery in East Wenatchee, Washington asked me if I’d like to pour their wines at the big Taste Washington event in Seattle on Sunday. I jumped at the chance, of course, because you hardly ever get to see supply and demand in the wine market at work in such a personal way. I will admit that I enjoyed this opportunity and I might have been a little too enthusiastic at times. I think my boss, Robin Wade, had to restrain me at times from talking up the wines and the winery more than I should. (Robin is my student at Puget Sound during the week, but she was my supervisor on Sunday at her family winery’s tasting table).

Taste Washington is a big event: more than 220 wineries, 70 restaurants and a long list of what I would call “lifestyle product” vendors ranging from Viking, the maker of high end kitchen appliances, to Maserati, the Italian sports car. Click here to download a pdf of the program. People paid $125 to attend the VIP tasting from 2-4pm. Then the doors opened to the “masses,” who paid $85 for unlimited tastings from 4-8pm. Many of the VIPs were industry people – winemakers, distributors, restaurants, wine shops, and so forth. The “masses” were a very mixed group that I’ll discuss below. I guess about 3500 people came in all.

The event is all about giving things away. Wine is sampled, but cannot be sold. Restaurants give samples of food. No cash changes hands once you are inside the room, but I suppose that exchanges can be arranged for future delivery. Apparently someone bought a Maserati ($135,000) off the show floor. There was a moment of silence (while everyone drew a breath) when that was announced.

The Supply Side of the Pour

The list of wineries was long and diverse. Columbia Crest makes at least 200,000 cases each of some of their Two Vine wines, for example, while Benke Cellars, located near us in the exhibition hall, has a total output of just 200 cases. Some of the most prestigious wines in Washington were represented (DeLille Cellars was across the aisle from us and Quilceda Creek was across the room) alongside humble family start ups. Fielding Hills was one of several wineries in a sort of intermediate position: a small family operation, but one with an impressive record of ratings and reviews and hence a built-in audience among wine enthusiasts.

What do wineries gain from giving away wine at tasting events like this? There needs to be a benefit, especially for the smaller wineries who may pour away a couple of percent of their annual production. Some of the large volume wineries seemed to use the event to show that they were about more than just fruit forward popular premium supermarket wines. Chateau Ste Michelle, for example, poured these wines

  • 2005 Boreal, Columbia Valley $30
  • 2005 Ethos Cabernet Sauvignon, Columbia Valley $38
  • 2006 Chardonnay, Horse Heaven Hills $22
  • 2007 Eroica, Columbia Valley $22

and Columbia Crest offered these

  • 2005 Grand Estate Merlot, Columbia Valley $11
  • 2004 Reserve Red Walter Clore, Columbia Valley $44
  • 2005 H3 Chardonnay, Horse Heaven Hills $15

These are very good wines – on average several steps above what you would probably taste for free at the winery. I like the Eroica quite a lot and I wish I’d found an opportunity to taste the Walter Clore. The Grand Estates Merlot is a great value in my opinion.

I spoke with a famous winemaker – he was treated a bit like a rock star – who spent most of his time in close conversation with customers, distributors, and fellow winemakers. He said he thought it was important to be at the tasting and to make personal contact, but he wasn’t sure if it had much effect on sales. He was “preaching to the choir,” he said, talking with current customers and business clients more than making new ones. I wonder if he’s right. I like to say that wine is good but wine and a story is better. A story about talking with a rock star winemaker adds a lot of value to a bottle of wine. Maybe he was just being modest.

Mike and Karen Wade are certain that this event benefits them by connecting them with the trade network and giving wine drinkers who read about their wines in magazines (but often cannot find them on local shop shelves) an opportunity to see what all the fuss is about. I certainly think the wines made a good impression and even created a bit of a buz in the room as word spread. It will be interesting to see how this is reflected in the market.

Spit, Don’t Swallow!

Spit! We were told to encourage people to spit the wine rather than swallow it so that they would not get tipsy so soon. The trade visitors often did spit, as you have to do if you are really going to taste a lot of different wines, but most people didn’t. They did dump out extra wine into the spit buckets, however, which was a good thing. The woman who came around to empty the spit buckets every 15 minutes estimated that she had collected 20 gallons by 6pm.

Like the organizers, I was worried about the alcohol problem. Faced with 200+ wineries pouring maybe 700 different wines – and you with a bottomless glass until 8pm – it is easy to see how things could get carried away. I only talked with a few tasters who had clearly had too much to drink, however. Most people seemed to understand the problem and, even if they didn’t spit, they tried to limit consumption so that they could continue tasting.

The people on the other side of the table were an interesting collection of wine people. The $125 VIP tasters were mostly trade people, as you might imagine, many with well-defined agendas of people to meet and wines to taste. It was fun to talk with them to get an insider view of the event and the business. The $85 general admission tasters were perhaps younger than I expected (many in their 20s) and more diverse in their apparent knowledge of wine. Many were wine enthusiasts, of course, armed with detailed notes and Parker numbers, looking to taste specific wines, interested in every detail from vineyard to barrel.

Others were “image seekers” (to use Constellation Brands’ Project Genome taxonomy – see next post). They didn’t know as much about wine but they wanted to learn. It was fun to meet them because we were pouring a 2005 Cabernet Franc – a varietal many of them had never tasted before – and I enjoyed watching them make up their minds about what was in the glass. Finally I would say that I met some “traditionalists” and even some “overwhelmed” consumers (it was easy to be overwhelmed at this event, to be honest, with so many wines and wineries present). They were spending $85 to try to figure out what was new and what they liked. That seems like an expensive education until you consider how fast you can burn through $85 on failed wine experiments.

People always ask me if interest in Washington wine is a bubble that will someday pop leaving broken wineries in its wake. It is difficult to be sure about bubbles (ask Alan Greenspan about this) and I actually worry that there might be a supply side wine bubble shaping up and a shakeout coming (Paul Thomas, a pioneer Washington winery, closed shop last year). But the demand side looked strong to me as I poured my measured tastes on Sunday. Education is the key to sustainable growth in the wine industry and I met a lot of people who seemed to be committed to broadening and deepening their knowledge of wine. The Washington wine industry can only benefit from this. That makes Taste Washington a more important program than I thought it would be.

Wine in Restaurants: Recent Trends

mainpage_april08.jpgEach year Wine & Spirits publishes a special issue that reports the results of their annual survey of wine sales in restaurants — information of more use to trade professionals, I imagine, than to wine lifestyle readers. Although the sample is relatively small — 309 Zagat -ranked U.S. restaurants participated in the 2008 survey — and restaurant wine sales are probably unrepresentative of broader market sales, I still find the trends reported here to be of interest, especially since many of them reinforce data I have found elsewhere.

More and More.

Some of the trends are unsurprising to any restaurant wine-drinker. The importance of wine in restaurants continues to grow — over 70% of the restaurants reported that wine was a larger percentage of their total sales in 2007 compared with 2006. More restaurants are paying more attention to wine and wine-drinkers and increasing sales accordingly. A second non-surprise is this: restaurant wine costs more. More than 60 percent of the surveyed restaurants reported that the average price of the wine they sold increased in the last year. Personally I have been staggered at the price of wine in some restaurants recently. There are both demand and supply drivers behind this trend.

Restaurants have an incentive to raise wine prices, of course, but nobody forces diners to buy the stuff. Some of the price increase is demand-side — educated (or status-seeking) wine consumers choosing more prestigious and expensive bottles. Smart restauranteurs and their sommeliers take advantage of the wine boom by offering interesting and hard-to-find wines, which attract wine enthusiast diners and generate higher revenues. So higher prices are the result of education, enthusiasm and strategic behavior. We pay more because we are willing to pay more, up to a point at least.

Even Less is More

The falling dollar is another part of this trend. Cheap dollars mean that restaurants have to pay more for imported wines, which drives up costs and prices. The pass through effect of the exchange rate changes is not yet complete, however, so you can expect even higher prices in the future. Rising wine costs are a supply-side driver of higher wine prices generally. The recent trend to more wines from Argentina and Chile is partly a reflection of the fact that the dollar has not fallen quite so far relative to these currencies, so South American wine is a relative bargain.

The weak dollar also affects the demand side. Many of the surveyed restaurants are located in transnational hub cities where international travelers are a significant factor. Foreign tourists and business travelers take advantage of the weak dollar to treat themselves to otherwise more expensive wines when they dine in the U.S., thus driving up the price averages. This is not an insignificant factor for many of the upscale urban eateries that participate in the Wine & Spirits survey.

Prices continue to rise for even the most inexpensive restaurant wines. About 35 percent of the restaurants reported that they have increased the price of the least expensive wine on their list in the last year. In my experience, however, no one ever orders the least expensive bottle on a wine list. The real indicator would be the price of the second cheapest bottle. I imagine that it costs more now, too.With the price of wine edging up relentlessly it is not surprising to find that restaurants and wine drinkers are paying more attention to by-the-glass sales. More restaurants are offering more wines (and more interesting wines) by the glass as well as the bottle. The average price reported by the survey rose to a new high of $11.05.

The trend toward rising wine prices is not likely to slow very much in the future (see my previous post about The End of Cheap Wine), but this trend is not uniform across the entire wine list. Surveyed restaurants reported steep declines in sales of Merlot and Chardonnay, for example, and flat sales of Cabernet Sauvignon. Average sales prices actually declined for Cab and Merlot. Pinto Noir prices and sales have increased again, as you might expect.

Hot or Not?

No sales trend data were reported for two supposed “hot” wines: Riesling and Syrah. Riesling is the sommelier’s favorite, according the Wine & Spirits (and I don’t disagree), because it is so food-friendly, but it does not seem to be an important factor in restaurants sales. I have my own theories about this, but no facts, so I won’t speculate at this time. I’ll try to find out more at the Riesling Rendezvous that Ste Michelle Wine Estates is organizing this summer.

The case of Syrah is interesting, too. Wine & Spirits says that there was a Syrah/Shiraz boom a few years ago, but that it has faded and Syrah has now settled into a minor niche-role on the restaurant wine list. I suppose that this reflects the changing circumstances of Australian wine (see The Wizards of Oz) more than anything else since so many people identify Australian wine with Shiraz and vice versa.

The fact that Riesling and Syrah don’t figure prominently in restaurant sales suggests to me that restaurant buyers as a group are less adventurous than you might think. Rather than using an unfamiliar wine list as an open invitation to experimentation I think they might on average be looking to avoid making a faux pas, either in terms of the wine they choose or the social signals that they send to the others seated around the table with them. Wine trends in restaurants might, therefore, lag behind wine trends generally rather than leading them. Or it could be that restaurants believe that their patrons are unadventurous and wine lists reflect this, focusing mainly on old standbys rather than hot trends. The result would be the same in either case.

If this is true then Riesling and Syrah will move up on the restaurant wine lists, if they do at all, only after they have become more prominent in other wine venues. Or at least winegrowers in Washington State should hope that this will happen. Because, my goodness, we seem to be making a lot of Riesling and Syrah!

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