Sababay Wines of Bali: New Latitudes, New Flavors, New Frontiers

BottlesThe Wine Economist’s chief Hanoi correspondent Ali Hoover recently visited Bali, Indonesia and volunteered to investigate the local wine sector, focusing on Sababay wine. Here is her report.

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A decade ago, one of my personal favorite wine celebrities, Jancis Robinson, wrote about a new breed of wine emerging on the market – New Latitude Wines. Joining existing wine region categories of Old World and New World, New Latitude’s name suggests it all: these alternate regions seek to break out from the +/- 30 to 50 degree latitude belt considered the bookends of quality viticulture, due in part to climate change, but also enabled through increasing human understanding of how and when vines grow and advancements in refrigeration and irrigation techniques. Jancis ended her article with hesitation, though, admitting “I still find it hard to believe that New Latitude Wines will ever be seriously good, but then that’s what was said about New World Wines not that long ago.”

Since then, wine has begun to pour into the international market from a myriad of unexpected places. I certainly didn’t think Kenya, Azerbaijan, or Thailand were producing wine, and apparently I’m not alone; the Wine Explorers estimates 80% of wine producing countries are poorly known to the general public.

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Among the surprisingly extensive list of non-traditional wine producing countries is equatorial Indonesia, and Bali in particular. After my visit to Bali last month, I’m happy to report it deserves the overuse of the word “paradise” in reference. Despite a confluence of tourists and a disproportionate amount of surfer types, Bali has preserved much of its cultural essence. The crowd favorite ‘homestay’ accommodation looks more like a new-purposed temple, replete with impressive stonework, koi ponds covered in lotus flowers, and breakfast served on sunny patios in the morning. Crystal blue water, lush green vegetation, infamous coffee shops, yoga retreats, and small boutiques have created a getaway nothing short of idyllic. The abundance of fresh fish and produce, coupled with the laid-back attitude and stunning views lends itself all to easily to a crisp glass of wine, but producing local wine posed its own difficult set of challenges.

The Sababay Project

At a mere -8 degrees latitude, low-quality grapes considered unfit for consumption flood the Balinese market, destined for the omnipresent sidewalk religious offering (pictured below). But it turns out climate wasn’t the biggest barrier to quality wine – education in farming sustainability and viticulture standards was. Seeking to use these advances in modern technology to contribute to their native homeland, Evy Gozali and her mother founded Sababay Winery and the Asteroid Vineyards Partnership. In exchange for agricultural & technical support, Northern Balinese grape farmers commit their yields exclusively to Sababay—the 175 farmers currently producing have experienced yield increases of up to 50% in the first year alone with the new viticulture practices, and some have even reported a ten-fold annual profit increase since engaging in the partnership.

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What struck me most was Sababay’s strong Indonesian identity, a true achievement in an industry with a constant tug of war between terroir and global appeal. Beyond their tangible contributions to local agriculture, Sababay produces wine to match the cultural preferences and local flavors. Marketing wine to the largest Muslim country by population in the world is no small feat, but the demand is growing, and Sababay provides an alternative to these new consumers who’re looking for a twist-top wine that tastes good with dinner. The resulting wines, designed to be poured young, are sweet, with low alcohol content, and are a perfect pair for the complex, spicy flavors of Indonesian dishes.

Think Global, Act Local

Sababay does not currently export its wines – they’re 100% focused on local consumers. In keeping with advancements in technology and understanding, they have machinery imported from all over the world and a French winemaker to make the magic happen, but in all other facets of their operation they maximize Indonesian involvement in their leadership, staff, production, branding, and promotion. Sababay’s focus is a wine for the people, as opposed to an award winning wine – though they’ve incidentally done that as well! Their sparkling Moscato d’Bali (my personal favorite) recently won the silver award at the WSA Wine Challenge 2014 in Singapore.

As wine expands its boundaries, both in terms of production and consumption, I believe local identity and alternative branding will play a critical role in New Latitude’s potential success. There are untapped demographics with unique preferences and flavors, and New Latitude presents an opportunity to break out not only from geographic constraints, but traditional flavor profiles as well. In our increasingly global world, it seems the time is right to engage these regions and step outside our delimiting 30/50. Rather than expecting New Latitude to produce “seriously good” wines by our preexisting standards, I think we ought to encourage them to create “seriously relevant and unique” wines that appeal to emerging demographics and engage local consumers. So keep your eye out for these intriguing New Latitude wines on your next vacation, it’s bound to shake up your wine experience and add an extra dimension to your cultural experience.

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Update: All of the Sababay wines entered in the Chine Wine & Spirits Awards competition have received medals.  The Sababay Pink Blossom received a double gold! Congratulations to Sababay on this international recognition. To see the details click on the awards link and search for Sababay.

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Thanks to Ali for her report. Here is a photo of Ali (red blouse) and the Sababay team.

I’m also impressed by the Sababay wines and also by the values they embody. Here is the winery’s mission statement (taken from the website):

Our mission is to elaborate local products of international standard that are accessible to all to enjoy and to give back to the land and to the local community.

  • Developing a diversified and performing agriculture in Indonesia with reduced impact on the land.

  • Recycling solid and liquid wastes at every steps of the production.

  • Social responsibility in the local community by creating jobs.

  • Constant training of the work force.

  • Harmonious relationship with trading partners and consumers.

 

Thanksgiving: American Wines for an American Celebration

Thanksgiving is the distinctively American holiday and we are happy to share the idea of a day of appreciation with other nations. A festive meal is generally part of the Turkey Day plan and so the question always comes up, what wines should we serve?

America: Beyond the Usual Suspects

There are many good choices depending upon the components of the meal, but we tend to lean towards American wines here at The Wine Economist office. And as Jancis Robinson and Linda Murphy’s recent book American Wine reminds us, we do not need to limit our choices to wine from the “usual suspect” states and regions. While most of America’s wines are produced in California, most of America’s wineries (by a small majority) are in other states!

Wines & Vines reports that the United States boasted more than 7400 wineries in 2012 and of those about 3500 were located in California. The Californians made a vast majority of the wines measured in either value or volume, but there are active wineries in all of the states and so lots and lots of  “local wines” for anyone wanting to support the local industry.

Most of us have tasted wines from California, Washington and Oregon and while some wines are surely better than others, it is clear that the best are world class products. Perhaps fewer have sampled wines from further down the list: New York, BC, Virginia, Texas and so on. What is the state of the art of wine in these states and regions?

Well, I have tasted many New York, Ontario, B.C. and Michigan wines at Riesling Rendezvous and other tastings and I can attest to the high quality of the best wines. Idaho with 50 wineries doesn’t make this list, but we tasted many outstanding wines when we visited there in October.

An opportunity to sample the wines of Missouri, for example, or Oklahoma does not frequently present itself. Most of the wineries are small and rely mainly upon cellar door sales. Very few make it into the broader distribution channels. It is a rare treat to be able to taste them.

Great American Wine Festival

Which is why we motored down to Portland recently to join the fun at the Great American Wine Festival, an event organized to coincide with a wine tourism conference. I’ll paste a list of the wine regions represented and the specific wines that they poured at the bottom of this column.

The event presented a cross section of American wine ranging from regions with high name recognition  (Sonoma County, Santa Barbara) to others that would be better known to wine historians than to contemporary wine consumers (Maryland, for example, plus Virginia and Missouri).

How were the wines? Well, first a couple of caveats. No one is going to send a bad wine to an event like this even if some questionable wines are made. And I might have cheated a little bit — there were too many wines to taste them all so I let the winery recommendations from Jancis’ and Linda’s book steer me to particular labels in many cases.

Wine Thanksgiving

And as with any tasting, we liked some of the wines better than others. But I would say that overall the quality of the wines we tasted was impressive and they can make us proud of American wine. There was something to enjoy at each table and several of the wines really surprised and delighted us.

Choose well, Americans, and your local wine (or in any case an American wine) will be the highlight of your Thanksgiving table — something we all can give thanks for!

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Thanksgiving update: Our wines were

Appetizers: NV Domaine Ste Michelle Columbia Valley  Brut sparkling wine

Turkey dinner: 2006 Boedecker Cellars “Stewart” Willamette Valley Pinot Noir

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Here is a list of wines presented by the regional wine groups present at the Great American festival. Click here to see all of the participants, including individual winery representatives not on the list below. Thanks to the Great American Wine Festival for their hospitality and to everyone we met at the tasting. Keep up the great work!

COLORADO WINE

Boulder Creek: 2011 Cabernet Franc

Canyon Wind Cellars: 2012 Anemoi Apeilotes

Carlson Vineyards: 2012 Cougar Run Dry Gewürztraminer

Colorado West: 2012 Elks Gewürztraminer

Ruby Trust Cellars: 2011 Gunslinger

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COLUMBIA GORGE WINEGROWERS ASSOCIATION

Cathedral Ridge Winery: 2010 Cabernet Reserve

Cathedral Ridge Winery: 2012 Riesling

Jacob Williams Winery: 2012 Chardonnay

Jacob Williams Winery: 2009 Syrah

Memaloose Winery: 2011 Cabernet Franc

Memaloose Winery: 2012 Trevitt’s White

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IDAHO WINE COMMISSION

Cinder Wines: 2012 Dry Viognier

Clearwater Canyon Cellars: 2009 Renaissance Red

Koenig Vineyards: 2010 Syrah

Ste. Chapelle: Soft Huckleberry

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Livermore Valley Wine Country

Concannon Vineyard: 2010 Conservancy, Cabernet Sauvignon

Garre Vineyard & Winery: 2009 Primitivo

John Evan Cellars: 2010 The Paracelcian, Cabernet Sauvignon

Las Positas Vineyards: 2009 Casa de Vinas, Cabernet Sauvignon

Little Valley Winery: 2010 Tempranillo

Longevity Wines: 2012 Livermore Valley, Chardonnay

McGrail Vineyards & Winery: 2010 McGrail Reserve,Cabernet Sauvignon

Murrieta’s Well: 2012 The Whip, White Blend

Nottingham Cellars: 2011 Casa de Vinas, Petite Sirah

Retzlaff Estate Winery: 2006 Cabernet Sauvignon

Tamas Estates: 2010 Double Decker Red (blend)

Wente Family Estates: 2012 Morning Fog, Chardonnay

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 MARYLAND WINE

Basignani: 2007 Lorenzino Reserve, Cab Sauvignon, Cab Franc

Big Cork Vineyards: 2012 Chardonnay

Big Cork Vineyards: 2012 Late Harvest Vidal

Boordy Vineyards: 2012 Dry Rose, Merlot, Cab Franc, Cab Sauvignon, Syrah & Petit Verdot

Boordy Vineyards: 2010 Cabernet Franc, Reserve, Eastern grown Cabernet Franc

Crow Vineyard and Winery: 2012 Barbera Rose, Barbera, Vidal

Elk Run: 2011 Syrah

Knob Hall Winery: 2012 Willow, Traminette, Chardonnay, Pinot Gris, Vidal Blanc

Knob Hall Winery: 2011 White Oak, Chardonnay, Traminette, Vidal

Old Westminster Winery: 2012 Chardonnay

Sugarloaf Mountain Vineyard: 2010 EVOE!, Cab Franc, Petit Verdot, Merlot, Cab Sauvignon

2011 Columbia Valley Viognier

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MISSOURI WINES

Hermanhoff Winery: 2010 Vidal

Les Bourgeois Winery: 2011 Premium Claret

Montelle Winery: 2012 Chambourcin

Montelle Winery: 2012 Dry Vignoles

St. James Winery: 2009 Norton

St. James Winery: 2012 State Park Seyval Blanc

Stone Hill Winery: 2012 Chardonel

Stone Hill Winery: 2011 Chambourcin

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OKLAHOMA GRAPE GROWERS & WINEMAKERS ASSOCIATION

Chapel Creek Winery: 2012 Oklahoma Tempranillo

Chapel Creek Winery: 2011 Oklahoma Norton

Coquelicot Vineyard: 2010 Estate Sangiovese

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SANTA BARBARA COUNTY VINTNERS’ ASSOCIATION

Dragonette Cellars: 2012 Sauvignon Blanc Happy Canyon

Dierberg/Star Lane: 2011 Dierberg Chardonnay

Fess Parker Winery & Vineyard: 2012 Fess Parker Santa Barbara County Chardonnay

Foxen Winery: 2012 Pinot Noir

Hitching Post: 2008 Hitching Post Pinot Noir Perfect Set Sta. Rita Hills

Lafond Winery: 2011 Pinot Noir AVA Sta. Rita Hills

Lucas & Lewellen: 2008 Cabernet Franc

Refugio Ranch Vineyards: 2010 Barbareno, Santa Ynez Valley – Syrah / Petite Sirah

Santa Barbara Winery: 2012 Chardonnay AVA SB County

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SOUTHERN OREGON WINERY ASSOCIATION

Agate Ridge Vineyard Ledger-David Cellars

Cliff Creek Cellars Plaisance Ranch

Deer Creek Winery RoxyAnn Winery

Del Rio Vineyards & Winery Serra Vineyard

Devitt Winery TesoAria Vineyard & Winery

EdenVale Winery Trium Vineyard & Winery

Kriselle Cellars

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VIRGINA WINE

Barboursville Vineyards: 2012 Viognier Reserve

Rappahannock Cellars: 2010 Meritage

Rappahannock Cellars: 2012 Viognier

Tarara Winery: 2012 Nevaeh Red

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THE WINE ROAD NORTHERN SONOMA COUNTY

Alexander Valley Vineyards: – 2009 CYRUS

Alexander Valley Vineyards: 2010 Sin Zin

Silver Oak Cellars: 2009 Alexander Valley Cabernet Sauvignon

Stonestreet Winery: 2011 Gravel Bench Chardonnay and Broken Road Chardonnay

Trione Vineyards and Winery: 2012 Russian River Valley Sauvignon Blanc

Trione Vineyards and Winery: 2010 Russian River Valley Pinot Noir

Twomey Cellars: 2011 Russian River Valley Pinot Noir

What’s Ahead for Idaho Wine?


Everyone we met in Idaho was keen on the potential of this sometimes overlooked wine region but at the same time aware that greater success — in terms of sales, recognition, and premium prices — is far from guaranteed.

Idaho, as I discussed in last week’s column, is unique in many respects, but it is typical of emerging American wine regions in that it is searching for the key that will unlock the latent potential of the people and the land.

Idaho Wine Surprises

One thing that surprised me was the vitality of the local wine market. Although Idaho has wine roots going back to the 1860s, the industry and the local wine culture was destroyed by Prohibition and was slow to recover afterward even by American standards.

Boise — the state capital and largest city — has changed enormously since I first visited over 30 years ago. The downtown now boasts both a Whole Foods Market and a Trader Joe’s — a sure sign that there is a critical mass of resident upscale consumers — and the wine department of the Boise Co-op supermarket grew so large that it took over a nearby building (it was crowded with interesting wines from Idaho and the world and buzzing with activity when we visited).

Pluses and Minuses

Boise impressed me as quite cosmopolitan. We had lunch on the Basque Block, for example, a cluster of Basque restaurants, social clubs and community center. Boise celebrates the cultural diversity that its Basque community brings and is working to strengthen ties (including wine connections) with the Old World. A group of local winemakers recently traveled to Spain to exchange ideas with wine people there, which seems like a great idea given the success some wineries are having with Tempranillo. A lot of pluses here.

And some minuses, too. Idaho wine is not well known outside the region and this is a disadvantage for those with national ambitions for their wines although obviously less of a factor if you define your market territory carefully to include the mountain states and parts of the Pacific Northwest.

Focused effort seems to be what is needed. Greg Koenig looks to be on the verge of success in China, for example, where buyers may not know where Idaho is but they understand what he has to offer — delicious Snake River Valley Riesling Ice Wine!

Building Brand Idaho

The economic structure of the Idaho industry is not ideal with big dog Ste Chapelle dwarfing the rest of the industry. It would be great if Ste Chapelle were to play a hegemonic role, working to grow markets and develop the supply chain for all of Idaho wine the way that Chateau Ste Michelle did for Washington wine in that industry’s early days. Or at least that’s what I was thinking  before my visit.

But these are different times and Idaho is a different place. Ste Chapelle is part of the dynamic Precept Wine group which has important wine assets in Washington, Oregon and Idaho and competes in a market environment where important new players (Gallo in Washington and Kendall Jackson in Oregon) have recently entered. Ste Chapelle must necessarily act as part of an ensemble, not as a solo performer, and while I think that great success is possible for the winery itself, it might not necessarily be able to pull the rest of Idaho wine along with it. The smaller wineries need to make their own paths and they seem to realize this fact.

I noticed that some of the new Ste Chapelle “soft” releases were designated “American Wine” even though they are for now at least made using only Idaho grapes. This will help the Ste Chapelle brand if and when they scale up production using fruit from other areas, but it doesn’t promote Brand Idaho. Not a criticism,  because I understand the business logic, but true nonetheless. On the other hand, however, it must be said that the Idaho wine industry would be much less vital without Precept’s key vineyard investments, which provide grapes for many smaller producers.

Opportunities

What will it take to bring Idaho wine to the next level? Well, I’m tempted to say that a big critical success would do it and high scores certainly help. The quality of the best wines makes strong ratings more than a dream (and in the case of a few wines, already a reality). But the market is very crowded right now and my winemaker friends tell me that even 90+ scores don’t always have the impact on prices and sales that they would like.

Wine tourism is another strategy that holds promise. The Sunnyslope area is a short drive from Boise and a wine trail is in place although it is hampered a bit by state restrictions on signage that limit the ability of individual wineries to direct buyers to their tasting rooms. Visitors from adjacent states represent an obvious marketing opportunity that effective wine tourism promotion could enhance.

New investment in vineyard assets would be welcomed hereabouts, as I wrote last week. But what will it take to get major vineyard investments that would fill the barrels and bottles that Idaho winemakers long to produce? Well, it’s complicated of course. From a strictly economic point of view the situation is that land must be worth more as a vineyard than at its next best alternative use — orchard, pasture or residential development — and this isn’t always the case.

Economic Impact

Idaho wines are often a bargain given their quality and tend to sell for much less than the Walla Walla wines that some makers compare them to. This helps sell the wines, but it also limits vineyard growth. Low wine prices dictate low grape prices, which means low vineyard land valuation.

 An economic impact statement prepared in 2008 projected that the number of Idaho wineries would continue to grow from 11 in 2002 to 38 in 2008 to 78 in 2015. The current number is around 50, much less than that estimate, and the number of vineyard acres has probably declined a bit from the 2008 level.  Is this just an understandable (given the Great Recession) pause in the upward trend or has the industry plateaued?

Too soon to tell, really, but I am cautiously optimistic. The land is there and the people, too, both thoughtful consumers and smart, hand-working producers.  I sense a new energy in America’s regional wine industries (this energy was captured in the book American Wine by Jancis Robinson and Linda Murphy). Idaho’s time will come.

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Here’s a list of some wineries from our visit. Sorry that we didn’t have time to visit others!

Bitner Vineyards

Huston Vineyards

Koenig Vineyards

Fujishin Family Wine Cellars

Hat Ranch Winery

Ste Chapelle Winery

Cinder Winery

Coiled Wines

Mouvance Winery

Telaya Wine Co.

Shifting Perspectives on Idaho Wine

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The view down toward the Snake River from Bitner Vineyards

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We spent a weekend in the Idaho wine country last month and I’m still trying to make sense of the experience. It seems like every time I think I know what Idaho wine is I shift my ground a little bit and see something new and usually something different.

So the view keeps changing. Rather than trying to ignore this problem, I thought I’d make it the theme of this column.

Snake River Valley Views

Let’s start with the natural elements. The main vineyard area in Idaho winds along the Snake River and some of the views are spectacular — the photo above taken from Bitner Vineyards shows one of the best.

The vineyards reach down towards the river and the slope is key both because these  hillsides provide a natural solar-collector effect (the area is called Sunnyslope), but also because cold air drainage is an important factor in preventing frost damage to the crop and freeze damage to the vines.

The view shifts when you move along a few miles. This region is a high desert plateau. A lot of the land is pancake flat, ideal for many crops but not necessarily wine grapes, especially given the cold issues. Rainfall is surprisingly sparse here so access to irrigation water is key.

Although Idaho shares borders with both Washington and Oregon, there’s no question that its wine industry is more Columbia Valley than Willamette Valley. This might seem obvious since the Snake River joins the Columbia River on its way to the Pacific Ocean, but it’s mainly because they share that dry plateau feature.

No sense looking for a “signature variety” in Idaho as they do (in Pinot Noir) in Oregon. No, Idaho is more like Washington — lots of grapes can thrive here (in the right spots) and lots of interesting wines are possible. A blessing from a winemaker standpoint and a bit of a curse from a marketing point of view. Riesling to Tempranillo and lots of options in between.

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Looking down to the plateau from Sawtooth Vineyard

Big Dog Ste Chapelle

From an economic point of view, on the other hand, Idaho is a world of big and small without too much in between. This is also a bit like Washington state wine, where Ste Michelle Wine Estates (including Chateau Ste Michelle, Columbia Crest, 14 Hands and other wineries) dominates making more than half of all the state’s wine. Ste Chapelle is the big dog in Idaho to an even greater extent producing a total of about 300,000 cases of wine under the Ste Chapelle label plus other brands.

Ste Chapelle is part of the Precept Wine group these days, having been bought and sold several times since it was founded in the 1970s as the U.S. wine business went through consolidation and then financial crisis. I think there is a sense that the stability that Precept can provide is welcome after some years of drama. The largest privately held wine company in the Pacific Northwest, Precept controls half of Idaho’s vineyard acreage (variously estimated at 1200-1500 acres) in addition to its assets in Washington and Oregon.

Ste Chapelle makes several lines of wine. Their “soft” (read sweetish) wines are technically well made and perfectly in line with current sweet red and moscato-style market trends. The soft red and a soft pink wine with a subtle huckleberry flavor are the top selling wine SKUs in the state, crowding out the California “usual suspects.”

Ste Chapelle also makes smaller (but still substantial) quantities of dry wines, including 40,000 cases a year of an off-dry Riesling that nearly stole the show at Riesling Rendezvous this year. And they produce Precept’s wildly popular Chocolate Shop and Almond Roca wines at their facility.

Limits to Growth

If Idaho is the land of the big it is also a world of small. From 300,000 case Ste Chapelle we drop sharply down to 12,000 – 15,000 case Sawtooth (also a Precept Wine brand) and Greg Koenig’s operation of about the same capacity, where he makes his own products as well as those of four other wineries including Bitner. That’s a big gap between #1 and the rest in terms of size and market penetration. Not too many of the remaining 40+ wineries in the state have total production as high as 5000 cases.

What limits growth? Well, you have to sell what you make, so market demand is an obvious factor. But I got the strong sense from several winemakers that they could sell more if they could make more. Vineyard capacity is a real roadblock.

While they were glad to be able to purchase fruit from the Precept group’s 400 acre Skyline vineyard, they needed even more. Land surveys indicate that there are many good sites that could contribute to the industry’s growth if only new investors would enter the region.

Made In (But Not of) Idaho

If Idaho has not attracted as many wine growers as it needs, it certainly has attracted wine makers who see this area as a good place to live and to work. A number of small urban wineries have sprung up as wine enthusiasts from other regions are attracted here and others who have left to establish careers elsewhere return home.

Many of their wines are clearly Idaho products, but we tasted a number of them that were made from grapes imported from Washington, Oregon and even California. The practice of using out-of-state or region grapes or juice is not that uncommon in the Pacific Northwest. Oregon’s largest winery, King Estate, brings in fruit from the Columbia Valley for its NxNW wines, allowing them to produce a more complete portfolio of wine varieties and styles. And the  Pamplin Family Winery in the Willamette Valley is one of several that make high quality Bordeaux blend wines using Columbia Valley fruit. And of course most of the grapes used in Seattle-area wineries are trucked over the mountains from Eastern Washington.

Necessity (and limited local grape supply) dictated the use of non-Idaho grapes in some cases, but we met several winemakers who cited passion for a particular style of wine as a driving force. I did a University of Puget Sound alumni program at the Mouvance Winery tasting room while we were in Boise and enjoyed their Pinot Noir and Pinot Gris wines made from the fruit of the family’s own vineyard in Oregon. Pinot passion drives this project and so Idaho grapes just won’t work.

What should we think about Idaho’s cross-border wineries? Well, just like everything else in Idaho wine it depends on your point of view. They certainly do contribute to the critical mass of winemaking that the industry needs to move ahead and clearly help foster what I see as a vibrant emerging wine culture (more about this next week). But I also picked up understandable concern that their efforts didn’t contribute as much as some would like to building the local industry from the ground (the vineyards) up.

Where is Idaho wine headed? My thoughts next week.

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Thanks to everyone who met with us during our Idaho visit. Special thanks to Jim and Melissa Thomssen, Ron Bitner, Greg Koenig, Gregg Alger, Maurine Johnson, Moya Shatz Dolsby, and the Idaho Wine Commission. Thanks to Sue Veseth for the photos.

Wine in China: Government Investment, Civil Servants and Hospitality

I’m still in Australia (soon to step aboard a flight to Tasmania) and, through the magic of the Internet, simultaneously in Mendoza, Argentina, where I am a member of a virtual panel of experts (or is that a panel of virtual experts?) addressing the competitiveness of Argentina’s wine industry at the IX Foro Internacional Viniviticola. I guess you can be in two places at once these days!

Last week’s column by  Cynthia Howson, Pierre Ly and Jeff Begun on the search for Chinese terroir generated a lot of interest. Here is the second part of their report. Come back next week for the final installment.

Government Investment, Civil Servants and Hospitality in China

by Cynthia HowsonPierre Ly and Jeff Begun

 In the last post, we talked about the diversity of Chinese terroir and how the distinctive features of each region might be developed. It’s no secret that the government is a major player in the Chinese economy and wine is no exception. Each winery we encountered depends on some form of support or relationship with local government officials, usually at the local level (town, county or prefecture). And each wine producing region has a provincial government that is committed to upgrading in some way, but the issues they face and the resources they can provide vastly different.

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In this photo, a couple poses at the “World Wine Walk”, a street in Yantai, Shandong, where city has built a beautiful space to highlight the wine industry. Presumably, wine shops or other stores will fill the vacant spaces, but for now, it is just a very pretty place to walk near the beach and restaurants.

The State as Public Investor, Institutional Facilitator and Quality Control Monitor

Crucial government support can come in the form of investment, cheap credit, infrastructure or institutional support, like facilitating contracts or coordinating farmers. Each of these is critical and is likely to affect the types of wineries that will be most successful in each region. For some wineries, relationships with farmers require careful, daily supervision. In one case, the village head provides much of the human resource management for a winery, coordinating day laborers and making sure the vineyard has the right workers at the right time. Elsewhere, a manager for a large corporate winery said it’s not so much about financial support as good policy, helping to coordinate with banks and institutions. “They don’t interfere,” he said.

In Ningxia, local governments encourage new wineries by providing electricity, irrigation, pavement, signs on the road, subsidies for imported vines and even funds to invite foreign consultants and prizes for award-winning wineries. In Shandong, local governments coordinate lease agreements with farmers so that a winery can establish a single vineyard and control its grapes even if dozens of different farmers control the small plots of land.

Interestingly, the role of government as regulator came up less frequently in our discussions, but it is one of critical determinants of a successful wine industry. Pollution, pesticides and food safety are all critical features of a healthy vineyard and are very sensitive topics in China. Indeed, a 2012 scandal over contaminated wine stoked concerns about the largest producers and whether food safety inspectors should become stricter about pesticides. We took this photo of a pesticide-laden cluster at a major state-owned winery (although this may be just a very large demonstration vineyard).

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Needless to say, this is not what the grapes looked like in most of the vineyards we visited, including those of small farmers.  However, several wineries expressed concerns about producers using pesticides that are banned in China (where regulations are already looser than in Western countries). This is a particular concern in Shandong, where humidity is most threatening and where, it’s worth noting, some farmers are hesitant to eat the skins of their own grapes. Here, efforts to tighten enforcement of environmental regulations could be facilitated by ongoing efforts to promote agribusiness over more diverse types of wineries.

Another Public Investment: Government as Customer

The most successful wineries benefit from government contracts for banquets and from civil servants as high end customers. Those sought after consumers are not just wine drinkers, of course, but collectors, and most importantly, those who purchase wine as gifts. It’s no secret that gifts are an important part of business negotiations in China. Some experts have pointed out that a market for extremely expensive Chinese wine has benefited from civil servants and business magnates who are looking for an appropriately priced gift. Such a gift need not be consumed. At other times, negotiations might involve fancy banquets or informal meetings, where the spirit of friendship is facilitated by a meal and a bottle. Indeed, most people we spoke with emphasized food and drink as part of maintaining good relationships with local officials.

But conventional wisdom has it that civil servants have seen their belts tighten, a trend that the new President, Xi Jinping, is eager to continue. The national government has made some public efforts toward curbing corruption in addition to increasingly strict monitoring of accounts. Of course, careful control of public expenditure sounds great to a political economist, so we were surprised when even a taxi driver called it a “disaster.” The “disaster,” we are told, is that when civil servants are constricted in their use of expense accounts, the entire hospitality industry is affected, including hotels, bars, restaurants, taxi drivers, and of course, wineries. Now, it’s important to keep in mind that our informal conversations are just that. We can’t say whether civil servants have actually changed their spending habits or if, for example, announcements in the media have stoked the rumor mill, but we did find it curious to encounter the same perspective from very different people in the hospitality industry and to note that it was echoed by Beijing Boyce. We asked a driver in Shanxi province whether he sees a lot of tourists and he explained how changes in government spending have hurt the tourism industry. We discussed the prices of Chinese wine with a foreign barrel merchant in Shandong province and he explained how changes in civil servants’ accounts are crushing the market for low quality, expensive gift wines.

If our barrel merchant and others are correct, there may be important changes in Chinese supermarkets. If wine drinkers seek out higher quality at the same time as consumers limit their purchase of exorbitantly price gift wines, we might start to see some of the delicious wines we tasted taking up more space at the supermarket. Actually, we are pretty optimistic that those delicious wines are coming regardless of civil servants’ expense accounts.

In Search of Chinese Terroirs

I am in Australia this week where I am giving a talk called “Australia on the Global Stage” at Savour Australia 2013, the international wine gathering that Australian wine is using to relaunch Brand Australia on the global scene. I will have a report on what I learn in Australia in due course, but for now I’m busy just being there.

My friends and colleagues Cynthia Howson and Pierre Ly and their associate Jeff Begun have recently spent several weeks in China examining trends and issues in the Chinese wine industry. They have been kind enough to write three short essays that I will publish here while I’m away from the office. I think you will find their analyses very timely and interesting! Here is their first report.

In Search of Chinese Terroirs

by Cynthia HowsonPierre Ly and Jeff Begun

We were lucky to spend a month last summer traveling through several Chinese wine regions, meeting producers, farmers, and experts, and tasting some truly delicious wines. In past Wine Economist posts, Mike noted that China’s fragmented agriculture was the biggest challenge for Chinese wine producers. How can winemakers ensure a reliable supply of flavorful and fully ripe grapes, when they have to work with hundreds of implausibly small family-run vineyards?  Mike pointed out that the best producers are those who somehow solved this problem. Another serious and more permanent challenge comes from the climate. So how did they improve and what’s next?

The grape supply chain

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Stunning view at Grace Vineyard in Shanxi province.

Getting control over land is not easy in China and many producers still have to work in large part with hundreds of small family-run vineyards. Yet, some high quality producers have found ways to work with this difficult supply chain by developing relationships with growers. For example, Grace Vineyard, in addition to renting land to grow grapes with their own labor, works with hundreds of very small farmers, and provides them with training and credit for inputs. Grace is willing to pay the price for good quality grapes and provides incentives to farmers accordingly. Of course, at Grace like elsewhere, this takes a lot of work with supervisors going through the vineyards and checking on the work, relationships are not always easy and some compromises may have to be made in difficult vintages to sustain good relationships. But the excellent wines we tasted at places like Grace Vineyard in Shanxi, or Leirenshou in Ningxia, could not have been produced without flavorful, fully ripe fruit and a sizeable portion of it had to come from small family farms.

Of course, it is easier for wineries to secure high quality fruit when it is grown in-house, by renting land to farm with their own employees. Some wineries rent large plots of land directly from the government. Others have to rent from individual farmers, either by dealing with each individual grower directly, or by entering contracts with a village authority which then redistributes rents to individual farmer. In each case, relationships and the local institutional context determine which types of arrangements are feasible and on what terms. Future policies and reforms regarding land markets will certainly play a key role to spread existing improvements in Chinese wine on a larger scale.

Many Chinese terroirs?

So if wineries have found and continue to find ways to improve the grape supply chain, what about the climate? Isn’t China simply too difficult a place to grow high quality wine grapes? People seem to disagree on this issue but what we saw makes us hopeful and optimistic that pockets of high quality will continue to develop.

One source of hope is that China, as one would expect given its size, has many terroirs with incredible diversity. One winemaker told us that opportunities and challenges come together, and this applies to each region in a different way. This post by award-winning winemaker and consultant Professor Li Demei, does a great job explaining the pros and cons of the climate in seven wine regions. For example, toward the Northwest, in Ningxia and Xinjiang, although harsh winters require that vines be buried in winter, reliably hot and dry summers protect the grapes from disease. A reputation for limited or no pesticide use could be a strong selling point, given that food safety incidents in China (including some related to pesticide residue) have received a lot of media attention.

In Shandong province on the East coast, producers enjoy a mild winter and vines do not have to be buried. However, the location also comes with the challenge of humidity and rain during the summer, and especially at harvest. The risk is that people will use pesticides a bit too generously, but careful disease prevention programs can be developed. Emma Gao, from award winning winery Silver Heights, based in Ningxia province, told us she saw a lot of potential for Shandong winemakers, and she compared them to the Burgundians, in the sense that there are many people there willing to put in the hard work needed to overcome challenging conditions. Hardworking Shandong terroiristes overcoming adversity, how interesting would that be! It will be interesting to see future advances there, and it is worth noting that the DBR (Lafite) – Citic project is currently under construction there in a small village next to the resort town of Penglai.

Unlocking China’s terroirist soul

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Terroir labeling: the mountains of Alti-wine, and the sandy dunes of Skyline.

That’s what Mike hoped when he wrote about China in Wine Wars. There are many challenges ahead for producers of course, from contracts on land and grapes, to infrastructure and climate. But our last tasting before leaving China gave us further hope. Jim Sun, founder and chief editor of the leading industry media winechina.com, welcomed us at his China-focused cellar in Yantai to share insights, as well as five delicious wines. With passion, Jim told us the story of each of the wines he picked from regions we had not visited, to illustrate a variety of interesting microclimates. The terroir message of each wine was evident, from the Gobi desert vineyard of the Skyline Chardonnay, the vertiginous high altitude of vineyards of the “Altiwine” red produced in Yunnan province, to the proximity to a lake that keeps some Cabernet Sauvignon vines cooler than usual in Xinjiang.

Experts seem to disagree on whether China can become a serious producer of fine wine. But there are already some delicious wines, and they each come with their unique and interesting story. That may be enough to get wine enthusiasts interested in China and encourage further progress.

In our next post, we will discuss the role of government in Chinese wine.

Turkish Wines Make a Statement

“There is, perhaps, no country in the world where drinking a glass of wine in a public space has more political significance than in Turkey. Just now, that significance extends to a glass of Turkish wine drunk anywhere in the world.”

It’s Not [Just] About the Wine

We don’t usually think of wine in political terms, but as this quote from Andrew Jefford’s  recent Decanter.com column indicates, these are unusual times in Turkey and even otherwise innocent wine is caught in the crossfire. Jefford writes that

The world watched Turkey tumble into political turmoil last week. Protests over a building project … erupted into wider discontent about what many see as PM Erdoğan’s peremptory paternalism, and the sense that Turkey’s hard-won secular traditions were being gradually eroded in a stealthily managed slide towards ‘soft Sharia’.

So how does wine fit in? The answer is law number 6487, which piles additional restrictions on the promotion and sale of alcohol, including wine. This law seems a step backwards for a county that seeks to join the European Union, where wine is nearly ubiquitous . But, Jefford explains, it’s not about the wine.

What makes life for Turkey’s wine producers so singularly wearying is that alcohol is a lightning rod for these [political and social] tensions. As Turkish journalist Sevgi Akarçeşme wrote in her blog in Today’s Zaman on May 26th, alcohol is always “more than alcohol” in Turkey.  It is, she said, “an issue about which you can hardly have a reasonable public debate. …  in Turkey alcohol is not simply about a personal decision to drink or not to drink.”

A recent article in The Economist (the source of the pointed illustration above) provides additional context.

Hoteliers fret that the curbs will scare off tourists. Secularists see another step to sharia rule. After a decade under AK [the ruling party] Turkey feels a lot more conservative. Islamic clerical training for middle-school pupils has come back, Koran courses have grown and finding a drink in rural Anatolia is hard.

Recommended reading if you are interested in learning more about the controversy: Elin McCoy’s report form VinExpo on the challenges and opportunities for Turkish wine.

But What About the Wine?

So wine makes a statement in Turkey and Turkish wine, according to Jefford, makes a political statement everywhere else. So what kind of statement is it — as wine, I mean, not as a political symbol? Well, I suspect that most Americans don’t really know and would be hard pressed to find a bottle of Turkish wine to satisfy their their desire to lend support to one side or the other in the Turkish protests.

We were fortunate to be given the opportunity to sample a number of otherwise hard-to-find Turkish last week when Olga and her team at Vinorai (who are just breaking into the wine import business) invited us to sample some wines being considered for the U.S. market. The Turkish Commercial Attaché was there to give his blessing — wine may be controversial within Turkey but wine exports apparently are not.

The wines represented a wine range of grape varieties, wine styles and price points.  We found much to like even if we liked some better than others as would be the case in any tasting. Although there were credible wines made from international grape varieties such as Cabernet Sauvignon, Merlot and Shiraz, Sue and I were drawn to the indigenous grape varieties, especially white wines made from Narince and Emir and juicy, fruit-forward red wines made from Öküzgözü.

P1050952A Rose is a Rose

Narince and Emir are unfamiliar names to most U.S. wine drinkers, but they are not especially intimidating ones and there is no particular reason why consumers who have only recently learned to say “Torrontes” should not embrace them. If you see one of these wines in a shop or on a menu, try it. Very refreshing.

Öküzgözü is another matter of course with its Scrabble-master spelling and abundant diacritical adornment — it really looks like a Turkish name, doesn’t it?. I suppose the name alone might stop some consumers in their tracks, which is a shame because we tasted some delicious interpretations of the grape. The literal translation is “bull’s eye” or “ox eye” because the grapes are as large and dark as a farm animal’s pupil and perhaps a clever marketer can exploit that fact to entice consumers to lean in.

(Hungary’s “Bull’s Blood” wines are popular and most people who buy them probably don’t concern themselves that the wine is a blend featuring the Kadarka grape, which is thought to have been brought from Turkey!)

So how do you get consumers to try Turkish wines? Well, I’m not sure you have to get people to try them because, as Olga noted, so many Americans have vacationed in Turkey and tried and enjoyed the wines there (even if they might not have made notes about which particular varieties they liked best). It may only be necessary to reintroduce these former visitors to the wines by inviting them to relive their experiences enjoying Turkish food, culture, and of course its wine.

Beyond Politics: Wine, Food and Culture

The wine taken completely by  itself may be a hard sell, I admit, because the market is so crowded and the competition is so fierce, but the key is to present the wines as part of an integrated Turkish cultural package that draws on happy memories and associations and promises to extend them. Italian wines (even those from unfamiliar regions made from hard-to-remember indigenous grapes) have always benefited from this cultural  strategy. And while Turkey doesn’t have Italy’s prime place in American hearts and minds, there are plenty of positive associations to draw upon.

Culture, not politics, is key when it comes to selling Turkish wines in America. Andrew Jefford  is probably right that raising a glass of Turkish wine makes a statement just now, but when it comes to expanding the market for the wines, it may be best to keep divisive politics out of it and let the warm and welcoming side of the Turkish people themselves lead the way.

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Mike and Olga with Recep Demir, Turkish Commercial Attaché

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Thanks to Olga and her Vinorai team for inviting us to sample these Turkish wines. Thanks to Sue for her tasting expertise and the photos shown here.

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