Category Archives: emerging wine regions

Chilean Wine at the Crossroads

December 13, 2011 By in Australian wine, brands, Chilean wines, emerging wine regions, Oz Clarke, wine exports, wine price, wine research 7 Comments


When Oz Clarke spoke at the Wines of Chile Awards seminar earlier this year, his theme was simple and clear: Chilean wine is at a crossroads and it was up to the people in that room to decide which direction to go. Would they make the same mistakes as winemakers in Australia, for example, or choose another path? Oz, who was a stage and film actor in a previous life, is a dramatic speaker, but if you watch the video I think you will agree with me that his message is even more powerful than the delivery.

Preaching to the Choir

Oz Clarke is not alone in this view and to a certain extent I’m sure he was “preaching to the choir.” Wines of Chile released its ambitious  Strategic Plan 2020  about a year ago (you can download a pdf of the full report here). The plans calls for Chile to become the #1 New World producer of “sustainable and diverse” premium wines by 2020.

The carefully devised Plan projects an average annual growth rate of 9.2% and is based on strengthening the recognition and appreciation of  “Wines of Chile” as a world-class appellation, which will in turn increase the average price, sales, and added value for all Chilean wine industry stakeholders, including small and large growers, suppliers, wineries, and exporters.

The plan focuses on four messages to drive the transformation:

  • Diversity and Quality. Chile has much to offer with respect to quality, diversity, and wines that over-deliver at every price point.
  • Sustainability. Sustainable Chile: Clean, efficient, and responsible.
  • Country Image. Chile is good for you.
  • Innovation. Chile: Moving above and beyond.

The plan’s ten year time horizon speaks to the sense of “Chile at the Crossroads” immediacy while the four “strategic pillars” indicate how much needs to be done in terms of recasting Chile’s image. Chile’s reputation as a producer of bargain Cabernet Sauvignon, Chardonnay and Sauvignon Blanc needs to be reshaped in terms of both wine types and price points. And the image of Chile itself must be updated or redefined, according to the plan’s analysis, so that the country sells the wine  (as Italy’s image obvious does for Italian wine) and not the other way around. (Whether a campaign built around the slogan “Chile is Good For You” can accomplish this is debatable.)

Audacious Goals?

Exports are key for Chile since domestic consumers drink up only about 30% of total production.  The idea that revenues might grow by 9.2% in the next decade is not as ridiculous as it might sound, given the current economic climate, although it is certainly an audacious goal.

Chile’s wine exports grew by a yearly average of 33% in the 1990s (according to data in the Wines of Chile report) and by 11% per year between 2000-2009. But whereas growth came through both increased price (7%) and quantity (25%) in the 1990s, the 11% revenue growth in the 2000s was due to volume growth (12%) offsetting 0.1% average price declines. The new strategic plan calls for a radical change, with rising price not higher production driving revenue growth.  Good idea, but easier said than done.

So (and this is the “crossroads” theme again), Chile needs to turn things around in a fundamental sense and this may be difficult in today’s market environment as an excellent interview with  with Rabobank’s Stephen Rannekleiv in a special September 2011 Chile Report  issue of The Drinks Business makes clear. Rannekleiv is an optimist about Chile’s wines, but very cautious about its wine industry’s ability to meet the 2020 goal.

 Something Completely Different

Rannekleiv suggests that Chile seek out new markets to supplement but not replace the UK, its largest export market today, where margins currently are thin or even  negative and where upward price adjustment is extremely difficult. Focus must be on price and quality, Rannekleiv notes, so major supply surges must be avoided.

It is very difficult to raise price (without dramatic loss of market share) for existing product lines in today’s market, so  ”Chile needs to find something different, such as marketing around new varieties that are exceptional; it also needs to continually work on improving quality.”

There is no silver bullet, Rannekleiv suggests. It will take a combination of controlled output growth, continuing quality improvements, image development and new products and markets to turn the Chilean wine industry onto the right path.

Getting the Message Out

One element of the Wines of Chile strategy is a series of blogger wine tastings that are designed to educate, inform and persuade social media representatives and their audiences of Chile’s new direction. I took part in one of these programs last year that featured Chilean Syrah and Pinot Noir, stressing the diversity of Chilean wine.

This certainly is part of the 2020 strategy’s message (and the wines told that story pretty well), but Syrah is a problematic market these days and while Pinot is popular, it is hard to break in except at the bulk level. (Although both Chile and Argentina produce Pinot Noir, for example, neither country made the cut for inclusion in Benjamin Lewin’s recent book In Search of Pinot Noir.)

Is Carmenere The Key?

Which brings us to Carmenere, the focus of the most recent blogger tasting program.  Is Carmenere the key (or one of them) to Chile’s crossroads dilemma? Carmenere is (like Malbec) a Bordeaux variety that is now better known in the New World than the Old. Can Carmenere be to Chile what Malbec has become for Argentina, a signature variety that creates a new market and that serves as a brand ambassador for the entire country?

A Carmenere boom would tick a lot of the Wines of Chile 2020 plan boxes. Is Carmenere the key? Come back next week for my answer.

Reimagining Chile’s Wine Identity

April 19, 2011 By in brands, Chile, Chilean wines, emerging wine regions, globalization, wine brands, wine exports 3 Comments

What do you think of when you think of Italian wine? Many people think first of Italy — the place, the art, the people, the culture and the food (OK, especially the food). The romantic idea of Italy sells Italian wine. Brand Italy is stronger, it is said, than any Italian wine brand and Italian winemakers have profited from this fact.

Changing Places

The relationship between country and wine image is reversed for Chile, or at least that’s the theory I found in a recent report called the Wines of Chile Strategic Plan 2020.  The wines of Chile are the nation’s ambassadors to the rest of the world, the report asserts. The wines of Chile have a more distinct image than Chile itself (although of course the two are related) and so when people think of Chile they think first of its wines.

I am not sure that I completely agree with this idea — “Chile” conjures up many images and associations for me — but I am willing to consider it for the sake of argument. Certainly how we think about the wines of Chile has some impact on our attitudes towards this country more generally. Chile’s wine identity, as important as it is to people in the wine industry, may have an even broader significance in terms of international investment, export sales, tourism and so forth.

Good and Good Value

So what is Chile’s wine identity? Well, for most of the last 50 years Chilean wine has been synonymous with “good value for the money.” As I wrote in a previous post, Chile has been trapped in a vicious cycle of rising expectations that has made it difficult for them to increase price even as the quality of their wines has continued to improve.

Is this a bad thing? Yes, I know that it is better to be known for good value than for bad value, but in today’s very competitive global market it is also good to have products that consumers are willing to pay a bit more for. The average FOB export price of Chilean wine hovers around USD 2 per liter or less than USD 20 per case. The appreciation of the Chilean peso in 2010 combined with the difficulty of raising the USD price has really put the squeeze on Chilean wine producers.

Chile is the most trade dependent of the top wine producing countries, according to the Wines of Chile report, exporting nearly 70 percent of their production.  Wine accounts for over 2.5% of Chile’s total export earnings. So enhancing the image of Chilean wine abroad by moving it upmarket is important.

There are several ways to define a country’s wine identity and this video illustrates the current theme, Wines of Chile: The Natural Choice. As you can see the theme connects the dots of factors contributing to Chile’s complex terroir and stresses the fact that that its phylloxera-free vines grow on their own rootstocks — a  nice “natural” connection.

But broad messages like this have their limitations since by definition they cannot thoroughly take into account detailed factors that may be important to understanding and promoting the wine.  The New Zealand wine tagline is “Pure Discovery,” for example, and here in Washington the motto is “The Perfect Climate for Wine.” None of these tag lines is especially stirring or sharply defining, although the key words — Natural, Pure, Perfect — have obvious appeal.

Is Carmenere the New Malbec?

Another way to think about wine identity is in terms of grape varieties, although this has limitations, too. If you think Burgundy  you think Pinot Noir and Chardonnay, for example. And Napa Valley is Cabernet Sauvignon. There is much more to the wine from these regions than type of grape, of course, but the iconic varieties are straightforward identifiers that confused New World consumers can easily understand.

Wine in Chile is really about three varieties: Cabernet Sauvignon, Sauvignon Blanc and Carmenere. Cab Sauv and Sauv Blanc together account for more than two-thirds of all wine grape plantings in Chile. These wines can be very good, but it must be said that they are cursed with that “good value” label that will be hard to shake no matter how many Wine Spectator Top 100 awards they receive.

Carmenere represents only 7 percent of vineyard plantings now, but it is seen by many as the breakthrough wine of the future, a uniquely Chilean wine that has the potential to do for Chile what Malbec has done for Argentina. The Wines of Chile report has high hopes for Carmenere both as an export product and as a tool to redefine Chile’s wine identity. But it warns against cutting corners to capture low price sales. Carmenere needs to be a premium brand if it is to serve its useful symbolic function.

Blogger Wine Tasting

Which brings us to Syrah and Pinot Noir — not grape varieties that you usually associate with Chile. They were the focus of a recent tasting organized by Wines of Chile that brought together, if that is the right phrase, a virtual group of U.S. wine bloggers including members of The Wine Economist staff. The idea was to use new media to get out the message about Chilean wine’s new directions and to help establish its wine identity among younger tech-savvy consumers. We were sent wines to sample, literature to read and provided with online access to Chilean winemakers for interactive Q&A.

Are wines like these the way forward for Chile? Syrah and Pinot Noir are high value bottled wine exports (FOB prices of $4.66 and $4.08 per liter respectively in 2009 compared with $3.37 for Cab Sauv and $2.79 for Sauv Blanc) and so they may be useful tools in this task of getting consumers to rethink the wines of Chile and what they might be willing to pay for them.

(Math note: Chile receives only about $2 per liter on average for its wine exports because lower priced bulk wine sales drag the average down while higher priced bottled wine exports try to hold it up.)

I asked the winemakers to comment on the potential for these wines on the international markets. How can Chilean Pinot Noir differentiate itself from New World Pinots from Oregon and New Zealand? And how can Chilean Syrah succeed in the U.S., where Syrah sales are slumping?

Wine Economist volunteer tasting staff: Scott, Janice, Kevin and Jeni

Their responses were not very enlightening, but I blame the online environment for that, with the group of winemakers in a boardroom in Chile trying to answer questions submitted from thousands of miles away by faceless bloggers. Anyone who has been on a conference call knows the problem. But, like conference calls, this internet session facilitated a great deal of interaction even if it wasn’t completely satisfying and so the pluses outweigh the minuses. I’ll just need to follow up, that’s all.

Tasting Notes? From the Wine Economist?

No one comes to The Wine Economist to read tasting notes, but I thought you might be interested in the team’s reactions to the wines. On the whole we liked the Pinots a bit better than the Syrahs — we just found more complexity in the glass and more to talk about. That said, I noticed that when everyone was given the opportunity to take home a partial bottle, it was the Syrahs that disappeared. Interesting.

The Syrahs were better with food, which in our case included tasty empanadas purchased from Pampeana Empanadas here in Tacoma and bruschetta with Fontina and  Huerto Azul Myrtleberry Chutney with Merken, a Chilean product that was provided by Wines of Chile along with the wines and is available from puro-gourmet.com.

I was especially interested in how college students Jeni and Kevin reacted to the tasting since young consumers are a key wine marketing target and new media initiatives like this are often organized with them in mind. Jeni said that she had never purchased a bottle of wine from Chile — her image of Chilean wine was pretty much a blank canvas –  but that the tasting put Chile on the wine map for her and she was more likely to try these wines in the future. Jeni’s image of Chilean wine changed from invisible to positive — a good sign.

Kevin had tasted Chilean Pinots before — he comes from the Willamette Valley in Oregon and is friends with many winemaker families. In Oregon, the aim is to be Burgundian, he said, and he was surprised by a couple of these Chilean Pinots. They weren’t exactly what he was expecting, which made him want to taste more to try to understand the Casablanca Valley terroir and the winemaker styles a bit better. Another good sign

Overall I would say it was a successful tasting that answered some questions and raised many more. The question of the future of Chile’s wine identity remains to be answered, however, so I’ll come back to it in an upcoming post.

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Thanks to Wines of Chile for inviting us to participate in the blogger tasting and to Amber Gallaty of the thomas collective for making the arrangements. Special thanks to Sue Veseth, Janice Brevik, Scott Hogman, Jeni Oppenheimer and Kevin Chambers for their insights on the wines and the virtual tasting process. The photos are by Sue and Scott.

Here are the wines featured in the April 2011 blogger tasting

Is Malbec Washington’s Next Big Thing?

April 11, 2011 By in Argentina, AVAs, brands, emerging wine regions, Riesling, Washington wine, wine brands, wine education, wine markets 3 Comments

Celebrate! April 17 is Malbec World Day

Every year Seattle magazine publishes a list of Washington’s top wines and wineries and identifies an “emerging” wine variety to highlight and promote. This year it was Grenache and there are some great Grenache and Southern Rhone-style Grenache-blend wines made in Washington state, so I think this was a good choice. The wines we sampled at the Taste Washington Grenache seminar were delicious (see list at the end of the post).

The Big Freeze

But Grenache, as good as it can be here, is probably pretty far down the list in the search for The Next Big Thing in Washington wine. There is only a tiny bit of it planted and I don’t think there are any “old vines” left (old vine Grenache is said to produce more complex wines). Grenache was more widely planted in Washington wine’s early days, but the vines didn’t survive the hard winters that strike the Columbia Valley every few years. Now, with greater attention to vineyard location and management practices, Grenache is making a welcome comeback.

Grenache is an up-and-comer and there are great wines being made already,  but as it is probably best viewed as the Next Next or Next Next Next Big Thing until more and older vines are on line.

But what about Malbec?

When you say Malbec everyone thinks Argentina and, since I’ve recently returned from doing fieldwork in Mendoza, naturally so do I. But what about Washington Malbec? Seattle magazine named it their hot wine variety in 2009 and so I decided to use this year’s Taste Washington event to evaluate the Malbec status quo. (Click here to view a video of last year’s Taste Washington Malbec seminar.)

Mendoza del Norte?

Argentina makes distinctive Malbec wine and there is good reason to think Malbec might do well here in Washington, too. Mendoza and the Columbia Valley are both basically deserts (the Andes and Cascade mountains respectively provide rain shadow effects) where irrigation is a necessity. Both areas get plenty of sunlight although I think vineyard elevations are higher down south.

There are many patches of Malbec planted in AVAs from Lake Chelan to Yakima Valley to Snipes Mountain, Red Mountain and Walla Walla. Statistically Malbec is the fifth most-planted black grape variety after Cabernet Sauvignon, Merlot, Syrah and Cab Franc and ahead of Sangiovese, Pinot Noir and Lemberger (according to Washington Wine Commission data).

The vines are relatively young, reflecting Washington’s comparative youth as a quality wine producer. Most of the wines I tasted were made with grapes from roughly 10 year old vines, but I know there have been recent plantings that should begin to appear in forthcoming wine releases.  Argentina has some old vine Malbec (80 years and more) in Luján de Cujo, but a lot of the vineyards (especially those in the Uco Valley) are about the same age as Washington’s.

When I ask Washington winemakers why they started making varietal Malbec they usually say that it was because the wine was too good to hide in a blend and, while I don’t dispute this, I suspect Argentinean Malbec’s market success did not unnoticed.

Malbec was originally planted here to use as a blending grape — Malbec is one of the five classic Bordeaux varietals along with Cabernet Sauvignon, Merlot, Cab Franc and Petit Verdot. Seven Hills released a what I think was the first varietal Malbec (from very young vines) in 2001, but most other makers restricted it to blends until more recently.

Price and Cost Differences

If Washington and Argentina share certain aspects of geography, they differ tremendously in terms of production cost and retail price. There are precious few Washington Malbecs below the $20 price point. The most frequently observed Malbec price at Taste Washington was $28 and many more were priced above than below this figure. Reininger’s 2007 Walla Walla bottling was the highest priced Malbec on the published listing at $51 and I think that the Eliseo Silva was the cheapest at a listed $10.

Argentinean Malbecs can be found at all price points from about $10 up, but they are biggest in the sub-$20 arena. In other words, Washington and Mendoza compete in the Malbec market, but exactly not head-to-head.

Cost differences account for some of the price difference. Malbec is in short supply at the moment in Washington (only 1100 tons were crushed in 2010 compared with 31,900 of Cab Sauv). Malbec is Washington’s most expensive wine grape according to USDA average price data. Malbec cost $1,540 per ton on average in 2010, putting it ahead of Cab Franc ($1,325) and Cabernet Sauvignon ($1,297).

Malbec is in short supply in Argentina, too, but land and labor costs are a lot less there. High quality Malbec costs 5-6 pesos per kilo in Argentina these days and good quality costs 4 pesos (both figures have risen significantly in the last two years).  At an exchange rate of 4 pesos per dollar and figuring 5 pesos per kilo, that converts to about $1100+ per ton, a lot less than in Washington.

Taste Washington Malbec

There was a lot of Malbec at Taste Washington, mostly from small producers.  Nineteen wineries listed Malbec on the program but I think there may be nearly 100 different Malbecs made in this state by the 700+ large and small registered wineries.

I am not an expert wine taster (which is why you won’t find wine ratings on this website), but I sampled enough quality Malbec in Argentina to begin to understand it a little. In general I found the Malbecs at Taste Washington to be very good representations of the varietal, with well integrated oak in most cases, and able to reflect the different vineyard terroirs. I think they compete very well with the Mendoza wines in the same price ranges, which is a high complement.

My favorites, for what it is worth, were from Fidelitas, Gamache, Hamilton Cellars, Nefarious, Reininger, Saviah and William Church. Special marks go to Hamilton Cellars for making Malbec in three styles: Rose, straight Malbec and a Malbec-heavy Bordeaux blend.

So is Malbec Washington’s Next Big Thing? Not yet — not until there are more vines on line and Chateau Ste. Michelle or  Columbia Crest get into the market and help develop it. Interestingly, Columbia Crest’s newly-appointed chief winemaker, Juan Muñoz Oca,  is Argentinean and Columbia Crest recently released it’s first Malbec — maybe that’s a sign! I’m looking forward to finding out.

Cost is still a big issue and perhaps Washington cannot compete with Argentina at the key price points. But in terms of quality? Yes, it could happen. Malbec could be Washington’s NBT.

[Thanks to Sean Sullivan and Guillermo Banfi for help tracking down Malbec grape prices in Washington and Argentina respectively.

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Taste Washington Seminars: Washington’s Emerging Varieties: Grenache Panache
Presented by Seattle Magazine

The rising popularity of this new-to-the-Washington-scene grape variety in recent times is a boon for wine drinkers.  Seattle Magazine recognizes that Washington State’s offerings with this amazing grape are truly delicious, having awarded it Best Emerging Varietal in their 2010 Best of Washington Wine Awards. Bob Betz MW, an admitted Grenache fiend, will join Seattle Mag’s wine columnist Shannon Borg and an esteemed panel as they help you discover why our region’s Grenache offerings are fast becoming some of the New World’s most distinctive and respected.

Moderator:
Bob Betz MW (Betz Family Winery)
Panelists:
Shannon Borg (Seattle Magazine)
Brian Carter (Brian Carter Cellars)
Sara Schneider (Sunset Magazine)
Sean Sullivan (Washington Wine Report)
Wines:
2008 Milbrandt Vineyards “The Estates” Grenache, WS $25
2009 Maison Bleue “La Montagnette – Upland Vineyard” Grenache, SM $35
2008 Darby Winery “Stillwater Creek Vineyard” Grenache, CV $45
2009 Betz Family Winery “Besoleil” Grenache, YV $50
2007 Brian Carter Cellars “Byzance” Red Wine, CV $30
2008 Syncline Wine Cellars “Cuvée Elena” Red Wine, Columbia Valley $35
2008 Rôtie Cellars “Southern Blend” Red Wine, WA $35

Washington Wine’s Identity Crisis

April 4, 2011 By in brands, emerging wine regions, Jancis Robinson, The Next Big Thing, Washington wine 8 Comments

The title of the seminar was provocative: “In Search Of: Washington’s Singular Style.” Moderator Bruce Schoenfeld of Travel + Leisure magazine wanted to talk about regional wine identity. What does “Washington wine” mean in the wine glass and to consumers in the marketplace?

Schoenfeld’s search for a definitive Washington wine identity was cleverly conceived (I have pasted the details of the seminar including the list of wines we tasted at the end of the post). We began by tasting wines from three regions with clear identities: Chablis, Ribera del Duero and Barolo.

An Identity Crisis?

These wine regions have strong brands, if you think of it from a business angle. Does Washington have a strong brand in this sense or does it suffer from an identity crisis that limits its market potential? Well, there are many ways to try to answer this question and Schoenfeld deftly guided the discussion to consider several of them.

Can Washington wine be defined by grape variety?  Well, not exactly. Over the years Washington has embraced and then abandoned a string of “defining wines” from the varietal standpoint. First it was Riesling, then Merlot, then on to Cabernet Sauvignon and now Syrah and soon maybe Malbec (the featured “emerging variety” at last year’s conference) or Grenache (highlighted this year).

The problem is that none of the wine identities have stuck, so Washington must seem a bit schizophrenic to outsiders who pay attention to these things. Washington Riesling, the first attempt to define the state’s wine identity,  can be great here, but it is a white wine and red wines get most of the attention in the wine world today. Young wine regions like Washington want that attention, so Riesling fell off the radar despite its high quality and strong sales.

Multiple Identities

Merlot was The Next Big Thing and Washington Merlot can be great, too. Washington makes some of the best Merlot in the world, Jancis Robsinson once wrote, sending hearts hereabouts fluttering with excitement. But, so what? she added. Merlot isn’t a serious wine, or so some  say, and the search for that defining variety continued.

Cabernet Sauvignon was next up and Washington has produced more than its share of 95+ point Cabs. But Napa Valley seems to have the Cab identity locked up. First rate Washington Cabs sometimes sell for half the price of second-tier Napa products. That Napa reputation seems to be invincible.

So now Washington wants to show off its Syrah wines, and they can be wonderful, too. But the damn Aussies have messed up the Syrah bonanza. I think it is easier to make quality Syrah in Washington today than it is to sell it. So the search for a wine identity goes on.

A Certain Style

Maybe it’s not a grape variety that defines Washington wine, Schoefeld suggested, but a style of wine. Bob Betz agreed in principle, suggesting that Washignton wines at their best combine Old World structure with New World fruit — a tag line that a lot of us in the audience liked, even if it might be difficult to communicate to consumers.

Tasting through the Washington wines (from Riesling to Merlot, Cab and Syrah), Schoenfeld asked the panel and audience, “Can you tell that this is a Washington wine — does it have the Washington style?” He certainly thought so, but I never saw more than half the hands go up.

This was a pretty serious  winemaker, consumer, trade and journalist audience. They’ve tasted a lot of wine and a lot of Washington wine. All the wines Schoenfeld selected were interesting, but did they individually or collectively outline a Washington style? I didn’t think so. I’ve tasted wines similar to these from other regions and I have tasted very good Washington wines with completely different styles from these. I don’t claim to be a skilled wine taster (which might for once be an advantage since I am on a par with many consumers in this regard), but I can’t find a definitive Washington style.

What did I conclude from this interesting (and delicious) investigation? Having a successful regional wine identity is an advantage in the marketplace, but Washington doesn’t have one. Bob Betz may be right about Old World structure and New World fruit, but I don’t think wine style is easily understood by many consumers.

No Strong Identity. No Crisis Either.

Grape variety is easy to understand and communicate, but that leaves the question which one? If I had to choose, I would select Riesling on the basis of market penetration. Chateau Ste Michelle is the largest producer of Riesling wines in the world (yes, the world!). More Riesling grapes were crushed in 2010 (33,500 tons according to USDA data) than any other Washington variety. Washington Rieslings  (including the widely distributed Eroica, Poet’s Leap and Pacific Rim wines) can hold their own with the best in the world. What more do you want in a wine identity?

But there’s that status thing (red trumps white) and many of Washington’s iconic producers don’t make Rieslings, so focusing on this variety to the exclusion of others would in some ways be counter-productive in terms of regional identity.

So where does that leave us? Washington may lack a strong wine identity but I don’t think it has an identity crisis. Better no single identity than a bad one (think Brand Australia). Better to produce many types and styles of good wine and simply celebrate that!

[Thanks to the Washington Wine Commission for inviting me to attend the Taste Washington seminars.]

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Taste Washington Seminars / March 26, 2011

In Search Of: Washington’s Singular Style

Moderator:
Bruce Schoenfeld (Travel & Leisure Magazine)
Panelists:
Bob Betz MW (Betz Family Winery)
Shayn Bjornholm MS (Washington State Wine Commission)
Sandy Block MW (Legal Seafoods)
Drew Hendricks MS (Pappas Brothers)
Wines:
2008 Louis Michel “Montée de Tonnerre” 1er Cru Chablis, FR
2004 Bodegas y Viñedos Alion, Ribera del Duero, Spain $70
2001 Cavallotto “Riserva Vignolo” Barolo, Piemonte, Italy $75
2009 Chateau Ste. Michelle/Dr. Loosen “Eroica” Riesling, CV $24
2007 Hightower Cellars Merlot, CV $28
2007 Abeja “Reserve” Cabernet Sauvignon, CV $80
2007 Cadence “Ceil du Cheval” Blend, RM $45
2008 Betz Family Winery “La Serenne” Syrah, YV $50
2008 Cayuse Vineyards “En Chamberlin” Syrah, WWV $65

Argentinean Wine: A SWOT Analysis

March 5, 2011 By in Argentina, Brazil wine market, BRICs, China wine, economic crisis, Economic impact, emerging wine regions, exchange rates 10 Comments

The first thing we did when Sue and I arrived in Mendoza was to walk to the offices of Área del Vino, the group that publishes Vinos y Viñas magazine, the WineSur website and provides economic and strategic analysis to the wine industry here. We met with Javier Merino, Área del Vino director, and Gonzalo Merino, director of WineSur. They got our visit off to a flying start.

Our discussion was wide ranging. Gonzalo is working on new media projects to expand the market for Argentinean wine and reach a new generation of consumers. Javier was just back from Hong Kong and China and keen to discuss the potential new markets there. Both were happy to talk about controversial questions, such will the Malbec boom be sustained and whether Torrontés really is The Next Big Thing.

Their analysis has been very useful to me as I have met with wine-makers, winery owners and managers. Based on all these discussions I have prepared this SWOT analysis, which represents my current thinking about Argentinean wine today. This is a work in progress (and necessarily very brief), so I welcome comments that correct my thinking or re-direct my analysis.

Strengths

Argentina has many strengths. The most important may be that it has a “hot” brand, its signature Malbec. When wine enthusiasts think of Argentina they think of Malbec and vice versa — a strong identity that many wine regions envy.

But, as I will explain in future posts, Argentina is not just Malbec (or even just Malbec and Torrontés as some writers propose).  Quality extends across a broad spectrum of wine varieties, styles and price points, which is a very good thing.

Weaknesses

That said, the industry is very dependent upon exports of Malbec to three main markets, the United States, Brazil and Canada.  There would be trouble if Malbec exports to these markets were to falter due to either a decline in demand to a shift to some other “hot” variety.

The domestic market for wine is very substantial, but it is still dominated by low-price basic wines — another weakness. The Argentinean industry would be much stronger if a larger domestic market for quality wines could be developed.

Water is also an issue here as it is in many wine regions. Not an issue today, Javier told me, but for the future. And of course the future is fast approaching.

Threats

There are a number of very serious economic threats that cloud the short term outlook. Domestic inflation is high in Argentina. The government estimate is about 10%, but I failed to find anyone who thinks that it is less than 25%.  Production costs are rising rapidly– labor, grapes and other inputs are increasingly expensive. Land prices for new vineyard projects seem to be growing exponentially.

Revenues are not increasing at the same rate, with the result that margins are being squeezed.  In fact, the pressure is on to cut prices in the competitive U.S. market. It is not clear how long the current combination of rising costs and falling revenues (or soft revenue growth) can be sustained.

I visited several wineries that were clearly focused on increasing efficiency in an attempt to claw back margin without sacrificing quality.  But I also heard rumors of wineries that were taking the perhaps desperate move to source lower cost grapes from other regions to stay in business. The concern was that quality would suffer and The Brand undermined.

Opportunities

There are many opportunities and they fall into two categories: new wines and new markets. By new wines I mean a movement to expand Brand Argentina beyond value Malbec, both into the higher reaches of the wine wall and into other varietals. I’ll be writing more about this in future posts.

I’ve already written about the new markets. As I listened to Javier discuss the great potential in countries like Brazil, with large and growing populations and fast economic growth I knew just what he was talking about: The BRICs (and the New BRICs). Javier believes that the BRIC-like markets  are the key to the next stage of Argentina’s export growth. Because geography still matters in both wine and economics, Brazil is a particularly attractive target, but both Hong Kong and China are high on the list.

Argentina’s China card is that its wines could fill an open market niche. Not cheap bulk wines like those from Chile and Australia. And not overpriced prestige labels like those from France. Quality Malbec from Argentina would be more affordable (and in most cases better) than the French and of course much better than the bulk wines. Distinctive, too, on several dimensions.

But China’s a tough market to break into, as I have said before.  China will require patience and good luck as well as good wine.

The new market with the greatest potential for Argentinean wines may be Argentina itself.  Nearly everyone I talked with said that the best thing that could happen would be for the domestic market for quality wine to expand, making the industry less dependent on exports and less vulnerable to inflation and exchange rate changes.

Bottom Line Analysis

So what’s the bottom line? Well, of course, I believe that the long run opportunities are important, but it seems to me that the short term threats are on everyone’s mind right now, in particular, the inflation-exchange rate squeeze. If inflation continues at high rates and the U.S. dollar – peso exchange rate stays stuck at about 4 pesos per dollar, some producers here will be squeezed out of the U.S. market. Perhaps they can sell to Brazil or on the domestic market, but the prospects are not good if everyone tries to shift focus at once.

What is keeping the exchange rate stuck at an over-valued level? Politics and fear, I suppose. There’s a presidential election in the fall and everything here has taken on a political significance, so it is no wonder that holding the line on the exchange rate (and denying that an inflation problem exists) would be political, too.

And then there is the fear.  Argentina has experienced inflation-devaluation vicious cycles in the past. Inflation leads to a falling currency, which adds to inflation pressures, which forces the currency down even more. Etc, etc.  There’s a worry here that lowering the exchange rate would set the cycle off once again and nobody wants that.

Fear and politics are powerful forces. Argentinean wine, for all its strengths and opportunities, is caught in the squeeze.

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Thanks to Javier Merino, Área del Vino director, and Gonzalo Merino, director of WineSur for meeting with us in Mendoza and to everyone who has talked with us about wine economics in Argentina during our stay here.  Watch for future posts that examine particular elements of the Argentina wine story in more detail.

Everything Old is New Again: Wine in Mexico & Turkey

February 12, 2011 By in BRICs, emerging wine regions, history, wine exports, wine history, wine markets 2 Comments

This is the seventh  in a series of articles on wine in the BRICs and the New BRICs. Today we examine Mexico & Turkey.

Old Old and Old New

What in the world do Turkey and Mexico have in common? It is easy to generate a list of differences ranging from geography to history, language, and religion. Jim O’Neil probably included them on his list of the New BRICs because they both have relatively large populations (107 million in Mexico, 75 million in Turkey) and so substantial market potential as their middle classes expands

From a wine standpoint, Mexico and Turkey are linked by the term “oldest.” Turkey may be the oldest Old World wine producer, with evidence of wine production going back more than 6000 years. You cannot get much more “Old World” wine than Turkey, even if most people in the Old World never give Turkish wine a second thought.

Mexico is the oldest wine producer in the New World. Spanish soldiers and priests brought wine grapes with them,  The first evidence of wine production dates from 1521 (I see a 500 year anniversary celebration on the horizon). Conquistador Cortés ordered that new settlers plant grape vines (1000 vines for every 100 persons, according to the Oxford Companion to Wine), thus spreading Spain’s wine culture throughout the New World empire. Wine production in Mexico grew so successful that King Felipe II of Spain order a stop to new production in 1699 in an effort to protect Spain’s domestic wine industry.

Red and White vs Raki and Brandy

It is ironic that we don’t associate wine production with these two countries today given their deep historical roots. Turkey? It’s a Muslim country, of course, so we don’t think of alcohol or, if we do, it is raki, the fiery anise flavored drink. Mexico brings images of tequila (and wasting away in Margaritaville), beer, and perhaps Mexican brandy, the national liquor. Casa Pedro Domecq’s Presidente brand is said to be the best selling brandy in the world. Domecq is now part of the French drinks group Pernod Ricard.

Both Mexico and Turkey are important grape and wine producing nations today. Mexico produced a little over 1 million hectoliters of wine in 2007 according to OIV data — about  as about as much as New Zealand made in 2005 before its recent boom. Turkey is the world’s sixth largest table grape producer, surpassing Italy in this area, but only a small fraction of its output is made into wine. Turkey makes roughly the same amount of wine (213,000 hl) as Israel (218,000 hl).

Wine production in Mexico has fallen by almost 50% since the 1980s according to the OIV records while Turkey’s production levels have been more stable. Both Turkey and Mexico have the potential to rise up in the world wine rankings, but they each face particular challenges.

The Taste of Turkish Wine

Turkish wines can be stunningly good. Jancis Robinson’s tasting notes (from a 2009 research trip) find many peaks among wines make from international grape varieties. A Corvus Corpus 2004 received a rating of 17/20, for example. “This right bank style wine is really quite rich and full, verging on overripe. Extremely opulent and velvety.” A Robert Parker kinda wine, she said.

Ron and Mary Thomas, my senior Turkish wine correspondents, reported similar success on their 2010 tasting trip. “We found the wines of Turkey to be ubiquitous, great values, and extremely enjoyable,” they write. Among the reds they found the Syrah  wines hard to beat — some of the best Syrahs they have tasted anywhere — high praise. But the highest peak came from an unexpected source.

Our greatest discovery was the varietal called Emir.  We found it from several different producers in each area of Turkey where we stayed, most of the producers (or the fruit) located in the area we first stayed (Cappadocia—central Turkey).  This stony, flinty land produced this wonderful grape that is unlike anything I’ve tasted.  Think about a cross between a flinty sauvignon blanc from the Loire and a very dry viognier.  It had a light golden color and a very crisp finish.  Some lemony-apple notes, wonderful minerality, and pleasing to sip while it stood up well to fish and the ever-present smoky-roasted aubergine (which I had at every meal in Turkey).  This was a favorite wine we would drink anytime.  We found the same bottles to cost anywhere from about 15 Turkish Lire in the winery, to 30-90 in a restaurant (depending on the scale of the restaurant).  That’s a range of about $10 USD to $65.  We sometimes did not find it on the wine list, and started asking for it:  in all cases but one, they found a bottle in the back and presented it to us, and no matter who produced it, it was great.  It went beautifully with the bronzino in Ephesus and Istanbul, and was perfect with the stuffed zucchini flowers in Cappadocia.  Emir is king.

Indeed. And that’s part of Turkey’s problem. As the Oldest of the Old World countries, it has perhaps the richest treasury of native grape varieties. But who has heard of them, of King Emir and his court? Very few, I think, and this is problematic in a world where so many consumers are already confused by wine and have trouble mastering the basics.

The domestic market for wine in Turkey is relatively small and its international exports are limited. Belgium is its largest international customer according to a government report (Belgium?) followed by Northern Cyprus, Germany, Britain, the USA and Japan. A local search for Turkish wine uncovered a few bottles at a Mediterranean restaurant and not much else.  As the report says, there is much work to do for Turkey to realize its great wine potential.

More Than Margaritaville

“Baja — the New California?” was the title of Jancis Robinson’s review of Mexican wine after her visit to Baja California in 2010. “I am excited about the potential for wine in Mexico,” she said. And indeed some of her tasting notes are enough to make anyone excited. Here’s what she had to say about Union de Productores Textura 1 2007 (a blend of Tempranillo, Zinfandel and Grenache): “Deep crimson. Very sweet and dusty and ripe berried. Very Mexican. Very rich. Sweet spicy then nice dry finish. There’s a real beginning, middle and end to this wine. Good refreshing stuff on the finish.”

Very Mexican! I like that. Not a me-too wine. Not all the wines are big or sweet, of course, which is just as well. Lots of variety. Lots to look for and to like.

The biggest challenge? Climate, according to Jancis. Not enough rain. And, while I’m sure she is right in the long run, I think that infrastructure is probably an even bigger short term problem.

People who taste the wines of Mexico at wineries rave about their quality. But then when they order them in restaurants in the cities they are sometimes puzzled. Is this the wine I liked so well? I wonder what’s happened to it, they ask?

The answer, in many cases, is that Mexico’s transportation system of poor roads and long rides in hot trucks has baked the freshness out of the wine and left just a  hollow shell behind. Mexico can produce excellent wines, but it must also find ways to get them to market in good condition. This is a wine problem but of course it is much more than that.  It is a symptom of a general challenge to Mexico’s continued development.

Lego Wine: Wine in the [Newest] BRICs

February 3, 2011 By in BRICs, emerging wine regions, wine history Leave a comment

This is the sixth in a series of articles on wine in the BRICs – Brazil, Russia, India and China.

2011 is the 10th anniversary of the BRICs. Jim O’Neil of Goldman Sachs announced back in 2001  that the future belonged to four big economies that were poised to move out of the “emerging market” category: Brazil, Russia, India and China.  I’ve spent the last few weeks examining wine in each of these important markets and so, with China just finished, it seems like it is time to sum up.

But Wait … There’s More!

But just when I thought I was done with the BRICs it turns out that there are more of them! According to the Financial Times, O’Neil  has decided to expand the list to include Mexico, South Korea, Indonesia and Turkey. I think for now people are calling them “the new BRICs” since MSKIT, MITSK, SKIMT or even TIMSK lacks the cool symplicity of  BRIC (rhymes with NIC for newly industrialized country, sounds like “brick,” an important building block).

Maybe they should call them the LEGO countries — they come in lots of styles and colors and you can put them together pretty much any way you like. You see, the New BRICs are a not a very coherent concept. They seem sort of cobbled together — like a kid’s LEGO project.

None of the countries on O’Neil’s list are obvious candidates for the new BRICs team. Everyone wanted to know why Mexico wasn’t included in O’Neil’s grouping ten years ago, for example. It seemed like an obvious oversight. But Mexico these days, with its shocking drug crime, is an even less friendly business environment than before. No one would ask why Mexico was left off the list today.

Turkey is a founding member of the OECD (a.k.a. “the rich countries’ club). Its inclusion on a list like this seems a bit of an afterthought however welcome the attention might be to Turkish business leaders and government officials.

I need to think about Indonesia and ask why O’Neil might have chosen that country and not Malaysia (or the Philippines or Vietnam). Maybe he needed to buy a vowel. (Or, to be fair, perhaps he knows something about Indonesia’s economic prospects that  I don’t, which seems likely.)

South Korea makes no sense — it is one of the original four Asia Tigers NICs (along with Taiwan, Hong Kong and Singapore), a group that predates the BRICs and outranks them in terms of economic stature.  South Korea was an economic powerhouse long before the BRICs were born.

Members Only?

O’Neil’s New BRICs are strange bedfellows, but that is not the end of the story.

The original BRIC nations have decided that they are more than a figment of an investment banker’s imagination; they actually  work together on various global issues.  And they recently decided to expand their membership. Apparently they didn’t consult O’Neil because their invitation list didn’t include any of the MSKIT countries.

According to Reuters, the BRICs have invited South Africa to join their club.

China, South Africa’s largest trading partner, has invited South African President Jacob Zuma to attend a summit of BRIC leaders that Beijing will host [in 2011] , Nkoana-Mashabe said. “China believed that South Africa’s accession would promote the development of BRICS and enhance cooperation among emerging market economies,” she said.

The BRIC countries have sought greater clout for their grouping, holding a summit in Russia in 2009. “BRIC” is a term invented in 2001 by Jim O’Neill, the chairman of Goldman Sachs Asset Management.  South Africa applied to join BRIC at the G20 meeting of the world’s leading economies in Seoul in November, Russian President Dmitry Medvedev said at the meeting.

Not Your Father’s Bali Hai

So what can be said about wine in the LEGOs … er, new BRIC nations? Well, it is a very mixed bag from the wine market perspective.  All five of the Legos produce wine. I’ll look at two of them here, saving the three largest producers for future posts.

Indonesia, the world’s most populous Muslim country,  is an unlikely wine producer. And indeed, production is limited to relatively small amounts on the island of Bali, according to the Oxford Companion to Wine, which reported three wineries as of 2005. Hatten Wines (founded in 1994) is the largest and is a pretty ambitious project according to their website, with more than 40 employees at the winery, distribution center and 14.5 ha vineyard.

Since Bali is so close the equator, tropical viticultural practices apply — pergola-trained vines to cope with humidity, vinifera and hybrid grape varieties and three crops a year (harvest every 120 days according to the website). A recently released Shiraz breaks new ground for tropical winemaking.

I found one tasting note on CellarTracker — written by a tourist happy to find a local alternative to expensive imported wines. He scored the Hatten AGA White 86 points. “The wine was very aromatic, with banana, honey, lemon, pineapple, and hints of peach and grass on the nose. On the palate, the wine showed banana, honey, lemon, kiwi and citrus. It was slightly off-dry, with medium-level acidity. The wine was much better than we expected. It lacked the structure to earn high-end scores, but it was extremely delicious and drank very well in the tropical climate. In addition, it paired extremely well with Indonesian cuisine.”  The review continues …

A little fun fact: we had multiple bottles of this wine in different restaurants and the bottles showed some variation. Two bottles in two different restaurants were identical, having the most accented banana flavours and earning the highest scores (87). In another restaurant, we had two bottles on two different days – these bottles were identical, but different from the two bottles we had in other restaurants (less banana-driven, with more pronounced citrus flavours, higher acidity an some heat on the back-end (earning the lowest scores – 85)). The other bottles we had in different restaurants kind of fell between those four bottles (86). The bottom line is that all bottles showed basically the same profile, but with subtle difference. I guess that is the fun part of having multiple harvests each year.

Mixing Drinks in South Korea

South Korea is better known for producing table grapes than wine grapes.The first wines were made in 1901 by missionary Father Antonio Combert for the members of his Korean Catholic Church.  Contemporary production dates to 1977 when the drinks company DooSan Baekwha began production of Majuang wines, which dominates the domestic wine market.  As in China, Korean wine is often a mix of domestic and imported products. None of the tasting notes I found on the Internet was very detailed.

DooSan had 140 ha of vineyards in 2005 and, while my research turned up substantial vine acreage beyond this, most of the fruit goes to the fresh grape market. Wine grape production is also limited by climate concerns — although Korea is at about the same latitude as Napa Valley, its winters are famously harsh.

My guess is that Korea will be more important as a consumer of wine, domestic but especially imported, than as a producer. Perhaps Korean-born Jeannie Cho Lee, the first Asian Master of Wine, will lead the way. Indications are that wine sales have increased rapidly in recently years, so things are looking up.

South Korea imposes trade barriers on imported wine and this has become a bargaining chip in its free trade area (FTA)  negotiations with wine exporting countries and regions. First Chile and then the European Union have  signed agreements with Korea and now have free access to this market. The Korean-U.S. agreement awaits completion. I’m sure U.S. winemakers would like to have equal access to this growing market.

The wines from South Korea and Bali are very interesting — I hope I have a chance to try them eventually — but they are unlikely to be serious contenders in the world wine league tables in the near future.  That’s not the case for the other LEGOs (new BRICSs): Mexico, Turkey and South Africa., the subject of my next blog post.

http://www.cellartracker.com/wine.asp?iWine=884560

The BRICs: Two Faces of Chinese Wine

January 28, 2011 By in BRICs, China wine, emerging wine regions, wine fraud, Wine Wars 5 Comments

This is the fifth in a series of articles on wine in the BRICs – Brazil, Russia, India and China. Today I discuss the cultural contradictions of wine in China. Coming soon: wine in the New BRICs.

Wine, Fake Wine and Chinese Wine

China’s rise in the the world of wine is having many surprising effects. One of the most unexpected is this: apparently the most valuable bottle is my tiny cellar is an empty one — this jeroboam (double magnum) of 1994 Chateau Pêtrus. It is a souvenir of a particularly decadent party thrown by friends to celebrate their son’s graduation from college. Somehow I ended up with custody of the empty bottle.

Bottles like this are in high demand in China, according to recent news reports. Chinese entrepreneurs will reportedly pay up to £300 for an empty trophy wine bottle (especially Lafite), to be refilled with a lesser vintage wine and sold to gullible consumers or collectors. Provenance is important and condition matters:

“The bottles need to be in the best condition possible,” said another dealer, called Mr Ye, at a Shanghai company. “It is very important. And I only want genuine bottles, no fakes,” he added.

No fakes! I love it.

This sort of wine fraud is noteworthy just now because of all the attention that is focused on wine in China, but it there’s really nothing exceptional about this kind of scam. The story of The Billionaire’s Vinegar and its after-shocks suggest that fake wines are as common as fake Dalí prints — more common, actually, if you take Gallo’s embarrassing accidental purchase of bogus Pinot Noir into consideration.


But the story gets worse. A few weeks ago Chinese authorities raided 30 wineries in the Hebei region near Beijing (sometimes called “China’s Bordeaux)) for making chemical-laced fake wines.

CCTV’s footage showed a local sales manager admitting that some wines made in the coastal city of Qinhuangdao contained only 20 percent of fermented grape juice, with the rest being composed of sugar water mixed with chemicals, including coloring agents and flavorings.

Huang Weidong, a leading expert on the wine industry from the China Alcoholic Drinks Industry Association, said that the additives could cause headaches and irregularities in the rhythm of the heart, as well as cancer.

Solving the Puzzle

I’ve written about wine in China more than any of the other BRIC nations (follow the links in the next few paragraphs to read the posts), but fraud has only come up once before, in my report on Canadian Ice Wine.  China is a major market for this glorious elixir and some reports suggest that as much as a third of the stuff sold in China is bogus.

My reports on wine in China have been quite varied, covering a number of different topics. For example, China is on the verge of becoming a dominant force in global auction market for wine. I noted the change when Hong Kong dropped their punitive tariffs in an attempt to attract the auction houses and again in my report on last year’s Bordeaux en primeur circus.

In terms of the domestic market, I examined the factors that seem to be holding Chinese wine back in terms of quality and found that the biggest problems are in the vineyards, where China’s fragmented agriculture presents a roadblock. The best wines, like Grace Vineyards, come from wineries that have found ways to solve this puzzle.

Everyone wants to break into the Chinese market, including the Australians — especially given their current problems — the Portuguese and some of my American friends, but the French have a (perhaps unfair) advantage.  The image of the great first growths casts a long shadow at present, although I expect that Chinese wine consumers will get smart soon. They are so savvy in everything else that I think they will develop a more sophisticated idea of wine pretty fast.

I note, for what it is worth, that President Obama made a point to serve some really excellent American wines to Chinese President Hu at the recent White House state dinner in his honor.  The Quilceda Creek Cab can compete with fine French wines and I’ll bet the Poet’s Leap dessert wine was a hit, too.

The Two Faces of Chinese Wine

So what do I think about Chinese wine today? Well, I am still concerned about the quality of the grapes themselves and the  supply chain that delivers them to the wineries, which I believe are the biggest roadblocks to development, not the fraud that is the focus today. But, that aside, I find myself surprisingly optimistic.

China gets a whole chapter my forthcoming book on the Wine Wars (you can now pre-order it on Amazon.com!). It starts with my first rather revolting taste of Chinese wine and ends, many pages later, with another tasting, this time of one of China’s most notable wines.  Here’s an excerpt from the final draft:

Our Grace Vineyards Cabernet Franc was a solid effort, we thought, but nothing special– a bit light compared American wines of this type. Writing in The Wine Economist, I noted a distinctive “green” taste I associate with wine made from under-ripe Cab Franc grapes. A problem in the vineyard, I speculated. Maybe the climate’s just too contrary to fully ripen these grapes.

A day later one of my readers lobbed in a counterargument.[i] Maybe, he said, that green flavor is intentional. He had heard that this particular flavor is familiar to Chinese consumers and that some Chinese wineries harvest grapes a bit earlier in order to achieve it. It wasn’t a flaw in the wine, he suggested, but a feature. Something that makes it Chinese wine, not a Chinese imitation of someone else’s wine. It’s the Chinese market terroir, if you will. Maybe the thinness that the critics note is another reflection of local taste?

That got me to thinking. Maybe we were judging Chinese wines by the wrong standards. What matters most? How I feel about the wines (and how they compare to international standards) or how the Chinese consumers look at them? Interesting question.  So I hit the books.

A little research turned up more evidence that the judgments of Western critics might be unfair to Chinese wines. Jeannie Cho Lee, Korea’s first Master of Wine, argues that Asian food and wine traditions prime consumers to think about wine differently and to appreciate different qualities in it.[ii] Why don’t Chinese wine drinkers appreciate that a crisp Pinot Gris pairs nicely with their cuisine? Well, Ms. Lee explains, many Asian cultures do not consume beverages (apart from savory soups) with their meals – they drink them before and after. White wines are generally chilled, of course, and most Asia drinks are warm or room temperature. And the sweetness of a Pinot Gris can seem unrefined to palates that are used to more complex sweet-sour flavor profiles.

Why such a fascination with Bordeaux? It could be the tannins, Ms. Lee argues, which are appealing to wine drinkers from cultures with a tradition of consuming very tannic teas. Even the basic flavor reference points are different, she explains. Westerners think of Pinot Noir in terms of raspberries and strawberries, for example, but the Asian descriptors would be yangmei (bayberries), dried wolfberries and dried bonito flakes! An Asian description of Sauvignon Blanc would start with pandan leaves and longan and move on to mangosteen – not a familiar flavor or aroma vocabulary for me. But I can relate a bit better to her description of Riesling: Thai white blossoms, lemongrass and green mangoes.

Hmmm. So maybe it’s time to rethink Chinese wine.

Wouldn’t it be great if the most important qualities of Chinese wines – the ones that Westerners reject — turn out to have been lost in translation and that a true indigenous Chinese wine culture evolved, one that reflects China’s history, cuisine and palate. I hope so because it would support my theory of the future of wine. Suffering just now from the excesses of globalization and Two Buck Chuck, China needs to unlock its inner terroirist soul!

[i] Thanks to Bob Calvert for this insight.

[ii] Jeannie Cho Lee, “Language of Taste,” Decanter (July 2009), pp. 78-79.

The BRICs: The New New World of Wine?

December 13, 2010 By in Brazil wine market, BRICs, China wine, Economic impact, emerging wine regions, India, Russia wine market, wine research 7 Comments

This is the first of a series of articles on wine markets in the BRICs. BRICs? Is that a wine term? No, although it sounds just like brix, a measure of a grape’s sugar level. Jim O’Neil of Goldman Sachs coined the term BRIC in 2001 to refer to  Brazil, Russia, India and China.

Initially many people suspected that BRIC was just a gimmick — a way to package four very dissimilar countries into an appealing acronym that would draw investor interest. If it was a strategic maneuver it was a brilliant one because of the way it captured the world’s imagination.

More than a Gimmick

“BRICs” is an attractive name for many reasons, perhaps especially because it looks and sounds like NICs — the Newly Industrialized Countries of Hong Kong, Singapore,  Taiwan and South Korea that have been so successful in the global economy.  There was some question initially about why these four particular countries were chosen (why Brazil and not Mexico, for example, and what about Turkey?) and what if anything they had in common, but the idea quickly caught on.

Today the BRICs are firmly established, as the Economist noted earlier this year in an article titled, “The BRICs: The trillion dollar club.”  The BRICs have turned into something real.  Why? According to the Economist …

The BRICs matter because of their economic weight. They are the four largest economies outside the OECD (Organisation for Economic Co-operation and Development, the rich man’s club). They are the only developing economies with annual GDPs of over $1 trillion (Indonesia’s is only half that). With the exception of Russia, they sustained better growth than most during the great recession and, but for them, world output would have fallen by even more than it did. China also became, by a fraction, the world’s largest exporter.

In a recent Economist article (that included this provocative graph), Goldman’s O’Neil was asked to look ahead 25 years, from 2011 to 2036, and to speculate about the future.

One of the questions he raised was whether the BRICs would have greater total (but obviously not per capita)  income than the G-7 countries and what that might mean if they did. A good question to discuss … over a glass of BRIC wine.

The Future of BRIC Wine?

BRIC wine? Well, yes. All the BRIC countries produce wine and all are important wine markets for the future. As these economies grow, their expanding middle classes will be increasingly attractive target markets for the world’s wine makers and their wines will begin to appear on you local shop’s shelf.

China was the 6th largest wine producer in the world in 2007 according to International Organization of Vine and Wine (OIV) statistics, with an estimated 12 million hectoliters of wine produced (for readers who still think in “English” units, a hectoliter equals 100 liters or a little more than 11 standard nine-liter cases of wine).

By comparison, #1 Italy and #2 France produced nearly 46 million hl each in 2007 followed by Spain (34 million hl), the U.S. (20 million hl) and Argentina (15 million hl). BRIC Russia was 11th in the global wine league table, with 7.3 million hl of output followed by Brazil in 15th place with 3.5 million hl.

India does not appear in the OIV wine statistics, indicating that its wine industry is quite small at present. But India definitely is on the wine map — the omnipresent Michel Rolland even has a client there (Grover Vineyards). India is already a major producer of table grapes, with 2007 production only a little less than Chile and the U.S. combined (that’s a lot of grapes), so it is not unreasonable to suppose that higher levels of wine grape production may follow. India would be on the wine BRIC list for its potential as wine import market, of course, even if it didn’t make any wine at all.

Solving the BRIC Puzzle

Some people in the wine industry dream that the BRICs will be the solution to the problem of global over-supply. OIV estimates that 266 million hl of wine was produced in 2007 but only 249 million hl consumed,  a gap of 17 million hl or about 200 million cases. Yikes! Do the BRICs have the potential to soak up all that extra wine and bail out the global industry?

Dream on, say the experts consulted for a 2009 article in Meininger’s Wine Business International. “Are the BRIC countries going to solve the problems of oversupply in the world today? I don’t think so,” said Arend Heikbroek, associate director for beverages at Rabobank (and one of the sharpest wine analysts I know). “It’s a long-term shot,” he continued, ” it’s complicated, each market is completely different. You need to understand the risk, the dynamics, the traders, the distribution system and the legal system in each of these markets.”

Fair enough. Each BRIC is its own particular puzzle, I guess, and it is too soon to know how they will fit into the bigger puzzle of global wine.

The BRICs will be important to the future of global wine even if they aren’t a silver bullet solution to current problems. They are the new new world of wine and we need to figure out what we know about them– and we don’t know.

In this series I’ll examine each BRIC wine market in turn starting with Brazil by bringing  together and synthesizing various published reports and then try to pull things together into a summary. I hope readers with particular expertise will leave comments to help broaden and deepen the analysis. So away we go!

Extreme Wines: Idaho?

September 1, 2010 By in emerging wine regions, extreme wine 7 Comments


When the writers of “The Muppet Movie” tried to think of the most extreme, the most ridiculous source for wine to use in this scene with Kermit, Miss Piggy and an obnoxious waiter played by Steve Martin, their minds somehow turned to Idaho. Idaho wine — what could be funnier (and indeed it is a funny scene)? So I guess Idaho wine is a suitable entry in the Wine Economist Extreme Wine files.

The Undeserving

But I don’t think Idaho deserves its problematic place in the cinematic history of wine. Why not? Well, first of all, there are funnier places for wine to come from. Wine is produced in all 50 U.S. states, so in choosing Idaho the Muppet writers missed the opportunity to make fun of other states like North Dakota and Nebraska or Arkansas and Mississippi. (I would suggest Minnesota and Wisconsin, but I’ve had perfectly good wine from both states.)

That’s the second reason why the Idaho line is confusing. Not only does Idaho make wine, it actually produces really good wines, including some quite outstanding ice wines. To someone who knows the wines of the region, there is nothing funny at all about the idea of an Idaho wine. (There is something funny, on the other hand, about Steve Martin’s skimpy waiter costume).

This meditation on the topic of Idaho wine is provoked by the receipt of a new book about that state’s wine industry, Idaho Wine Country by Alan Minskoff with photographs by Paul Hosefros (Caxton Press, 2010). It’s a beautiful book and a very interesting read. I’ve been following Idaho wines for some times, but I was still a bit surprised at how much has changed in recent years.

Surprising Terroir

I appreciate that wine grapes don’t automatically spring to mind when you think of Idaho. Idaho, isn’t that where all the spuds come from? Yes, it’s true: the license plates still say “famous potatoes.” You’d think they’d make vodka in Idaho instead of wine. And they do.

But Idaho isn’t all potato fields or Rocky Mountain slopes. While there are several regions that produce wine, the main area is the Snake River AVA in the southern part of the state, which has everything you might look for in wine growing region. It has a moderate climate where tree fruit and grapevines both thrive. And the Snake River, too. Grapevines famously love to overlook water. This region has a great deal in common with the Columbia Valley AVA in Washington, but at an altitude of 2900 feet it is a little like  Mendoza, too.

Early grape plantings were the usual cold climate suspects like Riesling  and these varietals still do fine, but global climate change has benefited the area immensely and warm climate varietals are now commonly planted including Chardonnay, Cabernet, Merlot and Syrah.

Idaho Spuds?

To a certain extent the modern history of Idaho wine is the story of Ste Chapelle Winery, which is by far the largest winery in the state and the fifth largest producer in the Washington-Oregon-Idaho region. Ste. Chapelle is to Idaho as Chateau Ste. Michelle has been to Washington: the early trailblazer, the dominant producer by volume, a leading advocate of quality and a key factor in the expansion of the entire industry. It is hard to imagine that we would be talking about Idaho wine today (or even joking about it) without Ste. Chapelle.

Ste. Chapelle was basically a collaboration  between winegrower and winery owner Dick Symms and legendary winemaker Bill Brioch beginning in the 1970s. Symms and Broich  lasted only a few years as a team, but made a reputation for high quality despite surprisingly high volume (more than 100,000 cases). Their legacy stands tall today, both the winery (now owned by Ascentia Wine Estates, which also owns Columbia Winery and Covey Run, Buena Vista Carneros, Atlas Peak and  Geyser Peak) and the growing Idaho wine industry.

Idah0. No joking, it’s not just spuds any more.

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Thanks to my old friend Jim Thomssen of Home Federal Bank for reminding me about Idaho’s interesting wines.

Where are they now: Bill Broich has retired from full time wine making duties, but he still has the wine bug. He and his wife, Phyllis McGavick, own McGavick Winery and donate 100% of their proceeds to charity! You can find them on Facebook.

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