Extreme Wine South Africa: Nederburg Edelkeur

Since I’m writing about South Africa’s Extreme Wines (see previous post) I cannot neglect a wine so extreme that it it took an act of Congress (figuratively) to get it produced, and act of Will (literally) to initiate a tradition that can be sustained only when acts of Nature permit, and that  provoked the creation of a very special stage for extreme acts and actors.

I’m talking about the wine in the photo, Nederburg Edelkeur, one of South Africa’s (and the world’s) treasured extreme wines.

[This is part of a series of posts reflecting on my recent visit to South Africa. Click here to see all the posts in this series.]

Wine Gets Personal

This is a personal story for me because my small cellar now holds two half-bottles of Edelkeur from the 1977 and 1979 vintages. They were given to me by Carina Gous, Distell Business Director of Wines, as a token of thanks for giving the keynote address this year at the Nederburg Auction. I’m looking forward to sharing these wines with Sue (and perhaps one or two special friends) on an appropriately special occasion several years in the future.

Edelkeur was the personal vision of an extreme wine person, Günter Brözel, one of South Africa’s most honored winemakers who was Nederburg‘s cellar master for 33 years until his retirement in 1989. (You can see and hear  Brözel in the video below. You can read details of Edelkeur’s history here and  another story here).

Brözel’s extreme idea was to create a Noble (made with Botrytis infected “noble rot” grapes) Late Harvest wine that would express the elegance and power of South African terroir in much the way that German Trockenbeerenauslese, French Sauternes and Hungarian Tokaji represent their respective wine producing regions. The only things that stood in his way were Mother Nature and the South African wine law.

Mother Nature is easy enough to understand. Late harvest wines are tricky to produce because the grapes need to stay on the vines long after the usual harvest and they are subject to damage from birds, mold and other problems. Making a Noble wine is even harder and requires both luck (in the vineyard) and lots of harvest labor. You can’t count on making a noble late harvest wine every year and indeed the first Edelkeur vintage in 1969 was not followed by a second until 1972.

Extreme Wine Law

So Edelkeur required an act of nature to make, but an act of Congress? Well, not literally Congress, but it’s a fact that South African wine laws prior to the 1969 vintage did specifically forbid this kind of wine. The rules permitted (and protected) sweet fortified wines but outlawed the production of natural (unfortified) wines with more than 30 percent residual sugar. Tokaji Eszencia often has as much as 50 percent to 70 percent residual sugar (90 percent in the 2000 vintage!). Brözel was going for an extreme and the law got in his way, so the law had to be changed. And it was.

But not all the laws yielded to Nederburg’s cellar master. The most reliable way to get late harvest grapes (because Mother Nature’s part is reduced) is to harvest them earlier and dry them on racks, concentrating the flavor that way. (Just as the most reliable way to make Ice Wine is to pick unfrozen grapes and then … freeze them!) But Nature’s Law prevailed here and so the grapes for Edelkeur are left to hang exposed to and expressing wild nature before being finally picked and vinified.

A Special Stage 

And so finally Brözel was able to make Nederburg Edelkeur but that created another problem: how to distribute the tiny amount of this precious wine that law and nature permit. After some early trial and error, it was decided that a special stage was needed and this became the now-famous Nederburg Auction, where a juried selection of rare South African wines are offered up once a year to the international wine trade. Some of the 1972 vintage was sold at the first Nederburg Auction in 1975 and the link between the auction, Edelkeur and the best of South African wine has been going ever since.

The “first five” founding wineries — Nederburg, Delheim, Groot Constantia, Overgaauw and Simonsig — are now joined by many others, the Auction Selection wines determined through rigorous blind tasting panels. It’s an honor just to be selected for the auction and to have your bottles wear the “Nederburg Auction Selection” ribbon.

The auction today does much more than just allocate one extreme wine. It honors an extreme wine person’s vision and draws international attention to South Africa’s best wines.

Back to the Wine

So what does the wine taste like? Well, I’m not going to open my bottles for several years, but I was able to taste through several vintages of Edelkeur on the first day of the auction and they were memorable and gave a hint of how this wine can age. I don’t rate wines or write reviews, but I found this CellarTracker tasting note for the 1976 vintage that sums up my opinion.

Brown with a bright yellow rim. Fabulous nose – intense citrus, caramel and leather with a very slight flor touch. Amazing attack. Citrussy sweetness. Amazing life. Huge depths of flavour. Great length. Excellent

One of the people I was tasting with that day had this reaction: “They shouldn’t sell these wines; they should hold them back.” She didn’t care about the money, she just knew that the wines would get better and better and that it was a sin to drink wines like the 1979 and the 1977 so young.

She’s right, I suppose, because certainly the wines will continue to develop for many years, but I think she’s wrong, too. Yes, the wines will get better with age, which is why I’m not rushing to pull these corks, but putting some of them up for auction isn’t really about the money or maybe even [just] about the wines themselves. There’s something bigger going on here — defining the identity of South Africa and its wine and honoring the passion of the wine makers — and that’s what makes it really extreme.

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Update November 1, 2012. Here’s a new video from the Nederburg Auction website. Cheers!


Extreme Wine South Africa: Oldest Living Wine?

I received many invitations to sniff, swirl and chat while I was in South Africa and I had to decline most of them because of my tight schedule. But I’m glad I made time for lunch with Cobus Joubert of Maison Joubert and his winemaking (and photo-taking) brothers. It was a most memorable Extreme Wine experience.

[This is part of a series of posts reflecting on my recent visit to South Africa to attend Cape Wine 2012 and give the keynote address at the Nederburg Auction.  Click here to see all the posts in this series.]

Brothers in Wine

The agenda for the tapas lunch was mainly to talk about wine and South Africa (and for me to autograph a copy of Wine Wars that Cobus brought along for that purpose). Cobus and his wine-maker brother Meyer opened several bottles of wine from the family wine farm, Joubert-Tradauw, which were excellent and paired well with the tasty food.

But the simple tasting turned a bit competitive when another brother, Schalk-Willem Joubert, Cellarmaster at Rupert & Rothschild Vignerons, pulled out some of his wines for comparison. Joubert-Tradauw and Rupert & Rothschild represent two faces of South African wine that, like the brothers, compete in a friendly way.

The Joubert family history in South Africa goes back ten generations to 1688 when French Huguenot Pierre Joubert arrived in Cape Town. The current  Joubert-Tradauw wines date from 1982, when vines were planted in Klein Karoo, and 1997, when the cellar was established.

Rupert & Rothschild, on the other hand, is a partnership between the Rupert family of South Africa and the late Baron Edmond de Rothschild. The Rupert family, whose wealth is measured in the billions, controls the Swiss luxury goods multinational Richemont (brands include Cartier, Alfred Dunhill, Van Cleef & Arpels, Piaget, Sulka, Montblanc, and Baume & Mercier) as well as South African wine and spirits producers such as La Motte Wine Estates.

Baron Benjamin de Rothschild, who continues his father’s work in this project, is descended from the non-winemaking branch of the Rothschild family tree, but certainly the Rothschild name unlocks doors, for wine as other things, especially in the growing China market. The R&R wines have South African roots to be sure, but with high international aspirations.

It was interesting to taste the brothers’ wines at lunch. Sometimes Meyer’s wine would shine a bit brighter, other times it was Schalk-Willem’s wine that stood out. The wines were deliciously different, but not without a certain family resemblance, just like the brothers themselves.

The Oldest Living Wine?

But the brightest star of all came at the end of the meal, when Cobus brought out a small bottle of Jaubert Muscat d’Alexandrie vintage 1800! Wow, what an experience it was to taste this wine. Here is Neal Martin’s Wine Advocate tasting note:

Just twelve 250-ml bottles of this incredibly rare and ancient Muscat d’Alexandrie are released from a 100-litre French oak barrel in Klein Karoo that is topped up each year. It has an iridescent clear amber hue with green tints on the rim. The nose is simply stellar: candied orange peel, toffee, apricot and almond soar from the glass and fix you to the spot. The palate is perfectly balanced and fresher than some South African wines two centuries younger! It has a Sauternes-like viscosity but is not cloying like a Tokaji Essenzia. There is a touch of sherbet at the tip of the tongue and then it fans out towards a kaleidoscope of spice, clove, candied fruits and a touch of honey. One can discern an oxidative tang towards the finish that has a touch of volatility. Very long and intense and yet somehow refined and elegant, this is an ethereal experience. Drink now-2100+. Tasted June 2011.

I missed the touch of sherbert, but the rest was there in my glass. Drink now or until 2100+. Now that’s a wine that can age.

The brothers date the wine in their barrel from 1800 because that is the date that is given for the few similar lots of wine that are still around, but they think it could be older. The barrel has been in the family for several generations and in fact the house they grew up in was built around the barrel, so there is no way to get it out. They worried a bit (as brothers would about an ageing uncle) that the oak barrel was getting old and might some day simply collapse. But they had no plans to try to fix it up — too risky.

They maintain the wine — and share it! — through a sort of solera practice where, as the tasting note above explains, three liters of the wine are drawn off each year, replaced with new wine and a little bit of spirits. Is it the “oldest living wine” in the world as some have said? That probably depends upon your point of view, but it is certainly the oldest wine that I have ever sampled. And one of the youngest and freshest, too, if you go by taste.

One of my goals in visiting South Africa was to taste a wine as close as possible to the famous Vin de Constance that European heads of state treasured and Napoleon requested on his death bed. I did in fact get to taste a 2007 Klein Constantia Vin de Constance (made by Adam Mason, who was at the Joubert lunch) at a dinner party hosted by Mike Ratcliffe and it was great — hats off to Napoleon and special thanks to Mike and Adam. But the glass that Cobus put in my hand brought me as close as any human being can come to that 200 year old taste.

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The lunch group shown in the photo includes (left to right)  John Mitchell, Chris Waters, Igor Ryjenkov MW, Schalk-Willem Joubert, Adam Mason (winemaker at Mulderbosch, ex of Klein Constantia), Cobus Joubert, Mike Veseth and Meyer Joubert. Photo by Andries Joubert. Thanks to Cobus and family for sharing this great experience with me.

Extreme Wine South Africa: De Toren Book 17 XVII

Regular readers know that I’m interested in how Old and New intersect in the world of wine — and that I like to push arguments to their extremes (that’s why my next book will be called Extreme Wine). So it should come as no surprise that I sought out extremes of new and old during my time in Cape Town. And I sure found them!

[This is part of a series of posts reflecting on my recent visit to South Africa to attend Cape Wine 2012 and give the keynote address at the Nederburg Auction. Thanks to Wines of South Africa and the Nederburg Auction for facilitating my visit. Click here to see all the posts in this series.]

My interest in seeing what’s new in South African wine provoked me to call on a number of wineries in the CapeWine 2012 exhibition hall. One of them was De Toren Private Wine Cellar, a boutique winery started by Emil and Sonette Den Dulk in 1994 to make Bordeaux-style wines that showcase Cape wine terroir. The first wine, a 1999 vintage, was Fusion V, a left bank (Cab-centered) Bordeaux blend using all five (or V if you will) traditional grape varieties.

Extreme in Several Dimensions

I tasted the current release of De Toren Fusion V as well as a right bank (Merlot-centered) blend called De Toren Z. Both were classic representations, noteworthy for their fine tannins and delicate balance. This part of the New South Africa is doing very well, I thought. And then things started to get extreme.

Emil reached behind the counter and pulled out a bottle labeled “Book 17 XVII,” the most extreme wine in the De Toren collection. It’s extreme in several ways at once. First, its inspiration is pretty extreme. Pliny the Elder wrote about wine and viticulture in Book 17 of his treatise on Natural History and De Toren sought to apply Pliny’s farming principles to make a modern wine (Emil showed me the relevant passages from Pliny’s text). Pliny’s favorite wines were quite sturdy, potent and age-worthy, but elegant, too, and that’s what this project aimed to achieve.

Having started with an extremely old way of growing grapes, De Toren’s winemaker Albie Koch then studied the most extreme contemporary winemaking techniques, focusing on cult wines such as Screaming Eagle and Harlan Estate. Extremely low yields in the vineyard (300 grams of grapes per vine). Hand de-stemming, foot stomping, hand punch-down and 200 percent (not a misprint) French oak.  I tasted from one of the extremely scarce 650 bottles that resulted.

I don’t have much experience tasting cult wines and I admit to being a little frightened as I stared into the black hole at the bottom of the glass. Book 17 XVII was notably darker and more extracted than the other wines I had tasted. But in fact the wine was balanced and elegant and while all the oak showed in the glass it didn’t knock me down with a two-by-four as might happen in less skilled hands.

Chicken or Eagle?

Going to extremes without going over the edge is a tricky business and you can see it in Neil Martin’s Wine Advocate review of the wine (I think he was tasting from barrel).  On one hand “It has a super-ripe creme de cassis, fruitcake and fig scented bouquet with a palate that is ostentatious to the point of vulgarity” which sounds like it’s over the top. “However, this full-bodied turbo-charged wine is so damn silky smooth and seductive in a super-Tuscan kind of way, that its charms will be nigh impossible to resist.” Hmmm. Sounds a little like Lady Gaga.

Making cult wines must be a bit like the “chicken game” in Rebel Without a Cause. I think De Toren Book 17 XVII succeeds in mixing ancient inspirations with extreme techniques to make a very interesting wine. Martin was obviously seduced by the wine’s elegance in the end (as was I), which pulled it back from the cliff edge at the last minute.

Unlike the Z and Fusion V wines, I wouldn’t want to drink XVII  every day (which would be impossible in any case given cost and limited production). But I appreciate its potential to make wine enthusiasts reconsider the potential of South African wine.

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Is that an angry chicken or a screaming eagle on the title page of Pliny’s book? You be the judge. Thanks to Emil Den Dulk for letting me taste the wines and providing helpful background information.

South Africa: Old World or New?

The question is this: should South Africa be considered an Old World wine country or part of the New World. The answer is easy: it’s both. The reasoning (and why it matters) will take a bit of time to explain. Here’s the first installment.

[This is part of a series of posts reflecting on my recent visit to South Africa to attend Cape Wine 2012 and give the keynote address at the Nederburg Auction. Thanks to Wines of South Africa and the Nederburg Auction for facilitating my visit. Click here to see all the posts in this series.]

The New South Africa

The conventional wisdom classifies South Africa as part of the New World based mainly on geography. Europe is the Old World. Everything else is New. QED. Fine, if that’s how you want to have it, but wine has been made in South Africa for more than 350 years and some of the vineyard estates (sensibly called  “wine farms” here) have been in family hands for six or seven generations — longer than most Old World vineyards and far longer than anything you might find in California. So it’s not really new, even if it’s not entirely old.

The stronger case for the New World classification is that South Africa’s modern wine history is less than 20  years old. When the period of isolation ended and the post-apartheid era began, the South African wine industry was suddenly reconnected with a rapidly changing global wine industry. Significantly, Chile, Argentina, Australia and New Zealand all also emerged on the international scene in the decade bracketing South Africa’s opening, changing the face of global wine. It didn’t all happen at the same time and certainly not for the same reasons, but looking back you can see that the seeds of today’s New World of wine were being sowed.

Each of the countries I’ve just mentioned has navigated the new ocean in a different way, finding markets, raising quality benchmarks, avoiding crisis (or not avoiding it) and trying to steer a clear course through uncharted seas. South Africa is New World wine in the sense that it is constantly changing, adjusting, learning. There’s something new around every corner and inside every bottle. Visiting Cape Town and tasting the Cape wines was certainly an eye-opening experience for me.

The Old South Africa

But then there’s the Old World connection. The new industry did suddenly or magically appear, it grew or evolved out of the older wine industry — and this complicates things in South Africa as elsewhere. Adjusting to the new external environment obviously also required considerable internal re-negotiation and it is understandable that this came as a shock. Much of what I will write in up-coming posts will explore this theme.

But the question I want to consider here is what those pre-global era (the “old” South Africa) wines were like? Many of them were below the current international standard of course (as was true in the other New World countries and the Old World ones, too). But some of the wines were apparently spectacularly good, as a pair of older wine seminars I attended at CapeWine 2012 made clear.

The first, organized by Michael Fridjhon and Simon Back, surveyed white wines from the early years of the new era and red wines from the 60s, 70s and 80s. You can see the list of wines in the top photo and the colors of the wines in the glasses in the lower photo.

I am not an expert taster but even I could appreciate the quality of these wines and, especially in the case of the reds, how time had transformed them into something very different and special. My spirits were lifted by this tasting. If the New South Africa is built upon a foundation that includes wine like this, I thought, it is in very good shape indeed.

The second seminar afforded a rare opportunity to taste older Pinotage, starting with the 1964 Lanzerac shown here. Everything about Pinotage is contested, I believe, and everyone seems to have an opinion. But if the question is whether Pinotage can age (as Old World wines are supposed to do), the answer is very clearly yes it can. These particular older vintages have evolved into quite fascinating creatures — interesting enough to make a fan of old Burgundies stop and think. Another eye-opening experience.

We were fortunate to have some of the old timers in the room — the people who made these wines or were involved in significant ways in the process. As they talked about how the wines were made back in the day I got the impression that the session was meant to be much more than nostalgia. I think there was a concern that today’s wines might not age as well — that the adjustments necessary to compete on international markets came at a cost and that cost is that these wonderful old wines were becoming (figuratively as well as literally) things of the past.

Old and New again, but in a different relationship. More to follow.

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Top photo: A tasting or older South African wines that was moderated by Michael Fridjhon. Michael is shown carefully extracting corks along with Simon Back of Backsberg Estate Cellars.

Lower photo: I love the subtle colors of older red wines such as those at the Fridjhon tasting. Can Pinotage age? This 1964 Lanzerac Pinotage still had a lot to say.

Critter Wines, Signature Varietals and South Africa’s Secret Weapon

This is part 2 of the Nederburg Auction talk I delivered on Saturday, September 29, 2012. 

Although we would like Brand South Africa to be defined by the great diversity of its wine, the fact is that the space currently available for South African wines on highly competitive U.S. retail shelves and restaurant lists is very limited. South Africa has two feet to tell its story, a national wine distributor executive told me. And the story that is often told is defined not so much by the wines as by their labels.

I told the audience that when I went to the local wine shop with the most comprehensive selection of South Africa wines I found that 15 of the 16 wines on the shelf were “critter wines.”

The Paradox of Critter Wines

If those two feet of shelf space include brands such as Sebeka, The Wolftrap, La Capra and Goats do Roam (all of which are or have been widely distributed in the U.S.), then the identity is clear. South Africa means “critter wines,” a class defined by Yellow Tail and Little Penguin. Critter wines are fun and often sell very well, but the image that they project is simplicity, not complexity, even when the wines themselves are not simple at all.

The paradox of so-called critter wines is that while they can be hugely successful for the individual wineries that deploy them (think Yellow Tail in the U.S. market), they can potentially undermine a region’s reputation if they are so numerous and prominent that they become the de facto collective brand. So Brand South Africa could use an upgrade in the U.S. if you want to expand beyond the self-limiting critter category. But how?

The Signature Wine Strategy

It is natural to look at the countries that have established new national brands in the U.S. market and to try to discover the secrets of their success. Australia then New Zealand and now Argentina are on the list of usual suspects.  The one general factor that unites them is effective distribution.

In the talk I also stressed another factor — the importance of international partnerships and strategic alliances — that I think runs through all these examples.

Brand Australia was driven in part by Yellow Tail’s partnership with W.J. Deustch, the family distribution firm that previously carved out the U.S. market for Beaujolais. Brand Argentina owes much of its success to the Gallo company, which opened doors for Alamos, the best selling Argentinean wine in the U.S., and Don Miguel Gascón, the number three brand. And Brand New Zealand’s success was built in part on the high level of international investment in that country’s wine industry, which allowed brands like Cloudy Bay to take advantage of the sophisticated distribution channels that its owners – Möet Hennesy Louis Vuitton – had already constructed.  Or Brancott Estate, which rides Pernod Ricard’s global wave.

In property investment they say that the three most important things are location, location, location. In the structurally complex U.S. wine market, it is distribution, distribution, distribution. Effective distribution alone will not make a wine brand, but success is very difficult  without it.

Beyond this, however, Australia, New Zealand and Argentina are best seen are special cases that would be difficult (or perhaps even dangerous) to try to replicate. Brand Australia has suffered as the simple critter wine strategy has backfired. Argentina has been unable to extend the Mendoza Malbec wine brand to other varietals, although many still hope for a Torrontes surge. And New Zealand has also been frustrated in its attempt to expand the brand beyond Marlborough Sauvignon Blanc now that the Sideways boom in Pinot Noir sales has run its course.  The Kiwis have had difficulty establishing other white varieties such as Riesling or Pinot Gris or the red wines of Hawke’s Bay in the U.S. market.

Increasingly the “signature varietal” brand strategy is seen to be a one note samba rather than the first step towards broad market penetration. Although it is tempting to try to brand your excellent Pinotage or Chenin Blanc as South Africa’s version of a signature wine, this seems like a risky bet in terms of the U.S. export market. It is important to simplify wine a bit – which is what a signature varietal does — so that consumers, especially new ones, can understand it. But beware of Einstein’s Law. It is difficult to see how a single varietal could truly open the door to South Africa’s diverse wine portfolio.

Terroirists’ Revenge

So how will South Africa win the Wine War for the U.S. market? Well, the good news, given what I have said, is that Brand South Africa is actually something of a clean slate for many U.S. wine consumers – especially the rising millennial generation who are open to new wines from new places and show no particular reverence for conventional wisdom.  They are refreshingly original in their thinking, bold in their actions and willing to open their pocketbooks. These new wine drinkers and others like them around the world are high value targets. How should they be approached?

Millennials are very independent. They are accustomed to writing their own narratives and they embrace products and experiences that integrate into a lifestyle experience. They aren’t just buying wine, they are building an identity. Millennials are not fundamentally different from earlier generations in this regard, simply more skilled, self-empowered and more interconnected. Reaching them, which requires more emphasis on story-telling, social media and first person wine experiences, is ultimately the task of South African wineries and their U.S. distributor partners; there is also a role for Wines of South Africa in shaping perceptions.

Millennials and other “clean slate” consumers are predisposed to respond to the Terroirists’ Revenge message. They are seeking wine and a story about wine that connects them to the wine, to an engaging culture, to a rich and exciting lifestyle and ultimately to each other. It’s about the wine, but it’s not just about the wine. South Africa’s terroirists have a secret weapon in their beautiful land and inviting culture than gives them a critical Wine War story-telling advantage.

How can South Africa connect with the Millennials, I asked the audience? Well, don’t look to me for answers, I said. I’ve only been in South Africa for a week. You will have come up with the answers. Only you will know what there is in South African culture and society that will make the connection. I think this statement came as a surprise to the audience, who are probably used to outsiders telling them what to do. But I am sure I am right. 

I felt I had to make a contribution, so I took a chance. My first full day on South African soil was Monday September 24 — National Heritage Day, which is also National Braai Day. Water keeps people apart, I told the audience, but wine brings us together. And the braai seems to bring South Africans together, too. And so I proposed braai as South Africa’s secret weapon.

One possible key to this terroirist strategy – and this is my own crazy idea — is the braai. Almost no one in the U.S. knows what a braai is, but we all love the barbeque experience and this is a good starting point. Any country that makes the braai its national food culture speaks to us in a language we can understand.

But the braai, I have learned, is not merely a food culture — and this is its magic. It is an expression of generosity and hospitality. If you ask someone to share your braai, you are opening your heart and your hearth to them, whether you are preparing a gourmet meal or more humble fare. If South African wines are seen as an extension of that warmth and engagement, they might well strike a sympathetic chord among American wine enthusiasts.

And happily there are many different cultures of the braai in South Africa – there are diverse braai terroirs if you know what I mean – and each has its own story and each lends itself to a different kind and style of South African wine. Americans will love the unique experience of an Afrocentric winelands braai once they get to know it and this can be the gateway to a fuller appreciation of South African culture and lifestyle and to the diverse wines that have evolved along with them.

If you invite Americans to join with you and to celebrate your people, land and culture – to make every day National Braai Day — they will toast your success with your own wonderful wine.

And that’s how South Africa can win the Wine Wars. Thank you.

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The photo above shows me with Jan Scannell, managing director of Distell Group, Ltd, South Africa’s largest wine and spirits producer and sponsor of the auction. Jan is holding the copy of Wine Wars I gave him. I’m holding a bottle of 1977 Nederburg Edelkeur Noble Late Harvest wine. I clearly got the better of the deal! By complete coincidence, Jan’s son (also named Jan but operating under the name Jan Braai) is the leader of the National Braai Day unity movement.

Thanks to everyone at the Nederburg Auction for inviting me to speak. Special thanks to Dalene Steyn and Lesley Gikas.

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Update 10/4/2012  The response to my talk has been pretty positive. Click here to read my favorite (because it is so unexpected) review.

Can South Africa Win the [U.S.] Wine Wars?

Note: This is the first part of the talk I gave last week in Paarl, South Africa. at the Nederburg Auction, which is arguably the Southern Hemisphere’s most prestigious wine auction gathering.  Come back for the second half of the talk in my next post. The talk as delivered was different (more topical and funnier as anyone who has heard me speak might guess) than this written version, but the main points were the same.

Good morning. I’d like to thank the Nederburg Auction for giving me the opportunity to speak to you today and Wines of South Africa for inviting me to attend Cape Wine 2012. Thanks to all of you for coming today to support the Nederburg Auction and the cause of South African wine.

At this point in the talk I paused to make a prediction, since economists are known to be oracles. My prediction: Australia 18, South Africa 21. That was my predicted score for the rugby match that was to be played later that day. I have never heard an economist’s prediction so warmly received!  It turns out that I was half right, but in the way that will not disqualify me from a return visit. The actual score: South Africa 31, Australia 8.

I’m here to talk about how South Africa can win the Wine Wars, so I guess I need to explain what the Wine Wars are and how South Africa fits into the action. Wine Wars is the title of my 2011 book. The title is short and punchy but the real business of the book is described by the long subtitle, The Curse of the Blue Nun, the Miracle of Two Buck Chuck and the Revenge of the Terroirists, which outlines the three elements of the book’s argument. Let’s take them one by one and then think about how they apply to South Africa.

A Tale of Curses, Miracles and Revenge

The first argument, “The Curse of the Blue Nun,” is about the risks and opportunities of globalization. Blue Nun was arguably the world’s first mass market wine brand. Although most people in the U.S. remember Blue Nun as that reliable but so-so German wine that they drank in the 1970s and 1980s (along with Portugal’s Mateus Rosé and Italy’s Riunite Lambrusco), the fact is that it initially gained international attention because of the extraordinary quality of the 1921 vintage. For a time it was the best selling imported wine in the U.S. and distributed around the world.

Globalization powered the rise of the Blue Nun brand and globalization nearly destroyed it. The pressure to fill the vast global pipeline forced the original owners of the Blue Nun brand to sacrifice quality to gain quantity. Blue Nun lost its distinctive character and became just another brand, albeit a potent one that continued to sell on that basis even as quality declined. (Blue Nun is back today, as I explain in Wine Wars, with new owners and a new global strategy).

People think that the “Miracle of Two Buck Chuck” is that anyone can make and sell a wine for as little as $2 per bottle, as Fred Franzia’s Bronco Wine Company does with Charles Shaw wine, which is sold exclusively at Trader Joe’s stores in the United States. But that’s no miracle at all. The Aldi stores in Germany actually sell the equivalent of One Buck Chuck –simple red and white wine blends that sell for about €1 per liter (roughly one USD per standard 750 ml bottle equivalent). The miracle isn’t that they can sell an inexpensive wine like Two Buck Chuck, the miracle is that anyone would buy it!

Globalization has flooded U.S. supermarkets (and drug stores and even petrol stations) with an embarrassment of riches when it comes to wine.  The sheer number of wines for sale is sometimes overwhelming and the many different brands, varieties and regions makes the problem even worse. You need to master a secret code (I call it the Da Vino Code in Wine Wars) to make any sense of the situation. The fact that wine prices vary so much from bottom shelf to top compounds the confusion.

No wonder so many U.S. consumers purchase no wine at all. They are afraid to stoop down to buy cheap wine because they fear it will be disgusting. They are afraid to reach up to buy expensive wine because they worry it won’t be worth it. The Miracle of Two Buck Chuck is that Trader Joe’s have given buyers the confidence they previously lacked to purchase wine. Their house brand wine strategy effectively expands the reputation of the retailer to the wine. And it works.

Brands are powerful weapons in The Confidence Game that is the U.S. wine market today, but there’s a problem that I call Einstein’s Law. Albert Einstein said that everything should be as simple as possible – but no simpler. By this he meant that, while simplicity is useful, there comes a point where it becomes over-simplifying and essential qualities are lost. Brands simplify in order to sell, but they can go too far. When wine becomes a choice between Bud Red and Bud White and the diversity and distinctiveness of wine is lost, we will have crossed the line.

What is to prevent this? Well, in Wine Wars I argue that “The Revenge of the Terroirists” will save the day. Terroirists worship (or at least honor) the idea of terroir – a  sense of “somewhereness”  (to use a term coined by Matt Kramer) that is so important to us in today’s everywhere, anywhere, nowhere world. Wine, better than almost anything else, connects us to a particular time and place and is thus a fitting focus of terroirist zeal.  Globalization has created the battlefield; the Wine Wars pit the forces that seek to over-simply wine against the terroirists who strive to preserve its soul.

South Africa and the Wine Wars

Can South Africa win its Wine War in the United States market? Yes – anyone who has tasted the wonderful wines being showcased at the Nederburg Auction will have no doubt about the final answer. But it won’t be easy. The U.S. market is crowded, intensely competitive and structurally difficult penetrate. It will take “boots on the ground,” sustained commitment, well-conceived strategy, opportunistic tactics and a little bit of luck. If that sounds like the description of a military battle plan, you are starting to understand the Wine Wars. Let me analyze the battlefield terrain in terms of the three big forces I talk about in my book.

First is globalization – the Curse of the Blue Nun. South Africa has long experience dealing with globalization’s two faces. These days for example, the global markets promise to connect Cape wine producers with new consumer markets around the world – a real plus. At the same time, however, the changing logic of the international wine trade has shifted momentum from bottled wine exports to bulk wine sales. New markets create jobs and income, but the trend towards bulk wine exports shifts the terms of trade in the opposite direction. That’s how globalization rolls.

At the other extreme we have the Revenge of the Terroirists. South African winemakers are terroirists – how could they not be with such wonderful terroir all around them — and, although most consumers in the United States don’t yet understand the complexity of South Africa’s terroir, the fact of the diverse Cape wine terroir is terribly useful. More to follow on this point.

So this brings us to brands and reputation — the Miracle of Two Buck Chuck. What does Brand South Africa look like in the United States? Here are impressions I have gathered in confidential communications with U.S. wine professionals from all the supply chain links and my own personal observations.

My industry informants tell me that when winery or distributor representatives are present to provide samples and information, South African wines fly out the door, but they need that personal connection. The key, one successful distributor of South African wines told me, is for the wines to stand on their own – sparkling against sparkling, Cabernet against Cabernet and so on. Then their quality and value carry the day. Emphasize the “made in South Africa” element, he told me, and interest wanes.  Why?

To be continued …

Wine Wars in South Africa: Nederburg Auction Keynote

I’m pleased to announce that I’ll be giving the keynote address at this year’s Nederburg Auction in Paarl, South Africa. I was already planning to attend Cape Wine 2012 as a guest of Wines of South Africa, so I was delighted to receive an invitation from the Nederburg Auction organizers to extend my visit by a day or two in order to address their international audience.

About the Nederberg Auction

A premier event on Cape Town’s wine calendar, the Nederburg Auction serves to showcase the spectrum of award-winning wines and rare Cape finds created by the country’s most talented winemakers. Since its beginnings in 1975 with the ‘famous five’ founding participants; Delheim, Groot Constantia, Overgaauw, Simonsig and of course Nederburg, and an offering of just 15 wines, the Auction has evolved into an international event where major local and overseas wine buyers bid for a stringently selected range of the finest wines created by South Africa’s most talented winemakers.This year marks the 38th year of this prestigious event.


Here’s a video about the 2011 Nederburg Auction.

The Press Release

Guests at this year’s prestigious Nederburg Auction won’t want to miss the keynote address by best-selling US author and wine expert Mike Veseth on Saturday 29 September at Nederburg in Paarl.

With the state of the global economy crisis posing many challenges to the wine world and the South African wine industry in particular, this acclaimed US economics professor and “wine economist” will bring his considerable expertise to the speaker platform, tailoring his keynote address around the subject of how South Africa can win the Wine Wars. This aptly follows the fresh insight presented by last year’s speaker, David White, into the changing wine landscape and the future implications for the industry and consumers.

He will discuss the market trends that are redrawing the world wine map and the terroirists (those focused on a wine’s terroir or place of origin) who resist them. Veseth believes that wine businesses are at a critical crossroads, shaped by the powerful forces of globalisation, corporate branding and the exploration of new markets.

As a professor in international political economy at the University of Puget Sound in Tacoma, Washington, Veseth is regarded as an authority on the political economy of globalisation and the global wine market, applying his sharp and astute mind to analyse and understand the complex dynamics of the international wine world.

Nederburg Auction Business Manager Dalene Steyn says: “While believing in preserving the essence and the soul of wine, Mike is also well-versed on breaking into new markets in China, Australia, France and the US. With this combination of a love for wine along with extensive business and economic acumen, we believe he will inspire and motivate wine lovers in South Africa – just like he has done elsewhere in the world.”

The editor of The Wine Economist blog and author of more than a dozen books has won critical praise for his recent book“Wine Wars: The Curse of the Blue Nun, the Miracle of Two Buck Chuck and the Revenge of the Terroirists (2011)”, which draws remarkable conclusions on the market forces that drive the wine industry. The book has won several awards and prizes, including being selected as Best American Wine History Book 2011 by Gourmand International and a Wine Book of the Year by JancisRobinson.com.

Mike Veseth will address guests of the Nederburg Auction at 09:00 on Saturday 29 September in the Graue Hall, prior to the start of the day’s bidding session. For further information visit http://www.nederburgauction.co.za. The Nederburg Auction is sponsored by Nederburg.

I’m honored to be asked to give this keynote address and pleased to be associated with such a prestigious event.

The Final BRIC: South African Wine

This series of posts has taken Goldman Sachs executive Jim O’Neil’s list of BRIC and New BRIC nations and examined them from the particular perspective of wine. All of the BRICs (Brazil, Russia, India and China) and New BRICs (South Korea, Mexico, Indonesia and Turkey) produce wine. They have glorious pasts, tempting futures, and face certain present challenges linking the two.

In a sense (but I don’t want to push this too far), the challenges and opportunities that these countries face in terms of wine reflect their overall national situation. In vino veritas? Yes, I think so, but not just in the usual sense. Read the individual posts and you will see what I mean.

The Undiscovered BRIC

So now I turn at last to the overlooked BRIC: South Africa. With a relatively modest population (less than 50 million), it was probably too small to qualify for O’Neil’s signature group in terms of market size. But South Africa punches above its weight in many fields and has great symbolic importance, too, which is one reason it was chosen to hold the 2010 soccer World Cup.

If South Africa is too small to be a BRIC in gross domestic product terms, it towers over many of the other countries with respect to wine. South Africa was listed at #8 on the world wine league table for 2007 according to OIV statistics, with 9.7 million hectoliters of wine production, just behind Germany and head of Australia and Chile. Among the BRICs only China produces more wine (12 million hl, #6 on the list), although it isn’t clear that all Chinese wine is actually wine or really made in China.

Like many of the BRICs, South Africa has a deep wine past and a sunny future — it’s the present that’s problematic. The first wine was pressed on April 6, 1652. The famous Groot Constantia wine estate was established outside of Cape Town in 1682. By the 18th century its eponymous Muscat-based sticky was one of the three most sought-after wines in the world (Tokaji from Hungary and Cotnari from Romania completed the tasty trio).

South Africa’s wine history has been filled with peaks and valleys, both the usual ones for wine producers  and some that are country-specific. Phylloxeria, persistent over-production, and difficulty breaking out of the fortified wine cycle to produce quality dry table wines are familiar stories.  Apartheid — the notorious South African exception –  damaged the industry by effectively shutting off export markets and distorting domestic demand.

South Africa’s  fast emergence in the world of wine in the last 20 years  has been exception in a good way. South Africa surpassed France (France!) in U.K. wine sales in early 2010.

Good News / Bad News

I would like to say that South Africa is poised to beat all the BRICs and assume a place at top of the wine wall, but I hesitate just a bit. Part of it is due to the exchange rate. South Africa has a reputation for good value wines and it is suffering just now from a case of the Dutch disease. The Rand’s value has increased by more than 40% in the last two years (higher gold prices are part of the story) and the higher exchange rate has cut South Africa’s competitive advantage.

But there are lots of disturbing factors.  If you search the Decanter.com website for “South Africa” you get lots of good news (booming sales, distinctive varietals, demand so high there have been grape shortages) and bad news, too (burnt rubber aromas, persistent grape surpluses, Pinotage image problems). U.S. sales of South African wines have actually fallen by about 10 percent in the past year according to Nielsen data published in the most recent issue of Wine Business Monthly.

Perhaps it would be the same with a news search for any wine region — lots of good, bad and ugly news to go around — but coming off the Apartheid era of dreadful news, South Africa needs more than a bit of sunshine just now.

So I am left a bit uncertain, honestly. Optimistic but realistic, too.

And I think this is my opinion of the BRICs and New BRICs generally. The wines and the countries that produce them will succeed, no doubt, but not without a struggle, if only  because the times we live in are so uncertain. Mother nature and human nature are both very fickle and wine cannot help  but reflect them both.

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The video up top shows how South African winemakers used the occasion of the World Cup to try to market their wines abroad. A good idea, but I think there was a better one that they missed.  These days South Africa is trying to use wine as part of their program of Black Economic Empowerment by promoting black owned wineries and vineyards. It’s still in the early stages, but I like the idea. Given this, it seems to me that Invictus is a better image for South African wine than Bend It Like Beckham.

Vineyard Plague: The Dutch Disease

As if things weren’t bad enough in Australia, now there’s this: the Dutch Disease. No, it isn’t a fungus spread when you plant tulip bulbs in the vineyard or something you saw on the television series House MD. It’s much more serious than that. And it’s hitting South Africa, too. Look out!

Australia’s Perfect Storm

I’ve written several times about Australia’s continuing wine crisis. It seems like everything that could go wrong has gone wrong. Too much heat, too little water, excess capacity, collapsing demand — even smoke-tainted grapes caused by runaway brush fires. Yikes!

Now there is more bad news and it’s the result of too much good news? Good news is bad news? Yes. Read on.

The Dutch Disease is the name economists give to the problem of too much good news in one industry and its negative impact on the rest of the economy. If one sector of the economy gets hot on global markets (think oil exports, for example) one effect can be that export sales increase the demand for the country’s currency, causing it to appreciate in real terms. The rising currency value makes all the nation’s other products more expensive on foreign markets, sending them into a tail-spin.

The Good News the Bad News

That’s how good news in one part of the economy can backfire. The Economist magazine apparently invented the term to describe the dilemma of the Netherlands after a big gas field was found there in 1959.

The good news / bad news in Australia is clearly the fact that China’s economy is growing rapidly and sucking in the natural resources that Australia has in considerable abundance. But big purchases of the Australian dollar needed to pay for these products has pushed the currency up, making Australian wines more expensive here in the U.S.

This helps explain why off-premises sales of Australian wines are still falling here even though many other segments of the wine market are recovering. Recent Nielsen retail data show the U.S. wine market growing by 4.3 percent in the period ending in August, but sales of Australian wine fell by 7.5 percent (data from the November issue of Wine Business Monthly).

As the chart above shows, the Australian dollar has continued to appreciate since these data were compiled, magnifying both the Dutch Disease problem and the sense of crisis in the Australian wine industry.

South Africa Also Hit

South Africa seems to be experiencing the Dutch Disease as well. There are many factors that have contributed to the sharp rise of the Rand against the dollar, but surely the surge in gold prices must be the most important one. As speculators and investors who have worried about inflation turn to gold, their purchases have driven up the value of South Africa’s currency as well.

This helps explain why sales of South African wine in the U.S. have been in a bad slump. Nielsen data indicate that South African wine sales fell by 8.3 percent in August and by 9.4 percent in the last year.

The U.S. dollar’s rapid recent fall will affect all countries that depend on our huge markets for exports, but inevitably some will be hit more than others.  Those like Australian and South Africa who suffer the Dutch Disease will be challenged the most.

We’ve entered an era of extremely unstable currencies, reflecting both the inherent instability of international financial flows and the increasingly cut-throat battles in the global currency wars. Inevitably many industries — including wine — will get caught in the cross-fire.

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Fair Trade Wine’s Long Journey

In this global age we are accustomed to having the world’s assorted products (including wine) wash up conveniently on our local supermarket shores. We seldom give much thought to how they got there or why, but wines don’t make, move or sell themselves so there is always a story to tell.

Case in point: this bottle of 2008 Fairhills Mendoza Vineyards Carbernet Sauvignon purchased last week at a Cost Plus World Market store in Tacoma, Washington. It is the product of a rather complex process of globalization.

Uncorking a Bottle’s Biography

The Fairhills brand is South African, but the wine is from Argentina. Must be a story there. The logo at the bottom proclaims that it is Fair Trade certified – wine with an ethical intent. You don’t see Fair Trade wines every day. The red tag up on the bottle’s shoulder indicates market reality: marked down from $9.99 to $8.88.

(Some studies suggest that wine buyers are not willing to pay more for “ethical” organic or biodynamic wines. In fact, one study found that wines labeled “organic” sold for less than identical wines without the ethical indicator. I wonder if this inverse price/ethics relationship holds for Fair Trade wine as well?)

Fair Trade products, like this wine, ask us to think about supply chains more seriously because they promise to return a bit more to the original producers to help build sustainable communities. I’m interested in the Fair Trade wine movement (I wrote about Fair Trade wines here, here and here), so I thought I’d try to learn a bit about this particular bottle’s long journey.

Twists and Turns

The story begins, unexpectedly, at the Du Toitskloof Winey in South Africa, founded in 1962 as a cooperative by six wine families. Originally a bulk wine producer in the bad old days of South African wine, DTK as it is known has moved upmarket in the post-apartheid export-driven era and Fair Trade wines are part of its strategy.

Since 2005 DTK has worked with the Fairhills Association to produce Fair Trade wine. Fairhills brings together a group of South African vineyard owners and their workers, with the workers having a majority of votes. Fairhills wine farmers supply the grapes, DTK makes the wine and Origin Wine, the third partner, provides logistical and market support. The growers receive a premium for their Fair Trade grapes and funds are returned to the Fairhills Association for community investments, a typical Fair Trade practice.

The initial market for Fairhills wines seems to have been Great Britain, since they worked closely with the UK-based Fair Trade certification group there. Susy Atkins,  the Telegraph’s wine critic, reports that Fair Trade wines have good penetration in London through supermarket chains including Co-op and Sainsbury’s and are featured in annual Fairtrade Fortnight programs. Click here to view a list of Fair Trade wines available in the UK. Fairhills has the largest listing (44 wines).

Fair Trade Pipeline

The South Africa-UK wine pipeline proved very robust (South African wines are now the fastest growing segment of the British market) and helped to expand the market both in terms of supply (drawing Chile and Argentina into the mix) and demand (introducing Fair Trade wines to the U.S. and other markets). Argentina is the biggest supplier of Fair Trade wines to the U.S. and the Fairhills Mendoza Vineyards Cab that I purchased at Cost Plus is part of that pattern. Organic Wine Trade Company distributes Fairhills here along with their other “ethical” wine products.

Whole Foods Market is one of the most important retailers of Fair Trade wine in the U.S., which makes sense since they sell so many other Fair Trade products (coffee, tea, chocolate, sugar, energy bars, body care products, flowers and rice according to one list). Other national retailers that stock Fair Trade wine include Sam’s Club, Target and of course Cost Plus World Market where I bought this bottle.

TransFair USA reports that over 120,000 cases of Fair Trade wine were sold in the U.S. in 2009, up from about 20,000 cases in 2008. The growth rate is a source of optimism, but the absolute quantity is relatively modest  – about the production of a single medium-sized domestic winery. TransFair says that the 2008-2009 sales produced a “premium” of over $130,000 that was returned to the grower cooperatives — quite a lot relative to the low wages they receive as farm workers. The distributor website reports that:

Fairhills Cabernet Sauvignon benefits the local farmers of Bodegas y Viñedos de Marañon and three small producers along with their farm worker community in Mendoza, Argentina.  The Fair Trade initiative is dedicated to ten farms to improve the quality of life for 210 members and 300+ children. The initiative is one of the first in Argentina and has used their sales to upgrade various schools in the region, purchasing new toys, establish a soup kitchen, and purchase an ambulance for the local health care center.  Future plans are to convert from conventional farming to all organic, building a sports club, and continue improving health care clinics and schools.

The journey that brought this bottle to my cellar is thus quite complicated. The wine comes from Argentina, but it wouldn’t have got here without help from people in faraway London and South Africa. The fact that this complex web can return community benefits to Mendoza farm workers is heartening, even if the amounts are quite modest at present.

The Future of Fair Trade Wine

Fair Trade coffee is easy to find these days — in fact it is impossible to buy anything other than Fair Trade coffee on my university campus. Fair Trade chocolate is everywhere, too. But Fair Trade wine remains a tiny (but growing) market niche. I wonder if this will change and what barriers Fair Trade wine must overcome to achieve the success of Fair Trade coffee? With this question in mind I’m starting a small research project to learn more about Fair Trade wine’s present market condition and future prospects. Watch this space for occasional related posts in the coming months.

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Thanks to Kazuko Golden at TransFair USA for helping me with statistics about the Fair Trade wine movement. Thanks to Leigh Barrick for sharing her research on Fair Trade wine with me.

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