The Curse of Corporate Wine-Think?

When I wrote about the global financial crisis in my 2010 book Globaloney 2.0: The Crash of 2008 and the Future of Globalization, I focused on three forces that I saw as both key to the crisis and limits on global finance: misperceptions of risk, the excessive use of leverage and the resulting moral hazard, which produced the boom and then the bust.

Now, as I think about the reasons why corporations are not more dominant in the wine industry, I find myself returning to those same themes. Is this an important insight, or am I just a broken record? You be the judge!

Note: This is the final column in the current series on family wine businesses. This column is more speculative than the earlier ones — as many questions as answers! — reflecting the fact that it is difficult to generalize about either corporate wineries or family and private wine firms.

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Asking the Right Questions

Last week’s column ended by questioning the question of the curious success of family wine business. There are good explanations for the success of family-owned wine businesses, I wrote,  but sometimes they feel a bit ad hoc, tailored to explain a particular case and less capable of generalization.  And they often fail to fully account for the fact that many family wine businesses  either fail or, like the Taylor family, end going over to the dark corporate side.

The question of why family wine businesses are successful isn’t easily answered. But maybe we are asking the wrong question. Maybe the issue isn’t why family-owned wine businesses are surprisingly robust and instead why corporate owned wine businesses are sometimes ineffective? Is there something about wine that turns smart corporate brains to mush (not all of them, but a few)?

Protecting Assets versus Leveraging Them

One difference that I have noticed about family wine businesses versus some of the corporations regards the role of key assets such as brand and reputation.  Many family wineries that come to mind seems to see their role as protecting brand and reputation so that they will continue to provide benefits well into the future. Some corporations that come to mind, on the other hand, seem to focus on leveraging brand and reputation in order to increase short run returns.

What’s the problem with leveraging a brand? Leverage has the potential to increase returns in any business, but it also increases risk. And one risk is that the integrity of key assets can be undermined by the leverage process itself.

An example? Well, I hate to pick on Treasury Wine Estates because they have seen enough bad news in the last few years, but one of my readers emailed me in dismay when a news story appeared about Treasury’s latest market strategy. I’ll use this as an example, but Treasury isn’t the only wine corporation that I could pick on and maybe not even the best example

One element of Treasury’s plan is to develop brands for the “masstige” market segment, which means taking a prestige brand and levergaing it by introducing a cheaper mass market product that rides on the iconic brand’s reputation. 

Masstige? Sounds like something from a Dilbert cartoon, which means of course that it is a totally authentic contemporary business term. Prestige fashion house Versace, for example, seems to have developed a masstige product line for mass market retailer H&M. The line was launched in 2011 and I’m not sure where it stands today. Maybe it was a big success? If  masstige  worked for shoes and dresses, how could it be a bad idea for wine?

I’m sure a prestige association helps sell the cheaper mass market products, but I can think of some examples in the wine business (Paul Masson? Beringer?  Mondavi?) where it might have undermined the iconic brand itself a little or a lot, which seems self-defeating. I know that has happened in the fashion field (think about how the Pierre Cardin brand was diluted by cheap logo products) so I imagine it could be a factor in wine, too.

Think Global, Source Global

Here’s another example. Regional identity is more important in wine than in some other industries and Treasury owns some famous “wine of origin” brands — wines associated with particular regions, which are valuable assets.  But my worried reader was concerned about Treasury’s plan to source globally to expand the scale of some of these regional brands.

“Building scale via sourcing breadth is one of the most critical platforms necessary for the globalization of wine brands,” according to the report. Gosh, that even sounds like corp-speak, doesn’t it? Logical, I suppose, but maybe locally-defined brands need to be locally sourced to maintain authenticity? Maybe consumers would be suspicious of a Stags Leap wine, to make up an example, that is sourced from Australia or some other distant place as a way of leveraging its brand power? I wonder just how flexible these terroir-based brand concepts are in the real world where consumers are the ones who decide what is authentic and what is bogus.

Cupcake Vineyards, a Wine Group brand, is an example of a multi-regional strategy that has been astonishingly successful, so it is clearly possible to build a globally sourced brand and perhaps this is Treasury’s model. But I’m suspicious of the idea of leveraging a place-specific brand through global sourcing. Does it make sense to try to turn icon Penfolds, for example, into a Cupcake look-alike? Maybe! But I worry that you’d lose what’s important about Penfolds in the process.

Treasury has no doubt studied this thoroughly and they are probably right about their strategies and I am probably wrong, but it seems problematic to me. I wonder if family firms are more likely to resist corporate wine-think and  try to protect key assets like a prestige brand or a regional identification while corporations are driven instead to try to leverage these assets to expand their market share? I am sure there are counter-examples to this theory and I can think of a few myself. I’d appreciate hearing from readers in the comments section below.

Global Market Moral Hazard

What about moral hazard? Some big wine corporations that have had troubles in recent years seem to have made the mistake of thinking that big global markets will soak up all that they (and the other big firms) can produce. It’s a matter of global-think. The global markets are huge. There’s always a market for another dozen containers somewhere in the big world of wine, or so it might seem, and so the risk of failure is misunderestimated, to use a GW Bushism.

In finance we would say that the false sense that the global market is always there to bail you out  leads to moral hazard and this is probably true in wine, too.  Moral hazard encourages excessive investment and promotes booms and the busts that often follow. What seems to be true for an individual company is not necessarily true for an industry and misunderstanding this sort of risk is downright dangerous in an industry like wine, which is by its nature subject to cycles and booms and busts.

If private- and family-firms avoid the tendency to think global when their markets are local and thus avoid misunderestimating risk and if they really do work to preserve rather than leverage key assets it might help explain their lasting power and influence. Lots of “ifs” there, but its a theory. What do you think?

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Thanks to everyone who has followed this series. Next up: what wine can learn from the analysis of the language of restaurant menus.

Trading Up? The New Conventional Wisdom About the U.S. Wine Market

Last week I wrote about the unexpected state of the U.S. wine market today, where sales of wines above about $9 are strong and growing while the below $9 segments are stagnant or in decline. Thinking back to the dismal state of the wine market a few years ago, with trading down and heavy discounting, the current situation comes as a big surprise.

What accounts for the transformation of the U.S. wine market? And is this the “new normal” that we should expect for future years? Let’s look at the emerging conventional wisdom on these questions.

Trading Up?

I don’t know many people who think that the shift toward more expensive wines is a simple reversal of the recession years’ trading down, although that doesn’t mean that it doesn’t happen. Consumers seem as price sensitive as ever, which is why store shelves are still papered with “shelf talkers” like the one shown here that beckon buyers with discounted prices.

Yes, discounting is still going on, although perhaps not quite at the same level as during the Great Recession. The best argument for trading up is that consumers who had an opportunity to sample better wines during the deep discount days and  liked them now are feeling more economically secure and are continuing to buy them at higher prices. I’m sure that this is happening to a certain extent, but I don’t think it is the whole story.  Consumers are simply too focused on price to have suddenly changed.

Price resistance means that most consumers aren’t willing to pay more for the same or similar wine, but they are willing to spend more for something different. Who is doing this?

The Millennial Theory

One theory holds that the changing shape of the wine market is driven by younger wine drinkers — we often call them the millennials here in the U.S. but I have also seen the term “echo boomers” used and Constellation’s latest Project Genome study calls them “engaged newcomers.” As a group they tend to buy wine less frequently than some other groups (they also drink spirits, craft beers and so on) but spend more per bottle. This is the opposite of my behavior as a young wine drinker and probably a good thing.

If what we think we know about millennials is true, then they can account for some of the trend towards higher price wine sales, but they are certainly  not the whole story.  They don’t explain the shift away from lower-priced wines because they were never the driving force there. And they cannot account for all of the upmarket shift because at this point they don’t buy enough wine to move the whole market this way. Millennials are part of the story, but not the whole answer. What else?

The Bad Wine Theory

One very interesting theory is that the relative quality of wine below about $9 has fallen, driving customers away in search of something better to drink. They have found it, too, in craft beers, ciders and spirits.

W. Blake Gray recently made this point in a column titled “Wine under $10 sucks. Should we care?”  Tim Atkin made a similar point about wine in the UK market.  It’s very difficult to find decent wine below £5, he says, which is a change from the past.

A recent article on Bibendum’s website tells the sad UK story, which this graphic illustrates. If you want to get value in wine in the UK, it seems you have to move upmarket. The actual cost of the wine is more than a third of the total cost of a £20 bottle, but less than 10% of the cost of a £5 wine. Shocking!

This deteriorating value of inexpensive wines, if true, is a surprising situation. Only a few years ago we experienced something of a revolution when the character of commercial quality wine improved  quite dramatically (I called it the Miracle of Two Buck Chuck in my book Wine Wars). A structural surplus of decent wine and grapes on the U.S. and world markets made it possible for winemakers to assemble products at low price points that rivaled some brands in higher price segments. The unexpected value they provided drew millions of consumers into the wine markets Is poor quality and value pushing them away?

Well, poor value is certainly part of the answer in the U.K., where high wine duties have distorted the market and undone much of the miracle of the past. And I have some friends in California who complain that cheaper and lower quality bulk wine imports are now filling bottles of California-brand wine. The brand is associated with California (like Barefoot, for example) but the wines themselves come from many places (and are so-designated on the packaging).

Have quality and value suffered? I’m an economist not a wine critic, so I will leave it up to you to decide, but some of my California friends think that’s what’s happened. If this is true, then where is the better California wine going? Some of it is sitting in tanks, which are pretty full after a couple of generous vintages in a row. The rest? Some of it, I think, fills the bottles of wine brands specially created for the new market environment.

The Branded Age

This supply-side theory holds that smart wine executives have noticed that many consumers are willing to pay more for something different (and are put off by the commodity wines) and they have responded by creating new brands to fill specific upscale market niches. This helps explain the great proliferation of wine brands and even virtual wineries on the scene.

Each year I enjoy Jon Fredriksen’s talk about the state of the U.S. wine market at the Unified Wine and Grape Symposium, but recently I have noticed that his list of the hottest wine brands is full of unfamiliar (to me) names. These aren’t new wineries, simply new brands created by innovative existing large- and medium-sized wine firms.

Jon’s data suggest to me that these are some of the wines that are attracting buyer interest and pulling the market along. An example? Take The Wine Group, which is the second largest wine producer in the U.S. with 57.5 million case sales according to Wine Business Monthly. A few years ago I thought of them in terms of brands like Almaden and Franzia wines, which are  in that lower market tier that is stagnating today.

Now when I think of The Wine Group I think of Cupcake Vineyards, which at 3 million cases is small compared to Franzia’s 26 million, but perfectly fits that upmarket profile and is often priced right at or just above key $9-$10 threshold along with Apothic, 14 Hands and other hot brands.

Which Theory? The New New Normal?

No single theory explains what has happened and the market is full of special cases. Take Argentinian wines, for example. Customers are buying more expensive products from Argentina now in part because the cheaper labels have disappeared. With inflation still soaring and the exchange rate stuck, many Argentinean firms cannot afford to export cheaper Malbecs to the U.S., which shifts the center of gravity upmarket.

All these ideas (and others, too) are part of the explanation of today’s transformed market. It’s a perfect story of effects (or a train wreck, depending which end of the market you are in). Is this the new “new normal” and, if so, how long will it last? That’s a question for next week.

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Thanks to everyone who commented on last week’s columns — great ideas! Keep them coming.

Wine Vision Takeaway Messages

Click on the image above to view my interview with BeverageDaily.com editor Ben Bouckley at Wine Vision 2014.

I’m back from Wine Vision 2014 and reviewing my notes in search of the most important takeaway messages. Not an easy task in this case, because the content stream was so rich and varied. Not sure whether the best ideas came from the formal program or casual conversations. That’s a sign that the organizers did their job of assembling a critical mass of thinkers and doers from inside and outside the global wine trade.

Many of the points that participants found particularly useful focused on new or emerging trends. Lots of discussion of new consumers (millennials, for example), new marketing opportunities (direct-to-consumer both generally and via in-home “meet the winemaker” type events), and new competitors within the alcoholic beverage category, some of which are so “innovative” that they seem poised to “jump the shark” into oblivion.

We were informed and entertained by presentations on what to do and — more critically — what not to do in social media relations (lots of cringing at the dumb things that smart people can do on Twitter and Facebook). And we were introduced to packaging and label innovations, including my first experience with Amorim’s new “twist off” Helix cork stopper/bottle package. Something for everyone at this conference.

 Big Bang Theory

My presentation probed four powerful forces that have shaped the wine world of today — the “big bang” of global wine production that has redrawn the world wine map, the new “lingual franca” of wine, which now defines the competitive landscape, the forces of disintermediation that have changed the game from monopoly to monopsony, and the “new wine wars”realignment of interests within the wine business.

Reading through press coverage and Twitter comments, I find that different people focused on different elements of my presentation, which is probably as it should be. In the video above, for example, BeverageDaily.com editor Ben Bouckley drills in on the importance of authenticity and the new wine wars and, in response to a question, I highlight LVMH wine chief Jean-Guillaume Prats‘ comments about sustainability. Lots of interesting ideas in the air.

UK Wine Trade at the Crossroads?

Wine Vision disappointed me in only one respect — not what was said but what wasn’t. In the run-up to the event I suggested that this was the perfect time and place for an open discussion of power dynamics in UK supplier-retailer relations. The Tescogate financial scandal seems to have nothing to do with the wine trade, I wrote, but it has created an opening where a discussion of power in the UK wine world might be usefully and openly engaged. As a recovering liberal arts college professor, open discussion is in my blood, so naturally I wanted to see it happen here.

But it didn’t happen and perhaps it never will. I tried to open the door in my presentation, drawing a parallel between UK wine retailers and Amazon.com in terms of power dynamics. But no one really jumped at the opportunity and in any case I was whisked off the stage before anyone could comment or ask a question. Time was up, I guess.

Pernod Ricard UK chief Denis O’Flynn attempted to suggest that supplier-retailer relations were at a “crossroads,” but without any more success than I had.  A panel on supplier-retailer relations managed to almost entirely avoid the topic. Interesting! It felt like a “Voldemort” moment (“he who must not be named,” for those of you who are not Harry Potter fans).

Race to the Bottom?

Maybe, as a friend suggests, it was just British politeness — must not say anything that might make someone uncomfortable. Or maybe it was, as the wise Adrian Bridge suggested, simply that nothing was going to change. Might be better to invest energy in areas where progress is possible. He’s probably right and I’m probably wrong.

But I really think that something has to change.  Retailers cut price to increase market share (in the process training consumers to think of wine as just another 3-for-£10 commodity). Then they push suppliers for lower costs to restore margins before another round of price cuts kicks in. The fact that the UK Treasury’s excise tax share of the transaction has increased so much only makes matters worse, eroding margins and accelerating the downward spiral spin.

The UK wine business is caught in a dangerous race-to-the-bottom cycle and it isn’t going to turn around unless and until something changes. Is it impolite to talk about this? Denial, as I like to say, isn’t just a river in Egypt.

I’m on the “State of the Industry” panel again in January at the Unified Wine & Grape Symposium in Sacramento. Look for further commentary there.

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The issue of supplier-retailer relations isn’t just about Tesco, but the fact of Tescogate puts that firm, the world’s largest wine retailer — in the spotlight. Dan Jago, the head of Tesco’s wine department, was originally scheduled to speak at Wine Vision, but withdrew when he, along with other department heads, was suspended pending the investigation. (It is now rumored that Jago will leave the company.) Laura Jewel MW, the head of Tesco’s wine development program, stepped in to replace him but  a week after the conference she seem poised to leave Tesco to take a position as UK and Europe director of Wine Australia. As Jancis Robinson said on Twitter, “Who’s left at Tesco?” Good question. Maybe some of the UK insiders at the conference knew about these upcoming changes and so avoided any situation where they might have to comment? Pure speculation.

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Thanks to Wine Vision for inviting me to speak! It’s a  well-organized and very successful event — worth the long flight from Seattle to London. Thanks to participants and fellow speakers for making this such an interesting and worthwhile conference.

A Field Guide to Prosecco’s Many Faces

P1090234Prosecco sales here in the U.S. are surging — up 34% in the first half of 2014 according to one report. At 1.27 million cases, the U.S. is now the #3 export market for Prosecco trailing only the UK and Germany.

Quantity is one thing, but quality is often something else entirely. Last week’s column talked about Prosecco’s upmarket move and the premiumization pyramid that lies at the heart of the strategy.  Is premium Prosecco real or just a marketing gimmick?

Mionetto’s Impressive Line-up

We tasted the wines from three producers during our quick business trip to the Veneto and if there is truth in wine, then premium Prosecco is real.

Our first stop was at Mionetto, a large producer that is the U.S. market leader with their popularly priced, crown capped “IL” Prosecco line of wines. “IL” is great fun and has attractive packaging — we like it a lot — but it doesn’t especially strive for upmarket status. But wait, there is more …

We tasted through several Mionetto wines that showed the true potential for premium Prosecco wines. We started with Prosecco made from organic grapes — the idea came from the growers not the marketing department — that was perhaps the most effective presentation of an organic wine that I have seen. This wine should appeal both to enthusiasts seeking something different and to dedicated green wine fans. The wine, the messaging, the packaging — they all come together in a very impressive way.

Opulence and a German Bet

We then moved up the pyramid to a single vineyard “Rive di Santo Stefano” DOCG Prosecco and into the “Luxury” series of wines, then reaching the summit with the Mionetto Luxury Cartizze DOCG. The luxury wines really were opulent both in the glass and to the eye. Very impressive. Will wines like this some day challenge Champagne? No future tense needed — I think they already do so, providing that memorable feeling (isn’t that what Champagne is really all about for most people?) at a more attractive price point. Here is a list of the Mionetto wines we tasted with links to more information about them.

An interesting sidebar to the Mionetto story is that the Italian firm was purchased a few years ago by Henkell, the German sparking wine producer, and everyone worried that the usual layoffs and cost-cutting measures were in store. Instead the new parent company kept all hands on board and hired more workers while investing in plant modernization and expansion. They are betting on the premium future of Prosecco and based on the “cards” we tasted it seems they have a winning hand.

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A Different Prosecco: Sorelle Bronca

Sorelle Bronca is a very different enterprise that illustrates Prosecco’s many dimensions. A small firm run by two sisters, all its wines are organic. Total production is much smaller than Mionetto, but the wines are perhaps equally diverse in the experiences they present the curious wine enthusiast.

We tasted through several excellent organic DOCG Proseccos and some still wines, too, including a white blend featuring the Manzoni Bianco grape and a Colli di Conegliano DOCG Riserva “Ser Bele” red blend of Cabernet Franc, Cab Sauvignon and Merlot (Bordeaux grape varieties have long been planted in the Veneto) that received Gambero Rosso’s  top “3 glasses” rating. Red wine from Prosecco-ville? Maybe. Really great red wine?  Apparently yes. I didn’t see that coming.

The “normal” Proseccos we tasted here were delicious as was the Sorelle Bronca Valdobbiadene Prosecco Superiore DOCG Particella 68  made from grapes from a specific vineyard bloc. But the hit of the tasting was Sorrele Bronca Valdobbiadene Prosecco DOCG “Difetto Perfetto” Sur Lie. Difetto Perfetto? Defective and perfect at the same time? Well, yes. This cloudy wine (see photo) had its secondary fermentation in the bottle not the pressurized tank as is typical for Prosecco. Then it was left on the lees for a period and then not disgourged, so the lees were still there.

Cloudy, a bit like a hefeweizen beer. I think “foggy” is the best word — look at the photo. Unfiltered, but not Difetto in my opinion. The first taste was just the wine, taking care not to disturb the lees at the bottom of the bottle. Good! Then we shook up the bottle and tasted it all together. Wow! Even better, Sue and I agreed.  Champagne-like but still clearly Prosecco without the strong leesy taste you might expect because the sur lie period was so short.  And quite an interesting mouth-feel. A Prosecco to surprise and delight. What fun!P1090311

A Bisol Mosaic at Venissa

We spent the night in Venice and set out the next day to visit Venissa, the ambitious vineyard project of the Bisol family that is located on an island in the Venetian Lagoon (see next week’s column for a full report). The Bisol Prosecco house is behind Venissa and as part of our visit Matteo Bisol arranged for us to taste several of his family’s wines along with dinner at the restaurant.

Usually, Matteo said, he would serve just one Bisol wine as part of a multi-course / multi-wine tasting menu, but he decided to use the opportunity to show us many difference faces of Bisol and Prosecco. It was quite an experience.

We started with the classic Bisol “Crede” Prosecco DOCG  2013  (“Crede” refers to the marine limestone subsoil of the growing area) that we have tasted before here in the U.S. A premium and traditional DOCG Prosecco.  Next, in a silver-clad bottle, was Bisol noSO2 Prosecco Extra Brut 2012 . NoSo2 — no sulfites — in the “natural wine” style.

Bisol Relio Extra Brut 2009  came next, made from the Glera grape commonly used in Prosecco but using the classic method (secondary fermentation in bottle not tank). Different from the Sorelle Bronco sur lie wine — the Champagne style yeastiness more pronounced.

The Dry and the Sweet

Following this we were served Bisol “Eliseo Bisol Cuvee del Fondatore” Millesimato 2001 — Pinot Noir, Pinot Blanc, Chardonnay grapes, classic method. Italian Champagne, you might say (if such language were permitted) with Pinot Blanc taking the place of Pinot Meunier in the grape blend.  Note the vintage date! Quite spectacular.

The last sparkling wine of the evening was the opulent Bisol Cru Cartizze DOCG –– from the prime Cartizze zone. I felt fortunate to taste wine from Cartizze both here and at Mionetto. A friend had warned me that Cartizze would be too sweet but I found both wines dry and well balanced. Prosecco, like Champagne, can be and is made in different degrees of dry and sweet and some styles are more popular than others in particular markets.

The final wine was sweeter but still very well balanced and it came as a complete surprise. It was Bisol Duca de Dolle Prosecco Passita — dessert wine made  with air-dried grapes like a white Recioto, but aged in a modiied solera system you find with some Sherries. A unique experience — different from any of the other wines from this region we tried and not exactly like any other sweet wine, either. Matteo wanted to show us the variety of Prosecco expressions and he certainly succeeded.

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Final thoughts? The Prosecco mosaic caught me by surprise — Prosecco is not one thing, but many things and hopefully consumers who start with cheerful wines like the Mionetto “IL” bottlings can be persuaded to move up the Prosecco Pyramid to the DOCG and Rive wines and perhaps even summit with Cartizze and beyond to some of the truly unique wines we were fortunate to be able to sample. Thanks to the everyone who hosted us and to the Conegliano Valdobbiadene Consortium for arranging the winery visits. Next time: the story of Venissa.

Anatomy of Australia’s New Wine Strategy

Click on the image to view one of the Restaurant Australia videos.

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In my last column I talked about Australian wine’s plans to re-brand itself on the global market through an integrated food-wine-tourism campaign called “Restaurant Australia.”  Delegates to Savour Australia were treated to four specially produced videos  (click on the image above to see one of them) that introduced the concept and, not coincidentally, also introduced the chefs and purveyors who would be providing some of our (delicious) meals over the next few days.

Beyond Sensory Overload

The audience seemed to pause, slightly stunned, after each video. At first I thought that it was just sensory overload. And it was. The stunning images presented on the big screen with rich surround sound was an intense experience, to be sure. The fact that we experienced it all again later, meeting the chefs, tasting the produce– that was intense too.

But now that I am back home and reflecting on the experience, I think that perhaps we also paused for a different reason. The whole purpose of our gathering was wine. We had journeyed long miles to Adelaide to see and hear Australia tell its wine story. But where’s the wine?

Yes, wine and a winemaker appeared in each video, but they seemed a bit of an add-on rather than the featured element of the message. What would happen if you left out the wine ? Nothing much else would change. Is that the way we want people to think about Australian wine — an afterthought in the grand “Restaurant Australia” concept?

Now There’s Your Problem

Obviously not — and it would be a mistake to judge the marketing campaign by a few introductory videos. But, as I thought about it, I began to recognize that it was related to a bigger problem.

One of the chapters in Extreme Wine is about wine and modern media — I call it Extreme Wine Goes to the Movies — and it concludes in part that wine’s inherent sensuousness seems to be difficult to translate to video. Yes, wine famously unlocks all the physical senses and a few of the mental ones, too. But it is an experience good. Like fly fishing and some other things you might be able to think of, its more fun to do than to watch someone else do.

That’s why there are surprisingly few films where wine plays a really central role. There are a few excellent ones (Sideways fans please put down your pitchforks!) but you’d really expect there to be far more than I found in my research. Food, on the other hand, seems to be something that video can capture very well. Does watching someone drink wine in a movie make you thirsty? Maybe. Does watching a celebrity chef eat a delicious dish make you hungry? You bet it does!

Hungry?

No doubt about it. Wine’s magic is difficult to capture on the silver screen (or that little screen on your tablet or smartphone). That’s why we have Master Chef but not Master Enologist.  There are rock stars in wine, but they don’t generally transcend the wine category the way the foodie celebrities increasingly do.

Wine Porn versus Food Porn

My foodie friends are always taking X-rated “food porn” photos of the the plates they are served at fancy restaurants. But my wino buddies generally don’t bother to snap “wine porn” images of their glasses (although I admit to some G-rated bottle/label shots myself).

Assume that I’m correct about this for a moment (or, better yet, grab a copy of Extreme Wine and read a more detailed account, which uses Sideways to show why really powerful wine films are so rare). Given video’s undeniable importance in communications today, what is wine to do? Well, one answer is to do what Australia wine seems to be doing, which is use what works (the foodie side of the campaign) to drive the message.  They call it “Restaurant Australia,” but I have a better name.

Strongest Brand in the World?

I call it The Italian Way. What region has the strongest generic wine brand? Well, here in the United States I would say that it is Italy (although France can make a claim because of Champagne’s powerful brand). Americans love everything about Italy — the food, the people, the art, the scenery, the food again, and now with the new Fiat 500, even the cars.

Americans love Italian (or sometimes Italian-style) coffee. And they love Italian wine. Just the fact that it’s from Italy gives it an automatic advantage at supermarkets, restaurants and wine shops.

It seems to me that “Restaurant Australia” aims to get Americans to love warm, friendly Australia in the same way that they have always loved warm, friendly Italy. A good idea? Yes. But not easy to do. If it was easy to achieve Italy’s reputation, everyone would do it. But it is worth trying. Australia has authenticity in its favor — it really is warm and friendly and the food and wine you can find there really are great– and that’s worth a lot.

Is it the only way to re-brand Australian wine? No — tune in next week for my report on another approach to this problem.

Restaurant Australia: Re-Branding Australia (and Australian Wine)

Click on the image to see a “Restaurant Australia” video.

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I’m back from Australia, where I spoke at Savour Australia 2013 (click here to view my presentation). The purpose of Savour Australia was to re-launch Brand Australia wine on the global market by bringing together about 700 domestic and international delegates and rolling out an integrated marketing plan that combined Australian food, wine and tourism.

Savour Australia was quite an intense and impressive global gathering and I am still trying to process all my experiences both at the conference and in independent travels (scroll down to see a brief list of extreme wine moments). I’ll be analyzing what I think I’ve learned over the next several weeks.

Food Stars, Porn Stars, Rock Stars

“Restaurant Australia” is the proposed new brand and you can perhaps best appreciate how its elements connect by clicking on the image above and watching the short video that appears. The basic idea is that food and wine have become much more important tourism drivers. Nature (think Grand Canyon) and culture (think Italian Renaissance art and architecture) are still important draws, but increasingly travelers seek out fine wines, great restaurants and cult foodie experiences. Then they become brand ambassadors, spreading the word across the internet and around the world.

This sea change should not come as a surprise. As I wrote in Wine Wars, this is an effect of the growing popularity of foodie television shows and networks, like the insanely popular international Top Chef and Master Chef series and the rise of foodie celebrities such as Jamie Oliver, Nigella Lawson, Anthony Bourdain and so on. Seriously, food stars get more exposure than porn stars and are sometimes more popular than rock stars (“rock star” being the gold standard for pop culture status).

The food’s the thing, don’t you know? The Australians are smart to realize this and to try to recast their image around it.

Shrimp on the Barbie

But they don’t start the process of re-branding with a clean slate (or clean plate, I suppose). For many people here in the United States, Australian cuisine is defined by Crocodile Dundee and Outback Steakhouse. Paul Hogan, the actor who portrayed the famous Crocodile Dundee character in the films, was featured some years ago in an Australian tourist campaign that generated the memorable line “throw another shrimp on the barbie.” Australian food (and culture generally) is warm and generous, if not particularly sophisticated according to this approach. A good image then (and Australians sure are warm and generous), but not especially useful now. The game’s changed.

For better or worse, Outback Steakhouse’s popularity has reinforced this idea of Australian food culture. Outback is a meat and potatoes kind of place, although I see they now also feature grilled chicken “on the barbie.” It’s signature menu item is a “bloomin” deep fried onion appetizer. Tasty, I bet,  but not really haute cuisine.

So the Australians have their work cut out for them and the videos we saw at Savour Australia (and the great food and wine we enjoyed there) suggest that they have both great raw materials to work with and a sophisticated understanding of the story-telling necessary to make their strategy work. Click here to view videos from Savour Australia, including four stunning chef-centered  “Restaurant Australia” themed videos.

Terroirist Revenge Strategy

I’m a big fan of this approach, as I told my Adelaide audience, because it fits very well into the analysis I presented in Wine Wars. I didn’t have Australia in mind when I wrote that book, but its argument fits the great land down under very well. Australian wine has experienced the double-edged sword of globalization and the problems of over-simplified marketing messages (these are the “Curse of the Blue Nun” and the “Miracle of Two Buck Chuck” of the book’s subtitle).

Now, I think, they need to channel their inner terroirists and tell a more sophisticated story that draws upon, to use a catch phrase of the Restaurant Australia campaign, the people, places and produce of their land. (People, place and produce is not a bad definition of terroir).

Will it work? Will “Restaurant Australia” be able to launch Australian wine on a new path? Come back next week for more analysis.

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Australia 2013: Memorable Moments

Herewith a few memorable moments from our trip, some of this will be featured in future Wine Economist columns.

  • A festive wine dinner with Australia’s First Families of Wine, an association of Australian producers who are doing their level best to change the way the world sees Australian wines.
  • A fabulous tasting of Australian wines from the Yalumba Wine Museum (I guarantee you will be jealous when you hear about the wines we sampled).
  • Wine writer and broadcaster Michael Hince and his wife Amanda  invited us to a dinner in Melbourne where they showed off wines from Victoria. It was a really spectacular demonstration. Wow! You can read Michael’s account of the wines and the dinner here.
  • Great hospitality during our time in the Barossa Valley, with memorable visits to Rockford, Torbreck, Hentley Farms and Charles Melton.
  • My wine economics colleague Kym Anderson gave us a memorable tour of his Adelaide Hills region (highlights: Ashton Hills Vineyards for the Rieslings and Pinot Noir and Hahndorf  Hill Winery for Gruner Veltliner and Blaufrankisch) and sent us to Seppeltsfield winery in Barossa, where we happily immersed ourselves in Australian wine history.
  • Tasting and talking with Peter Althaus at his Domaine A winery near historic Richmond, Tasmania (and staying at Tara’s Richmond Farmstay).
  • The fabulous family-style long-table winemaker lunches at Savour Australia. Outstanding food, wine and conversation.
  • Working (not just attending) the Wednesday “Grand Tasting”. Prue and Stephen Henschke let me pour their fabulous wines (including Hill of Grace)  for about 90 minutes so that I could see the conference and the delegates from the other side of the table.  What a treat!

Early Days for Virginia’s Early Mountain Vineyards

P1050858It is still early days for Early Mountain Vineyards, the ambitious and progressive new project that Jean Case has started along with her husband Steve (of AOL fame).

The goal (and the challenge) goes beyond establishing a destination winery in the Monticello AVA. The Cases want to help elevate the profile of Virginia’s growing wine industry generally.

That’s a worthwhile aim, but not a simple or easy one in today’s competitive market environment. As one friend put it, early days and a mountain to climb.

Virginia Wine Mosaic

We were in Virginia to visit Sue’s parents Mike and Gert who live near Richmond and came to Early Mountain on the advice Frank J. Morgan who writes the popular Drink What You Like blog, which analyzes Virginia wine.   With about  200 wineries of various sizes and foci and 15 AVAs, Virginia presents the potential wine tourist with many choices. Frank suggested several interesting winery targets and I selected Early Mountain both for its proximity to Charlottesville and for its ambitious stance.

The Cases are big fans of all things Virginia and saw in the bankrupt Sweely Estate winery an opportunity to contribute to the wine industry here. The Sweelys built an impressive facility — a 20,000 case winery and a separate spectacular hospitality and event center, but they were apparently better at making wine than selling it for profit.

Early Mountain (named for the famously hospitable Early family who lived in these hills in Revolutionary War times) rose from these financial ashes in 2011 with the double mission to add to the chorus of Virginia wineries and also help the whole industry open a new era.

Best of Virginia

The most obvious evidence of this broader purpose is the Best of Virginia wine program at Early Mountain. The winery has partnered with the nine wineries shown above and promotes their products along with its own. This is done mainly through a series of tasting flights, only one of which is based on Early Mountain wines alone.

The rest feature a mix of products from the ten different producers carefully selected by Michelle Gueydan, a sommelier employed specifically for the Best of Virginia program. The flights are changed up periodically to both broaden the range of wines so promoted and to encourage visitors to return repeatedly to see what’s new.

I understand that there are also plans to eventually channel winery profits to promote Virginia wines in line with Case’s Revolution concept of social entrepreneurship. Profits seem a long way off, based on my back-of-the-envelope calculations of revenues and costs, but a patient capital philosophy rules.

Early Days for Wine Identity

We enjoyed platters of local cheeses and meats, which paired very well with an Early Mountain Pinot Gris. The focus on local producers was both clear and delicious.We then turned our attention to a red wine flight that showcased four wineries and four grape varieties or blends. The Barboursville Sangiovese (they are owned by the Italian Zonin family) and the ’08 Early Mountain Merlot were Gert’s favorites among the reds we tasted. I was attracted to a distinctive Petite Verdot.

I’m optimistic about this project (as I am about the future of Virginia wine more generally), but I think everyone agrees that it is still early days. Early Mountain is still building up its wine portfolio, which necessarily takes a few years to accomplish. (If you were starting from scratch you would wait for the wines before opening the hospitality center but the desire to seize the opportunity caused the cart to be put ahead of the horse for now).

My perspective is that the components for success are coming into place and need to be lined up effectively into an identity for the winery and a message for the industry. I think the Early Mountain project is about Virginia hospitality and while that is clear in a sensual way when you step into the big open room, it could be communicated more explicitly in other ways.

The Early Mountain wines themselves don’t seem to have an identity yet, but that is perhaps natural since they are still works in progress. But they will need to be more clearly defined at some point, too, and that is not a trivial problem. The most successful wineries know who they are and express this identity consistently from first greeting through the wines and the wine experience on down to the product design and promotion materials and throughout every member of the staff.

An American [Wine] Dream

The Best of Virginia idea is a good one, but at this point the wines more or less speak for themselves and while visitors might find individual wines that they enjoy from around the state, I would like to see a better developed educational element to draw them progressively into Virginia wine in a way that includes the varieties and styles, the wineries, the AVAs and the terroir and of course a cultural element that connects to local history and cuisine.

An educated consumer is more than just a buyer — she can be an ambassador for Virginia wines and that’s where the real pay-off comes. It might seem like I am demanding a lot — and I am — but this is a rare opportunity due to the resources and commitment of the Case family and it would be great if it succeeded on all fronts.

This is not just Early Mountain’s problem, of course, but an issue that the Virginia industry needs to wrap its head around. Right now it seems to this outsider that the Virginians, like wine producers in many regions, are working through the debate about the need for a signature grape variety. Viognier? Cabernet Franc? Petite Verdot? It seems to me that this is an unproductive debate (or maybe a counter-productive one).

Virginia makes lots of different wines (Barboursville apparently makes a helluva Nebbiolo — who would have guessed?) from many grapes varieties in many styles (something the Early Mountain flights demonstrate). Defining the region by one grape or two wouldn’t do justice to this diversity.

Virginia also makes some disappointing wines, as is the case with most developing wine regions, and the store shelves feature many sweet wines and fruit wines, too, which may be very good but certainly provide a mixed message. Perhaps  a focus on more consistently high quality (and not signature grape) is the road ahead? I think that’s part of the Best of Virginia plan — to draw attention to high quality and try to raise the bar for everyone.

As the recently published  American Wine by Jancis Robinson and Linda Murphy teaches us, America is full of wine and wineries — they are not just in the big states or made by the big producers. I dream of an America where wine is made everywhere and enjoyed everywhere. Early Mountain can be a part of that dream. I wish them success.

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Thanks to Allison, Dave, Steve, Erich and Jacob at Early Mountain for their hospitality and willingness to answer all our questions. Thanks to Frank for his advice. Thanks to my most senior research assistants Mike and Gert for their able assistance and to Sue for photographs and her sharp eye and keen ear.

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Update June 5, 2013. A nice article about Virginia wines (including a mention of the Early Mountain “Best of Virginia” partnership) has been posted on the Appellation America website. Enjoy!

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