New Directions at Wine Enthusiast and Alquimie

winemag2I am hopelessly old school in some ways — I continue to resist the trend towards electronic publishing in wine, for example.  Although I read the Financial Times and Wall Street Journal on small screen devices, I can’t resist the look and feel of print wine magazines like Wine Spectator and Decanter.

So I am interested when old print publications take new directions (apart from the obvious and perhaps inevitable road to an on-line only existence) and when new print magazines enter the marketplace. Here are a couple of interesting recent developments.

Embracing Lifestyles at Wine Enthusiast

Wine Enthusiast magazine recently announced a major redesign and the change is more than skin deep. Yes, the physical design of the magazine has changed, but what’s new is something that is also really old.  Wine Enthusiast is called by that name because it isn’t just about wine, it is about the world of the enthusiast, the reader, who experiences wine in many ways.

Increasingly the wine enthusiast experience involves food and travel, for example, and the editors at Wine Enthusiast have chosen to embrace the lifestyle elements enthusiastically. Here’s a description taken from a press release that came my way

The newly redesigned Wine Enthusiast Magazine is back this month with even more lifestyle coverage! The April issue covers a variety of epicurean adventures from highlighting the golden age of classic chianti to a breakdown of trending party savers to the “Recipe of the Month: Banh Mi” and even a piece on the salty side of cocktails.  This issue further showcases the publication’s dedication to its FRESH and lifestyle focused revamp.

The new Wine Enthusiast (winemag.com) now delivers the best of epicurean culture through engaging and compelling content that is entertaining and “of the moment.” The new, fresh look better reflects the audience of contemporary wine drinkers while continuing to provide insights readers won’t find anywhere else.

The Buying Guide with ratings and tasting notes (for wine, spirits and beer) is still there, of course, but there is even more content than before relating to destination travel and food, chefs and recipes.  That’s no surprise, I suppose, since so much of our lives now bears the mark of trends and celebrities from Food TV and The Travel Channel and it makes sense that wine magazines would be part of this pattern.

Wine marketers have learned to play the lifestyle card and the Australians are betting heavily on it for their Restaurant Australia wine/food/tourism promotion. Wine magazines are on the band wagon with the rest of the media.

Although wine is my serious focus, I must say that I found the lifestyle aspects of the new Wine Enthusiast engaging and entertaining. Don’t judge me too harshly for this statement. It is easy to criticize the lifestyle marketing trend, but I think that magazines probably need to move this direction to stay relevant. Even Decanter, my favorite monthly wine publication, has its share of lifestyle articles and is in fact part of its publisher’s portfolio of lifestyle magazines in various fields.

Wine Enthusiast has not blazed a completely new trail, since this is where wine publishing has been going for some time, but rather has transformed itself  by more completely committing itself to the journey.winemag3

Alquimie: New Directions Down Under

Alquimie is a quarterly magazine from Australia. Edition Two arrived at my doorstep a couple of weeks ago and it has taken me a little while to really understand and appreciate it.

At first glance Alquimie  appears to be a sort of luxury lifestyle magazine full of beautiful photos and illustrations on rich paper stock (but minus the luxury good ads that you might expect to see). It reminds me a bit of Slow, the magazine of the Slow Food Movement or maybe a wine version of Granta. Both of these publications have a distinctive style and feel and pride themselves on taking their readers in serious new directions.

Alquimie (think alchemy?) is so beautiful and distinctive that at first I just wanted just  to page through it and to enjoy the sensations that the images evoke. It took a week or so before I finally sat down and actually started reading the articles. That’s when I really became a fan. Alquimie says that its goal is “Breathing New Life into Drinks” and I think it succeeds by breathing new energy into drinks publishing.

The magazine is divided into four parts, The Story, The Study, The Palate and The Excess and each contained something of interest in the issue I was sent. Since I’ve visited Australia, South Africa and Portugal in recent months I was naturally intrigued by The Study section, which included an excellent profile of South African Chenin Blanc, a report on the work of viticultural scientists at the University of Melbourne who are developing the Vineyard of the Future (look for more dogs and drones), and an introduction to some of the hundreds of indigenous Portuguese grape varieties.

The tasting notes in The Palate part of the magazine are real works of art and were used artfully in several articles, including one that sought wines to pair with a four-kilogram Wagyu rib eye steak and another that compared a 1990 Madeira wine with another from 1890.

Wine, beer and spirits are all in Aquimie’s domain, but milk? I was surprised and then delighted by an article called “What Ever Happened to Real Milk?”  about micro-dairies that are trying to bring back old school moo juice. I didn’t know that Momofuku had a milk bar — did you! (Karl — you once said that milk was all over — gotta rethink that!)

We also learn about an ultra-natural Tasmanian water so precious that it once sold in Europe for 22 euro per 750 ml bottle. The global financial crisis put and end to that market, but the water is still there and the passionate people behind continue to work to bring it to market.

Is this a lifestyle magazine? It certainly looks it with its high design, rich materials and hefty cover price (AUD 18 per issue).  But it is different and not just because there are no advertisements. It seems to me that it takes the lifestyle intent to engage with consumers at a deeper level than just products and pushes it much deeper and maybe in a some new directions.  A really impressive achievement. I wish them much success!

 

Which Wine Magazine?

Wine enthusiasts spend a lot of time and money on magazines and guidebooks and I guess they are never sure if they’re getting the best advice. One of this blog’s most common referring links is the Google search query “world’s best wine magazine?” Want to know the answer? Read on.

If you were going to read just one wine magazine, which one would it be? I decided to use my university students to try to find out. They are plenty smart and know a lot about wine, but they don’t (yet) spend much of their time reading these publications.  Perfect subjects for a little media analysis experiment.

Three Ideas of Wine

I passed out copies of perhaps the three most influential wine magazines on the planet and asked my students to analyze them in terms of point of view, intended audience and, of course, which one they would want to read.

The three magazines are Wine Spectator, Decanter and Wine Advocate. Wine Spectator has the highest circulation of any wine magazine in the United States and probably the world. Decanter, a British publication, sells fewer copies, especially here in the U.S., but has global reach.

Robert Parker’s Wine Advocate is a subscription-only publication; most people don’t actually read the Wine Advocate, they just see the rating numbers and blurbs on Wine Wall shelf talkers promoting particular bottles. It’s very influential despite its limited distribution.

The magazines are different in almost every way. They certainly represent three different ideas of wine. Which is best? Well, that depends.

Wine Spectator

My students quickly labeled Wine Spectator a “lifestyle” magazine and this isn’t just because it has non-wine or tangentially-related-to-wine  “lifestyle” articles about food, travel, celebrities and so forth. The advertisements were the giveaway to them. While many wine companies advertise in WS, so do the producers of many luxury and designer products.

(Most wine mags are lifestyle publications, they just have differing ratio and proportion of wine, wine-related and pure lifestyle editorial content. It would be interesting in give the students Wine Spectator, Wine Enthusiast and, say, Wine & Spirits to analyze regarding wine versus lifestyle emphasis. Maybe next term.)

Taken together, the editorial content and the advertising (plus the “coffee table” large format) gave my students a strong sense of a plush lifestyle publication. Wine is part of that world, they said, but not the only part of it. Some were attracted to this lifestyle image and other repulsed. They all found it fascinating.

Decanter

Decanter’s cover boldly proclaims that it is “The World’s Best Wine Magazine.” Is it?

Decanter is a lifestyle magazine, too, but that’s not what struck my students. Compared to Wine Spectator they noted a more specific wine focus and talked about finding deeper analysis of wine regions and issues.  I’m not sure if this is really true or if it reflects Wine Spectator’s high advertisement page  count, which might make it seem like there is less wine content.

But for whatever reason Decanter seemed more seriously interested in wine as opposed to lifestyle, according to my students.

Decanter has a different approach to wine ratings, too. Whereas Wine Spectator has many wine reviews in the back covering new releases from the U.S. and many international regions, Decanter typically features in-depth review articles on just two regions. You get more breadth of coverage with Wine Spectator and more depth with Decanter.

Wine Spectator made good  browsing, one student said, and sometimes that’s just what you want, but Decanter would be better to read.

Wine Advocate

My students were shocked by Wine Advocate. Nothing in their experience had prepared them for a “just the facts, ma’am” wine publication. Black type on tan paper. No photos. No ads. Page after page of winery and wine reviews, focusing on three or four regions in each issue.

Not for browsing. Not for reading. You have to study Wine Advocate to get anything out of it they said.

Who reads Wine Advocate? No one would read it for pleasure, according to the students. (I disagree — geeky baseball fans read columns of statistics on their favorite sport. I think there is a similar wine reader.) You would read it for business — because you are a wine retailer, distributor, investor or maybe own a restaurant.  This, they said, was a magazine for readers with a serious professional purpose.

The World’s Best Wine Magazine?

So which one is the best?  I know my answer. If I could only read one it would be Decanter because I think  it is more focused on the supply and demand issues I write about. It’s a wine magazine written by and maybe for “Masters of Wine” who care a lot about commercial concerns.

Unfortunately, Decanter’s specific consumer wine advice is mainly irrelevant to me since the British market it covers is so different from my Wine Wall here in the United States. Very few U.S. wines (apart from the big multinationals) successfully break into the British market, for example, and so we get little space in Decanter compared to wines from Europe and Australia. The market here is just the reverse.

My students weren’t willing to choose a “world’s best wine magazine.” They could see strengths and weaknesses in all three.  One student said it boiled down to a trade-off between accessibility (Wine Spectator) and authenticity (the more detailed analysis of terroir you find in publications like Wine Advocate) and there’s no perfect balance between them.

In wine, as in many other areas of life, we want both accessibility and authenticity and I guess my students have already become both surprisingly self-aware of their position in this struggle and skilled at negotiating the complex space it  creates. Interesting.

World’s best wine magazine? No such thing. It depends on who you are, what you are looking for and your particular idea of wine.

Marketing the Wines of Spain

Mario Batali famously said that there is no such thing as Italian food – there are only the diverse regional cuisines of Italy. I believe the same idea applies to the wines of Spain. Spanish wine? No such thing. 

The many regions are so different and the wines, grapes and styles so diverse that it is impossible to say very much about them as a group. They are best understood individually.

Something for Everyone

This is a great advantage for wine enthusiasts who are seeking diversity. And it is an advantage for Spain’s producers too just now because their wines are seen to be good values and at time when value is so important.

Diversity and value mean that Spain can offer something for everyone and indeed sales of Spanish table wines are up 3.7 percent in the last year (same as the overall market), rising at an annual rate of 9.4 percent in the last quarter according to Nielsen Scantrak data.

The Diversity Challenge

But diversity is also a challenge because it means that you need to be both a winemaker and an educator. Spain’s regions and grape varieties are unfamiliar to many wine enthusiasts and to engage them you need to inform them. How do you establish a market identity for such a diverse group of wines? It’s a real problem and I decided to look closer at how Spain’s wine establishment is trying to solve it.

What image or images do current marketing campaigns project of the wines of Spain and how do they compare with other national or regional advertising efforts? Raphaela Haessler and Lily Chiang, two of my students, volunteered to help me find out. I loaded them up with a stack of wine and lifestyle publications (Wine Spectator, Wine Enthusiast, Wine & Spirits, Bon Appétit, and Gourmet among them) and asked them to prepare a comparative analysis of the advertising they found. Here, in part, is what they had to say.

The ads portrayed Spanish wines as new, different, fresh, and lively.  In contrast, the French seemed outdated, austere, cold, and inaccessible.  The Spanish ads had bright but earthy colors connoting Southern Spain, late summer and late evening parties; whereas Italy’s romantic black and white photos and France’s monotone or beige imagery did not pop out as much to the reader.  The French, Italians, and even Americans based their advertising off of their reputation, family, and tradition.  The Spanish, on the other hand, focused more on moments of joy and lightheartedness.  While the traditional wine producers said “you should buy our wines” the Spanish message was “anyone’s invited to our party.”

I think this is a great message for the current economic climate. Wine enthusiasts don’t want to simply trade down because wine is a lifestyle product and trading down means accepting a lower self-image for many buyers. They would rather “trade over” to a different lifestyle that is more fun and relaxed (and, incidentally, less expensive to support).

Reputation versus Lifestyle

Reputation and tradition are still powerful marketing tools, to be sure, but the lifestyle message is potent in today’s market

The Spanish wine ads also highlighted the wine’s uniqueness and diversity with the national wine slogan being “far from ordinary” (and the national tourism slogan being “Smile, you’re in Spain.”)  The ads mention that there is great variety and something for every taste.

Something for every taste — yes!  And every wallet, too, I suppose. Good to see the diversity advantage being exploited. But there are two sides to diversity when it comes to wine.

The ads promoted a specific state of mind, but what they were lacking was a sense of place.  While one ad had historical sights of the country, there were no images of vineyards, cellars, or even winemakers.  There was also a lack of refinement.  Most of the other advertisements presented wine as a cultured, luxurious form of leisure, or at least a family endeavor resting on tradition.  In contrast, Spain’s ads came across as youthful, energetic, social, yet naïve and flippant.

Faceless and Placeless

As you can see, Lily and Raphaela really reacted quite strongly to the lack of terroir in the Spanish wine advertisements. The association with a fun Spanish lifestyle is a plus in their view, but compared with other marketing schemes Spain was surprisingly faceless and placeless. That’s the diversity challenge.

So what is my bottom line of Spain’s wine identity? First it is important to acknowledge the limitations of this study — these conclusions are based on a snapshot of Spanish wine marketing at the present moment in a small number of important publications. A more detailed analysis over a longer time frame might produced different conclusions.

I think that the current campaign is right for the times, but incomplete as an overall stragegy. I hope Spain’s wine marketing gurus are prepared a follow up program that will educate and inform about the particular wines and regions (or an orchestrated set of private marketing campaigns by the major producers and distributors to accomplish the same thing).  It is important to drop the second shoe and not leave well enough alone.

That’s the message that Australian producers have learned the hard way. Their inexpensive Shiraz wines were so successful that they let them become Brand Australia. Now that they have fallen from favor, the job of re-branding Australian wine in terms of its fabulous regions is very hard. Spain should start now on this project and not wait until the fun lifestyle fad fades.

>>><<<

Thanks (and a bottle of Las Rocas Garnacha from Calatayud) to Raphaela and Lily for their research assistance on this project.

Gourmet, Rachael Ray, Chardonnay Connection

1940-2009 RIP

I was trying to explain to my students the lasting importance of Robert Mondavi and I suddenly realized that Julia Child was the key. Mondavi tried to do for wine in America what Julia tried to do for food. This made me think about other parallels between our wine and food cultures — and the significance of the last issue of Gourmet magazine.

The End of Gourmet

Condé Nast announced yesterday that it was pulling the plug on Gourmet magazine, America’s signature culinary monthly since 1940. The cause of death, clearly, is the economic crisis, which has reduced advertising pages by over 30 percent. Gourmet‘s subscribers (there are nearly a million of them) will have to find something else to read on the still-cluttered Food & Lifestyles section of the newsstand. Bon Appétit (another Condé Nast title) is the obviously choice, although it is not a perfect substitute — more recipes I’m told, and less upscale travel and leisure.

Gourmet‘s obituary appeared everywhere — even on the front page of the New York Times. The Times made it clear that this wasn’t just a business decision (although Condé Nast assured us it was — the McKinsey consulting firm made the call). This is really the end of an era. And not a good end.

“It’s Rachael Ray’s world now,” the story declared, referring to the 30-minute-meal Food Network star; “we’re all just cooking in it.” Roll over, Julia Child (as Chuck Berry might have said) and tell Escoffier the news.

Rachel Ray Chardonnay?

Setting aside for a moment the premise of the Times article — that Gourmet defines the era — I wonder if what’s true for food in America is also true for wine? This must be a valid concern because it is he gist of the question that I’m most frequently asked by journalists — is the current slump in fine wine sales (especially wines selling for $20 or more in the shops) a temporary trend or a permanent shift in demand? Is this the end of an era for wine? When the economy perks up eventually, will people want to buy very expensive wines again? Or is the switch to cheaper, simpler wines (my made-up Rachel Ray Chardonnay) here to stay?

The question became more interesting as I read the Times article. I tried to substitute wine terms for food terms in the article and it seemed to make sense. Here’s what I mean.

The death of Gourmet [insert name of expensive wine] doesn’t mean people are cooking less [drinking less] or do not want food magazines [good wine], said Suzanne M. Grimes, who oversees Every Day With Rachael Ray, among other brands, for the Reader’s Digest Association.

“Cooking [wine drinking] is getting more democratic,” she said. “Food [wine] has become an emotional currency, not an aspiration.”

It has also become democratized via the chatty ubiquity of Ms. Ray [Gary Vaynerchuck?] and the Food Network stars. Ms. Reichl [the Gourmet editor — insert Robert Parker or maybe Jancis Robinson] is a celebrity in the food [wine] world, but of an elite type. She [or maybe he] “is one of those icons in chief,” said George Janson, managing partner at GroupM Print, part of the advertising company WPP. But what harried cooks [budget conscious wine drinkers] want now, it seems, is less a distant idol and more a pal.

The substitution works, pretty well, don’t you think? And the McKinsey consultants surely did their job. Food and wine down the tubes. Maybe Robert Mondavi and Julia Child are both turning in their graves!

Exaggerated Rumors

But rumors of the death of both fine dining and fine wine are probably exaggerated, as Mark Twain might have said. Gourmet is an iconic brand and the fact that Condé Nast cut it rather than Bon Appetit surely does mean something. But we have to remember that print magazines themselves are an endangered species in this internet age. What information we consume and in what form are both changing very rapidly. Magazines will change rather rapidly in the next few years to remain relevant or else they’ll fade away. Gourmet isn’t the first and won’t be the last to bite the dust.

So I am not willing to declare fine wine (or the Gourmet food lifestyles) dead on the basis of this news alone. The question of whether Americans will return to their old wine-drinking habits when the recession ends remains open for now.

Note: A lot of great wine writing appeared in Gourmet over the years. Look for a future post that tries to understand the changing American wine work through the Gourmet lens.

Decanter’s Wine Power List

Decanter, the self-proclaimed “World’s Best Wine Magazine,” takes its rankings very seriously. Wine rankings, of course,  and, in the July 2009 issue, Power rankings. Who are the most powerful people in the world of wine and what does the power list tell us? Let’s see if we can find the message in this bottle.

The Power List

The names on the power list are very interesting but the story that they tell about wine today is perhaps more important. Here are the first ten (top ten) people on the list.

  1. Richard Sands, USA, Chairman, Constellation Brands
  2. Robert Parker, USA, wine critic
  3. Mariann Fischer Boel, Denmark, EU Commissioner for Agriculture
  4. Mel Dick, USA, Southern Wine & Spirits (wine distributor)
  5. Annette Alvarez-Peters, USA, Costco wine director
  6. Dan Jago, UK, Tesco wine director
  7. Jean-Christophe Deslarzes, Canada, President of Alcan Packaging
  8. Jancis Robinson, UK, wine critic, author and journalist
  9. Nicolas Sarkozy, France, President of France
  10. Pierre Pringuet, France, Pernod Ricard

Since Decanter is a British magazine with very small US distribution you might be surprised that three of the top ten positions (and both of the top spots) are held my Americans, but don’t be. Constellation Brands is the largest wine company in the world and accounts for one out of eight bottles of wine sold in the UK. And Robert Parker is best known for his ratings of French wine, not Napa bottlings, which is important to British buyers and merchants. The presence of Sands and Parker at the top of the list does not reflect any sort of US-centrism, just the realities of the global marketplace. It really is a global list. Or at least, like those famous New Yorker cover illustrations, the globe as seen from London.

I won’t list the second ten names (out of 50 in total), but the I think they illustrate the global reach of the wine market today: America, China, Chile, Australia, Spain and so on. Even India, an emerging wine market, makes the top 50 ranking.

The list is complete and up-to-date (Gary Vaynerchuck, the US internet wine guru, shows up at number #40), but there are some interesting gaps. Fred Franzia, the godfather of Two Buck Chuck, is nowhere to be found, for example, despite his obvious influence on the US market, while Judy Leissner of Grace Vineyard in China, who perhaps represents the future of Chinese fine wine, makes the “Ones to Watch” list.

No wine economists make the list, alas. Greg Jones, the respected Southern Oregon University wine climatologist, is the only professor (#33). Maybe next year …

The Story

It is fun to see who makes the list and who doesn’t (why Jancis and not Oz?), but the ranking is more interesting if you strip out the personalities and consider what market forces they represent. Herewith my version of this  story.

The world of wine is very unsettled. Although wine is one of the most fragmented global industries (much less concentrated than beer or spirits, for example), size matters more and more as consolidation continues. [Hence the power of Constellation Brands, Pernod Ricard and Southern Wine & Spirits.] Reputation matters, of course [Parker and Robinson], but the world is changing and everything is up for grabs from how and where wine is sold [Costco and Tesco] to how the bottle is sealed [Alcan].

Although change is generally associated with New World wine, this is no longer the case. The biggest threats to “business as usual” for Old World wine come from inside the European Union itself. On one hand, the new EU wine regime [Mariann Fischer Boel] will pressure Old World wine to compete with the New World head-on and without continuing EU support. On the other hand we have an unexpected prohibitionist movement [symbolized by Sarkozy] that seeks to regulate wine like the Americans do (even as some parts of America are changing) — as a dangerous controlled substance. It is thus imperative for Old World wine to master the tricks of the New World industry — tricks that Constellation and Southern and Costco symbolize.

These changes take place, of course  within the context of the expanding global market, global climate change and a continuing global economic crisis (that’s where a wine economist would have been a useful inclusion).

I won’t pretend that the Decanter Power List is a scientific ranking (Decanter doesn’t claim this in any case), but it is an interesting peek into how wine insiders view their industry. I’ll be curious to see how the names and the story lines change when the next Power List appears.

Crisis and Change in the Wine World

When the economic crisis began to unfold last year many people said that it wouldn’t affect the world of wine — people will still want to drink, they said, even more so when they are worried or depressed.  Recession is good for wine, they assured us.

Well, we all know now that that line of reasoning was misguided.  The crisis is hitting almost every shelf on the Wine Wall as consumers cut back and trade down (only a few value brands like Barefoot Cellars seem to be benefiting).  The most recent issues of Wine Spectator and Decanter feature cover stories that are designed to appeal to recession-shocked bargain-hunting wine enthusiasts. (See note below.) Wine industry publications are packed full of stories about how producers, retailers and restaurants are coping with declining demand.

Cycle or Shift?

Now that we know that economic crisis is having a real impact on wine, it is time to think more seriously about what form that impact is taking. Most people that I have talked to are thinking in terms of boom-bust cycles. The current downturn will be very difficult — and a shake out will take place across the industry — but, they say, the wine economy will bounce back again once the economy itself starts to recover.  This is probably the correct way to think about the future of wine markets, but it isn’t the only way.

A second possibility is that the crisis will produce a long term structural change in the wine market.  The market won’t bounce back from its low, but rather will reset itself and proceed along a new and possibly unpredictable future path. Economists who study other sectors (finance, automobiles, agriculture) and taking the possibility of structural shifts seriously.  Could it be happening in the world of wine?

I have given a lot of thought to question of cycles and shifts over the years.  My best known work in this regard is a comparative economic history of public debt in advanced economies called Mountains of Debt: Crisis and Change in Renaissance Florence, Victorian Britain and Postwar America (Oxford University Press, 1990).  (Mountains went out of print in the Clinton years when the US deficit went away, but George W. Bush and the current crisis convinced the publisher to bring it back).

One point of the book is that some crises are more significant than others.  Sometimes a crisis is a tremor that shakes things up for a while but leaves the landscape pretty much unchanged.  Other crises are major earthquakes, with more lasting long term implications.  Maybe this is a “Big One,” at least in terms of wine. I’m going to use the next few blog posts to think through this important question.

The Market Center Shifts

One early indicator of structural change comes from London, the center of the wine world.  Great Britain, as I’ve said before, is the most important wine market in the world. The British don’t drink the most wine in the world or produce the most, either, but they buy a lot of wine from other countries, making them the largest import market and therefore the focus of international competition (Germany and the United States along with Britain form the Big Three import markets).

But this may be changing.  Britain’s economy is being badly battered by the economic crisis, as an article in yesterday’s Financial Times makes clear.

As the UK economy contracts at its fastest rate since the second world war, the … Industry Watch report predicts that more company casualties will follow in 2010. It says 39,000 businesses, or one in 50, are likely to fail next year.

Britain’s banking sector is in bad shape, perhaps even worse than the US industry, and its government budget deficit is also spiraling into the red.  This has general wine market effects similar to those in the US (cutting back, trading down, switching over), but some different ones, as well, the most important of which is due to the exchange rate.

As Britain’s economy has imploded the pound has collapsed as well. The pound has fallen by about 25% against both the dollar and the Euro. It took about $2 (or €1.30) to buy a pound a year ago, now it is selling for $1.45 (or €1.06) today.  This means that imported wine (which in Britain is, well, wine) costs much more because of the exchange rate at the same time that the slumping economy (and lowered expectations) are undermining demand. The US dollar, on the other hand, has appreciated relative to most currencies apart from the yen, promising wine buyers lower prices to match their reduced economic circumstances.  So the recession is affecting wine in Britain more than the US wine market.  A shift is taking place — is it temporary or will it be permanent?

Although it is too soon to know for sure, I think it is possible that these factors could cause London to lose its preeminent position in the world wine market.  I see indicators in the decline of the Australian industry (complicated by other factors, I know — but the collapse of the British market is part of it) and the recent global focus on Argentina and its excellent wine values (both Wine Spectator and Decanter make this point).

Although Argentinean producers are looking to export wherever they can get a foot in the door, my strong sense is that they see their future in the U.S. market more than Great Britain.  Perhaps they are at the head of the pack as the world wine market resets and proceeds on a different path.

[Note: Wine Spectator includes 18 tips on stretching your wine dollar. My favorite is tip #7: buy by the case and get a discount (page 55 of the April 30, 2009 issue).  Sound advice, although the particular example cited may miss the point: “A 10 percent discount on a $300 case translates into a saving of $2.50 per bottle. That adds up fast.”  The problem, of course, is that the people who used to buy those $300 cases are cutting back the hardest and I’m not sure that $2.50 a bottle  is going to turn them around.]

The Wine Spectator Award Hoax

It has been a couple of weeks now since the Wine Spectator hoax hit the news. Robin Goldstein (a.k.a. fearlesscritic.com) “blew the whistle” on Wine Spectator in a session that I happened to chair at the American Association of Wine Economists meetings in Portland. (Robin actually revealed his hoax as an unscheduled prelude to a completely different presentation at the meetings.)

The wine media quickly picked up the story and now it is everywhere. The story has generated a certain amount of embarrassment for Wine Spectator and given Robin and his new book a lot of  publicity.

What Robin did was to create a fake Italian restaurant (Osteria L’Intrepido di Milano) along with a made-up menu and wine list. Then, following directions on the Wine Spectator website, he applied for an Award of Excellence, which is the way that Wine Spectator recognizes and encourages restaurants with strong wine programs. Wine Spectator tried but was not able independently to confirm the facts about the fake restaurant; they took the application on trust as an honest entry and presented it with the appropriate award in the August 31, 2008 special restaurant issue (see page 181). You can read all about it on Robin’s website for the fake restaurant, http://osterialintrepido.wordpress.com/

Where is the Outrage?

How upset should we be to discover that Wine Spectator can be tricked into giving its wine award to a fake restaurant?  Michael Morrell, my chief cheap wine research assistant, was outraged.  Although price is the most important factor for him in choosing wine, he admits that he is also influenced by wine ratings. The award hoax undermines his trust in wine critics in general and the ratings and advice they produce.

I can understand Michael’s concern, so I consider this a very serious matter, but I don’t think the fact that Wine Spectator fell for a hoax is reason for us to doubt its integrity.  Here is my report.

The Wine Spectator Award of Excellence is given to restaurants to recognize their wine programs.  Although the actual criteria for receiving an award seem very modest to me (you can read them on page 97 of the special restaurant wine issue), it is a fact that about 30% of the new entries each year fail to meet them (the success rate is obviously higher for establishments who enter and receive an award year after year).

There are three levels of award.  3254 restaurants received the base level recommendation.  802 second tier “Best of Award” ratings were given to restaurants with more comprehensive wine lists. 73 top of the line “Grand Awards” were bestowed.  The people at Wine Spectator are proud of their award program and believe that it has encouraged restaurants to upgrade their wine programs.

Caution: Economics Content

I’m sure this is true, but I tend to view the matter in economic theory terms.  Consumers have lots of restaurant options and are uncertain which ones might have good wine choices. The restaurants know how good their wine selections are but have trouble effectively communicating this to potential customers. This is the classic economic problem of “asymmetric information” and the classic economic solution is “signaling” – where one side of a potential transaction finds a way to reveal key information to the other side to help seal the deal.

Restaurants that want to attract wine enthusiast customers need a way to “signal” them about their wine programs and the Award of Excellence is one way to do this.  Restaurants that think sending this signal is worth meeting the criteria and paying the entry fee do it and get on the list.  Others, even some that have strong  wine programs, don’t bother. They have other ways to send the message, I guess.

Wine Spectator fell for the Osteria L’Intrepido hoax because it relied upon the honesty of applicants, assuming, I suppose, that no one would go to the trouble and expense of applying without a conventional commercial purpose. This is another side of asymmetric information — Robin presumably knew his motives in setting the fake restaurant “sting” and Wine Spectator could only guess or assume.

In Vino Veritas

Truth is especially important in the wine world and, because of the problem of asymmetric information, it is particular difficult to know with confidence.  We depend upon the honesty of self-interested actors and the truthfulness of their signals. When we read wine ratings or see wine competition awards, for example, we assume that the judges and critics are tasting the same wines that we buy in the market. But it would be easy for a dishonest producer or distributor to put special wines in the bottles sent to the critics or wine award competitions. The easiest switch would be to put some of last year’s highly ranked wine in place of this year’s weak effort. Most wine critics rate products that are sent to them by makers and distributors and rely upon the honesty of the sender.  Only a few – Gaiter and Brecher at the Wall Street Journal come to mind – seek out and purchase their wines through normal retail channels.

Doctored “critic cuvee” wines are a potential hoax problem.  I am not aware of any wine publications that have been hoaxed in this manner, but I have read and heard speculation about special “award cuvee” wines being entered in competitions.  The nature of the situation makes us all vulnerable to hoaxes.

Wine Spectator fell for this hoax but it wasn’t because its editors are dishonest in giving their awards.  I think most of the criticism of Wine Spectator in this situation is a bum rap, especially since the magazine’s editors seem to be unusually careful in avoiding advertising conflicts of interest.  That’s the subject of my next post.

Follow

Get every new post delivered to your Inbox.

Join 1,916 other followers