Friuli Revisited: Surveying Collio’s Changing Winescape

It has been more than  a dozen years since our last visit to Friuli. Friuli-Venezia Guilia is tucked up in Italy’s upper right-hand corner, north-east of Venice, north-west of Trieste, bordered by the Adriatic Sea to the south, Austria to the north and Slovenia to the east. It is sometimes awkwardly lumped together with Trentino and Alto Adige as the Italian Northeast.

Friuli is a cultural mixing bowl with influences from all its sides. It is also a beautiful region with great wines. Why did it take us to long to return?

Lucky Day: Cantina Aperte

Our last visit was memorable. We happened to arrive at  Venica & Venica, well-known both for its wines and its hospitality, on Cantine Aperte Day, which is the one day of the year when many otherwise private cellars throw open their doors and welcome swarms of enthusiasts. It was a lucky day for us because we met so many wonderful people and tasted some memorable wines. Later we moved from the Venica B&B to to La Subida close by the Slovenian border and used it as a base to visit Udine, Cividale, San Daniele, Gorizia, Trieste and Aquileia.

As much as we enjoyed our visit to Friuli I wondered if we would ever return. There are so many interesting regions in Italy and the world, so many distinctive wines. But the pull of Friuli was strong and so we pointed our rented Fiat 500 in the direction of Cormons. We wanted to revisit some friends and wines, but “what’s new, what’s changed” were the questions on our minds.

We spent half a week at  Borgo San Daniele in Cormons, one of the best wineries in the region and a comfortable base of operations, before following the recommendation of our friends Zari and Greg and shifting to another wine estate,  Il Roncal, just outside of Cividale del Friuli for the final few days. (See below for some wine tourism notes.)

Super White: Tiare Sauvignon Blanc

When we visited before we were struck by the stunning white wines of the region and later attended some “SuperWhites” events in the U.S. designed to inform American wine enthusiasts about this under-appreciated part of Italy and draw attention to the stunning wines. We enjoyed many wonderful wines on this trip, too, including the memorable Ronco delle Cime Friuliano at the expanded and updated Venica & Venica.

But the highlight on the white side of the wine ledger was probably an impromptu visit to Tiare and the opportunity to taste a wine that had been named the best Sauvignon Blanc in the world. Best in the world? Those are big words and I don’t really know if it is even possible to settle such a claim with certainty, but the Sauvignon Blanc that we sampled (from the following and possibly even better vintage) was unquestionably excellent.

And it might not even be the best wine that Tiare makes. Roberto Snidarcig, the owner and winemaker, was even prouder of another Sauuvignon Blanc called Empìre that showed subtle oak, channeling France more than New Zealand.  And he smiled when Sue and I tasted his Pinot Noir, a pet project that showed real character and finesse.

Pinot Noir? Well, yes, as I said Friuli is a mix of influences from France and Austria and of course the indigenous Italian  grapes like Refosco, Friuliano and Ribolla Gialla.  The ebb and flow of global and local influences shows itself in many ways.

Bastianich, for example, is a project that American “Del Posto” and “Eataly” entrepreneur-restaurateur Joseph Bastianich (son of the remarkable chef and cookbook author Lidia Bastianich and business partner of the irrepressible Mario Batali) launched in 1997 to make the wines of the region and to introduce them to the U.S. and other markets.  The wines are good enough that Italy is today an important market, too. You may think of Bastanich as a showman — he was until this season a host/judge along with Gordon Ramsey on the U.S. Masterchef (he hosts Masterchef Italia now), but I can assure you that the wines are the real deal and not just a show.

Market Forces: A Region in Transition

White wines no longer steal the show in Friuli. It isn’t that they have declined in quality, only that winemakers have turned their attention to sparkling wines and back to reds, too. There have always been good reds made in Friuli, as we were reminded at Venica & Venica when we were served a stunning Merlot from the 2001 vintage that had been lost in the cellar and recently rediscovered. Clearly the best Collio reds can age! Climate change is partly responsible for the increased interest in red wines. Red wine grapes are a more reliable bet today than they were 50 years ago, I was told. The rising interest in indigenous red grape varieties such as Refosco, Schioppettino, and Pignolo is also a factor.

Market forces are another reason for the shift in direction and economics is a powerful factor in Italy, which cannot seem to extract itself from a long-term recession. Back in the old days the Bank of Italy could devalue the lira and temporarily restore competitiveness when the economy slowed down. But now Italy is a euro country and competitiveness must come the hard way — though internal reforms — rather than from exchange rate adjustment. These are difficult times for everyone including wine and we heard through the grapevine that many vineyard properties are for sale. Financial security is in short supply.

Hence a shift toward fast-selling sparkling wines because the Prosecco production zone extends into Friuli. The town of Prosecco is actually a suburb of Trieste although  the zone of DOCG production is in the Veneto, south-west in Conegliano-Valdobbiadene. Pinot Grigio is a reliable money-maker, too. Costco’s Kirkland Signature Pinot Grigio, its best-selling white wine, is from the Friuli Grave zone. Follow the money in times like these.

The marketability of Prosecco and Pinot Grigio put pressure on the indigenous wines that I am always keen to discover.  Some wine makers we met with were concerned about the region’s identity slipping away a bit, especially the very high quality Collio and Colli Orientali zones where we spent most of our time. The marketplace for wines (Italian wines, wines in general) is crowded and very competitive. Tough to get and hold consumer attention! Difficult, too, to earn that all important quality premium. A strong regional identity isn’t the solution to this problem, but it can be part of it. Need to make a statement.

My next column will profile three wineries that are making such statements in very different ways. Circle back for details.

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I can’t end this overview of our Friuli expedition without a few comments on the wine tourism experience. Sue and I just love this region for its physical beauty and cultural importance, great food and wine, and the warm hospitality of the people. It is an exceptional wine tourism destination, well-known to Italians, Germans, Austrians and the Swiss, but mainly undiscovered by Americans. Put it on your list.

We were the only guests at Borgo San Daniele in Cormons (they have three nice rooms in the winery compound), so we had the place all to ourselves at times and enjoyed our stay very much. We had breakfast in the kitchen each morning and came back at one point to discover the sleepy cat shown here who may have come in through the window and obviously made himself as comfortable as we did.

Il Roncal was a different experience but one that we would also recommend.  More rooms, more visitors, lots of activity on this hilltop estate overlooking the vines. A group of German bicyclists passed through one day and several family groups took full advantage of the outdoor meeting areas. Our room was elegant. The private tasting featured local delicacies paired with each wine, which was a real treat.

There are many exceptional restaurants in the area including a homey new osteria at La Subida with great food and wine. The staff built a fire in the outdoor fireplace for us one night when thunder, lightening, and a heavy rainstorm chased all the other diners inside. What atmosphere! trota

We had to return to Al Giardinetto in Cormons and it was as spectacular as we remembered. The food is wonderful, but the wine stands out in my memory. Our host pulled many corks, showcasing limited and unusual wines that we would not otherwise have been able to taste. A glass of this, a half glass of that, you might find this interesting, it was great as he shared treasures of the cellar with the guests.  And the total cost was much less than we might have paid for a single bottle of wine in other circumstances. A real wine lover’s restaurant.

Two other meals stand out among many. We stopped for lunch Alla Trota in the little village of Pulfero near the Slovenian border in the beautiful Natisone valley. We sat out on the patio overlooking the Natisone river that produced the trout on our plates. I went over the top with tagliatelle with a smoked trout ragu followed by  roasted whole trout and then apple strudel along with this jug of local wine.

salepepeThe next day we found ourselves in an even tinier town at lunchtime. Not many dining options in little hillside Stregna and when we asked at the door we discovered that Sale e Pepe‘s kitchen was closed for a thorough cleaning. What to do? Well, the chef said, just because we can’t use the stove doesn’t mean we can’t fix you lunch. And so we enjoyed the rather spectacular salad, cheese, charcuterie and dessert shown here accompanied by one of the region’s best red wines from Le Due Terre.

Did I mention warm hospitality before? Now you know what I’m talking about. Obviously we need to return when the kitchen is cooking on all its burners. Must be spectacular!

Circle back for a profile of three wineries that really caught our attention. Cheers!

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Thanks to everyone who hosted and helped us during our week in Friuli. Special thanks to Michelangelo Tagliente for his advice.

Butterfly Effect: How China’s Crisis Threatens the U.S. Wine Industry

china1“The Butterfly Effect” is a term coined by Edward Lorenz that describes the nature of a highly interconnected system such as the global environment or the global economy. A butterfly beats its wings in Brazil, the story goes, setting off a chain reaction that indirectly results in a tornado thousands of miles away in Texas.

The Butterfly Effect was on my mind last month when I spoke at the annual meeting of the California Association of Winegrape Growers in Napa, California. Part of my presentation outlined several indirect global threats to the California and U.S. wine industries. Two of these are in the news this week.

China Market Meltdown and Contagion

The financial crisis in China was one of the threats that I highlighted. “I know what you are thinking,” I told the group, “Mike, we don’t have a lot of money in the Chinese stock market and we don’t really sell too much wine in China, so I don’t see how falling Chinese stock prices are a threat to our business.” Well, they aren’t much of a direct threat, it’s that Butterfly Effect that you need to worry about.

Economists have a name for the Butterfly Effect of a financial crisis — we call it contagion and it takes several forms. Exchange rates are one way that economic effects are transmitted from country to country.  The Chinese crisis drives down raw material prices on global markets and this has pushed down the foreign currency values of many natural resource producing countries including Australia, New Zealand and Chile.

These three countries are important wine exporters to the U.S. and lower exchange rates for their currencies means increased competition for U.S. producers. When you find that a Chilean producer has undercut your price for bulk Cabernet Sauvignon, for example, there might be a Butterfly Effect at the root of the problem.

Oil is another potential contagion vector. As China slumps, oil prices do, too. This has a disproportionate impact on certain countries such as Russia, which relies on oil exports to China more than in the past due to the current international  sanction regime. When Russia also slumps due to falling oil sales wine producers in Spain, for example, find themselves stuck with excess stocks earmarked for the Russian market. If they try to sell them off here in the U.S. at a bargain price that’s another Butterfly Effect to consider.committee

The Contagion-Busters

Contagion occurs in other ways and I highlighted the group that I think of as  “The Committee to Save the World” (shown above) in my Napa talk (you might prefer to call them the Contagion-Busters). The “Committee’s” job is to stop contagion or at least minimize its effects and it is a difficult task. They have been focused on Greece in recent months, but now it is impossible for them to ignore China.

Hopefully they can prevent the Chinese crisis from having real impacts on other large economies. It is already clear that there have been substantial financial effects (the U.S. stock market “correction,” for example) but the real economy of jobs and output is slower to react and sometimes is less affected. Fingers crossed.

Certainly the Chinese crisis adds risk to the whole world economic system and puts constraints on policy. If the Federal Reserve now goes forward with its widely anticipated plan to raise interest rates in September, for example, the result is likely to be a big spike in the value of the U.S. dollar on foreign exchange markets, putting U.S. wine producers at a further competitive disadvantage. Another beat of the butterfly’s wings?

Keep an eye on China. The impacts could be both bigger and different than you otherwise expect.

The “Big & Hot” Guide to Best-selling U.S. Wine Brands

wv082015The August 2015 issue of Wines & Vines magazine is full of interesting and useful information as usual. One article that caught my eye provides IRI off-premise wine sales data for the top 20 U.S. wine brands. What are the best-selling off-premise brands? What’s hot (and what’s not)?

Bigfoot Barefoot?

The best-selling brand in the IRI league table is Gallo’s Barefoot, which accounted for an incredible $622 million in sales in the 52 weeks ending on June 14, 2015. That’s 5% more than the previous year in value terms and a 7% increase in volume. Congratulations to Gallo on their great success with this popular-priced ($5.64 average) wine. It is commonplace to say today that the sub-$9 wine category is in a slump, but Barefoot is the obvious exception to the rule

Sutter Home from Trinchero Family Estates is #2, but a long way back at $356 million sales. The rule does apply here — value is down 2% on the year and volume is down 3%. The Wine Group’s Franzia Box is just behind with $325 million in sales on the year, flat in value terms and down 5% in volume.  Franzia’s average price per 750 ml equivalent is up 11 cents to $2.17 compared with Sutter Home’s $5.25.

Who are the other big players? Here are the remaining members of the top ten listed in  order: #4 Woodbridge by Robert Mondavi (Constellation), #5 Yellow Tail, #6 Kendall Jackson, #7 Beringer (Treasury), #8  Chateau Ste Michelle, #9 Cupcake (The Wine Group), and #10 Mènage à Trois (Trinchero).

The next ten largest brands includes four Gallo product lines (Gallo Family Vineyards, Apothic, Carlo Rossi and Livingston Cellars), four from Constellation Brands (Black Box, Clos Du Bois, Robert Mondavi Private Selection and Rex Goliath) plus 14 Hands from Ste Michelle and Bogle Vineyards.

Clearly the Big Three companies (Gallo, Constellation and The Wine Group) dominate the list, but note how Trinchero and Ste Michelle punch above their weight. Kudos to Bogle for their success, too.

Hot N Cold Brands

The biggest wine brands are not always the hottest brands and the IRI data reported in Wines & Vines bears this out. As noted above, many of the top brands are experiencing slower sales in value terms including Sutter Home (-2%), Yellow Tail (-5%), Gallo Family Vineyards (-2%), Carlo Rossi (-3%), Clos Du Bois (-2%), Mondavi Private Selection (-4%), Livingston Cellars (-5%) and Rex Goliath (-4%).

These declines are matched by some spectacular gains elsewhere on the wine wall, often at much higher price points. Mènage à Trois tops the Hot List with 24% growth in value and 23% increase in volume, continuing its incredible market run. Black Box is right behind with 23% value growth. Gallo’s Apothic is next 21% value growth.

Continuing down the Hot List (among the 20 largest brands) is 14 Hands (+17%), Bogle (+15%) and Chateau Ste Michelle (12% value growth).

When you’re hot you’re hot, I guess. While Beringer and Clos Du Bois  have experienced falling average prices according to IRI (-11 cents per bottle equivalent for Beringer and -27 cents for Clos Du Bois), Mènage à Trois has seen its average price rise by 10 cents while Apothic’s average price holds steady at $9.58.

Remember that these are data for off-premise sales only and all data sources have limitations, so draw conclusions cautiously. Thanks to Wines & Vines for publishing this interesting snapshot of the U.S. wine market in transition. What will the final picture look like? Stay tuned to find out.

Speaking of Hot N Cold …

The Great Convergence? Changing Patterns of Global Alcohol Consumption

The Economist magazine’s current issue includes a brief  article on “Booze Around the World: The Changing Demography of Drinks,” which features  this interesting info-graphic.

It is interesting to see that alcohol consumption per person (third graph) is experiencing a type of convergence in the main markets that some globalization theorists have predicted more generally due to falling income disparities among leading nations and international cultural exchanges that take place via media, immigration and tourism.

Although the graphs are about alcohol in general, this convergent pattern also true for wine, with rising consumption in the new world and falling use in the old world (including Argentina, which is an old world wine country located here in the new world).

The Economist graphs and related story raise a lot of questions. For me the most interesting thing is that, while overall alcohol consumption shows surprising stability (the first graph) the who, what when, where, how and why of consumption displays surprising change (the third graph illustrates the dramatic shift in who and where, for example).

The more things stay the same the more they change? Perhaps! Can’t wait to see what new patterns develop in the next ten years.

Wine Wars in Prosecco’s Home: A Report from Conegliano

Sue and I spent 12 days in the Italian Northeast last month and this is the first of an series that reports our experiences in this colorful piece of the Italian wine mosaic.

Conegliano Genesis

We came to  Italy in response to an invitation to speak at the Scoula Enologica di Conegliano,  the famous wine school in Conegliano — which I like to think of as Italy’s equivalent of UC Davis in the U.S. Students come here from across Italy to train in viticulture, enology and also to study the business of wine.

Because of its location and history, there is a special focus on the wines of the Veneto and perhaps especially Prosecco, the famous sparkling wine.  Indeed, the statue you encounter as you approach the school is of the founder, Antonio Carpenè, who is also the originator of the “Italian method” of making sparkling wines (secondary fermentation in autoclave, not bottle), which is used today to make most Prosecco wines and many other sparkling wines around the world.

Interest in the U.S. market is very high these days in Italy (as it is in most winegrowing regions around the world), so I had an attentive audience for my seminars on “Anatomy of the U.S. Wine Market” and “Wines of the Veneto: A SWOT Analysis of the U.S. Market.” Anna Paola Giacobazzi, export manager at Cantina Della Volta, came all the way from Modena for the first seminar, bringing with her a bottle of Cantina Della Volta’s award-winning and distinctive Rimosso,” a Lambrusco made using the classical method and bottled sur lie. Stunning color and distinctive flavor! I’ve never tasted anything like it!

The opportunity to meet with researchers from the wine school and to visit wineries in the Italian Northeast was too good to miss, so we spent several days touring the region visiting a small group of distinctive wineries. Each winery told a different story and I am still working to put them together into a coherent story for a future book project.

Giro [Northeast] d’Italia

The Giro D’Italia is Italy’s elite professional bicycle race (the Italian competitor to the Tour de France). The race, which was won this year by Alberto Contador, passed through the Italian Northeast a few days before we did but sometimes it seemed like we were climbing higher and higher like the racers themselves — not just in terms of altitude but also quality and sophistication. It was an elevated experience to be sure.

We visited four wineries in Conegliano and they presented us with a classic “compare and contrast” exercise. What did they have in common? Prosecco, of course, and the traditional still wines of this region. They all displayed an emphasis on quality and an obvious  rising ambition. With Prosecco’s recent success and the continuing popularity of Pinot Grigio, everyone sensed that this might be the Veneto wine industry’s moment to take the next step in export markets and especially in the United States.

The contrasts were striking, too. These wineries differ so much in their size, scope and history and because of this their strategies are very different, too.  Herewith four brief profiles to illustrate my point.

Paladin: Prosecco and  More (including a surprising Malbech!)

Our wine school hosts first guided us to Paladin, an innovative family firm that celebrated its 50th anniversary in 2012. Prosecco is the name of the game here, of course, and it came in all of that wine’s many delicious forms. A great beginning.

The Bosco de Merlo line featured many fine still wines, both red and white, in addition to bubbles, with an emphasis on regional grape varieties. At my request we tasted a Malbech (my first Italian Malbec!), a wine with a longer history in this region than I would have guessed and a celebrated part of the Paladin portfolio. Can it be true that Italian immigrants introduced Malbec to Argentina? If so, we owe them a debt of gratitude.

Paladin’s strategy is multi-region: they also owns an award-winning  winery in Franciacorta (Castello Bonomi), which was recently named Italy’s best sparking wine, and a winery and beautiful agritourism facility in Rada in Chianti, Borgo Castelvecchi.  The same team directs winemaking at all three locations, maintaining a consistent emphasis on quality.

We learned that tradition is important at Paladin, but that innovation and imagination are honored and embraced. The whole operation is very analytical and data-driven — but rigor and respect for tradition are not mutually incompatible.  Soon we found ourselves out in the middle of a Paladin vineyard in the company of viticultural scientists from the wine school. Together Paladin and the school are doing research to discover how winegrowing itself might mitigate wine’s big  carbon footprint.

The vines apparently take carbon from the atmosphere as they grow. How? And how much? These are the questions that this rather sophisticated project seeks to answer and the researchers are optimistic that their studies will yield results that will be good news to environmentally-concerned winegrowers and wine drinkers everywhere.

Ponte: A Progressive Cooperative

On the way to Paladin we drove by La Marca, a big Prosecco operation and maker of one of the best selling Proseccos in the U.S. We learned that is a second-level cooperative — a cooperative of cooperatives — with the resulting size and economies of scale. Our next stop after Paladin was different  cooperative, Ponte, which is also quite large (14 million bottle annual production) if perhaps less well-known here in the U.S.

Cooperatives are born in times of crisis — when growers have no choice but to make wine with their own grapes because no one will buy them and so growers band together to share risk, cost, and expertise. Ponte was born in the postwar wine crisis year of 1948. It started with just a handful of growers and now has grown in scale and scope, with 1200 members farming 2000 hectares of vines.

American wine growers please read those numbers again. 2000 hectares (about 5000 acres) and 1200 members. The average vineyard holding is 1.7 hectares or about 4.1 acres per member and, since this is an average, you know there are lots of vineyard plots of one hectare or less in the mix. Making such tiny holdings profitable is a huge challenge and puts a lot of pressure on the cooperative to be efficient in its operatives and successful in marketing the wines.

Ponte makes dozens of different wines at many price points but, unlike some of the old style cooperatives you have heard about, the goal here is not simply to dump plonk into the bulk market. Despite the scale and fragmented ownership, we learned, there is a focus on quality that displays itself most prominently in a line of sparkling and still wines that honor Teatro la Fenice, the famous Venetian theater.

Like the successful cooperatives we discovered in Alto Adige a few years ago, Ponte is very demanding of its cooperative members, who must supply grapes of high quality to get the best prices. Then it is up to the winemakers in the vintage winery (distinctive state-of-the-art architecture when it was built  in the 1950s, state of the art production technology today).  Interestingly, Ponte’s portfolio also includes wines from outside the Veneto:   Champagne de Castelnau from Reims, France, MonteStregone from the Piedmont, and Nuraghe Crabioni from Sardinia.

In Tune with the Times at Borgoluce

One of my themes in speaking about marketing wine is the importance of seeing wine as consumers do, as part of a life experience that often includes food, travel and culture. The fact that Americans think about Italian wine in this way gives the Italians a big advantage over wines from other regions. Borgoluce understands this holistic message and has embraced it to a degree that frankly caught us  off guard.

Borgoluce is all about wine  — Prosecco of course and also red and white still wines —   but wine sometimes faded into the background just a bit (except at lunch) when considered alongside the bigger enterprise: a large family estate with vines but also pigs, beef and buffalo (raised for both their milk and their meat). Sustainability and accountability are watchwords here and key to the experience whether in the shop, where wines and other products of the estate are sold, the osteria up in the hills where farm-to-fork is the name of the game or in the farmhouse holiday venues.

Ludovico Giustiniani showed us around, taking obvious pride in the environmental accomplishments and “triple bottom line” approach and the opportunity that Borgoluce presents to those who want to reconnect with the land, nature and ultimately I suppose themselves. But, having said earlier that wine sometimes seemed in the background, it is actually the foundation of it all since from an economic standpoint wine makes possible the tremendous investment in agriculture, hospitality and tourism. The Borgoluce wines we tasted were great, but Sue and I will always remember the values they stand for, which seemed to us to be entirely in tune with the times.

Past, Present and Future at Carpenè

Our final winery visit in Conegliano completed the circle — from the wine school that Antonio Carpenè founded to the winery he built: Carpenè Malvolti, the original Prosecco producer. Brand manager Roberta Granziera was in the audience for my lectures and arranged for us to meet with global sales and marketing manager Domenico Scimone at the historic downtown winery.

Once upon a time Carpenè was synonymous with Prosecco (you asked for a Carpenè not a Prosecco much as someone might ask for a Kleenex not a tissue) and this is still true in some places. Carpenè is number one in its category in China, we were told. But Prosecco’s rapid growth has weakened both this brand identity and the identity of the wine itself. To many consumers who have just discovered this product it is not clear that Prosecco is a product of place rather than the name of a grape variety.

Carpenè’s intent is to reestablish Prosecco’s identity, connecting the history and the territory. They are confident that once consumers really understand Prosecco’s history and appreciate it is a product of a particular region (not a generic grape designation), then they will reach for wines that represent these ideas, including especially Carpenè Malvolti. One project that got our attention was a very limited production luxury wine called PVXINUM after the first reference to Prosecco (as a still wine) found in Pliny the Elder’s works.

Carpenè aims to lead from the front and we were impressed with the wines, the people and the strategies we discovered here. Very different from our other Conegliano visits, but that makes sense since each of these wineries is so distinct in history and personality. A good foundation for the next stop on our tour.

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Thanks to everyone who met with us during this quick trip and extra special thanks to our hosts at the Conegliano wine school: Professors Vasco Boatto and Luigi Galletto, Luigino Barisan, Gianni Teo, Tanja Barattan and Michela Ostan.

California Conundrum: The Best of Wines, The Worst of Wines?

“It was the best of wines, it was the worst of wines (apologies to fans of Charles Dickens). The global wine glass seems both quite empty and full to the brim.”

These are the opening lines of my 2011 book Wine Wars and if you change “global” to “California” they apply very well to the situation today.  That’s why I will be in Napa Valley next week, speaking at the California Association of Winegrape Growers‘annual meeting summer conference (I’ll paste the conference program at the end of this column). There’s good news for California wine these days and bad news, too.

When is a Drought a Good Thing?

The good/bad – best/worst situation exists in several dimensions. Take the case of water. The on-going drought in California is on everyone’s mind, but its impact has been very different in different regions. The recent news from Napa Valley, for example, is that the drought can be beneficial  in terms of wine quality. Smaller grapes, the story goes, produce more intense wines. Good news for those who drink or make Napa Cabernet, we are told.

drought

I can’t tell you how many of my friends have told me how amazing it is that four years of drought are actually good for California wine! Really? Well, I’m amazed too, but because there much more to California wine than Napa Valley. To focus just on Napa and the North Coast as many articles have done is misleading about the overall situation.

Napa Valley produces a lot of wine, but it is more or less a drop in the bucket compared with the huge wine production in other parts of California where the drought situation is very different. Higher costs and lower yields are not good news to most California producers, who are less able to extract a quality premium and suffer falling margins.

Many winegrowers have grubbed up their vines, in fact, switching to higher-value crops in the face of poor winegrape profitability. Paradoxically, however, some farmers are actually switching into grapes from other thirstier or less drought-tolerant crops, presumably because they see scarce water as a long term trend. It’s a complicated situation.

Demand and Supply Apply (As Usual)

Changing market conditions add to the good news/bad news conundrum. Rabobank reports that the current excess supply situation for under-$10 California value wines (as opposed to higher-price North Coast and mid-price Central Coast  wines) is likely to go from a worrisome problem to a real crisis in the next few years, as this graphic suggests.

supplydemand

A recent report by Allied Grape Growers reinforces this message. AGG President Nat DuBuduo noted grape prices as low as $15o per ton in the San Juaquin Valley and as high as $6000 per ton in the North Coast.

Part of the problem is that, for reasons I discussed earlier this year on The Wine Economist, the momentum in wine demand has shifted to premium and super-premium wines with lower-priced wine sales stagnant or falling. At the same time, however, potential production of value wine is about to increase dramatically because of vineyard decisions made a few years ago when market conditions were much different.

Rabobank estimates that 100,000 acres of currently non-producing wine grapes will come into production in the next three years. That my friends is a lot of wine to sell. Where is the increased acreage? Don’t look in Napa Valley, where rising demand and limited supply push prices higher and higher. Some of it is in the Central Coast, according to Rabobank, where demand is rising to potentially match the larger supply.

A lot of it is in the Central Valley when California’s value wines are produced and where prices are already low. This emerging wine lake will add to the current problem of full tanks and lackluster sales of value wines. Bad news for Central Valley winegrowers who are most affected by this pattern.

Best of Wines and the Worst, Too

Best of wines, worst of wines? The Rabobank report suggests a building crisis in one part of the California wine industry while it’s happy days in the North Coast with Central Coast wine seeking to balance rising demand and supply.

My job at the CAWG meetings will be to analyze the international and global aspects of the complicated situation and my remarks will suggests that this is a time of great uncertainty on these fronts, with important risks that might not come from usual sources. Combined with what the other speakers will offer I think it will be a great discussion.

Here’s the agenda for the sessions. Hope to see many of my California wine industry friends in Napa.

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CAWG’s Annual Business Meeting & Conference, on Thursday, July 23, 2015

Wine Market Update and Insights explores the interplay between current trends in U.S. wine consumer behavior, the influence of foreign wines in the U.S. market, and what California growers and wineries need to do to stay competitive. Mike Veseth, Editor of The Wine Economist and John Gillespie, Wine Market Council president, will speak.

How Do We Grow the Market for California Wines? Wine consumption in the United States continues to grow, but that growth is unevenly distributed and competition in the domestic beverage alcohol market is fierce. California winegrape growers must compete with foreign wine growers, and domestic producers of craft beers and distilled spirits. This session will consider the  current trends, conditions and future views on wine industry growth, consumer demand trends and how growers and wineries must position themselves to compete and grow market share here and abroad. Amy Hoopes, Chief Marketing Officer/Executive Vice President, Global Sales, Wente Family Estates and Rob McMillan, Executive Vice President and Founder Silicon Valley Bank Wine Division, will speak.

Update from Washington, DC will highlight a variety of federal policy issues, including taxes, water, immigration and more. Louie Perry, CAWG’s federal lobbying team member from Cornerstone Government Affairs in Washington, DC, will provide the update.

The View from Trinchero Family Estates will be the luncheon keynote address from Bob Torkelson, president and COO of Trinchero Family Estates. Mr. Torkelson will share his insights and analysis on leading industry trends and issues.

The 41st Annual Business Meeting will take place after the speaker program, during lunch.

 

The [Sometimes Slow] March of the Kiwi Terroirists

slowhorseLast week’s column looked back to the concerns about terroir and geographical designations a few years ago when Sue and I visited New Zealand to gather material for my book about globalization, Globaloney. There was frustration and anxiety about how to delimit the Kiwi vineyards and concern that things weren’t moving fast enough.

The people in Hawkes Bay were so frustrated that they took  matters in their own hands, creating and trademarking the Gimblett Gravels region! Well, the good news is that progress is at last about to be made on the policy front although the promise of progress hasn’t stopped winemakers from trying to speed things along through their own branding strategies. Here’s a quick report.

The Slow Horse Theory

My friend Woody says that justice rides a slow horse and, if that’s true, then the new Kiwi geographical indicator policy must be just indeed. It certainly has been slow in coming!

I was struck by a recent Decanter article about New Zealand geographical indicators for wine.  “Ministers said …that they would put into practice the Geographical Indications (Wine and Spirits) Registration Act – first passed as long ago as 2006 but yet to enter into force.” The  reason for the rush to get the law implemented is a concern over international competitiveness.

‘The act will set up a registration scheme for wine and spirit geographical indications, similar to the trademark registration scheme,’ said New Zealand Trade Minister Tim Groser.

‘Being able to register wines and spirits geographical indications here will make it easier for their users to enforce them in New Zealand.
‘It will also make it easier for our exporters to protect their geographical indications in some overseas markets.’

Since the New Zealand industry is very dependent on exports, it makes good sense to bring Kiwi practices into line with the global rules of the game.

The move was ‘warmly welcomed’ by generic body New Zealand Winegrowers, whose CEO Philip Gregan said: ‘It will equip the industry with the tools to protect its premium brand from misappropriation or misuse, as well as help secure market access in some regions.

‘It’s a big step forward for the industry.’

A Bill to amend the Act will be introduced to New Zealand’s Parliament later this year, and the Act is expected to be passed by the end of 2015.

Paul Goldsmith, New Zealand’s Commerce and Consumer Affairs Minister, noted that some consumers are prepared to pay a significant premium for wines from certain New Zealand geographic regions.

“The reputation of New Zealand wines must be jealously guarded if we are to continue growing our wine exports.

“The ability to register geographical indications under the new Act will help our wine industry promote and protect its premium brand from misappropriation or misuse by overseas producers, as well as secure access in certain markets which require government-recognised geographical indications.”

Good idea. But what took so long?  I found an analysis of the situation on the Baldwins intellectual property law website which provided useful background. Apparently passing the geographic indicator act back in 2006 wasn’t enough — it is also necessary for the Governor General to issue an Order in Council, which was not done (as was the case with a previous geographical indicator act from 1994).

I have not been following this situation, so perhaps there have been very good reasons for the long delay in implementing the GI act. As I noted last week, some think that it might be premature to set down strict boundaries or worry that appellations in general have gotten out of control.  But clearly the NZ wine export sector’s needs are now being given priority. With a little luck they can begin to use the new system next year. Slow justice I suppose. I’d appreciate comments from those in New Zealand who are directly affected by the change. Are there issues here that don’t show up in the news stories?

Marlborough Pioneer Brancott Estate

I hope the geographical indicator law, when it is finally implemented, will provide New Zealand producers with the protections and processes that they need. But in the meantime terroir grows in importance every day in the global market as upscale consumers look for markers of integrity and authenticity in everything they buy. Wines of origin designations don’t guarantee these qualities, but they are a way to signal intent to buyers.

Smart Kiwi producers are doing their best to exploit terroir both in bottle and as brands, a fact that was clear when we were invited to participate in a digital wine tasting of Marlborough Sauvignon Blanc organized by Pernod Ricard’s Brancott Estate.

Brancott Estate is the pioneer Marlborough Sauvignon Blanc producer. The photo at right shows Frank Yukich planting the first Marlborough Sauvignon Blanc vine at the Brancott vineyard in Marlborough in 1975. If  you look closely you can see he is “fertilizing” the vine with a silver coin and irrigating it with Champagne.

The Yukich family’s company, Montana Wines, eventually changed hands and current owner Pernod Ricard rebranded it globally as Brancott Estate a few years ago. I suppose the Montana brand wine was never going to be an easy sell here in the U.S. where a wine from Montana can have more than one meaning, but Brancott Estate is a hit, hence our digital tasting.

P1090870There were five wines in the tasting flight, starting with a low alcohol Sauvignon Blanc called Flight Song and moving on to the mainstream Brancott Estate wine that is widely distributed here in the U.S. Then we climbed up the wine ladder from Stoneleigh Latitude (Stoneleigh is a sister winery to Brancott) to Brancott Estate Letter Series and ending with the Brancott Estate Chosen Rows (tiny production — not currently available in the U.S. market).

We tasted the wines in the company of Sue’s parents Mike and Gert with Brancott winemaker Patrick Materman as our virtual guide via a web link. The low alcohol Flight Song, made from early-harvest grapes, was not a favorite, but the popular Brancott Estate bottling was well received with its classic Marlborough flavors and aromas. A good reference point for the wines that followed.

The Stoneleigh Latitude Sauvignon Blanc is made from vines planted in Marlborough’s “Golden Mile,” where river rocks carpet the vineyard floor capturing the sun’s heat. Stoneleigh focuses exclusively on wines made from this one vineyard area. This wine, my favorite of the flight, displayed unexpected minerality on first taste and rich fruit when re-tasted an hour later and then the next day.

The Letter Series wine came exclusively from vines in the original Brancott vineyard (and not a regional blend) while the Chosen Rows (my second favorite) was sourced from a selection of the best rows of vines from Brancott. It was noticeably more serious and elegant — and more expensive. It’s s shame that it is made is such limited quantities because it might change some minds about Marlborough Sauvignon Blanc. I hope I have an opportunity to taste it again.

Strengthening Brand Marlborough

Together these wines demonstrated, just in case anyone had doubts, that Marlborough’s particular terroirs show themselves in the wines and that Pernod Ricard and the Brancott team are committed to making these wines and telling terroirist stories to go with them.

Focusing on the vineyard level with a particular brand isn’t the only way to tell the story, but it’s one way to do it until a more formal system of geographic indicators is in place. And even when sub-regional designations are improved, the vineyard-level story will be powerful and relevant.  The time is ripe for a terroirist take on New Zealand wines and producers are ready to rock and roll.

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Here is a march to accompany the [slow] implementation of the New Zealand legislation. Perhaps you have heard it before?

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