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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Term Papers: Wine, Women, Song (and more)

I’ve been reading the final papers from my university class on The Idea of Wine and I thought I would share some of the topics with you to give you an idea how bright college-aged American students think about wine after spending a semester studying it.

Women and Wine Bars

The “wine, women and song” of this post’s title was inspired by two first-person research papers. Ali is interested in both gender issues and wine in a social setting, so it was natural that she might want to study “Women and the Wine Bar: a Tacoma Case Study.”

Ali’s paper began with academic study (the social analysis of drinking cultures), which she then applied to wine bars. Traditional bars, which feature beer and spirits, are seen by some scholars as a space to create and sustain male relationships.

Ali observed that wine bars attract a disproportionately female clientele and she and a friend observed the demographics of three local wine bars and the pattern of apparent relationships of the patrons. An interesting first step towards an understanding of wine, women and wine bar culture.

Music and Wine: A Harmonious Relationships

Erin, a music performance major,  added song (or music) to the mix with her study of “The Musical Palate: An Exploration of Factors Linking Wine and Music.” Her research began with Clark Smith’s famous studies of  how different musical pieces affect the perception of specific wines. Correctly paired, Smith suggests, music can improve the wine experience. I understand that a number of wineries are working with Smith in this regard.

A classically trained musician, Erin decided to see if the effect could move in the opposite direction, so she tried pairing  several different wines with iconic musical pieces to see if they might enhance the listening experience. Incredibly she found that the right wine really did add something to musical appreciation — it was something like the way turning up the base or treble knobs on a stereo can alter the sound itself, she said. Erin’s study was personal, not scientific, but like Ali’s it suggests an area ripe for further study.

Money, Taste and Retsina?

Several of my students were able to connect wine with their other academic studies in interesting ways. Joanna, for example, saw links with her Psychology class on Sensation, Perception and Action. The course description reads

This course considers the phenomena and methods of sensation, perception, and action in biological organisms. It focuses primarily on vision and audition, but with an emphasis on the general principles of how various forms of physical energy in the world are transduced and transformed to yield useful representations and purposeful behavior.

Joanna moved the focus from sight and sound to taste. Her scientific final paper, “It’s on the Tip of My Tongue: Impact of Individual Tasting Difference on Wine,” was fascinating in a geeky kind of way I really appreciate.

Kelsey also asked to write a cross-over paper that would merge her wine studies with her work in Advanced Empirical Economics. The result was “China and Bordeaux Wine Auction Prices,” which used econometric techniques to probe the timing and impact of Chinese demand on wine prices.

Crown cap from a bottle of Retsina

Many students found ways to connect wine with their personal and professional interests. Taylor had never tasted Retsina, but she was attracted to it as a cultural artifact with contemporary relevance. Her paper is titled “Retsina: An Ancient Wine with an Ongoing Impact in Greece.” I wish I could have been there to see her face when she took her first sip of Retsina — it’s always a surprise!

Business major Eben looked at the closure issue from a winery business perspective in  “A Corking Predicament: Closures of the Present, Past and Future.” Home brewer Lukas just had to write “Beer versus Wine: Switching Roles?” And Kirsten examined social media applications in “Wine on Facebook: Marketing Wine to a New Generation.”

The University of Puget Sound where I teach is a liberal arts college and it is easy to see from these paper topics why The Idea of Wine fits into the curriculum so well. Wine, with all its many forms and functions, is a clearly liberal art!

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Sorry, but I cannot distribute copies of these student papers. Anyone with an interest in a specific study can contact me at Mike@WineEconomist.com and I will try to connect you to the author.

Is Craft Beer the Next Big Thing in Wine?

Is craft beer the next big thing in wine? No — not if you’re asking if wineries are going to start putting in tanks for IPA (India Pale Ale) alongside their racks of expensive french oak barrels.

But yes — maybe — if you are thinking about things in terms of market spaces. The wine market space and that of craft beer are increasingly overlapping as craft beers infringe on wine’s turf (and low alcohol wines threaten to do the same for beer). And if the common battlefield isn’t huge at this point, it is certainly growing and warrants attention.

Anatomy of Craft Beer

A Craft beer producer, according to CraftBeer.com, the Brewers Association website, has three essential qualities:

  • Small: Annual production of 6 million barrels of beer or less.
  • Independent: Less than 25% of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member who is not themselves a craft brewer.
  • Traditional: A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewers brands) or has at least 50% of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.

Although by definition craft beer producers are relatively small, the market category has made a lot of news recently because of its rapid growth, both in terms of number of retailers who carry craft beers and total sales. Rapid growth from a small base — sound familiar?

It’s the growth that gets your attention. Remember Moscato? It surged from a small market niche to become the next big thing and is according to one report is now the third best selling (by volume)  white wine varietal in the U.S. after Chardonnay and Pinot Grigio and ahead of Sauvignon Blanc. Is craft beer the next Moscato?

The Next Moscato?

I put the question this way because the particular beer that provoked this post was actually made with Muscat grapes. It was a 12 ounce  bottle of Midas Touch from Dogfish Head Brewery. that I bought for $3.50 at the Metropolitan Market up the street.

Although Midas Touch probably wasn’t made with wine drinkers strictly in mind, it is certainly being marketed to the wine space as the videos below will show you and I have to say that its complex aromas and flavors (plus wine-like 9% alcohol by volume) made it a beer that can stand up to many wines in a sip by sip comparison.

The brewery says that “This sweet yet dry beer is made with ingredients found in 2,700-year-old drinking vessels from the tomb of King Midas. Somewhere between wine and mead, Midas will please the chardonnay and beer drinker alike,” and I can’t really disagree. I found it very pleasing (and not overwhelmed by the addition of saffron as you might expect), although this is clearly a matter of taste. Sue was less impressed, saying that it didn’t taste like beer and wouldn’t be her choice over wine.

Midas Touch is not a typical craft beer, but it demonstrates pretty well what craft beer is capable of doing in competition with wine.  It is a complex and interesting beverage that pairs well with food — just like wine. It tells a story that draws in the consumer and deepens the attachment — just like wine.

New and Improved!

Innovation is a hot topic in the beverage business these days and craft beer presents more opportunities for innovation and product development than most wines if you are aiming at that market segment. Midas Touch, based on an ancient recipe using exotic ingredients — is an example of how far the innovations can go.

Interestingly, complexity comes at a lower relative price with craft beer than with wine, which is something to consider. The difference between the lowest and highest priced grocery store wines is huge — sometimes a factor of 50 or more — with $2-3 per bottle equivalent for a 5-liter Franzia box at the low end and $100 or more at the top is not unusual at an upscale supermarket.

By comparison, the exotic product premium for craft beers is relatively low. The Midas Touch was a bargain at $3.50 or about $7.00 per 750 ml bottle equivalent in the sense that it was not very much more expensive than basic beers and ales.  I have to admit that it was a lot more interesting to drink that a lot of $7 wines that I have tasted even if, like any particular wine, it is not necessarily to everyone’s taste.

And even the most exotic cult beers (like the locally fabled Pliny the Elder) can often be found for $10-$20. So the Screaming Eagle craft beer equivalent can be purchased for the price of a good but not exceptional bottle of wine. You can see how that might attract the attention of some wine drinkers, especially young ones. And I guess it has.

Wine’s Counterattack?

A lot of the attention has been focused on alcohol levels. Some craft beers are even more potent than the 9% abv Midas Touch, which puts the beer in ballpark of wine.  Certainly high octane beer should be treated like wine and sipped (wine glasses are often recommended) not gulped.

But not all craft beers are this boozy and in fact I think that their lower alcohol levels (compared with wine and spirits)  can be a competitive advantage when you look at the market that way.

The trend towards lower alcohol wine (like the 5.5% abv line of wines that Gallo recently launched in the British market)  might be seen as wine trying to capture some of the beer market through product innovation.

Craft beer drinkers often display the same sort of insane devotion and geeky attachment that we see in wine enthusiasts and there are even interesting beer tourist destinations like Bend, Oregon — an old mill town that is home to 14 craft breweries within easy walking (or stumbling) distance of each other along the Bend Ale Trail, which attracts some of my university students as a Spring Break destination.

Midas Touch

So craft beer has a lot in common with wine and maybe a couple of advantages. With these products more widely available and a growing customer base that is ready and willing to experiment, I think it is plausible and wine and craft beer will increasingly share market space and must take that competition into account.

Will some wineries take the next logical step and start brewing small lot beers? Well, it isn’t a crazy idea where regulations permit it. Compared to wine with its single annual harvest, beer is a Chateau Cash Flow business. Breweries can operate pretty much year round as one batch it bottled and another fills the tanks.

Cash Flow Ale? Maybe that’s how beer-drinking Midas got his golden touch!

OTBN: The Cure for Conspicuous Non-Consumption

The last Saturday in February has for some years been officially designated “Open That Bottle Night” and we plan to celebrate it again this year in the company of our friends Jenny,  Bonnie and Richard, Rosemary and Ken and Mary and Ron, who are hosting the gathering.

OTBN was invented by wine writers Dorothy Gaiter and John Brecher to solve a problem that plagues many wine enthusiasts. Some wines are just too precious to open. For one reason or another we want to let them sit, waiting for a “special occasion.” As if opening an intriguing bottle isn’t special occasion enough! Go figure.

So, Dottie and John proposed, let’s just pick an arbitrary date, pull the cork, and celebrate. The wine doesn’t have to be old (although it might not be a bad idea to drink up older vintages if you have any) or expensive, either. It’s the thought that counts. Or the story that goes with the wine — I like “story wines” best of all.

I’m a big fan of OTBN because I see it as positive step. Wine enthusiasts do lots of silly things, as I point out in my forthcoming book Extreme Wine. We spit out good wines (at tasting events, where there are too many wines to even think of swallowing them all) and then slurp down mediocre ones (at weddings and receptions, etc.)

And whereas others suffer what Thorstein Veblen called “conspicuous consumption,” we sometimes stand out because of what we don’t drink (but could). No doubt about it: time to open that bottle.

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otbn2013

Update February 24, 2013. I thought you might be interested in the menu and wine list for our OTBN dinner last night. Try not to drool on your keyboard or tablet screen as you read this. (Note: I failed get the maker of the 1990 Riesling .)

Hors d’oeuvres: Smoked chicken and dried apricot terrine with a lemon caper sauce /  Smoked lamb loin with tarragon aioli served on toasted baguette / Pecorino cheese beignets with pink lady apple butter

  • Gloria Ferrer Brut Sonoma

First course: Smoked salmon rosette, lemon cream, crispy brioche, shaved fennel and arugula with citrus olive oil

  • 2010 Venge Vineyards Bacigalupi Vineyard Pinot Noir Russian River

Second course: Seared jumbo scallop with forbidden rice, avocado poblano butter, and roast bell pepper foam

  • 2007 Joseph Drouhin Savigny Les Beaune “Talmettes” Premier Cru
  • 2008 Domaine Drouhin Oregon Pinot Noir, Willamette Valley

Third course: Sunchoke and cauliflower puree with coriander cream

  • 1990 Wehlener Sonnenuhr Riesling Auslese, Mosel
  • 2008 Joseph Rosch Riesling Kabinett, Mosel

Fourth course: Poached lobster tail, lemon beurre fondue, stewed leeks, and caramelized anise

  • 1996 Verget Puligny-Montrachet Les Enseigneres
  • 1996 Chavet-Chouet Puligny Montrachet Premier Cru

Fifth course: Muscovy duck, braised red cabbage, roast pearl onions and bacon lardons, herb spätzle

  • 1982 Gloria St Julien, Bordeaux
  • 1998 Cuvee Vatican Chateauneuf du Pape
  • 2000 Le Vieux Donjon Chateauneuf du Pape

All accompanied by Sue’s signature fresh-baked bread

Dessert: Bonnie’s famous chocolate dacquoise

  • 2006 Cakebread Cabernet Sauvignon Napa Valley

Afters: Fantasy of Spanish almonds, Italian hazelnuts, Turkish figs and dried apricots

  • 2004 Dobogo Tokaji Aszu 6 Puttonyos

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James May seems to be an opponent of conspicuous non-consumption, as this clip from the wonderful BBC mini-series he made with Oz Clarke makes clear. Enjoy!

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Juice Box Globalization: Is this the Future of Wine?

applegrapeI’m back from the Unified Wine & Grape Symposium and busy trying to process all that I’ve learned while simultaneously catching up on the work that seems to have piled up while I was away. You know the feeling …

One theme of the seminars this year was the impact of globalization on the U.S. wine industry. I thought I would approach this topic in two parts. First, let me tell you a little of what I said on the Tuesday Globalization panel and then I’ll try to synthesize what learned from the discussion in a follow-up post.

Thinking Outside the [Juice] Box

My remarks were an attempt to get the audience to think about the impact of globalization in a broader context (it’s that liberal arts thing I do in my day  job as a college professor). Globalization isn’t a simple thing, I told the audience, and it isn’t a one-way street, either.

Don’t think that globalization is just competition from imports from other countries (although that’s part of it, of course) or just export opportunities abroad (as important as they can be). Globalization is both of them and many more influences, too.

One way to understand wine globalization a bit better is to look at globalization in another industry and seek out parallels and note contrasts, too. The apple industry is a bit further along the globalization process than wine, so maybe it reveals something about the road ahead.

The apple market has always been segmented, for example, but globalization has magnified the category distinctions and intensified competition within them.  Maybe that’s happening to wine? Here are three flavors of apple globalization that may or may not have lessons for wine business in the future.

juicebox

Juice Box Globalization

Consider the common juice box. If you have children or grandchildren or pack your own lunch you probably have these things around you all the time. Who knew that they embody an extreme form of globalization?

Take a look at the list of ingredients. Water, juice concentrate, etc. — no surprises there. But look where the juice concentrate comes from: USA of course but also Argentina, Austria, Chile, China, Germany and Turkey.  The apple juice concentrate that supplies the juicy fruit taste could come from any of five countries on four continents. Wow! That’s globalization for you.

The concentrate is a completely generic product (simply apple — not some particular variety of apple) traded in highly competitive global markets where cost (for standardized quality) is king and minor changes in exchange rates, transport costs and trade fees can have big effects.

As we consider the major increase in bulk wine shipments around the world — 45 percent of all New World wine exports are now big bag – big box bulk shipments – you can’t help but wonder if Juice Box globalization might be on the horizon.

Granny Smith Globalization

I’m old enough to remember when Granny Smith apples entered the U.S. market in 1971 (from New Zealand, as I recall) as a premium product. The Granny Smith was developed nearly 150 years ago by a grandmotherly Australian woman named Smith who discovered the natural cross in  her garden  and propagated it.

Initially, I think, the appeal of Granny Smith was that it was a premium Southern Hemisphere apple that filled a seasonal market niche in United States. Now however, Granny Smiths are grown pretty much everywhere and have lost some of their premium appeal. Highly integrated international apple companies source them from everywhere and distribute them everywhere.

Granny Smith globalization is not nearly so extreme as Juice Box globalization, but it is still quite dramatic. It reminds me of some of the bulk wine trade today, where certain varietal wine brands at certain price points are increasingly sourced from all over the world. Product differentiation in some segments is increasingly based upon brand rather than appellation or country of origin — which can change from California to Chile to Italy and beyond from year to year — just like the  Granny Smiths.

Honeycrisp Globalization

The best margins in the apple business today are probably found in what I call the Honeycrisp market segment where innovative super-premium products command high prices. The Honeycrisp apple was developed by the Agricultural Experiment Station at the University of Minnesota to be an eating apple with distinctive flavor and especially texture profiles that consumers seem to love. Patented and licensed, it has been a very profitable product.

The plant patent on the Honeycrisp has apparently expired, so production is increasing and prices have fallen a bit, but the idea behind it is still strong. Plant scientists in Europe have developed new specialized patent apple products to take over where Honeycrisp left off. Sue is especially fond of  Kiku and Kanzi, which I think are variations on the Fuji variety from Japan that were developed in Northern Italy and the Netherlands respectively and are grown in limited quantities here in Washington State.

Honeycrisp globalization is about product innovation and product differentiation. Follow the money: the tight margins created by Juice Box and Granny Smith globalization have nudged the Honeycrisp strategy into the spotlight.

Apples, Oranges and Wine

Is there anything to be learned about wine by thinking about apples? Or is it an “apples and oranges” thing? Well, my goal was to get people thinking and I admit that when I asked the big audience if they thought that there was something to the Juice Box (or Granny Smith or Honeycrisp) idea of wine I saw many heads nodding “yes.”

Not a surprise, of course. Apples and wine are specialized industries, but they are both businesses, too, and perhaps the similarities that people see are because of that. Maybe this little lecture has got you thinking, too. If so, come back next time when I’ll talk about some of the interesting ideas I heard from other speakers regarding globalization and U.S. wine.

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Here’s a video about Kiku — about as far from a Juice Box (in terms of product differentiation) as you can get.  Enjoy!

The Unified Symposium: Globalization, State of the Industry and Book Signing

I hope to see many Wine Economist readers next week at the Unified Wine and Grape Symposium in Sacramento, California. The Unified is North America’s biggest wine industry gathering. Here’s how the website describes it.

Built with the joint input of growers, vintners and allied industry members, the Unified Wine & Grape Symposium is held annually in Sacramento, California and is the largest event of its kind in the western hemisphere. Serving as a clearinghouse for practical information important to wine and grape industry professionals, the Unified Symposium also hosts a trade show with over 650 suppliers displaying their products and services to the more than 12,400 people who attend annually.

It’s a Really Big Show (as Ed Sullivan might have said) and I’ll be part of three events: two sessions and a book signing. I’ll paste the details of the sessions at the end of this post.

  • I’ll be on the panel for the general session on globalization and the U.S. wine industry that starts at 9 am on Tuesday, January 29,
  • I’ll be moderator for the “State of the Industry” panel that starts at 8:30 am on Wednesday, January 30, and
  • I’ll be signing copies of Wine Wars at the Wine Appreciation Guild booth in the trade show from 12:30 – 2 pm on Wednesday.  Please stop by Booth # 1620 and say hello if you are there.

Here are the details:

How the Global Wine Market Affects U.S. Production

U.S. growers and wineries are directly or indirectly impacted by the global wine market. Bulk wine movements ebb and flow based upon changes in currency valuations, relative costs of production, transportation costs, and supply and consumer demand. U.S. producers are accustomed to competition from branded imports, but numerous U.S. brands also source bulk wine internationally to meet cost-of-goods targets or to satisfy consumer demand for popular wine styles or varietal grapes in short supply. These trends affect U.S. grapegrowers and wineries, and this session will help you understand the market forces that will likely affect your business.

Moderator:

Jeff O’Neill, O’Neill Vintners & Distillers, California

Speakers:
Kym Anderson, University of Adelaide, Australia
Greg Livengood, Ciatti Company, California
Stephen Rannekleiv, Rabobank, New York
Mike Veseth, The Wine Economist Blog and The University of Puget Sound, Washington

State of the Industry

The State of the Industry session will provide a comprehensive look at every aspect of the wine industry, from what’s being planted to what’s selling. This 2½ hour session features highly regarded speakers and delivers incredible value for attendees who need to understand the market dynamics of the past year and are seeking insight into the market trends that will define the year ahead.

Moderator:
Mike Veseth, The Wine Economist Blog and The University of Puget Sound, Washington

Speakers:
Nat DiBuduo, Allied Grape Growers, California
Jon Fredrikson,
 Gomberg, Fredrikson & Associates, California
Charles Gill, Wine Metrics, Connecticut
Glenn Proctor, Ciatti Company, California

Busting the Big Tank Myth: Durbanville Hills

dhwThere are easier ways to get to Durbanville Hills Winery than aboard a snorkel-equipped Land Rover, but I don’t think there’s a better way to go.

They brought out the 4×4 vehicles (snorkel-equipped — who knew? — so the engines can breathe even in deep water crossings) so that we could experience and appreciate the hills, the vineyards and the rugged terrain even before we came to the winery itself and the braai lunch that was planned for us there.

My visit to Durbanville Hills Winery started as adventure and became a learning experience about the diverse nature of wine in South Africa. Now it is also Exhibit A in the case against the One Big Tank myth that I wrote about last week.

The Big Tank theory is that giant wine and drinks companies with dozens of brands in their portfolios offer consumers the illusion of choice, not real choice. It’s as if all the different wines came out of one big tank.  Although there is a grain of truth in this idea, I think it is fundamentally bogus and Durbanville Hills is a case in point.

From Oom Tas to Nederberg Noble

Durbanville Hills Winery is part of the Distell drinks empire. As I wrote last week, Distell is South Africa’s largest wine and spirits producer and is a global power in several beverage categories. They superficially fit the Big Tank stereotype, but within their range of brands you will find choices over a wide range starting with very basic wines such as Oom Tas (described as “an inexpensive, dry, golden, unsophisticated wine of constantly good quality and taste”) and Kellerprinz (” an unpretentious, fun wine, its quality is nevertheless good and consistent, offering value for money”) and moving on up the ladder to the rather special Nederberg Noble Late Harvest wine I wrote about last year.

Durbanville Hills Winery is a relatively new addition to the Distell group.  The winery is beautiful in a modern way that does not seem out of place for its setting. The public spaces are welcoming, the restaurant gets good marks and you can’t beat the views looking out over the vineyards or on to the city. It looks like Distell has put a lot of time and money into the operation and the result is impressive.

Even Lettie Likes It

The wines are impressive, too. I especially liked the Sauvignon Blanc, which seems to do especially well in these hills. And the Pinotage is good enough to get a nod from self-confessed Pinotage-hater Lettie Teague, wine critic for the Wall Street Journal.

Durbanville Hills’ wines are distinctive (which runs counter to the Big Tank myth), but in fact the whole operation is unusual and not what you would expect from a “drinks company” winery at all.

Durbanville Hills was founded in 1999 as a partnership between Distell and seven wine farms in this region and the first wines were released in 2001. This area has a long history of wine growing — the youngest of the farms was founded in 1714 according to the winery website.

Triple Bottom Line

Distell’s representatives sit on the winery board, as I understand it, along with the farmer partners plus a workers’ representative. The wine farm workers have a 5% equity stake in the business that is administered through a trust that provides a number of social and economic benefits to workers and their families. Durbanville Hills was one of the first wineries to be accredited by the Wine Industry Ethical Trade Association. 

Cellar master Martin Moore is an enthusiastic promoter of a particular brand of sustainability that is sometimes called the “triple bottom line” approach (although he never used this term when talking with me). Businesses need profits to sustain themselves in the long run, of course, but economic sustainability doesn’t mean much if the environment is sacrificed (true for all business, but especially for wine), so you have to add that factor into the equation. And what are planet and profit without people? Communities must be sustained along with business and the environment. So true sustainability is the intersection of the three spheres of life taken together.

To quite intentionally organize a wine company around these values is a long term commitment and not the sort of thing that you associate with a corporation nervous about quarterly earnings reports. But it seems to me that everyone at Durbanville Hills is in this for the long run and the structure of the business is meant to keep it that way. It’s an impressive achievement and it makes a glass of Durbanville Hills wine a particularly satisfying drink.

Not Free Range

Clearly there are values and principles beyond a simple short-term profit motive behind the Durbanville Hills project, but they are usefully balanced with a sense of realism — you have to be pragmatic to make the triple bottom line work because this idea of business  isn’t about avoiding trade-offs, it’s about confronting them and making effective choices.

I saw this in a sort of sustainability manifesto that Martin Moore gave me at the end of my visit. Moore writes that, “We farm responsibly … not organic, not biodynamic … but sustainably.”  I think his point is that it is difficult to balance all three bottom lines if you swear off potentially important tools. “I would not even claim that we have free range vines,” he jokes, “as most of it is stuck in a trellis system.”

But I do believe that if we continue improving strengthening our 3 pillars of sustainable farming Durbanville Hills, our producers, our farm workers and community will hand over a successful business to the future generation without having to apologize.P1040576

Myth and Reality

Clearly Durbanville Hills Winery doesn’t fit the Big Tank theory and I think it is an indication that Distell and other giant wine and drinks companies are capable of offering wine consumers real choice — choice in both the wines themselves (which is the point after all) and in the entire wine experience.

It would be easy to make the case that Distell and Durbanville Hills are special cases. South Africa has a unique wine history that stretches back for hundreds of years and a unique social history, too, which motivates many there to address directly issues of race and inequality.

And then there is the Rupert family’s influence on Distell. If anyone understands the the benefits of product differentiation and avoiding a Big Tank syndrome, it is probably the Ruperts, whose broad holdings control many luxury brands including Cartier. They would certainly appreciate the business value of distinctive products compared with Big Tank uniformity.

Distell is a unique wine company in many ways, but I don’t see it as unique in terms of the Big Tank myth.  While I don’t deny that there are a few Big Tanks out there, in general I believe that even giant wine companies have strong business incentives to provide consumers with diverse choices (and even in some cases to take seriously the triple bottom line).

It is a sad fact that some of the great potential diversity of wine production does get filtered out by the logic of distribution and retail economics, and the vast scale and scope of the wine giants indirectly contributes to that problem. But, as I said in my last post, it takes a village to raise a child and it takes an entire supply chain to deliver diverse wine choices … or not. But it’s not just a Big Tank problem.

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I realize that one example, even a really good one like Durbanville Hills, isn’t enough to bust a myth (n=1 is a pretty small sample size). But there are lots of examples if you only take off the “Big Tank” glasses and look around.

Thanks to Cellar master Martin Moore and Managing Director Albert Gerber for taking the time to answer all my questions at Durbanville Hills and Cape Wine 2012. The images up top are from the winery’s website.

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