Economic Impact: Wine [Not Just] By the Numbers

Apple, maker of iPods, iPads and other iGadgets, recently released data that tried to establish the corporation’s economic impact on the American economy (this in response, I think, to charges that its high-outsource policies mean that its products benefit China and other countries more than its U.S. home market).

The company published the results of a study it commissioned saying that it had “created or supported” 514,000 jobs in the United States. The study is an effort to show that Apple’s benefit to the American job market goes far beyond the 47,000 people it directly employs here.

The number of indirect jobs claimed drew attention from economists.

David Autor, an economics professor at the Massachusetts Institute of Technology, said via e-mail that the “entire business of claiming ‘direct and indirect’ job creation is disreputable” because most of the workers Apple is taking credit for would have been employed elsewhere in the company’s absence.

I tend to agree with Prof. Autor’s comment mainly because I can do the math. If Apple is right, then its small labor force is responsible for an incredible fraction of all U.S. jobs. If we made similar estimates for all other U.S. industries I am confident that the total number of jobs claimed would quickly exceed the total number of jobs … period.

Suspicious Minds

But then I tend to be suspicious of economic impact studies … period … whether they are about the gadget industry or any other industry. And this is due mainly to the incentives that are present. No one ever commissions an impact study unless they have a reason to want to show a large impact (usually it is politics — to prevent a political backlash against Apple’s outsourcing policy, for example, or to encourage provision of “key industry” government benefits).

And I know from personal experience that no one ever takes on an economic impact study without realizing that higher numbers are better for the client. I’m not saying that anything shady takes place. I’m just pointing out the incentives and you know what economists think about the power of incentives!

So (and I’m sure you can see this coming) I’m also suspicious of economic impact studies of the wine industry that are occasionally published. Economic theory says that economic impact (the total value added throughout the supply chain) should be equal to the final sales price of the product. This is such a strong idea in economics that it is stated as an identity rather than an equation or theory.

And the reported economic impact always seem to exceed the final sales by a large margin just like Apple’s jobs study. Yikes. No wonder I have my doubts!

Visible Hands

It is good to be critical in assessing numbers, but I’m afraid my skepticism sometimes goes a bit too far, to the point where I don’t really appreciate how important the wine industry is and how broad its impacts really are. That’s why my travels this year to the Unified Wine & Grape Symposiium and the Washington Association of Wine Grape Growers meetings have been so useful.

It’s not [just] that the presentations have been useful, although they have. It’s really the trade shows that have taken my breath away and provided a needed perspective. I’ve been able to see and meet the people behind the numbers and it has been very helpful.

This was especially true at the Unified in Sacramento, which had two huge floors brimming with about 650 exhibitors. The trade show was so large that Wine Business Monthly created an online planning guide to help visitors navigate the room (http://www.winebusiness.com/planningguide/2012/). Wow! I heard that there was a smartphone app available to optimize your walk through the trade show based upon your business interests. A great idea.

The Ordinary Business of Wine

I’ve pasted in a directory of exhibitors from the 2011 Unified event so that you can see the wine range of businesses that come to the meetings (and the wide range of economic impacts involved, too). I really wanted to use a photo for this, but I couldn’t find an image that captured the sense of the place, so the table (more numbers) will have to do.

Many of these firms are specific to the wine industry, but a number are what I would call “ordinary businesses” (see my last post) that provide the wine industry with the sorts of goods and services that all businesses need, albeit often with a special wine slant. If wine has a large economic impact, and I think it does, these ordinary businesses — banking, accounting, marketing, legal services, flooring, hoses, tanks and even iPad-enabled electronic sommelier apps — are part of the process.

iPad apps for wine? Wow, I guess this means that we are part of the Apple empire, too. (Or is it the other way ’round?)

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Thanks to Ken (who put it better than I did here) for suggesting the “wine as an ordinary business” theme.

State of the Wine Industry: Global Perspectives

I’m back from Sacramento where I moderated two panels at the Unified Wine and Grape Symposium, North America’s largest wine industry gathering.  I chaired the morning “State of the Industry” session (estimated audience = 2200 according to one news report) and a smaller afternoon break-out on “Leveraging Global Supply.”

You can find a list of the session speakers at the end of this post and you can read a comprehensive  news report here. I thought I would use this space to outline what I said   in the morning session. My job was to try to provide a global frame for the speakers who followed.

Silver Linings and Dark Clouds

Global Perspective. Wine is a global business. When David Ricardo wrote his economics textbook almost 300 years ago the example he used to illustrate international trade was the wine trade between Britain and Portugal. It has always been important to have a global view of wine, but now more than ever as the wine world gets smaller and more tightly connected.

Silver Linings. This is a year with much good news for the wine industry, especially for winegrape growers as the shortage phase of the wine cycle unfolds and prices rise after years of structural surplus.

But as an economist, it is my responsibility to channel Alan Greenspan and to caution growers to avoid irrational exuberance. Silver linings don’t always come wrapped in dark clouds, but sometimes they do. There are dark clouds a plenty for the global economy and some of them will affect the wine industry.

A Dangerous Phase

A Dangerous Phase. The global economy has entered a “dangerous phase” according to the International Monetary Fund. It is a time of great uncertainty and risk because global growth is slowing, albeit unevenly, at a very inconvenient time.

The problem, of course, is the debt crisis. And while each country has built “mountains of debt” in its own way, there is only one route down from the summit: stop adding to the debt and then try to outgrow the debt burden.

Europe, the U.S. and Japan are all struggling to contain growing debt. Stopping the bleeding is the first priority, of course, but no one seriously expects the debt to be paid off. The only solution is for debtor countries to grow faster than their  compound interest bills and to slowly make the debt and its burden a smaller and smaller proportion of GDP.

Catch 22: Slowing growth (and the probability of recession in Europe) means that even more emphasis must be put on cutting budgets, which unfortunately makes it even more difficult to generate growth.

The Growth Squeeze. So everyone will be desperate for growth, but where will they find it? Consumer spending? Not likely with unemployment high and the housing crisis still unresolved. Business investment? Not with credit so tight and business confidence so low. Goverment spending? Please! The pressure is on to cut government outlays, not expand them.

This leaves only international trade and it seems likely that many countries will try to stimulate exports through currency depreciation to get the growth they so desperately need. This has worked for the U.S., which has had a secret “weak dollar” policy. Look for currency wars as many countries try to follow suit by depressing their exchange rates.

Wild Cards. There are many “wild cards” in the global economic scenario — factors that could change everything. The Euro is probably the biggest wild card, since a collapse of the single currency would be a financial earthquake with global repercussions. The U.S. economy is another wild card, especially in an election year.

A Tight Squeeze for Wine

A Tight Squeeze. The wine industry is connected to the global economy but not perfectly synchronized with it. The wine industry is in for a tight squeeze in the coming year. There will be increased competition on both ends of the market — for wine grapes (and bulk wine) and for wine drinking customers and retail accounts.

[The intensity of the squeeze, as detailed by the other speakers in this session, was probably the biggest news to come out of the State of the Industry panel. Vineyard plantings have been stagnant for several years, so there is not enough supply to meet rising demand in many market categories.]

The shortage of grapes and bulk wine will force wineries to search high and low for product to sell. The higher costs that result will put even more pressure on margins and this may be the biggest squeeze of all since buyers are now accustomed to discounts and, having reset once down to lower prices, will be not quickly reset back up again across the board.  The pressure on margins will increase because of rising competition for market share.

Currency Wars. Exchange rate shifts will make this situation more complex. The U.S. has enjoyed a weak dollar for several years — this stimulated wine exports and kept the price of import competition high. The dollar strengthened in 2011 and  is likely to continue to strengthen in 2012 and this will reverse some of those effects, making the U.S. wine market more attractive to foreign wine firms. These effects will loosen the big squeeze in some places and tighten it in others, creating both dark clouds and silver linings.

Wild Cards. There are lots of  wild cards, but the most interesting one for me is China. We expect China’s growth to slow in 2012  – perhaps to 8% or less — if Europe’s recession is more serious than projected and if U.S. growth stalls.

The “bicycle theory” of Chinese economic growth holds that China must grow by at least 8% in order to overcome structural weaknesses and social instability. If growth falls below 8%, the theory holds, a “tipping point” effect might cause rapid deceleration.

No one knows if the bicycle theory really holds for China, no one knows if 8% is the tipping point number. And no one wants to find out.

A Chinese slump would have some direct effect on wine sales there, but the biggest impact on global wine would be indirect, spread through trade flows and financial flows. The Chilean Peso, Australian dollar and South African rand would all likely fall in value dramatically altering the competitive structure of global wine trade.

All this could happen, but of course it might not. That’s the biggest squeeze this year — uncertainty.

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Thanks to the Unified Symposium’s organizers for inviting me to take part. Special thanks to my fellow panelists, who helped me so much, and to Jenny and Lisa for their guidance and support. Here are the details of the two sessions.

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 is selling. This 2½ hour session features highly regarded speakers and will offer 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/University of Puget Sound

Speakers:
Nat DiBuduo, Allied Grape Growers, California
Steve Fredricks, Turrentine Brokerage, California
Jon Fredrikson, Gomberg, Fredrikson & Associates, California

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Leveraging the Supply Side of the Global Wine Market

This session will focus on supply to Brazil, Russia, India and China (BRIC) as well as to Chile and Argentina.

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

Speakers:
Steve Dorfman, The Ciatti Company, California
Liz Thach, Sonoma State University, California

New Year’s Resolution: De-Alcoholized Wine

I’ve made a New Year’s Resolution: De-Alcoholized Wine. I’ve resolved to study this misunderestimated wine market niche. Heck, I might even drink some!

My resolution is provoked by a friend who had a bad bicycling accident. She’s going to be OK, but she suffered a serious head injury and her doctor says no alcohol while her brain recovers from the shock.

No Wine? No Way!

No alcohol? Well, that’s easy enough. But no wine? No way! Wine is more than just alcohol — it’s civilization. And so she’s exploring the possibilities of de-alcoholized products as a way to enjoy wine without having to deal with the negative effects of alcohol. And she is not alone.

A lot of people are interested in alcohol-free beverages — you see non-alcoholic beer all the time at summer picnics, for example, and I think every holiday party features non-alcoholic alternatives like sparkling cider and fruit juices. Less alcohol means fewer calories, another advantage. No reason why wine shouldn’t be added to this mix.

In fact there might be particular reasons to consider wine, since it famously features health benefits. Many supermarkets feature gourmet grape juice as a health product and growers like Draper Valley Vineyards bottle unfermented juice of Riesling, Pinot Noir and other wine grape varieties. These juices are delicious, but they don’t taste like wine. In fact I have my students taste them so they can see how much different wine is from its juice.

With only a couple of exceptions (I think Moscato might be one of them), wine grape juice does not taste like the corresponding wine. The magic of fermentation does more than produce alcohol, it changes things in a good way. So making the wine then removing the alcohol is the way to go.

Haven’t Tried It? Yes You Have!

Have you ever tried de-alcoholized wine?  I’ll bet you have and don’t know it!

That’s because a lot of today’s wine is actually partially de-alcoholized. Some but not all the alcohol’s been removed (don’t look on the label — the info isn’t there).  It is not uncommon for wineries to take a portion of their wine and have the alcohol removed, with the resulting liquid blended back into the original vat, lowering the average alcohol level by a percent or two. Why do they do it? To correct the taste or style. And sometimes to bring the alcohol level below the 14 percent threshold where higher federal tax rates kick in.

No one talks much about this (or about the practice of adding “jesus units” — water — to fermenting wine to accomplish more or less the same result) but I am told that it happens all the time.  Imagine how much of a punch some of those big Zins and Shiraz/Syrahs would have if they weren’t tamed a bit!

My bicycling friend reports that the de-alcoholized wines she’s tried have been very satisfactory. They are clearly wine, not grape juice, she reports, and while the flavors and aromas aren’t as complex, they provide the civilized experience she seeks. “I find it a very acceptable way to feel like you’re drinking your traditional glass of wine with appetizer or dinner, especially if you have compelling reasons to avoid alcohol intake.”

Red, White and Orange?

De-alcoholized wine actually contains a tiny bit of alcohol, but can be sold as a non-alcoholic beverage so long as it contains less than 0.5 percent alcohol by volume. Amazingly, this is about the same amount of alcohol you will find in orange juice. Really!

A trip to my local upscale supermarket  revealed a surprisingly good selection of de-alcoholized wines (six still wines and one sparkler) selling for about $5 (a holiday discount price) to $12.  Fre (a Sutter Home brand) and Ariel (owned by J. Lohr Vineyards) are the two largest producers and accounted for all the wine I saw.

Other brands you might see here in the U.S. include Carl Jung from Germany and posssibly Vandalia from Napa Valley, the subject of a 2010 Wall Street Journal story (they’ll sell you a case of their 2002 de-alcoholized Cabernet Sauvignon for $200 if you act now). Other countries have de-alcoholized wines, too, including Wine Zero in Italy.

Interestingly, the two big U.S. brands are made in very different ways. Both begin with wine, of course. Ariel uses reverse osmosis to remove alcohol and water, resulting in a concentrated wine. The image above (from the Ariel website) shows how it works. Fresh water is added to the de-alcoholized wine concentrate before bottling.

Fre, on the other hand, uses the spinning cone method to remove alcohol and then adds back in a small amount of the unfermented juice to give the wine better body.

A Growing Market Segment?

I wrote to both companies asking for sales data but neither sent a reply. I wanted to test my hunch, which is that sales of de-alcoholized wine are growing. This might make sense since interest in wine is on the rise and concern about alcohol’s health effects is also strong. Possibly these two trends are in complete conflict, but maybe there is an overlapping niche where brands for Fre and Ariel (and the juice products, too).

Now that I am sensitive to the issue, I seem to see news reports about head trauma problems everywhere — in the international news about soldiers returned form overseas duty, for example, and in the sports pages where football, hockey and even soccer injuries are reported. I can’t help thinking that my bicycle-riding  friend is not alone among head trauma patients in her desire to enjoy wine in some form during her recovery.

My New Year’s Toast: Raise a wine glass (alcohol optional) to good health. Cheers!

Holiday Wine Sales: That’s Where the Money Goes!

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That’s where the money goes

To buy my baby those

Crisp German Riesling wines

And Oregon Pinot Noir.

She shifts to bubbles when

Santa’s back in his den

Oh boy, that’s where my money goes.

I remember learning this tune from a Mitch Miller singalong LP years ago (click here to hear the song). I’ve written new lyrics to highlight a report from Nielsen about holiday wine and spirits sales (see chart above).

Wine sales surge around the holidays, but sales don’t increase evenly across the board. Here’s a summary of the findings, courtesy of Danny Brager, VP Beverage/Alcohol Group, Nielsen.

The U.S. consumer is much more inclined to open up their pocket books during the holidays.  While overall wine sales are 67% higher in that week leading up to Christmas compared to an average week, that jumps up to 124% higher for wines priced $15-$20, and 180% higher for wines $20 and higher

And which varieties tend to really shine during the holidays? Rieslings and Pinot Noir lead the way – with sales increases compared to an average week in the year 107% and 74% higher respectively, even more of a jump than the wine category overall.

By country, wines from Germany, tied to that Riesling jump, followed by France and Italy exhibit the greatest holiday sales leap compared to an average week, while wines from Oregon pop the most when looking at major U.S. wine producing states

Trading up for the holidays doesn’t surprise me, but I must admit that I would not have predicted surging sales for Riesling and Pinot Noir. Those are actually the wines that I recommend to my students for festive holiday meals (along with bubbles, of course). I guess the word is out!

Illusive Progress in Wine Advertising?

A lot of money, talent, and technology goes into advertising today, but is the product really better than in the past? For your consideration (and winter holiday fun) we present three television wine commercials from past and present. All feature celebrities along with increasing levels of money and technology. The wine gets better as we move along,  but does the quality of the message? What do you think? Cheers!

Thunderbird: Not quite like anything I’ve ever tasted

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Paul Masson Chenin Blanc: Yummy

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Legendary wine (and acting)

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I know, I know, you were hoping for one of those famous Orson Welles commercials for Paul Masson. Well, you can find them and more on YouTube.com. Click on this link for a selection.

Is Carmenere Chile’s Next Big Thing?

Can Carmenere be for Chile what Malbec has become for Argentina — a game-changing wine that opens up new markets and upgrade perceptions in old ones? That’s the question I asked at the end of my last post.

An Unlikely Curse

Chile has earned a reputation for good value Cabernet, Chardonnay and Sauvignon Blanc; this good reputation is ironically an anchor holding the industry back as it attempts to move upmarket. It will be quite a struggle to get consumers to pay more for established varieties of Chilean wines in the UK and US. New markets and new wine varieties may be the key to future success.

This is where Carmenere comes in. Carmenere is a variety that once produced famous wines in Bordeaux. But when vines were replanted after phylloxera, Carmenere was phased out because of its succeptability to a disease called coulure, which reduces yields. It thrived in phylloxera-free Chile, where it was mistaken for Merlot, an error only corrected in 1994. It is still unclear how many of Chile’s Merlot vines are really Carmenere.

Carmenere is a niche product here in the United States. If you take varietal Carmenere and blends together they account for about 0.2 percent of Nielsen- measured U.S. off-premises wine sales. Concha y Toro is the leading brand followed by Santa Rita and Root 1. By comparison, Chile has about a 2.7% overall share of the measured U.S. market by dollar value, so Carmenere is still quite small, but not insignificant. Total sales of all Chilean Carmenere and blends are less than the dollar value of revenues from Concha y Toro’s 1.5 liter Cabernet Sauvignon alone.

The first Chilean Carmenere that I remember seeing here in the U.S. was a line of wines called Oops, playing up the Merlot-Carmenere mix up. Here’s a nice Chilean Merlot … oops! It’s really something else! I remember trying a bottle and while the label was memorable it didn’t do much to establish Carmenere or Chile in my mind as a quality wine segment.

Carmenere Comes to Britain

Fast forward to 2010. Wines of Chile launched a big campaign in the key UK market called  Carmenere: made for Curry.  It was apparently quite successful, winning the prize for “generic promotion campaigns” at the International Wine Challenge Awards. The idea was to link Chilean Carmenere with Indian food (generically called “curry” in the UK), which is Britain’s most popular ethnic food category, and hope that Chicken Tikka Masala would do for Carmenere what Argentinean steak has done for Malbec.

But a big Carmenere tasting report in the July 2011 issue of Decanter raises some doubts about the quality of the wines, which is obviously a key factor in the strategy. Chilean Carmenere is a “work in progress” according to one of the panelists. Others suggested that Carmenere’s best bet is in blends (especially with Syrah), not as a varietal wine. None of the 132 wines tasted earned Decanter’s top 5-star rating and only 6 received 4 stars. Eight-six wines were “recommended” and 35 were named “good value” (Chilean good value — of course!).

[By comparison, a June 2010 Decanter tasting of 255 Argentinean Malbecs produced four 5-star, twenty-one 4-star and 131 three-star "recommended" ratings.]

Interestingly, the panel suggested that the “overt, oaky, alcoholic, heavy-bottle wines” were made to appeal to the U.S. and South American markets and lacked the balance they’d need to find favor in the U.K. The tone of the review was not as dark as I am probably painting it here, but the conclusion was clear: there was nothing revealed in those 132 bottles that would fundamentally alter Chile’s reputation.

Curry and Carmenere in the U.S.A.

The Curry and Carmenere campaign was so successful in the UK that Wines of Chile brought it to the U.S. earlier this fall and we were invited to participate in a blogger tasting. Sue and I asked two of my “Idea of Wine” students, Marina Balleria and Mike Knape, to join us.  Marina and Mike both studied abroad in Chile and brought local wine knowledge to the table as well as excellent critical thinking (and tasting) skills.

 We concluded that Curry and Carmenere is not a ridiculous idea (Mike reported a “perfect” bite with one of the wines and an onion empanada with a curry sauce), but not all the matches were equally successful. In any case, curry doesn’t have the same significance here in the U.S. that is does in the U.K. Even if Carmenere hit a home run with curry that wouldn’t automatically open up a very large U.S. wine market segment.

We found the alcohol and oak that the Decanter tasters noted, but Marina suggested that oak is part of what she expects from Chilean red wine, so this was a positive feature for her — a defining style. One of the bottles was heavy indeed — 1084 grams according to our scale, the heaviest bottle I’ve encountered since I started keeping track.  Not exactly in keeping with the “Chile is good for you” environmental theme. Most of the wines were more interesting when re-tasted the next day.
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 So what did we decide about the critical question — is Carmenere the special one that will lead Chile into the next phase of its wine market evolution? Not yet — I think that’s the answer. We didn’t find the distinctive style and consistent quality that we were looking for although there were some we really liked (and — sorry! — thought were good values).
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Project Carmenere is still under construction. When will it be finished? This is hard to say. Malbec wasn’t built in a day, although the Malbec boom, when it came, developed very quickly. Carmenere’s story may be the same — or maybe the time has passed when hot new red varieties can make wine drinkers swoon.
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Either way I think it will be tough for Chile to achieve its 2020 goals but I think they need to try. Carmenere may be Chile’s best bet and I look forward to tracking its progress.

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Here are the wines we tasted for the Curry and Carmenere event. Thanks to Wines of Chile for inviting us to participate and thanks to Mike and Marina (see photos above) for their insights.

Blogger Tasting Wine List

1- Emiliana Natura Carmenere 2010 / Colchagua Valley 100% Carmenere SRP: $16.99

2- Casa Silva Los Lingues Gran Reserva Carmenere 2008 / Colchagua Valley 100% Carmenere SRP: $22

3- Santa Rita Medalla Real Gran Reserva Carmenere 2008 / Colchagua Valley 100% Carmenere SRP: $19.99

4- Montes Alpha Carmenere 2008 / Colchagua Valley 90% Carmenere, 10% Cabernet Sauvignon SRP: $24.00

5- Carmen Gran Reserva Carmenere 2009 / Apalta Valley 100% Carmenere SRP: $16.99

6- Santa Carolina Reserva de Familia Carmenere 2009 / Rapel Valley 100% Carmenere SRP: $19.99

7- Concha y Toro Marques de Casa Concha Carmenere 2009 / Peumo Vineyard, Rapel Valley 100% Carmenere SRP: $20.00

8- Haras de Pirque Cabernet Sauvignon / Carmenere 2007 / Maipo Valley 40% Cab. Sauv., 37% Carmenere, 13% Cab. Franc, 10% Syrah SRP: $13.00

Occupy Napa (and Sonoma and Burgundy and Bordeaux)

One of my loyal readers, perhaps inspired by Wine Economist posts about bargain wines and Martians versus Wagnerians, writes to suggest that I  organize an “Occupy the Vineyards” movement. The purpose? To protest that part of the wine world that focuses on iconic wines for elites. What about the rest of us, he says? What about the other 99% of wine drinkers who are looking for good, affordable quotidian wines and don’t really care about impossibly expensive 100-point wines?

Not Wine Porn

It is a very Wagnerian idea (the reference here is to Philip Wagner, who promoted a democratic notion of wine here in the U.S., not the more famous aristocratic composer) and I am very sympathetic towards it. Wagnerian wines don’t have to be cheap cheap cheap, they just need to be good drinkable, affordable wines   Wine food, not wine porn, if you know what I mean. A sensible idea.

So I started fooling around on the internet, searching for titles like “Occupy Napa” and “Occupy Bordeaux.” I figured that a catchy name would help make the point.

But they’re already taken — by groups affiliated with the “Occupy Wall Street” movement. Occupy Napa leads weekend protests at a Napa, California town square. Occupy Bordeaux seems to be part of the broader Occupy France movement. (I thought France was already occupied …)

CafePress website sells Occupy Bordeaux souvenirs including T-shirts, water bottles and the neat 20 ounce drinking glass pictured here, but I don’t think it is directly affiliated with the group in France. The Occupy Together website has a cool interactive map that shows “Occupy” movements around the world and lists their websites if you are interested in seeing how this movement has evolved.

The Occupy Principle

I like the idea of promoting a more casual idea of wine, but I guess I won’t be using the “Occupy” trademark, since it would be  too easy to confuse the wine group with the larger transnational advocacy movement.  But I think that what I am calling the “occupy principle” probably applies to both.

Usually we think that movements need to stand for something quite specific — to have an clear agreed agenda — and in the long run I think this is very important. But in the short run sometimes it helps if a movement is a little ambiguous, with a flexible identity that can lend it self to several different purposes and attract a good many followers. I think this ambiguity helped the Occupy Wall Street movement to gain initial attention and to spread as it has done.

The Occupiers I have read about resent and oppose unequal wealth and power (the gap between the 1% and the rest), but differ in many other respects. It will be interesting to see if a clearly focused agenda emerges and, if it does, what specific goals are adopted. Perhaps, of course, the protest itself and the consciousness-raising it provokes are sufficient as a first step.

Conspicuous Non-Consumption?

A wine movement for the 99% would surely bring together the wine world equivalent of “strange bedfellows,” too. Some supporters are just cheap (or thrifty, if you will) and want a little respect for their self-restraint. Others may be against an elitist idea of wine or oppose conspicuous consumption (which in the case of trophy wines often takes the rather bizarre form of conspicuous non-consumption — costly “collector” wines to look at and talk about, not necessarily to drink).

The reader who originally suggested the Occupy Wine idea has a more basic approach: wine doesn’t have to be a mystery (and most wine isn’t) and it shouldn’t cost an arm and a leg (most wine doesn’t). There’s no reason that perfectly decent, relatively affordable wine can’t be a part of almost everyone’s daily life. That’s a Wagnerian attitude through and through and I can see why he wantd to see it given more attention in the wine world.

The Commanding Heights

So if there were to be an Occupy Wine protest, where would we gather and what would we do? That’s a bit of a problem since the places that sell the most wine (including supermarkets and wine shops) often have a lot of choices for the 99 percent — not much to oppose there.  Costco is the largest wine retailer in the U.S. and although it does sell some icon wines, most of the products are more affordable. Most 99-percenters probably view Costco as friendly territory because of its policy of marking up wine only 15% for most bottles and 17% for house brand Kirkland Signature wines.

I suppose that we could protest in front of high end restaurants that sell superstar wines at super-nova prices. But I think restaurant wine mark ups are an issue of their own. And besides, the smell coming out of the kitchen would probably make me crazy. We could meet at Trader Joe’s to acknowledge the Two Buck Chuck phenomenon, but it wouldn’t be the same.

No, we would need to occupy the “commanding heights” — which in the case of wine means the wine media, where the 1 percent wines are praised and raised to an often unreachable altar.  But there are flaws in the plan to Occupy Wine Spectator, too. First, all the popular wine magazines are making efforts to reach price-sensitive “99%” buyers just now, even if they also run stories about one percent wines. Even Wine Advocate identifies good values and I have seen box wines and house brands included in some wine magazine reviews.

Fait Accompli?

The other problem is that I am not sure that there is a market for an alternative Occupy Wine magazine that would focus on everyday wine values and ordinary wine lifestyles. The target audience probably wouldn’t buy it — they’d rather spend their money on wine than wine literature. And in any case there are several wine blogs that cater to the good value audience.

Maybe … and this is only speculation … maybe we have already occupied wine and we just don’t realize it? The wines are there and so are we, the 99 percent.

Occupy Wine is a fait accompli? Who knew! Spread the word.

The Big and Hot (and Not) Wine List

It’s time to update the “Big and Hot” list that I published last November. The list is pretty simple — what segments of the wine market are the biggest (measured by revenue) and which are the fastest growing? What’s big isn’t always hot and what’s hot isn’t always big. Here is my report, which also includes some notes on what’s not so hot.

But first a few disclaimers. The list is based upon published data found in the December 2011 issue of Wine Business Monthly. The data are from Nielsen surveys of table wine sales made through the off-premises food/drug/liquor store channels, not including convenience stores. These data measure an important slice of  wine sales, but not the whole thing (see the comments section of last year’s post for a good exchange on the strengths and limitations of Nielsen data).

Finally, data are for the 52 weeks ending 8/20/2011. Sorry for these limitations, but you know what they say about data: you want it good, fresh (or fast) and cheap but you can only have two at a time. These numbers are pretty good (if you understand their limitations) and relatively cheap, but not so fresh.  Not ideal, but it’s worth a look, especially if you haven’t checked on these trends in a while.

Category

$ millions in 52 weeks to 8/20/11

% change from previous year

Total Nielsen survey table wine

9,637

4.5%

Domestic table wine

6,924

6.2

Imported table wine

2,713

0.6

750 ml

6,584

6.1

1.5 l

1,977

1.1

3 l

323

3.3

4 l

111

-6.9

5 l

382

-0.9

Red table wine

4,797

4.3

White table wine

4,234

6.5

Chardonnay

2.050

1.8

Cabernet Sauvignon

1,444

6.6

Merlot

871

-4.6

Pinot Gris/Grigio

790

7.5

Italy import

831

3.2

Australia import

751

-7.1

Chile import

240

-2.1

France import

224

-4.4

Argentina import

222

20.2

New Zealand import

156

24.2

Syrah/Shiraz

240

-13.3

White Zinfandel

405

-6.0

Source: Wine Business Monthly 12/2011

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Start with good news: the wine market measured here grew by 4.5% in these 52 weeks, which is up from 3.2% growth in the previous  year. The growth was concentrated in domestic wine versus imports. Domestic wine is both big (in $ revenues) and relatively hot (growing faster than the overall market). Imported wine? Not so hot as a broad category.

Wine in 750ml bottles is both big and hot. 1.5l bottles are big but not very hot. One liter containers are growing quickly (+14.8%), but from a small $18 million base. Interestingly, the 3l, 4l and 5l box wine formats grew more slowly than the overall market. Perhaps the box wine boomlet is fading?

Pinot Gris/Grigio is overtaking Merlot for the #3 spot on the “varietal wine” list. PG is hot and Merlot is cold in these data.

Australia continues to be big in terms of sales — it is far ahead of Chile for the #2 spot among wine imports. The gap is so huge that even though Australia wine sales are “cold,” falling 7% in the measured period, it would take years for them to fall to Chile’s level.

In the meantime, Argentina and New Zealand continue to be red hot, with 20+ percent sales gains on the year. In fact, it looks like Argentina will overtake France on this list, which is quite an achievement. But remember that this data excludes on-trade sales, where France may have an advantage.

Finally, I note that Syrah/Shiraz continues to shrink along with White Zinfandel and the whole blush wine category. In the case of White Zin, I suspect that it is a victim of the current trend towards Moscato and sweetish red wines. But these wine types don’t appear on the Nielsen list.

Let’s toast the good news of the growing wine market and hope that it continues!

Grape Transformations: Piemonte’s Twin Tornados

This is the second in a series on people who have revolutionized the way the world thinks about wine or a particular wine region. This post takes us to Italy’s Piemonte region, famous for its Barolo and Barbaresco wines.

Two winemakers stand out here. Many of you have probably already guessed the first name: Angelo Gaja, who is associated with the transformation of Barbaresco. The second name? I’ll leave you in suspense for a few paragraphs. See if you can figure it out.

Gaga for Gaja

Angelo Gaja changed the way the world thinks about Piemonte wine (and to some extent Italian wine in general). Joe Bastianich (writing in his book Grandi Vini) says that Gaja is “the most famous Italian wine producer in the world” (this may come as news to the Antinori and Frescobaldi families, but I’m sure Joe knows what he is talking about). Barbaresco was seen as the plain little sister of sexy Barolo until Gaja changed everything.

Exactly what Gaja changed and how is a matter of opinion, although the achievement is clear. Bastianich looks to the vineyard, the development of particular vineyard sites and the production of “cru” single vineyard “terroir” wines. He also praises Gaja’s efforts to travel the world promoting his wines and the other wines of the region. The power of Gaja’s personality is clearly part of the story here.

Matt Kramer, writing in his book Making Sense of Italian Wine, tells a different story. For him Gaja’s contribution was in the cellar even more than the vineyard, where he introducing an international style to the wine by using small French oak barrels (Gaja also controversially introduced international grape varieties to the family’s vineyards).

Gaja’s second and perhaps even greater achievement, Kramer suggests, was to charge outrageous prices for his wines. “While few people know about wine, everybody’s an expert on money: Could this Gaja … really be worth that much money? The sheer chutzpah was captivating and so, too, it turned out, were the wines.”

Gaja became a role model for Piemonte and perhaps for aspiring winemakers throughout Italy.

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Barbera, Bologna, “Braida”

As much as I admire Angelo Gaja, enjoy his wines and respect his innovations, he is not alone on the Piemonte “grape transformations” podium. The second “tornado” is someone who did for democratic Barbera what Gaja did for aristocratic Nebbiolo. The achievement may be even greater.

Nebbiolo, the noble grape that is responsible for the great Barolo, Barbaresco and Langhe Rosso wines, is far from the most planted Piemonte grape. It has the best reputation, but perhaps because it ripens so late and requires specific site characteristics to excel, it is not as widely planted as you might imagine. There is 15 times more Barbera than Nebbiolo in Piemonte.

Barbera! Making this humble everyday wine respected  and even fashionable today is a signal achievement. This is the claim to fame of the late Giacomo Bologna of “Braida” winery in Rocchetta Tanaro, just a few miles from Asti.

Barbera is not finicky like Nebbiolo — it will grow pretty much wherever you plant it in Piemonte, both where it produces outstanding grapes and where quality is not so high. There was not much of a premium for quality grapes in the early postwar era when wholesalers would buy indiscriminately and lump them all together. Giacomo Bologna thought he could do better and set out to achieve excellence beginning in the 1960s, when Gaja was also picking up steam.

The old Barbera was nothing special, but focusing on specific sites with old vines and low productivity, engaging in aggressive cap management and aging the wines in small French oak, Bologna was able to create both a new Barbera wine and a new image of Barbera wine. The top wines, including the famous Bricco dell’Uccellone, redefined the region and jumpstarted the quality wine movement.

Another “Braida” Revolution?

We visited Braida in June when were in Italy for the wine economics conference in Bolzano. Nadine Weihgold led us on a tour of the winery, pointing out the many ways that Giacomo Bologna’s vision and plans have been fulfilled since his untimely death by his wife Anna and his two children Raffaella and Giuseppe (both of whom are enologists).

We tasting the single vineyard wines and then Ai Suma, an extreme version of Bologna’s idea of Barbera that is only produced in special years. These are wines of distinction and reputation and so popular in Italy that a surprisingly small amount leaks out to the rest of the world.

Giuseppe Bologna happened to pass through on his way to the barrel room and, hearing the wine economics conversation, sat down to join us. “Is there anything else you’d like to taste?” Nadine asked? Embarrassed and apologetic, I confessed I wanted to follow these great wines with their vivacious but less prestigious little sister – La Monella, the frizzante Barbera that was the company’s first success. A simple wine, but with style and quality.  Were they offended? No, just the opposite. Grinning with obvious pleasure, Giuseppe went to work, corks started to fly and soon were we chatting away in mixed Italian and English.

Ai Suma might be literally the summit of Giacomo Bologna’s mountain, but his son Giuseppe has his own dreams and plans — and they include Pinot Noir. Pinot is a blending grape in this part of Italy, but Giuseppe has hopes that it might some day learn to stand on its own as Barbera has. He called for a barrel sample and the wine was very interesting — not an imitation of Burgundy, Oregon or New Zealand, but something different, still developing, full of potential.

Pinot Noir in Barolo-ville? Giuseppe Bologna must be nuts. But then they probably said that about Giacomo Bologna and Angelo Gaja back in the day.

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This video has nice images of Giacomo Bologna and family and tells the winery’s history very well (I think you can catch the gist even if your Italian is a little rusty). The first video features Angelo Gaja telling his own story. Cheers!

Invisible Wine … Revealed

The main theme of Ralph Ellison’s classic novel Invisible Man, according to one plot summary, “is the invisibility of the underdog. As the title suggests, the main character is invisible because everyone sees him as a stereotype, not as a real person. While the narrator often bemoans his state of invisibility, he comes to embrace it in the end.”

If we think of invisibility this way (and not the more literal  spooky H.G. Wells way) then I suppose that Kerner is an  Invisible Wine.

Son of Frankenwine?

Kerner is a hybrid wine grape – a cross between noble Riesling and very humble Schiava Grossa, also known as Trollinger in Germany and Vernatsch in its native Alto Adige region of Italy, where it mainly produces inexpensive everyday  red wines for local consumption.  Kerner is a relatively recent invention, first bred in 1969 according to the Oxford Companion to Wine, and named for Justinius Kerner, a 19th century poet and song-writer with a particular affinity for wine.

Justinius Kerner

Hybrid grapes have the same reputation as movie sequels. They are frequently profitable and sometimes very enjoyable, but never as good as the original. There are exceptions to this rule (both for grapes and for films) but in general the stereotype holds. Kerner is often viewed as a Riesling sequel, having many of the qualities of Riesling, but with higher yields and better frost resistance.

Critic reactions to Kerner are mixed. Jancis Robinson, like me a big Riesling fan, writes that “The large white berries produce wines commendably close to Riesling in flavour except with their own leafy aroma and slight coarser texture.” She calls it a “great success story.” Oz Clarke is less enthusiastic, writing that “It is one of the better modern crossings … which perhaps is not saying a great deal.” You see what I mean about stereotypes.

There are about 3700 hectares of Kerner in Germany, far behind Riesling (22,000 hectares), Muller Thurgau (13,000 hectares) and Sylvaner (5000) among white grape varieties but still a considerable amount. While varietal Kerner wines are made in Germany (some quite good, according to Robinson), I suspect most of the grapes are destined for “invisible” inclusion in various blends, which is what happens to hybrids.

A Different Story in Italy

Peter Baumgartner

The story is quite different in Alto Adige, that part of Italy that was Austrian before the First World War and exists today as a semi-autonomous region with both German and Italian (as well as Ladin) as official languages. This is the home of Kerner’s parent, Schiava/Vernatsch, and Kerner is embraced here for what it is, not as a Riesling sequel or substitute. The Valle Isarco (or Eisachtaler in German), which follows the Isarco river up into the Alps,  is the main Kerner region and here, freed of stereotypes, it achieves something quite special.

We were fortunate to have a private tasting of the wines of the Cantina Porduttori Valle Isarco (a.k.a Eisacktaler Kellerei) in Chiusa. Peter Baumgartner, a local banker who is the cooperative winery’s president, explained the winery’s business side (look for an upcoming post on cooperatives in this region) and guided us as we tasted the wines.

Cantina Valle Isarco specializes in white wines (Baumgartner plans to phase out the remaining reds in the portfolio): Sylvaner, Muller Thurgau, Veltliner, Traminer Aromatico, Pinot Grigio, Pinot Bianco, Chardonnay, Sauvignon, Riesling and of course Kerner. Production is about 1 million bottles a year and the market is mainly local: 50% in Alto Adige, 40% in other parts of Italy with most of the remaining 10% exported to Germany and Switzerland. Wines are produced to hit several price points starting about about €6 for the entry level and moving up from there.

The Cantina makes four Kerner wines starting with the entry level wine (which we did not taste) and moving up through the premium Artisos series, a limited edition Sabiona Kerner (made from grapes from the Sabiona Monastery vineyards) and ending with a deliciously sweet Kerner Nectaris Passito made from late-harvest grapes left to dry and concentrate their flavors on straw mats in the manner of Amarone.

Wine Wisdom from Charles Barkley

I once heard the sports philosopher Charles Barkley say that a particular basketball player was successful because “he plays like himself” instead of trying to be someone else.  I think the Kerner wines made by the Cantina Valle Isarco are interesting (and apparently successful, too) because they “play like themselves” — they seem to be made to be themselves and not an imitation, substitute or sequel for something else.

In fact, they are among the very best white wines of Italy. Or at least that’s what the editors of the Gambero Rosso guide seem to think. My 2007 Vini d’Italia guide lists three Kerner wines (from Cantina Valle Isarco, Manfred Nössing-Hoandlhof and Abbazia di Novacella) among the 282 wines from all of Italy receiving the highest “three glasses” (tre bichierri) award. That’s a disproportionate achievement for an invisible wine from a tiny Alto Adige valley.

Kerner shows that local wines can excel if local markets embrace them and that even invisible wines can sometimes shine in the spotlight if they follow Charles Barkley’s sage advice.

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Cooperatives have a bad reputation in the wine business. Some of the worst wines in the world are made by cooperatives that favor quantity over quality. But, as we have seen here, some of the best wines are also made by cooperatives. High quality cooperatives are unusually prominent in Alto Adige. Why? How? These are questions I’ll try to answer in my next post.

Thanks to Peter Baumgartner for his generous hospitality during our visit to Cantina Valle Isarco and also at the opening reception of the AAWE meetings in Bolzano.

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