Sniff & Swirl Meets Bits & Bytes


Marshall: Ordinary businessman

Alfred Marshall defined economics as the study of people as they go about the ordinary business of life. People who love wine believe that it is special and they are right to a certain extent, but it is also ordinary at least in terms of some of the business functions. Herewith the first of two posts about how ordinary and extraordinary intersect in the wine business.

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Information technology (the bits and bytes of the title) has insinuated itself into almost every aspect of our daily lives — why should wine (the sniff and swirl) be any different? And indeed it is not, although most of us probably romantically wish it were otherwise.

The most obvious place where IT comes into play is in the marketing of wine. Most winemakers today try to use social media vectors such as FaceBook and Twitter to establish and nurture relationships with customers. I’ve read that the hard sell approach isn’t generally effective (readers: use the comments section below to share your experiences with this), so the focus is on soft sell.

But is it worth it? That’s the business question. Yes, it is probably a mistake to ignore social media entirely  (just as you would be crazy not to have a winery website or a website for your barber shop if that’s your business), but what’s the smart level of investment? After all, social media doesn’t create and manage itself. Someone’s got to represent the winery as host, posting content and responding to friends and followers. How much investment makes sense?

One big time winemaker friend put it this way. Which is better for the winery — a full time employee to manage social media or three full page advertisements in Wine Spectator? Wow, that’s a tough one, especially since the audiences and the nature of the impact are so different. But, from a business standpoint, that’s the sort of trade-off that must be evaluated.

It’s the same thing for QR codes. Wineries can use QR codes to enrich their story-telling to smart phone-enabled customers, which is surely an advantage, but not without some investment. The old marginal cost versus marginal revenue questions will always be there, even in the wine game.

Cloud Data Systems

Trend Micro sent me information about their SafeSync for Business cloud data system. It provides a safe, secure data storage system. What got my attention is that they featured a winery case study: Good Harbor Vineyards on Michigan’s Leelanau Pennisula.

 “As a wine maker, we are highly monitored and regularly audited by numerous government agencies. We have to keep track of everything—every bottle and every ounce has to be accounted for—from purchase through production, bottling, sale, and shipment. We were worried that someone could gain access to these records. Losing our files would be crippling in any type of audit — and these take place frequently.

This made me realize that wineries have all the business IT needs that other types of firms do, and a few more as well. I think it is interesting that a big firm like Trend Micro would make a point to feature winery applications. I wonder if small and medium sized wineries (like similar businesses generally) have lagged behind the IT cutting edge and are therefore a ripe market for upgrades. Or maybe wine is just the sort of example that makes everyone realize how important data can be.

Extraordinary Business Needs

While some parts of the wine business are not so different from any other business (with a couple of special wrinkles in the cloth just to keep things interesting), some business needs really are fairly specific to wine. Every business needs to be able to track shipments and inventory, for example, but wine’s needs often go beyond the norm.

A London to Hong Kong shipment record.

The wine business is large enough to spawn IT applicantions to meet its particular specialized needs. For example, a company called eProvenance has been formed to provide reliable detailed information about wine shipping conditions. Wine buyers, especially those at the high end of the market, now seek assurance of the quality and authenticity of their investments and their concerns extend all the way through the supply chain.

A Bordeaux to Beijing shipment record.

Your bottle of Chateau Margaux (lucky you!) won’t be the same if it has been “cooked” in an improperly handled shipping container, for example.  But how can you be sure it hasn’t been? Enter the NFC temperature sensor!

Boston, Massachusetts – December 6, 2011 – eProvenance, a Franco‐American company applying advanced technology to monitor the temperature of fine wines as they travel from wine producer to customer, has developed temperature sensors that are compatible with the Near Field Communication (NFC) protocol and can be read through wooden cases of wine. Using the NFC protocol, which makes it easy to communicate data via smartphones (like the Google Nexus S), the new eProvenance sensors can transfer the temperature history for the case of wine through a reader or smartphone to the secure eProvenance online database. Using their NFC mobile phones, consumers will be able to access the eProvenance temperature history, and thus verify the provenance of the wines they purchase.

As you can see from the two temperature tracks above, not all wine shipments are treated with the care they deserve (and their buyers probably expect), so the tracking data can be very important. And now data can be collected in the warehouse as well as the shipping container for longer time periods, another way to ascertain quality.

With a 15‐year battery life, the new 2G (second generation) eProvenance sensors can be embedded in the wooden wine case to provide continuous, long‐term temperature monitoring, which creates a record of provenance over time that adds to the value of the wine. eProvenance customers can choose either to convert the temperature data into a provenance rating or simply share the data, allowing the importer or customer to make their own judgment about the temperature conditions.

The Opus One Story

Opus One is taking the logical next step in the use of IT, according to the press release from eProvenance — combining story-telling and temperature tracking at the single-bottle level.

Presenting at WineFuture Hong Kong 2011, David Pearson of Opus One said, “Starting with our 2008 vintage, we have an NFC tag on each bottle under the back label, which connects consumers to a video of our winemaker. Now we envision adding an eProvenance sensor inside each case to monitor the temperature for 15 years, allowing consumers with an NFC phone to read the entire temperature history with one click. The potential to connect with our consumers and to safeguard their wine is tremendous.”

I’m not sure if Alfred Marshall liked wine, but I’m pretty sure he would like the wine business today for its combination of ordinary and exceptional business practices.

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Thanks to eProvenance for giving me permission to use the temperature charts above. Thanks to Ken B. for the suggestion that provoked the “ordinary business” blog posts.

Wine Science: Better Drinking Through Chemistry

I’m always excited to read the final papers written by students in my class on “The Idea of Wine.” The students come from all corners of the university and bring with them a diverse range of skills, interests, and experiences both with wine and with academics and life generally.

Reading these papers is never tiring or boring, but that’s probably obvious. To paraphrase Dr. Johnson’s comment about London, a person who is tired of wine is tired of life. As in the past, I’ve picked a handful of papers from the fall semester to feature here. This time I want to focus on two themes: wine science and wine politics.

Better Living Through [Wine] Chemistry

Alex (a Math and Chemistry major) wrote an excellent survey of  “Improvements in Wine Making Through Chemistry” that argued  that “In every part of the [winemaking] process there are questions that can only be addressed using modern chemical models and knowledge.” He supported this point with several examples of detailed chemical analysis. I suspect Alex was “provoked” to write this excellent paper by the combination of the anti-scientific sentiment of the film Mondovino, which the class watched, and the very pro-science attitude of Biology PhD and Master of Wine Benjamin Lewin’s book Wine Myths and Realities, which we read.

Two papers dealt with health issues. Julie (Biochemistry) wrote on “Resveratrol: Potential Health Benefits of Red Wine” while Abby (Exercise Science)  analyzed “Moderate Intake and the Risk of CVS: Resveratrol, NO pathways and SIRT1.” Both papers took the conventional wisdom of the French “Red Wine Paradox” and examined it in detail through the lens of scientific papers and studies. I learned so much from these papers and I can’t thank Julie and Abby enough for writing them.

Frankenwine and Tropical Terroir

Fletcher wrote “Happy Halloween, Enjoy Your Glowing Wine,” an analysis of what I call the “Frankenwine” issue – the application of genetic engineering to wine. As a Business major, Fletcher was naturally interested in consumer attitudes towards GMO products and the marketing implications, but I was impressed with his more technical survey of the application of GMO technology to grapes (to deal with climate change?) and yeasts (such as the ML01 strain, which has been in use since 2003).

Mike (International Political Economy) wrote about “New Lattitdes” viticulture in “Towards a Tropical Terroir: Winemaking Lessons from Thailand.” Although the Thai wine industry is a work in progress, Mike argued that the technical lessons learned in tropical viticulture might eventually be applied to other parts of the world as climate change progresses. His paper combined science with economics and also politics in his analysis of how the AOC system might make it more difficult for Old World producers to benefit from the technical findings of Thai and Brazilian researchers. Very interesting!

Crossing Over, Breaking In

Two students wrote especially interesting papers that probed wine politics issues.  Immigration policy is a hot button political issue this  year – it seems to come up in every Presidential candidate debate. Katherine (Spanish and Art History) wrote about “Grapes of Wrath: Immigration Policy and the U.S. Wine Industry,” looking at immigration flows both in terms of U.S. agriculture generally and the wine grape industry in particular. She suggests that the wine industry would be particularly impacted by changing immigration policy

Patrick (an International Relations major) wrote “The U.S. Racialized Wine Industry: Can Latinos Break Through?”  We know that Latino migrants provide skilled labor in the vineyards – have they been successful in breaking into the cellar, becoming winemakers and winery owners? The answer is yes, but not very often. Patrick examined the structural barriers that seem to stand in the way and speculated about the future .

Thanks to all my “Idea of Wine” students for their great work, both during the semester and on the final papers. A note to students who have signed up for the Spring 2012 class: the Fall students have set the bar pretty high!

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My policy with student papers is that they belong to the students not me, so I do not post them on-line. If you’d like to get a copy, send me an email and I’ll try to put you in touch with the particular students, who may or may not choose to share their work.

Chilean Wine at the Crossroads


When Oz Clarke spoke at the Wines of Chile Awards seminar earlier this year, his theme was simple and clear: Chilean wine is at a crossroads and it was up to the people in that room to decide which direction to go. Would they make the same mistakes as winemakers in Australia, for example, or choose another path? Oz, who was a stage and film actor in a previous life, is a dramatic speaker, but if you watch the video I think you will agree with me that his message is even more powerful than the delivery.

Preaching to the Choir

Oz Clarke is not alone in this view and to a certain extent I’m sure he was “preaching to the choir.” Wines of Chile released its ambitious  Strategic Plan 2020  about a year ago (you can download a pdf of the full report here). The plans calls for Chile to become the #1 New World producer of “sustainable and diverse” premium wines by 2020.

The carefully devised Plan projects an average annual growth rate of 9.2% and is based on strengthening the recognition and appreciation of  “Wines of Chile” as a world-class appellation, which will in turn increase the average price, sales, and added value for all Chilean wine industry stakeholders, including small and large growers, suppliers, wineries, and exporters.

The plan focuses on four messages to drive the transformation:

  • Diversity and Quality. Chile has much to offer with respect to quality, diversity, and wines that over-deliver at every price point.
  • Sustainability. Sustainable Chile: Clean, efficient, and responsible.
  • Country Image. Chile is good for you.
  • Innovation. Chile: Moving above and beyond.

The plan’s ten year time horizon speaks to the sense of “Chile at the Crossroads” immediacy while the four “strategic pillars” indicate how much needs to be done in terms of recasting Chile’s image. Chile’s reputation as a producer of bargain Cabernet Sauvignon, Chardonnay and Sauvignon Blanc needs to be reshaped in terms of both wine types and price points. And the image of Chile itself must be updated or redefined, according to the plan’s analysis, so that the country sells the wine  (as Italy’s image obvious does for Italian wine) and not the other way around. (Whether a campaign built around the slogan “Chile is Good For You” can accomplish this is debatable.)

Audacious Goals?

Exports are key for Chile since domestic consumers drink up only about 30% of total production.  The idea that revenues might grow by 9.2% in the next decade is not as ridiculous as it might sound, given the current economic climate, although it is certainly an audacious goal.

Chile’s wine exports grew by a yearly average of 33% in the 1990s (according to data in the Wines of Chile report) and by 11% per year between 2000-2009. But whereas growth came through both increased price (7%) and quantity (25%) in the 1990s, the 11% revenue growth in the 2000s was due to volume growth (12%) offsetting 0.1% average price declines. The new strategic plan calls for a radical change, with rising price not higher production driving revenue growth.  Good idea, but easier said than done.

So (and this is the “crossroads” theme again), Chile needs to turn things around in a fundamental sense and this may be difficult in today’s market environment as an excellent interview with  with Rabobank’s Stephen Rannekleiv in a special September 2011 Chile Report  issue of The Drinks Business makes clear. Rannekleiv is an optimist about Chile’s wines, but very cautious about its wine industry’s ability to meet the 2020 goal.

 Something Completely Different

Rannekleiv suggests that Chile seek out new markets to supplement but not replace the UK, its largest export market today, where margins currently are thin or even  negative and where upward price adjustment is extremely difficult. Focus must be on price and quality, Rannekleiv notes, so major supply surges must be avoided.

It is very difficult to raise price (without dramatic loss of market share) for existing product lines in today’s market, so  “Chile needs to find something different, such as marketing around new varieties that are exceptional; it also needs to continually work on improving quality.”

There is no silver bullet, Rannekleiv suggests. It will take a combination of controlled output growth, continuing quality improvements, image development and new products and markets to turn the Chilean wine industry onto the right path.

Getting the Message Out

One element of the Wines of Chile strategy is a series of blogger wine tastings that are designed to educate, inform and persuade social media representatives and their audiences of Chile’s new direction. I took part in one of these programs last year that featured Chilean Syrah and Pinot Noir, stressing the diversity of Chilean wine.

This certainly is part of the 2020 strategy’s message (and the wines told that story pretty well), but Syrah is a problematic market these days and while Pinot is popular, it is hard to break in except at the bulk level. (Although both Chile and Argentina produce Pinot Noir, for example, neither country made the cut for inclusion in Benjamin Lewin’s recent book In Search of Pinot Noir.)

Is Carmenere The Key?

Which brings us to Carmenere, the focus of the most recent blogger tasting program.  Is Carmenere the key (or one of them) to Chile’s crossroads dilemma? Carmenere is (like Malbec) a Bordeaux variety that is now better known in the New World than the Old. Can Carmenere be to Chile what Malbec has become for Argentina, a signature variety that creates a new market and that serves as a brand ambassador for the entire country?

A Carmenere boom would tick a lot of the Wines of Chile 2020 plan boxes. Is Carmenere the key? Come back next week for my answer.

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!

Boom Boom! On Money and Wine

I’m just back from the San Francisco Treasury Symposium where I gave the luncheon keynote speech on “Wine Boom and Bust — With Lessons for Finance in the 21st Century.” You might well ask what business a wine economist has speaking to a group of treasury executives (I asked that question myself!), and the answer has two parts.

First,  I actually know a little bit about global finance from my day job as a university professor. I’ve written frequently about global financial flows and especially the periodic crises that seem to plague them.

The other reason is that the conference organizers thought it would be interesting and different to hear someone talk wine, but in a way that would still be relevant to their treasury executive audience. So that was my challenge.

Money into Wine? Easy! Wine into Money … Not So Much

Money and wine are closely tied, although it is an asymmetrical relationship. It is pretty easy to convert money into wine, for example. In fact, it may be a little too easy to do this. Some of my friends report that the whole “money into wine” thing has gotten way out of hand for them. You probably know the problem from personal experience if your cellar has grown bigger than your bank account.

It is harder to convert wine into money, especially if you are in the wine business. The best way to make a small fortune in wine, people tell me, is to start with a large one.  I focused on three aspects of wine economics for my talk: globalization’s opportunities and threats, the “new rules of the game” and the need to embrace (or at least accept) volatility. All these points apply to both wine and 21st Century finance.

Globalization: Opportunity and Threat

Globalization offers a world of opportunity to winemakers and financial managers alike, but it is a complex world and a very competitive one. New markets open their doors … but your market doors are open wide, too. Optimists will see the wine glass more than half full and seize the opportunities that present themselves, hopefully taking the associated costs and risks into account.

One problem with globalization is that the risks are so difficult to fully evaluate. The Australian wine industry, for example, is currently suffering from a bad case of globalization gone bad and part of the problem has nothing directly to do with wine.

Although the Crash of 2008 slowed down the global economy, China continues to surge ahead, its demand for natural resources (one of Australia’s strong sectors) growing year after year. Australian has come down with a bad case of the “Dutch Disease” where success in one sector causes chaos elsewhere. As mineral sales have increased, the strong Australian dollar has depressed the already weakened wine industry by discouraging exports. Click on the “Dutch Disease” link to see my report on this problem.

The [New] Rules of the Game

Global finance is dominated by a number of key financial centers that set the “rules of the game” for money. Wine works the same way, but the centers have shifted and the rules of the game have changed.

Producing nations (think France and Italy) once determined the rules of the game with their AOC designations.  The center shifted to Great Britain, Germanyand the United States in the last 20 years and now the rules are written by those who sell wine (think Tesco, Costco and Aldi) more than by those who produce it. The most successful wine sectors so far are those that have best adjusted to the new rules.

The rules will change again soon, I suspect, as the BRIC and new BRIC nations make their wine market influence felt. I think finance will also experience shifting centers with new rules and have to adjust accordingly.

Volatility was my final point and wine markets have plenty of it. Boom and bust cycles seem to be “baked in the cake” in both money and wine. I talked about Australia’s five big wine booms and busts in the past 150 years and characterized them in terms of Hyman Minsky’s famous “seven stages” description of financial crises.

Beyond Boom and Bust

Booms and busts are bad enough, but wine markets also suffer from medium-term cycles of surplus and scarcity as illustrated by the Turrentine Brokerage “Wine Business Wheel of Fortune.”  High prices today sow the seeds of low prices a few years down the road, according this analysis, which is based on the well-known “cob-web” model of lagged adjustment in agricultural markets.

Anyone who has tried to guide their 401k portfolio (much less manage corporate financial affairs) knows how volatile financial markets can be – the wine world’s bubbles and cycles must seem pretty peaceful by comparison.

Wine and money may be very different, but the problems they face bear a certain resemblance, don’t you think? What can wine teach money in these uncertain times?

One lesson, I proposed, is to “think global but drink local.” This sounds pretty simplistic, but it captures trends that I see in wine today. Economic imperatives have made both global and local markets more important than in the past. Developing direct sales vectors and developing and maintaining personal relationships is high priority today. Wine (like money) is a relationship business that needs constant attention.

Boulding’s Law

But it’s useful (and often necessary) to keep a global mindset even as you cultivate local markets. The world is getting bigger and smaller at the same time and the rules of the game continue to change.

The second lesson is what I call “Boulding’s Law” after Kenneth Boulding, the famous economist. Boulding once made a study of the history of the future. He looked at what people thought about the future at various points in time and then did a “fast forward” though the history books to see if they were right.

His conclusion? When the future came around people were usually surprised. It wasn’t what they expected at all (even if it was exactly what they predicted years before!).

Hence Boulding’s Law: The best way to prepare for the future … is to prepare to be surprised. That holds for wine, I think, and for money, too.

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Thanks to the San Francisco Treasury Management Association for inviting me to speak at their symposium. Special thanks to Jim Lindsay and Larry Goldman.

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!

Grape Transformations: Mondavi and Catena

Karl Polanyi’s classic 1944 book, The Great Transformation presented a theory of how the Industrial Revolution transformed much the world. Polanyi proposed a complex paradigm of acting (economy and technology) and reacting (politics and social movements) forces that combined to shape history.  It is a must read (but not always an easy one) if you are  looking for Big Ideas in an era of disruptive change.

This Changes Everything

I’m working on my own theory of  “Grape Transformations,” which will be an occasional series here at The Wine Economist. I’m not interested in fads and trends. I want to understand instances where a person or small group fundamentally changed the nature of wine or the way that a type of wine or wine region is perceived.

Jesus is at the top of my list, of course, since he changed water into wine, the ultimate grape transformation. And there is a reason that we call think of this as a miracle. As the always insightful Ken Bernsohn reminds me, inertia is a very strong force in the world of wine (and elsewhere). This is obviously true in the vineyard itself, where years are required to “turn the supertanker” from one grape variety to another. It is also true in the marketplace, where a visible iceberg of wine drinkers interested in trying new things sits atop an invisible bulk of consumers with preferences and habits that are frozen in place (most of them drink no wine at all).

So it really is a miracle (although not in the “fishes and loaves” class) when wine makes a big turn. What are some important examples for my Grape Transformations file?

The Julia Child of Wine

Julia and the Mondavis at the Smithsonian

Let me begin with Robert Mondavi, if only because I discuss his case at some length in Wine Wars. Here’s how the section on Mondavi begins …

I like to say that Robert Mondavi tried to do for American wine what Julia Child (public television’s “French Chef”) tried to do for American cuisine: revolutionize it by convincing Americans that they could not just imitate the French but maybe better them at their own game.

Julia Child succeeded, although not by herself of course. American cuisine was transformed by her books and The French Chef, which aired from 1963 to 1973. She changed the idea of food in America. American ingredients, French techniques. Bring them together and cooks could be chefs.

Robert Mondavi did the same thing for wine. He was convinced that American grapes and Old World techniques could produced world-class wines. And he was right. When the Robert Mondavi Winery opened in Oakville in 1966, it was the first major new investment in Napa Valley in decades and it changed everything (not by itself, of course) and paved the way for a distinctly American vision of fine wine that coexists today along with a Gallo-tinted image of mass-market wines.

Mondavi wasn’t alone and he didn’t do it by himself, but I think it is fair to associate Robert Mondavi with the Grape Transformation of American wine. Quite an accomplishment.

The Mondavi of Mendoza

I think of Nicolas Catena as the Robert Mondavi of Mendoza, although I admit that the similarities only go so far. Catena transformation of Argentina’s wine industry is perhaps even more significant because previous winemaking baseline was so low.  Laura Catena tells the story in a very personal way in her excellent book, Vino Argentino. She explains how and why Argentinean wine changed in terms of her family history.

A broader and more detailed account is due for publication in a few months — Ian Mount’s brilliant The Vineyard at the End of the World (I’ve just finished reading an advance copy — watch for a review here nearer the publication date). Placing Nicolas Catena’s accomplishments in a broader context, as Mount does, changes the Catena story a bit and raises new questions, but does not alter our view of the transformative force he helped launch.

I admit to prejudice in this matter because of the courtesy we were shown when we visited Mendoza and visited with Catena and Luca (Laura Catena’s project) winemakers. Nicolas Catena has a PhD in economics and was a visiting professor at UC Berkeley when visits to Napa winemakers (and a meeting with Mondavi) transformed his idea of what New World wine could be. It was a special treat when, during our winery visit, I was given the opportunity to browse for just a moment through Catena’s personal collection of economics texts.

No Plan B

Accept for the sake of argument that Mondavi and Catena belong on the Grape Transformations list. What can we learn generally from their two specific cases? Something, I think, but n=2 is a small sample size so we shouldn’t press too hard. Robert Mondavi and Nicolas Catena have little in common in terms of personality from what I have read. Catena seems be as pensive as Mondavi was outgoing. Both were driven, I suppose, and perhaps that’s the critical factor.

Both took big risks and that seems like an important characteristic. And I think that they both felt that they had little choice but to take risks, although for different reasons and from different perspectives. Mondavi left the family business and forged out on his own relatively late in life. He didn’t have a Plan B — his new winery had to succeed.

Nicolas Catena, on the other hand, unexpectedly ended up with the family business (ruining his plans for an academic career). But Argentina’s wine markets were in a funk — export was the only route open and he (and those who worked for and with him) had no choice but to remake the wine and the business if they were to avoid collapse. No Plan B here, either.

Finally, it is interesting that family is such as powerful theme in both stories, too, and this is something I will try to explore a bit more in future posts. In both cases the transformations that they led began as internal revolutions, dramatic changes within the family way of doing business, and rapidly spread outward.

The family theme continues today. Laura Catena is now the face of the family business even though she still maintains her “day job” as an ER doctor in the San Francisco area where her family lives.  The Mondavi sons carry on the family business tradition, but not of course the actually family business — Constellation Brands purchased the Robert Mondavi brand back in 2005.

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I have a couple of “Grape Transformation” stories in mind that I will share in future posts. In the meantime, I hope my readers will use the Comments link to give their thought on this idea and suggest names for the list of people who changed the idea of wine.

Authentic Wine: Terroirist Manifesto and DIY Guide

Jamie Goode and Sam Harrop MW,  Authentic Wine: toward natural and sustainable winemaking. University of California Press, 2011.

“The wine industry is at a crossroads,” write Jamie Goode and Sam Harrop in the concluding chapter of their fine new book, Authentic Wine. “Wine is a wonderful natural, authentic product. Do we emphasize this naturalness, celebrate the diversity of wine, and put our house in order by steering away from unneeded additions and manipulations? Or do we allow wine to become simply another manufactured beverage whose flavours are manipulated to match perceived consumer preferences?”

Thus do Goode and Harrop state what I have come to call the Terroirist Manifesto. It is pretty clear, when you put it this way, that our only choice is to take up arms in defense of natural, authentic wine. Going down the other road is unthinkable (and perhaps undrinkable).

Terroirist Sympathies Disclosed

Let me say up front that I am very sympathetic to the Terroirist Manifesto. Indeed, I argue in Wine Wars that “the revenge of the terroirists” is a necessary feature of the future of wine. We need terroirists to keep us (and our wine) honest.

But does it boil down to a simple choice — this way or that way? Despite my stated sympathies, I say no. Wine is not a single thing, it is many things and I think it that monolithic thinking is the wrong approach. Wine travels many roads and I don’t really see the harm if some wines are industrialized so long as that doesn’t stop other wines from taking a more arts and crafts approach. It is up to us, the consumers, to understand the difference so that the wines of the type that Goode and Harrop champion will endure and prosper.

So it would seem that I disagree with the authors, but that’s not really true. What makes this a really interesting book (and one that I recommend enthusiastically) is that Goode and Harrop argue strongly for the principle of authentic wine and then carefully instruct on the practical matter of how to get there, focusing on choices in the vineyard, the cellar and the marketplace and taking account the real world differences between high volume commercial products and small lot craft wines.

In other words, I think Goode and Harrop are really telling winemakers that they don’t have to make a big choice — wine is not really at a crossroads — because there are practical sensible ways to achieve their goals without debasing the idea of wine as a unique element of society. The key is keep the idea of authenticity in the forefront.

Natural versus Authentic Wine

So what is authentic wine? Well, even after reading the book I don’t think I can give you a precise definition. This may be by design. Apparently Goode and Harrop originally wanted to title their book Natural Wine, but then the “natural wine” movement appeared, advocating extremely limited intervention in wine making. Although its advocates argue that this is the only way to make “real wines” (remember the English “real ale” movement of a few years ago), others say that it is just a fad or an excuse for the flawed wines that result from this extreme approach.

Goode and Harrop were probably wise to duck this controversy. Although their goals may align pretty well with those of the most vocal natural wine advocates, their strategies and tactics do not. They are far too practical (a good thing in my book) and understand that no one is going to risk making a million gallons on flawed wine because they are wedded to the most extreme versions of the natural wine principle.

Goode’s fingerprints are readily recognized on many pages. A scientist, he is also author of The Science of Wine, a book that I have read from cover to cover twice and consult very frequently. The combination of emotional manifesto and reasoned analysis works very well.

VooDoo Viticulture?

So what do the authors think of biodynamic wine (the topic of last week’s post)? Biodynamics is an interesting test — a sort of enological shibboleth. You would think that biodynamics would be the ultimate natural wine, but the question is more complicated in practice. Although biodynamic wine is pretty consistent with natural wine practices in the vineyard, I think biodynamic rules actually allow some winemaking practices (sulfites, for example) that the “natural wine” proponents forbid. So biodynamic wine may be authentic, but not natural. Very strange.

Goode and Harrop devote an entire chapter to biodynamic viticulture and they offer a very readable summary of the  limited academic literature on the subject. The bottom line: there doesn’t seem to be any objective evidence that biodynamics has positive effects that go beyond those available through standard organic viticulture. The cosmic “voodoo” elements may be just that and, the authors warn, they may even have negative impacts to the extent that they divert the focus from organic practices.

So biodynamics is a hoax? Well, not so fast, the authors say. The limits of the test studies are examined, as they should be, and then the chapter finishes with a set of profiles of winemakers around the world and their biodynamic biographies (this, interestingly, a thumbnail version of the approach Katherine Cole takes in her book about biodynamics in Oregon, Voodoo Vintners). Maybe it really is doodoo voodoo yoga (as I reported in my last post) after all!

Goode and Harrop can’t prove that biodynamics works, but they don’t want to dismiss it. They are sympathetic (as am I) perhaps for philosophic reasons or perhaps it is political — every movement needs a few fundamentalists to keep the party line from straying too far.

Authentic Wine: A Fork in the Road?

At the end of the day it is pretty hard to argue with the idea of Authentic Wine as presented here. This is partly because Goode and Harrop make such a strong case, but it is also because in “authentic wine” they have created a flexible concept that is narrow when they want it to be and loose when that’s what’s needed — along with a map for  consumers and producers to follow so they can enjoy the benefits of authenticity without tears or fears.

Go to the fork in the road … and take it! I think it’s a step in the right direction.

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In case it isn’t clear above, I recommend Authentic Wine enthusiastically. I read it in the galley stage and wrote a “blurb” that you’ll find on the back cover. I saw one critic refer to this as an “academic book” and I suppose it is — it’s published by the University of California Press. But that doesn’t mean that it is tedious and full of charts and graphs. It is actually full of people, which is a great way to tell a story. It is a serious book, but you wouldn’t be reading The Wine Economist if you didn’t already have a serious interest in wine.

Biodynamics: The DooDoo VooDoo Yoga Effect

Katherine Cole, Voodoo Vintners: Oregon’s Astonishing Biodynamic Winegrowers. Oregon State University Press, 2011.

You can’t come to Oregon and speak about “green wine” as I did a couple of weeks ago without talking about biodynamic viticulture. The Willamette Valley is a hotbed of biodynamic activity; Demeter USA, the national biodynamic certification organization, is even based here. And now Katherine Cole, a writer for The Oregonian newspaper and several wine publications, has chronicled the movement in her nifty new book Voodoo Vintners.

Black Magic Burgundy

Biodynamic viticulture is controversial – do a simple Google search for the phrase “biodynamic viticulture debate” and you’ll see what I mean. Organic viticulture sort of adopts Google’s motto: Don’t Be Evil. Eliminate chemical fertilizters, sprays and so forth. Biodynamics takes a different and more proactive approach that considers vineyards the way the Gaia Hypothesis thinks of the earth, as a living organism. Just avoiding harm is not enough! If you want healthy grapes you need the entire environment to be healthy and growing, from the dirt and its microrganisms on up.

This sounds good enough, but then there are the cow horns and other unexpected elements of the system. Rudolf Steiner, biodynamic agriculture’s Austrian founder, prescribed certain treatments, sprays and practices that strike many as more black magic than agricultural science. Any recipe that begins with burying a cow horn filled with manure (that’s DooDoo) in the vineyard and involves special stirring instructions for the resulting organic tea to harness cosmic energy before it is sprayed on the vines (VooDoo?) is bound to have skeptics.

Walking the Talk with Alois

Some wine people declare that biodynamics is bogus, a hoax. Others approach the concept with almost religious reverence. We spent an hour walking the vineyard rows with Italian biodynamic guru Alois Lageder earlier this summer and the depth of his faith was hard to miss … or to resist. He’s a true evangelical biodynamic fundamentalist and there are many who share his faith.

Alois Lageder Mesmerizes Mike

So I approached Cole’s book with great interest. Would she argue for the fundamentalists like Lageder or side with the skeptics? The answer is neither – the book is organized around a set of profiles of Oregon wine people rather than a strong central argument.

As you read the book you learn about the history of biodynamics and Rudolf Steiner, its charismatic originator. And you meet some Oregon wine growers who embrace biodynamics, some who reject it, some who’ve tried it and given up and others who like the idea, but will only go part way, It’s an interesting journey because these are interesting people and Cole is a fine writer who takes us into their lives as they weigh the costs and benefits.

Biodynamics and Yoga

All very interesting … but so what? What’s the point? I kept looking for Cole’s argument and I couldn’t find it.  Then, going back through the book I discovered that I had missed the thesis, which was stated in the introduction.

For my part, I like to compare BD [biodynamics] to yoga,. It’s a way to strengthen and fortify the whole body, to ward off illness and to maintain health.  …

OK, but what about the voodoo stuff? Well, Cole writes, yoga has its mystical side, too.

Yoga is self-contained, holistic. … There is another, metaphysical, aspect to yoga that isn’t much discussed.  … It is possible to be a practitioner of yoga without buying into the spiritual side.

That’s true. I used to do yoga exercises but I was only interested in the physical (flexibility) and mental (calm) benefits. I wasn’t looking for enlightenment.

Biodynamic viticulture in Oregon is similar to yoga at your neighborhood studio. Although it’s still a fringe phenomenon, it’s becoming increasing popular and voguish. Many winegrowers are dabbling it it. A small number are devout practitioners.

Having read the book I think Cole’s yoga analogy is a good way to describe how wine growers in Oregon relate to biodynamics — most are pragmatists and do what they think works, although a few also embrace its more mystical elements. This is a book about the people as much as (and maybe more than) the biodynamics they practice [or not]. For all its black magic, in Cole’s telling of the story, it’s still the human element that matters most.

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I enjoyed Katherine Cole’s book and I recommend it, but I still have doubts. Is biodynamics really like yoga, a healthy activity but ultimately matter of personal choice? Isn’t there any scientific evidence one way or another that can serve as a guide?

Well, there is a new book that examines biodynamics (and other green wine approaches) systematically and makes a strong argument that goes beyond bending and stretching. It’s called Authentic Wine and I’ll tell you all about it in my next post.

In the meantime, here are some Yoga exercises for wine drinkers (hint: don’t try this at home)!

The Mother of All Wine Competitions

Decanter, the self-proclaimed “World’s Best Wine Magazine,” organizes the mother of all wine competitions each year. The results of the 2011 judging are out — you can read them here.

I think that the Decanter World Wine Awards is the largest and most comprehensive wine competition in the world. The press release proclaims that “This year a staggering 12,252 wines from 44 countries were tasted in the DWWA, with 8,327 medals awarded.” Staggering is right! That’s a lot of wine from a lot of places and a lot of awards, too.

Can you imagine a wine competition with more than 8000 winners (two thirds of all wines entered)? What an incredible undertaking.

Suspicious Minds

Wine economists are suspicious of wine competitions. This is partly because economists are suspicious people in the first place, always looking for the dark dismal cloud whenever they spy a silver lining. But there are other reasons, too. De gustibus non est disputadum is the economists’ motto;  everyone is entitled to her own opinion on matters of taste. The idea that anyone, even experienced judges,  could objectively rank something as inherently subjective as wine runs against an economist’s nature, so you can imagine how suspicious we are about big competitions where thousands of wines are tasted and rated.

Richard Hodgson, a winemaker and retired statistics professor, was for many years a judge at the Mother of All American Wine Competitions, the California State Fair Commercial Wine Competition. California State Fair judges evaluated more than 3000 wines from 600 wineries in 2009. It’s a huge competition, although nothing compared to the Decanter contest. Hodgson’s analysis of raw data from wine judges suggests that they are only human after all and likely to suffer the sort of tasting inconsistencies that you would expect (if you are a suspicious-minded economist).

Hodgson and his colleague G.M. “Pooch” Pucilowski, California State Fair Wine Competition manager and chief wine judge discussed their findings at the 2010 meetings of the American Association of Wine Economists in Davis, California. Here’s a summary taken from the Wine Business Monthly report on the session.

Hodgson served as a judge in the California State Fair competition, and is now on the competition’s Wine Advisory Task Force working with Pucilowski to try to improve judging quality and consistency.

With Pucilowski’s assistance, Hodgson has been evaluating the competition judges since 2005 with trials that place three samples from the same wine bottle in one flight of judged wines to see if the judges ranked each sample consistently. Hodgson, who taught statistics at Humboldt State University, said, “Fewer than 10% of judges could judge the three wines and maintain consistency in their scores.” He added, “Some of the same wines received ratings that ranged from no award to gold.” When the study, “An Examination of Judge Reliabiity at a Major U.S. Wine Competition,” was published in the JWE, it received significant media attention and created a stir among wine judges and within the wine industry.

Pucilowski, who has managed the State Fair competition 25 years and often serves as a judge in other competitions, openly admits that his competition and all wine judging events are highly subjective. To his credit, he is constantly looking at ways to improve the competition and to help judges improve their abilities.

The Value of Wine Competitions

So it seems like there is good reason to be skeptical about wine competition results. Why, then,  do winemakers enter these competitions, given that they are the people who are most likely to know when their wines are scored too high or low compared with others? Ego may have something to do with it, but the obvious answer is that there is commercial value in a gold medal and the attention it receives, although I don’t know how much a medal is really worth — probably depends upon the circumstances. I noticed, for example, that the Achaval Ferrer Malbec that was the top wine last year in Decanter’s  big comparative tasting of Argentinean Malbec did not receive a medal at DWWA. I’ll bet that’s because it wasn’t entered.  Nothing to gain for this famous (and probably sold-out) wine.

Some wine producers probably enter competitions on the theory that they might win a medal in at least one of them, which gives them bragging rights. There has been a medal on the label of every bottle of Gallo’s value-priced Barefoot wines that I’ve ever seen, for example. A medal gives the cautious bargain-buyer some assurance of quality. Three non-vintage Barefoot wines — Merlot, Pinot Grigio and Moscato — earned “commended” medals in this year’s Decanter competition.

Even Two Buck Chuck wins gold medals, according to an article in the Napa Valley Register.

The Charles Shaw 2005 California chardonnay (yes, the $1.99 “Two Buck Chuck” made by Bronco Wine Company sold at Trader Joe’s)  was judged Best Chardonnay from California at California State Fair Commercial Wine Competition.

The chardonnay received 98 points, a double gold, with accolades of Best of California and Best of Class.


Decanter’s Value

As the video above shows, Decanter (like the California State Fair competition) goes to great lengths to overcome the inherently problematic elements of wine judging. This makes sense since there is so much at stake, both for the winemakers and for Decanter itself, which puts its reputation on the line. The Decanter awards probably have more commercial value than most because the Decanter name has credibility, especially in the U.K.  Decanter sells colorful foil medals to decorate winning bottles and the decorations sell the wine, the magazine and, well, the whole enterprise.

Winning a medal is good, but perhaps the biggest prize for many wineries is winning distribution. Making good wines is often easier than getting them into consumer hands, both here in the U.S. where our fragmented three-tier system creates many obstacles, and also in Great Britain, where the big supermarket chains dominate. Scrolling through the online winner lists I notice that a lot of the wines that are received medals in the competition  aren’t currently sold in the UK. Perhaps that’s the point of entering — to get distributor attention and break into the market.

Thick and Thin

Wine competitions are fun, but I admit that I don’t take the results too seriously since they depend on so many uncontrollable factors, including which particular wines are entered and which (like the Achaval Ferrer Malbec) are held out. I do, however, find the Decanter results worth careful study because  they have some important stories to tell.

The wine world is very broad but the world wine market surprisingly thin and uneven. Looking at the award list, it is interesting to see the large number of countries (44, including India, China and Thailand) that sent wine to London for the judging. As someone who writes about the globalization of wine, it is great to see evidence of the world wine web’s continuing expansion.

But the list of entries is also relatively thin and uneven in some respects, even with more than 12,000 entries, reflecting the fact that the British market is difficult to break into and so not everyone sees value in entering Decanter’s competition.

If you search for U.S. award winners, for example, I think you will be a bit puzzled by the long list of wineries that result, both in terms of the wines that appear and those that are missing, probably because they were not entered in the competition.  There are affordable wines from large scale producers (like Gallo’s Barefoot noted above) and some expensive boutique ones, too, but much of America’s vast middle kingdom of wine, which is in many ways the country’s great strength,  is under-represented. Not interested in the award because not represented in the British market, I suspect.

The U.S. Medal Count

This perhaps accounts for the odd showing of American wines on the Award league table. Only four U.S. wines earned top awards in 2011 (many more earned Silver, Bronze and Commended medals, however). The top four are:

Vina Robles Cabernet Sauvignon Huerhuero Estate 2008 (Paso Robles, San Louis Obispo County) earned a regional trophy (second only to an international trophy in Decanter’s galaxy of awards). It was the top U.S. wine. No U.S. wine earned an international trophy.

Three wines earned gold medals: Chateau Ste. Michelle Artist Series Meritage 2007 (Columbia Valley, Washington State), Justin Justification 2008 (Paso Robles. SLO) and the Silverado Vineyards Estate Cab 2008 (Napa Valley).

Are you surprised? I’ll bet this isn’t the list you were expecting. And it is interesting that none of the American wines made the highest level of awards.

Is four a good medal count? Not compared to Argentina, which received almost 20  gold medals and nine regional trophies. Why the big difference? Perhaps the judging panels applied different standards or maybe there just aren’t as many really good wines from the U.S. these days, but I think it has something to do with the intensity of Argentina’s export drive and the importance they attach to Decanter’s international reputation compared with producers from the United States.

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I’ve been asked to chair the session on wine competitions at the annual meetings of the American Association of Wine Economists later in the month. It will be interesting to see shat new insights the panelists will provide. Watch this space for a report.

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