Ants, Elephants and Washington Wine

I’m just back from the Washington Association of Wine Grape Growers annual meetings where I gave a talk about Wine Wars and its implications for Washington wine. Wine Wars focuses on global wine markets and the forces that are shaping them — what insights can it offer for Washington wine growers?

The Confidence Game

Wine Wars argues that reputation (and the value of  your brand) is an increasingly important factor in today’s crowded and competitive marketplace. No one has to buy your wine (or to buy wine at all given the many liquid alternatives). You have to stand for something (your reputation) and your brand has to reflect and effectively communicate that to break through the market noise. I call it The Confidence Game and reputation is a key strategy. That my friends is the Miracle of Two Buck Chuck that I talk about in Wine Wars.

But reputation and brands are complicated — a pretty obvious lesson that I only really learned a couple of weeks ago when I was at the Unified Wine & Grape Symposium in Sacramento.  My session (on The State of the Industry) examined the wine market from the global, international, national and California perspectives. After the session I was talking with a friend who has a 50,000+ case winery in Napa Valley. I think my business is important, he told me, but I today I felt like an ant in a room full of elephants.

Life in Ant-Ville

The U.S. wine industry is very large (and California dominates it, of course) but Napa Valley is just a thin stripe at the  bottom of the wine production bar graph (compared to the bigger producers elsewhere in the state) and my friend’s winery is only a small part of that. That’s ant-ville — nearly invisible — compared with elephant-land, the domain of the large scale producers and bulk wine trade (although 50,000+ cases is not at all insignificant in an absolute sense).

Washington is ant-town, too, I told my audience. (No offence intended! Ants are great creatures. They can carry many times their own weight. A colony of ants can probably strip an elephant carcass in a few hours. Ants are powerful collectively. But individually they are pretty don’t have much clout.)

Wine world ants need all the help they can get to get their brand or reputation out there. They need to have a strong private brand, of course, but they also need a strong regional brand (Napa Valley, for example) to create a reputational wave that the winery brand can ride. That’s one reason my friend’s winery is successful, even if it is just an ant in a crowded room.

Why Elephants are Different

Elephants are different these days — and it is not entirely by choice. Elephants (wineries that produce millions of cases) need strong brands, too, but increasingly they are being forced to distance themselves from regional brands such as AVAs and rely more and more on their own reputations. The reason? The emerging wine shortages that are forcing them to search far and wide for grapes and wine to fill their massive pipelines.

Years of stagnant vineyard expansion combined with rising demand have created a growing structural shortage of certain types of wine (bad news for those of us who have gotten used to deep wine discounts in the surplus years).

This is why so many wines that used to carry regional appellations are now forced to identify themselves as “California” wines. They need to blend wine from all over the state to fill their orders. Take a look at $8-$12 Zinfandels the next time you are in the supermarket and you will see what I mean.

The Logic of American Wine

“California” is a pretty broad appellation, but I am hearing rumbles from elephant land that increased use of the previously rare “American” appellation is in the cards. And expect more bulk wine imports (legally labeled to be sure) to make their way into bottles of wines you might reasonable suppose to hold All-American wine.

Is this a good thing? Well I’m not sure that it is good or bad — it’s just necessity. And I suppose it helps the ants with their stronger regional associations to differentiate themselves from the more generic elephants. But, on the other hand, the elephants’ promotion of regional brands in the past probably strengthened them, unintentionally benefiting local ants.

Since Washington wine is a teeming ant colony, it follows that it would benefit from a stronger regional brand. What is Brand Washington? Good question. (Paul Gregutt recently suggested how Brand Washington might be better promoted — click here to read his  column.)

[At this point my talk veered into a discussion of Brand Washington compared to Oregon, Napa Valley, Argentina and Chile. This part of the talk will have to wait for future Wine Economist post.]

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Another speaker joked that Ste Michelle Wine Estates (SMWE), which is by far Washington’s largest wine producer, is the state’s only elephant, but CEO Ted Baseler objected, citing the Wine Wars description of SMWE’s “string of pearls” (or chain-of-ants?) structure.

Who am I to disagree with Ted, especially since he was on the program to announce an exceptionally generous $1 million donation to help create a Wine Science Center on the Washington State University campus in wine country!

Thanks to WAWGG for inviting me to speak and special thanks to all the Wine Wars and Wine Economist readers I met at the conference.

Book of the Year, Wine Wars Tour & Top Posts of 2011

Happy New Year, everyone! Herewith brief reports on the top Wine Economist posts of 2011, the next stops on the Wine Wars World Tour and an unexpected book of the year award.

Wine Book of the Year

I’m very pleased (and more than a little suprised)  to report that Wine Wars and Benjamin Lewin’s terrific In Search of Pinot Noir have been named wine books of the year 2011 by Paul O’Doherty, the book reviewer at JancisRobinson.com.  He writes that

From the get-go you just don’t want to put this book down, slaloming as it does informatively through economic and social history, the wine industry, the future, and observations setting the scene for the great battle between the market forces redrawing the world wine map and, as Veseth puts it, ‘the terroirists who are trying to stop them’.

O’Doherty makes the fair criticism that, like the college professor that I am, I tend to go off on occasional tangents and not always get to the point as quickly as you might like. But he spins this into a rather charming compliment:

 However, in his defence, there’s a kindly lecturing sweep to his narrative so that, if you were listening to him at the back of his economics class in college, you’d just want him to keep talking forever.

Not sure my students would vote for “forever,” although I suspect it seems like forever to them on some days. He concludes that

This is undoubtedly a fascinating read that will be a treat to most tastes and is, along with Benjamin Lewin’s In Search of Pinot Noir, one of the books of the year.

Thanks for the kind words. I am flattered by the praise and honored to be on any list that includes a book by Benjamin Lewin.

Looking Ahead: Wine Wars Tour Continues

I’m excited to see what 2012 will bring. I know I will meet more interesting people as the Wine Wars World Tour continues to unfold. Here is my current schedule for January and February.

January 2012

February 2012

Looking Back: Top Posts

2011 was a big year for the Wine Economist blog, with about 190,000 hits for an average of about 525 per day. About 1000 people “follow” the Wine Economist either through email updates that are sent out whenever a new post goes live or via the Wine Economist FaceBook page. These are small numbers compared to the most popular wine websites, but they suggest that there is a surprisingly large audience for wine economics analysis.

I thought you might be interested in the most frequently visited Wine Economist posts for the year. Here is the league table as compiled by WordPress, based on which posts on the entire Wine Economist site received the most hits.

Year’s Most Popular Wine Economist Blog Posts 2007-2011

  1. Wine’s Future: It’s in the Bag (in the Box)
  2. Cracking the Chinese Wine Market
  3. Costco and Global Wine
  4. Curse of the Blue Nun
  5. Olive Garden and the Future of American Wine
  6. What’s The Next Big Thing in Wine?
  7. Wine Distribution Bottleneck
  8. The World’s Best Wine Magazine?
  9. Argentinean Wine: A SWOT Analysis
  10. Riesling: How Sweet It Is?

The picture changes a bit when you look at number of hits for posts first published during 2011 (excluding those from previous years).

Year’s Most Popular 2011 Wine Economist posts

  1. What’s The Next Big Thing in Wine?
  2. Argentinean Wine: A SWOT Analysis
  3. It’s Official! The Wine Wars Have Begun
  4. Extreme Wine: O Canada Ice Wine
  5. The Forbes Interview: Wineries that “Get It”
  6. Sizing Up Supermarket Wine
  7. The BRICs: Russian Wine Market Report
  8. The BRICs: Surprising Wines of India
  9. The BRICs: Misunderstanding Brazilian Wine
  10. Liquid Assets: Fine Wine versus Crude Oil

At first glance it is difficult to pick out a common thread from among these posts, since they cover so many individual topics (both a strength and a weakness of this blog, I suppose). But, stepping back a ways, I think I do see a theme: change. Most of these posts examine ways that the wine world is changing, shedding old traditions, embracing new technologies, opening new markets. Certainly economics is a driving force for innovation and change in wine, so perhaps this makes sense.

On that note I wish you a Happy 2012. Can’t wait to see what happens next!

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I’d like to take this opportunity to thank everyone who helped me with The Wine Economist and Wine Wars in 2011, especially during our fieldwork expeditions in Argentina and Italy. Special thanks to my university students, Patrick (“the wine guy”), research assistants Janice & Scott, Nancy & Michael, Ron & Mary, and of course #1 research assistant Sue.

What’s Red, White & Green? Wine Packaging Greens Up

What’s red and white and green all over? Wine, naturally. And naturally Oregon wineries are in the green forefront — a fact that was reinforced at a recent Wine Wars book talk.

The Difference Between Water and Wine

Forty-eight  alumni came out on a beautiful August evening to attend an event at the Boedecker Cellars winery near downtown Portland.  That’s a testament to the old saying “Water keeps people apart, wine brings them together.” Urban wineries are a growing trend and Steward Boedecker and Athena Pappas have located theirs in a cool 1950s building across the street from the Pyramid Ales brewery. (Stewart is a Puget Sound alumnus, so Boedecker is on my growing list of  alumni wineries.)

Because I was asked to talk about Wine Wars with particular attention to Chapter 14′s topic, wine and the environment, I titled my presentation “What’s Red and White and Green All Over.” Portland is a good place to give a talk like this because it is so close to the wine country and its citizens are so environmentally minded. Green wine is big in these parts.

Green wine is made in the vineyard, of course (the organic or biodynamic viticulture choice), and part of it is made in the cellar (especially regarding water use and re-use, which is a significant issue almost everywhere). I’ve seen estimates that it can take as much as 120 liters of water to produce a single glass of wine if you follow the product chain from start to finish. Wow! That’s a big environmental factor.

And finally there’s green wine packaging.

Weighing the packaging options: Jen, Allison, Mike and Brad.

The Weigh In

With the help of two volunteers, Jen and Brad, I demonstrated some green and no-so-green wine packaging options.  The differences in size, weight and perceived quality were astonishing. Here is the tale of the scale.

  • Standard 750ml bottle filled 1320 grams
  • Standard bottle empty 578 grams
  • Prestige bottle empty 844 grams (46% heavier than standard bottle)
  • Eco bottle empty 476 grams (82% of the weight of standard bottle)
  • Ultra-eco bottle empty 444 grams (the blue bottle in the photo — 77% of standard bottle weight)
  • PET bottle empty 56 grams (the yellow bottle in the photo — less than 10% of the standard bottle weight)
  • Tetra-Pak 1 liter container empty 40 grams (less than 8% of standard bottle weight)

The Tetra-Pak is more efficiently produced and recycled and saves over 90 percent of shipping weight compared with the standard bottle, an amazing saving of resources all along the product chain.

I predict that much of the wine we drink every day will eventually be delivered in eco-containers. Just as many consumers seem to have gotten over their prejudice against screw caps, I think we’ll come to accept eco-packaging as an appropriate delivery system for the ordinary everyday wines that make up more than half of all wine sales.

Animated winemakers: Athena Pappas and Stewart Boedecker

Fine Wine versus Vin du Jour

But what about fine wine? Well before my visit to Boedecker my answer was that the eco packaging choices were pretty limited – lightweight glass was about all I could recommend since the most extreme eco choices (Tetra-Pak, for example), are not appropriate for medium- or long-term storage. They are for vins du jour – the wines you buy at 3pm and open at 5pm (which make up the bulk of total wine sales, of course).

But Stewart surprised me by explaining that he had found some innovative ways to cut Boedecker’s environmental footprint without sacrificing the quality of the delivered product.

How about re-using wine bottles the way we used to collect and reuse soda bottles? The idea of recycled wine bottles is very appealing, but the practical problems of collecting used bottles, cleaning, sorting and distributing them are hard to overcome. But Stewart told me about a California firm (I think he was talking about Wine Bottle Renew) that has tackled this project with success, using high tech scanners to sort the bottles (a key and previously prohibitively labor intensive process).

The money and resources saved by not having to melt down and recast the glass are considerable, Stewart said, and the delivered glass is both cheaper than new, it is also actually cleaner (an obvious concern).  He’s sold on recycled bottles and it is easy to see why – a trend to follow for sure.

Riding the Keg Wine Wave

Boedecker is also riding the keg wine wave, which is another eco-packaging movement. Wineries deliver 20-25-liter kegs to restaurants and other “on-premises” establishments to fill “wine by the glass” orders with no waste. It makes a lot of sense to eliminate as much of the packaging as possible for wine that will move so quickly from barrel to glass.

But keg wine is currently mostly a local phenomenon because of the logistics of recycling and reusing the kegs, which is the key to the whole enterprise. So I was surprised to learn that Stewart was selling Boedecker wine kegs in New York City.  They ship the wine in bulk to New York where a local partner handles the keg operation.

What a great idea! It opens up a distant market, is good for the environment and is good for the wine, too.  Kym Anderson recently explained to me that shipping in bulk versus shipping in bottles can actually result in better wine because the liquid mass of the wine (up to 25,000 liters in the case of ocean container shipments) is more temperature stable than cases of wine in bottles. Cheaper, greener, better quality — a winemaking trifecta!

Bulk shipping and local “bottling” into kegs is kind of a return to U.S. wine market practices in the 1930s, where California winemakers would ship bulk wine across the country in railroad tank cars. Local bottlers would market the wine, usually under their own brands rather than the name of the wine producer. This practice ended in World War II when the Army commandeered the tank cars and wineries were forced to bottle (and brand) themselves and ship cases of wine in box cars.

Will keg wine take off and take us back to the future of wine? Stay tuned.

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Thanks to Stewart and Athena for hosting the alumni event at their winery. Thanks as well to Brad Boyl, Rainier Aliment, Renee Kurdzos and Allison Cannady-Smith for all they did to make this event a success.

At Last: Wine Wars for Kindle

I know that some of you have been waiting patiently (and some not-so-patiently) for July 16, 2011 — the day that Amazon.com releases Wine Wars in its proprietary Kindle e-book format (and the Nook and other electronic formats are released, too).

Well, you can stop waiting and start reading: today’s the big day. I’d love to hear what Kindle readers (and e-book readers generally) have to say about Wine Wars. And don’t forget to leave a review on the Amazon.com site if you like it!

E-books are hot and I think it’s possible that more people will read Wine Wars on e-books than in the hardback version. One problem: how do I autograph an e-book? (Using a Sharpie on the screen seems like a bad idea.) Let me know if you have a solution!

The Forbes Interview: Wineries that “Get It”

Forbes Asia published “The Future of Wine,” a  three page excerpt from Chapter 15 (“The China Syndrome”) of Wine Wars last month. A follow up interview appeared this week on Karl Shmavonian‘s Forbes.com blog “Horse Feathers” under the heading “An Economist Shares His Thoughts on Wine.” (You can read the excerpt and the interview by clicking on the links provided.)

It was fun to answer Karl’s questions. Karl’s focus is Asia, so I wasn’t surprised that he had questions about Chinese wines, the Chinese-Bordeaux wine market and even the prospects for South African wine in India and … Sub-Saharan Africa!

One question really made me think. Who “gets it” in the wine world?  Here’s the question and my brief answer copied from “Horse Feathers.”

Name a few wineries that “get it” from a business standpoint.

I think Chateau Ste Michelle gets it here in Washington State. Ste Michelle Wine Estates has a “string of pearls” operating philosophy that allows each of their winery brands (including Columbia Crest, for example, and Stag’s Leap Wine Cellars) a good deal of independence while benefiting from the economies of distribution, etc. Even the large production facilities like the white wine facility in Woodinville contain mini-wineries that allow the winemakers to do small scale projects while also producing hundreds of thousands of cases of the mainline products.  Chateau Ste Michelle balances the big and the small without losing their terroirist souls. Boisset and Frog’s Leap (both in California) are examples of two totally different companies that both get it. In particular, they both get the environmental problem, although they approach it in very different ways.

Reading this, you probably wonder what I mean by “getting it” and why I picked these three wineries as examples? Here’s the story.

What does it mean “to “get it?”

“Getting it” in this context means understanding the tensions that are at the core of the wine market (and that I analyze in Wine Wars).  Globalization and wine market expansion generally have brought a world of wines to our doorstep. This embarrassment of riches is both blessing and curse. It’s a blessing because of the opportunity to sample wines from all around the world. It is a curse because of the difficulty of choosing. Too much choice can be intimidating, especially in the case of wine, which has so many other intimidating factors associated with it.

Anyone who can simplify the choice and gain the consumer’s trust stands to benefit in this complex market environment. Brands have therefore become increasingly important, both private brands like Mondavi and Mouton Cadet and more general types of brands like Brand Marlborough Sauvignon Blanc and Brand Argentina Malbec. Consumers understand the wines associated with these brands and so are more confident in making purchases. (Just having a strong brand is not enough, however, as the roller-coaster story of Brand Australia Shiraz demonstrates).

The risk with brands, however, is that they can sometimes go too far in their effort to simplify (the Shiraz problem). It is important that branded wines not sacrifice the qualities that make wine special. Wine that is just another packaged good has lost its “terroirist” soul — the winemakers just don’t “get it.”

The Terroirist Revenge

So Wine Wars argues that the future of wine will be determined by the battle between the market forces that will push wine into the world and the “revenge of the terroirists” that will push back. Because I am an optimist (I have “grape expectations”), I think the future is bright. But this requires that wineries “get it.” So, Karl asked me, who does?

Well, a lot of wineries get it, to be honest, but in the short time available I only mentioned three of them. Boisset gets it, for example. It’s a good example of a “global” wine business, with strong brands in both the Old World (France) and New World (California). But there is a strong terroirist element to Boisset that keeps it honest, both in terms of the desire for wine to express a sense of place and also a concern for the environment. Boisset has been especially active in packaging innovations, for example, that aim to reduce the carbon footprint of wine. That’s one way to “get it.”

Frog’s Leap gets it in a different way. It is an example of a producer that has developed a strong brand without dumbing down its wines or selling its soul. Frog’s Leap is such a strong brand in Japan, for example, that it was the featured winery in the Japanese re-make of Sideways. But Frog’s Leap proves that branding doesn’t have to sacrifice quality or reduce wines to a least-common-denominator status. Frog’s Leap stands for something, both in terms of wine and with respect to the environment (dry farming, sustainable methods). They show that it is possible to “get it” this way, too.

Global-Local Nexus

Chateau Ste Michelle is my third example. They are the largest wine producer in Washington State and the largest producer of Riesling wine in the world. The parent company, Ste Michelle Wine Estates, usually ranks about #7 among U.S. wine producers. The Chateau as it is known here in Washington knows about globalization (its wines can be found all around the world) and brands, too, but it hasn’t sacrificed its soul in the process. In fact, I think you could argue that it has tried to use the forces of globalization and brands very constructively — through international partnerships with Germany’s Dr. Loosen and Italy’s Antinori family, for example.

The Chateau collaborates with the Antinori on two projects: Col Solare (an ambitious winery in the Red Mountain AVA) and as partners in the Stag’s Leap Wine Cellars in Napa Valley. Working together, they leverage powerful brands and bring together international expertise, but the goal is to produce distinctly local wines.

The partnership with Germany’s Dr. Loosen has created Eroica, one of America’s most distinctive Riesling wines, and a series of Riesling Rendezvous conferences, which bring together terroirists from across the nation and around the world to share their expertise and plot strategies to promote Riesling without sacrificing quality. The Chateau really “gets it,” but in its own unique way.

The future of wine? A big question. Not everyone will “get it” but I’m betting that enough will to justify my grape expectations.

It’s Official! The Wine Wars Have Begun

June 16 is the official release date of my new book Wine Wars: The Curse of the Blue Nun, the Miracle of Two Buck Chuck and the Revenge of the Terroirists.

The hardcover book has been available for several weeks (and has frequently been listed on Amazon’s wine best-seller list), and the e-book versions will be on-line starting on the 16th. (Wine Wars was a pre-release wine best-seller in Amazon’s Kindle store!)

So far the response to the book has been very positive, but I know that books, like wine, are a matter of taste. One reviewer, for example,  thinks I was a bit too clever when I organized the chapters into three “flights” rather than just calling them sections. “Flight” is a wine term, of course, but also a general description of a group of related things (flight of geese, flight of stairs), so I don’t think I was too far out of line, but I appreciate the point.

The same reviewer was a bit suspicious of the way I end each flight of chapters with a flight of wines — a suggested wine tasting to encourage readers to make up their minds about my wine arguments by tasting the wines themselves. Maybe that is too clever, but I still think it is a good idea. In vino veritas, as they say.

I actually appreciate all the comments and critiques because they help me think through both what I argued and how I argued it. Without outside reactions an author can develop an uncritical “cellar palate” and I want to avoid that. In fact, one reason that I stated writing The Wine Economist was to be able to work out ideas in public, where I could benefit from the comments and suggestions of a great many people, not just my own wine industry friends. This strategy has served me well by introducing me to many interesting people and viewpoints.

I don’t know if you’ll find Wine Wars to your taste, but I hope you’ll give it a try. The fact that you are here, on The Wine Economist website, suggests that you are interested in the sort of problems that Wine Wars tries to figure out. Cheers!

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I want to take this opportunity to thank everyone who has been involved in the Wine Wars project including wine makers, wine industry executives, wine critics and fellow wine writers. Thanks as well to all the family, friends and former students who provided support, encouragement and critical feedback.

Special thanks to Paul Gregutt, Sasha Issenberg and Jeff Lefevere for writing “blurbs” for the book cover and to my editor, Susan McEachern, for guiding the project through to a successful completion.

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July 1 update: Apparently Amazon will release the Kindle version on July 16, a month after the official publication date. I think all the other ebook versions are available now.

Wine Economics: Coming Full Circle

My new book, Wine Wars, will be officially released next month; it tells the story of the battle for the future of wine (the Curse of the Blue Nun, the Miracle of Two Buck Chuck and the Revenge of the Terroirists) starting  in Napa Valley, where my interest in wine economics began, and ending  back in the same place 30 years later. Here’s a brief excerpt from the book.

Back on the Silverado Trail

People often ask me how I became a wine economist, an economist who studies the global wine markets. The answer is rooted in a particular time and place. Sue and I were still newlyweds, taking a low-budget vacation in the Napa Valley back in the day when that was still possible. We were headed north on the Silverado Trail late on our last day, pointed toward our economy motel in Santa Rosa, when we decided to stop for one last tasting.

The winery name was very familiar and I had high hopes for our tasting. If I had known more about wine back then I would have recognized this as one of the wineries that kicked French butt in the 1976 Judgment of Paris wine tasting. We pulled off the road and went in to find just the winemaker and a cellar rat at work. No fancy tasting room back then, just boards and barrels to form a makeshift bar. They stopped what they were doing and brought out a couple of glasses. If I knew more about wine back then, I would have been in awe of the guy pouring the wine, but I was pretty much in the dark. So we tasted and talked.

I started asking my amateur questions about the wine, but pretty soon the conversation turned around. The winemaker found out that I was an economics professor. Suddenly he was very interested in talking with me. What’s going to happen to interest rates? Inflation? Tax reform? He had a lot of concerns about the economy because his prestigious winery was also a business and what was happening out there in the financial markets (especially to interest rates and bank credit, as I remember) had a big impact on what he could or would do in the cellar. Wineries, especially those that specialize in fine red wines, have a lot of financial issues.

Besides the initial investment in vineyards, winery facility, equipment, and so forth, there is also the fact that each year’s production ages for two or three years, quietly soaking up implicit or explicit interest cost as it waits to be released from barrel to bottle to marketplace. The wine changes as it ages, but the economy changes, too. It’s impossible to know at crush what things will be like when the first bottle is sold. As Bill Hatcher (of Oregon’s A to Z Wineworks) likes to say, from an economic standpoint the only person who is crazier than a winemaker is his or her banker.

Wine economics is a serious concern. Few winemakers are completely insulated from the business side and sometimes the economy can have a huge effect on what winemakers get to make (if they have the resources to stick with their vision) or have to make (if they don’t).

And so a famous winemaker taught me to think about wine in economic terms and to consider that supply and demand sometimes matter as much as climate and soil when it comes to what’s in my wineglass. I should have known. Fully a third of the ferociously difficult Master of Wine exam (the MW designation that appears after the names of many famous wine experts) deals with business and economic issues.

Coming full circle — returning to the Stags Leap District and to that same cellar 30 years later –  gave me a strong appreciation for how wine has changed in the past and will likely continue to evolve in the future. I hope I have captured that understanding in Wine Wars.

Adam Smith’s Winery

I came full circle in another sense last weekend, when Sue and I crossed the Cascades to work on the bottling line at the Fielding Hills Winery in East Wenatchee. Mike and Karen Wade use the great fruit from their Riverbend Vineyard in the Wahluke Slope AVA to make wine at their small production facility perched high on a hill overlooking the Columbia River.

The very first Wine Economist blog post was an account of my initial visit to the Wade’s winery and the fun Dave Seago and I had helping out on the bottle line that year. I was struck by the productivity of the bottle crew (particularly since some of us were “quality testing” the wine as we worked) and I compared it to Adam Smith’s famous pin factory example of the benefits of the division of labor. (It is a little known fact that Adam Smith is both the Father of Economics and also the Father of Wine Economics.)

Arriving at the winery on Friday, I was very pleased to discover that the Wades were celebrating their tenth year of handcrafted production with a T-shirt that actually listed the twelve bottle line work stations.  The twelve tasks are:

  1. Bottleunboxer
  2. Sparger
  3. Fillerdeupper
  4. Corker
  5. Wiperista
  6. Foilplacer
  7. Foilmeister
  8. Wiper
  9. Labelista
  10. Boxfillerupper
  11. Tape Gunslinger
  12. Palletizerist

Adam Smith could not have organized the assembly line any better (or come up with more creative titles).

Mike and Karen’s daughter Robin was one of my university students and they have been very generous with their time, teaching me how the wine business works in practice to supplement my theoretical background. So I was pleased to join the volunteer bottling crew again this year, 243 blog posts after that first visit.  The Smithian division of labor allowed us to bottle 291 cases (that’s 3492 individual bottles) of Cabernet Franc between 9 a.m. and 4 p.m., when we finally ran out of wine to bottle.

The Wine Economist has come along way from that first post and the Wades and Fielding Hills have come a long way, too, from their first tiny vintage ten years ago. Although production levels are still relatively small (about 1200 cases this year, up from 800 when I first visited), their reputation is large and growing.

When Paul Gregutt surveyed Washington’s 600+ wineries for the second edition of his authoritative book Washington Wines & Wineries he awarded five stars to just twenty wineries. Fielding Hills made the five star list, as it did in Gregutt’s first edition, joining much larger producers like Chateau Ste. Michelle and famous wineries like Betz Family, Leonetti, Woodward Canyon and Quilceda Creek. Nice company to be in.

Coming full circle. It’s what winegrowers do — the conclusion of each vintage is also the start of the next. I guess it’s what wine economists do, too.  It is a good feeling to circle back and start out again!

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Photos by expert Foilplacer and master Boxfillerupper Sue Veseth.

The BRICs: Two Faces of Chinese Wine

This is the fifth in a series of articles on wine in the BRICs Brazil, Russia, India and China. Today I discuss the cultural contradictions of wine in China. Coming soon: wine in the New BRICs.

Wine, Fake Wine and Chinese Wine

China’s rise in the the world of wine is having many surprising effects. One of the most unexpected is this: apparently the most valuable bottle is my tiny cellar is an empty one — this jeroboam (double magnum) of 1994 Chateau Pêtrus. It is a souvenir of a particularly decadent party thrown by friends to celebrate their son’s graduation from college. Somehow I ended up with custody of the empty bottle.

Bottles like this are in high demand in China, according to recent news reports. Chinese entrepreneurs will reportedly pay up to £300 for an empty trophy wine bottle (especially Lafite), to be refilled with a lesser vintage wine and sold to gullible consumers or collectors. Provenance is important and condition matters:

“The bottles need to be in the best condition possible,” said another dealer, called Mr Ye, at a Shanghai company. “It is very important. And I only want genuine bottles, no fakes,” he added.

No fakes! I love it.

This sort of wine fraud is noteworthy just now because of all the attention that is focused on wine in China, but it there’s really nothing exceptional about this kind of scam. The story of The Billionaire’s Vinegar and its after-shocks suggest that fake wines are as common as fake Dalí prints — more common, actually, if you take Gallo’s embarrassing accidental purchase of bogus Pinot Noir into consideration.


But the story gets worse. A few weeks ago Chinese authorities raided 30 wineries in the Hebei region near Beijing (sometimes called “China’s Bordeaux)) for making chemical-laced fake wines.

CCTV’s footage showed a local sales manager admitting that some wines made in the coastal city of Qinhuangdao contained only 20 percent of fermented grape juice, with the rest being composed of sugar water mixed with chemicals, including coloring agents and flavorings.

Huang Weidong, a leading expert on the wine industry from the China Alcoholic Drinks Industry Association, said that the additives could cause headaches and irregularities in the rhythm of the heart, as well as cancer.

Solving the Puzzle

I’ve written about wine in China more than any of the other BRIC nations (follow the links in the next few paragraphs to read the posts), but fraud has only come up once before, in my report on Canadian Ice Wine.  China is a major market for this glorious elixir and some reports suggest that as much as a third of the stuff sold in China is bogus.

My reports on wine in China have been quite varied, covering a number of different topics. For example, China is on the verge of becoming a dominant force in global auction market for wine. I noted the change when Hong Kong dropped their punitive tariffs in an attempt to attract the auction houses and again in my report on last year’s Bordeaux en primeur circus.

In terms of the domestic market, I examined the factors that seem to be holding Chinese wine back in terms of quality and found that the biggest problems are in the vineyards, where China’s fragmented agriculture presents a roadblock. The best wines, like Grace Vineyards, come from wineries that have found ways to solve this puzzle.

Everyone wants to break into the Chinese market, including the Australiansespecially given their current problems — the Portuguese and some of my American friends, but the French have a (perhaps unfair) advantage.  The image of the great first growths casts a long shadow at present, although I expect that Chinese wine consumers will get smart soon. They are so savvy in everything else that I think they will develop a more sophisticated idea of wine pretty fast.

I note, for what it is worth, that President Obama made a point to serve some really excellent American wines to Chinese President Hu at the recent White House state dinner in his honor.  The Quilceda Creek Cab can compete with fine French wines and I’ll bet the Poet’s Leap dessert wine was a hit, too.

The Two Faces of Chinese Wine

So what do I think about Chinese wine today? Well, I am still concerned about the quality of the grapes themselves and the  supply chain that delivers them to the wineries, which I believe are the biggest roadblocks to development, not the fraud that is the focus today. But, that aside, I find myself surprisingly optimistic.

China gets a whole chapter my forthcoming book on the Wine Wars (you can now pre-order it on Amazon.com!). It starts with my first rather revolting taste of Chinese wine and ends, many pages later, with another tasting, this time of one of China’s most notable wines.  Here’s an excerpt from the final draft:

Our Grace Vineyards Cabernet Franc was a solid effort, we thought, but nothing special– a bit light compared American wines of this type. Writing in The Wine Economist, I noted a distinctive “green” taste I associate with wine made from under-ripe Cab Franc grapes. A problem in the vineyard, I speculated. Maybe the climate’s just too contrary to fully ripen these grapes.

A day later one of my readers lobbed in a counterargument.[i] Maybe, he said, that green flavor is intentional. He had heard that this particular flavor is familiar to Chinese consumers and that some Chinese wineries harvest grapes a bit earlier in order to achieve it. It wasn’t a flaw in the wine, he suggested, but a feature. Something that makes it Chinese wine, not a Chinese imitation of someone else’s wine. It’s the Chinese market terroir, if you will. Maybe the thinness that the critics note is another reflection of local taste?

That got me to thinking. Maybe we were judging Chinese wines by the wrong standards. What matters most? How I feel about the wines (and how they compare to international standards) or how the Chinese consumers look at them? Interesting question.  So I hit the books.

A little research turned up more evidence that the judgments of Western critics might be unfair to Chinese wines. Jeannie Cho Lee, Korea’s first Master of Wine, argues that Asian food and wine traditions prime consumers to think about wine differently and to appreciate different qualities in it.[ii] Why don’t Chinese wine drinkers appreciate that a crisp Pinot Gris pairs nicely with their cuisine? Well, Ms. Lee explains, many Asian cultures do not consume beverages (apart from savory soups) with their meals – they drink them before and after. White wines are generally chilled, of course, and most Asia drinks are warm or room temperature. And the sweetness of a Pinot Gris can seem unrefined to palates that are used to more complex sweet-sour flavor profiles.

Why such a fascination with Bordeaux? It could be the tannins, Ms. Lee argues, which are appealing to wine drinkers from cultures with a tradition of consuming very tannic teas. Even the basic flavor reference points are different, she explains. Westerners think of Pinot Noir in terms of raspberries and strawberries, for example, but the Asian descriptors would be yangmei (bayberries), dried wolfberries and dried bonito flakes! An Asian description of Sauvignon Blanc would start with pandan leaves and longan and move on to mangosteen – not a familiar flavor or aroma vocabulary for me. But I can relate a bit better to her description of Riesling: Thai white blossoms, lemongrass and green mangoes.

Hmmm. So maybe it’s time to rethink Chinese wine.

Wouldn’t it be great if the most important qualities of Chinese wines – the ones that Westerners reject — turn out to have been lost in translation and that a true indigenous Chinese wine culture evolved, one that reflects China’s history, cuisine and palate. I hope so because it would support my theory of the future of wine. Suffering just now from the excesses of globalization and Two Buck Chuck, China needs to unlock its inner terroirist soul!


[i] Thanks to Bob Calvert for this insight.

[ii] Jeannie Cho Lee, “Language of Taste,” Decanter (July 2009), pp. 78-79.

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