The Wine Spectator Award Hoax

September 4, 2008 – 1:44 pm

It has been a couple of weeks now since the Wine Spectator hoax hit the news. Robin Goldstein (a.k.a. fearlesscritic.com) “blew the whistle” on Wine Spectator in a session that I happened to chair at the American Association of Wine Economists meetings in Portland. (Robin actually revealed his hoax as an unscheduled prelude to a completely different presentation at the meetings.)

The wine media quickly picked up the story and now it is everywhere. The story has generated a certain amount of embarrassment for Wine Spectator and given Robin and his new book a lot of  publicity.

What Robin did was to create a fake Italian restaurant (Osteria L’Intrepido di Milano) along with a made-up menu and wine list. Then, following directions on the Wine Spectator website, he applied for an Award of Excellence, which is the way that Wine Spectator recognizes and encourages restaurants with strong wine programs. Wine Spectator tried but was not able independently to confirm the facts about the fake restaurant; they took the application on trust as an honest entry and presented it with the appropriate award in the August 31, 2008 special restaurant issue (see page 181). You can read all about it on Robin’s website for the fake restaurant, http://osterialintrepido.wordpress.com/

Where is the Outrage?

How upset should we be to discover that Wine Spectator can be tricked into giving its wine award to a fake restaurant?  Michael Morrell, my chief cheap wine research assistant, was outraged.  Although price is the most important factor for him in choosing wine, he admits that he is also influenced by wine ratings. The award hoax undermines his trust in wine critics in general and the ratings and advice they produce.

I can understand Michael’s concern, so I consider this a very serious matter, but I don’t think the fact that Wine Spectator fell for a hoax is reason for us to doubt its integrity.  Here is my report.

The Wine Spectator Award of Excellence is given to restaurants to recognize their wine programs.  Although the actual criteria for receiving an award seem very modest to me (you can read them on page 97 of the special restaurant wine issue), it is a fact that about 30% of the new entries each year fail to meet them (the success rate is obviously higher for establishments who enter and receive an award year after year).

There are three levels of award.  3254 restaurants received the base level recommendation.  802 second tier “Best of Award” ratings were given to restaurants with more comprehensive wine lists. 73 top of the line “Grand Awards” were bestowed.  The people at Wine Spectator are proud of their award program and believe that it has encouraged restaurants to upgrade their wine programs.

Caution: Economics Content

I’m sure this is true, but I tend to view the matter in economic theory terms.  Consumers have lots of restaurant options and are uncertain which ones might have good wine choices. The restaurants know how good their wine selections are but have trouble effectively communicating this to potential customers. This is the classic economic problem of “asymmetric information” and the classic economic solution is “signaling” - where one side of a potential transaction finds a way to reveal key information to the other side to help seal the deal.

Restaurants that want to attract wine enthusiast customers need a way to “signal” them about their wine programs and the Award of Excellence is one way to do this.  Restaurants that think sending this signal is worth meeting the criteria and paying the entry fee do it and get on the list.  Others, even some that have strong  wine programs, don’t bother. They have other ways to send the message, I guess.

Wine Spectator fell for the Osteria L’Intrepido hoax because it relied upon the honesty of applicants, assuming, I suppose, that no one would go to the trouble and expense of applying without a conventional commercial purpose. This is another side of asymmetric information — Robin presumably knew his motives in setting the fake restaurant “sting” and Wine Spectator could only guess or assume.

In Vino Veritas

Truth is especially important in the wine world and, because of the problem of asymmetric information, it is particular difficult to know with confidence.  We depend upon the honesty of self-interested actors and the truthfulness of their signals. When we read wine ratings or see wine competition awards, for example, we assume that the judges and critics are tasting the same wines that we buy in the market. But it would be easy for a dishonest producer or distributor to put special wines in the bottles sent to the critics or wine award competitions. The easiest switch would be to put some of last year’s highly ranked wine in place of this year’s weak effort. Most wine critics rate products that are sent to them by makers and distributors and rely upon the honesty of the sender.  Only a few - Gaiter and Brecher at the Wall Street Journal come to mind - seek out and purchase their wines through normal retail channels.

Doctored “critic cuvee” wines are a potential hoax problem.  I am not aware of any wine publications that have been hoaxed in this manner, but I have read and heard speculation about special “award cuvee” wines being entered in competitions.  The nature of the situation makes us all vulnerable to hoaxes.

Wine Spectator fell for this hoax but it wasn’t because its editors are dishonest in giving their awards.  I think most of the criticism of Wine Spectator in this situation is a bum rap, especially since the magazine’s editors seem to be unusually careful in avoiding advertising conflicts of interest.  That’s the subject of my next post.

By Mike Veseth | Posted in Wine Competitions, wine awards, wine critics, wine magazines, wine spectator | Comments (3)

The Two Faces of French Wine

August 27, 2008 – 12:33 pm

A new book by Jean-Robert Pitte provokes a reconsideration of wine stereotypes.

It is very easy to fall into the habit of thinking of the world of wine in terms of Old World and New World.  Everyone does it.  Old World (Europe) is associated with vins de terroir and the struggle against natural and market forces to produce wines of great distinction.  New World (everyplace else) is associated with vins technologique and the business of selling large quantities of homogeneous wines to brand conscious consumers.  Difference is the key attribute of the Old World.  Sameness is the hallmark of the New.

Everyone knows that it isn’t as simple as this.  Old World / New World is more of a spectrum than a dichotomy, for example, and difference versus sameness is an issue that cuts across every wine market and culture.  But Old versus New is a convenient simplification and such shortcuts are hard to resist in our overcomplicated world.

Old World versus New World in France

Jean-Robert Pitte’s thoughtful new book forces us to confront the beauty of complexity by reminding us that the global battle for the soul of wine is also a local battle, fought most fiercely, perhaps, in his native France (Pitte is Professor of Geography and former President of the University of Paris Sorbonne).  The opposing forces are not noble vignerons versus multinational corporation (as you might think after viewing Mondovino), but rather the two most famous Old World wine regions, Burgundy and Bordeaux.

Both wine regions, Professor Pitte reminds us, owe a debt to foreign influences, especially the Romans who introduced vines to France.  Bordeaux is warmer and sunnier, like California, so grapes will ripen in the broad valley, permitting large vineyards and high production volumes.  Burgundy is cooler and farther North, more like Oregon, so narrow hillside vineyard locations are needed to capture solar energy; individual vineyards are small and fragmented and the production correspondingly modest. Bordeaux wines, unlike their Burgundian cousins, are blended for style and consistency.

Both regions were shaped at critical moments by the markets they came to serve.  Bordeaux, with easy access to the Atlantic, found a large market for powerful wines in Great Britain and Northern Europe. Wines needed to be strong to survive the ocean voyage. This large export market matched very well with the substantial productive capacity of Bordeaux.  Burgundy’s location made ocean export impractical, but a vigorous internal trade emerged with Paris and the French court.  Differences in tastes and the less stressful transport encouraged production of a lighter and more sensuous style of wine. Pure Pinot Noir versus sturdy, barrel-aged Cab and Merlot blends.

Both wines can be wonderful, but they can also be horrible.  Vast quantities of unsold mediocre Bordeaux are distilled into industrial alcohol each year.  Burgundy’s problem is less over production than unreliable production - the weather is a constant foe and the strict rules of the region restrain winemakers from correcting in the cellar the damage that nature inflicted in the vineyard.

Dysfunctional Family

Bordeaux is more New World, when you think about it that way, and Burgundy fits quite well the stereotype of Old World.  So naturally they despise each other, which is the point of the book.  The great debate about Old World versus New World wine is here revealed to be but a global projection of the continuing squabble among the members of France’s dysfunctional wine family. No wonder the conflict is so bitter.

Professor Pitte’s apparent self-appointed mission is to patch up family relations. He doesn’t want Burgundy to become Bordeaux or vice versa.  He wants them to respect their differences and learn from each other. “Bordeaux and Burgundy, fraternal enemies, are two faces of a stimulating dialectic and debate that one must hope will not soon cease.”

In doing this Professor Pitte seems to stake out opinions in the deadly crossfire of the middle ground of many wine debates, which is where I often find myself.  He doesn’t dispute the idea that wine is made in the vineyard, for example, but he doesn’t reject the notion that it can sometimes be improved in the cellar.  He seems to respect both terroir and technologie as universal concepts.

He doesn’t think difference and sameness are as incompatible as they seem, but rather simply two faces of the same idea of wine. It is an interesting position to take - so French!  Yes, I know, and so anti-French, too.

Bordeaux/Burgundy: A Vintage Rivalry by Jean-Robert Pitte (translated by M.S. DeBevoise). University of California Press, 2008. Originally published in France by Hachette (2005)  under the title Bordeaux Bourgogne: Les passions rivals.

By Mike Veseth | Posted in book reviews, wine markets | Comments (0)

Glocalism and the Future of Wine in Argentina

August 18, 2008 – 6:49 am

The editors at WineSur, which is based in Mendoza, Argentina, saw my recent posts on wine glocalism (”Flying Winemakers and the Glocalism of Wine“) and some of the theory that tries to explain it (”Creative Destruction“) and asked me to write a brief piece for them.  You can read it here: Globalism and the Future of Argentina’s Wine Industry.  I’m looking forward to a research trip to Argentina in the next year or so.  Thanks, WineSur, for your interest.

By Mike Veseth | Posted in Argentina | Comments (0)

A Riesling Revival?

August 12, 2008 – 10:06 am

A hundred years ago the most treasured and expensive wines in the world were not the great reds from Burgundy and Bordeaux, they were wonderful Rieslings from Germany.  Since then Riesling has fallen on hard times in the market, although its status among wine critics and cult collectors has not wavered.  Now there is change in the air.  Have we entered a Riesling Renaissance?

Riesling Rendezvous

Woodinville, Washington was the center of the Riesling world for a few days in July when Chateau Ste Michelle and Dr. Loosen hosted a program called “Riesling Rendezvous” that brought together more than 200 producers, critics and industry representatives from around the world. (Chateau Ste Michelle let me attend to do research for my next book - thank you CSM for your support!).  This was the second Riesling Rendezvous conference and a third round is planned for 2010.

Chateau Ste Michelle is the largest Riesling producer in the United States - more than 700,000 cases of their Columbia Valley Riesling are released each year along with a number of other Riesling wines that range from a Dry Riesling all the way to a deliciously sticky Ice Wine.

Dr. Loosen is a famous Mosel producer that has a decade-long relationship with CSM - they jointly produce a Washington Riesling called Eroica and work together in other ways - so their Old World - New World partnership makes this event a natural.  Ernie Loosen (as everyone calls him) is a great ambassador for Riesling.  He reminds me of the glass artist Dale Chihuly - funny, flamboyant, affable and dead serious about his work.  We tasted a lot of wine at the event, including one that Ernie made in 1983 that still sings; quality Riesling is built to last.

The Curse of the Blue Nun

Riesling Rendezvous operated on at least two levels.  The top level was a celebration of Riesling in all its diverse forms.  The $50 ticket to the Grand Tasting on Sunday is one of the great values in the wine world, in my opinion, as dozens of producers poured their best wines on the Chateau grounds and the CSM chefs prepared finger foods to accompany them.  Each of the trade sessions I attended included tastings of great Rieslings brought from afar by the producers.  Honestly, no one could come away unimpressed with the state of Riesling wine today and the commitment that winemakers around the world have to this great varietal.

The state of the Riesling wine economy is another matter.  The Riesling market went all to hell in the 1970s when German producers pumped out lots of low quality wines to try to appeal to a mass market (a market defined here in the US, I suppose, by the big jugs of sweet California “Rhine” wine that filled the supermarket shelves).  They made the fatal mistake of devaluing their brand.  Riesling’s reputation suffered and it has been a long struggle to rebuild it.  Perhaps this is Riesling’s moment, now that everyone has grown tired by simple over-oaked Chardonnay and thin Pinot Grigio. Perhaps this is under-appreciated Riesling’s time to shine?  Certainly the sales numbers are trending up, although a relatively small segment of the market accounts for most of the sales.

But Riesling has an identity crisis and a lot of the discussions centered around this fact.  There is no one Riesling wine, as we learned through the tastings, because Riesling reflects it terroir so faithfully.  Wines from different vineyard areas (or subject to different cellar choices) taste very different.  This diversity is one of Riesling’s most appealing characteristics, but it makes it hard to sell to confused and uncertain buyers.

Consumers as a group tend to think of Rieslings in terms of a single characteristic: its sweetness. This is a shame because there is much more to wine than sweet versus dry, but it is Riesling’s particular burden, its  Blue Nun curse.

Rieslings are sweet, of course, but they also are dry.  I tasted wines that ranged from a few grams per liter of residual sugar (very dry) to perhaps fifty times that.  But the key to Riesling isn’t dry-sweet, as Pierre Trimbach said on the first day, it is balance - the balance of sugar and acid and the other critical elements of the wine.  The technical problem is to produce balanced wines of whatever degree of alcohol and residual sugar.  The economic problem is to communicate to consumers the characteristics of the wine so that they can buy it with confidence.  I would say that the Riesling Rendezvous showed that producers are closer to solving the technical problem than the economic one.

Riesling and Thai Food: How Many Stars?

Consumers want to know what’s inside the bottle and it is particularly hard to explain this with Riesling.  The nature of the wine isn’t as transparent to buyers as the glass bottle it comes in.  The German wine labeling rules classify wines by their sugar levels, which reveals something about the wine, but that isn’t as useful as you might think since two wines with similar residual sugar levels can have different tastes depending upon the acid balance, the type of sugar (some forms of sugar taste sweeter than others) and of course the myriad other factors associated with wine.  The German code gives some information, but it doesn’t solve the problem. In a way, in fact, it might define the problem because it defines Riesling by its sweetness.

New World labels aren’t much help either.  Only a few of them give technical data that would help a geek like me figure out what’s inside.  Some use vague descriptors (what does “off dry” mean and why is this one producer’s off dry so much sweeter than another’s?) but most just make you guess what style of wine you have before you.  Guess wrong three times in a row and I predict you will stop buying Riesling wine for a while.

A producer group, the International Riesling Foundation, is trying to address this problem by creating a clear and simple system that would tell consumers what to expect - something perhaps like the star system commonly used in Thai restaurants.  You know how it works: one star is mild, five stars is very very hot.  The star system makes people more comfortable ordering food at Asian restaurants, although there is obviously more to Thai food than just heat (and more to Riesling than residual sugar).  It’s worth a try, I suppose.  Even a trustworthy dry-to-sweet graphic index would probably help in the marketplace.  Sake producers (see below) are working on this problem, too, although I wouldn’t recommend their particular descriptors (a translation problem?).

This is how different styles of Sake are described on www.sake.com

This is how different styles of Sake are described on www.sake.com

I hope that Riesling producers can find a way to make the complex characteristics of their wines clearer and therefore more appealing to confused consumers.  Conferences like the Riesling Rendezvous are a useful way to get that conversation going. There is a natural tendency, however, for such gatherings to “preach to the choir” and focus on the well informed specialist market that already exists rather than the potential market of former Chardonnay drinkers looking for a more interesting wine, who could be drawn to Riesling if they understood it a bit better. I think this educational mission is the real challenge for Riesling Rendezvous III: thinking beyond today’s market to tomorrow’s.

I am hopeful that the International Riesling Foundation will make progress in this regard, but the collective action problem is significant here. It won’t be easy to get dozens of producers of differing size, style and market position to agree to standards and then implement them uniformly. It is more likely, I think, that a few of the big brands like CSM will lead the way and define the image of Riesling in consumer minds.  Others will follow or not and so the future of Riesling will unfold.

By Mike Veseth | Posted in Chateau Ste. Michelle, Dr. Loosen, Riesling, Supply and Demand, wine brands | Comments (0)

Bargain Wine and the Big Mac Index

August 5, 2008 – 8:38 am

These are interesting times for a wine economist!  I’ve recently been interviewed by a national newspaper (wearing my international economist hat)  about the presidential candidates’ policies and then by a popular supermarket cooking magazine (in my wine economist role) about exchange rates and rising wine prices.

The Dollar and the Wineglass

The dollar hit a new low against the Euro earlier this summer and although it has rallied a bit of late, Euro-zone imports are still very expensive.  This affects the wine market in a number of way.

Old World wine import prices are being pushed up as the strong Euro works its way through the distribution system. Producers and distributors have tried to postpone price increases, but I think they have run out of wiggle room, especially with high energy costs pushing up transportation costs, too.

There is pressure to raise domestic wine price, too.  Increased exports (the benefit of a weak dollar) have drained some of the domestic surplus.  Those surpluses were a reason for low wine prices earlier in this decade, but they will soon be gone as we move through the Turrentine boom and bust wine cycle. (Unexpectedly large 2008 harvests in Australia and New Zealand, however, will moderate price pressures a bit in some market segments).

The cheap dollar is probably also at least partly responsible for soft Euro prices of French en primeur wines and the recent sale of the iconic California producer Chateau Montelena (of 1976 Paris tasting fame) to a French buyer.  The Euro’s high cost has discouraged U.S demand for wine contracts (although indications of a weak vintage are also a factor) while the cheap dollar makes U.S. wine assets a relative bargain for foreign investors.

Exchange rates affect all international businesses and wine is no different.  This is one reason why large wine companies go global,  sourcing products and managing brands from many regions. Troubles in one area can be offset by opportunities elsewhere.

The McWine Index

Wine prices in the U.S. appear to be heading up - what’s a bargain-seeking shopper to do?  That’s the question I was asked by the wine and spirits editor of a major cooking magazine.  The answer is to try to make the exchange rate work for you, not against you.  The Economist magazine’s Big Mac Index can help.

The Big Mac Index, which appears in the July 26, 2008 issue of the magazine,  is a simple indicator of whether a currency is over-valued or under-valued relative to the U.S. dollar based on the price of the ubiquitous fast food entrée. The Euro, for example, is estimated to be overvalued by about 50 percent.  A $3.57 Big Mac costs the equivalent of $5.34 (50 percent more) when purchased at Euro-zone prices at the prevailing exchange rate.  European Big Macs are overpriced for dollar-holding buyers by this measure and so is just about everything else, including European wine. (The worst place to buy a Big Mac, according to the index, is Norway, where it costs the equivalent of $7.88 - ouch!).

The Big Mac index is a crude way of measuring the relative purchasing power of different currencies (to do this properly is a very complicated process), but the burgernomic indicator is generally surprisingly robust. It is pretty closely reflects the perceptions of tourists and traders and is often consistent with the more scientific  results of detailed academic studies.  Who knew that hamburgers could be so useful?

Bargain Wine Hunt

Where are most favorable exchange rates in the wine world for dollar buyers?  The Big Mac index points to Argentina, Chile, Uruguay and especially South Africa.  The South African Rand is undervalued by 37 percent according to the Big Mac index - that $3.57 hamburger sells for the equivalent of just $2.24 in Capetown.  The cheaper Rand results in cheaper South African wines, even taking into account high transportation costs. That is helping these wines break into the U.S.market, although there is more than exchange rates involved in this process (watch this space for an upcoming report).

But Southern Hemisphere wines aren’t the only bargains. Washington State wines are exceptional values at every quality level and I included them in my cooking magazine recommendation list. Washington wines don’t benefit from an undervalued currency. Instead they suffer somewhat from an undervalued reputation, which results in relatively lower prices for the quality. There is so much focus on high profile California wines in the U.S. that great wines from other regions don’t get the attention they deserve.  This condition, like today’s exchange rates, won’t last forever, so take advantage of it now.

By Mike Veseth | Posted in Supply and Demand, Washington wine, emerging wine regions, globalization, wine price | Comments (0)

Creative Destruction

July 31, 2008 – 10:24 am

I’m just back from the Riesling Rendezvous, where I tasted more than 120 Rieslings from around the world and met the producers (I will write more about this event next week).  If there is any wine that reflects its local roots it is Riesling.  But even Riesling is affected by global market forces, which brings me back to the subject of an earlier post: glocalism, or the intersection of global and local interests and forces.

Unreserved Concern

Steve Heinoff over at the Wine Enthusiast magazine’s Unreserved blog picked up on my earlier column and expressed his concern about consultants, flying winemakers, and the homogenizing effect of global market forces generally.  I had asked the question, “Which feature will dominate - the global or the local, or will some synthesis emerge?’  Heinoff’s  answer is pretty clear:

The synthesis, I would think, is not to be desired, for, as with all syntheses, the product is mush. Nor is much more globalization of wine a good thing; we’ve already gone too far in that direction. What would benefit California is a return to local conditions. The wine world here needs something along the lines of the locovore movement in food - the practice of eating foods grown and produced locally. We need wines that show true regional and sub-regional differences, the way they once did. I’m not sure it’s going to happen, though. Are you?

An op-ed piece by by Roger Cohen posted today on the New York Times website argues that at least in some circumstances the local can survive and even thrive, although this might not be the general rule.  “Uniformity of style is one of the depressing aspects of globalization, and nowhere more so than in the wine business,” Cohen begins, noting the increasing sameness of wines (particularly red wines, which Heinoff also mentions).

But Champagne is different, he argues, and the recent decision to redraw the 1927 AOC lines will not diminish its quality or distinctiveness (even though it is widely viewed as a response to growing global demand pressure) but should, he says, by being more precise make the wines even better. “No rush to accommodate the global palate is at work here,” he writes.

The reason Champagne can resist global market forces, I suspect, is because it is a global market force.  It is certainly a global brand, as Cohen’s piece acknowledges, one that producers in other countries attempt to emulate, including Champagne producers who now make sparkling wines abroad, in the U.S. Australia, New Zealand and Argentina.

Creative Destruction

My favorite economic analysis of local-global tension is a fascinating little book by Tyler Cowen called Creative Destruction (Tyler Cowen, an economics professor, is not be be confused with Tyler Colman, the political economist who is Dr. Vino).  Cowen is particularly interested in the interaction of global and local forces in the production and consumption of creative products such as art, film and music.  I do not see it as too much of a stretch to try to apply these ideas to the art of wine.

At the end of the day Cowen is as concerned as the rest of us with the potential for global markets to destroy what wine people might call cultural terroir.  And, frighteningly, he invokes Hegel’s notion that “the owl of Minerva flies only at dusk” - somehow people don’t get wise to the threat until it is too late (something that is becoming all too clear on the climate change front).  But he resists the urge to simply assume or assert that global market forces are the only ones that matter, that they are always all-conquering and that they always destroy.

Cultural exchange is pervasive, he argues, and what we assume is authentic local culture is often actually a hybrid result of previous waves of global, international or cross-cultural influence.  Creative people are always finding ways to enliven the familiar by mixing in a bit of exotic spice. If you like fusion cuisine, well you know what I am talking about.  This effect holds for food, music and art - Cowen’s book provides many interesting examples - and so we shouldn’t be surprised that it happens in wine, too.

In the beginning at least the global-local exchange is mutually beneficial.  The global side benefits from the new creative stimulus while the local side gains from having a larger market for its cultural products.  But things get twisted around as the market interaction intensifies.

Local terroir is strengthened in some ways because the larger global market encourages a specialist market made up of well informed consumers who appreciate the nuances of the real thing.  My wife Sue, for example, is part of a global community of lace knitters who exchange information about books and patterns, ideas, techniques, tools and yarn and enjoy the conversations that go with them.  No purely local market could support such a specialized art or craft as well as a larger market does.  Globalization, by creating a wider market, allows greater specialization and so lace knitting thrives.  The small benefits from the existence of the large.

I saw this at the Riesling Rendezvous, too.  A global market may encourage production of an international style of this wine, but it also  creates a bigger market for small producers with highly distinctive wines by expanding the community of enthusiasts who appreciate, study, collect and consume them.

So globalization can create, which is good, but obviously it also can destroy.  This is especially true when market forces are unbalanced and the pressure to appeal to a large and undemanding audience is strong.  Pretty soon everyone forgets about the real character of the original product and only the debased form remains.  Lizzie Collingham’s 2006 book about globalization and Indian food, Curry: A Tale of Cooks and Conquerors, is perhaps the best study of this. If you were writing about wine you might call the book Chardonnay – or is that being too cynical?

Both Sides Now

I think we have to accept that there is both creation and destruction at work but also acknowledge that more than one outcome is possible. Great fusions are not always created. Worthwhile tradition is not always destroyed. The problem is to encourage creation without destroying what is really precious.  That’s possible, but it’s very hard to do.

I talked about this problem in a different context in my 2005 book Globaloney. I wrote about the Slow Food Movement and how it seems to me and many others to be a step in the right direction - drawing attention to distinctive and traditional products and processes and, by expanding their market, preserving them.  That’s the theory — that globalization can be used to undermine homogenization –  but it doesn’t always work out that way in practice, as I discovered doing fieldwork in Italy.  Here’s an excerpt from the seventh chapter of the book:

Another dinner in Umbria forced me to consider a dark side of the Slow Food movement that I had not previously noticed.  We were staying near Deruta at an agritourismo, which is a sort of farmhouse bed and breakfast.  The farm seemed to typify the Slow Food ideal.  Not only was the prosciutto made from one of the farm pigs, for example, we even knew the pig’s name [it was Timmie].  What about the Slow Food movement, I asked?  Our host shook his head.  Very bad, he said.  It can ruin everything.  When Slow Food identifies an artiginal product, like a cheese or a salami, he explained, then suddenly everyone has to have it precisely because it has been given the Slow Food stamp.  It must be the best.  So they all rush in to  buy this great thing, which of course cannot possibly meet this new demand.  The producers try, but in doing so they cut corners or make compromises and end up destroying the very qualities that they set out to preserve. That’s what my Umbrian host saw in the Slow Food movement.

And that’s how many people see global market forces in general, even if there are exceptions like Champagne.  I don’t want to end on this gloomy note, however.  The Riesling Rendezvous experience has made me cautiously optimistic. Watch this space to find out why.

By Mike Veseth | Posted in Shameless Self-Promotion, Supply and Demand, book reviews | Comments (0)

Screwed not Corked

July 26, 2008 – 2:39 pm

“The rumors of my death” Mark Twain wrote, “are exaggerated.”  I wonder if the same is true about wine bottles and the corks that seal them?

Screwed!

Fine wine comes in a bottle and is sealed with a cork - this long been a given of the world of wine, but things are changing very rapidly.  I wonder what the Wine Wall at your supermarket will look like in ten or fifteen years? Will there still be bottles and corks?  Or is the death of wine tradition over-stated.

Corks seem headed for the endangered species list for all but the most precious age-worthy wines.  Non-cork closures including screwcaps were nearly invisible just 10 years ago (with perhaps 1 percent of the bottled wine market), but this is changing quickly.  A report in Meininger’s Wine Business Monthly suggests that about 35 percent of wine bottles–  over 2.5 billion units — had non-cork closures in 2007, including about 90 percent of New Zealand’s wine production.

Screwcaps have long been associated with inexpensive wine, but this too is changing.  The August 2008 issue of Decanter magazine features an article titled “50 Reasons to Love Screwcaps.”  Ten wine critics including Steven Spurrier and Linda Murphy recommend wines for summer drinking and comment on both the products and their screw tops.  “The screwcap closure is one of the best things to have happened to wine in my lifetime,” according to Spurrier (the organizer of the famous Judgement of Paris tasting.

“Given the choice of the same wine with screwcap or a cork, I’d choose the screwcap every time,” writes Joanna Simon, The Sunday Times wine writer. It’s a pretty enthusiastic endorsement, especially coming from Decanter. Economics is behind the move away from cork. Screwcaps are not remarkably cheaper than cork, but they avoid the loss of good wine to cork taint, generally estimated to affect about three percent of cork-closed wines. That’s a cost that winemakers would like to avoid.  But it can get much worse than three percent in individual cases George Taber wrote about a much worse situation in his great book To Cork or Not to Cork. A shipment of tainted cork almost ruined the David Bruce winery some years ago and destroyed forever the reputation of its Chardonnay wines. It had to rebuild (successfully) as a Pinot Noir maker.

Big Bag, Big Box

Don’t throw away your corkscrews yet - bottle and cork won’t disappear over night.  But the screwcap is replacing cork and the familiar glass bottle, well it’s under attack, too. As much as 30 percent of the 20 billion liters of wine sold this year will come in a non-bottle package - a bag-in-box “cask,” TetraPak “juice box” or something else. Economics is driving this change, as well.

Bag-in-box casks are cheap and efficient, and so we have come to expect very inexpesive wines to be sold this way, in 3-liter or 5-liter containers.  Think Franzia and Peter Vella.  The bag-in-box system is even used in international wine trade, but on a bigger scale.  Bulk wine shipments increasingly arrive in 20-foot shipping containers that hold 24,000 liters of wine in a single seamless bladder called a Flexitank. Wow, that’s really bag in box!

But it’s not just the cost of the container itself that is at work here.  Bottles are heavy to ship and costly to recycle. Rising transportation costs and increasing concern about carbon footprint are pushing the industry to look very closely at alternative packaging systems.

A French company is leading the way on this front, and I am not sure whether to be surprised or not. France is generally associated with resistance to innovation and change - picture the rebel José Bové torching a McDonalds in protest of its encroachment on French life and cuisine. On the other hand the France is home to many of the most dynamic multinational corporations - including two of the world’s five largest wine companies - and the country has a huge interest in the wine business, given that it is still the largest producer. So perhaps it just makes sense that they are innovators in this field.

What’s French for Entrepreneur?

The producer I’m talking about is Boisset Family Estates, which makes fine wines such as Louis Bernard in France and DeLoach here in the United States. Boisset seems to be pushing the envelope, selling a €150 screwcapped Chambertin as well as affordable TetraPak French Rabbit wines.  I wrote about French Rabbit in my earlier post, Red, White and Green All Over.

I think we will be seeing more and more wine in non-traditional packages — screwcaps, casks, plastic bottles and so forth.  Cost, quality and environmental concerns are all pointing in the same direction for  wines that are sold for everyday consumption.  Hmmm.  Maybe the days of the wine cork really are numbered.  Great — my cork collection may finally be worth something!

By Mike Veseth | Posted in French Rabbit, cork vs screwcap, decanter, sustainability, wine markets | Comments (2)

Flying Winemakers and the Glocalization of Wine

July 20, 2008 – 9:30 am

Glocal is one of my least-favorite words - it’s part of the standard vocabulary in the globalization literature, which is where I spend my time when I’m not working on wine.  Glocal is a combination of global and local and is meant to describe the exchange between global flows and powerful local influences.  It hurts me to say it, but wine is increasingly glocal and the flying winemaker phenomenon is a good illustration of how it works.

Aero Merlot?

Flying winemakers are winemakers and consultants with clients and interests on several continents.  They are the part of a longstanding global exchange of human capital in the wine industry. It is very common, for example, for young people in the wine business to take jobs in several regions or countries, building up a portfolio of experiences, expertise and network connections before settling in to work back home.

Flying winemakers are both an obvious extension of these initial connections and the logical consequence of global wine investments, which see Champagne makers, for example, producing sparkling wines in France, California, Argentina and Australia.  It makes economic sense that high level expertise would be exploited globally, especially as the winemaking seasons are reversed in the northern and southern hemispheres.

The flying winemaker process takes Michel Rolland, the most famous wine consultant, all over the globe, but it also brought Katherine Williams, who I met through my research assistants Michael and Nancy Morrell, to Tsillan Cellars in Lake Chelan, Washington.  Katherine and her husband Adrian Lockhart are Australian winemakers who, having made reputations in Oz, now work abroad.  Adrian is head of Tohu Wines, New Zealand’s Maori-owned winery.  Katherine divides her time between New Zealand and Lake Chelan. Tsillan isn’t a high volume operation and Lake Chelan is what you might call an “emerging” wine region, but it’s linked in to the global wine network and can take advantage of international winemaker resources.

The Long Shadows Experiment

I began thinking about flying winemakers at a wine tasting at a local shop on Friday evening.  The wines were from Long Shadows Vintners in Walla Walla and a roomful of happy wine enthusiasts paid a tasting fee and queued up patiently to receive tiny tastes of five wines made from Washington grapes by some of the most famous winemakers in the world.  Long Shadows, you see, is the ultimate glocal wine experiment.

Alan Shoup, former CEO of the Chateau Ste Michelle group (and a legend in Washington wine), got the idea to use flying winemakers to draw global attention to Washington’s terroir. He built a cluster of wineries, hired Gile Nicault to be resident winemaker, and arranged for esteemed figures from the world of wine to fly in to Walla Walla and make one wine each. The tasting began with Poet’s Leap Riesling, which was made under the direction of Armin Diel of Scholssgut Diel in Nahe River Valley - a German take on Washington State’s bestselling varietal wine.  Next was Pedestal, a mainly Merlot blend by Michel Rolland.  Pedestal was followed by Pirouette - a classic Bordeaux blend by Agustin Huneeus and Philippe Melka - then a 100% Cabernet Sauvignon by Randy Dunn called Feather and a Syrah named Sequel by John Duval of Penfold’s Grange fame.  All the wines were from the 2005 vintage except the Riesling.

There are two other Long Shadows products that we didn’t get to taste.  Chester Kidder Red wine is an eclectic blend make by Giles Nicault and Saggi is a supertuscan blend made by the Folonari brothers, who should know how to make such a wine.  Poet’s Leap sells for about $20 and the red wines go for $45 to $60 per bottle according to my copy of The Wine Advocate, although the winery’s website says that they are sold out.  Tasting some famous “impossible to get” wines and the chance to buy a few bottles - that’s what drew a big crowd to the shop on a July Friday evening.

Blend it like Beckham

Big name flying winemakers like Michel Rolland are controversial because they are associated with the homogenization of wine - “international styles” are said to replace distinctive local wine qualities. That’s why Rolland is cast in the role of the devil in the film Mondovino. Long Shadows, however, aims to reverse the flow, to use global wine celebrities to highlight the quality of local terroir, so it is kind of a natural experiment in glocalism.  Which feature will dominate - the global or the local, or will some synthesis emerge.

Bringing Michel Rolland to Walla Walla is a lot like hiring the soccer star David Beckham to play for the  Los Angeles Galaxy.  The idea is to draw attention to the local team and help establish its domestic and international credibility, but it doesn’t always work out that way.  You’ve got to bend fan attention around the international celebrity back to the local product so the reputation eventually transcends the famous flying foreign connection.

I am not an expert wine taster (and this was not a good tasting opportunity), so I am not drawing any strong conclusions just yet.  The Riesling and the Syrah did impressed my research assistants (Sue Veseth and Anne and David Seago) as successful glocal experiments  - distinctly Washington wines but with an appreciable stylistic twist.  The other wines? Well, it is too soon to tell, in terms of the wines themselves, but they are obviously successful in drawing attention to the region and enhancing its reputation.

Note:  I’ll have a chance to meet a number of famous flying winemakers (and explore glocalization) next week at the Riesling Rendezvous meeting in Woodinville, Washington, which will bring together Riesling makers from all over the world  Watch this space for my report.

By Mike Veseth | Posted in Flying Winemakers, Mondovino, Washington wine, emerging wine regions, globalization | Comments (0)

Wine Politics

July 17, 2008 – 1:05 pm

Tyler Colman, Wine Politics: How Governments, Environmentalists, Mobsters and Critics Influence the Wines We Drink. University of California Press, 2008.

The French have a word for it: assemblage. It is the act of blending wine from different barrels and when it works the result is full and round, delicious. Tyler Colman (a.k.a. the internet’s Dr Vino www.drvino.com) has assembled stories about the social forces that affect wine in order to round out our understanding and appreciation of this glorious  product.  It is a very readable revision of Colman’s Ph.D. dissertation on the politics of wine and I think it’s a blend that will appeal to a lot of wine enthusiasts.

The contrasts between the Old World (France, especially Bordeaux) and the New World (California, especially Napa Valley) form the book’s main axis.  Alexis de Tocqueville famously noted that a distinguishing characteristic of the young United States was the unexpected vitality of its voluntary associations. Americans didn’t look always to the state, he wrote, they worked together to solve collective  problems.  Nothing like it in France, with its strong state controls.  But wine is different, Colman explains.  Regional wine associations (like the groups behind the appellations d’origine contrôlée system ) play a strong role in France while the heavy hand of the state (the French call it dirigisme) is seen in America’s rigid regulation of wine (and alcoholic beverages in general) and the complex and cumbersome three-tier distribution system that makes it all but impossible for some wine enthusiasts to legally purchase products that are readily available just across the state line. Colman’s history of the political process that brought us to this situation makes good reading.

Green power politics is part of the blend, too, as Colman contrasts the influence of environmentalists in California with the biodynamic movement in Europe.  The politics of the palate - and the influence of wine multinationals and critics  like Robert Parker (and Dr. Vino himself?) — rounds out the final product,  Colman concludes on a upbeat note:  the relationship between wine and society here in the United States is complicated, a mixture of politics and economics, wealth and power, science, tradition, religion and environmentalism and there are a lot of problems to be solved, but he’s optimistic - we have more and better choices and a growing wine boom to push the process along.

It’s not really surprising that I would like this book.  It’s called Wine Politics but there’s a lot of wine economics here, too. You have to be a little bit of a wine nerd to want to study the political economy of wine when you could just spend your time and money sniffing, swirling and slurping and I guess I fit that profile.  The broad themes are important and there are plenty of interesting historical tidbits that you can work into conversation at your next wine tasting party.  Now, for example, I know why Two Buck Chuck, which costs $1.99 in California, sells for about a dollar more here in Washington.

Thinking critically, I would have appreciated a bit more depth on some of the topics (many of the chapters are strings of short blog-length entries) and I wish that there was a stronger central theme.  Yes, wine is affected by many social forces.  Well, so what?  A long memorable finish is something I look for in a wine … and a wine book.

Congratulations, Dr. Vino, on a successful first cuvée.  I’m looking forward to your next book, which is due out this fall.

By Mike Veseth | Posted in Uncategorized | Tags: , | Comments (1)

Breaking In

July 2, 2008 – 1:02 pm

I’ve written before about the British wine market, the most important marketplace in the world of wine.  Everyone wants a place on Britain’s Wine Wall, but breaking in isn’t easy to do, as a recent Decanter article and a conversation with one of my former students makes clear.

Decanter Discovers Washington Wine.

Many Washington winemakers are keen to try to get their feet in the door of European markets.  They figure that the time is right: the dollar is cheap and their wines are excellent. They cannot help but be pleased, therefore, with the July 2008 issue of Decanter magazine, which features an article about Washington wine by regional wine critic Paul Gregutt.  Three pages of text, maps, photos and wine reviews - it’s a nice package.  Several of the wineries mentioned even backed up the effort with two pages of advertising.  A really good display for Washington wines in the world’s most influential wine magazine.

But there’s a problem. British buyers know about these great wines now (more than ten wineries are mentioned including Columbia Crest, Seven Hills, L’Ecole 41 and Reininger), but only one (Columbia Crest) has current British distribution.  Want one of the other nine?  Call the winery in Washington State, the Decanter listing says. You’ve got to wonder how many buyers will do this and how many will just turn the page to the next New World wine - one that is actually available in Britain. You need publicity to get distribution, I know, but publicity without distribution doesn’t make the cash register ring.

On a different note, I have to wonder about the quoted price for the Columbia Crest Horse Heaven Hills Chardonnay.  Wine Spectator gives it 91 points and lists the price at $15.  The British price is apparently £19.53 or about two and a half times as much in dollar terms.!  It’s not going to be easy to break into European markets under these circumstances,

When Gallo Went to Europe

Gallo today is a classic American integrated wine multinational.  Although it is based in Modesto, in the heart of California’s Central Valley, and the bulk of its business is U.S. market, Gallo has complex international linkages.  Gallo sources wine from Italy, France, Australia and New Zealand and sells wine in Europe, Japan, and Latin America.  But it wasn’t always that way.  Gallo’s was drawn into the global marketplace in the 1980s, attracted by the markets in Britain and Germany.

I asked my former student Steve Emery to tell me what happened when these American wines (and American wine ideas) invaded Europe.  Steve is CEO of Earth2O, an Oregon company that bottles and distributes water from pristine Opal Springs near scenic Bend, but in the late 1980s he was Director of Sales for Gallo’s program to establish its varietal wines in England, Ireland and Germany.  His experiences say a lot about the nature of global wine then and now and the problems of breaking into new markets.

Getting Gallo into Europe was difficult, Steve told me, although ultimately successful.  Even though Gallo is a huge presence at home, it was an unknown quantity abroad.  I remember seeing Gallo wines on the shelf of my local wine shop when I taught in England in 1989 and I was surprised at the price point.  Gallo wines seemed expensive to me, about the same price as the most popular French and Italian wines on the shelves.  I expected Gallo to be a cheaper brand like it was at home.  But the advantage of lower price wasn’t really possible in the British market, given such obvious barriers as transportation costs and not-so-obvious hurdles such as the British wine tariff.

Many countries tax wine imports, whether to collect revenue, protect domestic winemakers, or try to shift consumption to other commodities such as local beers and spirits.  Britain is not unusual in this regard.  What makes Britain different is that the tax is relatively high and levied on a per-bottle basis (and only on non-EU wines, of course).  Britain collects more than $2 on each bottle of imported. (£1.29 according to a recent Rabobank report).  The flat per-bottle tax has a way of shifting the demand for wine towards more expensive products.  A $2 tax on a $2 wine represents a 100 percent tax. For a $4 wine, a $2 tax increases the price to $6, a 50 percent rise.  For a $10 wine, the tax raises the price to $12, only a 20% increase.  So the tariff falls heaviest on lower price goods and shifts the market upscale towards better or at least more expensive bottles and wines produced in the EU, not the New World. The cost advantage that Gallo enjoyed  in the United States was partially offset by the British tariff regime.

But that wasn’t the main problem, Steve told me.  The British supermarkets were savvy retailers - some of the wine buyers were highly trained Masters of Wine - the highest designation in wine education.  But they were organized to purchase and market wines based on geographic region rather than brand or type of wine.  As Steve says, they didn’t think in terms of brands (apart from the obvious fact of their own store brands).  This is true even today.  If you go into a Marks and Spencer store in Britain, you will find a world of wine available, but the wine is mainly organized and labeled according its place of origin rather than a US-style brand.  The wine’s “pedigree” (Friuli D.O.C. Grave Merlot, for example, or Macon Rouge, appellation Macon Rouge contrôlée) is listed in big letters, but the maker’s name and the brand - custom bottled for Marks and Spencer - are tiny by comparison.  The wines that Gallo sent to Europe were California wines, a useful geographic designation, but Gallo was the brand that defined the wine, not California.

British wine marketing was also different in other ways.  Steve told me that the British weren’t applying the basic Wine 101 lessons he learned with Gallo in the U.S. - lessons about where to put the most profitable wine (right at eye level on the shelf), where to position your target products in a wine cooler (on the right, where most people will look and reach first) and the many strategies of point-of-sale merchandising. They also introduced print advertising to the wine market successfully.

Gallo had to adapt, Steve said, to be successful in the foreign environment, even replacing the practical screw caps on its least expensive wines with more traditional cork closures (creating a shortage of corks in the process).

The German Problem

Germany was even more difficult, Steve said.  That’s easy to understand given the focus on bargain basement wines.  It doesn’t seem like most German buyers are interested in paying for a brand.  Low price seems to be the main factor and cheaper wines were readily available, Steve said, from Germany, Italy and France.  The supermarket wine buyers didn’t want to talk to him, Steve said, so Gallo resorted to guerrilla  marketing.  They got into the stores through the meat department, using a technique called cross-merchandising.  They sold the wine as the perfect accompaniment to beef, chicken and fish rather than wine alone.  Every meat purchase was therefore a potential wine sale as well.  You are probably familiar with cross-merchandising yourself, even if you’ve never heard the work before.  It is the process that has placed small displays of wine all over your supermarket, so that you never miss an opportunity to pair up wine with whatever you actually came to buy.  The Germans seem to understand cross-marketing very well now.  I visited my local Trader Joe’s this morning and found wine everywhere. I think there was probably more wine spread throughout the store than in the wine section itself.

The wine business is very competitive and Gallo found that the “rules of the game” were much different in Europe.  Wine is regulated as an alcoholic beverage in the U.S., so every aspect of its sales is subject to federal or state regulation.  In Europe, however, Steve said, wine is just another product and the competition is much freer.  That’s why he was able to bargain with the meat department managers in Germany rather than go through the wine buyer department.

Gallo was very successful in Britain and in Europe and many other American wine companies have followed them, but that hasn’t eliminated the challenge of breaking into new markets.  I wish our Washington winemakers good luck in their well-timed assault on the Old World markets. It’s not going to be easy.

By Mike Veseth | Posted in British wine market, Gallo, Paul Gregutt, decanter | Comments (0)