Monthly Archives: February 2008

[Yellow Tail] Tales

February 26, 2008 By in Australian wine, sustainability, Trader Joe's, Two Buck Chuck, Yellow Tail 2 Comments

caselawinery-coloured-small1.jpgYellow Tail is the best selling imported wine in the United States. Yellow Tail accounted for 11 percent of all U.S. imports in 2005. This one wine brand represents about 8 percent of all Australian wine production and 15 percent of that country’s total wine exports. Yellow Tail sells more wine in the U.S. than all French producers combined.

This is an aerial photo of the winery, which is located in a small village called Yenda in the Riverina region of South East Australia. If it doesn’t look like a quaint little craft winery it is because the volumes are so large. The warehouse structure in the upper right corner can store 900,000 cases of wine at a time, according to Wine Business International. The bottling line next door is the fastest and loudest in the world, filling 30,000 bottles per hour (two more lines are planned to increase capacity). Total production is about 11 million cases, of which about 8.5 million are exported to the United States.

It is a sophisticated factory, with blending facilities that assure that each bottle tastes just like the one before. That differentiates it from Charles Shaw wine (a.k.a. Two Buck Chuck), the Trader Joe’s wine, which people say can vary considerably from case to case.

Yellow Tail is expanding in every imaginable way: more varietals (an Australian Pinot Grigio), a Reserve line of wines sourced from cooler-climate vineyards and now sparkling wines, too. The Yellow Tail’s distinctive yellow-footed rock wallaby “critter” is everywhere.

Yellow Tale is a phenomenon, but not one you will read about in the supermarket wine magazines. They don’t waste much ink on wine that costs about as much per bottle as the magazine itself does per issue. Magazine? Bottle of wine? It’s easy to tell which one the Yellow Tail customer will purchase! So I’ve been trying to find out more about Yellow Tail and here is my report.

Wine as a Family Affair

The interesting thing about the Yellow Tail success story is that it can be told in several different ways. This is not unusual in my experience. Stories of success and failure are frequently spun into meaningful narratives to try to make particular points. One version of the Yellow Tail story, for example, focuses on family and the importance of family businesses in the wine business.

This Yellow Tail Tale begins with the Casella family, winemaking immigrants who came from Italy in the 1950s and eventually planted their own Australian vineyards in 1965, selling grapes under contract to larger producers. Keen to make their own wines and export them, Casella invested in production facilities in the late 1990s and started looking for ways to crash the emerging U.S. wine party.

The key event in this version of the story is the alliance that was struck between Casella Wines Ltd, an Australian family business, and an American one, the William J. Deutsch company. Deutsch is a major U.S. wine distributor — they helped make the French Georges DuBoeuf wines a major U.S. brand — and they were willing to take a chance on an unknown Australian wine with a clever label. A partnership was established, with each family firm owning half of the Yellow Tale brand. Casella made the wine, Deutsch sold it. U.S. sales soared, from about 60,000 cases in 2001 to more than 8 million cases today.

Why was Yellow Tail so successful? One theory is that it is family and trust that are the key elements and that the cooperation and commitment that Casella and Deutsch have demonstrated would not have been possible if either of them had been a public corporation, beholden to shareholders and driven to meet quarterly profit targets Family is the key to Yellow Tail.

Red Ocean, Blue Ocean, Yellow Tail

A second group of business analysts have also appropriated Yellow Tail and made it the basis of a wholly different narrative, this one told using some unfamiliar jargon (unfamiliar to me, at least). Here is the Yellow Tail story told in terms of Blue Ocean versus Red Ocean.

The oceans in question are markets. Blue Oceans are markets for new products. Red Oceans are markets for existing products. Why are they red? I don’t really know but based upon what I saw last summer on the Discovery Channel’s “Shark Week” I’m willing to guess that existing markets are a tough environment to enter. You’ve got to compete with well-adapted predators who will cut you up badly if you aren’t really strong (Red Ocean = bloody ocean — get it?). A Blue Ocean, on the other hand, is uncontested open water. You’ve got a much better chance of profit if you can stake out the market for a new product before the competition gets there.

So how is Yellow Tale a Blue Ocean product? According to one article it is because Yellow Tail isn’t wine as we know it — it’s a whole new thing. The Wine Business International article cited above provides the details. People don’t really like wine, the article suggests. Even the Casellas don’t like it (is this possible?). It’s very tannic and acid and people aren’t used to those qualities except in tea. Who wants to pay $6 a bottle for something that is bitter and sour. The key to Yellow Tail was the realization that wine without tannin and acid could be very appealing, especially to the majority of Americans who really don’t like wine. (It was designed to appeal to the 85% of non-wine drinkers, according to the article, while not offending the 15% who already like wine. That’s 100%, if my math is correct. No wonder it is so popular). Yellow Tail isn’t as strong a brand in Great Britain — maybe it’s because the British actually like wine, acid tannin and all?

The Red Ocean, then, is the market for wine and the Blue Ocean is the market for wine that doesn’t taste like wine. (You might call it the Blue Nun Ocean in honor of a popular semi-wine wine of the 1970s.) If this analysis is correct, then you can see why Yellow Tail is such as success. But you can also see why its success might be short lived (and why, therefore, Casella may be moving into other markets). The Blue Ocean of semi -wine was quickly populated by competing predator species. Two Buck Chuck is an obvious example but there are really dozens and dozens of copycat critter wines out there. The trick for Yellow Tail is thus how to succeed now that their Blue Ocean is turning Pink.

Water Torture

Here’s a final Yellow Tail Tale that continues the focus on water. A third explanation for Yellow Tail’s success can be summarized in a single word: irrigation. Yellow Tail was made possible by the existence of enough water to irrigate the vast Casella and South East Australia vineyards. Water made it possible to grow grapes so efficiently that you could ship the wine half way around the world and sell it cheaply and make a fortune.

a_wby_lg_pic01.jpgBut the environment is changing for Casella’s vineyards. It’s not Blue to Red, but wet to dry. Australia has experienced several consecutive drought years, which have caused vineyard yields to crash and changed the whole business model of Australia wine. Put simply, the plentiful cheap fruit that has fueled Yellow Tail’s growth is now just a memory. What is to be done?

Casella seems to be considering several approaches. The first is conservation. According to their website, they have invested heavily in water recycling facilities, which will allow them to reclaim 400 million liters of wastewater each year for use in their vineyards. That’s a good start — and sustainable winegrowing is everywhere a concern — but I don’t think it will be enough to irrigate all the vineyards.

So another strategy may be considered: outsourcing. There are many places on earth where inexpensive wine can still be produced. Will Yellow Tail consumers care if their wine comes from Chile, South Africa, France or maybe even Romania instead of Australia? My guess is that it won’t matter very much and that Yellow Tail may become a globally-sourced brand. Boy, that little wallaby gets around.

But the long term threat to Yellow Tail probably isn’t water, it is wine. If Yellow Tail customers ever learn to like wine (you know — the stuff with tannin and acid?) then the brand’s days will be numbered! Until then, little critter, wallaby wine is safe.

Masters of Wine (and Economics)

February 24, 2008 By in critics, globalization, Jancis Robinson, Masters of Wine, robert parker, wine critics 4 Comments

imwlogo.gifPeople always seem surprised when I tell them that I’m a wine economist, that there is an American Association of Wine Economists and even a Journal of Wine Economics. I don’t know exactly how they think about wine, but they don’t seem to consider it in economic terms — until they start talking to me, of course.

Wine is a business and if you want to understand what’s in your wine glass, where it comes from, how it got here, and why you paid so much (or so little) for it, you have to learn a little wine economics. This is true even for the most famous names in wine.

Masters of Wine

The most respected title in the world of wine is Master of Wine (MW). It is a title that you wear proudly, appending it to your name like this: Jane Hunter, MW. I would say that it is the Ph.D. of the wine world except that it seems to be harder to get than a Ph.D.

The MW is not a degree given by Harvard or Yale. It is a special designation created by the Institute of Masters of Wine, a 50-year old London-based, industry-supported non-profit organization dedicated to wine education. The MW program was originally created for British wine traders, who obviously needed to be very knowledgeable to succeed in their profession, but it eventually expanded both in occupational and geographic terms. Today there are 264 Masters of Wine in the world scattered across 22 countries. Not surprisingly, Britain remains the center of MW membership and activities, reflecting its central position in the world wine market generally.

Some of the world’s most famous wine critics and winemakers hold the MW designation. Jancis Robinson, Michael Broadbent, David Peppercorn and Serena Sutcliffe are famous MW wine critics, for example. Among the winemakers who have earned the MW title are Steve Smith and Jane Hunter in New Zealand and David Lake and Bob Betz here in Washington State.

It’s hard to get a Masters of Wine. You need to work in the wine industry for at least 5 years and take preliminary studies at a major wine research center such as UC Davis, the University of Bordeaux, Geisenheim University in Germany or the University of Adelaide. Then, once admitted to the MW program, you have to pass exams in four theory areas, stagger successfully through three 12-wine blind tastings, and write a 10,000 word dissertation on a topic relevant to the wine industry. (Jancis Robinson’s dissertation, I understand, was a very complete study of the world’s grapes and wines which was published in book form as Vines, Grapes and Wines: The Wine Drinker’s Guide to Grape Varieties. It is one of my favorite wine reference volumes.)

Master of Wine Economics

I’m not planning to apply for a MW myself (I’m quite sure that I would not survive the blind tasting trials), but I’m interested in knowing what wine experts think they need to know about wine economics, so I’ve been reading the MW syllabus. It is full of wine economics.

The first two papers MW candidates must write deal with the theory and practice of wine production. The syllabus says that …

The purpose of this unit is to assess candidates’ knowledge and understanding of wine production. An understanding of the processes of grape growing and wine making should be complemented by knowledge of the science which underlies the practical issues. Candidates should be aware of the implications for wine style, quality and costs of decisions taken at each stage of wine production. An awareness of areas of active research in topics relevant to wine production will be necessary. Whilst region specific questions are unlikely, candidates will require a broad background knowledge of the world’s wine regions and wine styles. The examples given in answers should demonstrate a familiarity with a variety of wine regions. Candidates should know how issues such as finance, economics, law, general management, quality assurance/quality control and the environment bear on wine production.

You can see how much the business of wine enters into the understanding of wine. The third paper is even more closely focused on wine economics:

The purpose of this unit is to assess candidates’ current knowledge and understanding of financial, commercial and marketing aspects of the international wine industry. Candidates should demonstrate the ability to apply their knowledge to a range of business situations including marketing and investment strategies, financial decision making, supplier – customer relationships and strategies for identifying and meeting consumer demand. Candidates will require a broad background knowledge of wine industry structures around the world and how these relate to one another.

The fourth paper is written on contemporary issues. Then comes the blind tasting and dissertation. You can see why the MW is so hard to get and why it is so valuable. MW holders understand wine from the vine roots up to the global market structures. I can’t say that wine economics is the most important element in the curriculum, but it certainly is a key component.

It looks like wine economics accounts for about a third of the MW syllabus. That makes sense to me, both given the MW’s clearly commercial original purpose and more generally given the influence of economics on the wine industry today.

A New Wine Designation

Robert Parker does not have a MW, but he and Kevin Zraly have recently launched their own wine certification program. I haven’t looked into the Parker/Zraly program in detail but it seems to be aimed at wine enthusiasts more than wine professionals and I’m not sure how much wine economics is included. Here is a brief description.

The Parker & Zraly Wine Certification Program consists of three certification levels. After completing all eight examinations of Level I – Aficionado of Wine (AW) (launching September 20, 2007 with the Wines of France exam), wine lovers can gear up for the March 2008 launch of Level II – Connoisseur of Wine (CW). The most advanced, Level III – Expert of Wine (EW), will debut in September 2008 and will challenge even wine experts and professionals. Levels I and II consist entirely of online examinations. Level III will include a written exam as well as a meeting with Robert Parker and Kevin Zraly for a blind wine tasting and oral examination on wine.

I hope Parker and Zraly include a good dose of wine economics in their EW exams. I don’t see how you can really understand the world of wine without it.

The Wizards of Oz

February 19, 2008 By in Australian wine, British wine market, Constellation Brands, Gallo, globalization, Jancis Robinson, Supply and Demand, sustainability, Yellow Tail 1 Comment

20_australian_wine_industry_segments.jpgWhen I think about the future of the global wine market, my thoughts frequently stray to Australia because that’s where I see so many current trends originating or being most effectively exploited.

Export driven marketing strategy? That’s Australia. Branded varietal wines? Everyone talks about Gallo and Constellation brands, but who has done it better than [Yellow Tail]? Foreign market penetration?  The Aussies again, replacing the French as the strongest competitor in the British market and a strong presence in the United States.

Australia even wins the prize for the most sophisticated national wine strategy. Click on the image above to see a representation of the latest Australia wine strategy, which divides the market into twenty (20!) key segments where Aussie wines can compete.

Australia’s Boom and Bust

No doubt about it, if you want to learn about wine economics and integrated wine business, you should look to Australia. But that doesn’t mean that all is well down under. As I have written in previous posts, Australia has experienced a roller-coaster of wine market problems. First it was the problem of over-supply, which pushed prices down to unsustainable levels. And then, just when it seemed like things couldn’t get worse, they did and the early signs of wine shortages began to appear, which caused me to declare that the era of cheap wine was coming to an end. In each of these cases, trends that I see in many places now were first apparent in Oz. No wonder that I’m starting to view Australia as my leading indicator of global wine market trends.

This makes the news in Jancis Robinson’s column in Saturday’s Financial Times particularly sobering (not a good word for wine lovers). Robinson’s article suggests that Australia has hit ecological limits to the production of cheap wine. Water is scarce and expensive and this means that the cost (and therefore price) of bulk wines like [Yellow Tail] must rise — from A$0.40 in 2006 to A$1 in 2007 according to the article. That’s not quite a leap from unsustainable to unaffordable (the A$ is about 91 US cents today), but it presents a completely different business model. More to the point, however, the price rises exist because costs are high and the product is in short supply. Robinson is optimistic that Australian winemakers can compete and even thrive in the new market environment, but adjustment won’t be easy.

Robinson reports that Fosters has started sourcing some of its Lindeman’s brand from its vineyards in Chile (for the British market) and South Africa (in the U.S.). This continues the practice we have seen in the U.S. for some time for short-supply Pinot Noir. U.S. brands like Pepperwood Grove and Redwood Creek frequently contain Chilean and French wines respectively. Now, Robinson reports

There is much talk, though not much evidence, of basic bulk wine being imported into Australia from southern Europe, South Africa and South America to fill the so-called “casks” (boxed wine) and the cheapest bottles and flagons for the bottom end of the domestic market, prioritising export markets for such inexpensive Australian wine as the brand owners can afford. Australia has swung from famine to feast and back to famine in terms of its wine supply recently and bulk wine imports are nothing new. I remember encountering a director of one of Australia’s largest wine companies looking very shifty round the back of some fermentation vats at Concha y Toro outside Santiago de Chile in the mid-1990s.

Ecological Limits?

Now the problem here is not that the Australian’s are passing off foreign wines as their own. The wines I have seen have been clearly labeled and the few cases I know about where winemakers have tried to fool the public (some years ago in New Zealand, as I recall) ended badly for the dishonest producers. They were punished pretty severely in the marketplace when their tricks were revealed.

No, my concern goes more to the heart of the problem. Maybe Australia’s ecological constraints are a short term problem that will disappear. Maybe it is an Australian problem with no implications beyond the land of Oz. Maybe ready supply from Australia wannabe producers in South America, South Africa and Europe will always be there to fill the gap.

But that’s a lot of maybes and economists are trained to get nervous when it’s maybe this and maybe that. We know that the effect of climate change on the wine industry is real. And we know — or at least I think I know — that Australia has often been a good indicator of emerging trends in global wine. If this is the case, then we are indeed about to enter a new wine world, one where the natural constraints on wine production may be about to become as important as marketing strategies.

The World’s Best Wine Magazine?

February 16, 2008 By in British wine market, China wine, Constellation Brands, Costco, critics, decanter, globalization, Michael Broadbent, robert parker, Tesco 2 Comments

decanter-china.jpgDecanter bills itself as “The World’s Best Wine Magazine” and is sometimes referred to as the bible of wine. It is probably the most influential wine magazine in the world, too, although that could be a contested claim. It is the most-read wine magazine in the world’s most important wine market: Great Britain. Founded in 1975, it is based in London and published monthly in more than 90 countries including, since 2005, China. The Chinese Decanter (click on the image to see the Chinese cover) includes about 30% special content for the growing East Asian market.

The Most Important Wine Market

How can Great Britain (and not the United States) be the world’s most important wine market? The simple answer is that the British produce little of their own wine and import quite a lot, so just about every winemaker in the world wants to compete for British sales. The German market is large, too, but it’s a cut-throat pricing environment with emphasis on discounted price. The American market is big, but it is tough for international winemakers to compete with American wines at most segments of the market (especially for popularly priced branded varietal wines).

A slightly more complex answer is that entry into the British market is relatively straightforward, because it is for all intents and purposes an integrated national market with one set of rules and distribution channels. The American market is a maze, with 50 (plus the District of Columbia) different sets of rules and regulations to understand and comply with plus the nightmarish “three-tier” distribution system (retail/wholesale/producer) that adds cost and increases the mark-up at each stage.

You want national distribution in the U.S.? Better hook up with one of the big brand managers such as Constellation Brands or Cobrands. And you’d better have a lot of product to sell. Otherwise you should settle for regional distribution and hope for the best. No wonder many international sellers focus on the British market or go there first.

Decanter is published by a company called IPC Inspire, which produces a number of lifestyle monthlies including Country Life, Horse & Hound, Rugby World, SuperBike, Shoot Monthly and Yachting World. It is Britain’s largest specialist magazine publisher.

Although Decanter really is arguably the most important wine magazine in the world, it is not as ubiquitous as Wine Spectator and Wine Enthusiast here in the United States. You won’t find it on many supermarket racks. Like Robert Parker’s Wine Advocate, it attracts a specialist audience in America.

Mrs. Thatcher and the Rise of the British Wine Market

Decanter was founded in 1975, just at the moment when the British wine market was becoming the world’s most important. Most American’s think of the British as a beer and spirits drinking nation, but this has not always been the case. The British preference for ales and whiskey was partly the result of a tax and regulatory regime that biased the system against consumption of imported wine. High tariffs made wine expensive and retail sales regulation made it inconvenient to purchase.

Britain’s entry into what is now the European Union resulted in tariff rates more favorable to wine imports. Mrs. Thatcher’s programs of retail industry deregulation opened up the opportunity for cheaper wine and more convenient distribution, especially though the supermarket chains. These supermarkets – Tesco, Sainsbury and Waitrose among them – became world’s most important wine distribution channels. The produce of the world’s vineyards are now sourced to these British stores and, having made an impact there, have passed into the global market. Costco, I have argued elsewhere, is beginning to play a similar role in the United States.

Ironically, U.S. wines are underrepresented on the British market.  The U.S. and British distribution and marketing systems are so different as to represent a barrier to entry, at least for now.

Decanter was created to serve the consumer market created by the explosion of wine in Britain. As the global market has grown, Decanter’s distribution has followed (and sometimes, I suspect, leads the way).

If Decanter is so important, why doesn’t it have a stronger presence in the United States? The answer, I would argue, is that the British wine market is global and dominated in terms of volume by the large national supermarket chains selling wines from all over the world. The U.S. market is far more local (favoring American wines) with a far more fragmented distribution system and large firms like Gallo and Constellation Brands leading the way, selling branded wines from their large portfolios. Simply put, you won’t find a lot of the wines reviewed in Decanter in American stores. As vast as our selection is here in the U.S.A., it’s just a slice of what the global market offers. Really.

Uncorking Decanter

Decanter is a full service wine publication with something to offer almost any British wine enthusiast. There are interviews, topical essays and regional travel surveys (drink this, stay here, try this place for dinner). Columnists include such notables as Michael Broadbent, Steven Spurrier and Andrew Jefford. Decanter obviously includes wine investors among its readers because it contains very detailed monthly reports on wine auction sales prices. Bordeaux reds and the main focus (vintages dating back to 1961), but white Bordeaux, Burgundy and Port prices are also listed. It even publishes a wine auction index. This probably reflects Broadbent’s influence – he was for years head of the wine auction practice at Christie’s.

The monthly wine ratings are very interesting. Rather than try to sample a selection of all the new wines on offer each month as some American publications do (an impossible task in Britain, I reckon, with so many wines), one or two types of wines are chosen and about 100-150 wines from each of those segments of British market are tasted and rated.

The February 2008 issue, for example, has comparative ratings of just two types of wines, South Australian Shiraz and Loire (France) Reds (Cabernet Franc to Americans). Wines are first rating using a 20-point scale (with average scores from several tasters reported) and then grouped together into quality classes ranging from one to five stars. The five star (18.5 points or more) and four star wines (16.5-18.49 points) are listed along with photos of their bottles for easy identification in the shops. Three star wines get nice write-ups – this, after all, is where the real market is – and lesser wines are listed in appropriately grim tombstone format. It’s hard to imagine a Decanter reader buying a “fair” or “poor” wine except by accident.

How Decanter Rates Wine

I am impressed with the information provided for each wine. Besides the average 20-point rating, we learn the retail price, the degree of age-worthiness, receive brief tasting notes and find out where to buy it. Good value wines receive a gold £-sign designation. Thus, for example, the 2006 Shingleback Cellar Door McLaren Vale is rated at 14.75 points and sells for £7.99, which is a good value. Is has short term aging potential and can be purchased at Tesco. “Dark cassis jam notes. Medium body. Nice spicy notes. Fine velvet texture. Ripe and well-balanced fruit. 3-8 years.” Sounds good to me. Lots of useful consumer information here about these particular wines, although each monthly issue rates only a small slice of the British market.

The “stockist” listings are noteworthy. Wine Spectator will tell you what to buy, but not where to buy it. That would be nearly impossible in the U.S. The reason Decanter can tell you where to buy this wine is that the British wine system favors a relatively small number of national distributors and retailers, many of whom feature their own brands, much as Costco does here in the U.S. with the Kirkland label. The best value in the Shiraz tasting, for example. Was Berry’s Own Selection Elderton Australian Shiraz Barossa Valley 2006 (£8.50 and 16.5 points). “Big yet somehow seductive.” Berry isn’t a person, it is Berry Brothers & Rudd, a major British retailer.

Decanter wine critics are tough, by the way, stingy with the highest grades (the 4-5 star As and Bs) but generous in giving Cs that seem to really mean something.

Decanter and Global Wine
Decanter reflects the unique features of its main market, Great Britain, which makes me realize that this is probably true about all wine publications. Gambero Rosso has a strong regional focus because the Italian national wine market is less important there and regional identities matter more. U.S. magazines will be different because the U.S. market is so different.

Britain’s market is national in scale and global in reach so Decanter‘s strengths and weaknesses (particularly its inability to evaluate the majority of wines that are available) reflect this. I am not surprised that it would appeal to wine-drinking elites around the world, but it makes sense that it would not have a big market in the United States. The market is just too different over here.

Wine by the Numbers

February 9, 2008 By in critics, decanter, Jancis Robinson, journal of wine economics, Michael Broadbent, robert parker, Uncategorized, wine critics, wine magazines, wine ratings 1 Comment

Rating the Wine Rating Systems

People turn to wine critics to tell them what’s really inside that expensive bottle (or that cheap one) and how various wines compare. Some critics are famous for their detailed wine tasting notes (Michael Broadbent comes to mind here) that provide comprehensive qualitative evaluation of wines, but with so many choices in today’s global market it is almost inevitable that quantitative rating scales would evolve. They simplify wine evaluation, which is what many consumers are looking for, but they have complicated matters, too, because there is no single accepted system to provide the rankings.

I’m interested in the variety of wine rating systems and scales that wine critics employ and the controversies that surround them. This blog entry is a intended to be a brief guide for the perplexed, an analysis of the practical and theoretical difficulties of making and using wine ranking systems.

Wine Rating Scales: 100-points, 20-points, Three Glasses and More

winescales.jpgThe first problem is that different wine critic publications use different techniques to evaluate wine and different rating scales to compare them. Click on this image to see a useful comparison of wine rating systems compiled by De Long Wine(click here to download the pdf version, which is easier to read).

Robert Parker’s Wine Advocate, the Wine Spectator and Wine Enthusiast all use a 100-point rating scale, although the qualitative meanings associated with the numbers are not exactly the same. It is perhaps not an accident that these are all American publications and that American wine readers are familiar with 100-point ratings from their high school and college classes.

In theory a 100-point system allows wine critics to be very precise in their relative ratings (a 85-point syrah really is better than an 84-point syrah) although in practice many consumers may not be able to appreciate the distinction. Significantly, it is not really a 100-point scale since 50 points is functionally the lowest grade and it is rare to see wines rated for scores lower than 70, so the scale is not really as precise as it might seem. ( Any professor or teacher will tell you, there has been both grade inflation and grade compression in recent years and this applies to wine critics too, I believe.)

The 100-point scale is far from universal. The enologists at the University of California at Davis use a 20-point rating scale, as does British wine critic Jancis Robinson and Decanter, the leading global wine magazine. The 20-point scale actually corresponds to how students are graded in French high schools and universities, so perhaps that says something about its origins.

The Davis 20-point scale gives up to 4 points for appearance, 6 points for smell, 8 points for taste and 2 for overall harmony, according to my copy of The Taste of Wine by Emile Peynaud. The Office International du Vin’s 20-point scale has different relative weights for wine qualities; it awards 4 points for appearance, 4 for smell and 12 for taste. Oz Clarke’s 20 point system assigns 2, 6 and 12 points for look, smell and taste. It’s easy to understand how the same wine can receive different scores when different critics used different criteria and different weights.

A 20-point scale (which is often really a 10-point scale) offers less precision in relative rankings, since only whole and half point ratings are available, but this may be appropriate depending upon how the ratings are to be used. Wines rated 85, 86 and 87 on a 100-point scale, for example, might all receive scores of about 16 on a 20 point scale. It’s up to you to decide if the finer evaluative grid provides useful information.

Decanter uses both a 20-point scale and as well as simple guide of zero to five stars to rate wines, where one star is “acceptable”, two is quite good, three is recommended, four is highly recommended and five is, well I suppose an American would say awesome, but the British are more reserved. Dorothy J. Gaiter and John Brecher (who write an influential wine column for the Wall Street Journal) also use a five point system; they rates wines from OK to Good, Very Good, Delicious and Delicious(!).

The five point system allows for less precision but it is still very useful – it is the system commonly used to rate hotels and resorts, for example. ViniD’Italia, the Italian wine guide published by Gambero Rosso, uses a three-glasses scale that will be familiar to European consumers who use the Michelin Guide’s three-star scale to rate restaurants.

Which System if Best?

It is natural to think that the best system is the one that provides the most information, so a 100-point scale must be best, but I’m not sure that’s true. Emile Peynaud makes the point that how you go about tasting and evaluating wine is different depending upon your purpose. Critical wine evaluation to uncover the flaws in wine (to advise a winemaker, for example) is different in his book from commercial tasting (as the basis for ordering wine for a restaurant or wine distributor or perhaps buying wine as an investment) which is different consumer tasting to see what you like.

Many will disagree, but it seems to me that the simple three or five stars/glasses/points systems are probably adequate for consumer tasting use while the 20- and 100-point scales are better suited for commercial purposes. I’m not sure that numbers or stars are useful at all for critical wine evaluation – for that you need Broadbent’s detailed qualitative notes. Wine critic publications often try to serve all three of these markets, which may explain why they use the most detailed systems or use a dual system like Decanter.

In any case, however, it seems to me that greater transparency would be useful. First, it is important that the criteria and weights are highlighted and not buried in footnotes. And I don’t see why a 20-point rating couldn’t be disaggregated like this: 15 (3/6/6) for a 20-point system that gives up to 4 points for appearance, 6 for smell and 10 for taste. That would tell me quickly how this wine differs from a 15 (4/3/8). Depending upon how much I value aroma in a wine and what type of wine it is, I might prefer the first “15” wine to the second.

Wine and Figure Skating?

So far I’ve focused on the practical problems associated with having different evaluation scales with different weights for different purposes, but there are even more serious difficulties in wine rating scales. In economics we learn that numerical measures are either cardinal or ordinal. Cardinal measures have constant units of measurment that can be compared and manipulated mathematically with ease. Weight (measured by a scale) and length (measured in feet or meters) are cardinal measures. Every kilogram or kilometer is the same.

Ordinal measures are different – they provide only a rank ordering. If I asked you to rate three wines from your most preferred to your least favorite, for example, that would be an ordinal ranking. You and I might agree about the order (rating wines A over C over B, for example), but we might disagree about how much better A was compared to C. I might think it was a little better, but for you the difference could be profound.

To use a familiar example from sports, they give the Olympic gold medal in the long jump based upon a cardinal measure of performance (length of jump) and they give the gold medal in figure skating based upon ordinal judges’ scores, which are relative not absolute measures of performance (in the U.S. they actually call the judges’ scores “ordinals”). Figure skating ratings are controversial for the same reason wine scores are.

So what kind of judgment do we make when we taste wine — do we evaluate against an absolute standard like in the long jump or a relative one like the figure skating judges? The answer is both, but in different proportions. An expert taster will have an exact idea of what a wine should be and can rate accordingly, but you and I might only be able to rank order different wines, since our abilities to make absolute judgements aren’t well developed.

This is one reason why multi-wine social blind tasting parties almost always produce unexpected winners or favorites. The wines we like better [relative] are not always the ones we like best [absolute] when evaluated on their own.

Ordinal and cardinal are just different, like apples and oranges (or Pinot Gris and Chardonnay). Imagine what the long jump would look like if ordinal “style points” were awarded? Imagine what figure skating would look like if the jumps and throws were rated by cardinal measures distance and hang time? No, it wouldn’t be a pretty sight.

Economists are taught that it is a mistake to treat ordinal rankings as if they are cardinal rankings, but that’s what I think we wine folks do sometimes. I’ve read than Jancis Robinson, who studied Mathematics at Oxford, isn’t entirely comfortable with numeric wine ratings. Perhaps it is because she appreciates this methodological difficulty.

Lessons of the Judgment of Paris

Or maybe she’s just smart. Smart enough to know that your 18-point wine may be my 14-pointer. It’s clear that people approach wine with different tastes, tasting skills, expectations and even different taste buds, so relative rankings by one person need not be shared by others. This is true of even professional tasters, as the Judgment of Paris made clear.

The Judgment of Paris (the topic of a great book by George M. Taber – see below – and two questionable forthcoming films) was a 1976 blind tasting of French versus American wines organized (in Paris, of course) by Steven Spurrier. It became famous because a panel of French wine experts found to their surprise that American wines were as good as or even better than prestigious wines from French.

A recent article by Dennis Lindley (professor emeritus at University College London – see below) casts doubt on this conclusion, however. Read the article for the full analysis, but for now just click on the image above to see the actual scores of the 11 judges. It doesn’t take much effort to see that these experts disagreed as much as they agreed about the quality of the wines they tasted. The 1971 Mayacamas Cabernet, for example, received scores as low as 3 and 5 on a 20-point scale along with ratings as high as 12, 13 and 14. It was simultaneous undrinkable (according to a famous sommelier) and pretty darn good (according to the owner of a famous wine property). If the experts don’t agree with each other, what is the chance that you will agree with them?

Does this mean that wine critics and their rating systems are useless and should disappear? Not likely. Wine ratings are useful to consumers, who face an enormous range of choices and desperately need information, even if it is practically problematic and theoretically suspect. Wine ratings are useful commercially, too. Winemakers need to find ways to reduce consumer uncertainty and therefore increase sales and wine ratings serve that purpose.

And then, of course, there is the wine critic industry itself, which knows that ratings sell magazines and drive advertising. Wine ratings are here to stay. We just need to understand them better and use them more effectively.

References:

Dennis V. Lindley, “Analysis of a Wine Tasting.” Journal of Wine Economics 1:1 (May 2006) 33-41.

George M. Taber, Judgment of Paris: California vs. France and the History 1976 Paris Tasting that Revolutionized Wine. Scribner, 2005.

Wine Critics Reviewed: Gambero Rosso

February 3, 2008 By in critics, gambero rosso, Italian wine, Paul Gregutt, wine critics, wine ratings Leave a comment

The first in a series on the actors and institutions that shape the wine world.

gambero.jpg

I’m interested in the role of wine critics (and their publications) in shaping the global wine market. This is the first of several entries that will examine a few of the most influential publications. I’m not entirely sure where this process will take me, but I’m pretty interested to find out what I will learn. So let’s begin.

I want to start with Gambero Rosso, which is a very influential Italian publication. It is the Italian equivalent of Wine Spectator, but it goes well beyond WS in its coverage of food and wine culture and tourism. It publishes a number of important guides to Italian regional restaurants, food and wine that I have found to be extremely useful when I have lived in or visited Italy. The Italian monthly magazine is physically imposing – the issue that appears in the photo above weighs in at more than 400 pages and was filled with ads. I subscribe to the much thinner abridged quarterly English edition, but my comments here concern the Italian original.

Birth of the Red Prawn

The name Gambero Rosso means red prawn, so it is easy to imagine that the magazine started out with a focus on seafood and expanded from there. The true explanation is a bit more Italian and a bit more political (I wrote about it in Chapter 7 of my book, Globaloney.) A group of young revolutionaries found themselves working on a Northern Italian newspaper called il manifesto in the 1970s. They formed a social club, which later evolved into the Slow Food movement, on the theory that political revolution needed to have deep social roots and to draw upon important economic sources in order to succeed (the status quo they opposed, after all, was political, social and economic, too). It is hard to imagine a better way to bring people into a political movement than through food and wine. And so their project thrived.

Gambero Rosso first appeared as a slim culinary supplement to il manifesto, so I imagine the name made reference to both its “red” politics and its shrimpy size. The magazine grew to become an independent publication, spawned a number of books and guides, and now even includes a television network. It is no shrimp any more.

Gambero Rosso is unique among the wine critic publications I am examining here in that it is almost entirely focused on the wines of a single nation, Italy. Although other publications may emphasize one country or region over others, all attempt some form of international coverage (this is even true of Wine Press Northwest, which covers the Washington, Oregon and British Columbia wine industries). In this as in many other things Gambero Rosso is different.

Mario Batali has said that there is no such thing as Italian cuisine, there are only the regional cuisines of Italy. Gambero Rosso takes this view of Italian wines, locating each wine within its particular region and quietly seeking to reinforce regional wine identities and to resist the industrialization and homogenization of wine. It thus holds true to its Slow Food roots. Gambero Rosso has an agenda, as its il manifesto origins might suggest, and it promotes it effectively by identifying the very best regional products and local producers. Other wine critics have agendas, too, I think, but are not always so transparent as Gambero Rosso.

The Italian Way of Wine

Each monthly issue of Gambero Rosso features a major section on wine, usually devoted to a particular regional wine. Winemaker profiles and interviews are accompanied by ratings and tasting notes. The ratings use the usual 100-point scale, although it is applied a bit more rigorously than in U.S. publications, I think, judging by the relatively small number of 90+ wines that appear. A surprisingly small number of wines are rated each month given the thousands and thousands of Italian wines produced. This is because the most important ratings appear in an annual guide called ViniD’Italia (one word), which is the bible of Italian wine. You can purchase an English translation, ItalianWines. The 2004 edition that I have here ran 864 pages and rated 14,208 wines from 1,937 producers. The new 2008 edition (due out later this month) is probably even bigger.

Several features of ViniD’Italia are noteworthy. First, it eschews the 100-point rating system in favor a simple scale of zero, one, two or three wine glasses. The three glass or tre bicchieri wines are the best in Italy. There were only 254 of them in 2004, so this really is a high distinction and I am sure it is a tremendous market advantage to receive the highest rating. I admit that I think the wineglass rating system is refreshing and usefully informative. Tasting wine is not really rocket science at my level of (un)sophistication. Robert Parker probably really can tell the difference between an 88-point merlot and one rated 87, but I’m not sure I can. Good, better and best ratings meet my needs pretty well.

ViniD’Italia is noteworthy in other ways in comparison with other wine guides I have seen. It is organized by wine region (and then by wine town) rather than wine type, producer or some other system. The idea seems to be that regional identity really counts and so you should be thinking about comparing wines based on their terroir and the qualities of the people who make them rather than just grape varietal or brand name (there is no emphasis on brands here at all). Within regions, each important producer gets a single page. Terse but data-packed text evaluates the winemaker’s progress since the last publication and surveys briefly the changes the tasters perceive. Then a small number of wines are rated and compared to some of the same wines from the same producer in previous years, with relative cost noted to provide a quick index of value.

(The focus on identifying quality producers (and not just exceptional wines) reminds me of the winery rating system that Paul Gregutt developed in his recent book about Washington wines. Click here to read my book review.)

If you want to know about the wines of Venica & Venica, for example, you turn to the chapter on the Friuli Venezia Giulia province, find their town, Dolegna del Collio, and learn that their reserve Tocai Friulano, the Ronco delle Cima, received three glasses for the 2002 vintage. Venica & Venica are quality producers, according to the text, and their wines are reliably good — you really cannot go wrong. One or another of their wines usually receives the highest rating and they generally receive several two glass ratings as well. This is useful information. (By the way, because of its geographical organization, this guide is a great resource if you plan to do any wine touring in Italy.)

A Critical Agenda

The book is frankly hard to use if you are standing in a wine store, flipping back and forth trying to find out how different wines (from different provinces and cities, made in different vintages) come out in the ratings. But I doubt that the editors really care. You are supposed to learn to use it their way, not your way. They want you to stop thinking about wines except in terms of their regional and local identities and to make more disciplined and informed choices, taking the long term development of quality producers into consideration.

The Gambero Rosso publications want you to think about wine in a particular way that reflects its original political agenda and distinctive Italian roots. In many ways it is exactly the opposite of the wine guide I’ll consider next, Decanter.