I’m just back from the Washington Association of Wine Grape Growers annual meetings where I gave a talk about Wine Wars and its implications for Washington wine. Wine Wars focuses on global wine markets and the forces that are shaping them — what insights can it offer for Washington wine growers?
The Confidence Game
Wine Wars argues that reputation (and the value of your brand) is an increasingly important factor in today’s crowded and competitive marketplace. No one has to buy your wine (or to buy wine at all given the many liquid alternatives). You have to stand for something (your reputation) and your brand has to reflect and effectively communicate that to break through the market noise. I call it The Confidence Game and reputation is a key strategy. That my friends is the Miracle of Two Buck Chuck that I talk about in Wine Wars.
But reputation and brands are complicated — a pretty obvious lesson that I only really learned a couple of weeks ago when I was at the Unified Wine & Grape Symposium in Sacramento. My session (on The State of the Industry) examined the wine market from the global, international, national and California perspectives. After the session I was talking with a friend who has a 50,000+ case winery in Napa Valley. I think my business is important, he told me, but I today I felt like an ant in a room full of elephants.
Life in Ant-Ville
The U.S. wine industry is very large (and California dominates it, of course) but Napa Valley is just a thin stripe at the bottom of the wine production bar graph (compared to the bigger producers elsewhere in the state) and my friend’s winery is only a small part of that. That’s ant-ville — nearly invisible — compared with elephant-land, the domain of the large scale producers and bulk wine trade (although 50,000+ cases is not at all insignificant in an absolute sense).
Washington is ant-town, too, I told my audience. (No offence intended! Ants are great creatures. They can carry many times their own weight. A colony of ants can probably strip an elephant carcass in a few hours. Ants are powerful collectively. But individually they are pretty don’t have much clout.)
Wine world ants need all the help they can get to get their brand or reputation out there. They need to have a strong private brand, of course, but they also need a strong regional brand (Napa Valley, for example) to create a reputational wave that the winery brand can ride. That’s one reason my friend’s winery is successful, even if it is just an ant in a crowded room.
Why Elephants are Different
Elephants are different these days — and it is not entirely by choice. Elephants (wineries that produce millions of cases) need strong brands, too, but increasingly they are being forced to distance themselves from regional brands such as AVAs and rely more and more on their own reputations. The reason? The emerging wine shortages that are forcing them to search far and wide for grapes and wine to fill their massive pipelines.
Years of stagnant vineyard expansion combined with rising demand have created a growing structural shortage of certain types of wine (bad news for those of us who have gotten used to deep wine discounts in the surplus years).
This is why so many wines that used to carry regional appellations are now forced to identify themselves as “California” wines. They need to blend wine from all over the state to fill their orders. Take a look at $8-$12 Zinfandels the next time you are in the supermarket and you will see what I mean.
The Logic of American Wine
“California” is a pretty broad appellation, but I am hearing rumbles from elephant land that increased use of the previously rare “American” appellation is in the cards. And expect more bulk wine imports (legally labeled to be sure) to make their way into bottles of wines you might reasonable suppose to hold All-American wine.
Is this a good thing? Well I’m not sure that it is good or bad — it’s just necessity. And I suppose it helps the ants with their stronger regional associations to differentiate themselves from the more generic elephants. But, on the other hand, the elephants’ promotion of regional brands in the past probably strengthened them, unintentionally benefiting local ants.
Since Washington wine is a teeming ant colony, it follows that it would benefit from a stronger regional brand. What is Brand Washington? Good question. (Paul Gregutt recently suggested how Brand Washington might be better promoted — click here to read his column.)
[At this point my talk veered into a discussion of Brand Washington compared to Oregon, Napa Valley, Argentina and Chile. This part of the talk will have to wait for future Wine Economist post.]
Another speaker joked that Ste Michelle Wine Estates (SMWE), which is by far Washington’s largest wine producer, is the state’s only elephant, but CEO Ted Baseler objected, citing the Wine Wars description of SMWE’s “string of pearls” (or chain-of-ants?) structure.
Who am I to disagree with Ted, especially since he was on the program to announce an exceptionally generous $1 million donation to help create a Wine Science Center on the Washington State University campus in wine country!
Thanks to WAWGG for inviting me to speak and special thanks to all the Wine Wars and Wine Economist readers I met at the conference.
Mike – a great, thoughtful post. Your description of Washington as an “ant colony” is a propos of Virginia, too, where a strong state-led effort is helping boost the state’s national image as a wine region (it obviously helps that the wines are getting better year by year), compared to Maryland, which has never had the state support and only recently has had a strong winery association.
Very detailed and well thought off post sir! Kudos to you! I believe the “ant-ville” should also be noticed and supported by the government. It is where you usually find great wines where you least expect it to be.
Are you going to be on the West Coast or in the Napa in early April?
I’m from Melbourne Australia and host a program called Heard it Through the Grapevine on Vision Australia Radio. http://varadio.org.
Intend visting the Napa and if you around I would like to meet you. Wonder how sales of Australian sparkling reds are going in the USA?
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No Napa plans, but I live in the Seattle area which is West Coast but pretty far away from where you will be.
I have seen more and more sparking reds on US market shelves, but it is still a pretty small category. It’s a shame that they aren’t more popular because these can be good and useful wines. Meanwhile, sparkling Moscato is booming …
Maybe we could talk on the phone? Caught up with Jancis Robinson at a recent Cool Climate Symposium in Hobart, Tasmania. Served her an All Saints sparkling cabernet from Rutherglen in the north east of Victoria, Australia – a warm to hot climate region. A big, rich, chewy, full bodied wine and a style she was unaccustomed to – however conceded would be at its best served during a hot summer Down Under!
Moscato (inexpensive and easy to make) is taking off in Australia like there’s no tomorrow especially among young drinkers who are settin out on their wine exploration journey and among some wine critics and writers who dare not admit it. It’s been the salvation of many a local hot climate muscat grape grower who were, prior to its popularity, struggling to offload their grapes as there’s only so much fortified wine the market will accommodate.
There’s some seriously good sparkling red being made in Australia presently from shiraz and merlot in the main and it has always puzzled me why it is not more popular?
Plan on putting a flight of sparkling reds to the test in a blind tasting and will let you know the outcome if you are interested.
Is there any made in the USA?
Do you have any plans to visit Australa?
Dear Mike – this is an excellent, and thoughtful post on a subject of interest to all of us.
Thank you for providing the insight.
Mike, thanks for the shout-out! I sometimes wonder which of two seemingly conflicting assessments of the overall wine industry is more accurate. Are there too many wines, brands, and wineries for the market to support? Will problems of cost, competition, scale, succession (and now, apparently, lack of material) hamper or even reverse growth? Or is consumer demand so strong that the only real problems will be sourcing grapes (for the elephant wineries) or allocating very limited releases (for the ants)? In either event, this is a great topic for further discussion. I also wonder, as I look at the phenomenal growth being posted by spirits brands, how the cocktail culture will impact the consumption of wine. It seems already to be cutting into the consumption of beer; it seems inevitable that wine will become more of a niche and less of a mainstream alcoholic option, at least for younger consumers. Your thoughts?
Thanks for this. I think you are right to bring up the cocktail culture element and its probably impact on wine. Wine is everything for some people, but just another option for others and it is important to take that into account.
MIke – You are one of the only people writing on the bigger picture of this industry, and the way the parts all move together. You, along with a few others, inspired me to start my own blog. It is a quick read – let me know your thoughts?
Looks like you are off to a good start! Keep up the good work.