Extreme Wine South Africa: De Toren Book 17 XVII

October 16, 2012 By Mike Veseth in extreme wine, South Africa 2 Comments

Regular readers know that I’m interested in how Old and New intersect in the world of wine — and that I like to push arguments to their extremes (that’s why my next book will be called Extreme Wine). So it should come as no surprise that I sought out extremes of new and old during my time in Cape Town. And I sure found them!

[This is part of a series of posts reflecting on my recent visit to South Africa to attend Cape Wine 2012 and give the keynote address at the Nederburg Auction. Thanks to Wines of South Africa and the Nederburg Auction for facilitating my visit. Click here to see all the posts in this series.]

My interest in seeing what’s new in South African wine provoked me to call on a number of wineries in the CapeWine 2012 exhibition hall. One of them was De Toren Private Wine Cellar, a boutique winery started by Emil and Sonette Den Dulk in 1994 to make Bordeaux-style wines that showcase Cape wine terroir. The first wine, a 1999 vintage, was Fusion V, a left bank (Cab-centered) Bordeaux blend using all five (or V if you will) traditional grape varieties.

Extreme in Several Dimensions

I tasted the current release of De Toren Fusion V as well as a right bank (Merlot-centered) blend called De Toren Z. Both were classic representations, noteworthy for their fine tannins and delicate balance. This part of the New South Africa is doing very well, I thought. And then things started to get extreme.

Emil reached behind the counter and pulled out a bottle labeled “Book 17 XVII,” the most extreme wine in the De Toren collection. It’s extreme in several ways at once. First, its inspiration is pretty extreme. Pliny the Elder wrote about wine and viticulture in Book 17 of his treatise on Natural History and De Toren sought to apply Pliny’s farming principles to make a modern wine (Emil showed me the relevant passages from Pliny’s text). Pliny’s favorite wines were quite sturdy, potent and age-worthy, but elegant, too, and that’s what this project aimed to achieve.

Having started with an extremely old way of growing grapes, De Toren’s winemaker Albie Koch then studied the most extreme contemporary winemaking techniques, focusing on cult wines such as Screaming Eagle and Harlan Estate. Extremely low yields in the vineyard (300 grams of grapes per vine). Hand de-stemming, foot stomping, hand punch-down and 200 percent (not a misprint) French oak. I tasted from one of the extremely scarce 650 bottles that resulted.

I don’t have much experience tasting cult wines and I admit to being a little frightened as I stared into the black hole at the bottom of the glass. Book 17 XVII was notably darker and more extracted than the other wines I had tasted. But in fact the wine was balanced and elegant and while all the oak showed in the glass it didn’t knock me down with a two-by-four as might happen in less skilled hands.

Chicken or Eagle?

Going to extremes without going over the edge is a tricky business and you can see it in Neil Martin’s Wine Advocate review of the wine (I think he was tasting from barrel). On one hand “It has a super-ripe creme de cassis, fruitcake and fig scented bouquet with a palate that is ostentatious to the point of vulgarity” which sounds like it’s over the top. “However, this full-bodied turbo-charged wine is so damn silky smooth and seductive in a super-Tuscan kind of way, that its charms will be nigh impossible to resist.” Hmmm. Sounds a little like Lady Gaga.

Making cult wines must be a bit like the “chicken game” in Rebel Without a Cause. I think De Toren Book 17 XVII succeeds in mixing ancient inspirations with extreme techniques to make a very interesting wine. Martin was obviously seduced by the wine’s elegance in the end (as was I), which pulled it back from the cliff edge at the last minute.

Unlike the Z and Fusion V wines, I wouldn’t want to drink XVII every day (which would be impossible in any case given cost and limited production). But I appreciate its potential to make wine enthusiasts reconsider the potential of South African wine.

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Is that an angry chicken or a screaming eagle on the title page of Pliny’s book? You be the judge. Thanks to Emil Den Dulk for letting me taste the wines and providing helpful background information.

South Africa: Old World or New?

October 9, 2012 By Mike Veseth in South Africa 4 Comments

The question is this: should South Africa be considered an Old World wine country or part of the New World. The answer is easy: it’s both. The reasoning (and why it matters) will take a bit of time to explain. Here’s the first installment.

The New South Africa

The conventional wisdom classifies South Africa as part of the New World based mainly on geography. Europe is the Old World. Everything else is New. QED. Fine, if that’s how you want to have it, but wine has been made in South Africa for more than 350 years and some of the vineyard estates (sensibly called “wine farms” here) have been in family hands for six or seven generations — longer than most Old World vineyards and far longer than anything you might find in California. So it’s not really new, even if it’s not entirely old.

The stronger case for the New World classification is that South Africa’s modern wine history is less than 20 years old. When the period of isolation ended and the post-apartheid era began, the South African wine industry was suddenly reconnected with a rapidly changing global wine industry. Significantly, Chile, Argentina, Australia and New Zealand all also emerged on the international scene in the decade bracketing South Africa’s opening, changing the face of global wine. It didn’t all happen at the same time and certainly not for the same reasons, but looking back you can see that the seeds of today’s New World of wine were being sowed.

Each of the countries I’ve just mentioned has navigated the new ocean in a different way, finding markets, raising quality benchmarks, avoiding crisis (or not avoiding it) and trying to steer a clear course through uncharted seas. South Africa is New World wine in the sense that it is constantly changing, adjusting, learning. There’s something new around every corner and inside every bottle. Visiting Cape Town and tasting the Cape wines was certainly an eye-opening experience for me.

The Old South Africa

But then there’s the Old World connection. The new industry did suddenly or magically appear, it grew or evolved out of the older wine industry — and this complicates things in South Africa as elsewhere. Adjusting to the new external environment obviously also required considerable internal re-negotiation and it is understandable that this came as a shock. Much of what I will write in up-coming posts will explore this theme.

But the question I want to consider here is what those pre-global era (the “old” South Africa) wines were like? Many of them were below the current international standard of course (as was true in the other New World countries and the Old World ones, too). But some of the wines were apparently spectacularly good, as a pair of older wine seminars I attended at CapeWine 2012 made clear.

The first, organized by Michael Fridjhon and Simon Back, surveyed white wines from the early years of the new era and red wines from the 60s, 70s and 80s. You can see the list of wines in the top photo and the colors of the wines in the glasses in the lower photo.

I am not an expert taster but even I could appreciate the quality of these wines and, especially in the case of the reds, how time had transformed them into something very different and special. My spirits were lifted by this tasting. If the New South Africa is built upon a foundation that includes wine like this, I thought, it is in very good shape indeed.

The second seminar afforded a rare opportunity to taste older Pinotage, starting with the 1964 Lanzerac shown here. Everything about Pinotage is contested, I believe, and everyone seems to have an opinion. But if the question is whether Pinotage can age (as Old World wines are supposed to do), the answer is very clearly yes it can. These particular older vintages have evolved into quite fascinating creatures — interesting enough to make a fan of old Burgundies stop and think. Another eye-opening experience.

We were fortunate to have some of the old timers in the room — the people who made these wines or were involved in significant ways in the process. As they talked about how the wines were made back in the day I got the impression that the session was meant to be much more than nostalgia. I think there was a concern that today’s wines might not age as well — that the adjustments necessary to compete on international markets came at a cost and that cost is that these wonderful old wines were becoming (figuratively as well as literally) things of the past.

Old and New again, but in a different relationship. More to follow.

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Top photo: A tasting or older South African wines that was moderated by Michael Fridjhon. Michael is shown carefully extracting corks along with Simon Back of Backsberg Estate Cellars.

Lower photo: I love the subtle colors of older red wines such as those at the Fridjhon tasting. Can Pinotage age? This 1964 Lanzerac Pinotage still had a lot to say.

Critter Wines, Signature Varietals and South Africa’s Secret Weapon

October 3, 2012 By Mike Veseth in Nederburg Auction, South Africa 3 Comments

This is part 2 of the Nederburg Auction talk I delivered on Saturday, September 29, 2012.

Although we would like Brand South Africa to be defined by the great diversity of its wine, the fact is that the space currently available for South African wines on highly competitive U.S. retail shelves and restaurant lists is very limited. South Africa has two feet to tell its story, a national wine distributor executive told me. And the story that is often told is defined not so much by the wines as by their labels.

I told the audience that when I went to the local wine shop with the most comprehensive selection of South Africa wines I found that 15 of the 16 wines on the shelf were “critter wines.”

The Paradox of Critter Wines

If those two feet of shelf space include brands such as Sebeka, The Wolftrap, La Capra and Goats do Roam (all of which are or have been widely distributed in the U.S.), then the identity is clear. South Africa means “critter wines,” a class defined by Yellow Tail and Little Penguin. Critter wines are fun and often sell very well, but the image that they project is simplicity, not complexity, even when the wines themselves are not simple at all.

The paradox of so-called critter wines is that while they can be hugely successful for the individual wineries that deploy them (think Yellow Tail in the U.S. market), they can potentially undermine a region’s reputation if they are so numerous and prominent that they become the de facto collective brand. So Brand South Africa could use an upgrade in the U.S. if you want to expand beyond the self-limiting critter category. But how?

The Signature Wine Strategy

It is natural to look at the countries that have established new national brands in the U.S. market and to try to discover the secrets of their success. Australia then New Zealand and now Argentina are on the list of usual suspects. The one general factor that unites them is effective distribution.

In the talk I also stressed another factor — the importance of international partnerships and strategic alliances — that I think runs through all these examples.

Brand Australia was driven in part by Yellow Tail’s partnership with W.J. Deustch, the family distribution firm that previously carved out the U.S. market for Beaujolais. Brand Argentina owes much of its success to the Gallo company, which opened doors for Alamos, the best selling Argentinean wine in the U.S., and Don Miguel Gascón, the number three brand. And Brand New Zealand’s success was built in part on the high level of international investment in that country’s wine industry, which allowed brands like Cloudy Bay to take advantage of the sophisticated distribution channels that its owners – Möet Hennesy Louis Vuitton – had already constructed. Or Brancott Estate, which rides Pernod Ricard’s global wave.

In property investment they say that the three most important things are location, location, location. In the structurally complex U.S. wine market, it is distribution, distribution, distribution. Effective distribution alone will not make a wine brand, but success is very difficult without it.

Beyond this, however, Australia, New Zealand and Argentina are best seen are special cases that would be difficult (or perhaps even dangerous) to try to replicate. Brand Australia has suffered as the simple critter wine strategy has backfired. Argentina has been unable to extend the Mendoza Malbec wine brand to other varietals, although many still hope for a Torrontes surge. And New Zealand has also been frustrated in its attempt to expand the brand beyond Marlborough Sauvignon Blanc now that the Sideways boom in Pinot Noir sales has run its course. The Kiwis have had difficulty establishing other white varieties such as Riesling or Pinot Gris or the red wines of Hawke’s Bay in the U.S. market.

Increasingly the “signature varietal” brand strategy is seen to be a one note samba rather than the first step towards broad market penetration. Although it is tempting to try to brand your excellent Pinotage or Chenin Blanc as South Africa’s version of a signature wine, this seems like a risky bet in terms of the U.S. export market. It is important to simplify wine a bit – which is what a signature varietal does — so that consumers, especially new ones, can understand it. But beware of Einstein’s Law. It is difficult to see how a single varietal could truly open the door to South Africa’s diverse wine portfolio.

Terroirists’ Revenge

So how will South Africa win the Wine War for the U.S. market? Well, the good news, given what I have said, is that Brand South Africa is actually something of a clean slate for many U.S. wine consumers – especially the rising millennial generation who are open to new wines from new places and show no particular reverence for conventional wisdom. They are refreshingly original in their thinking, bold in their actions and willing to open their pocketbooks. These new wine drinkers and others like them around the world are high value targets. How should they be approached?

Millennials are very independent. They are accustomed to writing their own narratives and they embrace products and experiences that integrate into a lifestyle experience. They aren’t just buying wine, they are building an identity. Millennials are not fundamentally different from earlier generations in this regard, simply more skilled, self-empowered and more interconnected. Reaching them, which requires more emphasis on story-telling, social media and first person wine experiences, is ultimately the task of South African wineries and their U.S. distributor partners; there is also a role for Wines of South Africa in shaping perceptions.

Millennials and other “clean slate” consumers are predisposed to respond to the Terroirists’ Revenge message. They are seeking wine and a story about wine that connects them to the wine, to an engaging culture, to a rich and exciting lifestyle and ultimately to each other. It’s about the wine, but it’s not just about the wine. South Africa’s terroirists have a secret weapon in their beautiful land and inviting culture than gives them a critical Wine War story-telling advantage.

How can South Africa connect with the Millennials, I asked the audience? Well, don’t look to me for answers, I said. I’ve only been in South Africa for a week. You will have come up with the answers. Only you will know what there is in South African culture and society that will make the connection. I think this statement came as a surprise to the audience, who are probably used to outsiders telling them what to do. But I am sure I am right.

I felt I had to make a contribution, so I took a chance. My first full day on South African soil was Monday September 24 — National Heritage Day, which is also National Braai Day. Water keeps people apart, I told the audience, but wine brings us together. And the braai seems to bring South Africans together, too. And so I proposed braai as South Africa’s secret weapon.

One possible key to this terroirist strategy – and this is my own crazy idea — is the braai. Almost no one in the U.S. knows what a braai is, but we all love the barbeque experience and this is a good starting point. Any country that makes the braai its national food culture speaks to us in a language we can understand.

But the braai, I have learned, is not merely a food culture — and this is its magic. It is an expression of generosity and hospitality. If you ask someone to share your braai, you are opening your heart and your hearth to them, whether you are preparing a gourmet meal or more humble fare. If South African wines are seen as an extension of that warmth and engagement, they might well strike a sympathetic chord among American wine enthusiasts.

And happily there are many different cultures of the braai in South Africa – there are diverse braai terroirs if you know what I mean – and each has its own story and each lends itself to a different kind and style of South African wine. Americans will love the unique experience of an Afrocentric winelands braai once they get to know it and this can be the gateway to a fuller appreciation of South African culture and lifestyle and to the diverse wines that have evolved along with them.

If you invite Americans to join with you and to celebrate your people, land and culture – to make every day National Braai Day — they will toast your success with your own wonderful wine.

And that’s how South Africa can win the Wine Wars. Thank you.

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The photo above shows me with Jan Scannell, managing director of Distell Group, Ltd, South Africa’s largest wine and spirits producer and sponsor of the auction. Jan is holding the copy of Wine Wars I gave him. I’m holding a bottle of 1977 Nederburg Edelkeur Noble Late Harvest wine. I clearly got the better of the deal! By complete coincidence, Jan’s son (also named Jan but operating under the name Jan Braai) is the leader of the National Braai Day unity movement.

Thanks to everyone at the Nederburg Auction for inviting me to speak. Special thanks to Dalene Steyn and Lesley Gikas.

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Update 10/4/2012 The response to my talk has been pretty positive. Click here to read my favorite (because it is so unexpected) review.

Can South Africa Win the [U.S.] Wine Wars?

October 2, 2012 By Mike Veseth in Nederburg Auction, South Africa 2 Comments

Note: This is the first part of the talk I gave last week in Paarl, South Africa. at the Nederburg Auction, which is arguably the Southern Hemisphere’s most prestigious wine auction gathering. Come back for the second half of the talk in my next post. The talk as delivered was different (more topical and funnier as anyone who has heard me speak might guess) than this written version, but the main points were the same.

Good morning. I’d like to thank the Nederburg Auction for giving me the opportunity to speak to you today and Wines of South Africa for inviting me to attend Cape Wine 2012. Thanks to all of you for coming today to support the Nederburg Auction and the cause of South African wine.

At this point in the talk I paused to make a prediction, since economists are known to be oracles. My prediction: Australia 18, South Africa 21. That was my predicted score for the rugby match that was to be played later that day. I have never heard an economist’s prediction so warmly received! It turns out that I was half right, but in the way that will not disqualify me from a return visit. The actual score: South Africa 31, Australia 8.

I’m here to talk about how South Africa can win the Wine Wars, so I guess I need to explain what the Wine Wars are and how South Africa fits into the action. Wine Wars is the title of my 2011 book. The title is short and punchy but the real business of the book is described by the long subtitle, The Curse of the Blue Nun, the Miracle of Two Buck Chuck and the Revenge of the Terroirists, which outlines the three elements of the book’s argument. Let’s take them one by one and then think about how they apply to South Africa.

A Tale of Curses, Miracles and Revenge

The first argument, “The Curse of the Blue Nun,” is about the risks and opportunities of globalization. Blue Nun was arguably the world’s first mass market wine brand. Although most people in the U.S. remember Blue Nun as that reliable but so-so German wine that they drank in the 1970s and 1980s (along with Portugal’s Mateus Rosé and Italy’s Riunite Lambrusco), the fact is that it initially gained international attention because of the extraordinary quality of the 1921 vintage. For a time it was the best selling imported wine in the U.S. and distributed around the world.

Globalization powered the rise of the Blue Nun brand and globalization nearly destroyed it. The pressure to fill the vast global pipeline forced the original owners of the Blue Nun brand to sacrifice quality to gain quantity. Blue Nun lost its distinctive character and became just another brand, albeit a potent one that continued to sell on that basis even as quality declined. (Blue Nun is back today, as I explain in Wine Wars, with new owners and a new global strategy).

People think that the “Miracle of Two Buck Chuck” is that anyone can make and sell a wine for as little as $2 per bottle, as Fred Franzia’s Bronco Wine Company does with Charles Shaw wine, which is sold exclusively at Trader Joe’s stores in the United States. But that’s no miracle at all. The Aldi stores in Germany actually sell the equivalent of One Buck Chuck –simple red and white wine blends that sell for about €1 per liter (roughly one USD per standard 750 ml bottle equivalent). The miracle isn’t that they can sell an inexpensive wine like Two Buck Chuck, the miracle is that anyone would buy it!

Globalization has flooded U.S. supermarkets (and drug stores and even petrol stations) with an embarrassment of riches when it comes to wine. The sheer number of wines for sale is sometimes overwhelming and the many different brands, varieties and regions makes the problem even worse. You need to master a secret code (I call it the Da Vino Code in Wine Wars) to make any sense of the situation. The fact that wine prices vary so much from bottom shelf to top compounds the confusion.

No wonder so many U.S. consumers purchase no wine at all. They are afraid to stoop down to buy cheap wine because they fear it will be disgusting. They are afraid to reach up to buy expensive wine because they worry it won’t be worth it. The Miracle of Two Buck Chuck is that Trader Joe’s have given buyers the confidence they previously lacked to purchase wine. Their house brand wine strategy effectively expands the reputation of the retailer to the wine. And it works.

Brands are powerful weapons in The Confidence Game that is the U.S. wine market today, but there’s a problem that I call Einstein’s Law. Albert Einstein said that everything should be as simple as possible – but no simpler. By this he meant that, while simplicity is useful, there comes a point where it becomes over-simplifying and essential qualities are lost. Brands simplify in order to sell, but they can go too far. When wine becomes a choice between Bud Red and Bud White and the diversity and distinctiveness of wine is lost, we will have crossed the line.

What is to prevent this? Well, in Wine Wars I argue that “The Revenge of the Terroirists” will save the day. Terroirists worship (or at least honor) the idea of terroir – a sense of “somewhereness” (to use a term coined by Matt Kramer) that is so important to us in today’s everywhere, anywhere, nowhere world. Wine, better than almost anything else, connects us to a particular time and place and is thus a fitting focus of terroirist zeal. Globalization has created the battlefield; the Wine Wars pit the forces that seek to over-simply wine against the terroirists who strive to preserve its soul.

South Africa and the Wine Wars

Can South Africa win its Wine War in the United States market? Yes – anyone who has tasted the wonderful wines being showcased at the Nederburg Auction will have no doubt about the final answer. But it won’t be easy. The U.S. market is crowded, intensely competitive and structurally difficult penetrate. It will take “boots on the ground,” sustained commitment, well-conceived strategy, opportunistic tactics and a little bit of luck. If that sounds like the description of a military battle plan, you are starting to understand the Wine Wars. Let me analyze the battlefield terrain in terms of the three big forces I talk about in my book.

First is globalization – the Curse of the Blue Nun. South Africa has long experience dealing with globalization’s two faces. These days for example, the global markets promise to connect Cape wine producers with new consumer markets around the world – a real plus. At the same time, however, the changing logic of the international wine trade has shifted momentum from bottled wine exports to bulk wine sales. New markets create jobs and income, but the trend towards bulk wine exports shifts the terms of trade in the opposite direction. That’s how globalization rolls.

At the other extreme we have the Revenge of the Terroirists. South African winemakers are terroirists – how could they not be with such wonderful terroir all around them — and, although most consumers in the United States don’t yet understand the complexity of South Africa’s terroir, the fact of the diverse Cape wine terroir is terribly useful. More to follow on this point.

So this brings us to brands and reputation — the Miracle of Two Buck Chuck. What does Brand South Africa look like in the United States? Here are impressions I have gathered in confidential communications with U.S. wine professionals from all the supply chain links and my own personal observations.

My industry informants tell me that when winery or distributor representatives are present to provide samples and information, South African wines fly out the door, but they need that personal connection. The key, one successful distributor of South African wines told me, is for the wines to stand on their own – sparkling against sparkling, Cabernet against Cabernet and so on. Then their quality and value carry the day. Emphasize the “made in South Africa” element, he told me, and interest wanes. Why?

To be continued …

Wine Wars Paperback: Smaller, Lighter, Cheaper

September 25, 2012 By Mike Veseth in Shameless Self-Promotion, Wine Wars 1 Comment

The motto of the Olympic Games is Citius, Altius, Fortius (Faster, Higher Stronger). I think the motto of the new paperback edition of Wine Wars, which has just been released, must be Smaller, Lighter, Cheaper. That makes it a poor fit for the Olympics, but maybe a good fit for your pocketbook (and an interesting option for tasting room and book store sales).

Wine Wars Hardback	Wine Wars Paperback	Wine Wars Kindle
Size: 9” x 6.3” x 1”	Size: 8.9” x 6.1” x 0.8”	439 KB
Weight: 16.1 oz	Weight: 14.6 oz	0
List Price: $24.95	List Price: $16.95	Amazon.com $9.99

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The book is modestly smaller in its physical dimensions as any paperback would be compared with the hardback original. Incredibly, there is actually a little bit more content crammed in. I took advantage of the new edition to correct a couple of typos and then to add brief “tasting notes” at the end of several chapters. The notes update important events and comment on what how trends of changed or developed since the hardback came out in June 2011.

Cheaper is the factor that will probably get the most attention. The list price is $16.95 compared with the hardback’s $24.95 suggested price. Amazon is selling the Kindle version for a mere $9.99, which is a great price, but of course you have to buy a Kindle to read it (or download the free Kindle software or App and read it on your tablet or personal computer).

New and Improved? Well, yes — but that’s not the point (or the only point). I hope the lower price will encourage more readers to read the book or give it to their wine-loving friends.

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I’m in Cape Town, South Africa this week to participate in Cape Wine 2012 and give the keynote at the Nederburg Auction. Look for my first report next week.

Better in paper? You be the judge!

Is the Wine Market Saturated?

September 18, 2012 By Mike Veseth in Chateau Ste. Michelle, Gallo, wine markets 10 Comments

Is the wine market saturated? That’s the question a journalist asked me a few weeks ago. The query was provoked by the release of a study of the economic impact of the wine industry in Washington State, which noted that the number of wineries has reached 700+. Lots of wineries hereabouts and in California and the rest of the U.S. Lots of imports, too. Have we reached the limit? Is the market saturated?

Big and Small Cycles in Finance

Well, it is a mistake to think of a market as a sponge that sits there waiting to be filled up. Markets are complicated and adaptable — they are literally living creatures because they are made up of smart, incentive-driven human beings. So their behavior is likely to be more complicated than empty versus full.

Financial markets are a good example. Scale is useful in financial markets, so it is not uncommon for finance to go through periods of consolidation, where the big get bigger and absorb (another sponge reference) the small. At some point you might worry about saturation. But as the big get really big, they always seem to leave gaps behind that smaller financial firms rush to fill. So a cycle of big creating opportunities for the little emerges.

Financial markets cycles are more complicated than this, of course, and sometimes the sponge gets squeezed out in market adjustments, but I think you get the idea. The same dynamic process that seems to be filling the market in some ways is also leaving gaps for new entrepreneurs. It’s an interesting industry to study, but not necessarily a stable one to work in! Finance is a crazy business. Almost as crazy as wine!

Washington Wine Gets Bigger

So what does this have to do with wine? Well, I see some of the same patterns. Here in Washington State, for example, I see some of that consolidation going on right now. Gallo has finally (because it was inevitable) entered the state as a producer, acquiring the venerable Columbia Winery and Covey Run brands. It looks like Gallo will invest heavily to revive and upgrade Columbia’s wines and historic brand. It’s less clear what will happen with Covey Run — some speculate that the brand will disappear but the valuable vineyards and facilities will continue to produce.

Precept Wines is part of the consolidation pattern here in the Pacific Northwest, too. Precept has built and acquired a number of brands over the years — including the recent acquisition of Idaho’s Ste Chapelle — as it has established valuable scale and scope. Ste Michelle Wine Estates is also part of the trend. SMWE recently announced the purchase of O Wines, a maker of Washington Chardonnay. SMWE intends to add a red wine to the O Wines portfolio and take the brand national.

Washington Wine Gets Smaller

At the same time that Washington wine has gotten bigger (and some wine brands are being squeezed out like water from a sponge), it’s very clear that other winemakers are finding opportunities at the opposite extreme of the market. Their wines will succeed (or fail) not so much because of national branding and economies of scale but depending upon how well they can achieve real quality and successfully attract a small but loyal (usually local) following.

I wrote about Mosquito Fleet Winery a couple of months ago. This small Belfair, Washington winery has found a market for its excellent wines. The fact that the wines celebrate local history helps them connect to a particular customer base in a way that big brother wineries probably cannot.

Another local winery — this one only a few blocks from The Wine Economist’s office in Tacoma — is also succeeding in a crowded market by stressing its distinctly local roots. It is called 21 Cellars for the simple reason of its location: in a cellar beneath a medical office on North 21st Street, just a short walk from the University of Puget Sound.

21 Cellars is a two person operation. Philip Coates is the winemaker and Katrina Lange is assistant winemaker. But job titles are essentially meaningless in an artisan operation like this one, where everyone pretty much does everything — and most of it is done by hand. Here’s how the website describes the operation.

Fermenting in small lots with native yeasts, aging in French oak, and bottling unfiltered and unfined allows for highly structured and distinctive wines. Our limited production allows us to give more hands-on attention to each varietal, de-stemming by hand and using unique methods such as whole berry barrel-fermentation for our reds. Every bottle sold has been filled, corked, and waxed by hand, with labels designed by local artists. We are proud to present wines exhibiting creativity and longevity; showcasing the deep, earthy qualities of Washington’s premier vineyards.

Ruthless Exploitation?

21 Cellars’ roots go back to a home winemaking kit that Coates received several years ago. He caught the wine making bug and the rest is history if by “history” you mean lots and lots of hard work, constant learning and experimentation. Coates’s efforts were good enough to impress some picky vineyard owners, who agreed to sell him their fruit. (Reputation is key in wine and no vineyard owner wants his or her name on the label of a mediocre bottle of wine). We tasted the 09 Malbec and 09 Cab made with grapes from the Two Blondes vineyard, for example, which was developed by Chris Camarda for his Andrew Will winery. The wines we tasted were excellent, with real depth and balance.

Production is modest (less than 500 cases per year) with sensible plans to grow in the future. 21 Cellars will get bigger, but not too big. They don’t want to outgrow the niche that they have so successfully begun to fill.

21 Cellars ruthlessly exploits (and that’s a good thing) its small scale, personal approach and local base with the same passion that Gallo and the others exploit large scale and national or global reach. Marketing is community based. 21 Cellars seems to take pride in supporting local causes and events, including the Washington State Historical Museum. The small and local strategy seems to be very effective. Their recent Semillon release sold out in three weeks!

Is the wine market saturated? Well, it is crowded and competitive, that’s for sure. And some wineries and brands are certainly feeling the squeeze. But as in finance, it seems like there is always room for one more on the bus — if there is quality and commitment and if a legitimate local need is met.

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Thanks to Philip and Katrina for showing us around 21 Cellars and telling us their story. Thanks to Sue, Cynthia and Pierre for their work as research assistants for this project.

Boom Varietal: Film Festival Update

September 13, 2012 By Mike Veseth in Argentina, Shameless Self-Promotion 4 Comments

Boom Varietal: The Rise of Argentine Malbec, a documentary film produced by Kirk Ermisch and directed by Sky Pinnick, had its world premier last fall and has been on the independent film festival circuit since then, where it has earned several awards.

Boom Varietal is coming to the Seattle-Tacoma area in October as part of the Tacoma Film Festival. Local wine enthusiasts should make plans to attend the screening at 2pm on Saturday October 6 at the grand old Grand Cinema in Tacoma.

Boom Varietal is one of those films that seems to stimulate all your senses (and Kirk aims to make this literally true with a Malbec tasting and discussion after the film). It is certainly visually stunning with a beautiful soundtrack by Franchot Tone. And the story line should appeal to Wine Economist readers, too.

The tale of Malbec’s rise is about nature, history, people, passion and of course business — and that’s where I come in. I appear at several points in the film to sort of connect the dots. I was quite surprised by the amount of screen time I had when I first saw the film, but I guess it is an indication of how important economics is the world of wine today and how money connects people almost as well as wine!

I’ll be at the screening on October 6 — hope to see you there! Cheers!

Watch for Boom Varietal at these upcoming film festivals

Montana CINE International Film Festival 10/17-23
Rivers Edge International Film Festival 11/1-4
Napa Valley Film Festival 11/7-11

Book Review: New Bottles + Old Wine = Good Reading

September 11, 2012 By Mike Veseth in book reviews Leave a comment

A review of Howard G. Goldberg (editor), The New York Times Book of Wine (Stirling Epicure 2012) and Kevin Zraly’s Windows on the World Complete Wine Course (Stirling Epicure 2012).

Two new wine books have arrived on The Wine Economist doorstep. What they have in common is that they revise or repurpose some “vintage” wine writing. Does old wine [writing] in new bottles [books] work? Yes! And I recommend both books. But refilling bottles isn’t as easy as it looks and both books could have been a bit better. Herewith two brief tasting notes.

The Big Book of Wine

The New York Times Book of Wine is a real treat. It’s a big book (about 550 pages of text) that contains more than 150 articles taken from the pages of the New York Times over the last 30+ years, starting with some of Frank Prial’s wine columns back in the 1980s and stretching through Eric Asimov’s 2011 contributions. It commemorates the 40th anniversary of regular wine writing at the Times and is, therefore, a chronicle of my generation’s embrace of wine seen through the eyes of Asimov and Prial as well as Florence Fabricant, R.W. Apple, Jr., William Grimes, Frank Bruni and several others.

This is a fascinating collection and makes great browsing. Goldberg organized the pieces around themes such as “Wine Writing and Writers,” “What You Drink with What You Eat,” “South of the Equator,” “So, There You are in a Restaurant” and “A Magnum of Miscellany.”

At first I headed straight for the older articles because I love wine history and I see these columns as windows on the world of the past. I was going to skip the most recent articles because I read them all when they first appeared in the Times, but sure enough I was sucked in by the topics and the writing and the chance to contemplate them along side the older accounts. I spent a very pleasant summer afternoon in this book’s embrace.

Story-Telling Challenge

It’s a fine book, but it could have been even better. I have some experience with books like this, since I was editor of the New York Times 20th Century in Review: The Rise of Globalization, which appeared 10 years ago. I was given 100 years of everything in the Times — articles, editorials, op-eds, photos, cartoons, obituaries, etc. — and asked to tell the story of globalization from 1900-2000. My first impulse, given the vast quantity of material at my disposal, was to put things in piles — all the international trade stories here, all the financial crisis stories there, and so forth. But then I realized that I wasn’t telling a story, so I threw everything in the air and started over, trying to draw out the key threads that made the whole story make sense. I’m not sure how well it worked — there were more than 500 articles — but I tried to go beyond collecting and organizing to also tell an important story.

That’s what I miss in this wine volume. It’s great reading, but what’s the point? What do we learn about wine or about our society’s attitudes towards wine when we read 30 years of wine columns? Maybe there is no big story (although Asimov’s Foreword suggests that there is), just a collage of the individual authors and articles — a feast of tapas and sherries, as Goldberg writes in the Introduction. But I’d like to think that all this good writing adds up to something more. That’s the challenge I toss out for the expanded volume that I hope to see when the Times wine column celebrates its 50th anniversary.

Updating a Classic

Kevin Zraly’s Windows on the World Compete Wine Course is a big book, too, but in a different way. Zraly presents us with the vast panorama of whole world of wine. The book isn’t long (although you get your money’s worth in its 300+ pages) so much as heavy. The heavy paper stock that allows the color illustrations to be so clear and clean gives the book a real physical heft.

Zraly has been helping people learn about wine for more than 35 years and this book has been in print for as long as I can remember. The cover says that more than 3 million copies have been sold. The book is certainly comprehensive and interesting — the result of many years of fine tuning, I suspect — giving both the beginning and more advanced wine student something to master and something to think about. There’s a reason why it has been around so long.

I was interested in this new edition because it includes a number of features designed to appeal to today’s smart phone enabled wine enthusiast. This seems like a great idea — aren’t all publications moving in this direction? — and so I wanted to see how it would work? The answer is that it is a good beginning, but more work needs to be done to bring the iFeatures up to the level of the text itself.

There are three types of electronic features that can be accessed by scanning codes or entering URLs: introductory videos for the nine main sections, 1300 vocabulary audio files (to remove the fear of pronouncing Viognier) and links to the Sherry-Lehmann wine store’s online catalog to shop for the wines you have just read about.

Devil in the Details

The Sherry-Lehmann shopping links were the most successful and I think this is a nice service to provide readers, although I can understand why competing wine merchants might disagree. The audio files were more hit and miss. Most worked fine, but some were clearly mislabeled showing a lack of attention to detail. There were two “Willamette” links, for example, one of which pronounced the AVA “Yakima” instead of the Oregon name. And although the “Chelam” link clearly pronounced the word “Chelam,” I am almost certain that “Chelan” — a Washington State AVA — is what should have been there.

The brief introductory videos were great to the extent that they gave me a real sense of Kevin Zraly himself and the passion he brings to his teaching. Really made me want to take a seminar from him. But they were just 60 seconds each and therefore hopelessly superficial. They added something to each chapter, but they did not nearly rise to the potential that streaming video offers. This needs to be better done or not at all.

While I am picking nits, I would like more documentation of the data (which is generously provided) in the book so I can track down the source and date for the many tables and charts provided (the footnotes could be provided via web link to keep the book from getting any heavier). Some of the data is dated and some of it needs more explanation — the footnotes would let the curious reader dig a bit deeper without getting in the way. OK, I’m a university professor, so naturally I would want more documentation. But I really think some readers would appreciate it.

Just as I challenged the Times editors to tell more of a story with their columns, I’d like to encourage Kevin Zraly and his team to try to more fully realize the potential of apps and web links and streaming video to expand, enrich and transform the wine education experience.

Naked Naked Naked Naked Wine

September 5, 2012 By Mike Veseth in wine distibution, wine investment, wine markets 4 Comments

Maybe it’s just me. I’m kind of a modest guy but it seems like everywhere I look in the world of wine someone or something is getting undressed. I wonder where it will lead?

Naked Wine

It started with Alice Feiring’s 2011 book Naked Wine: Letting Grapes Do What Comes Naturally, which is an account of her attempt to make wine in the most natural way, with the smallest possible amount of intervention. The description on Amazon.com explains that

Naked wine is wine stripped down to its basics—wine as it was meant to be: wholesome, exciting, provocative, living, sensual, and pure. Naked, or natural, wine is the opposite of most New World wines today; Alice Feiring calls them “overripe, over-manipulated, and overblown” and makes her case that good (and possibly great) wine can still be made, if only winemakers would listen more to nature and less to marketers, and stop using additives and chemicals. But letting wine make itself is harder than it seems.

Three years ago, Feiring answered a dare to try her hand at natural winemaking. In Naked Wine,she details her adventure—sometimes calm, sometimes wild, always revealing—and peers into the nooks and crannies of today’s exciting, new (but centuries-old) world of natural wine.

The book is a contribution to the “natural wine” movement, which is both particularly active and controversial these days, especially in France where some wine bars specialize in the natural product while some critics argue that it is just an excuse for making bad wine. I love a good controversy, so the whole natural wine debate appeals to me.

But why not call the book “Natural Wine?” I guess publishers must think that “natural” doesn’t sell books (perhaps book buyers think — with some justification — that all wines are natural). I noticed that when Jamie Goode and Sam Harrop published their excellent book on this topic then ended up calling it Authentic Wine not Natural Wine. Naked (or authentic) sells better than natural I guess.

Naked Naked Wine

More and more wines are made using organic and biodynamic practices, but they seldom advertise it prominently on the label. I think winemakers see the “natural wine” category as unnecessarily limiting and so choose not to position their products that way.

One that does is the range of Naked wines made by Snoqualmie Vineyards, one of the Ste Michelle Wines Estate wineries. There is a Naked Riesling as well as Naked Merlot, Cabernet Sauvignon, Chardonnay and Gewurztraminer.

“Although all of our wines are made with minimal intervention,” the website declares, ” grapes used in the Naked wine series are farmed as “au naturel” as possible. “Naked” is made with certified organically grown grapes in a certified organic facility. Very true to the varietal, these wines fit in perfectly with [winemaker Joy Anderson’s] philosophy that it is best to leave Mother Nature alone – let nature take her course and then try to capture the natural essence of the vineyard in the bottle.”

Naked Naked Naked Wine

A six-pack of naked wines arrived at our door last week and they weren’t from Snoqualmie or from Alice Feiring. They came from an online retailer called NakedWines.com Inc. NakedWines originated in Great Britain and is now online for the U.S. market.

The idea behind NakedWines is to go beyond just buying and re-selling wine (although the UK site does this, too, including some “flash” sales). NakedWines encourages its customers to become “angels” and invest $40 per month (£20 in the UK) in the particular small wineries that are associated with the company. Angels are repaid in the form of deeply discounted prices on the wines that their angel dust has made possible.

This is an interesting business model, sort of a cross between Wines.com and Kiva.org, the online micro-lending website. Here is an explanation from the UK website:

Good winemakers want to invest in quality and NOT waste funds on slick marketing campaigns. Your £20 a month makes it possible for them to do just that. They know their wine is sold before they’ve even grown the grapes, so they can invest all their time, money and energy in the vineyard crafting delicious wines, and pass the savings on to you.

NakedWines was founded by a former colleague of Virgin’s Richard Branson according to the Wikipedia page and is credited with being a pioneer in the use of social media marketing. I poked around the websites and failed to find an explanation for the “naked” part of the name. Perhaps it has something to do with stripping away the middleman’s profit or maybe it is just marketing meant to attract attention by introducing a risqué element. If so, they are not the only ones to think of this.

OMG: Naked Naked Naked Naked Wine

We visited the beautiful Columbia Gorge AVA during the recent Wine Bloggers’ Conference in Portland and I found myself sitting at a table with representatives of the Naked Winery & Orgasmic Wine Company of Hood River, Oregon. Their wines include Naked Merlot, Foreplay Chardonnay, Missionary Cabernet Sauvignon and Climax Red Table Wine. There is also a Virgin Chardonnay which presumably is not to be confused with their Penetration Cabernet. (I’ll stop listing the wine names here to avoid getting a PG rating.) Customers are invited to “Get Naked” by sampling wines at the tasting room.

At Naked Winery, we aim to tease! A family owned winery based out of Hood River Oregon, we are on a mission to produce premium class Washington and Oregon wines, with exotic brands and provocative back labels that are just a bit risqué. We aim to please the palate, change the conversation and enhance the romantic experience of wine.

We believe that the entire experience around wine should be fun. Read our back labels or have your mother-in-law read the back label aloud at your next family function. As we say, drink what you like and who wouldn’t like to get a little Naughty now and then? You can taste all three of our brands, Naked Wine, Orgasmic wine and coming soon, Outdoor Wino at our Hood River tasting room. Enjoy live music four nights a week and good company all year round. Come get Naked!

Clearly this wine is “naked” in a different sense than the others. Naked is a way to get people to let down their hair and be more relaxed about wine. To have a little fun. I understand that that the tasting room is a popular destination.

Whether it is serious or only a bit of a tease, this naked thing seems to be a very popular. I wonder what is next? Naked Naked Naked Naked Naked!

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Speaking of a tease, here’s the final video from The Naked Wine Show series. It is (apparently) the only show in the series where the reviewer was clothed.

Fluid Dynamics: Washington Wine & Spirits Update

August 28, 2012 By Mike Veseth in Washington wine, wine price 11 Comments

“Washington Wine Sales in a ‘State of Flux'” — that’s that title of a recent article by Peter Mitham on the Wines & Vines website and I think Peter is right on the money. It’s a little like Bob Dylan’s “Ballad of a Thin Man:” You know something’s happening, but you don’t know what it is.

At least some Washington State voters are feeling that way. They voted to privatize spirit sales last year, assuming that increased competition would drive prices down.

Never assume, they tell you in school, and that would have been good advice in this case, since the combination of higher taxes and fees plus distributor mark-ups have pushed the price of spirits higher on average (for now at least) than under the state store system. Click on the link to Peter’s story to see exactly how this came about (and how it could “maybe” change in 2013).

Wine Does the Wave

It has been interesting to watch as waves of reaction and response have swept over the wine market. The first wave was all about geography — would the addition of spirits to retail store shelves reduce wine’s territory? The overall answer is probably yes, but different retailers adopted different strategies. Some held the line on wine and carved out new space for spirits. Others made room for spirit SKUs by cannibalizing the wine wall. And new entrants such as BevMo added space for both.

The ready availability of spirits was a novelty at first and I think some wine sales were replaced by spirit sales on that basis initially. The fact that spirit prices are higher than before means of course that wine is now relatively cheaper in Washington — and that should have increased wine sales to the extent that the two categories are substitutes, but I’m not sure that this has actually happened. No one has come up to me and gushed that wine is now a great bargain compared to vodka. So much for relative prices? Not so fast …

It’s All Relative (Prices, that is)

It’s been about three months since privatization and the price and geography factors are starting to stabilize, but the commodity composition of the wine wall is still quite fluid. We are seeing shifts in what types of wines and in what quantities are offered for sale.

One of the changes from the old regime is that distributors are able to offer case discounts or assess broken case premiums, which amount to the same thing. Essentially this means that the wholesale cost can in some cases depend on the volume that is purchased. This is business as usual in most parts of the retail world and in most parts of the U.S. wine market, but it’s a big change for us here in Washington. The bottle cost was the same whether you bought one or a dozen under the prior regime.

So now the relative price of slow moving wine has increased relative to fast-selling stuff and this seems to be having an effect on the commodity composition of the wine wall. Even where the total area allocated to wine has remained the same I am sensing somewhat fewer choices as the space allocated to higher volume products is increased and the low volume space shrinks accordingly. It’s as if someone imposed a tax on low volume wine.

If a winery offers six wines at similar cost and price points, but one sells much more quickly than the others and therefore justifies a discounted case purchase, well you can see the incentive to streamline purchasing. As Peter’s article suggests, this effect can be powerful in theory but it is very uneven in practice since not all distributors (or self-distributing local producers) offer volume discounts or charge extra for smaller lots.

So the wine selection hasn’t changed much at all at some wine shops, like Pike & Western, the excellent Seattle store profiled in the Wines & Vines article. But the transformation has been quite dramatic in other places and, of course, the big box stores change the game in others ways.

It is my sense (unconfirmed by hard data at this point) that the availability of small producer wines is at least somewhat diminished, but not uniformly so and that some retailers (such as Wine World & Spirits in Seattle) have stepped in to fill the gap by offering a larger selection of boutique wines. I was encouraging small producers to focus on direct sales (rather than relying on retail channels) before the recent changes and I think this is still good advice.

Some Gotta Win[e], Some Gotta Lose?

So what’s the bottom line? Well, I’ve actually avoided writing about this topic for several months (despite reader pressure) because I wasn’t sure. And I’m still not. It seems to me that the shoes are still dropping and the evolution of the market is not finished.

I’ve written in the past that wine markets bear certain superficial similarities to financial markets. One of these is the tendency to boom and bust and another is that price and quantity often “overshoot” in response to exogenous shocks. Both make it difficult to predict what will happen next.

Will the reforms ultimately be beneficial for wine in general and Washington wineries in particular? Probably, but I’m reminded of the late Chinese Communist leader Zhou Enlai’s reply when asked about the historical significant of the 1789 French Revolution. Too soon to tell, he said. In the case of wine, we’ve got to wait for things to settle down and for good data to be available.

Even then it will be difficult to pick apart the positive and negative effects that can be attributed to the privatization policies and regulatory reforms because of everything else that is going on. The wine market is in a rising trend generally and wine sales would have increased even without any change in the laws.

At the same time, the margin pressures that I wrote about in the Tight, Fat and Uncorked series would have put pressure on retailers and distributors to streamline their product lines even if the laws were unchanged. It will be tricky to separate these and other factors from the retail regulatory change effect.