Field Notes from the Porto Conference on Climate Change and Wine

portoccl

Sue and I were in Porto earlier this month for the global conference on climate change and wine. The event started with a day and a half of presentations and discussions directed at climate change solutions for the wine industry and then concluded with a half-day summit on climate change more generally.

The highlight of the summit was a presentation by Al Gore, the prominent climate change activist and former U.S. Vice President. Gore’s presentation was intense, focused, and inspiring. Sue called it a “stem-winder” of a speech — it really got the audience worked up.

The conference itself featured speakers from almost all corners of the wine world (Asia was the missing corner, with one non-wine speaker, Afroz Shah, a United Nations Champion of the Earth, from India, and Rajeev Samant, CEO of India’s Sula Vineyards, in the audience).

Herewith are some field notes from the eleven sessions. I recommend Richard Siddle’s report on the conference for additional detail and analysis. Videos of the presentations are being posted on the Climate Change Leadership YouTube.com page.

Ground Hog Day?

In a pre-conference column I wrote about the tragedy of the Groundhog Day syndrome — experts meet to talk about climate change, but it is mainly talk and nothing really gets done. The next meeting is pretty much like the last one, repeating with only minor variations, as the in the popular Bill Murray film.

The Porto gathering promised to break out of the Groundhog Day cycle and offer real solutions; I am happy to say that it generally delivered. Starting with Miguel Torres, we were offered concrete examples of determined companies and leaders who backed their talk with action.

One thing I learned is this: the basic outline for progress on climate change issues is fairly clear. Start with an environmental audit to establish a baseline, set specific quantitative goals to reduce emissions and improve efficiency, evaluate results, then repeat the process. Some of the achievements reported here were startling and show just how much can be accomplished once a serious commitment is made.

You could tell that many actors were still struggling a bit with exactly where to put priorities: Try to make progress everywhere? Or focus on a few big goals, either the ones that would be easiest or cheapest to achieve or perhaps the ones that would have the biggest impact? I do not know what the answer to that question is, but it is better to know what you want to do than to thrash around blindly.

The Porto Protocol

Participants were encouraged to sign the Porto Protocol, a platform created last July in the first iteration of this conference (which featured a keynote by Barack Obama).  Those who sign the protocol commit to doing more in the future than they are doing now and to sharing their methods and results with others. The idea is to create an open source database that will help everyone do more, faster, better.

Interestingly, Sue and I ran into several people who confided that their organizations were having trouble deciding whether to sign up, which was puzzling because each of them has developed a strong program to promote sustainability and confront climate change.

What’s the problem? One colleague said that his organization was already doing more than the protocol currently requires, so there was a concern that they might not get credit for what they have done. No one said it, but I think it is possible that the transparency requirement could also be an issue. If that’s the case, I hope we can get past it. As Adrian Bridge, the CEO of Taylor’s and the driving force behind this initiative, has said, “There is no time, and no need, to reinvent things. If we share our successes and experiences, we will all benefit.” He is certainly right.

Does Climate Change Action Pay?

This is the question that I am often asked about both climate change programs and sustainability measures generally.  The gist is that these programs are costly. Who is going to pay for them?

I do not recall hearing anyone say that consumers would be willing to pay a premium for climate change-friendly wine, although some of us talked at dinner about what could be done to draw consumer attention to wineries that are taking climate change action.

Does that mean that the costs fall like a tax on the wineries who fight climate change (and not on those who don’t)? Yes and no. Some of the defensive costs of mitigating climate change, especially in the vineyard, are going to be unavoidable. Better to treat them as a sunk cost and move on.

Some positive actions have the potential to pay for themselves, at least in part. Katie Jackson of Jackson Family Wines, told the story of the decision to move to slightly (one ounce) lighter-weight bottles for some of the millions of cases of wine that they sell. The conventional wisdom is that consumers associate lower bottle weight with lower quality, so there was pushback about this method to reduce the firm’s carbon footprint.

Happily, according to Jackson, consumers didn’t notice the difference and the environmental savings became a cost-reducing part of Jackson’s carbon-reducing program. The world is not filled with free lunches like this, but there were several examples given of actions that paid for themselves, contributing to both financial and environmental bottom lines.

All Along the Value Chain

Antonio Amorim, president of the world’s largest natural cork producer, argued for the environmental benefits of natural cork closures. The cork closure, which captures carbon rather than releasing it, can offset the carbon generated by the glass bottle it seals, he said. Amorim announced plans to expand cork forests, building upon previous innovations aimed at speeding up the long cork harvest cycle and ridding corks of perceptible cork taint.

Other speakers addressed issues up and down the supply chain, illustrating both the challenges and opportunities that climate change action presents.

U.C. Davis professor Roger Boulton’s presentation on “The Winery of the Future” was a fascinating deep dive into what is possible with current technology if you decide to design a winery from scratch to have zero or negative emissions. It is like a Rubik’s Cube in a way, since each action has many reactions, but Boulton showed that a solution is possible, with a super-efficient production facility the result.

Call to Action

Stephen Rannekleiv of Rabobank, Robert Swaak of PricewaterhouseCoopers, and I had the final session of the conference, “Efficiency and Economics: Call to Action” We presented in a “two-minute drill” mode because the earlier sessions went over time and the we had to finish on schedule so that the room could be turned for the afternoon summit.

Rannekleiv focused on the many steps that Rabobank is taking to foster innovation in the food and agriculture sector to address sustainability and climate change issues. Swaak could have touted PwC’s environmental impact assessment practice, but choose instead to add a new dimension to the discussion by highlighting how climate change impacts businesses, and not just wine, through the various often unseen risks that it introduces or magnifies.

I talked about the fact that climate change requires new ways of thinking (which fit in very well with my colleagues’ remarks) and issued the call for action. Wine gets it, I said, but that’s not enough. The wine industry needs to extend its influence across the value chain in order to maximize its impact.

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Sue and I want to thank Adrian, Taylor’s Port, Pancho, and David Furer for organizing this conference and give special thanks to Greg for suggesting that we participate.  To everyone we met at the conference: we hope our paths cross again very soon.

Precept Wine and the Willie Sutton Recipe for Market Growth

pinkbubblesAt the conclusion of the State of the Industry session at the Unified Wine & Grape Symposium each January Nielsen’s Danny Brager announces his Bronze, Silver, and Gold medal wineries. The medals aren’t for the best wine or even for the most wine (Gallo would win that one every year).  The prizes are for market success as measured by sales growth. Here are the 2019 winners.

GOLD – Delicato Family Wines, Riboli Family Wines, Precept Wine

SILVER – Deutsch Family Wines and Spirits, Jackson Family Wines

BRONZE – Duckhorn VIneyards, O’Neill Vintners and Distillers,  Zonin USA, Delegat, Winery Exchange, Jam Cellars

Growth was difficult in the U.S.wine market in 2018, when many categories experienced falling volumes or stagnating revenues. To excel in this environment is noteworthy. The Gold medal is especially difficult to earn because Brager’s criteria require both high absolute growth in terms of thousands of cases and also high percentage growth rates year on year.

Gold medal producers have to have some secret sauce that powers them ahead. Delicato has Bota Box, for example. Riboli has hot-selling Stella Rosa.

Precept Wine‘s recipe for success is a bit different and so worth a deeper look. Precept, founded in 2003 by Andrew Browne and Dan Baty,  is the largest private wine producer in the Pacific Northwest. Wine Business Monthly rates it as the 13th largest wine firm in the U.S. and, clearly one that is growing quickly.

I like to say that Precept has implemented the Willie Sutton recipe for growth. Sutton, a notorious criminal, was famously asked why he robbed banks. I rob banks, he said, because that’s where the money is. Pretty simple logic, don’t you think?

Precept Wine has grown so rapidly by moving decisively into the market segments where the growth is. This sounds simple, too, but it is not. Anticipating growth opportunities requires close analysis of changing market conditions. And then you must have the resources, flexibility, and determination to seize them. Not easy at all, but when you get it right the results can take your breath away,

If you made a list of growing wine market segments in 2018 it might look something like this.

  • Sparkling wine
  • Rosé wine
  • Alternative packaging (especially cans)
  • Private label wines
  • Low calorie / low alcohol wines
  • Super premium wines
  • Direct-to-Consumer sales

Precept has made important investments in each of these categories starting with its acquisition of Gruet, the New Mexico-based sparkling wine producer, which has experienced dramatic growth during the recent Prosecco-fueled sparkling wine boom. Gruet sales increased by 25% by value in 2018. Amazing.

Rosé is the fastest growing wine category in the last year and Precept has taken advantage of this with pink wines throughout their portfolio and leveragde for even higher growth by combining pink with bubbles, putting pink in cans, and even putting sparkling pink wine in cans as shown in the image above.

Precept has made a very serious commitment to the canned wine space and I see their House Wine cans in nearly every supermarket. The House Wine cans and Ste Chapelle wine spritz are two of the three top brands in this category.

Private label wines are another area of growth. Many wineries make their own products and also private label brands for retailers. Precept took a major step into this arena last year by acquiring Truett-Hurst’s business. The plan is to ride the wave of private label growth so that it represents 50% of total sales by 2020.

The Truett-Hurst acquisition included a wine brand called Cense, which is endorsed by WW (formerly Weight Watchers).  Low calorie, low carb, and low alcohol wines are still a small slice of the total market, but one that seems likely to grow rapidly as production technology and product quality improve.

The Cense line includes a Rosé (of course), a sparkler, and a Marlborough Sauvignon Blanc. Alcohol is around 9 percent. Look for Cense wine spitzer cans in time for summer. You have only to look at the investments that major brewers are putting into low/no alcohol beer to get a sense (or cense) of the potential for wine.

Precept is also experiencing impressive growth in the premium and super-premium wine categories with their lineup of brands that includes Browne Family Vineyards, Canoe Ridge Vineyard, Pendulum, and Waterbrook.

Can the fast growth be sustained? Prediction is difficult, especially about the future, but I would argue that the particular category growth waves that Precept is riding are trends and not fads, and unlikely to suddenly disappear. Times will continue to change, however, so Precept’s challenge (and a challenge for the rest of us, too) will be to remain nimble and entrepreneurial even as scale increases.

Global Rosé Market Q&A

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Interest in Rosé wine is on the rise. The most recent Nielsen numbers (as reported in Wine Business Monthly) show that sales of Rosé wine in the U.S. market is growing by more than 40% per year — the fastest growth rate of any category.

Producers want to better understand the Rosé phenomenon, which explains why both the Unified Wine & Grape Symposium and the Washington Winegrowers convention featured specialized Rosé seminars this  year.

This column aims to add to the discussion by bringing together what Sue and I have learned at the Unified and during recent visits to France, Spain, and Italy, some insights from Elizabeth Gabay‘s recent book, Rosé: understanding the pink revolution, and a 2015 report on the global Rosé market produced by the OIV and the Provence Wine Council (CIVP). Here is a pdf of the OIV/CIVP report.

Who Makes the Most Rosé Wine?

Rosé is made pretty much wherever wine is made and sometimes accounts for a remarkable share of a region’s production (think about how important Mateus and Lancer’s Rosé were for Portugal during their peak years).

France is the largest producer by far today followed by Spain, the United States, and Italy. Production has increased dramatically in Australia, Chile, and South Africa, according to the OIV/CIVP report.

Who Buys It?

Let me answer this question three ways using three different figures from the OIV/CIVP report. The data are from 2014, so current data will differ, but the patterns are still relevant.

oiv1

Rosé wine sales are significant just about everywhere wine is consumed, but France is the market leader. Rosé accounted for 30% of all wine sold in France in 2014 according to the study, consistent with other reports that Rosé outsells white wine in French supermarkets, which feature large sections devoted solely to the pink stuff.

Although France is the largest Rosé producer in the world, it actually imports Rosé from Spain, which is the largest Rosé exporter. I think there is a pattern of inexpensive Spanish imports, which fill supermarket shelves with box wine, although that is only part of the story.oiv2

Is Rosé a wine for women? I have heard this said many times and never really believed it. The OIV/CIVP study casts doubt on this stereotype. Although women drink significantly more Rosé than men in some markets such as Germany, the Netherlands, and the UK, there doesn’t seem to be a strong gender bias in other markets. especially in France but also in the U.S., Russia,  and Canada. Men drink more Rosé than women in Brazil, according to the study.

oiv3

Finally, consider the distribution of sales by age group. Winemakers today are very interested in breaking into the millennial market. So it is significant that the OIV/CIVP study finds a strong youth bias in Rosé consumption.  Young people in every country surveyed here have a higher Rosé consumption than older people. France is noteworthy because all age groups consume Rosé in substantial quantities, even if the younger ones drink a bit more.

Bottom line: the market for Rosé seems to be both broad and deep. No wonder everyone is so interested.

How Much Does Color Matter? Is Rosé Just a Summer Wine?

Wait — that’s two questions. I wrote about color in an earlier column, so I will make that answer short. The conventional wisdom is that pale Rosé sells better than darker Rosé wines. But the fact is that Rosé from around the world comes in many different hues (as Sue’s photo above from a tasting in the Loire Valley shows).

I agree with Elizabeth Gabay that the color issue is exaggerated, but I don’t expect to convince anyone. If someone makes a darker Rosé and it doesn’t sell, I am sure that the color (not other factors) will be blamed.  They used to say that nobody ever got fired for buying IBM equipment and no one’s going to get a pink slip for making too pale a Rosé wine.

The summer wine question is quite interesting and can be answered in two ways. Yes, Rosé is a summer wine in the sense that there is a strong seasonal component in sales. Consumers drink more Rosé in warmer months. But Rosé is not just a summer wine as sales are now significant throughout the year.

Is There Easy Money in Rosé?

The answer to this question is related to the seasonality question above. It is easy to imagine that Rosé is a Chateau Cash Flow kind of wine. You pick the grapes, make the wine, ship the wine, cash the check — all in just a few months. The money pours in on a timeline only a little longer than Beaujolais Nouveau, which is the ultimate cash flow wine.

But there’s a hitch in the easy money Rosé game — you have to sell out to make it work. The residual seasonality of Rosé sales means that moving your product in February is more difficult than in July or August. And although I have had some Rosé that has benefited from a few years of bottle age, the conventional wisdom is that last year’s Rosé is over the hill — Rosé passé!

The consumer preference for fresher Rosé (which is also true for some other wines, such as Marlborough Sauvignon Blanc) creates a problem for producers. If you don’t sell out, then last year’s slow-selling wine is likely to clog up the supply chain, discouraging orders for this year’s wine.  Reliable supply is important to developing customer loyalty, so you want to have enough, but excess supply is hard to get rid of. Rosé producers must navigate complicated currents!

That’s all there is space for this week. Please leave comments with more Rosé questions and answers.

Ten Years of Open That Bottle Night

Photo OTBN2009By Sue Veseth, Contributing Editor

In 2009, a group of people with a love of wine and connections to the University of Puget Sound decided to celebrate Open That Bottle Night. Our wines on that February evening included a sparkling wine and a Cabernet Sauvignon from Washington State, a classic Bordeaux, a Chateauneuf du Pape, a California port-style wine, and a Sauternes. The only “rule” of our gathering was that each participant had to bring a story with his or her wine.

At that first OTBN dinner, we knew we were on to something exciting. Open That Bottle Night was an opportunity for our core group — Mike and Sue, Ken and Rosemary, Ron and Mary, Richard and Bonnie — to get together to share wine, food, and, stories.

OTBN logoOver the years, our OTBN celebrations have included additional friends. A few times, one or two people from the core were unable to attend because of work or family needs. Some years, we met at someone’s home for an elegant dinner. Other years, we met at restaurants (with our own wine, of course). We even held potluck dinners for OTBN.

We have toured the world on OTBN, with wines from Washington State, Oregon, California, Arizona, Okanagan Valley in Canada, France, Italy, Spain, Germany, Portugal, Hungary, China, and South Africa.

The rule of wine-and-a-story is still the centerpiece of our OTBN. As expected, most of the wine stories have included special people: My mentor (or parent or boss or friend) gave me this. This was my engagement (or wedding) wine. This wine is from the birth year of my child. We visited with the winemaker at this winery. A wine merchant we trust recommended this wine.

Photo OTBN2019By coincidence, but not by design, our wine selections and stories have complemented each other. This year, with a decade of OTBN experience, a theme of “firsts and lasts” developed with our wines:

  • Sorelle Bronca Brut Prosecco — Mike thought this was the last bottle in his stash of this beautiful Prosecco, but there may be another one or two.
  • La Grande Dame Champagne Brut 1989 — For Ken, the Champagne “was the last of a four bottles I bought from a London wine merchant soon after moving there in 1992. They were the most expensive bottles of anything we had bought up to that point but as you know, I was always on the lookout for the 1989 vintage because Rosemary and I were married that year. Of course, I wish now that we had bought more.”
  • Ramsay Mouvedre 1995 Napa — For Ron, this wine “represents the last bottle of booty Mary and I brought home from our twice annual trips to Napa from 1991-2002. We always brought home to Connecticut some of our favorite tastings from these trips, and this bottle is the last of those souvenirs.”
  • DiStefano Cabernet Sauvignon 1999 Columbia Valley — This was the last bottle from the first full case of wine that Bonnie and Richard purchased. “I think we were all surprised that a Washington Cabernet had held up so well,” Richard said. “That bodes well for our collections!”
  • Andrew Will Sorella 2007 Horse Heaven Hills — For Ron and Mary, this wine was a “first” because it is their favorite Andrew Will wine. It also was the last bottle in a case of Sorella they purchased when it was released.
  • Chateau de Beaucastel Chateauneuf du Pape 2014 —This was the first bottle of the first case of wine that Bonnie and Richard purchased on a futures basis. Maybe not quite ready to drink but a double-first!
  • Dow’s Vintage Port 1994 — This was the first bottle out of a case Ken bought in London. “I have been eager to try it but decided to wait until its 25th birthday to try the first bottle,” he said.
  • Armagnac Napoleon J. Dupeyron Condom c. 1955 —Sue liberated this bottle from her parents when they down-sized. Jacques-François Ryst of Ryst Dupeyron said it dates from about 1955.

“I find it uncanny and wonderful how each year a collective story emerges from our individual wine contributions,” Ron said. “In vino veritas — and narrative!”

At a time when we lament that we are glued to our devices for interaction with family, friends, and colleagues, Open That Bottle Night gives us an opportunity to gather together to share, talk, eat, and drink. The beauty of OTBN is that your event can be as over-the-top or as modest as you want; it’s yours. Even better, the evening reinforces and strengthens long-standing friendships.