Return of the Roaring Twenties? Anatomy of Wine’s Next Chapter

Will wine’s next chapter be characterized by continued crisis and austerity? Or is a return of the Roaring Twenties on the cards? Herewith some thoughts about the changing wine market and where it might be going next.


I became an economist because I’m interested in change and economics provides a logical framework to study cause and effect. I gravitated to the study of wine economics as I began to learn more about global wine markets and saw in them case studies of the sort of dynamic forces that fascinate me.

There are many ways to think about the economics of change. The first formal model that I discovered in my first year university economics course was the “cob web model” of agricultural markets, which explains why some markets are in constant flux and seldom static or idle. Under some conditions markets will gradually converge to equilibrium, but sometimes they can blow up! Change is the rule, not the exception. It is no surprise that the cob web model applies to the wine market as the Turrentine Brokerage wine business “wheel of fortune” aptly illustrates.

The Dynamics of Change

I studied globalization for many years and developed an analytical framework to help me understand global change. It isn’t original by any means and doesn’t apply to every situation, but it is a way of thinking that helps me work things out. Here’s a way to think about change. Start with a dynamic force, the source of change. Could be a change in policy, technology, or even nature. The dynamic force stimulates responses in the form of actions, which attempt to accommodate or exploit change. The actions further disrupt existing systems and bring forth reactions to both the initial change and the actions it produced. If the reactions are strong enough, they can produce another wave of change.

Change. Action. Reaction. Change. Once you think about it  you start seeing these forces everywhere.

The Wine Wars Scenario

If you’ve read my book Wine Wars you can already see how this analysis can be applied to the wine industry. Globalization is the dynamic force in this case and it comes in many flavors and has many impacts both positive and negative. Globalization has spread wine around the world and fostered the exchange of international investment (think Chandon China), expertise (think Flying Winemakers like Michel Rolland), and grape varieties (Rkatsiteli in the Finger Lakes of New York, Gruner Veltliner in Australia’s Adelaide Hills, Chardonnay and Cabernet just about everywhere).

Globalization brings a world of wine choices to your doorstep, inducing many actions is response. The one that I focused on in Wine Wars was the commodification action. With so many choice at so many price points, consumers can feel overwhelmed. Risk and uncertainty discourage wine consumption, so a logical action is to simplify wine. I identified “the Miracle of Two Buck Chuck” as a particularly successful example of this action. Consistent commercial quality wine plus low price backed up by Trader Joe’s bulletproof reputation equaled a phenomenon. Two Buck Chuck gave millions of Americans the confidence they needed to try wine and to enjoy it. It helped democratize wine, if you see my point.

But not every attempt at commodification grows the wine pie the way that TBC did. And sometimes simplification can go too far, as the current hard seltzer phenomenon attests. It is no wonder that there is a reaction that I called “the revenge of the terroirists.” The reaction also took many forms, with the natural wine movement just one highly visible aspect.

What Next?

We have experienced a lot of change in the last 12 months in terms of the pandemic and the resulting economic crisis. This prompted a flood of actions ranging from dramatically aggressive monetary policies and fiscal stimulus packages to lockdowns of bars, restaurants, cities, regions, and sometimes whole nations. It’s been a “K-shaped” situation: some people have profited from the pandemic syndrome while others struggle and sometimes fail to hang on.

Now there is relief in sight with the emergency release and slow roll-out of vaccine. How will people react when the dark clouds begin to lift? I have argued that we are unlikely to see a sudden return to what we used to call “normal” life. You cannot simply flip a switch and bring back business and lives that have disappeared.

The Punch Bowl Overflows

But not everyone shares this cautious view and there are plenty who look forward to a “Roaring Twenties” of fast growth and exuberantly high times as Financial Times columnist Martin Sandbu recently noted in an op-ed titled “Goodbye virus-ridden 2020, Hello Roaring Twenties.” One hundred years ago the world was traumatized by a bloody world war and the devastating Spanish flu. When the fog cleared, people looked around and decided it was time to celebrate — to live for now since tomorrow is always uncertain.

From a financial standpoint, there is reason to think that the twenties might roar, at least for a while. I used to teach my university students the conventional wisdom that it was the role of the Federal Reserve to take the punch bowl away just as the party was really getting rolling. But these days central banks are pledging to keep interest rates very low and easy money available far into the foreseeable future.  It is easy to see how this could pump up a bubble (for bears) or sustain solid growth (for bullish types).

Sandbu writes that

Public health restrictions have disproportionately hit the more hedonistic end of the consumption spectrum: what we have stopped doing is eating together, drinking together, entertaining one another and going on holiday together. Vaccine-induced herd immunity will, quite literally, make it OK to party again. And my goodness will we have reason to party.

It is not just the numbers that point to a consumer boom; behind them lies something less tangible but yet more convincing. You do not have to be an economist, only human, to understand the desire to let loose, get together, and take risks after a year of cautiously locking down at home and distancing ourselves from one another.

This scenario suggests a roaring decade for wine, too, as the travel and hospitality sectors take flight. It won’t be a simple reset, however. As any Marty McFly fan can tell you, the future changes when you tweak its past.  But the wine sector should share the good times in Sandbu’s roaring economy scenario.

There are no guarantees, however. The roaring 1920s didn’t end very well. The current economic expansion depends upon both good health policy and good economic policy. What happens when fiscal stimulus ends, as it much eventually, and the monetary punch bowl runs dry? What will the receding tide reveal?

And then there is inequality to consider. Sandbu notes that

What all this calls for are measures which ensure that everyone feels the economic and social system has their back. A dark underbelly was, of course, also as much a feature of the previous Roaring Twenties as the glitz of its Great Gatsby surface.

The economy and the wine economy, too, have been K-shaped so far, with some sectors rising sharply while others struggle or fall. That’s not a recipe for sustainable growth.

8 responses

  1. I have often thought that we are in a 1920’s scenario and it scares me a lot. What if Jan. 6 was the tip of the iceberg? What if the followers vanish, but the leaders retreat to redouble their efforts, finding a real leader? We do have a problem in this country. History has seen this before. I literally pray that the new administration, with experience, brains, great diversity and heart will be able to quell a disquieted collective soul, but anger and vengeance are tough enemies.

    On the other hand, in my warped but important microcosm that is Manhattan, I do see people going back to what they were doing. It might take a minute, but I’ve not been sold on the idea that people love working home alone and foraging and cooking for themselves so much that they will continue. We are social animals and most people need and want the connection. The connection helps us think, grow and feel. Being in a prison cell never helped anyone.

    I have no idea how this affects the wine world. Social media has brought wine enthusiasts entertainment and perhaps new followers. I wrote an article about The Wineries of Sicily that made it to Google’s first page. I thought it was a great article, if I do say so, but I am amazed. If the pandemic, a cause for change, did anything, I think it enabled people to dig a little deeper into things without the distraction of the next thing to do. I’ve written and spoken about Sicily in ways that I didn’t have time to before. My son-in-law finished the scripts he was working on for years and has two (fingers crossed) deals in the works. Maybe wine will see a sudden surge, both for the obvious reason of restaurant openings and mobility, and a run towards making up for lost social time, but also because of new and deeper knowledge. Curiosity.

    And yes, carpe diem. Like many of my clients, I feel robbed of precious travel time. One never knows what the next day brings, so, better do it, try it, and drink it now.

    Thank you again for your musings. I am always drawn to read them.

    • Thank you for this, Karen. BTW your Sicily newsletter have helped sustain us during the pandemic and we always forward them on to grateful friends. Best wishes for a brighter 2021.

  2. It may take a couple of years but if history continues to repeat itself, there will be another roaring 20s. And I am sure that wine will be a part of that. As you point out, the aftermath is what we should be worried about!

  3. Congratulations on discussing the future without trying to say you know what happens next. Most people show their bias.
    This mans you won’t be prosecuted when you return to Canada (unlike lots of other forecasters).
    The Canadian Criminal Code says:
    365 Every one who fraudulently (a) pretends to exercise or to use any kind of witchcraft, sorcery, enchantment or conjuration, (b) undertakes, for a consideration, to tell fortunes, or (c) pretends from his skill in or knowledge of an occult or crafty science to discover where or in what manner anything that is supposed to have been stolen or lost may be found, is guilty of an offence punishable on summary conviction.
    You’ve walked a most difficult tightrope.

    • Thanks, Ken. This reminds me of a situation when I visited Argentina a few years ago. The government’s inflation data were obviously fictional and they got tired of economists pointing this out, so they made it a crime to criticize their numbers. I kept my mouth shut on the topic while I was there.

  4. I am very curious about what the future holds in terms of consumer wine purchasing behaviour. In hindsight it seems we should have been able to predict what the consumer would do, at the start of Covid, in terms of their wine consumption but it wasn’t that easy to see. Luckily it seems many wineries were able to adjust quickly. It should also be easy to predict what they are going to do once they get their vaccine but that isn’t an easy answer either. If I was going to predict anything it might be that we will experience the next baby boom generation starting about 9 + months after March 2020.

Leave a Reply