Monthly Archives: April 2022

Flashback: Global Rosé Market Q&A

April 26, 2022 By in wine, wine markets 1 Comment

Spring is here and summer is just around the corner, so it is time to Think Pink. Here is a Flashback column from 2019 that is still relevant today. We tend to assume that we know how the Rosé market breaks down, but the details might still surprise you.

One thing has changed: Rosé sales are not growing at the double-digit rates of three years ago, but then overall wine sales growth has been stalled in recent months. Keep an eye on store shelves in the coming weeks — I think you’ll see pretty pink bottles everywhere.

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(Originally published March 12, 2019) 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.

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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.

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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!

Here Be Dragons: Wine and the Economy Enter Uncharted Waters

April 19, 2022 By in economic crisis, Economic impact, wine, wine markets 6 Comments

The International Monetary Fund is expected to announce today revised global economic forecasts –– slower growth, higher inflation, and increased uncertainty due to war in Ukraine plus (although I don’t know if it will feature in the IMF report) massive  covid lockdowns in China. Here be Dragons, indeed!

As much as we all would like to think that economic conditions and the global wine market will soon return to what we used to call “normal,” I think it is important to realize that we have actually entered what are in some ways uncharted waters. Old maps and rules of thumb do not necessarily apply and the ability to pivot quickly as conditions change is even more important than in the past.

Flashback to the 1980s

Sometimes I get to thinking that I’ve passed this point in life one time before. (That’s actually a line from a John Hartford song.) Way back in 1981 I wrote a college economics textbook because I couldn’t find a text that could help my university students understand what was happening to the economy.

The uncharted territory back them was stagflation — high inflation and high unemployment at the same time. The standard textbook analysis used Keynesian analysis to understand unemployment and the Phillips Curve to plot the trade-off between unemployment and inflation. Higher unemployment meant lower inflation. But we had both high inflation and high unemployment — how did that happen? And what could be done about it?

The problem (in very simple terms) was that inflation was caused by cost-push not demand-pull factors and had unleashed sustained self-fulfilling inflationary expectations.  The Volker solution was highly restrictive monetary policy that pushed unemployment even higher until the expectations broke. Harsh medicine for a vicious disease.

Zoom Ahead to 2022

Zoom ahead to 2002. After years of relatively stable or even falling price levels, inflation is here again at rates that haven’t been seen in the U.S. since the 1980s. The problem this time is a combination of cost-push and demand-pull factors. Higher energy, food, and transportation costs plus persistent shortages of key commodities push prices higher while the huge fiscal and monetary stimuli of the pandemic and post-financial crisis era have pulled inflation higher, too.

This is not a repeat of the 1980s, by any means, but also not like anything we’ve seen at this level in a very long time. I can’t remember seeing such a combination of broad forces aligned to boost demand and constrain supply.

The war in Ukraine adds to the inflationary pressure, especially with respect to energy and food prices, and it is hard to see these forces disappearing any time soon. Even if a truce were declared today, the energy and food price effects would continue for some time. The Chinese covid lockdowns are squeezing production of many manufactured goods at the same time.

Disruptions in global trade and finance are another factor to take into account. For a long time the “China Price Syndrome” kept a lid on prices of manufactured goods. If a company was tempted to raise price, the ready availability of cheaper alternatives from Asia and especially China acted as a constraint. The “China Price” served as a price anchor then, but much less so now because of unraveling trade relations.

Getting from QE to QT

Taken together this is a situation we haven’t really seen before, but the thing that really makes people like me nervous is monetary policy, The Federal Reserve will be responsible for squeezing inflation out of the economic system (just as it was in the 1980s), but financial conditions are different now. We have had very low interest rates for a long time now and wave after wave of quantitative easing (QE — Fed purchases of Treasury and mortgage-backed securities that pump liquidity into the markets). The markets have kind of become addicted to the constant monetary boost.

Raising interests from this very low level can be expected to disrupt financial markets if only because of the mathematical impact on present value calculations. Exchange rates will shift, too, with disproportionate impact of development market currencies.

But the real “uncharted waters” factor is the transition from QE to QT, quantitative tightening. This will initially take place as the Fed’s bond holdings mature and are not rolled over, which takes liquidity out of the market. It will start slow (which still means billions of dollars a month) and could pick up speed if necessary.

The question is how financial markets will deal with this change after having a liquidity drip line month after month for this long? There is nervous talk of another sharp liquidity crisis, but maybe bigger than the last one, which the Fed addressed quickly and well. If key credit markets freeze up and contagion takes place, the Fed will have little choice but to reverse course, opening the door to even higher inflation.

The alternative is a very hard landing as the impact of the financial crisis spreads through the economy. How hard a hard landing? It depends on what it would take to shift inflationary expectations. So you can see the concern — we may be perched on a narrow ledge with higher inflation on one side and financial crisis on the other.

What About Wine?

The wine economy operates by its own rules, but it can’t fully escape the forces shaping the economy in general. To repurpose something that is said about the pandemic economic, we aren’t all in the same boat, but we are in the same storm.

Wine has also experienced a combination of cost-push and demand-pull factors, but not uniformly for various categories. Demand-pull, for example, seems focused on more expensive wines. Cost-push is everywhere, however, which means that the crunch is felt particularly in the middle- and lower-price tiers.

Honestly, I cannot remember a time when cost pressures have been so broad and deep. To what extent will price-sensitive consumers push back on price increases? Or will the consumer inflation expectations in general soften attitudes towards rising wine prices? Given that these are uncharted waters, the map holds more questions than answers.

Charting Chile & Argentina Wine Strategy for the U.S. Market

April 12, 2022 By in Argentina, Chile, wine, wine markets Leave a comment

These are challenging times for the U.S. wine market. NielsenIQ data reported in the April 2022 issues of Wine Business Monthly shows the wine market declining overall in value and volume terms. The picture isn’t perfectly clear, of course, because NielsenIQ numbers miss some sales vectors and it is hard to know what base to pay attention to given covid sales channel distortions. But there is plenty of cause for concern about U.S. wine market growth.

The situation is even worse for wine imports, because they face most of the headwinds of domestic producers but also have to deal with unfavorable international logistics issues and significant exchange rate and trade policy uncertainty.

But cloudy skies over the U.S. wine market landscape contain some welcome sun breaks — market segments where growth opportunities can be found — even for imported wines. Sue and I recently sampled wines from Chile and Argentina that illustrate this strategy.

Sauvignon Blanc to the Rescue

Where you search for growth depends on how you look at the market. In terms of grape varieties, for example, the clear target these days is Sauvignon Blanc. Sales of both domestic and imported Sauvignon Blanc have done very well in the last year.

For a long time Sauvignon Blanc has been all about New Zealand, which has sold out of this wine year after year. The rising SB tide seems to be raising all ships these days, which is good news for growers in California and elsewhere.

Chile has a long history of Sauvignon Blanc production with quality rising year after year. Sauvignon Blanc is the second most-planted grape variety and Chile is the world’s third largest SB producer. But the marketing focus has often been on that other Sauvignon, Cabernet Sauvignon. Until now. Concha y Toro sent us three wines that will compete very well in this dynamic market segment.

  • 2021 Concha y Toro Gran Reserva Sauvignon Blanc | D.O. Litueche, Colchagua Valley | $15 | 100% Sauvignon Blanc | 12.5% ABV | 1.5 g/L RS.  Sourced from our estate Ucúquer Vineyard, located in the arid hillsides of the Rapel River in Colchagua Valley, 10 miles from the Pacific Ocean.
  • 2021 Cono Sur Organico Sauvignon Blanc | Chile | $11 | 100% Sauvignon Blanc | 12.5% ABV | 3.1 g/L RS | Made with organic grapes | Vegan.  Fruit from coastal San Antonio DO’s Campo Lindo Estate and Bío Bío provide an ideal mixture of sand and red clay for this Sauvignon Blanc expression.
  • 2020 Concha y Toro Casillero del Diablo Reserva Sauvignon Blanc | Chile | $12 | 100% Sauvignon Blanc | 12.9% ABV | 2.44 g/L RS.  Fruit from Aconcagua—which stretches inland from the coast above San Antonio—Valle Central, and Región de Coquimbo compose the final blend.

As you can see from these wine profiles, the three wines present three distinctively different representations of Sauvignon Blanc from different Chilean wine regions. What they have in common — beyond grape variety — is their remarkably good value-for-money proposition.  This is especially true for the Gran Riserva. It is not often that you can find a wine like this for such a reasonable price. Distinctive and intense, you won’t mistake it for France, New Zealand, or California. Definitely worthy trying.

Raising the Bar for Malbec and More

Wines of Argentina sent us a little “mystery box” to sample and I wondered what would be in it? What message would they want to broadcast? How would they attempt to navigate the swirling U.S. wine market currents? The answers to these questions were clear as soon as we opened the package.

Message #`1: Argentina is Malbec, as everyone knows, but not just Malbec (just as Chile is not just Cabernet Sauvignon). Our mystery case included both a cool climate Wapisa Pinot Noir from Patagonia and a Trapiche Broquel selected barrel Cabernet Sauvignon, hand-picked from 30-year old vines.

Sue and I learned about the great diversity of Argentina wine on our first visit there in 2011. Our friend Andrés Rosberg arranged a tasting menu that featured wonderful wines not named Malbec until, at the very end, when a Rutini Vino Dulce Encabezado de Malbec 2007 appeared with dessert. Argentina is more than Malbec. Message received!

Message #2: Argentina makes wines that can compete successfully in the key growth segment of the U.S. wine market when we analyze it by price point — the ultra-premium $20-$25 range. A Salentein Reserve Malbec from high elevation vineyards in the Uco Valley and Luigi Bosca “De Sangre” limited edition Malbec from select vineyard parcels in the Altamira district.  I understand the average vine age is 90 years — remarkable!

During the Malbec boom of a few years ago Argentina became stereotyped as the source of simple Malbec wines at bargain prices.  Slowly — and now more quickly — Argentine producers have worked to show that they have more to offer and distinctive wines of higher quality, too, for those who are willing to reach up to a higher shelf on the wine wall.

Follow the Money

Follow the money. That’s what Deep Throat famously advised and it is something to consider in today’s U.S. wine market. If you break down market trends you’ll find a number of categories where growth opportunities exist. These Chilean and Argentinian producers demonstrate the strategy of focusing on key categories with wines of quality and value. Good lessons for us all to consider.

Wine Book Review: Britain, Imperialism, and the Wine World They Created

April 5, 2022 By in book reviews, globalization, wine markets Leave a comment

Jennifer Regan-Lefebvre, Imperial Wine: How the British Empire Made Wine’s New World. University of California Press, 2022.

Imperial Wine is a serious academic study of how imperial economic, political, and social relations between Great Britain and three of its colonies — South Africa, Australia, and New Zealand — shaped their wine industries and New World wine more generally from the time of the first plantings through to today.

This is an argument that I am glad to see examined in depth. In my books Wine Wars and the forthcoming Wine Wars II I nominate Great Britain as the center of the wine universe, so powerful, I think, is its influence on wine and the wine trade.

Australia and New Zealand were British colonies that developed wine industries that were shaped to a great extent by the ebb and flow of trade with the United Kingdom. Although South Africa and its wine industry have roots in Dutch colonial trade, the decades under British rule had powerful effects.

It is a fascinating study, but I admit that I struggled at times because I really wanted this to be a book about wine first and foremost and the author is really focused on imperialism, with wine used as a lens. I think that authors earn the right to define their works, so I cannot really complain. This is a story that can be told several ways.

Most people will be surprised at the poor reputation of Australian wines in the UK market in the early post WWII period, for example, given how popular they are today. There are many ways to demonstrate this, but the author highlights a lame Monty Python joke that compares and aroma of Aussie wine to the smell of an Aborigine’s armpit, which invites a discussion of imperial racist attitudes in the post-colonial era.

“Some wine lovers might protest that colonialism is a distant historical footnote to the history of wine, and that dredging up colonial history is a buzzkill, a weary intrusion on our enjoyment of wine,” the author writes in the concluding chapter, suggesting that she’s run into people like me before. “Can’t we just enjoy a glass of wine without someone introducing controversy?  Is colonial history designed to make wine lovers feel guilty?” Imperial Wine, the author argues, makes the case that ignoring the history of wine distorts our understanding of both it and the complicated processes that have shaped it.

Fair point. Understanding the forces that conditioned what is in your wine glass, how it is made, and who it is made for deepens the wine experience, don’t you think? And that includes the forces of empire and the long shadow that they cast.

The author’s deep dives into historical documents drew me in again and again. During World War II, for example, Old World wine pretty much disappeared from store shelves, replaced for the most part by “colonial wines” from South Africa, Australia, and Algeria (not a British colony, but a colony nonetheless).  The author traces changing wartime wine patterns though a study of the detailed records of the King’s College off-license store, called the buttery, which provided wine for fellows and sold it to students. Algerian red wine and South African sherry sold well to penny-pinching students, who would turn their backs on colonial wine after the war in favor of the French wines returned to the market.

Imperial Wine teaches wine enthusiasts about the role of empire in shaping the wine world of the past, present, and probably the future, too. And it teaches students of imperialism that the influence of those forces continues even in something as seemingly simple as a glass of wine.

Interesting. Well-written. Thought-provoking. I learned a lot. Did Imperial Wine change the way I think about wine? Yes, at least a bit. Well worth your consideration.

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Curry: A Tale of Cooks & Conquerors by Lizzie Collingham is one of my favorite books about cultural globalization. Imperialism is a strong force in this account (which includes historical recipes at the end of each chapter). I was reminded of Curry when I noticed that Collingham wrote one of the cover blurbs for Imperial Wine.