Which Brexit? Good, Bad & Ugly Scenarios for Global Wine Markets

41njy9jreolAs last week’s column explained, Britain’s exit from the European Union (a.k.a. Brexit) will disrupt global wine markets in a variety of ways. British wine drinkers will be affected, of course, but so will consumers and producers in other countries as global markets react, redirect, and seek out new market equilibria.

How much will the global wine market be disrupted? It depends upon exactly how Brexit unfolds. There are good, bad, and  ugly scenarios (although, as in the famous Sergio Leone film, the good is really only not-so-bad compared with the bad and ugly story lines).

The British Pound’s swift fall has increased UK wine prices already, as I said last week, but this isn’t the end of higher prices. I expect tax increases to be the next shoe to drop.

Mind the Gap: Higher Wine Taxes

Why would the May government raise wine (or alcohol) taxes? Brexit is going to be expensive. Really expensive. The UK will be on the hook for as much as £50-£60 billion of obligations for EU projects that are currently in progress. These payments may be negotiated to some degree, and are sure to be a point of contention, but they won’t go away. So outflows to the EU will continue.

In the meantime, the UK government will need to staff up domestically to replace government functions currently handled by EU personnel. One estimate suggests that 30,000 new government employees will be needed. Some of the first to be hired will be the trade negotiators needed to negotiate Brexit. Incredibly, the now-defunct Cameron government that called the referendum on EU-membership had no contingency plan for Brexit or staff to implement it ready in case it passed.

Higher expenses will come on line just as the British economy weakens (growth estimates for 2017 have been halved already — from 2.2% growth down to 1.5% — although the economy help up very well in 2016), so tax increases will be needed to span the budget gap. I expect wine/alcohol taxes to be part of that package. Such taxes already account for about 50% of the cost of inexpensive supermarket wine in Britain.

Beyond the exchange rate and tax effects, the impact of Brexit on wine depends upon what kind of Brexit is finally agreed — and there is a wide range of possible agreements (and disagreements!).ap-frame-622-good-bad-ugly-sergio-leone-italian-movie-poster-1966

Too Good to Be True: Buffet Brexit

Many in the UK would prefer what I call “Buffet Brexit” where the UK government picks and chooses what it wants from the relationship (access to the Single Market, please, and special considerations for the London financial sector) and what it prefers to skip (free labor movement and immigration).

Buffet Brexit would be not-so-bad for wine. The British market would retain free access to European wine markets and also the existing system of tariffs and trade agreements with outside countries. The tax and exchange rate issues would not go away, however, but might be less severe.

Buffet Brexit is, however, the least likely outcome. Probability = zero. If the EU lets Britain dine at the buffet, other members will want the same options and benefits and the union could quickly collapse.

Not-So-Bad: BFF Brexit

I call the second option BFF (Best Friends Forever) Brexit but the more common term is “Soft Brexit.” The UK formally leaves the EU but both sides pledge to stay best friends forever and so exit expenses are minimized and spread over many years, “passporting” agreements are made to allow the UK to remain a major financial hub, and access to EU markets, perhaps through customs union membership, allows continued access to EU markets.

Precedent (the Norwegian model) suggests the Britain would have to pay for the privilege of having market access, however, and remain subject to EU regulations without a voice in setting them.

BFF Brexit might not dramatically change the UK wine market depending upon how trade relations are negotiated. UK sales would still fall, however, creating a global surplus that would spill out into other markets, increasing competition and lowering margins elsewhere.

But even BFF negotiations are problematic. In case you haven’t noticed, trade agreements these days are detailed and negotiations take a long time — some believe it will take 10 years to reach complete agreement!

Even if the UK and EU remain BFFs through all this, the uncertainty the comes with these negotiations will be bad for wine and bad, really, for most sectors the British economy. Probability of BFF Brexit = only 10 percent, mainly because the exit cost conflict is likely to turn friends into enemies. That’s what often happens when couples divorce, isn’t it? And this divorce is very complicated and there is a lot more than custody of Fido at stake.

The Bad: Break-Up Brexit

Break-up Brexit (a.k.a. “Hard Brexit”) is a more drastic option and would have important impacts on global wine. Significantly, this is the option that Prime Minister May seems to favor. Britain would cut ties to the EU, with free access to the single market replaced with WTO “most favored nation” status which, according to the Economist, is a best understood as an open can of worms and not a simple process. Britain would need to start from scratch negotiating deals with its trade partners.

Interestingly, President-elect Trump, who says he hates trade deals, has recently said he would push through a UK-US trade agreement quickly in the case of a hard Brexit. Apparently he hates the EU even more than he hates trade deals. Go figure.

The cost of wines from France, Italy, Spain and other EU countries would jump in the UK as would those from non EU countries when existing trade preferences end. Chile, which has a preferential trade agreement with the EU, would be a big loser at least until a separate trade agreement with the UK is agreed after Brexit talks are concluded.

Break-up Brexit would give UK “Leavers” what they want most — control over immigration and trade barriers — but at a very high price.The impact on the UK wine market would be very substantial and the side-effects around the wine world would be quite large as the markets adjust to the loss of British sales. The UK’s central place in the wine industry would clearly change. Probability of Break-up Brexit = 40 percent.14565124

The Ugly: Train Wreck Brexit

Financial Times columnist Gideon Rachman argues that the most likely outcome is what he terms “Train Wreck Brexit” and I will give it a 50 percent probability, although that’s just a guess.

The train wreck occurs, in Rachman’s analysis, when EU and UK negotiators realize that they just can’t agree on critical elements of the exit deal throwing some issues into the courts (the International Court of Justice in the Hague might have to decide how much the UK owes for transition payments) and other issues into limbo. It could take years and years before the smoke completely clears and in the meantime the uncertainty would have terrible effects.

The train wreck scenario isn’t good for anyone and certainly not good for wine, which would suffer all the problems of hard Brexit plus others due to the lack of a clear path ahead. The stress and uncertainty levels would be high. Scotland might vote to exit the UK to gain some control over its destiny, which would add to the crisis.

Perhaps the threat of the train wreck will be enough to convince the parties involved to find a better solution. Interestingly, it is not clear that the Brexit process can be reversed once Article 50 is invoked. Like the doomsday machine in Dr. Strangelove, the idea seems to be to deter EU exit by making it a total and inevitable disaster. But, that doesn’t work if no one knows about doomsday plan (the Dr. Strangelove scenario) or if voters don’t believe it or just don’t care (Brexit).

Bottom Line

As you can see from my speculative analysis, the most likely options are also the most disruptive for the wine industry. Wine prices are likely to rise dramatically in the UK due to the falling Pound, rising taxes, and higher trade barriers. Price-sensitive British buyers will react accordingly, creating a surplus of wine on the global market and disruptive market arrangements generally.

EU wine producers will be hurt the most by lower UK sales and others like Chile, with its preferential access undermined, will also suffer. But the impacts will extend far beyond as the wine not sold in the UK looks for a home elsewhere in the global marketplace. Winemakers in California who never gave a thought to UK sales will find themselves the unintended victims of increased competition.

The odds are that Brexit will be a game changer for wine, but it is hard to know for sure what the new game will look like. Stay tuned.

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The Wine Economist takes a break next week — I’ll be at the Unified Wine & Grape Symposium in Sacramento moderating the “State of the Industry” session and talking about Brexit and other wine market issues. Hope to see you there!

In the meantime, enjoy this clip from Dr. Strangelove.

Brexit Means Brexit (But What Does It Mean for Global Wine Markets?)

“Brexit means Brexit,” according to British Prime Minister Theresa May and a host of other officials. If all goes according to plan PM May and the United Kingdom will formally begin the process of exiting the European Union in March 2017 when Article 50 of the Lisbon Treaty is invoked, starting a possibly irreversible two-year ejection-seat countdown.

Know What I Know?

But Brexit isn’t as simple as walking out the door and will require detailed negotiations on dozen of issues. No one knows what the terms of the exit agreement will be, so no one really knows what Brexit really means. Brexit means Brexit? Nonsense.

Brexit is best understood at this moment as a “known unknown” in Donald Rumsfeld’s famous taxonomy (see below) and not a “known known” as some people pretend.

Britain is sharply divided about what Brexit negotiations should seek to accomplish and in any case each of the 27 remaining members of the EU (and some regional bodies, too) will have to approve the final deal. Talk about herding cats!  Who knows what the final agreement will look like?

Britain’s Central Place in Wine
How concerned should people outside the UK be about Brexit? Tbottledimporthe conventional wisdom is that leaving the European Union will have very substantial economic effects for the UK economy, smaller impacts on the remaining EU nations and smaller disturbances still in the rest of the world.

While this may be true in general, it is clear that there will be more widespread disruptions in several particular sectors: possibly for automobile manufacturing, for example, very probably for finance, and almost certainly for wine.

sparklingimportBritain is not yet a very important wine-producing nation (climate change might eventually change that), but it a key consumer of wine. Data from the UIV’s  Wine by Numbers data project for the first nine months of 2016 show the UK’s central place in global wine markets.

The UK is #2 behind the US (and ahead of China) in terms of the value of bottled wine imports, for example.It is also #2 behind the U.S. in sparking wine imports and in second place (after Germany this time) in bulk wine imports, all rankings in value not volume terms.

This makes the UK market the #1 target for many international wine companies — even more important that the larger US market because of the US market’s complex and fragmented regulatory structures. Smaller wine exporters may find that they can get access to the entire UK market for the cost of entry into a couple of US states. Then, of course, you have to sell the wine, which is always the hardest part.bulkiimport

Plunging Pound and Rubik Cube

Any significant change in UK wine imports (or imports by any of the largest markets) has a disruptive impact on the global market for wine because, as I have written before, the global market is like a giant Rubik’s Cube. When one national market moves out of equilibrium it starts a process of changing relative prices and shifting sales that cascades through various interconnected markets until a new general equilibrium is reached.

newukbottledimportWine by Numbers data suggest that the largest direct effects would be concentrated in the countries listed in the table above that are the leading sources of UK imports: France, Italy,  Spain, Chile, New Zealand. (The table shows bottled wine imports only — bulk and sparkling imports have different distributions.) These countries are where the Rubik twists happen first.
ukfx

How and why will Brexit affect British wine imports? Well, as I said, Brexit hasn’t happened yet, but the initial impact of the Brexit vote was to cause the British Pound (GBP) to fall in value on foreign currency markets as the graph above, which shows the GBP versus USD, suggests.

The GBP’s plunge makes all imports more expensive to British buyers and inflation rates have increased in the UK as a result. The degree of exchange rate “pass through” into retail prices and the timing of the increases is different in each market. UK wine prices are on the rise.

The First Shoe Has Dropped

UK wine buyers are famously price sensitive, so wine sales will fall, setting the global market Rubik Cube spinning as sellers who are squeezed out of the changing UK market look for margins and opportunities elsewhere. Falling sales in London mean that more attention is focused on the U.S., Canada, and China sales, for example.

The exchange rate effect is only the first in a series of ways that Brexit will impact global markets. The other effects depend upon what form Brexit takes, making the “Brexit means Brexit” tautology doubly annoyingly. What are the possibilities? Come back next week for analysis.

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Here is the famous “known unknown” comment in case you  missed it.

 

What Happened to 2016 Wine Market Predictions? (and How to Prepare for 2017)

As I was putting together my notes for this year’s “State of the Industry” panel at the Unified Wine & Grape Symposium in Sacramento later this month I could not resist looking back at what I had to say at last year’s conference.dollar

2016 will be a crazy year, I told my audience. Anything can happen (and it did!). Then I suggested four trends to watch. Not predictions, exactly, but pretty close. Let’s look back and see what I said and how things turned out.

Strong Dollar Double Trouble

The big news on exchange rates in 2016 looked to be what I called the Euro-Dollar twist. European banks were set to push key interest rates to zero and below while here in the U.S. the Federal Reserve had pledged to raise interest rates. That twist in interest rates, I noted, should cause a big increase in the dollar’s value, which will encourage wine imports and make U.S. exports more difficult to sell.

The dollar’s value increased all right, creating a global dilemma because so much trade and debt is denominated in U.S. currency. Most international oil transactions are denominated in dollars, for example, so the rise in the dollar’s value on top of the rise in oil’s price is  double trouble for oil-importing countries.

The dollar reached its highest level in 14 years at the end of 2016 with room to rise some more in 2017 although, as I said, anything can happen — expect lots of volatility!

The dollar’s unusual strength reminds me a little of 1971 when U.S. Treasury Secretary John Connally told his G-10 counterparts that the over-valued dollar is “our currency, but it’s your problem.”  Today it is the U.S. wine industry’s problem, too, because of the way it squeezes producers here by discouraging exports and making imports cheaper.

The Fed and the European banks were part of the reason for dollar’s surge, but the British vote to leave the European Union (Brexit) and Donald Trump’s election to the U.S. presidency, along with the collapse of the Renzi  government in Italy after a failed reform referendum, all contributed “big league” to the dollar boom. Brexit, Trump, and Renzi — I didn’t see that trifecta coming back in January 2016. Did you?china

China Syndrome?

Look out for China, I suggested last year. The economy is fragile and slowing and this could have major indirect impacts on the U.S. wine market, especially through exchange rate shifts that affect third-party countries such as Chile and Australia.

I was right about the Chinese economy and things look even more uncertain for 2017 because it seems possible that China’s credit bubble might spring a leak. And I was right that China could have a major impact on wine, but not the way I speculated.

The biggest international impact, as a recent Rabobank report documents, has been that China imports of wine increased significantly  (and not just the cheap bulk blending wines and French first growths as in some years past).

Although it is still early days, China’s bottled wine import market is making strides, developing retail sales momentum, and attracting new buyers. China passed the U.S. in 2016 to become Australia’s largest wine export market. Amazing.

Argentina Renaissance?

Keep your eye on Argentina, I suggested last year. The Argentina wine export boom of a few years ago has plateaued because of economic policies that created inflation at home but propped up the exchange rate and discouraged export industries. The new Macri government aims to reverse these policies, which will eventually (but not necessarily immediately) make Argentina wine more competitive on export markets.

The economic reforms have gone through, creating much short-term hardship but setting the stage for renewed growth. I still think the wine industry will return to good health, but 2016 was a difficult year both because economic change takes time and because of a poor grape harvest that has increased cost and limited winemaker options.. Keep watching Argentina — maybe 2017 will be the breakout year.

Keep Out!

Finally, I was concerned about a rise in protectionist trade policies that I thought might appear. My logic was that the strong dollar would put pressure on many economies, especially developing countries, and they would raise protectionist barriers, which would affect trade in wine and many other products.

I was right about the protectionism, but wrong that developing countries would be the main problem. 2016 was a year when economic nationalism seemed to catch fire in Europe (Britain, France, Italy, Germany) and here in the United States, too.

Protectionist concerns are widespread and the prospects for new trade agreements have disappeared. 2017 will be the year when we see how far protectionist policies are pushed.

How to Prepare for the Future?

Prediction is difficult — especially about the future. So how did I do? Well, I think my instincts were right — I was looking for trouble in the right places — but my logic broke down in some cases as I (we?) were blindsided by unexpected events.

This reminds me of Boulding’s Law, which is named for the economist Kenneth Boulding, who once studied the “history of the future.” He looked back what people in the past had to say about the future. When the future finally rolled around, he said, it was seldom what the experts forecast. Surprise!

The best way to prepare for the future, he concluded, is to get ready to be surprised! Happy 2017!

Book Review: Patrick Comiskey on the Untold History of American Rhône

516ssktyc4l-_ac_us160_Patrick J. Comiskey,  American Rhône: How Maverick Winemakers Changed the Way Americans Drink. University of California Press, 2016.

“My name is Mike and I drink Syrah.” “Hi, Mike,” the members of the group reply in unison.

That’s pretty much the way the meetings begin every Thursday night when my chapter of Syrah Drinkers Anonymous convenes. Some members try to hide their Syrah-drinking habit from family and friends, only “coming out” at the meetings. Others are more open, but cautious nonetheless. Everyone remembers the terrible shaming of people who drank Merlot during the Sideways years.

A Success Story

If you take the long view, Syrah and the other Rhône wine grape varieties are an amazing success here in the U.S. and most of Patrick J. Comiskey’s terrific new book is devoted to this story. Comiskey tells his readers pretty much everything about the grapes (including the “curious case” of American Petite Sirah) and traces their long and fascinating U.S. history.

Comiskey’s account highlights key figures (Randall Grahm, Steve Edmunds, Sean Thackery, Manfred Kankl) and key producers and regions (Tablas Creek, the Walla Walla Valley) as well as the story of the influential Rhone Ranger movement.a-a-732-ds-1

Comiskey really knows his stuff — deep research is apparent here — and he writes with a fluid style, so learning about American Rhône is a real pleasure. You don’t have to like Syrah (you don’t even have to like wine!) to enjoy this book and to learn from it.

Biggest Loser

American Rhône is a success, but Syrah has the blues. The latest Nielsen Company data (as reported in Wine Business Monthly) indicate that Syrah/Shiraz sales are down 11.1 percent in the last year in the sales channels that Nielsen monitors. That’s the biggest decline of any segment and comes after several years of falling demand. (The overall U.S. wine market increased by 4.9 percent in the same period.)

Syrah/Shiraz is now just the sixth best-selling red varietal wine in the U.S. market after Cabernet Sauvignon, Pinot Noir, Merlot, Malbec and Zinfandel. These figures cause my fellow Syrah Drinkers Anonymous members a good deal of distress, although we take comfort in the fact that Syrah is often a component in “Red Blend” and Rosé wines — two market segments that are experiencing booming growth.

What happened to Syrah/Shiraz? Well, that’s the subject of my favorite part of Comiskey’s book (the section is called “Irrational Exuberance”) where he closely examines the complicated domestic and international forces that turned Syrah’s boom into bust. People often talk about Syrah’s decline as if it were all Yellow Tail’s fault, but that’s over-simplified.

Wine Spectator’s Matt Kramer predicted that Syrah would be the next big thing back in 2003, and it looked like he was right for a while until the bottom fell out of the market. Yellow Tail does figure in Comiskey’s analysis, of course, along with Southcorp/Penfolds, two Roberts (Mondavi and Parker) and, inevitably, Sideways. This chapter alone is worth the price of the book to anyone who is interested in wine market trends or history.

American Rhône is a terrific book, well-written and informative. It deserves a place on your wine bookshelf. Highly recommended.

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This is the final Wine Economist column for 2016. See you next year! In the meantime, here’s a Lone/Rhone Ranger blast from the past. Hi-yo, Silver. Away!

 

Wine, Food and Cheese — Oh, My! Oxford Companions Compared

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Oxford Companion to Cheese (edited by Catherine Donnelly), 2016; Oxford Companion to Food 3rd edition (Alan Davidson, edited by Tom Jaine), 2014; Oxford Companion to Wine 4th edition (edited by Jancis Robinson & Julia Harding), 2015.

The Oxford Companion to Wine is one of my favorite wine reference books. Interesting and authoritative, it balances breadth and depth very well indeed. A great source if you need to look something up and a pleasure to browse, too. I am a big fan.

Nobody can live on wine alone (although I have a few friends who might have tried) and apparently Oxford cannot live by wine reference books alone, either. They publish a whole range of reference volumes including Oxford Companions to both food and cheese.

Wine, food, and cheese? I could not resist the opportunity to compare and contrast when a copy of the new Oxford Companion to Cheese arrived at Wine Economist world headquarters at about the same time that a colleague offered me a copy of the older second edition of the Oxford Companion to Food he recently received as a gift from his OUP editor. How do they stack up?

Pizza, Poutine and Venezuelan Beaver Cheese

I found all three of the books interesting and useful, but the food volume suffered a little by the comparison, which I now realize was unfair. Food is such a huge topic — where does  it begin and end? It is impossible to get the breadth/depth balance on such a huge topic adjusted to everyone’s satisfaction. Although it is a terrific reference, I often found myself wanting more detail. But maybe that’s what the internet is for!

The cheese volume, on the other hand, was a perfect fit for me. Lots of great detail about cheese varieties, processes, cultures, issues, history and so on. Famous cheesemakers are profiled, notable cheese shops reviewed, and cheesy foods (pizza, poutine) analyzed.

There is even room for a bit of fun as the entry for Monty Python makes clear. Yes, you are correct, it is the famous Cheese Shop sketch (see below), which mentions 41 different actual cheese varieties and one fake one (Venezuelan beaver cheese).cheese

What About the Wine?

Browsing both books was fun, but my focus was on wine. Wine has obvious connections to food and cheese — how would the authors and editors approach the subject?  The “wine” entry in the food volume, located between “wild rice” and “winged bean,” was almost shockingly brief. Wine is treated here as an ingredient in cooking, not as food itself or part of a shared cultural experience. How disappointing.

Wine does not even appear in the index, which is intentionally “noncomprehensive” and “highly selective” in my older edition.

Wine enthusiasts will find more to like in the cheese volume, where a very informative  entry on  “wine pairing” is wedged between “Williams, Jesse” (a farmer and cheesemaker who opened the first American cheese factory in Rome, NY in 1851) and “Winnimere” (a raw cow’s milk cheese made by Jasper Hill Creamery in Greensboro Bend, Vermont). “See also Beer Pairing,” we are advised. Good idea.

The cheese volume has a comprehensive index and so it is easy to find information about wine as a component in the cheesemaking process (used to color the cheese, for example, or to wash the rinds of some varieties). Wine also appears in a number of the entries for particular cheese varieties, generally in the form of cheese-wine pairing recommendations. This is very useful, but not all the entry authors find wine pairing to be important. The otherwise comprehensive entry on Stilton, for example, fails to mention its potential pairing with 20-year old Tawny Port. What a pity!

The Wine Perspective

My examination of the food and cheese companion volumes made me curious about how the wine companion deals with culinary connections. A quick glance at the index revealed … that there is no index. I searched the online version of the book that is available to subscribers to Jancis Robinson’s website and found 15 mentions of “cheese.” The entry on wine-food pairing was very good, on a par with the wine pairing entry in the cheese book.

All three of the Oxford Companions are useful and interesting additions to your bookshelf. The wine companion is essential for wine lovers and, having spent some time with it, I think the Oxford Companion to Cheese is a “must-have” volume, too, especially for travelers who want to explore local food, wine and cheese. Don’t leave home without checking out the wine and cheese cultures you will encounter on the road!

But you don’t have to get out of town to enjoy these books. Global markets increasing make a wide world of wine available to us and this is also true of cheese. Upscale supermarkets offer dozens, sometimes hundreds, of cheeses.

The Oxford Companions can help open the door to fuller enjoyment of the wines and cheeses that lie waiting on our doorsteps. Enjoy. (And enjoy The Cheese Shop sketch, too!)

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Old Wine in New Bottles? What’s New for Porto and the Douro Wines

sandemanAs I noted in last week’s column, the Association of Port Wine Companies roadshow passed through Seattle recently and Sue and I were fortunate to be invited to attend the Porto and Douro Wines Tasting.

Expect the Unexpected

Events like this are always appealing because they represent a chance to see old friends and taste familiar wines. But the real attraction is the opportunity to find something new. Portuguese wines never disappoint!

In fact, when I think about it, all my recent experiences with wines from Portugal have included surprises, some of which I have written about here. Portuguese white wines, for example, were a surprising discovery during our visit to the Douro and Alentejo regions earlier this year.

Here in the U.S. consumers think Portuguese whites in terms of Vinho Verde and while these wines can be delightful, we found a world of white blends made using indigenous grapes that really took our breath away. Expect the unexpected, that’s Portuguese wine, and that’s how we prepared for the tasting.

Sandeman: Old Wine in New Bottles

The first big surprise was at the Sogrape table, where George Sandeman was pouring 10, 20, 30 and 40-year old Sandeman Tawny Port (as well as other nice Ports and great red and white Douro wines). The wines weren’t the surprise — it was the bottle.

The traditional Port wine bottle is black, but these bottles were clear and let the color of the wine shine come through. The idea, according to an article in Drinks Business, is to change the perception of these wines, especially in on-trade.

Port is often stuck in a rut as a wine that you drink at the end of a meal and at Christmas, but the wines are really much more versatile than that. These clear bottles (with their elegant Vinilok closures) invite consumers and bartenders to also think of Port as a brown spirit that has many uses, including cocktails and aperitifs.

The new design does change the look of Sandeman Tawny Port and the image, too. I wonder if it will have its desired effect or if the potential consumer of a 40-year old wine, for example, might not really prefer the traditional package?sandeman-logo_use-small

It would be a mistake to dismiss this redesign too quickly. Image isn’t everything, but it is something and if you want people to think about Port differently it doesn’t hurt to change its look.

Remember that the great success of the Sandeman wine brand is due both to the quality of the Port and Sherry wines and also to the effectiveness of its advertising. “The Don” (with the Spanish hat and Portuguese student cape) is one of the most powerful images in wine and maybe in advertising generally. New bottles for old wine? I will be interested to see what happens.dalva1971

Old Wine in Old Bottles

Another surprise was in store as we looked for new types of Port to taste. White Port was one of our discoveries this year and we spent the summer introducing our friends to White Port spritz (equal parts dry white Port and tonic), which is a great alternative to the ubiquitous Aperol spritz.

I noticed that C.Da Silva was pouring older white Ports and I asked to try a bit, but nearly changed my mind when I saw the deep color of the 1971 vintage wine. It looked like a Tawny Port to me. But these old whites are aged in barrel like Tawnies and take on the dark color.

We tasted through the decades, back to that 1971, and the wines were just fascinating — familiar and different at the same time. Memorable!thumb_kopke-10-year-white_thumbnail0

We moved on to the Sogevinus table, where we tasted Kopke’s line of White Ports with 10, 20, 30 and 40 years of age. These old wines were packed in the traditional stenciled bottles. Old wine in old bottles. I found them really interesting, although Sue was drawn more to other styles, especially the Vintage and LBV Port wines.

We sat at with the group from the Rozés Port house at dinner and enjoyed their fine Terras do Grifo white and red Douro wines, which we had not had an opportunity to try before.

Portuguese Wines on the Rise

Portugal may be a small country, as we were often told, but it is big in terms of the diversity of its wines. Always something new and exciting to discover. And it is clear that U.S. consumers are discovering them. Port wine sales are on the rise, due in part to more creative marketing efforts that, as Paul Symington notes, are necessary to bring Port out of the “dinosaur age” in terms of the who, what, when, where and how of its consumption.

Portuguese wine sales in general are booming. The most recent Nielsen data (published in the December 2016 Wine Business Monthly) indicate that Portuguese wines sales have increased by 13.8 percent  in the most recent year. That growth rate ranks behind only France (15.7%) and New Zealand (15.5%) among imports, although Portugal starts from a much lower base. Outstanding!

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Thanks to the Association of Port Wine Companies (AEVP) for inviting us to the Seattle tasting and dinner. Best wishes for continued success!

The Name Game: Porto, Napa Diplomacy and the Fortified Wine Dilemma

portoThe Association of Port Wine Companies roadshow passed through Seattle recently and Sue and I were fortunate to be invited to attend the Porto and Douro Wines Tasting, a ceremony initiating several local wine trade representatives into the Confraria do Vinho do Porto, and a festive dinner hosted by the winemakers.

The events, which involved wines and representatives from eleven Port houses, had two main purposes. The first and most obvious was to introduce or re-introduce local restaurant and trade people to the Porto and Douro wines and to establish or renew relationships. In other words, this was a sales call and I will talk about this aspect next week. But first I want to discuss a secondary purpose: economic diplomacy.

Protecting the Brand

Champagne and Porto have two of the world’s most valuable regional wine “brands.” Sparkling wines are made all over the world, but Champagne can only comes from the Champagne region of France. Ditto Port wine and the Porto region.

When producers in other regions use these terms generically, they potentially dilute or devalue the brand. It is easy to see why this might be a problem. Trade treaties have enabled Champagne and Porto to assert their intellectual property rights here in the U.S., but with pre-existing commercial use “grandfathered” in. Thus Gallo legally sells inexpensive Andre’s California Champagne and Fairbanks Port.21344

Not all of the grandfathered brands are high volume value wines. Prager Royal Escort  Port, made from Napa Valley Petite Sirah grapes, sells for $90 per bottle for the current 2009 vintage release. It may not be real Porto Port, but it is a wonderful wine.

Champagne, Port and the other key regions would obviously like to see there brand rights more strictly enforced and they hoped to accomplish this as part of the big Transatlantic Trade and Investment Partnership Agreement (T-TIP) that has been in negotiation between the U.S. and the European Union for some time.

Shifting Political Winds

But the political winds have changed directions (in case you haven’t noticed) and big trade agreements are now pretty much off the table. The incoming Trump administration seems more likely to dismantle existing trade deals than to encourage new ones. The political environment in Europe is no sunnier.

Even a fairly straightforward trade treaty with Canada nearly collapsed at the last minute when officials in the parliament of the Belgian region of Wallonia raised objections. Reminds me of The Mouse that Roared.

Facing this political roadblock, the Porto producers have turned to the art of persuasion — diplomacy. Thus the photo above, which shows George Sandeman at the October 27 Confraria induction ceremony in San Francisco where Boyd Family Vineyards, Freemark Abbey, Jessup Cellars and Schweiger Vineyards were welcomed into the Brotherhood of Port to honor their commitment to respect the traditional use of the Porto brand.

The Napa-Porto Connection

Napa Valley Vintners was also recognized for their work to protect place names. Napa has particular interest in this issue because the Napa brand itself is very valuable and, like Champagne and Port, is at risk of being diluted in various ways. It is no accident, therefore that the Joint Declaration to Protect Wine Place Names and Origins,  which an increasing number of regions are embracing, is also called The Napa Declaration on Place. Porto and Napa were founding members of this initiative.

I asked George Sandeman (the handsome fellow in full Confraria regalia in the photo above) about the situation and he noted that “Napa producers switched away from Champagne on a voluntary basis long ago.  Now nobody in Napa Valley produces Champagne, even though they legally may do so according to US law (those grandfathered in the 2006 Wine Accords).  The producers in Napa have made that change as a show of respect to the Champagne region.”

“There has been discussion for several years of doing the same for Port,” he continued, “and now the first handful of Napa producers voluntarily made a switch away from the term “port” to something else, even though they weren’t legally compelled to do so.  It was a sign of respect to Porto and the Port producers, but also an acknowledgment that it is important to “walk the talk” when it comes to respecting and protecting winegrowing place names.”

Not Port: The Name Game

One problem that the makers of Port-style wines face is “the name game” — how to describe their products and market them without using the forbidden terms. It is a tricky business. Poking around our little cellar, for example, I found two examples of winemakers who make interesting wines and work hard to stay inside the lines.mfw

Hedges Family Estate, for example, makes very small quantities of wine from traditional Port grapes (plus a little Cabernet Sauvignon in the example we have). The back label clearly identifies itself as “Fortified Wine,” which accurately describes the process and is one possible generic descriptor of these wines. Unfortunately, the terminology also emphasizes alcoholic strength and not everyone will see that as a positive.

Mosquito Fleet Winery makes a fortified wine called Griffersen Reserve from Touriga Nacional grapes . As with Hedges, the term “Port” is carefully avoided on the package. Small print on the back label describes the product as “dessert wine,” emphasizing sweetness and the after-dinner occasion instead of alcoholic content or production process. This is accurate (at the winery you are served a taste in a small dark chocolate cup– yum!), but is obviously also vague and somewhat limiting as a category.

If you called either of these wines Port they would be easy for consumers to understand. The diplomatic initiative to protect the Port producers’ brand would be more effective if someone could find a generic term that works as well for these wines as “sparkling wine” does for wines made in the Champagne style and method. The lack of such a term means that honest efforts to respect Porto’s rights in theory frequently fail in practice. While Hedges and Mosquito Fleet won’t call their wines “Port” nearly everyone else does when they refer to them.

What’s the best way to honor and protect the Port brand while also allowing U.S. producers to identify and successfully market their own fine wines? The name game continues.

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Seems like Shirley Ellis could solve the Porto name game dilemma.