Author Archives: Mike Veseth

Bordeaux Bloodbath? Grubbing Up Deja Vu

September 24, 2024 By in economic crisis, wine, wine history, wine markets 1 Comment

You’ve probably seen the news from Europe. The headline on Politico read, “Bordeaux bloodbath! France pays winemakers to dig up vines.”  The French government has allocated €120  million to subsidize the removal of as many as 30,000 hectares of grape vines in the Bordeaux region due to unfavorable market conditions, according to EuroNews. That’s about €4,000 per hectare. The Bordeaux program is part of a bigger plan to take as many as 100,000 hectares (out of a total of 800,000) out of production.

It seems to me that the numbers are both big (100,000 hectares removed?) and small (€4,000 per hectare). American growers will rue the fact that they generally don’t receive subsidies from anyone when they are forced to grub up vines. The French are both lucky and not.

Grubbing up is a hardy perennial. France isn’t the only country that has to pull out surplus vines today and this isn’t the first time, either. I looked back in The Wine Economist archives to see when the topic of grubbing up first appeared on these pages. Here is what I found. You’ll note that I was skeptical about the EU program when I wrote this back in 2008. New Zealand’s earlier vine-pull scheme turned out well, I noted, but ripping out vines is only a temporary fix unless there are associated policy and structural changes to alter the market balance. I expect the same holds true today.

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Grubbing Up / The Wine Economist / May 6, 2008

Grubbing up is one of my favorite wine economics terms. It means to pull the vines up by the roots and replace them with other agricultural crops. It is a harsh term, just as it sounds, because it is the opposite of wine — it is anti-wine. Grubbing up isn’t something that a wine lover contemplates with ease, but sometimes it is necessary. The European Union’s Council of Ministers has recently finalized a grubbing up scheme for the EU and it is probably a good idea, even if it may not work.

Watering Down the Wine Lake

The problem is that EU wine production vastly exceeds demand with the result that thousands of liters of wine must be bought up by the EU each year and distilled into alcohol to prevent prices from dropping through the floor. The distillation price support only encourages continued production, waste and expense. It is a mess — a wine lake, as people say — and it has to stop.

A fairly radical plan was introduced a few years ago, one that would have paid farmers to grub up thousands of hectare of vines and introduced market reforms to allow (by deregulating) and to encourage (through supporting programs) European winegrowers to compete more effectively with New World winemakers who are taking their markets.

The package that the Council of Ministers agreed last week is significant even if it is less radical than the original initiative (Decanter magazine called it “watered-down” — never a good thing when you are talking about wine). The program called for subsidies to encourage winegrowers to eliminate up to 175,000 hectares of vines (versus 400,000 hectares in the original proposal), limit chaptalisation (the addition of sugar in the wine-making process) rather than eliminating it, and market-based reforms that encourage and enable winegrowers to compete on world markets (through varietal labeling of wines) rather than hide behind protective barriers.

I’ve been reading up on the details of the final EU plan and it is pretty interesting.  The program includes money for grubbing up, of course, and deregulation of wine labels, removal of some vine planting restrictions (so marketable grape varieties can replace uneconomic grubbed up varietals), funds for wine promotion abroad, and so forth. Like any EU program, it is a complicated balance of economic reality, fiscal feasibility and political necessity.

The idea is to help the European wine industry transition to a new market environment, where export markets are growing, domestic markets shrinking and competition is fierce. It is not unreasonable to think that policies like this could work. They worked in New Zealand in the 1980s, for example.

Lessons from Kiwi Wine History

New Zealand today is famous as one of the great success stories in the world wine market. A small nation in an unlikely location, it punches above its weight in the global wine market, holding the title as champion exporter. Not in quantity, obviously, but in price. New Zealand has the highest average export price of any wine producing country.

But such was not the case 25 years ago. New Zealand suffered from a surplus of mediocre wine that could only be sold domestically behind high protective barriers. The industry collapsed with many failed firms from a combination of bad wine and surplus production. The government paid to grub up vines and then opened the market to international competition. Cheap but better wines from Australia flooded in to fill the domestic bulk wine market, leaving New Zealand producers only one choice — make better wine for export. They have done so brilliantly. Their success inspires the EU reforms.

It would be a mistake to think that what worked so well in New Zealand in the 1980s will work equally well in Europe today. It is unlikely that the EU would be willing to let its wine sector reach the sort of crisis that New Zealand experienced and that motivated the dramatic reforms implemented there. If big change comes from big crisis, as I believe (I wrote a book on this theme), then Europe is unlikely to see big change. The social cost of crisis is just too great. The guiding principle of EU policy is to prevent crisis, which makes change that much harder to effect.

Comparing New Zealand to Europe is problematic in other ways, too. New Zealand’s wine production is tiny — a drop in the bucket, really — whereas European producers account for well more than half of all the wine in the world. New Zealand’s grubbing up program may have been difficult, but only 1500 hectares were uprooted rather than the “watered-down” 175,000 set for the EU.

Changing the Rules of the Game

The principle of the EU wine reform scheme is sound, yet many reports that I have read are pessimistic. I think this is mainly because the final reforms are so much more timid that the initial proposal. But there are other reasons for concern.

One thing that economists have learned over the past 25 years is that institutions matter. This is another way of saying that economic forces do not always produce the same results. If the “rules of the game” are different the laws of economics will produce different results. Institutions are the rules of the game in life. Dani Rodrik, my favorite development economist, makes this point in his recent book One Economics, Many Recipes. The nature of local institutions, public and private, formal and informal, shapes the economic landscape in important ways.

This idea applies to the EU reforms in particular. Take the grubbing up scheme, for example. An incentive to repurpose large but unprofitable vineyards in Australia, for example, might well meet with an enthusiastic response because the institutions of wine growing there are different, with large vineyards and a consolidated industry. But European vineyards are much different and represent a completely different model.

Many vineyards (where much of the inferior surplus wine originates) are tiny inherited plots of a hectare or so, frequently on sites with few viable alternative uses. The rules of the game here are much different. A hectare might produce 20-30 tons if badly overcropped and, at perhaps $500 per ton at the local cooperative, gross revenues are too small for a family to live on but too great (compared to alternative uses) to give up. It’s an institutional trap that might be solved by consolidation, but making large vineyards out of these scattered small plots is necessarily costly and difficult.

Under these circumstances growers are likely to hang on to their vines for years rather than accept a modest one-time payment. Grubbing up might need to be forced, not voluntary, to have much effect.

New regulations to allow wines to be labeled according to grape variety (rather than the traditional local geographic designation) might be attractive to a large and distinctly commercial wine producer, but much wine in Europe is still produced by cooperatives that have little to distinguish their wines from others apart form the local designation. What advantage would they have as simple varietals in a world awash with good varietal wine?

A Certain Vision of Wine

It is possible to envision a future where the reforms can work, where the marginal vineyards have gone out of production, where consolidation has increased efficiency and where branded varietals can compete with the world market. (I have even seen some early attempts at EU branded varietals in the discount bins of a local store — more about this in a future posting.) I think it is possible that this vision may be realized — eventually.

But oh, it is such a big jump. The institutions of the small family vineyard and the local wine cooperative seem to me to make these reforms much more difficult. New Zealand’s success will be difficult to repeat.

Wine Film Review: SOMM Cup of Salvation

September 17, 2024 By in wine, wine history Leave a comment

SOMM Cup of Salvation is a new release from the talented team at SOMM Films who have already given us SOMM, SOMM: Into the Bottle, and SOMM III. Their wine-film catalog now also includes a streaming channel called SOMM TV. If wine is your passion and video is your medium, you can have it all pretty much 24/7.

SOMM Cup of Salvation is now available via Apple, Amazon, and SOMM TV streaming platforms and is scheduled for limited theatrical release very soon. Here is a link to the new film’s official trailer. It is worth seeking out. Sue and I approach wine films with caution because we’ve seen so many disappointing ones, but Cup of Salvation gets our top score, two wine glasses (sort of like two thumbs up, get it?). Here is our review.

What’s the Story?

Cup of Salvation unfolds in several layers. In the broadest terms it is the story of wine’s cultural importance. Wine might be just a casual drink to many people, but its meaning runs deep and what happens to wine can be a mirror of what happens to society. This is wine as religion, philosophy, and identity.

The Cup of Salvation story takes place mainly in Armenia, sometimes in Iran, and a little bit in Oregon. Armenia, which along with Georgia is arguably the birthplace of wine, is struggling today to restore wine to its rightful place. Armenia suffered repeated invasions and abuse at the hands of outsiders over the centuries and the historical vineyards have suffered, too.

When Armenia came under Soviet rule about a hundred years ago many of the ancient vineyards were destroyed, replaced by industrial farms growing grapes for brandy production. In the Soviet system of specialization, Moscow dictated that Georgia (Stalin’s home) make wine and Armenia make brandy. So the old vineyards, winemaking traditions, and wine culture survived on the margins and under the radar. This is wine and ideology, geopolitics, and James C. Scott’s theories of oppression and resistance.

With the collapse of the Soviet Union, the opportunity appeared for Armenian wine and society to emerge, but the road was not a smooth one.  This is where things get personal as we meet the bold and charismatic Vahe Keushguerian (creator of the Armenian sparkling wine brand Keush)  and his more cautious but very brave daughter Aimee (who makes Armenian wine from indigenous grapes under the brand Zulal).

Vahe and Aimee Keushguerian (shown here in a still from the film) are part of the returning Armenian diaspora who seek to preserve Armenia’s wine history and create its future. The story of what they do in Armenia, why they do it, and what it means to them and to others, is at the heart of the film.

Risk is a strong theme. Some of the very old, very high-elevation vineyards are in an Armenia-Azerbaijan war zone (Vahe’s winemaking cellar/bunker is fortified to resist bombs. Yes, that’s a flak jacket he’s wearing in the photo.)

And then, as if there isn’t already enough risk, there is the crazy idea that punctuates the film. Iran is right next door. Iran has a long history of wine growing. Grapes are still grown, but no wine. The authorities would never hear of it. So, why not smuggle grapes across the border into Armenia and make the first Iranian wines in 40 years? What could go wrong?  It would be, if you could do it, maybe the riskiest wine in the world (although there are vintages from Syria and Lebanon that would compete for that title).

The tale of the smuggled Iranian grapes makes up the last third of the film. Tensions and emotions are revealed and released.  The meaning of wine is shown, not explained, and it is hard not to be moved.

Where Did the Idea Come From?

I asked the film’s director, Jason Wise, how the pieces of SOMM Cup of Salvation came together. The answer, he told me, is that he was in Armenia working on a completely different project (set for release next year) and met Vahe Keushguerian. Vahe’s story of Armenia’s wine renaissance was compelling and seemed to demand a film of its own.

And then Vahe’s Iranian wine project came on the radar and I think that lights must have started flashing. Wise knew about Moe Momtazi from another film project. Momtazi and his wife Flora are Persians who fled Iran many years ago, eventually settling in the Willamette Valley, where they founded Maysara Winery and Momtazi Vineyard. They carried with them as they escaped across the border an understanding of Iranian wine and its potential.

Momtazi’s Persian origin story is well known in Oregon (I wrote about the Momtazis in my 2013 book Extreme Wine, for example), but Wise was talking with him about something else. Momtazi is well-known for his commitment to biodynamic wine growing. Once Wise learned the Iranian backstory, the dots started connecting and the new film’s story emerged.

Why the Film Works

Cup of Salvation works for many reasons. First, it is beautifully filmed and that is always a good thing. The story is strong, too, especially the Iranian connection. But it is the characters that dominate the film, Vahe and Aimee  Keushguerian most of all, but also Iranian-American winemaker Moe Momtazi and his daughter Naseem.

The characters are strong and the emotions authentic. It is hard not to connect with the people and through them the wines. There is even the subtle thread of daughters worrying about fathers to think about. Memorable.

Sue and I have to admit that some factors probably predisposed us to like this film. We first tasted the Keush and Zulal wines last year thanks to samples provided by Storica Wines, the U.S. importers.  And we know and like Moe Momtazi, whom we met when I spoke at the International Pinot Noir Celebration in Oregon several years ago.

Even without these personal connections, however, I think we would be sympathetic to the Armenian wine story because of what we learned when we visited Georgia when I spoke at the UNWTO conference there. Georgia, remember, was lucky to get the Soviet wine franchise while Armenia was assigned brandy production. But it wasn’t really a gift because the Soviet wine system was focused on industrial production of sweet wines. As in Armenia, the task of preserving the essence of Georgian wine was left to families tending their grapes and making traditional wines. Our sympathy for the Georgian producers trying to revive their industry is, I suppose, part of our reaction to this excellent film about Armenia and Iran.

I know a critic who sets a pretty high standard for the wines he chooses to write about. They must be delicious, of course, but that isn’t enough. They also need to tell a story and to reveal something meaningful about people and places or maybe values and ideas. We are not wine critics here at the Wine Economist, but the Armenian wines we have tasted were both delicious and told interesting stories. Everyone we’ve shared them with came to the same conclusion.

We are not film critics, either, but we set something of the same standards when it comes to wine films. They should entertain, but that’s not enough. Somm: Cup of Salvation is a pleasure to watch, that’s for sure, but the stories it tells, the questions it asks, and the truths it reveals make it something special.

Raise two glasses (or more if you have them) to SOMM Cup of Salvation.

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Storica Wines is currently offering a “Sip & Stream with SommTV” package that includes a 4-pack of Armenian wines featured in Cup of Salvation bundled together with free access to the SOMM TV channel for the rest of 2024. Here is a link to the offer details.

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There is a fine film about the Georgian wine struggle, which we reviewed here in the Wine Economist back in 2018, “Our Blood is Wine.”

Second Thoughts on Pinot Grigio?

September 10, 2024 By in Italian wine, wine 4 Comments

Sue and I find that we are having second thoughts about Pinot Grigio. And that’s a good thing.

I am not quite sure where and when it began, but we must have had a series of disappointing Pinot Grigio (PG) experiences. Maybe we were at too many receptions where PG was offered as the white wine alternative to Chardonnay. The wines seemed designed to avoid offending anyone, with no distinctive characteristic to raise eyebrows or draw attention and no rough edges either.

Pinot Grigio became a reliable cooking wine at our house, but not something that we’d go out of our way to drink.

Suddenly this Summer …

Then suddenly this summer something changed and now we find ourselves on the lookout for interesting PG wines to try. I think it started when we flew to northeast Italy to visit the Collio DOC region. We spent two mornings blind-tasting dozens of Collio wines: Ribolla Gialla, Friulano, Malvasia, Sauvignon, Collio Bianco. All of them were interesting and delicious.

But it was the Pinot Grigio that surprised us. We spent an hour happily working our way through 14 different Pinot Grigio Collio DOC wines. The wines were different from the stereotype imprinted on our memory. The differences in terroir and vintage came through clearly. If this was Pinot Grigio, we decided, we needed to pay more attention.

Then we started tasting Friulian Pinot Grigio wines made in the traditional copper-color Ramato style, which someone described as somewhere between Rosé and an Orange wine. These wines were recognizably still Pinot Grigio but taken in a different direction. How interesting.

Serious Fun with Pinot Grigio

Back home, we started looking for Pinot Grigio with character and we found interesting Pinot Grigio wines at a local tasting of Elena Walch and Cantina Terlan wines from Alto Adige. Different from the Friuli wines and different from one another. Fascinating. A trip to Total Wine gave us more to drink and think about. It was interesting that Ramato-style wines were featured in the Pinot Grigio section.

We even enjoyed a sort of “back to the future” Pinot Grigio from Friuli producer Eugenio Collavini. Their delicious Villa Canlungo Pinot Grigio DOC Collio is the result of Manlio Collavini’s mad experiment. It is a white wine, one of the first white Pinot Grigio wines made in Collio back in the day when Ramato set the standard. Now white is the norm and Ramato gets attention. Funny how things get all topsy-turvy!

We re-discovered an old favorite at a wine dinner that our friends at Ricardo’s  Kitchen & Bar in Lacey, Washington, organized. It was Julia’s Dazzle from the Long Shadows winery. They let their Pinot Grigio grapes get very ripe indeed, and the dazzling result is more like a Rosé.

But wait, there’s more. The Graziano family was among the first to plant Pinot Grigio in California and their wine stood out as we began exploring American products. Grapes from old vines in Mendocino are barrel-fermented and sur lie-aged for their Monte Volpe PG. It turns out that if you treat Pinot Grigio like a serious wine, you can make a serious wine with character and complexity. Who knew?

All Along the Wine Wall

Sue was prowling the wine wall at the Proctor Metropolitan Market and stumbled upon a wine with “Ramato” in big letters. But it was from Washington, not Italy. So we had to try it. The deeply colored and intriguing wine is made by Sage Rat wines in the Rattlesnake Hills AVA near Yakima, Washington. It is an example of how the idea of interesting Pinot Grigio (and the traditional Friulian skin-contact method, too) is rapidly spreading.

We’ve changed our minds about Pinot Grigio and are now on the lookout for interesting PG wines. So what’s the point? Well, there are a lot of wines that have been stereotyped in one way or another (think post-Sideways Merlot, post-Yellow Tail Syrah/Shiraz, or post-Blue Nun Riesling). Stereotypes and fashions are powerful forces, but once you break through them you often discover a more complex and interesting world. That applies to Pinot Grigio … and a whole lot more.

No one likes a wishy-washy person, but sometimes it is good to have second thoughts.

Asti: the OG LA Wine

September 4, 2024 By in Uncategorized 2 Comments

Over in Beer World, the NA (non-alcoholic) category is booming. Sales by market leader Athletic Brewing Company continue to grow while more and more other brands introduce NA products. There is a lot of interest in NA here in Wine World, too. The most-read single Wine Economist article of this year so far is an essay on “Non-Alcoholic Wine and the Second-Glass Test.”  However, NA wine remains a niche product compared to NA beer.

More of the Wine World focus is on LA (low-alcohol) wine, which is promoted variously as “light,” low-calorie, “better for you,” and so on. Many new products have been launched to take advantage of interest in LA wines. Some producers seem to think this is a new category, and it may well be to some consumers.

Everything Old is New Again?

We recently received a story pitch for a brand that seemed to think it invented the idea of LA wine. That rubbed the wrong way because low-alcohol wine has a very long history. German Rieslings, for example, have long featured their moderate alcohol (they might have been the first “session” wines). Stella Rosa wines, which have alcohol levels so low that they have to include nutritional data on the labels in addition to the usual alcohol warnings, are very popular and widely distributed. Riunite Lambrusco, once the most popular imported wine in the U.S., is low-alcohol, too.

The wines from Asti — still Moscato d’Asti DOCG  and sparkling Asti DOCG (aka Asti Spumante) — must be included on the list of OG LA wines here in the U.S. market and around the world, too. The abv for Moscato d’Asti DOCG hovers around 4.5 percent, considerably lower than most white wines, and Asti DOCG is a bit higher but still relatively low at 7.5 percent. Residual sugar levels are higher because the wines are not fermented dry, of course, but the best of these highly aromatic wines achieve good balance with higher acidity, although I admit I have sampled a few over the years that were unbalanced on the sweet side for my taste.

The Asti Consortium sent us a sample of each wine and they represented the region very well. Bava Bass Tuba Moscato d’Asti DOCG and Gancia Asti Spumante DOCG  were well-balanced and delicious. We sipped the Gancia Asti sparkler as an aperitif on a warm summer day and the Bava Bass Tuba Moscato d’Asti paired very well with a fresh fruit dessert. We tried  Moscato d’Asti DOCG along with some other wines paired with chocolate last year and were surprised by how well they worked with Chocolate Moonshine French Vanilla Fudge.

Global Interest in OG LA

Who drinks the LA wines of the Asti region? Judging by the ready availability of the wines, I would say that the market is quite large here in the United States. Costco regularly features its own Kirkland Signature brand of Moscato d’Asti, for example, in addition to other labels of this wine.

I asked the Asti Consortium for sales data and the results surprised me a bit. The pie chart above shows 2023 sales for sparkling Asti DOCG. Most is sold in Italy and the rest of Europe but the Russian market is very large, which makes sense because sparkling and sweeter wines are very popular there. In fact, 2023 might have been a particularly good year for Russian sales. The Economist reports that Russian government stimulus helped spending on imported sparkling wine increase by 80 percent that year!  The Americas and Asia take their share of the Asti DOCG pie, tool.

The sales pattern is very different for still Moscato d’Asti DOCG. The U.S. market is by far the most important followed by Italy, Greece, South Korea, and Switzerland. No wonder these wines are so easy to find on U.S. store shelves. U.S. consumers drink about two of every three bottles sold in the world! Amazing.

The sudden surge in attention given to LA wine may be new, but consumers have been enjoying LA wine for a long time. There are lots of new brands and concepts, that’s for sure, but the OG LA wines like Moscato d’Asti DOCG and Asti DOCG endure for a reason.

Wine Economics 101: the Three Vs of Wine

August 27, 2024 By in cooperatives, economic crisis, wine, wine markets 3 Comments

We often talk about trends and problems in the wine industry, but I think we all know that wine isn’t a single business about which it is easy to generalize. Different countries or regions have different business characteristics, for example, and making and selling multi-million case brands like Gallo’s Barefoot differs greatly from much smaller and more local operations.

The wine industry doesn’t come in one size or shape that fits all and doesn’t run at a single speed. Significantly, while all or most parts of the “wine patch” face challenges from climate change and declining consumption of beverage alcohol, the specific conditions vary and can change quickly.

So when a journalist asks me about what’s happening in the wine industry, as happens frequently, I have to stop, pause, and think. Which wine industry are we talking about?

Wine and the Three Vs

The Financial Times recently published an interview with Stephen Cronk, co-founder of the Provençal Rosé producer Maison Mirabeau, about the perils and rewards of starting a wine business more or less from scratch.  Mirabeau has achieved great success in just a few years. How did it happen? Here’s an excerpt of the Q&A.

Was there a seminal moment in your business? Probably when I met a British Master of Wine in the Languedoc in 2008. He told me about the three Vs: viticulture, vinification and vendre, farming vines, winemaking and selling. Up until then I thought I would focus on buying a vineyard. He said don’t buy a vineyard yet: build a brand. Looking back, it was absolutely the right advice.

The idea of the Three Vs is important. There is a romantic image of winemaking that looks like this. Lovingly hand-tended grapevines surrounding a modest winery, with a cozy tasting room next door where most of the wine is sold (often by the winemaker herself) to loyal customers.  This is the idea of wine that defines the industry for many people. But, from an economic standpoint, it is a bit misleading because it suggests that wine is a single business when it is really, as the Financial Times story points out, it is really more like three.

Growing grapes is agriculture. It is a risky capital-intensive business that requires specialized equipment and knowledge. Growing wine grapes successfully and profitably is a considerable achievement. Making wine is also a risky capital-intensive business. It requires specialized equipment, some of which is only used once a year.

Finally selling wine is a risky capital-intensive business, too. It is risky because selling wine like selling anything else is affected by market forces beyond individual control. It is capital intensive because building a brand or establishing networks of personal or professional relationships to facilitate sales can consume a good deal of time and money. Many winery owners have told me that, going into the business, they thought that growing grapes or making wine would be their biggest challenge, but selling wine and tending to customers sometimes is the hardest part.

Specialization and Exchange

Because all three businesses are capital heavy and all three are risky, there is a strong incentive for specialization at the firm level and for the industry to take advantage of Adam Smith’s principle of the division of labor. Smith said that the division of labor was determined by the extent of the market and so it is not surprising that it is most fully realized in the wine business by very large wine companies that specialize in one or two but seldom all three wine industry segments.

Some of the largest winemaking facilities here in Washington, for example, are mainly engaged in contract wine production for other firms, which market the wines under their own brand names. And some large wine firms sell big volumes of wine with few direct employees, relying upon purchased grapes, contract production, and bulk wine purchases to feed their efficient marketing and distribution pipelines.

Specialization and exchange is Adam Smith’s recipe for efficient production, but the situation is never as simple as that (and nothing is ever very simple in the wine industry). Remember that each of the V-factors is risky and the risks are very different. Engaging in just one V-function means you only have to account for one set of risks, not all three, but from an industry viewpoint the risks are always there. And in some cases division of labor can magnify them.

Risky Business

All three wine industry functions are risky in part because they involve lags. The final market for wine is constantly evolving, for example, but firms that specialize in marketing have to make plans many months or even years in advance, so there is always the risk that the last quarter’s market plan is no longer relevant. That’s a problem.

Wine production involves lags, too, and they can be much longer. The wine that a producer can sell today is based on decisions made one, two, three, or more years in the past. Time lags mean that costly shortages and surpluses are more likely, creating instability. The viticulture V is also subject to lags and they are much longer than the previous ones just because of the time it takes to bring grape vines into production or to alter the product mix on existing vines.

One implication of this situation is that, while sometimes the Three Vs are in synch and tell the same story, sometimes they are not and you get a different reading on the health of the industry depending upon which V you consult. Arguably this is the case today, when the disruptions of the pandemic era and rapid inflation are working their way through the system at different speeds.

Market Dynamics

There is a certain degree of instability baked into each wine industry segment’s cake. What happens when we fit them all together? Under some circumstances, the result can be benign or even beneficial as cycles offset one another the way that the sound waves your noise-canceling headphones emit silence the racket around you. But it is also possible for cyclical factors to compound, making the overall wine industry riskier than its individual segments.

Is this one of those times when risks are compounded because instability in each segment feeds the others? Risky business(es).

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I recently discussed some of these wine economics themes and more with “Wine Behind the Scenes” podcast host Laurel Simmons. Click on this link to listen to our 30-minute conversation.

What’s New? Portuguese Translation of “Around the World in 80 Wines”

August 20, 2024 By in globalization, Shameless Self-Promotion, wine, wine tourism 5 Comments

The Portuguese translation of my 2018 book Around the World in Eighty Wines is here. A Volta ao Mundo em 80 Vinhos was released last month by the Brazilian publisher Editora Valentina.  The new book is available from the publisher as well as through the usual online sellers including Amazon.com here in the United States.

What’s the book about? Well, here’s a brief excerpt from the summary to test your Portuguese language skills! (The English language summary can be found on the book’s Amazon.com page.)

Inspirado no clássico romance de aventuras de Júlio Verne, Mike Veseth nos leva à sua Volta ao mundo em 80 vinhos. A jornada começa em Londres, metrópole histórica da enologia. Logo viajamos pela França e pela Itália, para, em seguida, darmos uma guinada em direção a irresistíveis relatos sobre o vinho na Síria, na Geórgia e no Líbano. Toda taça de vinho conta uma história, e assim cada um dos oitenta vinhos aqui selecionados tem algo importante a revelar. Sem mais delongas, seguimos pela África do Norte até a Argélia, um dos maiores exportadores de vinho do mundo, e atravessamos o Mediterrâneo para chegar à Espanha e a Portugal. Acompanhando as rotas comerciais portuguesas, desembarcamos na Ilha da Madeira e depois na África do Sul, onde fazemos um rápido desvio para saborear o mais famoso Pinot Noir do Quênia. Como assim? Pinot Noir no Quênia? É isso mesmo? …

Authors don’t get rich from translation rights, but it’s exciting to see the new edition because it promises to expand the global audience for my book. Brazil and Portugal are important wine-producing and consuming countries and the Portuguese-speaking world is, well, worldwide. It seems like I find Portuguese and Brazilian influence wherever I go. Europe, Africa, Asia, the Americas, everywhere!

A Volta ao Mundo em 80 Vinhos is the third of my wine books to be available in translation. It joins “Вокруг света за 80 бутылок вина.”  (the 2019 Russian translation of Around the World in Eighty Wines) and “Războaiele Vinului” the 2017 Romanian translation of the 2011 edition of Wine Wars,. on the Wine Economist foreign-language bookshelf.

“Obrigado” to Editora Valentina and my other international publishers for their creativity and hard work. Thanks, as well, to all the readers for their support.

Is Wine a Good Value?

August 13, 2024 By in economic crisis, Economic impact, wine, wine markets, wine price 4 Comments

These are challenging times for many (but not all) consumers. Rising housing and interest costs are squeezing budgets. Pandemic-era stimulus check bank balances are going or gone. Student loan payments, paused for a time, are back again.

Faced with tight budget constraints and rising debt costs, consumers are struggling to cut costs without sacrificing their standard of living, which means they are more and more focused on value for money. Perhaps the most obvious indicator of this trend is the surge in purchases of store-brand supermarket products at the expense of similar but more expensive name-brand products. But, as the financial news reports, the changes in buying patterns go far beyond that.

Do You Want Fries with That?

Two recent news reports suggest that consumers want value, not just lower prices. A Wall Street Journal story about casual dining restaurant chain Red Robin (see article link below), noted a two-prong strategy to get diners back. Step one was to improve food quality. Step two was to expand the number of “bottomless” offerings so that there is a sense of abundance and value, even when (like me) diners rarely ask for free extra servings. Menu prices have not declined, but business traffic is up. Value sells

The Economist newspaper’s “Schumpeter” business columnist recently compared fast-food king McDonald’s value strategy with casual Mexican chain Chipotle (see article link below). McDonald’s has struggled in the post-pandemic era and recently introduced $5 meal deals in an attempt to regain its lost reputation for good value.  Chipotle, on the other hand, has actually raised its prices. Which strategy do you think would be more successful?

Chipotle wins, at least according to the Economist columnist, who argues that Chipotle is better value despite being more than twice as expensive as the McDonald’s meal deal. Maybe, as the column notes, the demographics of the two food chains are too different to make a comparison valid. But perhaps restaurant dinners look beyond price in calculating value. Schumpeter reports having two generous meals from his Chipotle order, but not wanting to even finish the salty McDonald’s $5 meal.

Price vs Value?

If value for money is a rising priority for many consumers it is fair to ask if wine provides good value? Or is wine’s value proposition one of the reasons the industry is facing headwinds these days?

This is an awkward question because different people have different ideas of what makes something a good value and also because wine comes in so many different price/quality combinations. When I asked my university students to do an economic analysis of the wine wall at a local Safeway store, for example, they found wines as cheap as about $2 per bottle equivalent and as expensive as about $225 per fancy glass bottle.

How can you generalize when there is such wide variation? One way is to look at average cost per serving of wine and other alcoholic beverages. Every study that I have seen suggests that wine is more expensive per serving than either beer or spirits using average price data. So there is reason to believe that consumers might see a value problem with wine.

The way that wine is packaged is a value problem, too. Many consumers hesitate to open a 750 ml wine bottle for only one or two glasses because they are afraid that what’s left will quickly go bad, making the bottle purchase an even worse deal than the per-serving averages suggest. (By comparison, beer comes in single-serving containers and spirits can keep for a long time, so they don’t suffer the same wasted money problem.)

Well, you might say, if this wine is too expensive, trade down to cheaper brands. Indeed, wine can be very cheap (per bottle or per serving) if that’s what you really want. But, good value isn’t the same as cheap price, as McDonald’s problems show.

And, indeed, consumers have for several years moved away from inexpensive wines, calculating perhaps that they are not worth even the low price charged. The premiumization trend has plateaued, too, suggesting that perhaps higher price doesn’t always mean better value.

It’s in the Bag?

If consumers are feeling the budget squeeze (and many are) and looking for value in wine as they are, apparently, in fast food and casual dining, where will they go? Some will abandon wine and indeed cut ties with beverage alcohol, generally. Some will drink less but focus on quality when they do. Others will try to find the spot on the wine wall with the best value proposition. Where is that?

NIQ market data reported in Wine Business Monthly finds only a few bright spots on the wine wall, one of them is for “premium” 3-liter bag-in-box wine selling at about $5 per bottle equivalent.  Sales of wine in this format have held up pretty well while sales of glass bottle wine at about the same price point have fallen. Maybe that Red Robin sense of abundance applies here, too.

Clearly, the economic side of the wine market equation, with its focus on disposable income, consumer budget constraints, and value for money, is not the whole story when it comes to today’s challenging environment. But I am convinced that it is part of the story and one, perhaps, that should be taken more seriously. The people who are having trouble selling other consumer goods have got the message.

What is wine’s value proposition? Food (or maybe drink) for thought?

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Blake Gray’s recent Wine-Searcher.com column is one example of what a value-driven wine marketing strategy might look like.

Here are links to the articles referenced above.

Economist newspaper “What Chipotle and McDonald’s say about the consumer slowdown.”

Wall Street Journal “Bottomless Fries, Floats, and Broccoli. One restaurant chain’s bid to get diners.“

Collio DOC: Wine, Brand, & Identity in Italy

August 6, 2024 By in Italian wine, wine, wine markets 2 Comments

[This is the third and final article in a series inspired by our recent visit to Collio DOC in north-east Italy. Click here to read the first report and click here to read the second.]

What does it take for a wine region to stand out in today’s crowded market? Excellent wine, of course, but good wine isn’t enough because there are lots of quality wines around the world; consumers need a reason to buy one instead of another.

Brand and Identity in Wine

What else does it take? There are many ways to think about it, but in my book Wine Wars II, I focus on two necessary (but perhaps not sufficient) factors: brand and identity. Brand is the image that distinguishes your wine from the competition. Identity is the quality that defines the brand.  Many wines suffer from the lack of a memorable brand. Others may have a brand, but its power is limited because it doesn’t actually stand for anything. Put wine, brand, and identity together and much can be achieved.

Sometimes an iconic wine can define a region, giving it a brand and identity.  The market for wines from Bolgheri on the Tuscan coast, for example, was shaped by Tenuta San Guido’s famous Sassicaia, Bolgheri, Sassicaia, Super-Tuscan.

Sometimes a singular event can provide the spark. Here in the United States, for example, the Oregon wine industry’s rise to prominence was at least partly due to success at the Wine Olympics of 1979. I wrote about this in the Wine Economist on the occasion of the Eyrie Vineyards’ fiftieth birthday:

The Wine Olympics was a competition, sponsored by the French food and wine magazine Gault Millau, that featured 330 wines from 33 countries tasted blind by 62 judges. The 1975 Eyrie Pinot Noir Reserve attracted attention by placing 10th among Pinots, a stunning achievement for a wine from a previously little-known wine region.

Robert Drouhin of Maison Joseph Drouhin, a Burgundy negociant and producer, was fascinated and sponsored a further competition where the Eyrie wine came close second behind Drouhin’s own 1959 Chambolle-Musigny. Thus was Eyrie’s reputation set (and Oregon’s, too). It wasn’t long before Domaine Drouhin Oregon (DDO) was built in the same Dundee Hills as Eyrie’s vineyards — a strong endorsement of the terroir and international recognition of the achievement.

Oregon wine was a thing, the Willamette Valley was the brand, and Pinot Noir was the identity. Oregon produces other good wines besides Pinot Noir. And Pinot Noir grows in other parts of Oregon. But the wine, brand, and identity were established anyway.

Building Brand Collio

Collio DOC, which hugs the Slovenian border in north-east Italy, has long been known for its excellent wines and it is home to many strong private wine brands. Sue and I visited Livon on our recent trip, for example, enjoying the delicious wines and the amazing view from the tasting room deck. The sleek wines are easily identified by the distinctive art nouveau-style label, which is just risqué enough to have been banned by authorities in at least one state in the American South!

A strong regional brand benefits all producers, so the Collio Consortium, which celebrates 60  years in 2024, has worked diligently to establish the image and reputation of the region and its wines.

Sue and I encountered the “SuperWhites” campaign about 20 years ago at an event in Portland, Oregon (not “Porland” as printed on the event poster shown at the top of this page). Sponsored by Slow Food Friuli and supported by a range of regional organizations, the promotion was inspired by the success of “Super Tuscan” red wines. The idea is that Friuli (and Collio) are to Italian white wines what the Super Tuscans are to Italian reds.

Although the Super Whites theme seems to have run its course, the commitment to collective effort persists, along with the color of the Collio wine region, bright yellow, is still very much alive. (I think of it as Tour de France Yellow Jersey yellow, but that’s just me). Yellow is Collio’s color, featured in all the promotional literature, the capsules found atop many of the wines, and even a bright yellow Vespa scooter that seems to show up in many photos of the region. If you are in Collio and you see yellow,  you can’t help but think Collio wine.

More recently there has been an effort to promote a trademark Collio wine bottle shape, which is also shown in the photo above. The distinctive bottle actually requires a special cork to seal it properly. Adopting it is a serious decision from a practical standpoint.

The Collio bottle shape is instantly recognizable on store shelves and when you look around at what is on tables at a restaurant. Although its use is strictly voluntary, not mandated by consortium rules, we saw it almost everywhere and sensed a certain pride in the identity. It makes a strong statement about the Collio brand project.

Collio’s Identity Quest

If Collio has been purposeful and successful in building a regional brand, the road to a specific identity to back up the brand is less clear. Indeed one person we met told us he thought that Collio was still searching for an identity.

Thirty or forty years ago Collio was pretty much synonymous with a wine they called Tocai, made from the Tocai Friulano grape variety. The grape variety’s name is still the same, but the wine can’t be called Tocai anymore because of objections from Hungary’s Tokaji region. Now the wine is Friulano and if you ask for a glass of local white wine at a bar or restaurant, it’s what you’ll get (and happily drink, I think).

Having lost control of its signature wine’s name, some winemakers in Collio looked in a different direction for a regional identity. The result, we discovered when we visited in 2019, was an emphasis on white wine blends under the name Collio Bianco. The wines we tasted on that trip were terrific. White wine blends are under-appreciated. But aside from their high quality, the wines didn’t have enough in common to be the foundation of an identity. Some were blends of native grape varieties. Others were blends of traditional grape varieties like Chardonnay, Sauvignon, and Riesling. Others combined native and traditional grapes.

The Collio wine identity remains a work in progress and perhaps that’s how it always will be. What all the wines really share is not color or grape variety but sense of the place, shaped by the local ponca soils and hillside vines. If I had to pick a grape variety it would probably be Tocai Friulano, but why do that? It seems like it would exclude so many great wines and accomplish very little.

No, I think Collio isn’t any particular wine. As we suggested in the first two articles in this series, it is best to think of it as a particular place and a deep experience. You don’t just drink Collio DOC, you experience the place through the wine. I know that that’s inconvenient when it comes to marketing, but important indeed when it comes to the wine.

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Sue and I recently received a very thoughtful gift, a copy of The Food of Italy by Waverly Root (1971). We turned quickly to the section on Friuli and found this:

“Our wines,” laments a writer from Friuli, “are more exquisite than renowned.”

More than 50 years have passed and I think the wines are even more exquisite, if that’s possible. Renowned? Not as much, but the word is getting out there and Collio’s reputation is fast catching up to its reality.

Leveraging Wine & Tourism in Collio DOC

July 30, 2024 By in Italian wine, wine, wine markets, wine tourism 1 Comment

[This is the second in a series of articles inspired by our recent visit to Collio DOC in north-east Italy. Click here to read last week’s introductory report.]

When Sue and I first visited Collio in 2000 we stayed in the newly opened agriturismo rooms at Venica & Venica and in a rustic cabin at La Subida.  We dined well at several memorable restaurants including Trattoria al Cacciatore at La Subida and Trattoria al Giardinetto in Cormons.

Wine Tourism and Economic Development

Guided by articles in Gambero Rosso and La Cucina Italiana (and Ornella Venica’s wise personal recommendations), we found great food, wine, and many fun things to do. The foundations of today’s wine tourism industry were already in place. We returned to Collio in 2015, 2019, and now in 2024. We’ve discovered new hospitality and wine tourism opportunities each time.

A strategic focus on wine tourism makes good sense for Collio and the Friuli-Venezia Giulia region generally. The vineyard area is relatively small compared to the Veneto, for example. Yields are necessarily limited to protect quality. From an economic development standpoint, the two ways to grow for the region are to increase price (through rising reputation, for example) and to leverage the wine’s magnetic pull through tourism development. Both forces are powerful in Collio and they can work together to drive the region forward.

Casanova & Castle, Wine & Golf

More and more high-quality hotels and restaurants can be found today, which is necessary but not sufficient for the growth strategy. This time we stayed at the Relais Russiz Superiore, for example, adjacent to the famous winery (which is now owned by a partnership between Marco Felluga and the Veneto’s Tommasi Family). One of our favorite wineries, Gradis’ciutta, offers visitors the opportunity enjoy the hospitality of Borgo Gradis’ciutta, a cluster of buildings that date back to the 1500s with nine rooms and three apartments. Engaging visitors beyond the tasting room counter is clearly a priority today.

The most ambitious investment in tourism and hospitality is probably  Castello di Spessa, where we stayed during our 2019 visit.  The business combines the historic castle (famous for its connection to the notorious Casanova!), hotel rooms, dining and event facilities, well-kept vineyards, a substantial winery operation, and even a golf course. We ran into California winery owners in Collio on holiday, who said that they came for the golf and stayed for, well, everything else!

Collio was a great place to visit 20  years ago and it has grown in every way, but without losing the characteristics that drew us to it originally (and have kept us coming back). But this is just the beginning, according to Ornella Venica, who challenged us to consider how much more Collio and Friuli have to offer to visitors interested in food, wine, history, culture, and nature.

The Vine Academy

Our first stop on this trip to Collio was lunch at the recently opened restaurant at Accademia Vine Lodge. The food and wine were delicious and the setting beautiful, but what sticks in my mind is the fact that this attractive wine tourist destination is also an education institution. When wine tourists are not filling its rooms, groups of earnest students move in.

The Accademia Vine Lodge has a double personality. It is both an attractive venue for visitors like us and also the home of the famous Simonit&Sirch vine pruning institute. The restaurant’s wine list includes bottles from Collio and the region, of course, but also from some of the more than 150 Simonit&Sirch clients around the world.

The vine lodge fascinates me because it reminds us that wine tourism can spring up in many ways. It isn’t just wineries with food or rooms, for example. Here is a case where globally respected technical expertise in the science and art of vine pruning has grown into a venue that has broad appeal.

Collio & the Beach

A highlight of our visit was an evening event called Collio & the Beach, set on a broad shaded patio beside the beach at Baia di Sistiana near Trieste. Could a seaside party draw a different demographic profile than typical winery tasting rooms? This was a wine event, but not just a wine event. Bustling booths were pouring local wines, for example, but the longest lines were for delicious foods such as porchetta, frico, watermelon, and hand-carved local Prosciutto d’Osvaldo.

We sampled from the different wine stations, eventually focusing on Friulano because it is so popular in this region. We were surprised, however, that the longest line was for Pinot Grigio! In fact, the line never ended because some folks got their pour and moved directly to the back of the queue so that they could try another wine.

Pinot Grigio? Really? Here in America, Pinot Grigio is often made in unexceptional styles, designed more to avoid offending than to develop distinctive characteristics. But these Pinot Grigio wines were different because many of them were made in that traditional Ramato style, with lots of skin contact. These wines, which are both old-fashioned and cutting-edge in terms of style, had appeal that spanned the generations. And they matched up perfectly with the traditional food and festive venue.

The 70 Percent Solution

Sue and I keep returning to Collio because offers so much that we enjoy and appreciate in terms of food, wine, culture, and nature. It seems to us that Collio today is doubling down on the “Collio Experience” and not just the wine. That was the case at Collio & the Beach and Castello di Spessa. And the experience especially stood out at  Subida di Monte in Cormons.

Once upon a time, this was a small family winery, but new owners saw the “experience” potential to leverage the winery with hospitality investments, including Locanda alle Vigne. The restaurant features traditional dishes in a fabulous setting. We were there on a late June Thursday night and the place was packed with guests of all ages.

The winery anchors the operation, of course, but the hospitality business generates 70 percent of the revenues, bringing more and different consumers to Collio and its wine.

Back to the Future?

Our Collio journey began at Venica & Venica and La Subida and both are still leading the way. The plans for a wine resort that Giampaolo Venica showed us in 2000 are now very much realized, for example. Very impressive!

La Subida has created a more casual restaurant called Osteria la Preda de la Subida that’s become one of our favorite places to eat. It is popular with tourists, but delights locals, too, with its celebration of the traditional food and wine of the region. It’s where we had our last meal (for this trip) before heading for our airport hotel near Venice.

Collio shows that wine and hospitality are two industries that can leverage each other to generate both happy visitors and also economic development opportunities. Other regions should take note!

Collio Revisited: Tradition & Change in One of Italy’s Great Wine Regions

July 23, 2024 By in Italian wine, wine 2 Comments

Collio DOC is a tiny appellation snuggled up against the Slovenian border in north-east Italy. It is a beautiful place. How beautiful? After our recent visit to the region, I noticed that Sue changed her computer’s desktop image to a photo of these hills. Collio replaced another beautiful vineyard area, Cartizze, on the screen, which last year replaced a photo of the Douro Valley. The competition for real estate on Sue’s desktop is fierce. Collio is that beautiful.

2024 marks the 60th anniversary of the founding of the Collio Consortium and we were there to catch up with what is new in this dynamic region, best known for its stunning white wines. This was our fourth trip, having previously visited in 2000, 2015, and 2019. We are grateful to our Colliio Consortium hosts and to everyone who answered our questions and let us sample their wines.

Continuity and Change in Collio

Collio is a region of paradox and contradiction, which makes it very interesting indeed. Start with geography. Colllio is defined by its most distinctive common elements, hills and soil. As the map above (which hangs on Sue’s office wall) shows, Collio is crescent-shaped, with winegrowing concentrated in the hills at the two extremes. The soil profile here is called ponca, stratified marl and limestone rich in minerals and fossils, that resulted from the the rising seabeds that created the hills. Hills and ponca. That’s Collio. Seems pretty simple.

But it is more complicated than that and the wines can have great complexity because of variations in vineyard aspect, grape varieties, clones, blends, and winemaking methods. What seems timeless and simple on first glass is more like a kaleidoscope when examined closely.

And the region and its wines have changed over time, or at least that is how Sue and I have experienced it. We discovered Collio Sauvignon on our first visit and we were swept away by wines like the famous Venica Ronco delle Mele. These wines seemed to us to be a completely different take on this famous wine.

The More Things Change …

We still enjoyed the Sauvignon when we returned in 2015, but other wines caught our attention, including Ribolla Gialla and Friulano. I’m not sure if the style of the Sauvignon had changed or if we were just more open to these new varieties, but it was fun to explore them. Our 2019 visit was focused on Collio Bianco, which are blends of white wines of the region. These white blends were once “kitchen sink” wines meant to use up leftover grapes, but they work so well that they have become signature wines for many producers.

For this trip we explored all of the white wines, including also Pinot Grigio and Malvasia, in blind tastings led by the talented wine writer and Friuli wine expert Richard Baudains. One thing that stood out from the tastings, winemaker meetings,  and winery visits, in addition to the overall excellence of the wines, was the rapid pace of change in the post-covid era. We found a lot to consider. A quick list includes:

  • Generational transitions

The Consortium’s 60 years is short in terms of the region’s wine history, but long on the human scale that defines family wineries. As in many parts of the world, this is a time of transition, with one generation seeking to pass the wine torch to another.

Sometimes the generational transitions are smooth, but sometimes less so. Children who have seen how hard their winemaking parents must work often opt for a different lifestyle. Or perhaps they have different ideas about what their wine should be. In Collio, we were told, one of the effects is that more women were finally entering the industry.

  • Back to the Future wines

I think the generational transition must have gone well at Polje, for example, where we talked with winemaker Sebastian Juretic while sipping his fine wines and looking our over desktop-worthy vineyard views. He loved the winemaking life with all its travails, but he didn’t want to make wines just like his father had, so we tried his Labuccia, an amphora-fermented Ramato-style wine.

Ramato is a traditional Friuli style of wine, with extended skin contact to create a copper color. Ramato is part of the new Collio but it is rooted in the past. Indeed some say that this region is the cradle of orange or skin-contact wine. Sebastian showed us photos of his grandparents making wines like his, but in old-fashioned open tanks, not sleek stainless steel.

  • Investment from outside the region

Several forces are at work driving increased investment in Collio wine from outside the region. Generational change is one of them. This factor was part of the story, we were told, of the iconic Jermann winery’s 2021 acquisition by the Antinori family.

Economic forces are also important. Tenuta Borgo Conventi, for example, is now part of the dynamic Villa Sandi group as that important Veneto wine group has expanded to other Italian wine regions in order to build scale and diversity in its portfolio of offerings. I was discussing this with Borgo Conventi winemaker Paolo Corso over a glass of his fine Sauvignon when I remembered where I had tasted the wine before. It was during a lunch last year at Villa Sandi. The winery executives there were proud to show off this important part of their collection.

This is not a new trend. Collio’s distinctive wines have long attracted attention from outside the region. Attems has been part of the Frescobaldi group for more than 20 years. However, the combination of generational transitions and market forces today seems to be strengthening the investment flows.

Small is Beautiful

Collio is a very small wine region. The Consortium has only about 300 grower and producer members farming 1300 hectares and producing 7 million bottles. Just a drop in the global wine bucket, if you know what I mean.

But the wines are distinctive and differ both from other Italian regions and from each other, but with the hillside and ponca common thread to tie them together. Now more than ever, it’s the kind of place and the style of wines that people are seeking out.

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Sue and I send our thanks to everyone who took time out to meet with us during our brief visit to the Collio region. Special thanks to Lavinia Zamaro, Guilia Formichetti, Federica Shir, and Richard Baudains. Cheers to Dutch wine writer Fred Nijhuis, who shared his insights with us during this trip.