Author Archives: Mike Veseth

Awaken, Bacchus!

January 16, 2010 By in popular culture 5 Comments

I’ve spent the last two weeks watching a nine-part Japanese television miniseries that is based upon a 20+ volume Japanese manga (graphic novel) called Kami no Shizuku (Drops of God).

Have you heard of it? No? Then read on because Kami no Shizuku seems to be changing how millions of people are thinking about wine. Maybe it will change how you think about wine, too.

The Sideways Effect

Wine enthusiasts like to think of wine as a very serious subject, all vintages and terroir and malolactic fermentation and so on. It is hard for us to accept that something as sacred as wine could be influenced by popular culture.

But we know that it happens. The 2004 film Sideways, for example, is said to have set off the Pinot Noir boom in the United States and brought to an end a previous Merlot bubble. It also romanticized wine in a way that cannot have hurt wine sales overall.

No wonder wine tourists come to the Santa Barbara area to drink the same wines, eat the same foods and visit the same wineries as the film characters Miles and Jack (played by actors Paul Giamatti and Thomas Haden Church).

Tokyo Wine-Quake

Sideways had a big effect on the wine world. The Kami no Shizuku effect seems to be several orders of magnitude larger. The reason you may not have heard about it is that this wine-quake is centered in Tokyo, not New York, Los Angeles or London.

The on-going comic book series, written by Shin and Yuko Kibayashi, first appeared in 2004 and has sold more than half a million copies in Japan alone. The Nippon television series that I’ve been watching on DVD premiered in January 2009 and reached millions more.

The Kiyabashis were ranked number 50 in Decanter magazine’s July 2009 “Power List” of the wine industry’s individuals of influence. Kami no Shizuku is “arguably the most influential wine publication for the past 20 years,” according to Decanter.

Most influential in 20 years! Wow. You can get a feel for the phenomenon by reading this English translation of some of the graphic novel volumes.  (Note: click on the images to move to the next page. Don’t worry if it appears to be in Japanese — the English shows up once the story begins. Read the story panels from right to left on each page the way the Japanese do.)

Kami no Shizuku has set off a wine boom in Asia, where, much as with Sideways, enthusiasts rush to taste the fine wines (mainly from France, mostly Burgundies and Bordeaux) that are featured in each storyline. The rising sales of these iconic wines has been good for these particular  producers, but I think the bigger effect has been to draw millions of Asian consumers into the market and help them to develop a personal sense of wine.

The Da Vino Code

I’ve been trying to decide how to explain Kami no Shizuku and why I think it has had such a profound effect on wine is Asia and soon, perhaps, around the world. One reason is that it is a good story and that it always important. The Nippon TV series is pretty much a soap opera and you know how addictive those are!

But I think the real factor is that Kami no Shizuku presents a different idea of wine.  Wine is presented as a sort of mysterious but not impenetrable secret  society (think Da Vinci Code), with its own history, geography, rituals language and traditions. It is a mystery waiting to be solved.

The reward for mastering its intricacies is a sort of divine communication (hence “Drops of God”).  Wine can communicate a time and place, an emotion or experience.  Tasting wine even allows the living to talk with the dead, in a way that the story makes clear but I won’t reveal here.

A Hundred Flowers

You can get a small sense of this communication by watching the music video with scenes from the television series I have embedded into this post. Our young protagonist is upset with his wine-obsessed father for never leaving flowers on his mother’s grave. He always leaves wine — Domaine de la Romanée Conti Richebourg 1990, if you are interested — not flowers as a proper grieving husband/father should.

Later, as he begins to learn the language of wine and unlock its secrets, he discovers that this Burgundy is the truest expression of the love the flowers are meant to represent — not a dozen flowers, but a field of them.  Watch the video — you’ll get this point and more. And so the journey and the complex exchange of ideas, feelings and emotions begins.

Awaken, Bacchus

“Awaken, Bacchus,” he says, when he wants to move beyond the physical senses to taste the memories and emotions that lie hidden in the wine glass. Who wouldn’t want to have such a transformative experience? Who wouldn’t want to see what mysteries wine can be revealed?

Kami no Shizuku seems to have unleashed two forces in Japan and perhaps eventually around the world. One is the competition for status and self-esteem through the conspicuous consumption of the trophy wines featured in the comics and television series. This materialistic competition is even part of the plot! It is nothing new, although I’ll bet the French producers are thankful for it during this economic crisis.

The other is a different sort of quest — this one for meaning and fulfillment — with unruly Bacchus an unlikely guide. The competition here is more subtle and inward-looking, but the rewards are much greater (another lesson of the story).

Both quests are important from an economic standpoint, but it is only the second one that has the potential to awaken a new kind of audience for the pleasures of wine by waking up the Bacchus inside us all.

http://drama.watchanimeon.com/kami-no-shizuku/

What [Wine] Women Want

January 10, 2010 By in health, popular culture, wine brands, wine research 1 Comment

I’m always interested in the questions my students ask about wine and so I look forward to their final papers, where they have pretty much free rein to pick the questions and search for answers. My Fall 2008 class seemed to be particularly concerned about what I think of as ethical questions – wine and the environment, for example, and fair trade wine. I wrote about their papers here.

My Fall 2009 group was very different in terms of their interests and “wine personalities” — and they were disproportionately female — and their choice of paper topics reflected these facts.

All in the Family

Three questions attracted more than one student’s interest and so are worth noting here. Marc and Isabelle both wrote on the future of family wineries. They are both business majors and interested in the fact that an unusual number of wineries, including very large ones like Gallo, Boisset and Yellow Tail, are family firms not private partnerships (The Wine Group) or public corporations (Constellation Brands).

Their papers examined the problems and limitations of family-owned businesses and what industry-specific advantages might account for the success of family wineries.

Wine, Women and their Health

Two students, Kelly and Libbie, decided to use their backgrounds in science to probe questions about wine and health in more detail than is typically seen. Kelly wrote on the chemistry of the “red wine paradox” while Libbie examined the question of whether pregnant women should drink wine. The conventional wisdom, of course, is that moderate wine consumption (2-3 glasses per day, especially red wine and especially with meals) provides positive health benefits except for pregnant women, who are specifically told to avoid any alcohol on government-mandated warning labels.

The research papers showed that the health issue is more complex than is generally appreciated and provided a surprising answer to the question, should expectant mothers drink wine? Although there are obvious problems with excessive alcohol consumption, research studies indicate that very modest wine consumption (in the range of one glass a couple of times a week, as I recall) can provide health benefits to both mother and baby.

It is obviously a delicate balance, however, and the fact of rising alcohol levels in wine (which I wrote about here) makes getting the balance right increasingly problematic.

What Do [Young] Women Really Want?

Two of my favorite papers were written by young women who wanted to know more about how wine companies tailor their marketing to their particular demographic. Elyse examined marketing to the so-called Millennial generation and Anna focused on wine brands designed to appeal to young women like herself. Women purchase more wine than men and young women are the key wine buyers of the future, so it makes sense that wine companies would try to target and develop this market.

Anna identified the wine brand pictured above as an example of marketing to young women. She noted that brand name, the choice of colors and several other factors made Bitch wine particularly attractive to young women wine buyers, especially those who are new to wine. Take a close look at the label and I think you’ll see what Anna is talking about. Pink label, sewing (female stereotype) imagery, Bitch rhymes with stitch, even the little hearts and crosses that suggest needlepoint.

Bitch Bitch Bitch

She called particular attention to the back label. Some wines use the back label to provide production details or tasting notes. Bitch wine, however, just says “Bitch bitch bitch bitch …” and so on.

Would Anna buy Bitch wine? Probably not. She found the packaging appealing, but the lack of more detailed information about the wine itself was a real negative. She might have tried it a few months ago, she said, but after taking our class she knew too much about wine (and asked too many questions) to respond positively to this marketing scheme even though the imagery attracted her.

Bitch seems to be wine for women who are beginners in wine, she said,  and Anna isn’t a beginner any more.

Australia: Back to Square One

January 4, 2010 By in Australian wine, economic crisis Leave a comment

I’ve written a lot about Australia’s wine crisis and for a long time I felt like Chicken Little. The sky is falling, I’d say, but Australia seemed somehow to muddle through.

There is a strong sense now, however that Australia’s crisis has arrived. (I was going to write something about Australia’s Chicken Littles coming home to roost, but it was too awful even for me.)

Sales of Australian wine are down here in the U.S., dragging down sales of Syrah/Shiraz from all places with it. It’s worse in Great Britain, Australia’s number one export market, I’m told.

Charles Gent’s article “The Writing on the Wall,” posted today on Inside Story, provides an excellent overview of the situation and is required reading for anyone interested in Australia’s wine future.

I find a number of parallels between the Australian wine crisis as explained in Gent’s article and the global financial crisis that I wrote about in my recent book Globaloney 2.0.

First, this isn’t the first wine crisis in Australia’s history. Gent writes that

Visiting an ageing Hunter Valley winery in the late 1950s, wine aficionado Max Lake was struck by a faded notice on the door, apparently dating from the Great Depression. Beneath the forbidding heading “Warning to Growers,” it read: “Owing to the dangerous position arising from Overproduction, Growers are warned against any further planting of Wine Grapes.” Beneath the text was the name of Herbert Kay, chairman of the Australian Wine Board.

Two months ago, the Wine Board’s modern equivalents slapped a similar notice on Australia’s wine producers. Issued jointly by the Winemakers’ Federation of Australia, Wine Grape Growers’ Australia, the Australian Wine and Brandy Corporation and the Grape and Wine Research and Development Corporation, the statement is more wordy than the 1930s edict, but equally blunt in its message. It states that Australia is producing twenty to forty million more cases of wine than it can sell each year, and that the current surplus stockpile, calculated at more than 100 million cases, will double in two years if current levels of production and demand persist.

A second feature is that the wine bubble (because that is what it was) had all the main features of a financial bubble including the fact that anyone who looked at it objectively would have recognized it as such. But these Chicken Littles could not compete with those with an interest in keeping the bubble growing.

The massive plantings were seen by many industry figures as a desirable and necessary corollary of the soaring offshore demand, and traditional grape growers who expressed misgivings about the rate of expansion got short shrift. As president of the Winemakers’ Federation in 1999, Brian Croser described their concerns as a “Luddite viewpoint” and called the tax scheme plantings “a great resource.”

Finally, to keep this post reasonably brief, it isn’t enough to just pull out a few vines and go back to business as usual. More fundamental reform is needed.

To go forward, it seems the industry first has to take a step backward. In other words, says Strahan, “We have to get rid of the oversupply as quickly as possible to start bringing some margin back into the business, and to start getting a connection with the consumer that is not defined by price.”

That’s not quite back to square one, but it’s close.

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Update 1/5/2010.

Decanter.com reports that Constellation Brands has cancelled 300 grower contracts in South Australia, another sign of the rapid consolidation of the wine industry down under. Decanter reports that …

Australia’s biggest buyer of wine grapes advised growers just before the New Year that they would see their contracts end after the 2012 vintage.

The company had previously given three years’ notice to more than 200 other contracted growers in December 2008.

The decision has come at a time when growers in the region are facing plummeting wine grape prices.

In some cases growers are being offered up to 50 per cent less for their grapes than in 2008, according to figures released by Constellation and other major wineries in December.

The Elephant in the Room: Alcohol

December 31, 2009 By in alcohol, health 2 Comments


I’m writing this post on New Year’s Eve, the night when many folks go out to celebrate, have a little too much to drink and end up “seeing pink elephants,” as the saying goes. It’s a good moment to think about alcohol in wine.

Pink Elephants

Alcohol is the [red, white or pink] elephant in the room for many wine enthusiasts. We know that wine contains alcohol and that alcohol levels having been rising in recent years (more about this later). We know that alcohol has lots of negative social and health effects. We know that anti-alcohol sentiments are rising around the world, even in France, where  wine is deeply embedded in the national culture. But, like the metaphorical pachyderm, we pretend we don’t see these facts and try to ignore them.

But maybe it’s time to sober up. Wine enthusiasts have for a long time been comforted by the French Paradox finding that moderate consumption (defined by health experts as 2-3 glasses a day) of red wine is beneficial to your health. We need to remember that the finding that wine can be good for you is actually the result of a delicate balancing act. The alcohol in wine has few positive and many negative health consequences. The resveratrol in wine and its antioxidant compounds generally have positive effects, especially when wine is consumed with food.

So it’s really a balancing act of pluses and minuses in terms of your health. And balance is the key, too, regarding wine’s social effects. Excess consumption of wine as for any alcoholic beverage is a real concern. Wine’s reputation as the drink of moderation has given us comfort in this regard. Wine drinkers aren’t as likely to go overboard as those who consume beer or spirits, we tell ourselves. Thus do we convince ourselves that wine doesn’t have an alcohol problem.

Zinfandel Rising

But maybe that is changing, both in terms of social attitudes towards wine (see France) and in terms of the wine itself.

Alcohol levels in wine, especially red wine, have been creeping up for many years. Twenty years ago the Zinfandels I bought averaged about 12 – 12.5 percent alcohol. Try to find one with less than 14 percent alcohol today. There are some out there, but most are 14.5  and even 15+ percent, which is about a 20 percent increase.

If you take the health issue seriously, this reduces your “moderate” consumption rate from 2-3 glasses to maybe 1-2 per day.

It also obviously affects the taste and texture of the wine and not always in a good way. The problem used to be that grapes were harvested too soon, so some European AOC rules provided more prestigious designations for wines with higher alcohol levels. Wines have to have at least 12 percent alcohol to gain the Chianti designation, for example, and 12.5 percent for Riserva. It isn’t the alcohol itself that is being encouraged here, but the higher quality riper grapes that produce it.

The 18.3 Percent Solution

This doesn’t seem to be as much of a problem today. By the time the grapes in many regions have fully developed flavors it seems that they have over-developed sugar levels that produce a lot of alcohol.

This fact struck me while I was reading Dr. Jay Miller’s review of 2008 Australian wines in the new issue of Wine Advocate. Australia had an awful year in 2008, with wildfires (that left some wines with smoke taint) and a heat wave — day after day of 100 degree plus weather that baked the vineyards and pushed sugar levels over the top.

The amount of alcohol that resulted is stunning (both figuratively and maybe literally, too). Dr. Miller reports that some reds from well regarded Marquis Phillips came in as high as 17.6% (for a Grenache) and even 18.3% (a Shiraz). Eighteen percent is fortified wine territory (and would be regulated as such in many U.S. states), but these are dry table wines. This pushes the limit for wine in all respects, don’t you think?

Adding Jesus Units

Interestingly, rising alcohol levels have appeared despite winemaker efforts to keep them low. The dirty little secret of California wine is that a great deal of it goes through some form of de-alcoholization, where at least part of each vintage has alcohol removed to bring down the overall level.

Another approach is to “just add water” to the fermenting must to literally water down the potential alcohol. A friend calls this technique “adding Jesus units” because water is turned into wine instantly; he says that it is a common practice, if not one that anybody admits using.

I think we might be at the tipping point in terms of alcohol in wine. Winemakers are surely aware of this fact and consumers need to sober up about it, too.

Wine critics have so far resisted reporting alcohol levels in their ratings and tasting notes except in exceptional cases. Maybe it’s time to change this practice so that we can begin to appreciate just how big our alcohol elephant has become.

Note: The “Elephants on Parade” sequence is from the 1941 Disney animated film Dumbo. It’s my New Year’s gift to all Wine Economist readers.


Can’t Buy Me Love

December 24, 2009 By in wine ratings, wine research 2 Comments

The discussion continues over on the American Association of Wine Economists’ blog about whether winemakers’ money (in the form of advertising) can buy love (in the form of higher scores from wine critics).

The discussion is provoked by an article recently published in the Journal of Wine Economics that tried to find out by analyzing Wine Spectator ratings of advertised versus unadvertised wines compared to the scores given by Robert Parker’s Wine Advocate, which does not accept advertising.

A Natural Experiment?

Economists are drawn to Freakonomics-style “natural experiments” like this one but there are several reasons why it would be difficult to prove systematic advertiser bias at Wine Spectator if it existed (and I don’t think it does).

First, you would need to have a set of ratings that would give you a “true” value for each wine that could be compared with the critic scores to reveal bias. However research published in the Journal of Wine Economics actually suggests that wine ratings are highly variable — different experts can give the same wine much different ratings and, indeed, the same wine judge can give the same wine different scores, too, in blind tastings.

I don’t think, based on this research, that  it is possible to assemble a set of objective, unbiased scores to serve as a “control” data set. Without that control, it is hard to prove anything, even with sophisticated statistical tools.

The Mondovino effect

Second, it is kind of ironic that Wine Advocate was used in this study as the control. Although WA doesn’t accept advertising and is presumably immune from advertiser influence, that doesn’t necessarily mean it is unbiased. Indeed, the scuttlebutt in the wine world (see Mondovino for example) is that Robert Parker has a very definite (you might say biased) idea of what wine should be and that his ratings very much reflect his particular palate.

Let me say that I am not how sure how true this is and, because I am not an expert wine taster, I am not the right person to judge it. I will say that I have tasted some very un-Parker wines (in terms of the style stereotype) that received high WA scores, so I am a somewhat of a Parker bias skeptic.

If, however, we accept for the sake of argument the conventional wisdom that certain types of wines are more likely to get high Parker scores than others, then it seems like WA ratings are a problematic control for this experiment. You would be comparing possibly-biased apples with oranges that could be biased in a different way.

The problem gets worse when you consider the accusation that is often heard that some winemakers tailor their wines to Parker’s palate in an attempt to get good ratings.  Some of these makers of “Parker wines” are probably more likely than others to advertise in WS and other publications.  It’s a messy situation, don’t you think? Hard to filter out an objective control with all the alleged “noise” in the data and even more difficult to track down potential bias.

Market Discipline

Finally, I’d like to suggest one more irony. The premise of the original study is that wine critics will cheat on their clients (the subscribers) when the benefits in terms of advertising revenue is high enough (so long as they can keep their bias secret).

I understand that subscribers don’t want to play if they think the game is fixed, but it seems to me that the same holds true for advertisers. Who would want to buy ads in a magazine if it looked like doing so was equivalent to paying “protection” to the mob? It seems to me that I’d run the other way. Wine critic publications both need to be unbiased and to appear unbiased in order to prevent the advertising equivalent of  “capital flight.”

And so the final irony is this. Because Wine Advocate does not accept advertising, it is not subject to this sort of “market discipline.” Robert Parker could in theory be as biased in his ratings as he wants and it would never cost him a single advertising dollar.

Does Parker exploit this freedom to promote particular interests? No, I don’t think so, but he could. Simply being ad-free is no guarantee of virtue (or objectivity) any more than selling ads is an indicator of vice.

Critics (and not just wine critics) live in a messy world of complex incentives and disincentives. We, the consumers of critic opinions, need to understand the situation and make our own subjective judgments.

Paul Samuelson: Wine Economist

December 14, 2009 By in wine research Leave a comment

OK , OK. I admit that I am not really sure that Paul Samuelson, who died yesterday at age 94, ever wrote anything about the economics of wine (except when he was analyzing Ricardo’s wine-for-wool comparative advantage story, of course).

But he sure wrote about everything else, as his full-page obituary in today’s New York Times makes clear. His influence infiltrated nearly every nook and cranny of contemporary economics so it is surely not wrong to say that he influenced wine economics, too.

Guns, Butter and Wine

I only met Samuelson once (at a party at George Horowitz’s house) but he influenced me and my work in many ways. I especially appreciated his wit. I have a copy of the 1948 first edition of his famous economics textbook and it always pleases me to note that when he draws the diagram for guns versus butter, he actually uses pictures of field artillery and tiny cubes of butter to make his abstract point concrete.

Most of all, however, I remember Samuelson for his bold focus on economic dynamics, which I discussed in the chapter seven of my 1998 book Selling Globalization. Samuelson saw economics as the study of change and the possibility of instability, not just static equilibrium (see the section called “unstable foundations” in the middle of the chapter).

That’s why I’ve chosen this photo from today’s Times. He’s sitting in front of a graph of the “cob-web” theory of a dynamic market. This model is most frequently applied to markets for agricultural products — like wine grapes (my wine economics hook) — and it was the graph that made me want to be an economist. (Click on the link above to view a short video about the cob-web theory.)

The idea is that agricultural markets aren’t always stable in the way we usually think about stability. They can be subject to various kinds of cycles and price surprises.

Here’s how it works. In normal markets, producers look at today’s price and decide how much to supply today. This often isn’t possible in agricultural markets because the supply decision was made in the past (when the crop was planted) based upon price information and expectations then.

Winegrower Cob-Webs

The result of this delayed grower response to today’s market information is that price seldom quickly settles into a comfortable equilibrium the way the textbooks teach.

Sometimes (as in the graph in the photo) price rises this year (encouraging growers to plant) and then falls next year (when the extra output hits the market, causing growers to cut back the next year) and then rises a little less the year after that (as the smaller crop pushes prices up again and makes growers optimistically increase plantings once again) and then falls a little less the year after that (due to the unintended surplus) and slowly converges on equilibrium by surrounding it (creating the cob-web shown here). Once at equilibrium, price holds steady until something inevitably shakes things up and starts the cob-web process again.

Winegrowers are certainly familiar with the market cob-web although theirs is more complicated because it takes longer for newly planted vines to bear marketable fruit. Even though the market may be stable in the theoretical long run, prices can fluctuate wildly in the short term, raising all sorts of havoc in the process.

Worse than this, however, is a second sort of cob-web (created by sometimes small differences in the slopes of the demand and supply curves) that causes  the price swings to grow larger and larger instead of converging until the market finally collapses in crisis.

Anyone who studies the history of commercial wine growing understands that this sort of cob-web is more than a theoretical possibility! Raise a glass and toast the life and work of a great economist, Paul Samuelson.

Do Advertised Wines Get Higher Ratings?

December 12, 2009 By in wine critics, wine research 1 Comment

That’s the question that Boston College economist Jonathan Reuter asks in a new article in the Journal of Wine Economics titled “Does Advertising Bias Product Reviews. An Analysis of Wine Ratings.”

The Answer is No

Using data from Wine Spectator (which sells advertising) and comparing them to ratings from ad-free Wine Advocate, Reuter fails to find significant systematic bias in favor of advertised wines. In fact, a comparison of the average scores given to advertised and non-advertised wines shows a slight difference the other way, with non-advertisers receiving higher average scores.

Wine Spectator advertisers = 87.50

Wine Spectator non-advertisers = 87.58

Wine Advocate (the control in this experiment) also rated the wines that weren’t advertised in WS slightly higher than those that were, although it also gave higher average scores to all wines in the data set and the gap between the two groups was larger.

Wine Advocate scores of WS advertisers = 88.15

Wine Advocate scores of WS non-advertisers = 88.65

Reuter concludes that

Overall, the tests for biased ratings and biased awards produce little consistent evidence that Wine Spectator favors advertisers. At worst, the tests for biased ratings suggest that Wine Spectator rates wines from advertisers almost one point higher than wines from nonadvertisers. However, selective retastings can explain at most half of this bias and only within the set of U.S. wines rated by both Wine Spectator and Wine Advocate. Given Wine Spectator’s claim that it rates wines blind, the remaining difference in ratings may simply reflect consistent differences in how the two publications rate quality. The fact that tests for biased awards provide no evidence of bias suggests that there is little bias overall. Therefore, despite the fact that Wine Spectator is dependent on advertising revenue, the long-run value of producing credible reviews appears to limit bias.

Reuter’s analysis obviously goes far beyond a simple comparison of means. Click on the link in the first paragraph to read the full article.

Dog Bites Man?

Most people are likely to see this as a classic  “dog bites man” non-story — the reason we pay attention to wine ratings is because we trust that they are unbiased, so it is not particularly newsworthy to discover that our trust is well placed.

But there is theoretical interest in the question because of the Principal-Agent problem. We the principals hire wine critics (by subscribing to their publications) to be our agents in evaluating wine quality. They have an interest in honoring this contract and assigning ratings with integrity in order to keep our business. On the other hand, however, they also have an incentive to act in their own narrow interests and exchange good ratings for advertising revenues.

Theory says agents will tend to cheat on our agreement if they can keep us from finding out. Hence we are suspicious of agents even as we put our trust in them. So you can see why economists might be surprised that wine critics, at least in this study, seem to put integrity first.

Reuter concludes that a reputation for honesty is worth more than potential gains from a pay-for-points regime. It is understandable that wine critics would be  offended that their life work is reduced to a simple balance of economic interests, but that’s how economists see the world.

Splitting Hairs

I appreciate the interest in wine rating scores — economists are attracted to data sets the way television-junkies go for reality shows. Since Wine Spectator rates the most wines of any publication it is unsurprising that we want to use them in our analysis.

I have always been uncomfortable with this. The temptation is to treat wine ratings as a consistent and reliable metric to measure quality (or at least perceived quality). But I’m not sure this is really a valid analytical technique.  I don’t rate wines, but I do rate students and I know that grades are not a perfect measure of the quality of student performance. Grades (even when given blind like the WS scores) are subject to any number of distorting factors. The scale is affected by context, of course, and changes over time.

I’m not saying that critics shouldn’t rate wines any more than I would advocate getting rid of student grades. I’m just saying that we ought to be very careful when we use wine scores (or student grades) in substantive research.

I know that comparing average grades for different types of classes taught by different professors at different times is problematic, so it is understandable that I think similar problems exist for wines ratings. I always take the conclusions  of empirical economic analysis based upon wine ratings — even when it is very good — with a grain of salt. To his credit, Reuter acknowledges the empirical limitations of his study.

How is Wine Spectator Different from Goldman Sachs?

Newspapers these days are full of stories of financial industry executives who are keen to raise cash and pay back TARP funds so that they are free to pay themselves generous bonuses. Although a closer investigation might make me alter my views, it sure seems to me that the collective interests of the principals (taxpayers, corporate shareholders) are being sacrificed in order to further the particular interests of the agents.

If Goldman Sachs does it, why should we think that Wine Spectator does not?  No wonder we are surprised by evidence that they don’t. Maybe the more interesting question, from an economic theory standpoint, is why Wine Spectator is different from Goldman Sachs when both face principal-agent problems in businesses where uncertainty and asymmetric information prevail? That would make a really interesting study!

Which Wine Magazine?

December 6, 2009 By in decanter, robert parker, wine magazines, wine spectator 9 Comments

Wine enthusiasts spend a lot of time and money on magazines and guidebooks and I guess they are never sure if they’re getting the best advice. One of this blog’s most common referring links is the Google search query “world’s best wine magazine?” Want to know the answer? Read on.

If you were going to read just one wine magazine, which one would it be? I decided to use my university students to try to find out. They are plenty smart and know a lot about wine, but they don’t (yet) spend much of their time reading these publications.  Perfect subjects for a little media analysis experiment.

Three Ideas of Wine

I passed out copies of perhaps the three most influential wine magazines on the planet and asked my students to analyze them in terms of point of view, intended audience and, of course, which one they would want to read.

The three magazines are Wine Spectator, Decanter and Wine Advocate. Wine Spectator has the highest circulation of any wine magazine in the United States and probably the world. Decanter, a British publication, sells fewer copies, especially here in the U.S., but has global reach.

Robert Parker’s Wine Advocate is a subscription-only publication; most people don’t actually read the Wine Advocate, they just see the rating numbers and blurbs on Wine Wall shelf talkers promoting particular bottles. It’s very influential despite its limited distribution.

The magazines are different in almost every way. They certainly represent three different ideas of wine. Which is best? Well, that depends.

Wine Spectator

My students quickly labeled Wine Spectator a “lifestyle” magazine and this isn’t just because it has non-wine or tangentially-related-to-wine  “lifestyle” articles about food, travel, celebrities and so forth. The advertisements were the giveaway to them. While many wine companies advertise in WS, so do the producers of many luxury and designer products.

(Most wine mags are lifestyle publications, they just have differing ratio and proportion of wine, wine-related and pure lifestyle editorial content. It would be interesting in give the students Wine Spectator, Wine Enthusiast and, say, Wine & Spirits to analyze regarding wine versus lifestyle emphasis. Maybe next term.)

Taken together, the editorial content and the advertising (plus the “coffee table” large format) gave my students a strong sense of a plush lifestyle publication. Wine is part of that world, they said, but not the only part of it. Some were attracted to this lifestyle image and other repulsed. They all found it fascinating.

Decanter

Decanter’s cover boldly proclaims that it is “The World’s Best Wine Magazine.” Is it?

Decanter is a lifestyle magazine, too, but that’s not what struck my students. Compared to Wine Spectator they noted a more specific wine focus and talked about finding deeper analysis of wine regions and issues.  I’m not sure if this is really true or if it reflects Wine Spectator’s high advertisement page  count, which might make it seem like there is less wine content.

But for whatever reason Decanter seemed more seriously interested in wine as opposed to lifestyle, according to my students.

Decanter has a different approach to wine ratings, too. Whereas Wine Spectator has many wine reviews in the back covering new releases from the U.S. and many international regions, Decanter typically features in-depth review articles on just two regions. You get more breadth of coverage with Wine Spectator and more depth with Decanter.

Wine Spectator made good  browsing, one student said, and sometimes that’s just what you want, but Decanter would be better to read.

Wine Advocate

My students were shocked by Wine Advocate. Nothing in their experience had prepared them for a “just the facts, ma’am” wine publication. Black type on tan paper. No photos. No ads. Page after page of winery and wine reviews, focusing on three or four regions in each issue.

Not for browsing. Not for reading. You have to study Wine Advocate to get anything out of it they said.

Who reads Wine Advocate? No one would read it for pleasure, according to the students. (I disagree — geeky baseball fans read columns of statistics on their favorite sport. I think there is a similar wine reader.) You would read it for business — because you are a wine retailer, distributor, investor or maybe own a restaurant.  This, they said, was a magazine for readers with a serious professional purpose.

The World’s Best Wine Magazine?

So which one is the best?  I know my answer. If I could only read one it would be Decanter because I think  it is more focused on the supply and demand issues I write about. It’s a wine magazine written by and maybe for “Masters of Wine” who care a lot about commercial concerns.

Unfortunately, Decanter’s specific consumer wine advice is mainly irrelevant to me since the British market it covers is so different from my Wine Wall here in the United States. Very few U.S. wines (apart from the big multinationals) successfully break into the British market, for example, and so we get little space in Decanter compared to wines from Europe and Australia. The market here is just the reverse.

My students weren’t willing to choose a “world’s best wine magazine.” They could see strengths and weaknesses in all three.  One student said it boiled down to a trade-off between accessibility (Wine Spectator) and authenticity (the more detailed analysis of terroir you find in publications like Wine Advocate) and there’s no perfect balance between them.

In wine, as in many other areas of life, we want both accessibility and authenticity and I guess my students have already become both surprisingly self-aware of their position in this struggle and skilled at negotiating the complex space it  creates. Interesting.

World’s best wine magazine? No such thing. It depends on who you are, what you are looking for and your particular idea of wine.

Wine Spectator 100: North and South

December 2, 2009 By in Argentina, Chateau Ste. Michelle, Paul Gregutt, Supply and Demand, Washington wine, wine awards, wine bargains, Wine Competitions, wine critics, wine markets, wine price, wine ratings, wine spectator 2 Comments

The lists of the Top 100 wines have started to appear — just in time for holiday buying. Wine Spectator released their Top 100 last week and now Wine Enthusiast has followed suit. Other lists are showing up, too, such as Paul Gregutt’s list of the 100 best Washington wines.  Fun and informative, these lists provide wine lovers with endless opportunities to discuss, debate and of course pull corks. Gotta love ’em.

But you’ve gotta hate ’em, too. Top 100 lists are a mixed blessing on the supply side of the market. Although they do promote wine and wine drinking generally, they necessarily privilege some wines over others and this is always problematic given the thousands and thousands of good wines that are produced each year. Why this wine and not that one? It’s an inevitable question that matters because wines on the list get more attention than the wines that don’t for some reason make the cut.

Dancing in the Streets

Top 100 lists slice up the market in many ways and this year my email inbox has revealed a North-South divide. Here in Washington State we are very happy with the 2009 Wine Spectator league table. Nine Washington wines made the list — more than any previous year — including the #1 spot, which went to the 2005 Columbia Crest Reserve Cabernet Sauvignon (95 points, $27 dollars). Two Oregon wines were also listed, so altogether this was a banner year for the Pacific Northwest.

While they are dancing in the streets in Woodinville and Walla Walla, the mood is more sober down south in Mendoza.  Two Argentinian wines appear on the WS100, which is welcome recognition of course, but that’s down from four last year. This is really Argentina’s year to shine in the U.S. wine market, with overall sales surging by more than 40% in dollar value according to Nielsen ScanTrack data. But only half as many WS100 wines! You can’t blame members of the Argentinian industry for kinda hoping to see their success more enthusiastically celebrated in the Top 100 lists. Hmmm. Maybe next year.

A Nobel Prize for Wine?

It seems to me that these top 100 wine lists are a little bit like the Nobel Peace Prize. Highly publicized awards like the Nobel and the Top 100  end up being both reflections of excellence and opportunities for the judges to send a message (political, economic or otherwise). There are many worthy nominees for each award so the final choice is always arbitrary — and the opportunity to send a message is irresistible. Or at least I wouldn’t be able to resist it.

There are obviously many factors that go into a Top 100 wine list and a wine’s objective quality  is just one of them. This is easy to see if you take numerical ratings seriously. The WS100 #1 wine this year earned a 95 score, for example, but the #2 wine received a higher score (96) and the #8 wine’s score was even higher (99). A 100-point wine was placed in the 21st spot last year. This is a numbers game but not just a numbers game.

Don’t Cry for Argentina

Wine Spectator uses four criteria in making their list: quality (the score), value (the price), availability (the volume) and excitement (the X-factor). The Columbia Crest wines (both the Reserve that won this year and their other wines) generally do very well on the first three factors year in and year out. The X-factor this year, I believe, was the recession and the desire to inspire some excitement among American buyers by giving them a #1 wine they could find and afford. That $27 Columbia Crest wine says that American wine drinkers can enjoy truly excellent wines at relatively affordable prices. Time to start pulling those corks! A good message to send in this economic climate.

What about Argentina? Well, I understand their situation. No problem with quality, volume or availability. But I think the market excitement is already there and doesn’t need any help from the wine lists at this point (as much as the Argentinian makers would love to have it). The U.S. industry (like President Obama?) could use some encouragement right now, which may be a good enough reason to draw attention to its outstanding, good value wines like the Columbia Crest Reserve.

Note: Congratulations to Juan Manuel Muñoz Oca, the 34-year old Argentinian winemaker who made the #1 Columbia Crest Washington State wine. What a great North-South connection!

Beaujolais Nouveau: A Black Friday Wine

November 23, 2009 By in economic crisis, globalization, Supply and Demand, wine bargains, wine brands, wine markets, wine price 2 Comments

I’m putting together wine recommendations for the upcoming Thanksgiving holiday feast. Bubbles (for celebration), Riesling and Pinot Gris (great food wines), Zinfandel (the most American of wines) and Pinot Noir (just because).

Missing from my list is perhaps the most appropriate wine of all: Beaujolais Nouveau. Here’s why.

A Wine for Today’s Thanksgiving?

Although the United States is not the only country to set aside a day for giving thanks, we like to think of Thanksgiving as our distinctive holiday. It was conceived as a day for deep reflection, but Thanksgiving has evolved into a long weekend of over-consumption and discount shopping. Some of my friends really prefer to celebrate Black Friday, the day after Thanksgiving, when the holiday shopping season formally begins and retailers find out if they will be “in the black” for the year based upon early sales data.

If you plan an Old Time giving-thanks Thanksgiving, then Nouveau is not for you. It is not an especially thoughtful wine. It is a sorta soda pop wine; if wine were literature, my friend Patrick points out, Nouveau would be the  trashy paperback novel you read at the beach. Nothing wrong in that — everyone needs an escape once in a while.

The grapes for Nouveau are picked in late September or thereabouts and the only thing that prevents instant sale is the necessity of fermentation and the mechanics of distribution.  It’s still a bit sweet when it’s bottled and sometimes a bit fizzy, too, when it arrives with great fanfare on the third Thursday in November (a week before Turkey Day). Best served cold (like revenge!) it is the ultimate cash flow wine.

Black Friday Wine?

Nouveau is not very sophisticated, so why do the French, who otherwise are known to guard their terroirist image, bother with it? The Beaujolias producers make very nice ordinary (non-nouveau) wines; character complexity, you can have it all and for a surprisingly low price.

Ah, but that’s the problem. Sitting close to prestigious Burgundy, the Beaujolais cannot command high prices for their wines, good as they are, so they must try to make money through turnover more than markup. They churn out millions of bottles of Nouveau to pay the bills.

At the peak of the bubble in 1992 about half of all wines made in Beaujolais were Nouveau. The proportion remains high even today. Ironically, Nouveau often sells at prices as high as Beaujolais’ more serious wines because it is marketed so well. So it is hard to see why you’d want to buy it instead of the region’s other wines. It’s easy, on the other hand, to see why you’d want to sell it.

Beaujolais Nouveau, it seems, is France’s Black Friday wine! If the makers can sell their Nouveau, then maybe the bottom line for the year will be in the black. If the Nouveau market fails, well that red stain on the floor won’t be just spilled wine.

More than the Usual Urgency

Nouveau is therefore generally marketed around the world with more than the usual urgency (just as those Black Friday sales seem a little desperate at times) — and not just because young wines hit their “best by” date pretty quickly. This year things are even more stressful than usual, as you might imagine, with the economic crisis still on everyone’s minds and 10+ percent unemployment here in the United States.

I saw Georges Duboeuf Beaujolais Nouveau selling for $8.99 a bottle on Saturday, about $4 less than last year. Given typical retail margins and the high cost of shipping this product by air, it is hard to see much profit. It will be a Red Thursday this year, I think, not a Black Friday, for Beaujolais.

Nouveau is usually distributed around the world via expensive air freight rather than more economic sea transport in part because the short time between harvest and final sale makes speed a factor. This year Nouveau was bottled in plastic for the Japanese market in part to lower shipping cost — a controversial move that may not be repeated because of its negative product image potential.

Intentionally choosing to adopt a more casual image (see photo), Boisset put all its US-bound Nouveau in screw-cap PET bottles, with a resulting 40% reduction in shipping cost.

An American Wine?

Sweet, fizzy and packed in PET bottles — Beaujolais Nouveau sounds like the perfect wine for the American consumers brought up on 2-liter jugs of fizzy-sweet Mountain Dew and Diet Coke. If you were kinda cynical, you would think Nouveau was an American wine … made in USA.

And it is, in a way. Although the wine obviously comes from France (and there is actually a long tradition of simply and fun early-release new wines in France and elsewhere), I think it is fair to say that the Nouveau phenomenon is an American invention.

W.J. Deutsch & Sons, the American distributors, really put Beaujolias in general and Nouveau in particular on the U.S. wine market map when they became exclusive distributors for Georges Duboeuf some years ago. They took this simple wine and made it a marketing event. To paraphrase an old Vulcan proverb, only Nixon could go to China and only the brilliant Deutsch family could sell Nouveau!

In fact they were so successful that they partnered with another family firm — the Casella family from Australia — and created a second wine phenomenon tailored to American tastes: Yellow Tail!

So although Nouveau is an American wine of sorts and might be perfectly crafted for this American holiday as we actually celebrate it on Friday, I’m going to pass this year (on Thursday, at least) and see if I can nurse some thoughtful reflection from my holiday glass instead. Cheers, everyone! And thanks.