Sometimes the Best Wine is a (Non-Alcoholic) Beer

win“Sometimes the best wine is a beer” is the title of a chapter in my book Money, Taste, and Wine: It’s Complicated. The chapter begins with a situtation that most wine drinkers have experienced. Stranded at a charity reception with only tasteless donated wine to drink, I long for the craft beer that others seem to be enjoying so much.

At really low price points (and sometimes at higher price levels, too), I am afraid that the best wine probably is a beer, at least if you care what you’re drinking.

Recently I’ve had an opportunity to explore another situation where wine fares poorly compared to beer: when you need to avoid alcohol for one reason or another.

Non-alcoholic wines are available but they are not really much of a thing here in the U.S. — at least not yet — although they are getting more attention in Europe. Sue and I learned about Matarromera Group’s innovative “Win” alcohol-free wines during our visit to Spain, for example. Matarrommera sees potential in the non-alcohlic wine market and has made significant investment in production and marketing.

Non-alcoholic wine is a narrow category here in the U.S. I am not sure I would even think to ask for non-alcoholic wine at a bar or restaurant. On-trade people — what is your experience? Do customers request non-alcoholic wine?

Non-Alcoholic Choices Everywhere

But beer is another matter. Every bar and restaurant I surveyed during my dry week offered a non-alcoholic beer option — most at the 0.5 % abv level that qualifies as non-alcoholic (that’s about the same abv as orange juice, for example). And some had 0.0 % options, too. A Whole Foods store we visited had seven different choices, including two 0.0% options.

What did they taste like? Well, the first non-alcoholic beer I tried was an old school O’Douls and it was just like I remembered it. No offense, but I’d rather drink warm tap water.

But at dinner at a French restaurant one night and then an Italian place the next night I was introduced to a couple of German import brands and they were terrific, with the aroma, body and flavor of real beer.  I guess the Germans take beer seriously and that attention extends to non-alcholic products.

beer

I really didn’t miss the alcohol and I appreciated the fact that, because they were priced like bottles of beer, these products were considerably less expensive than many of the by-the-glass wine offerings.

Hey Gallo!

I’d still rather have the wine, but I didn’t suffer with the non-alcoholic beers. It is clear that that the non-alcohol  beverage market is growing and that some producers are making significant investments in both product development and marketing.

Is there space for a decent non-alcoholic wine in a single-serve container? Yes, I think so. But someone’s going to have to make the investment to establish the market. Hey, Gallo — why don’t you give this a try? You are already expanding your Barefoot brand to include hard selzer in cans.  Why not take the next step with a non-alcoholic wine in a single serve can? Barefoot 0.0!

As the week was ending I found an affordable six-pack of Clausthaler Dry Hopped non-alcholic beer imported from Germany. Complex with a rich nose, amber-colored, made with Cascade hops, it seems ideal for a craft beer consumer who wants or needs to avoid alcohol.

And the perfect choice for those times when the best wine is an alcohol-free beer.

Wine and the Dry January Syndrome

 

It is easy to dismiss Dry January (going alcohol-free for the first month of the year) along with Veganuary as typical well-intended New Year resolutions on lists that might also include pledges to quit smoking, keep a daily diary, make better use of that gym membership, and spend less time fiddling with your phone.

Resolutions are an optimistic impulse. They signal that we think we still have the ability to improve, which is important. There is also an element of penance in some resolutions. Had too much food, drink, fun, etc. over the holidays (and maybe spent too much money, too). Time to settle up.

A Toast to Your Health?

But there is more to Dry January and similar impulses these days. Health has risen in the hierarchy of needs for a growing segment of the population especially, we are told, younger people, and reducing consumption of beverage alcohol (wine, beer, spirits) is part of that movement.  Young people in many countries now start drinking later than previous generations and then choose to drink less once they begin.

Slavea Chankova, health-care correspondent for the Economist newspaper, recently identified the health-driven pivot away from alcohol consumption as one of the key trends for 2020 and beyond. Drinking is going out of style, she argues. She notes that …

Big alcohol companies can see the writing on the keg. They are expanding their low- and no-alcohol offerings of beer, wine and spirits. Innovation in such drinks is booming. Many are now indistinguishable in taste from the real thing. Nearly 50 of Heineken’s brands, for example, have an alcohol-free version. In most Western countries such alternatives are still a novelty, but sales are growing fast. In Germany and the Netherlands, both early adopters, they make up about 10% of beer sales.

It’s Complicated

baxterWine’s relationship to health is complicated and can be confusing. It seems like there are new studies every week, often with contradictory conclusions. A new book, Wine and Health: making sense of the new science and what it means for wine lovers by Richard Baxter M.D. surveys and analyzes the scientific data and makes the case for moderate wine consumption as part of a healthy, happy life. It’s an interesting and useful book that I recommend highly.

If you accept the premise that wine can be part of a healthy life, there is still the question whether people actually behave this way.  An article in the Economist newspaper’s October 19, 2019 edition argues that “Alcohol firms promote moderate drinking, but it would ruin them.” The article cites research based on a study (see reference below) of British consumers in 2013 and concludes that the beverage alcohol industry in Britain is heavily dependent on unhealthy behaviors by their customers.

Drink, Drank, Drunk?

The study found that 25% of the British population consume hazardous (average 24 drink units per week) or dangerous (average 73 units per week) levels of alcohol. Together they drink 78% of total alcohol and account for 68% of revenues. Moderate drinkers (average 4 units per week within a range of 1 to 14) are 59% of the adult population, but drink just 23% of alcohol and generate 32% of revenues. (Non drinkers make up 16% of the British population according to the report.)

If all alcohol drinkers consumed at healthy moderate levels, the study concludes, the demand for beverage alcohol would fall dramatically. The data reported by the Economist does not break out wine from beer and spirits. I could be wrong, but I doubt that wine is as dependent on binge drinking and excessive consumption as beer or spirits, at least in the U.S.

Studies of the U.S. wine market, however, show that consumption is similarly concentrated in a relatively small proportion of the population. These frequent wine drinkers (who consume wine several times a month or more) are key to wine market success.

No Wine = 56% in U.S.

Wine drinkers are a minority in the U.S. A 2014 Wine Market Council study found that 35% of U.S. adults drank no alcohol and another 21% consumed alcohol, but not wine. High-frequency wine drinkers made up just 15% of the adult population. An even smaller group — 30% of the 15% of high-frequency wine drinkers — accounted for 90% of spending on $20+ wine and 40% of all purchases of $10-$20 wine.

Dry January and related health concerns are something that the U.S. wine industry needs to take seriously since its consumer base is so relatively narrow. If the small group of high-frequency wine drinkers reduces consumption for reasons of health, it will make a difference.

Obviously the point is not to promote high levels of alcohol consumption like those found in the British study, but to encourage healthy consumption patterns of wine as an element of a sustainable lifestyle, much as Wine in Moderation has done is many countries. Health is important and wine needs to address the concerns.

This isn’t the answer to the problems facing wine today, but it might be part of a strategy to make wine more relevant and appealing to today’s evolving consumer base.

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Sources for the Economist article: “Drug harms in the UK: a multicriteria decision analysis” by D. Nutt et al., The Lancet; “How dependent is the alcohol industry on heavy drinking in England?” by A. Bhattacharya et al., Addiction; Centre for Responsive Politics; NHS.

Economic Effects of Washington Liquor Initiatives

This is the third in a series on initiatives to liberalize Washington’s alcoholic beverage laws  (click here to read the first and second segments). How would Washington Initiatives I-1100 and I-1105 affect wine makers and wine consumers? Let’s look at wine makers first.

Wine producers in Washington are not united either in support of or opposition to the initiatives. One industry group, The Washington Wine Institute, publicly opposes both initiatives, for example, while the Family Wineries of Washington State supports I-1100 but opposes I-1105.

Winners & Losers

Both initiatives would create more avenues of competition for wineries by removing state restrictions that prevented discounted prices, negotiated payment schedules and so forth. Based on my conversations it seems that some wineries would welcome the opportunity to compete  using a fuller range of business strategies. They would like to be able to go after the business they want and to reward retailers and restaurants that carry the full range of their products or who make long term commitments.

Other wine makers are concerned that they may be disadvantaged in this new environment because they lack the resources or expertise to compete effectively. Interestingly, it is not just small wineries who want to avoid competition and not just large ones who embrace it. Obviously it is a complicated matter.

One wine maker candidly told me that it is hard to know if the gains will outweigh the losses.  This person saw obvious areas for new business expansion but realized there would be negative effects on margins and the need for more capital to accommodate extended payments. I sensed a very pragmatic attitude:  wine is a business and business people have to cope with whatever is thrown at them whether it is Mother Nature (a late harvest) or a change in state liquor laws.

My conversations reminded me of Olivier Torres’ discussion of the difference between French and American business strategy in his book The Wine Wars. American entrepreneurs, Torres says, look for new opportunities, taking risks, while the French business strategy is more about fending off threats. This is an oversimplified stereotype, of course, but it does seem to capture a bit of the wine war raging today in Washington state, where those with “French” attitudes are not necessarily from France.

Will Small Wineries Get Squeezed?

Television ads like the one I have inserted above suggest that small wineries would be especially hard hit by the new laws. A local news analysis of this ad raises some doubts about this claim (see  this King5 report). Will small local wineries get crowded off the shelf? Here’s my brief analysis.

I do think that large wine companies will have an advantage if the law is changed, but they have obvious economic advantages now, so this is nothing new. I would not be surprised to see big companies (Constellation Brands, Gallo, etc) increase their relative share of retail shelf space since they have the resources to offer discounts and incentives.

It is also possible that spirits companies and distributors will bring associated wine brands with them as they rush to fill their newly opened retail market niche if the initiatives pass, adding to the “crowding out” effect.  Retailers are trying to streamline their operations and reduced the number of suppliers they deal with, giving “drinks” companies that can supply wine, beer and spirits an advantage.

This effect will differ by type of retail account, of course, and be different for fine dining versus casual dining restaurant sales. In the supermarket segment, for example, you can already see differences in the relative incidence of the big producer portfolios in Fred Meyer (Kroger) and Safeway stores compared with regional chains like Metropolitan Market.

Although small wineries might get somewhat less shelf space, they certainly will not disappear from wine shelves and restaurant lists. Wine enthusiasts value diversity and smart sellers fill their shelves accordingly. That’s why a typical upscale supermarket offers 1500-2500 wine choices, at least ten times the number of options in any other product category. Retail wine margins are high and sellers profit by catering to their customers’ desire for a wide range of choices.

I think the competition among smaller winemakers will be more of a factor than between the big corporations and the small family wineries. There are hundreds of small wineries in Washington state all seeking a place at the retail table. Right now it is pretty difficult for the maker of a $40 Walla Walla Syrah to get shelf space (or distributor representation) and many producers are sensibly reconfiguring their business plans to focus more on direct sales. This will remain a good strategy if the initiatives pass, but makers who want to compete for shelf space will have more tools at their disposal.

And That’s A Good Thing?

Bottom line: small wineries will get squeezed by the big boys, but other small wineries are the real competition (hence the lack of a consensus among wine makers) and the initiatives will make this competition much more intense.

Is this a good thing? Well, it will probably be good for many consumers who will benefit from lower wine prices. They will likely have more (but different) wines to choose from too. Whether the new choices will be better is bound to be a matter of taste. If, as some have suggested, big box drinks retailers Bevmo and Total Wine open outlets in Washington it will change in significant ways the market terrain.

At the Ballot Box

How am I going to vote? The issue is complicated enough that I honestly haven’t decided yet. I am unlikely to vote for I-1105, however, since it seems like a stumbling half-step towards market liberalization.

I find the wine market aspects of I-1100 appealing and, as an economist, I am programmed to believe in the benefits of competition, but I am still concerned about the liquor law changes. I don’t know how making spirits cheaper and more readily  available will help solve the public health and safety problems associated with liquor consumption. Many will disagree with this view and I respect their opinions.

I guess I’m going to have to weigh the pros and cons before I cast my ballot just like everyone else.

Anatomy of the Costco Initiative

Second in a series on initiatives to liberalize Washington’s alcoholic beverage laws (click here to read the first segment).

A recent article on the Wine Spectator website does an excellent job of detailing the specific elements of Initiative 1100 (which I call The Costco Initiative) and I-1105 (a.k.a. The Distributor Initiative) as they pertain to wine. It is required reading for anyone interested in this issue.

For my part, let me approach the question in a different way: how would the initiatives affect Costco (and other wine retailers), wine distributors, wine consumers and wine makers in Washington state?  This post looks at retailers and distributors. I’ll address consumers and winemakers next time.

Costco’s [Big] Dog in the Fight

Let’s start with Costco, which is appropriate since it is a major backer of I-1100.  How would I-1100 affect Costco? Well, the most important factor is that it would allow Costco and other retailers to sell hard liquor, which is currently a state monopoly in Washington.  Other changes are important, but that’s the big one in terms of economic impact in my view.

What about wine? Not surprisingly, Initiative 1100 would allow Costco to be a much more efficient wine retailer.

First, Costco would be able to purchase wine directly from producers and could take advantage of more efficient central warehousing of alcoholic beverages. Costco would be able to negotiate volume discounts from producers and could benefit from other promotions (wholesalers must maintain uniform prices under the current law and are forbidden from providing retailer incentives). Costco could also negotiate payment schedules — current law requires that retailers pay for wine and beer at the time of purchase.

These changes would make the process of selling wine pretty much the same as other products by removing current restrictions. Costco would also be permitted to sell space on its wine shelves to producers (much as supermarkets routinely sell shelf space for grocery items), although it is unlikely this would actually happen. Costco does not sell space now in states where this is legal. Rather, like Wal-Mart I think, it simply asks for a lower wholesale price.

Taken together these market reforms would lower the cost that Costco pays for wine, savings that would be passed on to consumers. Costco’s normal mark-up on wine is 15% (17% for own-brand Kirkland Signature bottlings), so Costco’s existing absolute price advantage for the wines it carries would likely grow.

Don’t expect Costco to use these advantages to monopolize state wine sales, however. Costco has great wine prices, but it carries a surprisingly small number of wines at any time — about 100-150 different wine SKUs compared to the 1500-2500 that you can find at an upscale supermarket.

So while Costco wine sales will rise, there will be lots of room for other retailers, too. In fact, there is speculation that the market reforms will draw big box wine/beer/liquor retailers Bevmo and Total Wine into the Washington state market.

It is easy to see why retailers are backing I-1100. Their costs will fall and they should be able to sell more wine, which is a high margin item compared to most other supermarket categories.

 

The three-tier distribution system for beer (and wine).

 

The Impact on Distributors

It is also easy to see why distributors oppose I-1100 and why they back I-1105. Initiative 1100 privatizes liquor sales, liberalizes the alcoholic beverages market and allows retailers to cut out middlemen and purchase directly from wine, beer and spirits manufacturers. I-1105 is similar to I-1100 in most respects, but requires that the distribution step in the three-tier process be retained.

Distributors recognize that the ability of large retailers to bypass them and buy directly from producers and to demand discounts and other incentives is a threat to their business and it is understandable that they would oppose this.

Don’t expect distributors to disappear if I-1100 passes, however. Distributors play a vital role in connecting producers and retailers and, although they might lose some “rents” from their previous legal status, I can see where their role will change and might even expand in some specific areas as the overall wine market grows.

Larger distributors, who already have some economic advantages, might get an added edge if they are better able to offer retailers payment terms. Competition in general will increase, so there may be a shake out in this sector if I-1100 passes.

Fundamentally, I-1100 shifts market from distributors to retailers and will redistribute profits within each group, too. What about the people who make wine and those who drink it? Check back in a couple of days for analysis.

Extreme Wine Report: Wine in Kabul

I’m starting an occasional feature on extreme wines. Extreme wines? You know, the cheapest, the most expensive; the biggest producers, the smallest; the oldest, the newest and so forth.

The first report comes from one of the least likely places to find wine: Kabul, Afghanistan. It is unlikely because Afghanistan is a Muslim country and Islamic Law is not very wine-friendly.  Wine is pretty much the last thing you think of when someone mentions Kabul. But there is it, as a recent Time magazine story makes clear.

The Wine Economist’s Chief Kabul Correspondent (codename K.W.) sends this report on the wine scene there, including a rough and ready shopping guide, firsthand market (and black market) analysis and … tasting notes!. Here’s the report.

Note: This is a report from The Wine Economist’s Chief Kabul Correspondent, “K.W.”  All names have been changed. Click here to read a recent Time magazine article on nightlife in Kabul.

In Kabul, if you know the right people you can have them use their security clearance to get wine, beer and spirits from one of the military bases or the UN. Unfortunately, I have not been able to utilize such resources. My wine supply comes through slightly less direct channels and is only available at night when the streets of Kabul are sufficiently dark.

Afghanistan is an Islamic country but is also home to thousands of foreign workers who very much enjoy winding down the evening with some type of alcoholic beverage. The legal technicalities with respect to alcohol are consequently rather vague. At times, the Afghan National Police Force sweeps through the restaurants frequented by foreigners in Kabul and seizes their supply of alcohol. These “raids” only happen every once in a while and it is largely assumed that they are simply a way of maintaining a supply for their own consumption. At other times, it seems to be legal for alcohol to be consumed by foreigners but not by Afghans. For this reason, my Afghan coworkers from my day job at an NGO are hesitant to join me at the bar I manage at night.

All of this ambiguity means that when the bar runs out of red wine and our normal supplier is on leave in Dubai, Hamad (the bartender) and I are forced to find alternate sources.   Hamad and I jumped into his car and after I came to terms with the fact that the seat wasn’t going to slide back from the fully-forward position it was in we were on our way. Hamad floored it out onto the main road, with Bollywood beats on full blast and the windows down – Hamad puffing on a cigarette. Traffic can get pretty bad in Kabul but that depends on how good you are at weaving and playing chicken with on coming traffic. I had about a thousand dollars in twenties wadded up in my pocket.

On Flower Street, named after the displays of bright, plastic flowers in front of nearly all of the stores, we went in a spoke with a man behind the counter who wore a Mona Lisa grin. You would think that buying something out of the black market would mean you could get it for cheap. Not so much. After trying very unsuccessfully to haggle the price down I handed over a little over half the money in my pocket and we got back in the car and waited, with the trunk just barely open. The Afghan National Police has a bigger presence on Flower Street than anywhere else I’ve seen. When the time was apparently right three guys ran out of the store with four cases of beer and a case of Tajikistan vodka wrapped up in black plastic bags, dumped them in the trunk, slammed it shut and ran back into the store. The engine had been running and we took off only to be stopped behind another car right next to three Policemen.

If I get caught buying alcohol it gets taken away, they pretend to make a big deal out of it and then they send me on my way. If Hamad – an Afghan – gets caught buying alcohol he gets taken to prison where he could stay for years if he is unable to pay a several thousand dollar fine. A flashlight scanned our faces for an uncomfortably long period of time as the policeman holding it took a long, thoughtful drag of his cigarette. Traffic cleared, Hamad shifted into gear and I watched the policeman in the rear view mirror look passively back to his friends.

Before we had finished letting out our sighs we had made a few turns and were stopped in the middle of a dark, dirt road ready for our next purchase – the main reason for our trip. Hamad sent a text and we waited for about two minutes before two dark figures with boxes under their arms appeared down the street walking towards us. The two men shifted their eyes at us. After the greetings, a quick series of questions which neither side answers, I broke open the boxes to see what we were getting. Right then I felt I was in the scene of the movie where the mobster checks the trunk to make sure “the goods” were all in order and accounted for.  I looked down, half expecting to find some sort of vastly illegal contraband and instead found “Calvert Varietals” a French Cabernet marketed towards an international market, and then Sutter Home California Cabernet. I pointed at the Sutter Home and told one of the guys he should be the one paying me to take it off his hands. The joke didn’t really go over. Wine snobbery, even in jest, isn’t really understood here. We didn’t have enough money for all of it so some of the Sutter Home found its way back into dark alley wine supply to await its next nervous, desperate wine-starved foreigner.

I was reminded of the last wine purchase we made, an unusually large order of 72 bottles, all of a relatively drinkable and non-threatening Merlot, my favorite varietal. One customer, for some reason eager to expound his wine knowledge upon a 24 year old behind a bar in Kabul, expressed his distaste with the selection. “Merrrllot?”, he exclaimed, “Is that really all you have? I think I’ll stick to Becks”. While opening his bottle of beer I had wondered at how the reputation of one of the worlds greatest wine grapes had been tainted all the way out here. There was a chance that the customer knew what he was talking about and that his owns tastes led him to prefer other types of wines over what he reasonably assumed was a run-of-the-mill example of the often-times poor crafting of Merlot. There was also a chance that having tried a good amount of mediocre Merlot in the 1990’s the customer developed his own aversion to the grape that has continued to this day. More likely than not, this customer – an American – saw a movie and perhaps some snippets of Merlot criticism in the media and decided to use the outside influence to help guide him down the sometimes overwhelming path of wine selection, which is not unreasonable. After finishing a fervent defense of the grape (in my head), I took a sip and remembered that fewer people wanting to drink Merlot meant that there would be more for me.

Most of the bar patrons know better than to ask for a specific type of wine beyond red and white. In fact, most patrons of the bar know better than to ask for wine in the first place. That said, nearly every week we have a different red wine on the shelf and you never know, this could be the week when it’s drinkable before rather than after those rum and cokes. Recently we’ve had a decent supply of a South African white which is decent, especially now that the summer is swinging into gear and most everyone chooses to sit out in the garden at a picnic table. Red will typically be either Italian or French with the occasional American, Australian and Spanish bottles as well. As I cringe at the blown out fruit I have to remind myself that much of this wine has been sitting in giant metal shipping containers for months, seeing some of the worst transportation conditions possible.

How did this wine get here? For the most part, deals are cut with distributors or directly with producers and larger shipments are flown in on large cargo planes, destined for Embassies, the UN, the military bases and perhaps one or two influential individuals or groups. But what about my handful of cases in the alley? My guess is that occasionally, cases find their way off the pallets while waiting to be trucked off to the bases. Somebody’s cousin has a friend who’s brother knows somebody who once mentioned to Hamad the bartender that he may be able to get him something. Most of the wine I see is fairly recent, usually 2008, but every once in a while I see something like the dateless Barolo we had a few bottles of the other day with its yellowed, ripped labels and corks that indicated at least decade. What channels had those bottles gone through to eventually find their way to the bar?

When Hamad and I get back to the bar “Alain”, the rather stereotypical Frenchman is relieved to see the cases under our arms. Most of the customers are there for the Heineken or the Jim Beam but occasionally I see hopeful eyes peruse the bottles of wine behind me, looking for something that has not already disappointed them. In general, you are forced to ask the question, “why is this wine in Afghanistan in the first place?” The answer, more often than not, is revealed with the first unfortunate sip. That said, there is always the hope of finding that diamond in the rough, a glass of which will make you forget that when your last bottle of Tuscan red was fizzing in your glass, you shrugged your shoulders and decided to take a sip anyway.

Kabul Tasting Notes:

Calvert Varietals, Cabernet Sauvignon 2008 Vin Pays d’OC France

When the back label, in English, tells you that this bottle is good with everything from burritos to Satay beef your hopes tend to whither just a bit. A cooked nose (perhaps literally, given the way it was likely transported here), not unpleasant in taste but lacking in body and length.

Dona Beatriz, Rueda Verdejo, 2007 Spain

Very promising and interesting nose with several layers of red to dark-red fruit laced with deep roses. Unfortunately, it seemed watered down, completely lacking in taste.

Torregaia Negromaro Salento Indicazione Geographica Typica Italy

Bright fruit in the form of moderately high acidity. Dried cranberry followed by a small hint of cluster rot – as if the grapes were caught in an early rain while still too young and the vintner left them on the vine to try to get them a little riper.

The Elephant in the Room: Alcohol


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.


American Wine Laws: Time for a Change?

No food for sale in this NYC Trader Joes. No wine for sale at the Trader Joes next door.

Only in America? You can't buy food at this NYC Trader Joe's wine store. And you can't buy wine at the Trader Joe's next door.

A European visitor pulled me aside recently to complain about American wine laws, which considerably restrict the what, where and how of wine sales and consumption compared to more relaxed European practices.

“I thought there was separation of Church and State in America,” he said, showing that he hadn’t forgotten what he learned in Civics class years ago as a high school exchange student in Cleveland. He put the blame for America’s wine parochialism squarely on the influence of conservative religious groups.

Church and State vs. Special Interests

Religious groups are political powerful, I told him, and they no doubt have had some influence on the development of America’s wine laws. But that’s not the reason the laws don’t change, I said. It is the interests of those who gain from the current set up. He wasn’t convinced. He seemed to think that a moral explanation was inherently more persuasive (or more American?) than an economic one. But I still think I’m right.

My explanation — that economic forces organize around any set of regulations, become entrenched and use their political and economic clout to prevent change — has a good economic pedigree. It is the theory of structural rigidities developed by Mancur Olson in his two classic books, The Logic of Collective Action and The Rise and Decline of Nations.

Olson’s theory is elegantly simply. Restrictive economic arrangements benefit a small number of actors a great deal, so they have a strong incentive to organize and fight change. Eliminating the restrictions benefits a larger but widely diffused set of actors who have correspondingly smaller individual incentive to take action.

Even though the collective gain from liberalizing arrangements is likely to exceed the collective loss, the concentrated established interests have more of an incentive to influence legislators and regulators than the general public. This is why regulations, once enacted, are difficult to change. Public gain cannot seem to trump concentrated private interests.

Olson developed this theory in The Logic of Collective Action and used it in The Rise and Decline to explain why rich, stable economies sometimes experience slower growth rates. Stability allows interests to become entrenched and structural rigidities to solidify. Change becomes more and more difficult and potential collective gains from innovation are systematically sacrificed on the altar of vested interest.

Every once in a while, Olson argued, advanced nations need something that will shake things up and weaken the grip of special interests. Then all sorts of change becomes possible.

A Loaf of Bread But No Jug of Wine

An article by Graham Rayman in the August 11, 2009 Village Voice provides evidence to support this theory. New York is one of 15 US states where it is illegal to purchase wine or beer in a supermarket (and you can’t buy bread or cheese in a NY wine shop, either). It isn’t so much separation of Church and State as the division of  Wine and Cheese. Supermarkets can sell wine, beer and spirits as provided by the law, and some do this, but they must have separate stores with separate entrances, checkout stands and so forth.

Two doors, two lines, two sets of store staff. Greater legal control alcohol sales is possible, I suppose, but at a considerable sacrifice in convenience.  It is probably not a surprise that wineries and wine enthusiasts would want to change this, but it isn’t an easy thing to do.

The Village Voice article explains how liquor store interests organized and lobbied the NY legislature to kill a recent bill that would have permitted supermarket sales. The main force behind the proposal was the state government’s need for revenue — the state projected that increased sales though supermarkets would have added to state tax coffers. The story focuses on the anti-reform lobby — it would be interesting to know more about than the author reports here about how supermarket chain and corporate wine producer interests reacted to the bill. But the point about the blocking power of small but concentrated interests is well made.

Shake It Up, Baby

Supermarkets are just one distribution vector for wine, of course, and New Yorkers have many competitive specialist stores to keep prices down and service up, so we don’t need to feel too sorry for them. But it does seem that the increased convenience of grocery store sales would help expand the wine market and promote wine as a lifestyle choice. It’s too bad the reform effort failed.

The inconvenience of wine buyers in the 15 supermarket-ban states is important, but the grip of special interests on wine regulations extends to other areas.The cumbersome three-tier distribution system and restrictions on inter-state wine shipments are two other areas where entrenched interests have successfully fought off liberalization efforts.The result is the restrictive system my European friend finds so difficult to understand.

If Mancur Olson is right, restrictive regulations will be difficult to change unless something happens to shake things up. Maybe the economic crisis, which has put every link in the wine value chain under stress, will ultimately provide just such an opportunity. Consumers, wine producers and even state tax departments all have something to gain from changing the system now.

We Will Sell No Wine [Reform] Before Its Time

I told my European friend not to hold his breath waiting for wine reforms to trickle up from grassroots wine enthusiasts. The real hope is that the big players will push for liberal reforms.

Personally, I pin my hopes on Costco, the largest single wine retailer. And I wonder if Wal-Mart will get involved now that it is selling wine in many stores (it even has its own version of a Two Buck wine called Oak Leaf). OK, Wal-Mart is a long shot, given its Arkansas roots, but these are unusual times — almost anything is possible.

The New York defeat is a definite setback (and the California plan to increase wine taxes is a step in the wrong direction) but maybe European-style wine market regulations are an idea whose time has finally come.

8/27/2009 Update

Interesting article in the New York Times about Whole Foods’ failed attempt to open a wine shop in New York City.

Whole Foods learned the hard way that opening a wine store in New York is not easy. The wine shop at its market in the Time Warner Center was closed by the state liquor authority because the shop was deemed part of the supermarket; state law bans selling wine in food stores. Then Whole Foods’s license request for a wine shop near its store in the Bowery was denied because of community opposition. But the company succeeded in starting a wine store in the same building as its newest store on the Upper West Side: it opened on Aug. 24, and the supermarket will open on Aug. 27.

Read the whole story at

http://www.nytimes.com/2009/08/26/dining/26whole.html?_r=1