Will Argentina Wine Export Growth Return in 2016?

January 19, 2016 By Mike Veseth in Argentina, economic crisis, exchange rates, wine, wine markets 2 Comments

Last week’s column analyzed the reasons Argentina’s wine boom fizzled out. Wine exports to the U.S market have more or less plateaued since 2010 after a decade of rapid growth. Part of the problem, I wrote, is increased competition in the wine market, particularly from the so-called Red Blends that seem to have taken some of the momentum from Argentinian Malbec.

But the biggest factor has been Argentina’s domestic economic policies, which made it very difficult to do business and squeezed the margins of export industries, including wine. The squeeze has been particularly severe in the value wine categories, where the margins are so tight (or even negative) that Argentinian producers have been squeezed out.

Yes / No / Maybe?

Will Argentina wine growth in the U.S market return in 2016? Maybe is the answer, although 2017 looks like a better bet than 2016. The main reason for optimism is the change in government that took place in December 2015 when Mauricio Macri became President of Argentina, promising an end to the policies that crippled the economy, especially export industries like wine, and pushed inflation skyward.

The Economist magazine reports that Macri is “off to a fast start,” removing export taxes and allowing the peso to fall from its artificially high level. These actions will benefit exporters, but also send a shock to the domestic economy through higher interest rates and a short-term boost in the inflation rate due to rising import costs.

Argentina’s wine industry it likely to be twisted in 2016, with falling domestic economic activity offset by the exchange rate’s boost for exports. Growth in both domestic and export markets will have to wait until 2017 and beyond. Good news under the circumstances even if it is far short of an instant cure for the ailing industry.

Like a Normal Country

But some of my friends in Argentina tell me that they are not expecting a miracle. They just want Argentina to be “like a normal country,” as they put it, in terms of its politics and economics and perhaps that’s what they will get.

If “normalization” works, will Argentina’s wine boom return to the U.S market? Perhaps, but things have changed and adjusting the macroeconomic levers won’t turn back the clock entirely. Argentina will come back, that’s for sure, although it will take a while for the foreign exchange and other factors to be fully felt But don’t expect a return of the boom.

The best that Argentina should hope for — and it is actually a good thing — is to be like a “normal country” when it comes to the U.S. wine market. By this I mean that its exports are driven by the normal factors and not subject to booms or crises. Being a normal country in this context suggests a focus on the $10 and above price points, because that is where market grown and margin opportunities are.

A recent Rabobank report on Argentina’s wine sector notes that the reforms will allow more competitive pricing for Argentine wine exporters, but cautions against a rush into the value wine segment where Argentina used to be strong. “There are now opportunities to be more flexible with pricing,” Rabobank’s Stephen Rannekleiv notes, “but these need to be managed carefully in order to avoid undermining the long-term premium positioning of the brand and the overall category. … Excessive pricing moves may allow for windfall profits today, but could create headaches in the long run.”

And being a normaql country also means resisting the temptation to define Argentina as Malbec-ville. I know the temptation to adopt a particular grape as a region’s “signature variety” is strong, but I don’t see it as the best path for the industry.

Three-Dimensional Argentina

Argentina has Malbec, and that’s a good thing. But before the growth slowed smart Argentinean producers were already trying to add dimensions to their market space. Terroir is an obvious dimension that is even more important in signalling quality and authenticity than it was a few years ago. I think many consumers now look for region — Uco Valley? Salta? — and especially elevation (Malbec develops differently in Argentina depending on the vineyards’ altitude) as quality indicators.

Another way to add dimensions is to exploit grape varieties beyond Malbec. There are so many wines that do well in Argentina besides Malbec and Torrontes, the two “designated” signature grapes. I love Mendel’s old vine Semillion, for example, And we recently surprised a Syrah-loving friend at a local Argentinean restaurant by ordering a higher elevation Syrah from the Uco Valley. He loved it, but would never have thought of ordering an Argentine Syrah. Time to get that thinking started.

The options are nearly endless, as we learned a few years ago when we visited Buenos Aires and had lunch with sommelier Andrés Rosberg (you can read about the lunch here). Andrés knew that we would taste many Malbecs during our visit and he wanted to be sure that we understand that Malbec was only the most visible part of the story — not the whole story and maybe not even the best story.

No Sure Things

So he served us a line-up of wines that featured everything except Malbec and it was great. Lesson learned and it was reinforced as we met with winemakers and tasted distinctive Chardonnay, Cabernet Sauvignon, Cabernet Franc and even Bonarda. Malbec? Yes and that’s a good thing. But a lot more, too.

This is an age of discovery for wine and Argentina has much to discover, both within the Malbec terroirs and beyond Malbec. That’s the sort of strategy that “normal countries” are embracing in the U.S. wine market today.

Argentina has little experience as a normal country, making its way without crisis or drama. The success of Macri’s economic policies is not a sure thing since they depend on short-term sacrifice for long-term gains in an uncertain and even unstable global economic environment. It won’t be easy to become normal, but it is an important step.

Sometimes, as Argentina’s national soccer team has demonstrated, great players and great ideas can come to a disappointing end. I am optimistic, however, and hopeful that the wine sector gain will regain momentum while avoiding the boom-bust cycles of the past.

Whatever Happened to Argentina’s Wine Boom?

January 12, 2016 By Mike Veseth in Argentina, economic crisis, Economic impact, wine, wine markets 11 Comments

Whatever happened to Argentina’s wine boom (and can that country’s wine industry recover the momentum it has lost)?

Argentina is an important player in world wine. Recent OIV statistics (click here to download the pdf) tell us that Argentina is the fifth largest wine producer in the world (behind the USA and ahead of Australia) and the eighth largest consumer country. Just a few years ago it seemed like Argentina was poised to become the next New Zealand in terms of its export growth, especially here in the U.S.

Anatomy of the Malbec Boom

New Zealand somehow manages to sell more Sauvignon Blanc each year and it seemed like Argentina might find a way to do the same with its signature Malbec wines. In fact, the boom was so strong that it made some people nervous, as the award-winning 2011 documentary Boom Varietal revealed. Maybe it was too good to be true? Maybe the world would suddenly get tired of Malbec and move on to something else? What then? Bust?

The boom had many causes. Perhaps the most important was the Argentine Peso Crisis of the early 2000s. The collapse of the peso and the opening of the economy to foreign investment was a painful transition for the people of Argentina, but it restored international competitiveness and encouraged foreign investment, both critical to the industry’s rise.

Shift to US Exports

Like many European countries, wine consumption in Argentina is in long-term decline and the economic crisis made things worse for the domestic market, where inexpensive jug wines dominate. As explained in Laura Catena’s book Vino Argentino and Ian Mount’s The Vineyard at the End of the World, Argentine producers found themselves with no choice but to focus on export markets for growth and that meant major investments to improve quality. The U.S. market was the prime target, a different strategy than Chile, which developed more diversified export opportunities.

The US-led export push was effective for several reasons. First the wines presented good value and rapidly improving quality. The U.S. wine market was growing and consumers were turning away from Merlot and later Syrah/Shiraz, opening the door for easy to drink and understand Malbec.

Some of the most important brands established effective distribution partnerships, which enabled them to lead Argentina into the market and firmly establish the category. Catena partnered with Gallo, for example, to make Alamos the market leader No wonder Argentina’s wine exports boomed year after year.

The only questions, it seemed at the time, were would demand continue to rise and, if it did, could Argentina produce enough Malbec to satisfy thirsty buyers?

The End of the Boom

And then? Well, the boom didn’t turn to bust as many feared, but Argentina’s export growth has skidded to a stop. As Kim Marcus reports in his recent Wine Spectator article, exports to the U.S. have plateaued at about 13.2 million cases overall. Recent Nielsen data for off-premises sale as reported in Wine Business Monthly paint only a slightly more optimistic picture, with a meager 0.3% growth rate over the previous 52 week and a 2.5% fall in sales revenues over the most recent four weeks.

The Wine By Numbers figures for January through September 2015 shown above (click on the table to enlarge it) tell the story in detail. Export volume is up overall, but revenues are down because of falling unit price. Good success in bottled wine sales in some markets (UK, Germany and China, for example), is offset by declines elsewhere, including Sweden and Denmark. Note the huge rise in UK bulk sales. But the US market is still #1 for Argentina and it remains flat.

An article by Angel Antin in the current issue of Market Watch adds more detail about the U.S. market situation. Impact Databank statistics show that Argentina wine shipments to the US market peaked in 2010-11 in terms of volume after a decade of rapid growth. 2014 volume was modestly down from that peak, but lower than any year since 2009. The boom seems to have faded.

The situation for individual brands depends very much on price point and margin. Constellation’s Marcus James was the market leader in 2009 with 425 thousand cases in the U.S. market compared with Alamos with 75 thousand cases. But the situation has changed. Alamos, which sells at a premium price point, has plateaued at 900 thousand cases in 2014. Marcus James, selling at a much lower price point, has slumped to just 180 thousand cases.

The Red {Blend} Menace

What accounts for this situation? The U.S. market has indeed shifted. “Red Blends” are now the fastest growing red wine category, rising to #2 after Cabernet Sauvignon and ahead of Merlot and Pinot Noir. I suspect that some of the Red Blend growth is coming at the expense of Malbec sales.

The Red Blend category is very diverse, encompassing all sorts of blends (even some that include Malbec). I like to joke that the key to Red Blend success is that many of the products are blends of two wines that consumers say they hate but secretly love: Merlot and Shiraz. Whether this is really true or not, Red Blend is a convenient category for producers with stocks of red wines and an inconvenient truth for Argentina producers.

But Red Blends are far from the most important problem. It seems to me that the most severe constraint on Argentina exports in recent years has been supply not demand. Not so much difficulty growing grapes and making wine as navigating the harsh economics of the situation.

Economic Policy Squeeze

The economic policies of the government of President Cristina Fernández de Kirchner pushed up inflation rates, which pushed up wage rates, which increased the cost of producing wine. At the same time, the exchange rate was frozen at an artificially high rate, which squeezed margins. Capital controls added to the problem by making it difficult for Argentina to import technology and winemaking supplies from abroad.

The inflation/exchange rate squeeze was particularly hard on the value wine exports that were the initial key to Argentina’s success. It is nearly impossible to profit from exports of Argentinian Malbec with a retail price below about $10, so many of these wines have simply disappeared from the market (a few brave firms are absorbing short-term losses to maintain their market positions for the future).

The good news is that the $10+ part of the U.S. market is growing, and so the Argentinian wines that remain are in a good place. The bad news is that this market segment has become intensely competitive, so it will not be easy to survive and thrive. And of course the Red Blend trend continues.

I’ll end on a positive note. Economic policies are changing in Argentina, which gives hope for the wine industry there for 2016 or perhaps 2017. I’ll analyze the changing market environment in next week’s column.

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Here’s a good soundtrack for any discussion of a boom. Enjoy.

Celebrating Malbec World Day 2015

April 16, 2015 By Mike Veseth in Argentina, globalization, Shameless Self-Promotion 9 Comments

April 17, 2015 is Malbec World Day — a great opportunity to pull the cork on a bottle of Malbec wine and to appreciate how quickly this grape variety has come to be an important part of the U.S. and global wine scene.

I have a warm spot in my heart for Malbec because it reminds me of all the nice people and great wines Sue and I encountered during our visit to Argentina a few years ago. So many interesting experiences learning about old vine Malbec from Roberto De La Mota at Mendel winery, about Malbec -Cabernet blends at Catena and that Argentina is much more than Malbec at a special tasting arranged by Andrés Rosberg.

My appreciation of Malbec deepened when I was asked to take part in the award-winning 2011 documentary Boom Varietal: The Rise of Argentine Malbec produced by Kirk Ermish and directed by Sky Pinnick. The economics of the Malbec story came to play a surprisingly large part in the film and so I had more screen time than I would ever have expected.

Malbec’s story is inevitably associated with Argentina, but it has become a world-wide phenomenon, breathing life into the Malbec industry back home in its native France (where it is often called Côt) and opening doors to wine-growers around the world (perhaps especially here in the Pacific Northwest).

I’ll be toasting the rise of Malbec with a glass of … what else? … Argentinean Malbec on April 17. Please join me. Cheers!

Argentinean Wine & Restaurants: Reflections on a Catena Asado

June 17, 2014 By Mike Veseth in Argentina, wine markets 6 Comments

Sue and I and our friends Ron and Mary recently attended a sold-out Bodega Catena Zapata wine dinner at Asado Cucina Argentina in Tacoma. Some people came for the wine, which Daniel McKeown of Catena importer Winebow carefully explained to each table of guests. Others came for the music and dancing, which was simply spectacular. Everyone enjoyed the wonderful food — the menu is shown at the bottom of this post.

Most of the guests were already familiar with Argentinean wine, but I think some were surprised by the range of wines we sampled, including sparking pink Malbec (the only non-Catena product), Chardonnay, a Malbec from Vista Flores, a gutsy Malbec blended with a bit of Petit Verdot, and a Cabernet Sauvignon that was served with the chocolate course.

Although Argentina is known for Malbec, its signature grape variety, it is not and should not be defined by it. When we visited Argentina a few years ago our friend Andrés Rosberg made a point of showing us just how much the country has to offer beyond Malbec. You can read about our experience here.

The diners clearly enjoyed themselves and I think we all learned a lot. Hopefully this event and others like it will help interest in and sales of Argentinean wine to continue to grow.

The Gaucho Effect: How Malbec Conquered Britain

Restaurants are an important wine sales vector, of course, particularly for wines that need to be hand sold because consumers are not familiar with them. When diners try and enjoy a new wine at the sommelier’s suggestion they may become both continuing customers and also brand ambassadors. That’s why there is so much competition to get on a popular restaurant’s wine list.

But sometimes restaurants can have an even bigger impact. Some say that the rising British interest in Argentinean wines in general and Malbec in particular is due to the efforts of a single restaurant group. For the English to embrace the wines of Argentina is a remarkable event given the turbulent history of relations between the countries in the last century, including the Falklands / Malvinas War and the 1986 “Hand of God” World Cup soccer match.

So I think it was quite a bold move to open an Argentinean steak house in London, but that’s what Gaucho did and now they have 14 restaurants in Britain, have invested in Sucre, a popular eatery in Buenos Aires and opened a Gaucho outpost in Dubai. The Gaucho wine list includes more than 200 different wines from Argentina and is said to be the largest such collection outside of that country.

I haven’t dined at a Gaucho restaurant yet, but I hope to remedy that when I’m in London in November. Gaucho seems to succeed by embracing the whole Argentinean experience — the food, wine, people, culture, history — drawing British diners into the story. Irresistible! And great for Argentina’s wine industry.

But wait — there’s more. They have also opened a specialist wine shop in London, Cavas de Gaucho, to promote the wines of Argentina. They purchased a small vineyard with 80-year old vines in Lunlunta, Mendoza and started their own winery, Viña Patricia, which supplies the restaurant group. Gaucho also sponsors a widely publicized winemaker award in association with Wines of Argentina.

The total “Gaucho Effect” is very important — it shows the story-telling (and selling!) power of restaurants that bring together wine, food and culture in a way that captures consumer imagination.

Argentina’s Upbeat Future

I used the occasion of the Catena wine dinner to contact Laura Catena, who was just back from Florence and shared a nice story, which was appropriately set in a restaurant. She was dining with some members of the Italian wine industry, enjoying fine Italian food and wine, when she brought out a bottle of Nicolas Catena Zapata 2002 — her winery’s flagship Cabernet – Malbec blend. The Italians were blown away by the wine, she wrote — completely unprepared for the idea that a wine of such elegance could come from far-away Argentina.

I asked Laura about the state of the Argentinean wine industry and she was very upbeat. There are problems, of course, especially with domestic politics and the economy, but all of the elements are there for success, especially in export markets now that the Peso has weakened a bit. Former Central Bank chief Alfonso Prat Gay recently proposed that Argentina would rapidly emerge from its malaise once a new government is elected in October 2015. “Short pain, long gain,” he said, which would be good news for Argentinean wine.

I hope that Laura Catena and Alfonso Prat Gay are right — Argentina could certainly use some good economic news. Once the country’s political and economic policies are on track, the wine industry seems poised to advance. Argentina has distinctive terroirs, which many wineries including especially Catena are now highlighting in their wines. And as Laura said, Malbec continues to be hugely popular because it tastes so good. And then there is diversity …

There are many other varietals that do well in Argentina – chardonnay (we recently received 96 points from Parker for our white Stones Catena Zapata chardonnay), syrah, red blends, torrontes, bonarda, cabernet sauvignon +++ (many Argentines prefer cab to malbec or the blend) and the future holds all these new varieties as well as consumers discovering the high end, the ageability, collectibility (our Estiba Reservada Catena Zapata was recently ranked by wine searcher as one of the 50 most expensive wines in the world.)

Sustaining the Boom

I love Malbec and I am one of those who thinks that Cabernet and Cab-Malbec blends (and Syrah, too) have great potential in Argentina. Argentina remains a hot wine category in the United States (along with New Zealand).

How do you sustain such a boom? Obviously quality and value must be present in each glass, but you must also tell the right stories in the right ways to engage consumers and renew their interest. Wine dinners like the one we attended at Asado (and Laura’s dinner in Florence and the Gaucho Effect in Britain) are an important part of this process.

Stein’s Law and the Coming Crisis in Argentinean Wine

May 14, 2013 By Mike Veseth in Argentina, economic crisis, Economic impact, exchange rates 6 Comments

Stein’s Law, named for famed economist Herbert Stein, holds that if something cannot go on forever it will stop. Unsustainable trends ultimately yield to the inevitable in one way or another.

Stein’s Law seems to be simply stating the obvious, but you would be surprised how many people find a way to ignore the obvious when it is in their interest to do so. As Upton Sinclair wrote, “It is difficult to get a man to understand something if his salary depends on his not understanding it.”

Argentina’s Inflation Problem

And so we consider the case of the Argentinean wine industry. It’s not just the wine sector, of course, it’s the whole Argentinean economy, but wine is especially affected. Something’s going to happen according to Stein’s Law, because it can’t go on forever as it has up to now, but it is hard to know exactly what.

The problem begins with Argentina’s high inflation rate. The official statistic puts the annual increase in consumer prices at around 10%, but this number is viewed with disbelief by the international economic community. The Economist magazine quit publishing the official figure in 2012, saying “Don’t lie to me, Argentina” to the officials there. The most commonly cited estimate of the actual inflation rate is 25% per year.

Inflation is a sensitive political issue in Argentina as it is in every country that has ever experienced a hyperinflation crisis (think Germany, for example). Some in Argentina go to great lengths to deny the obvious reality of inflation.

The story (which may be true) is told about a McDonalds restaurant in Buenos Aires that displayed all the usual products on its big backlit menu board except the signature Big Mac. Where’s the Big Mac? Oh, we have that price hidden around the corner so that no one will see it — especially the people from The Economist magazine who use it to estimate the purchasing power of the peso in their Burgernomics index!

Inflationary Squeeze

As a recent article on The Drinks Business website suggests, high inflation is putting the squeeze on Argentina’s wine producers. (The squeeze is made worse, I understand, by government policies that restrict imports of products used in wine production as part of a general policy to control foreign exchange reserves). Production costs (grapes, labor, etc.) may have doubled over the past four years, putting a squeeze on margins.

It is difficult to pass these peso costs along to consumers in the U.S., Canada, the U.K. and Brazil, the main export markets. Consumers are price sensitive and while the average export price of varietal Cabernet and Merlot wines have risen by 7.2% and 24.8% respectively in the past year, this provides only limited relief from rising costs since Malbec takes the lion’s share of the export market and its dollar export price has risen by just 1% in the last year and by an average of only 2.8% per year since 2009.

Purchasing Power Inaction

The textbook remedy to this situation is for the foreign exchange value of the peso to fall to achieve what economists call Purchasing Power Parity. In a system of market determined exchange rates, according to the PPP theory, a 25% fall in the domestic purchasing power of the peso due to inflation should result in a 25% decrease in its foreign exchange value.

And indeed the peso has depreciated, but not by nearly enough to overcome the inflation difference between Argentina and the four main export markets. The peso has fallen in value by about 20% in the last two years, if we look at the official exchange rate, so each dollar of export earnings brings in more pesos, but inflation-driven peso costs have increased by much more. That puts a real squeeze on margins. This can’t go on forever — something has to give.

[I’m told that the black market exchange rate is 8 pesos per U.S. dollar, far below the official rate of about 5 per dollar. Such a big differential is often an indicator of crisis to come.]

Something’s Gotta Give

What happens when a country gets itself caught in a squeeze like this? Well, the conventional wisdom is there needs to be a sharp currency devaluation followed by monetary tightening to control inflation. This is a painful process and Argentina has been through it before. What if the government ignores the conventional wisdom? Internal adjustment must eventually take place to restore competitiveness if external adjustment through the exchange rate is ruled out.

A recent Wall Street Journal article about real estate prices in Buenos Aires shows one pattern of adjustment. The dollar prices of luxury apartments have tumbled as owners seek to cash out of their real estate investments and buy into the more credible U.S. currency. The WSJ reports that

In May last year, Argentine President Christina Kirchner strictly limited access to U.S. dollars and other foreign currencies in a bid to stem capital flight. With the Argentine peso facing about 25% annual inflation (government figures, widely discredited, set the rate much lower), and an unofficial exchange rate that has effectively devalued the peso sharply, demand is high for dollars.

These days, the main feature that foreign buyers say they look for in a Buenos Aires property has nothing to do with closet space or a wide terrace. It is a seller with a bank account outside Argentina to which they can legally wire funds. This is a way to get around having to convert any dollars wired into Argentina into pesos at the official rate, after which it is nearly impossible to convert back into dollars at the official rate.

Something will have to give in the wine industry, too, if the exchange rate doesn’t adjust and the currency controls continue. In the meantime, I think every effort is being made to control costs and to keep margins out of the red. But, as Herb Stein might say, this can’t go on forever so somehow it will stop.

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Herbert Stein may be best known today as father of Ben Stein, the actor, law professor, and columnist, but he was ever so much more famous in his day as a chairman of the president’s council of economic advisers

Little known fact: the Pabst beer company held an economics competition in 1944 (the year of the Bretton Woods conference) for the best plan to sustain high employment in the post-war era. Herb Stein’s plan was named the winner from among the more than 36,000 entries. He was 28 years old and the prize was $25,000 — the equivalent of $330,000 today.

Boom Varietal: Film Festival Update

September 13, 2012 By Mike Veseth in Argentina, Shameless Self-Promotion 4 Comments

Boom Varietal: The Rise of Argentine Malbec, a documentary film produced by Kirk Ermisch and directed by Sky Pinnick, had its world premier last fall and has been on the independent film festival circuit since then, where it has earned several awards.

Boom Varietal is coming to the Seattle-Tacoma area in October as part of the Tacoma Film Festival. Local wine enthusiasts should make plans to attend the screening at 2pm on Saturday October 6 at the grand old Grand Cinema in Tacoma.

Boom Varietal is one of those films that seems to stimulate all your senses (and Kirk aims to make this literally true with a Malbec tasting and discussion after the film). It is certainly visually stunning with a beautiful soundtrack by Franchot Tone. And the story line should appeal to Wine Economist readers, too.

The tale of Malbec’s rise is about nature, history, people, passion and of course business — and that’s where I come in. I appear at several points in the film to sort of connect the dots. I was quite surprised by the amount of screen time I had when I first saw the film, but I guess it is an indication of how important economics is the world of wine today and how money connects people almost as well as wine!

I’ll be at the screening on October 6 — hope to see you there! Cheers!

Watch for Boom Varietal at these upcoming film festivals

Montana CINE International Film Festival 10/17-23
Rivers Edge International Film Festival 11/1-4
Napa Valley Film Festival 11/7-11

Story Hour at the Wine Bloggers’ Conference

August 21, 2012 By Mike Veseth in Argentina, Oregon wine, wine education, wine tourism 4 Comments

We are just back from the 2012 Wine Bloggers’ Conference, which was held this year in Portland, Oregon. It was a big event, with a sell-out 350 registered participants and about 40 more on the wait list hoping to get in. Randall Grahm gave one of the keynote addresses and Rex Pickett (author of Sideways and Vertical) gave the other. I was a moderator in a wine blogging workshop.

It was great to meet so many wine bloggers and to get a personal sense of the vast virtual community of wine enthusiasts who read, write and comment on the web.

Beyond Hegemony?

The conventional wisdom is that the days of traditional media’s hegemony in the world of wine are numbered (if not already passed) and that younger wine enthusiasts will increasingly draw their influences from social media (blogs, Facebook, Twitter and so on) and not Robert Parker or Wine Spectator. The future of wine media might not be blogging, according to this viewpoint, but wine blogs are part of the evolutionary process.

No one really knows if this is true or not, of course, and many wine bloggers secretly suspect that their readership is made up mainly of other wine bloggers. But the theory is just plausible enough to make wine blogging and a big conference like this difficult for the wine industry to ignore. So I was interested to see who would show up to try to develop relationships with the wine bloggers and how they’d go about it.

The list of wine industry groups in Portland is quite long. Here, for example, is a list of the official sponsors. And then there were other industry groups, wine producers, public relations firms and individual Oregon wineries who had hospitality suites or organized pre- or post-conference events.

Grand Sponsors

Premier Sponsors

International Wine Night

Event Sponsors

Partners

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Story Hour: High Oregon Art

Why did all these industry groups converge around the bloggers? Well, people might think that the wine business is about bottles and corks (and it is to be sure), but it is really about relationships and, more than that, it’s about story-telling. The wineries, wine businesses and regional wine groups were in Portland to tell their stories to the story-tellers and then hope that the message would spread. The fact that they would invest not insignificant resources to be at the conference says something about the importance of relationships and narratives in the wine business.

There are lots of ways to tell a story and some were certainly more successful than others. The Oregon wine industry did an excellent job by embedding their wines firmly in the culture of the region, giving the bloggers a sense of the values that the wines are meant to represent.

I’ve inserted above the short video that King Estate produced to be shown at the awards banquet, which they sponsored. It gives a good impression of the Oregon story generally as well as the particular philosophy of the King Estate family. Take this as an example of the high art of wine story telling (even though the wine itself plays only a cameo role in the video).

You can only imagine how effective it was when the video, which introduced the faces, places and values, was followed by the actual food and wine and the real people who made them. It and the other messages that Oregon producers and the Oregon Wine Board scripted cannot but have left a strong impression on the attendees. Bravo.

Rich Narratives: Wine Story Tasting Notes

Winebow, an important wine importer and distributor, also showed great story telling skills. Winebow’s sessions showed off two faces of their import portfolio very effectively.

The first program focused on the wines of Argentina (they import several brands including Bodega Catena Zapata and Bodegas Nieto Senetiner). Each wine was paired with a tasty bite and a story about the wine and food of the region. The variety of Argentinean wine was showcased along with the food and even the culture (we were treated to Tango dancers). The combination encouraged us to slow down and listen, think and talk about the wines and the country. If the story is that yes, Argentina is Malbec and steak (and this is a wonderful combination), but it is also much more, then I think it was told very well indeed.

The second Winebow session was about “Off the Beaten Path” wines and it showed off the depth of Winebow’s portfolio. I think it was my favorite part of the conference. Sheri Sauter Morano MW led us in a tasting of seven wines that most of us had never tasted before and that many consumers would hesitate to try because of their unfamiliar names or place of origin. As I have written before, wine is ironically one of the least transparent everyday products and the uncertainty about what is in the bottle is a limiting factor in wine sales and wine enjoyment.

Sheri focused on the story-telling aspect. She had us taste the wines “blind” and asked us to think about how we would describe them and tell their stories to readers. What reference points (in terms of more familiar wines or other qualities) could we use and how might we distinguish their signal qualities? The “reveal” provided additional information about each wine and challenged us: How could we tell the wines’ stories in a way that would resonate with readers and allow them to have the same interesting and enjoyable wine experience? I thought this was a brilliant approach and I hope some of the bloggers embrace it to introduce their readers to new wine varieties and regions.

Food Truck Wine?

Wines of Chile is another skilled story-teller. I have worked with them on several projects and have always been impressed with their commitment to developing their brand message and their focus on social media strategies. They invited us to a participate in a pre-conference tasting that was a sort of moveable feast. About 20 of us boarded a double-decker London bus and visited three local venues (including an iconic Portland gourmet food truck cluster) where small plates of food were paired with particular Chilean wines. It was a very effective way to feature the wines and an opportunity to provide detailed and relevant information.

Taking all of the events together, including pre- and post-conference events and the chaotic “live-blogging” tasting events, I think most New World and Old World wine regions were represented in one way or another. Who has missing? I’m not sure I saw any wines or literature from either Austria or South Africa but I admit they could have been there and I just missed them. And of course if would be impossible for all the different wine regions of France, Italy or Spain to be present, but the national industries were well represented by the groups that did attend.

Bloggers need stories to tell and the wine industry needs story-tellers. No wonder everyone got on so well together at this conference.

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Thanks to all the sponsors who made the Wine Bloggers’ Conference possible. For more information I recommend Tom Wark’s assessment of the conference. I agree with Tom about most things, especially the value of real person-to-person face-time versus Facebook and Twitter.

Malbec & Maradona: Wine and History in Argentina

January 17, 2012 By Mike Veseth in Argentina, book reviews, history, wine education, wine history 3 Comments

Ian Mount, The Vineyard at the End of the World: Maverick Winemakers and the Rebirth of Malbec. Norton: 2011.

Malbec and Maradona

The most stunningly creative student paper I’ve received in more than 30 years as a college professor was written by a first year student enrolled in my introductory International Political Economy class. We were studying Argentina’s latest financial crisis and she analyzed the situation not just through facts and figures but rather by telling the story of Diego Maradona, the legendary soccer player who achieved great success on the global stage but succumbed to the pressures, stresses and temptations that came with it.

Maradona is always measured against Pele, the Brazilian star who is often proclaimed the greatest soccer player in history, and every talented young Argentinean forward is compared to him (Messi is only the latest “next Maradona”). But an air of tragedy is unmistakable despite Maradona’s heroic achievements. This same air, my student wrote, hangs over Argentina’s politics and economy, and then she proceeded to analyze Argentina’s political economy history in detail in terms of the Maradona story. It was, in both conception and execution, a brilliant analysis.

Ian Mount’s new book on Argentinean wine, The Vineyard at the End of the World, is also brilliant and in much the same way. Like my student’s paper, it can be read at several levels. It is, first and foremost, a history of the Argentinean wine industry from its roots with the Spanish explorers to its current spectacular flowering.

Although Argentina has been a major wine producer for literally centuries, it has only arrived on the global stage in the last ten years. Within Argentina its long history is heavy baggage that sometimes weighs it down. For the rest of the world, however, Argentina is a new discovery and the lack of prior experience of and attitudes toward its wines has arguably been an advantage.

Mount fills us in on the history and serious readers will appreciate the added depth this gives to the appreciation of the wines themselves. It also provides an interesting contrast to neighboring Chile and its wines, whose history is perhaps better known. But that’s only the beginning.

Lucky Survivors

Malbec is a second theme, which is understandable because Malbec is king in Argentina right now. Malbec from Argentina has been one of the hottest product categories in the U.S. wine market is the past few years. But today’s Malbec (like Maradona) is a lucky survivor of Argentina’s booms and busts – a lot of Malbec was grubbed up during the market swings and swirls. It makes me appreciate wines (like one of our favorites, Mendel Malbec) that are made from the surviving old vine blocks.

More than anything, however, this is a history of Argentina itself told through wine, making this a book that deserves a very broad readership. Based on my previous research, I knew that Argentina’s politics and economics were reflected in the wine industry, but I didn’t know how much. Come for the Malbec, stay for the politics, economics and personal stories of those who succeeded or failed (or did both) and try to understand the country and people of Argentina.

Significantly, the book ends with a sort of Maradona moment. In terms of wine, Argentina has won the World Cup with Malbec, although the country must share the glory with international consultants (like Paul Hobbs and Michel Rolland) and foreign investors and partners (too numerous to mention). But for all its strengths the industry is still somewhat fragile, struggling to overcome the problems of the domestic wine market that it still depends upon and the domestic economy in which it is embedded.

After decades of “crisis and glory,” Mount sees a bright future for both Malbec and Argentina. Let’s hope he’s right and the Maradona moment passes.

Ian Mount’s new book is a valuable addition to any wine enthusiast’s library. Mount provides a strong sense of the land and people of Argentina and the flow of history that connects them. Argentina is unique, as Mount notes early on, in that it is an Old World wine country (in terms of the nature of its wine culture) set in the New World, so that its history is broadly relevant and deeply interesting.

I studied the Argentina industry before going there last year, but Mount taught me things I didn’t know in every chapter. I love Laura Catena’s Vino Argentino for its account of the history of wine in Argentina told through the Catena family story and now I’m glad to also have The Vineyard at the End of the World for its broad sweep and detailed analysis. They are must reading for anyone with an interest in Argentina and its wines.

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Another Malbec-Maradona connection: Diego Maradona is most famous for a play that has gone down in soccer history as “the Hand of God” goal. It was in a 1986 World Cup quarterfinal match that Maradona illegally struck the ball with his hand and scored the winning goal – an offense that was clearly visible to everyone in the stadium except the officials. Must have been the Hand of God, not Maradona, I guess.

Now (or very soon depending upon the release date) there is Hand of God wine. We tasted Hand of God from the barrel when we were in Mendoza earlier in the year and we enjoyed the wine even if Maradona had nothing to do with making it. I suppose the name honors the importance of wine and soccer to Argentinean society and the struggles that both have endured. (Maradona’s team beat England in that famous game, so I wouldn’t look for big Hand of God wine sales in the U.K. market. Just saying …)

Special thanks to Jon Staenberg (proprietor of Hand of God) and Santiago Achaval for letting us sample this wine!

Malbec: The Film! [A World Premier]

October 11, 2011 By Mike Veseth in Argentina, Shameless Self-Promotion, Supply and Demand, wine history 6 Comments

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Boom Varietal: The Rise of Argentine Malbec. A film by Sky Pinnick (Kirk Ermisch, executive producer). “Southern Wine Group presents a Rage Productions documentary,” 2011.

We are just back from the BendFilm Festival in Bend, Oregon — an unlikely trip for a guy who sees about one new movie a year. The special occasion? The world premier of a documentary about the Malbec boom, Boom Varietal by filmmaker Sky Pinnick.

Simply Irresistible?

A film? About wine?. How could I resist?

Well, actually I might have been able to resist driving 6 hours from Tacoma to Bend for the premier since the track record for wine films is so mixed. Mondovino is a classic, of course, but it sure is long (or does it just seem that way while you’re watching it?) and it’s kinda annoying, too? So damn earnest! (“Le vin est mort” and all that.)

Then there’s Bottleshock, the film that’s loosely based on the famous “Judgment of Paris” tasting of French versus California wines in 1976. The film is a lot of fun (the opposite of Mondo?) but just as annoying since almost every single detail is distorted for dramatic effect or commercial purpose. The best way to watch Bottleshock is to forget that there really was a Paris tasting and enjoy the pure theater of the thing.

A Feast for the Senses

So which way would Boom Varietal go — earnest but annoying like Mondo or annoyingly commercial like Bottleshock?

Well, incredibly it is not annoying at all. In fact, it is completely enchanting. The first five minutes are a feast for the senses. The film captivated me, drawing me into the world of Malbec and the people and places associated with it.

The land and people of Argentina are the stars of this film, especially the winemakers. Executive producer Kirk Ermisch, CEO of Southern Wine Group, no doubt used his industry connections in Argentina to make the film possible, but he commendably resisted the temptation to make this a promotion piece for his business.

Typecasting? Dismal Scientist?

I went to Bend knowing that I had a bit part in the film. Sky and his wife and collaborator Shea Pinnick interviewed me me in my office last spring as they were trying to stitch together the video pieces to tell a coherent story. I’ve been writing about Argentinean Malbec for several years and obviously worrying about its future. My role, I thought, was to be the classic “dismal scientist” and wonder aloud if today’s silver lining isn’t really surrounded by a deep dark cloud. And that’s what it seemed to be when I viewed the film’s “teaser” (see above) a couple of weeks ago.

So imagine my surprise as I watched the film for the first time. I wasn’t dismal at all! Sky was able to capture my enthusiasm for Argentina and Malbec and my cautious optimism about its future in the world of wine. If Argentina’s Malbec industry falters (and that’s always a possibility in this uncertain world) I think it will be because of factors that are beyond the control of the winemakers — especially inflation and exchange rates.

I was also surprised to see myself on the screen so frequently. I think this is because Boom Varietal tells the story of the land, the people and the markets. A wine economics story! No wonder I had such a good time at the premier.

Beyond Malbec Boom?

I enjoyed this film and even learned a few things from it, but I had to keep reminding myself that this is a film about Malbec, not Argentinean wine more generally. Although the focus on Malbec is understandable and even appropriate for a U.S. audience (Malbec represents abut 2/3 of Argentina’s wine exports to the U.S.), one thing I learned from our trip to Mendoza earlier this year is that Argentina is Malbec, but not just Malbec.

If Malbec boom becomes Malbec bust (and I’m not predicting it will), then Argentina will be glad that it produces many other fine wines, both red and white. Search for Argentina among the Decanter World Wine Awards results and you will see what I mean. Maybe what lies beyond Malbec boom is not Malbec bust but a growing appreciate of Argentinean wine more generally.

But whatever happens I think Argentina will be thankful that Malbec vaulted them onto the world stage in the first place. An incredible story! Thanks to the makers of Boom Varietal for telling it so well.

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Thanks to Sky and Shea Pinnick and to Kirk Ermisch for their hospitality while we were in Bend and for inviting me to participate in this project in the first place. I wish them every success with their project.

Grape Transformations: Mondavi and Catena

September 13, 2011 By Mike Veseth in Argentina, grape transformations, Mondavi, wine history, wine research 3 Comments

Karl Polanyi’s classic 1944 book, The Great Transformation presented a theory of how the Industrial Revolution transformed much the world. Polanyi proposed a complex paradigm of acting (economy and technology) and reacting (politics and social movements) forces that combined to shape history. It is a must read (but not always an easy one) if you are looking for Big Ideas in an era of disruptive change.

This Changes Everything

I’m working on my own theory of “Grape Transformations,” which will be an occasional series here at The Wine Economist. I’m not interested in fads and trends. I want to understand instances where a person or small group fundamentally changed the nature of wine or the way that a type of wine or wine region is perceived.

Jesus is at the top of my list, of course, since he changed water into wine, the ultimate grape transformation. And there is a reason that we call think of this as a miracle. As the always insightful Ken Bernsohn reminds me, inertia is a very strong force in the world of wine (and elsewhere). This is obviously true in the vineyard itself, where years are required to “turn the supertanker” from one grape variety to another. It is also true in the marketplace, where a visible iceberg of wine drinkers interested in trying new things sits atop an invisible bulk of consumers with preferences and habits that are frozen in place (most of them drink no wine at all).

So it really is a miracle (although not in the “fishes and loaves” class) when wine makes a big turn. What are some important examples for my Grape Transformations file?

The Julia Child of Wine

Julia and the Mondavis at the Smithsonian

Let me begin with Robert Mondavi, if only because I discuss his case at some length in Wine Wars. Here’s how the section on Mondavi begins …

I like to say that Robert Mondavi tried to do for American wine what Julia Child (public television’s “French Chef”) tried to do for American cuisine: revolutionize it by convincing Americans that they could not just imitate the French but maybe better them at their own game.

Julia Child succeeded, although not by herself of course. American cuisine was transformed by her books and The French Chef, which aired from 1963 to 1973. She changed the idea of food in America. American ingredients, French techniques. Bring them together and cooks could be chefs.

Robert Mondavi did the same thing for wine. He was convinced that American grapes and Old World techniques could produced world-class wines. And he was right. When the Robert Mondavi Winery opened in Oakville in 1966, it was the first major new investment in Napa Valley in decades and it changed everything (not by itself, of course) and paved the way for a distinctly American vision of fine wine that coexists today along with a Gallo-tinted image of mass-market wines.

Mondavi wasn’t alone and he didn’t do it by himself, but I think it is fair to associate Robert Mondavi with the Grape Transformation of American wine. Quite an accomplishment.

The Mondavi of Mendoza

I think of Nicolas Catena as the Robert Mondavi of Mendoza, although I admit that the similarities only go so far. Catena transformation of Argentina’s wine industry is perhaps even more significant because previous winemaking baseline was so low. Laura Catena tells the story in a very personal way in her excellent book, Vino Argentino. She explains how and why Argentinean wine changed in terms of her family history.

A broader and more detailed account is due for publication in a few months — Ian Mount’s brilliant The Vineyard at the End of the World (I’ve just finished reading an advance copy — watch for a review here nearer the publication date). Placing Nicolas Catena’s accomplishments in a broader context, as Mount does, changes the Catena story a bit and raises new questions, but does not alter our view of the transformative force he helped launch.

I admit to prejudice in this matter because of the courtesy we were shown when we visited Mendoza and visited with Catena and Luca (Laura Catena’s project) winemakers. Nicolas Catena has a PhD in economics and was a visiting professor at UC Berkeley when visits to Napa winemakers (and a meeting with Mondavi) transformed his idea of what New World wine could be. It was a special treat when, during our winery visit, I was given the opportunity to browse for just a moment through Catena’s personal collection of economics texts.

No Plan B

Accept for the sake of argument that Mondavi and Catena belong on the Grape Transformations list. What can we learn generally from their two specific cases? Something, I think, but n=2 is a small sample size so we shouldn’t press too hard. Robert Mondavi and Nicolas Catena have little in common in terms of personality from what I have read. Catena seems be as pensive as Mondavi was outgoing. Both were driven, I suppose, and perhaps that’s the critical factor.

Both took big risks and that seems like an important characteristic. And I think that they both felt that they had little choice but to take risks, although for different reasons and from different perspectives. Mondavi left the family business and forged out on his own relatively late in life. He didn’t have a Plan B — his new winery had to succeed.

Nicolas Catena, on the other hand, unexpectedly ended up with the family business (ruining his plans for an academic career). But Argentina’s wine markets were in a funk — export was the only route open and he (and those who worked for and with him) had no choice but to remake the wine and the business if they were to avoid collapse. No Plan B here, either.

Finally, it is interesting that family is such as powerful theme in both stories, too, and this is something I will try to explore a bit more in future posts. In both cases the transformations that they led began as internal revolutions, dramatic changes within the family way of doing business, and rapidly spread outward.

The family theme continues today. Laura Catena is now the face of the family business even though she still maintains her “day job” as an ER doctor in the San Francisco area where her family lives. The Mondavi sons carry on the family business tradition, but not of course the actually family business — Constellation Brands purchased the Robert Mondavi brand back in 2005.

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I have a couple of “Grape Transformation” stories in mind that I will share in future posts. In the meantime, I hope my readers will use the Comments link to give their thought on this idea and suggest names for the list of people who changed the idea of wine.