Money & Wine: Good, Bad & Ugly

August 28, 2018 By Mike Veseth in decanter, globalization, wine, wine critics, wine price 6 Comments

cattivo We are living in a golden age for wine, or at least that’s what many people (including Jancis Robinson, Matt Kramer, and Richard Hemming) have said. Never before have so many wine lovers around the world been able to enjoy so much good wine from so many places in so many styles at so many price points. If that’s not some sort of golden age, I don’t know what is.

The wine world isn’t a utopia, of course. And, like all golden ages, this one probably contains the seeds of its own eventual demise. But I think it is pretty clear that these are s good times to be a wine drinker, don’t you think?

Jefford on the Money Problem

So was I a bit shaken when I came across Andrew Jefford’s Decanter column on “Money & Wine.” Jefford doesn’t see a golden age at all. Wine is sick, terminally ill, and the disease that is killing it is money. He writes that

“The biggest wine contaminant (far worse than sulphur) is money. I don’t know how to put it any other way. The contamination is growing worse all the time. The better the wine, tragically, the more money it contains. Fine wines are now brimfull of money.”

Ironically, having written about the devastating disease of money in Decanter on Monday, Jefford’s weekend column in the Financial Times was about a completely different devastating plague: grapevine trunk disease. Wow, wine is really sick, sick, sick.

I suppose there is a good reason why Jefford didn’t talk money to money, which he could have done by publishing his anti-money column in the FT instead of Decanter. In any case, it is clear that Jefford believes that wine is cursed. Golden age? Nonsense!

Masters of the Universe investors sweep up the best wines, pushing prices beyond the reach mere money mortals. Price becomes just a way to score the game and higher is better. Worse, I suppose are wealthy individuals who say that they are investing in fine wines but actually just want to lock them up and treasure them like Gollum’s precious ring. I have called their behavior “conspicuous non-consumption” with a nod to Thorsetin Veblen.

Jefford’s Lament

Jefford takes this whole money-wine syndrome seriously because, as a wine writer and critic, he feels that he is part of the problem. Once critics like Jefford have identified an outstanding wine, it becomes a target for those with money and pretty soon money is all that matters.

Worse, critics sometimes praise ludicrously expensive wines, presumably because they are really good, thus unintentionally reinforcing the notion that wine quality can be measured in dollars, euro, pounds, and yen. “I am guilty of this myself,” he writes, “and wholly complicit.”

One ironic result, Jefford notes, is that the wines that wine critics praise are sometimes bid up to such extraordinary prices that the critics can’t afford to buy them.

“They may briefly encounter great wines at a tasting, but they don’t own them, drink them, or develop a relationship of understanding with them in the way that wealthy wine-lovers are able to. This makes those writers, at best, outside observers of a world to which they will never belong …”

Don’t Cry for Me …

There is truth in this, I guess, but one thing that I have learned from personal experience is that pretty much no one feels sorry for wine writers. They taste wines that most people can only dream of sampling. That they cannot afford to own cases of them and have personal relationships with them doesn’t seem like a serious problem.

I am not an A-List wine critic like Jefford, but even a wine economist like me has occasional opportunities to savor great wines and have memorable wine adventures. I have learned not to speak too loudly about these experiences, however, and to write about them with care. None of my wine enthusiast friends would have any sympathy for me if I offered Jefford’s complaint as my own. Maybe Jefford’s friends are more sympathetic to his needs?

To DRC and Beyond

Tom Wark’s reaction to Jefford’s column (“Andrew Jefford and the Contamination of Wine”) acknowledged that there is a sliver of the market (fine wine, as Jefford defined it in the first quote above) where money is out of control. Top flight Bordeaux and Burgundy get lots of attention, but they are essentially irrelevant to the vast majority of wine enthusiasts. To generalize, even implicitly, from DRC and Petrus to the broader market is to misunderstand the impact of money on wine.

Robert Joseph’s Meininger’s Wine Business International column on “Is Money Ruining Wine” broadens the discussion in several interesting ways while still retaining the fine wine focus. Yes, great wines cost more today than 50 years ago, Joseph says, but global wealth has increased at the same time. Maybe today’s doctors and lawyers can’t drink Petrus every night (or have a relationship with it, I suppose), but they can afford to taste it on occasions if they want and that’s not nothing. 9781442234635

Joseph doesn’t mention it, but part of the money problem, in terms of higher price, is that interest in wine has spread around the world, so that affluent buyers in China and the U.S. seek their share. Price allocates the limited supply — more for New York and Shanghai means London gets less. That’s how markets work

It’s Complicated!

As a wine economist, I am supposed to know something about money and wine. The more I learn, the less willing I am to make bold statements as Jefford has done. There are just too many sides to consider.

That’s how I ended up writing my 2016 book Money, Taste, and Wine: It’s Complicated. I made a list of all the different ways that money could affect wine and then wrote this book to try to make sense of the situation. I ended up examining the good, bad, and ugly of money, taste, and wine. The book ends on a cautiously optimistic note, which is how I will end this column.

Money has many and varied effects on wine, just as it does on everything else. But wine is resilient and wine lovers are, too. Money and markets bring the world of wine to us, creating this golden age. Does the fact that the Golden Rule — he who has the gold makes the rule — is part of the golden age package (at least when it comes to fine wine) ruin everything? That’s up to you to decide.

It’s Not About the Wine

In the meantime, Jefford’s most recent Decanter column, Wine & the World, argues that money isn’t the world’s only curse — politics, culture, and environment are all being corrupted and society itself fragmented. If wine, with its privileged global status, isn’t part of the solution, Jefford argues, it is part of the problem.

The world is a messy place and Jefford’s goal seems to be to make you consider that fact and what you are doing about it with every glass of wine you drink. It’s not really about the wine, it is about you.

Heal the world — that’s a lot to ask of wine, but the healing needs to be done and wine is as good a place to start as any.

>><<<

The Wine Economist will take a brief break for the end-of-summer holiday and return in two weeks.

Walla Walla Comes of Age

July 15, 2014 By Mike Veseth in decanter, Washington wine, Wine Competitions 1 Comment

Sue and I recently returned from 10 days in the Walla Walla AVA — half spent attending events sponsored by the Walla Walla Wine Alliance celebrating the AVA’s 30th birthday through a celebration of its wines and half with the American Association of Wine Economists who met at Whitman College.

Coming of Age in Washington

As we drove back over the Cascades towards home base in Tacoma, we talked about key takeaway messages and at the top of both of our lists was the region’s coming of age. We’ve visited Walla Walla many times over the years and watched it grow and change, but without ever having a sense that it had achieved its potential.

Maybe it is because we had more time on this visit or maybe it is because we had so much access and guidance (from the Wine Alliance as well as from our growing list of winemaker friends there), but somehow this time it all came together and I will use the next few columns to tell you how and why we came to this conclusion and what it might mean.

International Recognition

A number of factors contributed to our view but as fortune would have it a single event sort of summed up the moment. We were up on a hilltop on the Oregon side of the AVA for a festive dinner at the Glass House at the Caderetta vineyard and we tasted a number of Bordeaux blend wines with the meal. (Scroll down to view the wines and menu for that dinner.) Marty Clubb of the Walla Walla pioneer winery L’Ecole No. 41 was there and we tasted his 2011 Ferguson Vineyard blend. I think we could actually see the recently developed Ferguson Vineyard over the hill from our vantage point.

The wine was great, with a real sense of place (more to come about this in future posts) and Marty told us that he was about to fly off to London because of this wine. The L’Ecole team was so happy with the Ferguson that they had entered it in the Decanter World Wine Awards and he had been summoned to London for the awards dinner.

The invitation meant that the wine had won one of the bigger prizes — not just a bronze, silver or gold. Maybe a regional trophy (best U.S. Bordeaux variety wine?) or maybe even an International Trophy (best of all the wine in this category from all over the world!). No way to tell which it was, but he was willing to fly to London to find out. How exciting!

A couple of days later I was busy hitting the F5 reload key on my laptop, impatient to see the Decanter results appear on my screen. And finally at 1:01 pm there they were. L’Ecole won the International Trophy for Best Bordeaux Variety Red Wine over £15 –– the top award in what must be one of the most competitive wine categories.

Wow — I couldn’t stop smiling when I learned that. Happy for Marty and his team. And happy for Walla Walla and Washington — great recognition for their wines. And a sign of Walla Walla’s coming of age, don’t you think?

Art versus Science?

I don’t know if I was lucky or not, but I got the news when I was surrounded by my academic wine economist colleagues, who are intensely skeptical of wine competitions and rankings. I think it is possible they have collectively devoted far too much of their very considerable intellectual firepower to proving what I think is obvious — that judging wines, even using expert tasters and careful protocols, is more subjective art than objective science.

Winning a Decanter award or any other obviously doesn’t prove that one particular wine is objectively “better” (whatever that means) than any other. But, I would argue, it is hard to deny that the excellence of the L’Ecole Ferguson stood out to the initial American tasting panel, which is how it entered in the International Trophy competition. And it obviously stood out there, too, when tasted with similar wines from other parts of the world. Not rocket science, I agree, but still worth celebrating.

Frenchtown Schoolhouse Roots

Best in the world? That’s a matter of opinion. But a sign that Walla Walla has come of age? Absolutely yes! And while LEcole is not the only Walla Walla winery set to take a place on the national and global stage, it is a very good example for us to study. The Ferguson vineyard itself, for example, shows L’Ecole’s determination to expand production without diluting quality and, at over 40,000 cases, L’Ecole is now large for a Washington producer (although everyone is small compared with Chateau Ste Michelle and its sister wineries, which together produce well more than half of all the wine in the state).

L’Ecole’s recently re-designed label also suggests a thoughtful approach to moving into the national spotlight. The old label was a playful rendering of the historic schoolhouse that serves as the winery tasting room today in the tiny town of Lowden, which was known in days past as Frenchtown because of the French settlers there. The new label keeps the Frenchtown schoolhouse image, but updates it and presents the wine in an elegant way that communicates quality to a broader audience while respecting the heritage of the winery and the region.

Is the L’Ecole Ferguson’s award the whole “coming of age” story? Far from it — I’m just getting started. Stay tuned.

>>><<<

Before I go: Here’s a brief video that Marty Clubb made before his London flight. I include it here because it anticipates my next column, but also because it gives you a sense of our experience talking with Marty on that high ridge overlooking the Ferguson vineyard last month. Enjoy!

>>><<<

Thanks to everyone we met in Walla Walla for their help and hospitality. Special thanks guide extraordinare Sharon Ferraro and to Duane Wollmuth and Heather Bradshaw of the Walla Walla Wine Alliance. Here’s the menu from the dinner at the Cadaretta glass house. Enjoy!

Decanter’s Power List 2013: Globalization and China’s Continuing Rise

July 16, 2013 By Mike Veseth in China wine, Costco, critics, decanter, Economic impact, globalization, Grace Vineyards, wine markets 1 Comment

He’s still #1

The July issue of Decanter (the self-proclaimed “world’s best wine magazine”) is out and with it comes the Decanter Power List 2013 – a list of the 50 most powerful people in wine this year as determined by the magazine’s editors.

The Power List, which appears every other year, is great fun, both in the way that it spurs debate (my soccer-fan friends spend hours and hours debating similar lists for their sport) and because of the glimpse it offers into the way the world wine map is changing … or not.

Small World After All

What does the 2013 list reveal? Well, the #1 most powerful man (only 15% of those on the list are women) is once again Pierre Pringuet, CEO of drinks multinational Pernod Ricard. There are bigger wine companies – Gallo (Gina Gallo is #17 on the list) and Constellation Brands (#5 Robert Sands) but it is Pernod Ricard’s global reach and decidedly global strategy that sets it apart and makes Pringuet #1. Or so I believe, because one of the messages of this Power List and the last one is that globalization is now the way of wine.

The new #2

Asia is the key to the global kingdom, or so the list seems to say. Ten of the 50 listed luminaries have a strong Asian connection, including the new #2 (up from #8 last year) Wu Fei, head of the wine and spirits division of COFCO, China’s state-owned Cereals, Oils and Foodstuffs Corporation.

COFCO makes wine (Great Wall brand), invests in wine properties (Chateau Viaud in Bordeaux with more foreign acquisitions to come) and is a key potential partner for anyone in the world who wants to sell bulk wine into the Chinese market. It will soon start bottling Australian and Chilean wines to sell under the Great Wall label, with more international expansion planned.

COFCO’s (and China’s) influence is so strong that its association with Bordeaux flying winemaker Michel Rolland seems to account for his surge in the ratings from #18 last year to #7 in 2013. The China connection also might explain Aubert de Villaine’s meteoric rise from #30 to #8.

De Villaine is co-owner of Domaine de la Romanée Conti and that alone might justify a place on the list. But 2013 has been widely seen as the year that many Chinese investors and collectors lost interest in Bordeaux and turned their attention to Burgundy. So no surprise that DRC, perhaps the most sought-after Burgundy wine, would surge in the ranking.

New Names and Faces

There is always a good deal of churn in the Power List and this year is no different. I counted 14 new names, starting with #48 Judy Leissner (CEO of Grace Vineyards, China) and ending with #11 (John D Watkins, ASC Fine Wine, China) and #12 (Yang Wenhua, C&D Wines, China).

Not every new face has a Hong Kong or China link, but many do including # 44 Li Demei (Chinese consulting winemaker), #42 Paolo Pong (Hong Kong retailer and restaurateur), #27 David Pedrol (Chinese online wine retailer) and #23 David Dearie (CEO of Treasury Wine Estates, which is noteworthy for opening a vast 6000 square meter wine gallery in Shanghai).

Other new names on the Power List are Magdalena Gerber (#33 – she is CEO of Sweden’s wine monopoly, Systembolaget) and Bob Peter (#32, head of the provincial monopoly Liquor Control Board of Ontario). Systembolaget and the LCBO are two of the world’s largest wine purchasers and retailers (along with Costco, the U.S. leader, represented by Annette Alvarez Peters at #4 and Tesco’s Dan Jago at #14). Globalization can create a huge wine pipeline and this gives power to those who can fill it (like Pernod Ricard) and those who can empty it profitable (Costco, Tesco, Systembolaget and the LCBO).

More questions than answers

The U.S. is the world’s largest wine market today and it seems a bit under-represented on the Power List with only eight names, but they are heavily concentrated in the top tier: #9 critic Robert Parker, #6 Constellation’s Robert Sands, #5 distributor Southern Wine & Spirits’ Mel Dick and Costco’s Annette Alvarez Peters at #4.

It’s interesting to ponder the Power List because it raises more questions than it answers. Who do you think really is the most powerful wine person in the world?

Why aren’t there more women on the list, especially from Europe where Jancis Robinson and Magdalena Gerber are the only female representatives? This is a question for the industry (and not just Decanter’s editors) to ponder. Will this year’s new faces still be around in two years when the next list is released? Where will the next group of new names come from?

And, of course, when will Decanter finally include a wine economist in the power list? I guess we’ll just have to wait and see.

>>><<<

Click on the links to read my analysis of previous Power List selections for 2011 and 2009.

Wine Reviews: A Modest Proposal

July 24, 2012 By Mike Veseth in decanter, wine price, wine ratings 14 Comments

Decanter, the self proclaimed “world’s best wine magazine,” is “relaunching” its Buying Guide section in an attempt to make wine ratings more transparent and therefore useful to its global audience. You can read all about the new tasting panel protocols here.

Three Heads Better Than One

Instead of listing a single rating score for each wine, for example, Decanter will now provide the individual scores of three critics. I wasn’t sure if this would make much of a difference, but having read through the new issue, I am a fan. Let me take the big review of Rias Baixas Albarino as an example.

Having read the press release, I was expecting to see four numerical scores for each wine (one for each of the reviews plus the average). What I found was a good deal more, however. Each of the three tasters (regional experts Ferran Centelles, John Radford and Jane Evans in this case) also provided individual tasting notes for the eight top wines plus summary assessments of the group of wines. (The wines were apparently spectacularly good — 8 top scores out of 74 wines and 25 designated as good value.)

Each of the tasters also provided notes for their “top three” recommended wines and John Radford wrote a brief essay to sum things up. Result: There is a lot of information here and a sense of a wine conversation rather than a monolithic judgment. Great new format.

Global Wine Drinkers Want to Know

For as long as I have been reading Decanter the wine ratings have had three components: a brief but useful tasting note, a numerical rating on a 20 point scale and finally an overall assessment of zero to five stars. Of these three the tasting notes are the most useful for serious study while the star system works well for me as a potential buyer. I’m not sure I can taste the difference between 15.5 and 16.0, but knowing what’s Good, Better and Best (my casual interpretation of three, four and five stars) is something I can use.

But Decanter’s scoring system has changed. Here’s a quote from the press release.

Perhaps the most significant new feature is the adoption of the 100-point score, to run alongside Decanter’s 20-point score, while the old five-star system has been dropped.

Introducing the 100-point system is essential as Decanter is now a global magazine with more than half its readership outside the UK, [editor Guy Woodward] says in this month’s editorial. Readers can now ‘use whichever [scoring system] they are more familiar with’.

Fair enough — although “essential” is pretty strong — but I’m going to miss the simplicity of the old five star system and I’m not really sure that I need to have the 20 point British scale translated into a 100 point American equivalent. Converting Decanter scores into Wine Spectator-type figures and back again isn’t exactly rocket science (see the conversation table below). But I don’t see any harm in it, especially if, as the Decanter story suggests, the point is to help “global” readers who may be unfamiliar with the 20 point system to make sense of the ratings.

Follow the Money: A Modest Proposal

It’s good to step back and rethink things like this every so often, but maybe Decanter’s relaunch didn’t go far enough, so in the spirit of Jonathan Swift, I’d like to offer a “Modest Proposal” for future reform.

Here’s my idea. Instead of asking critics to score the wines on a quality scale, let’s ask them how much they are worth! How much should someone be willing to pay for this wine?

Wine reviews generally tell us a wine’s price and a score, but what we really want to know is if it’s worth it. That’s the question that a lot of shoppers want answered and the question they are often trying to figure out when they read critic reviews. From a practical standpoint, don’t you think it would be more useful to translate scores into bucks rather than messing around with 20 points versus 100?

Yes, yes, I know there are lots of problems. A wine that tastes good enough to sell for $20 to you might only taste like it’s worth $12 to me. But that’s nothing new — differences in taste and the problem of what economists might call “interpersonal utility comparisons” are part and parcel of all wine rating systems.

The Mitt Problem … Solved

Income distribution is a more difficult question, however. Mitt Romney has mega-bucks, so me might be willing to pay a lot more for a given bottle of wine than I would. That would mess up the ratings if he were a wine critic. But, hey, Mitt doesn’t drink wine, so … problem solved!

There would be lots of benefits to this new system. Easy to use — just compare the price score ($15) with the market price and you know if the wine is “worth it” or not. Under a set of ridiculously improbable theoretical assumptions that I won’t explain here because it would put you to sleep, the gap between price and critic-assigned value would be equivalent to the welfare economics concept of “consumer surplus” and so the scores would allow consumers to more efficiently maximize utility and achieve a Pareto Optimal resource allocation.

And while this doesn’t really work in theory, it is how many people behave in practice. How many times have you heard someone brag that their $10 wine tastes like it should cost $20? And although this is a silly thing to say, I believe many people really enjoy the benefit they think they have gained from that value-price gap. So the new system wouldn’t change that way of thinking — just improve it. We’d be drawing upon expert opinion for judgment rather than our own amateur assessments.

A Crazy Idea

Yes, I know this is crazy, but that’s the point. Jonathan Swift’s original 1729 modest proposal — that the rich should eat the children of starving Irish peasants — was also crazy, but the point was very sane. The cost of food (due to the high rents that landlords collected, according to the author) was already killing children in Swift’s day. As he said, the landlords had already “eaten” the parents through outrageous prices — might just as well go after the children next.

My wine rating reform is crazy, too. You can’t use money to rate wine. Wine doesn’t taste like dollars — it tastes like wine! But, that’s my point. It doesn’t taste like dollars, but it doesn’t taste much like points, either, however useful consumers and producers might find the ratings to be. Hey, don’t get upset. It’s just a modest proposal!

Here’s the Decanter conversation table. Cheers.

Good to Great: Rethinking Chilean Sauvignon Blanc

May 22, 2012 By Mike Veseth in Chilean wines, critics, decanter, Marlborough Sauvignon Blanc, New Zealand 6 Comments

“Good wine, great value” — that’s been Chile’s wine reputation for many years. And while this isn’t a bad thing by any means, it is a bit of a self-limiting category. “Great wines” might be a more desirable label, or maybe “great values, great wines.” But things are changing in Chile. Is it time to rethink Chilean wine?

A Tale of Two Tastings

This post is inspired by a pair of tastings of Chilean Sauvignon Blanc. The first was in London at Decanter magazine’s headquarters, where a team of four experts tasted 80 Chilean Sauvignon Blanc wines for a report just published in the June 2012 issue. The tasters included Peter Richards MW, Mel Jones MW, Juan Carlos Rincon and Annette Scarfe.

The second tasting, a much more casual affair, took place 4500 miles away at our house in Tacoma. Sue and I were joined by three of my University of Puget Sound “Idea of Wine” students for a tasting of wines supplied by Wines of Chile. We tasted five Sauvignon Blancs (see wine list below) that were sent to us along with three Chardonnays that we tasted separately.

I was very interested to hear what my students would have to say about these wines. Abby and Marina studied abroad in Chile, so they brought some regional focus to the group. Ky is a quintessential Millennial wine “newbie” with a refreshingly open and thoughtfully candid attitude. They were the perfect tasting team to balance the experienced Decanter experts.

Upward Trajectory

Sauvignon Blanc is an important factor in the Chilean wine industry, as this table from the Wines of Chile Strategic Plan 2020 makes clear. Sauvignon Blanc is now #2 in the export dollar league table behind Cabernet and ahead of Merlot and Chardonnay. Exports of Sauvignon Blanc almost tripled in dollar value between 2002 and 2009 — much faster growth than Cabernet, Merlot or Chardonnay. Why?

One theory is that Chile has ridden New Zealand’s wave. Certainly Marlborough Sauvignon Blanc has opened doors and minds to Sauvignon Blanc, to the benefit of producers in South Africa, Chile and elsewhere.

But the Decanter tasters have a better theory: the wines themselves have improved as winemaking practices have caught up to the global “best practice” standard. Decanter’s team recommends buying the most recent vintage of Chilean Sauvignon Blanc not just for freshness but because they believe the quality of the wine making is improving every year.

That said, stuff sometimes happens and the Decanter team reported a few bottles that suffered from too much sulfur or excess acidity. We had the same problem — one of our five bottles pushed acidity to the borderline in our opinion.

Common Ground

Of the 80 wines that the Decanter team judged, two earned 5-star honors, twelve received four stars and 50 were “recommended” 3-star winners. Fifteen wines were judged “good values.” Is this a good showing?

Yes! A review of 121 Argentinean Malbecs in the same issue produced three 5-star wines, sixteen with 4-stars and 55 “recommended” 3-star wines. Twenty were declared good values. Adjusting for the number of wines sampled, I think you’d have to declare it just about a dead heat between Argentina and Chile (a statement that is likely to provoke a response on both sides of the Andes!).

We enjoyed the wines and commented upon the French stylistic influence which made them a change from the New Zealand wines we often drink. How did they compare to the wines you drank with your homestay families in Chile, we asked Marina (upper photo) and Abby (shown with Ky in the lower photo)? We didn’t drink white wines, they both replied. Always red.

Good to Great

“At the top end, I think New Zealand is still ahead of Chile, because the experience it has counts for so much,” according to one of the Decanter reviewers. “But the very best Chilean Sauvignon Blancs are fantastic wines that can more than hold their own in a global context. Chilean Sauvignon Blanc is a fantastic value for money next to New Zealand, South Africa and the Loire, and that is its forte”.

Overall these wines were very good — we will certainly enjoy them with summer meals — and our ranking of individual wines matched very well to Decanter’s point scores. Yet we a little disappointed. Good, no question, but not great.

Or not yet great. If quality continues its upward trajectory, “great wines, great values” may soon be within Chilean wine’s grasp.

>>><<<

Thanks to Wine of Chile for supplying wine, olive oil and spices for the tasting. Here is a list of the Sauvingon Blancs we tasted along with their U.S. suggested retail prices.

Casa Silva Cool Coast Sauvignon Blanc 2011 Colchagua Valley ($25.00)

Los Vascos Sauvignon Blanc 2011 Casablanca Valley ($13.99)

Cono Sur Visión Single Vineyard Sauvignon Blanc 2011 Casablanca Valley ($14.99)

Viña Casablanca Nimbus Single Vineyard Sauvignon Blanc 2011 Casablanca Valley ($12.99)

Veramonte Ritual Sauvignon Blanc 2011 Casablanca Valley ($18.00)

Money, Power and Wine

June 8, 2011 By Mike Veseth in decanter, Economic impact, wine critics 2 Comments

Wine is about flavor and aroma, of course, but it’s also about money and power. Anyone who has studied the wine business knows about the money that’s at stake and the power that a few key actors have to shape the market or exploit its peculiar structure.

Every couple of years Decanter magazine publishes a list of the 50 most powerful people in the world of wine, which gives everyone an opportunity to think about how wine has changed and how those changes have altered the distribution of power. I wrote about the 2009 Decanter Wine Power List two years ago and now the 2011 list has appeared. You can read all about it here: Decanter Wine Power List 2011.

Lewis Perdue, editor of Wine Industry Insight responded to the new Decanter rankings almost immediately, saying the list is based on “snobbery rather than power.” Perdue writes that

Decanter’s annual “Powerful” list is based not so much on power, clout, or the ability to move markets, but on a snobbish gaze at a small self-indulgent world that is increasingly irrelevant to the vast majority of the globe’s wine drinkers.

Indeed, the wine industry’s obsession with the navel-gazing worship of sacred grapes blessed by the gods since 1855 is one key reason wine remains a self-marginalized beverage.

Small wonder that so many people who have a real life choose to punt on haut vin’s rituals and mumbo-jumbo and order a vodka or an IPA instead.

What’s bugging Perdue? As someone who has recently asked “Is Bordeaux Still Relevant?” I can appreciate his point of view, which becomes clearer when you compare the 2011 ratings with the 2009 power list. I’ll reproduce the top tens from both years here.

2009 Wine Power List Top Ten

Richard Sands, USA, Chairman, Constellation Brands
Robert Parker, USA, wine critic
Mariann Fischer Boel, Denmark, EU Commissioner for Agriculture
Mel Dick, USA, Southern Wine & Spirits (wine distributor)
Annette Alvarez-Peters, USA, Costco wine director
Dan Jago, UK, Tesco wine director
Jean-Christophe Deslarzes, Canada, President of Alcan Packaging
Jancis Robinson, UK, wine critic, author and journalist
Nicolas Sarkozy, France, President of France
Pierre Pringuet, France, Pernod Ricard

The 2009 power structure reflected a certain rationalization of the wine business — by which I mean a movement towards de-mystified wine that consumers buy because they can understand it. Sands (#1) and Dick (#4) are in the business of selling and distributing wines to the masses — they are forces of democratization, if you will allow me to use this term very loosely.

Fischer Boel (#3) is the EU official who in 2009 was working on reforms to make the EU market more rational, more like the American market, so that European winemakers could compete with the Sands and Dicks of the world (and stop producing surplus wine that no one will buy).

Alvarez-Peters and Jago (#5 and #6 respectively) are part of that system, too. Costco and Tesco are the largest wine merchants in the U.S. (Costco) and the world (Tesco); key leaders in wine’s expanding (rationalized) retail domain.

Even Robert Parker (#2) is sometimes seen as part of the wine democratization movement, at least to the extent that he has weakened the hold of Old World elites on wine criticism. His 100-point scale is often characterized by critiques as rationalization taken to an extreme. (FYI French President Sarkozy made the list at #9 because his anti-alcohol policies represented a powerful and widespread threat to the wine business.)

The 2009 ratings, in this admittedly superficial analysis, were all about how power has moved not so much to the masses as to people with an interest in selling wine to the masses by reconfiguring the structure of the wine industry to that end. You can see from the part of Perdue’s remarks that I quoted above that he is probably sympathetic with the direction the 2009 power list points (except the Sarko element, of course).

2011 Wine Power List Top Ten

Pierre Pringuet, France, Pernod Ricard
Eric de Rothschild, Chateau Lafite Rothschild
Robert Parker, Wine Advocate
Mel Dick, Southern Wine & Spirits
Robert Sands, Constellation Brands
Annette Alvarez-Peters, Costco
Don St Pierre Jr, CEO of China-based distributor ASC
Wu Fei , general manager of Chinese wine company Cofco wine and spirits
Eduardo Guilisasti, Chief Executive Officer of Concha y Toro Winery
Jancis Robinson MW OBE , wine critic and author

Decanter explains the significance of its new rankings in the video I have inserted at the top of this post and also on its website:

Pierre Pringuet, CEO of ‘arguably today’s most diverse, far-reaching major wine producer’ has knocked Constellation’s Robert Sands from the number one slot.

The 60-year-old executive, number 10 in 2009’s Power List, presides over the world’s fourth biggest wine company, owner of brands from Champagne Mumm and Perrier-Jouet to Jacob’s Creek and New Zealand’s Brancott Estate.

Pernod Ricard spans both the mass-market and premium end of the global wine market, giving it ‘an enviable perspective on the rate of change currently affecting the wine world,’ Decanter argues.

In second place is Eric de Rothschild, who has looked after the diverse portfolio of Domaines Barons de Rothschild for 37 years.

He has shot up from number 20 on the basis of Chateau Lafite’s huge influence in China: ‘as the world’s premium producers blaze a trail east, it is in Lafite’s footsteps they tread.’

The 2011 rankings present a different picture of wine power. Parker, Sands and Alvarez-Peters still appear in the top 10, reflecting the continued relevance of an American idea of wine markets, but Pernod Ricard replaces Constellation Brands at the top. Constellation was #1 in the world in 2009 and is #2 now, behind Gallo. Pernod Ricard is #4 by sales today. (Gina Gallo appears further down the list a few positions ahead of her husband, Jean-Charles Boisset — a real wine power couple!)

But the real story is about the new faces in the top 10 list. China is the emerging market powerhouse and power is shifting, Decanter is telling us, to those who can ride that tiger most successfully. Rothschild’s #2 position is all about China. His Chateau Lafite Rothschild’s soaring prices are driven by Chinese buyers who cannot seem to get enough 0f that wine, no matter how much it costs (or how likely it is to be fake!).

Assessing the Power Shifts

It certainly is the case that wine market power is shifting. The U.S. appears to be the wine market of the present (it is now the largest national wine market) although it is hard to argue with the idea that China may be the market of the future. But the future could be a long way off. Still, I understand that everyone is looking for growing markets and The Next Big Thing, which is probably why there was so much attention given my series on wine in the BRIC nations.

Britain has always had a “special relationship” with Bordeaux (one that is hundreds of years older than its U.S. link), so it is perhaps understandable that Decanter’s editors would see the world through a different lens than some of the rest of us. Power has already shifted to Asia in certain segments of the wine auction market and for some Bordeaux wines, so if we define the universe of wine this way (which is what Perdue objects to) then Decanter’s strong focus on Asia makes perfect sense. If you take a different view of what is relevant in wine today and what isn’t, then your sense of where the power lies changes.

Power to the People?

Decanter says that one message in the power list bottle is the democratization of wine. Gary Vaynerchuck, the “people’s wine critic,” makes the list again (he ranks higher than Hugh Johnson) and “the amateur wine bloggers” make their first appearance in the #16 slot — behind Dan Jago and Gina Gallo but a couple of positions ahead of Michel Rolland.

I like the idea of recognizing the power of the internet. My university students get most of their information about wine from web sources — they don’t pay much attention to the traditional gatekeepers. But power transmitted through the web is different in nature from the ability to control wine distribution, for example. It is much like the distinction I make in my political economy courses between “hard power” and “soft power.” Both are important, but which is more effective depends on the context.

There are some wine bloggers with great influence (I wouldn’t call their efforts amateur, however), but I think Decanter missed the target here. It is probably not the bloggers who represent soft power in wine so much as the thousands of contributors to CellarTracker.com and similiar websites. Their influence surely trickles up, although the long term impact remains (like that of China) yet to be revealed.

The Mother of All Wine Competitions

June 1, 2011 By Mike Veseth in Charles Shaw, decanter, wine awards, Wine Competitions, wine critics, wine research 9 Comments

Decanter, the self-proclaimed “World’s Best Wine Magazine,” organizes the mother of all wine competitions each year. The results of the 2011 judging are out — you can read them here.

I think that the Decanter World Wine Awards is the largest and most comprehensive wine competition in the world. The press release proclaims that “This year a staggering 12,252 wines from 44 countries were tasted in the DWWA, with 8,327 medals awarded.” Staggering is right! That’s a lot of wine from a lot of places and a lot of awards, too.

Can you imagine a wine competition with more than 8000 winners (two thirds of all wines entered)? What an incredible undertaking.

Suspicious Minds

Wine economists are suspicious of wine competitions. This is partly because economists are suspicious people in the first place, always looking for the dark dismal cloud whenever they spy a silver lining. But there are other reasons, too. De gustibus non est disputadum is the economists’ motto; everyone is entitled to her own opinion on matters of taste. The idea that anyone, even experienced judges, could objectively rank something as inherently subjective as wine runs against an economist’s nature, so you can imagine how suspicious we are about big competitions where thousands of wines are tasted and rated.

Richard Hodgson, a winemaker and retired statistics professor, was for many years a judge at the Mother of All American Wine Competitions, the California State Fair Commercial Wine Competition. California State Fair judges evaluated more than 3000 wines from 600 wineries in 2009. It’s a huge competition, although nothing compared to the Decanter contest. Hodgson’s analysis of raw data from wine judges suggests that they are only human after all and likely to suffer the sort of tasting inconsistencies that you would expect (if you are a suspicious-minded economist).

Hodgson and his colleague G.M. “Pooch” Pucilowski, California State Fair Wine Competition manager and chief wine judge discussed their findings at the 2010 meetings of the American Association of Wine Economists in Davis, California. Here’s a summary taken from the Wine Business Monthly report on the session.

Hodgson served as a judge in the California State Fair competition, and is now on the competition’s Wine Advisory Task Force working with Pucilowski to try to improve judging quality and consistency.

With Pucilowski’s assistance, Hodgson has been evaluating the competition judges since 2005 with trials that place three samples from the same wine bottle in one flight of judged wines to see if the judges ranked each sample consistently. Hodgson, who taught statistics at Humboldt State University, said, “Fewer than 10% of judges could judge the three wines and maintain consistency in their scores.” He added, “Some of the same wines received ratings that ranged from no award to gold.” When the study, “An Examination of Judge Reliabiity at a Major U.S. Wine Competition,” was published in the JWE, it received significant media attention and created a stir among wine judges and within the wine industry.

Pucilowski, who has managed the State Fair competition 25 years and often serves as a judge in other competitions, openly admits that his competition and all wine judging events are highly subjective. To his credit, he is constantly looking at ways to improve the competition and to help judges improve their abilities.

The Value of Wine Competitions

So it seems like there is good reason to be skeptical about wine competition results. Why, then, do winemakers enter these competitions, given that they are the people who are most likely to know when their wines are scored too high or low compared with others? Ego may have something to do with it, but the obvious answer is that there is commercial value in a gold medal and the attention it receives, although I don’t know how much a medal is really worth — probably depends upon the circumstances. I noticed, for example, that the Achaval Ferrer Malbec that was the top wine last year in Decanter’s big comparative tasting of Argentinean Malbec did not receive a medal at DWWA. I’ll bet that’s because it wasn’t entered. Nothing to gain for this famous (and probably sold-out) wine.

Some wine producers probably enter competitions on the theory that they might win a medal in at least one of them, which gives them bragging rights. There has been a medal on the label of every bottle of Gallo’s value-priced Barefoot wines that I’ve ever seen, for example. A medal gives the cautious bargain-buyer some assurance of quality. Three non-vintage Barefoot wines — Merlot, Pinot Grigio and Moscato — earned “commended” medals in this year’s Decanter competition.

Even Two Buck Chuck wins gold medals, according to an article in the Napa Valley Register.

The Charles Shaw 2005 California chardonnay (yes, the $1.99 “Two Buck Chuck” made by Bronco Wine Company sold at Trader Joe’s) was judged Best Chardonnay from California at California State Fair Commercial Wine Competition.

The chardonnay received 98 points, a double gold, with accolades of Best of California and Best of Class.

Decanter’s Value

As the video above shows, Decanter (like the California State Fair competition) goes to great lengths to overcome the inherently problematic elements of wine judging. This makes sense since there is so much at stake, both for the winemakers and for Decanter itself, which puts its reputation on the line. The Decanter awards probably have more commercial value than most because the Decanter name has credibility, especially in the U.K. Decanter sells colorful foil medals to decorate winning bottles and the decorations sell the wine, the magazine and, well, the whole enterprise.

Winning a medal is good, but perhaps the biggest prize for many wineries is winning distribution. Making good wines is often easier than getting them into consumer hands, both here in the U.S. where our fragmented three-tier system creates many obstacles, and also in Great Britain, where the big supermarket chains dominate. Scrolling through the online winner lists I notice that a lot of the wines that are received medals in the competition aren’t currently sold in the UK. Perhaps that’s the point of entering — to get distributor attention and break into the market.

Thick and Thin

Wine competitions are fun, but I admit that I don’t take the results too seriously since they depend on so many uncontrollable factors, including which particular wines are entered and which (like the Achaval Ferrer Malbec) are held out. I do, however, find the Decanter results worth careful study because they have some important stories to tell.

The wine world is very broad but the world wine market surprisingly thin and uneven. Looking at the award list, it is interesting to see the large number of countries (44, including India, China and Thailand) that sent wine to London for the judging. As someone who writes about the globalization of wine, it is great to see evidence of the world wine web’s continuing expansion.

But the list of entries is also relatively thin and uneven in some respects, even with more than 12,000 entries, reflecting the fact that the British market is difficult to break into and so not everyone sees value in entering Decanter’s competition.

If you search for U.S. award winners, for example, I think you will be a bit puzzled by the long list of wineries that result, both in terms of the wines that appear and those that are missing, probably because they were not entered in the competition. There are affordable wines from large scale producers (like Gallo’s Barefoot noted above) and some expensive boutique ones, too, but much of America’s vast middle kingdom of wine, which is in many ways the country’s great strength, is under-represented. Not interested in the award because not represented in the British market, I suspect.

The U.S. Medal Count

This perhaps accounts for the odd showing of American wines on the Award league table. Only four U.S. wines earned top awards in 2011 (many more earned Silver, Bronze and Commended medals, however). The top four are:

Vina Robles Cabernet Sauvignon Huerhuero Estate 2008 (Paso Robles, San Louis Obispo County) earned a regional trophy (second only to an international trophy in Decanter’s galaxy of awards). It was the top U.S. wine. No U.S. wine earned an international trophy.

Three wines earned gold medals: Chateau Ste. Michelle Artist Series Meritage 2007 (Columbia Valley, Washington State), Justin Justification 2008 (Paso Robles. SLO) and the Silverado Vineyards Estate Cab 2008 (Napa Valley).

Are you surprised? I’ll bet this isn’t the list you were expecting. And it is interesting that none of the American wines made the highest level of awards.

Is four a good medal count? Not compared to Argentina, which received almost 20 gold medals and nine regional trophies. Why the big difference? Perhaps the judging panels applied different standards or maybe there just aren’t as many really good wines from the U.S. these days, but I think it has something to do with the intensity of Argentina’s export drive and the importance they attach to Decanter’s international reputation compared with producers from the United States.

>>><<<

I’ve been asked to chair the session on wine competitions at the annual meetings of the American Association of Wine Economists later in the month. It will be interesting to see shat new insights the panelists will provide. Watch this space for a report.

The Trouble with Wine Porn

September 13, 2010 By Mike Veseth in decanter, globalization, Jancis Robinson, Michael Broadbent, wine auctions 6 Comments

Not for everyone.

Sometimes I have doubts. Here at The Wine Economist we seem to be interested in what you might call everyday wines. Not that you necessarily drink them every day, but they are generally available and you can buy them if you can afford them. It’s a matter of choice. Everyman wines might be a better term if it didn’t sound just a little bit sexist.

Wine Porn

But much of the wine world seems preoccupied with impossibly expensive or incredibly rare trophy wines. A lot of attention is given to stories, ratings, tasting notes and images of wines that only a lucky few of us will ever have an opportunity to taste.

I’m tempted to call this wine pornography, mirroring the well-documented phenomenon of food porn. Stare if you like, drool if you must, but never, never touch! (I didn’t coin the term; I found it in Jancis Robinson’s “Wine Porn of the Highest Order.“) The whole Bordeaux en primeur phenomenon strikes me as borderline wine porn, if only the soft-core kind.

Wine porn may be a harmless vicarious thrill for the most part, but like pornography generally it can be a problem when people become compulsively attracted to it. I’m worried that all the fuss that trophy wines receive really does divert us from the excellent Everyman wines on offer and the problems and delights of everyday wine life.

Broadbent to the Rescue

Well, thank goodness for Michael Broadbent. I realize that this is an unlikely thing for me to say at this point because it would be easy to make the case that Broadbent is one of the inventors of wine porn. As the director of the wine department at Christie’s auction house in London, he certainly helped create the winner-take-all economic environment that fuels the wine porn industry now.

And then there’s his writing. Gosh! Broadbent’s tasting notes are extraordinary. Some, dare I say, are voluptuous! My glasses steam up when I read them. But it turns out that he shares many of my distinctly non-pornographic concerns about wine.

Broadbent recently published his 400th consecutive monthly column for Decanter magazine and he used the occasion to talk about the state of the wine world, very much focusing on Everyman and her wines. “My feeling is that consumers have never had so much choice but they have never been so confused,” he said. ‘”The whole world is making a good standard of wine today and they need some guidance.”

The Perfect Disguise Below

This embarrassment of riches sounds like good news, but Broadbent is concerned that the democratization of wine has created a power vacuum that big players will rush to fill. “Big business seems to be taking over and I don’t like the way things are going,'” he says. He’s concerned about the fate of small producers.

Head-spinning number of choices

Well, I certainly agree with Broadbent’s premise. Globalization has spread wine and wine expertise around the world. The discipline of global markets is slowly driving technically flawed wines from the market place (some still hang on, justifying their existence on the basis of low price or disguising their flaws as terroir). More wines, from more places, with a higher overall quality standard: good news for Everyman.

But globalization really has created problems. More choice is good, but only up to a point. Some times too much is too much, especially as wine draws in new consumers. The Constellation Brands study of American wine buyers found that 23% of potential buyers were “overwhelmed” by the choice and frequently walked away empty handed. Broadbent’s right about the confusion factor.

Globalization has changed the problem from making good wine to distributing and marketing it. Here (especially in distribution) large firms really do have an advantage, but this is not a new thing. Power in the wine world shifted to those who could manage distribution long ago — with the introduction of the railroad system in France in the 19th Century.

Beyond Wine Porn

Broadbent is concerned that the corporations will destroy wine as they try to simplify it for the mass market. This is contrary to their own business interests, of course, since people pay more for distinctive products. Building a wine portfolio ladder that starts buyers in Two Buck Chuck territory and leads them up to a higher (or at least more expensive) shelf only works if wine’s diversity is preserved.

Dumbing down to create a simple flat wine world is economic suicide as much as it would be an aesthetic tragedy of the commons. But these are desperate times for some large wine businesses and desperate CEOs do desperate things, so I do not rule this out absolutely.

I guess I am more optimistic about the future than Broadbent, even if I share his concerns. I think there is a pretty large middle ground between the bland corporate wine that worries him and the spicy wine porn that troubles me. This probably suggests that the state of wine today is quite good!

>>><<<

Congratulations to Michael Broadbent on his 400th Decanter column and his extraordinary life in wine.

The Democratization of Wine

August 23, 2010 By Mike Veseth in decanter, popular culture, wine awards, wine distibution, wine education, wine markets 1 Comment

As a known “Wagnerian” sympathizer, I am naturally in favor of the “democratization” of wine. Power to the People is good, Wine to the People is even better (and sometimes equally difficult to manage). Recently I’ve run into a couple of stories that suggest that good wine may be trickling down to the masses in interesting ways.

Le Froglet Wine

The first story comes from Britain, where “wine by the glass” now has a new meaning. I’m talking about Le Froglet wine, which comes in ready-to-drink stemmed plastic cups. The special “glass” is sealed by a patent-applied-for process that replaces oxygen with inert gas before a peel-away airtight foil seal is applied, thus keeping the wine fresh (in the short term) in its unlikely container

The 187 ml serving of French Shiraz (really?), Chardonnay or Rose wine sells for £2.25 at Marks & Spencer stores. This is wine that you can take anywhere and consume as you please, even if you only want a single glass. It is sort of a wine juice box in functional terms, if you know what I mean, but classier, with a stemmed plastic glass in place of the cardboard box and sippy-straw. I have seen Le Froglet here in the U.S. selling in the $3.50-$4 range.

Expert Opinion?

Le Froglet is noteworthy for several reasons, First, it seems to be very popular in Britain, where it has created a new market category. That doesn’t happen very often.

It has succeeded despite highly publicized expert opinion that the idea of takeaway “cuppa wine” is totally lame. James Nash, the inventor of the packaging and process, appeared on the popular BBC television show Dragons’ Den where supersmart investors took his product and business plan apart brick by brick, leaving him standing in a pile of rubble. Fuggetaboutit, they told him in no uncertain terms.

Interestingly, the people at retailer Marks & Spencer saw the same idea and came to a different conclusion. They viewed the single-serving glass as a perfect place to put their line of Le Froglet French wines. I suppose with a name like Le Froglet they weren’t taking themselves too seriously. Why not wine by the glass to go? Why not indeed? And so they gave it a try. They seem to be pleased with the results.

An M&S spokesman said: ‘The glasses are merchandised in our ‘Food on the Move’ section, which is obviously the aisle people on the go head to – particularly office workers. ‘We think that they are proving popular with people who want to perhaps enjoy the summer with a glass of wine in the park as part of an impromptu picnic – either after work or for a relaxing lunch.

‘They are also popular with commuters who want to enjoy a drink on the train home from work to wind down. We have found that they are very popular in locations popular with tourists.’ The M&S winemaker, Belinda Kleinig, said: ‘This is a really exciting step for M&S – our research has shown that our customers really like the greater convenience of lighter weight bottles so we thought we’d take it one step further with great quality wine ready to drink from a glass.’

The Benefit of Low Expectations

I think one key to Le Froglet’s success is that it exceeds everyone’s expectations (except perhaps the grumpy Dragons’ Den gurus). You don’t really expect the packaging to work, for example. You expect the seal to leak or the plastic glass to break. But apparently it works pretty well. Surprise!

And then there’s the wine itself. You logically expect it to be crap since it comes in such a goofy container. Who’d put good wine in something like this? But apparently the wine is surprisingly good. In fact, Decanter magazine recently announced that Le Froglet Shiraz has won a hard-to-get Gold Medal in its 2010 global wine competition. The award is actually for the bottled version of the wine, which sells for £5.49. Decanter’s editor reported that

‘The bottle is a great value find. It’s fragrant and complex, with lots of dark fruit and savoury chocolate. The plastic glass version is a great idea, but given that the bottled version has a screwcap, won a gold medal and works out cheaper per serve, I’d probably buy a bottle and find my own glasses.’

One element of the democratization of wine is making it more convenient and Le Froglet certainly does that. Of course this convenience comes at a price. One £5.49 bottle of Le Froglet holds four £2.25 single-serving glasses, making the bottled product the better buy. But that glass-bottle price ratio is about what you find in most restaurants, where the rule of thumb is that the retail price of a glass of wine is equal to the wholesale cost of the whole bottle.

Good, cheap and convenient seem to form a trilemma with wine — difficult to get all three at once. Cheers to Le Froglet for making decent wine more convenient, even if it isn’t really cheap.

Burger, Fries and Syrah?

What could be more democratic than fast food wine? Sounds perfect, but it is hard to imagine a fast food restaurant that could find a way to serve wine here in the U.S. with our Byzantine regulatory system.

So you can appreciate my pleasant surprise when I was able to order wine with my dine-in meal at the Burgerville fast food outlet near Vancouver, Washington. Burgerville is a popular Oregon-based fast food chain that specializes in fresh, local and sustainable products.

Burgerville is designed to exceed your expectations about what a fast food meal can be and if you pay a bit more for the food you probably get more, too. The restaurants have always been very busy when I have visited, so people must think they are a good value. I certainly do.

Here is the sales receipt from our meal at the Salmon Creek Burgerville (the only store in the chain to offer wine by the glass so far). I passed on the upscale burger / fries / shake part of the menu this time to take advantage of seasonal offerings: a mound of Walla Walla Sweet Onion Rings (yum!) and two Full Sail Amber Ale Battered Albacore fillets with a side of Oregon cranberry-studded summer slaw. My beverage of choice, a $5.95 glass of flavorful and refreshing A to Z Wine Works Oregon Pinot Gris. Heaven! Fast food taken to a new level.

Burgerville offers three red wines and three white wines by the glass at this location priced at $5.95 and $6.95. I think I’ll have a glass of the Syrah with a bacon cheeseburger on my next visit!

Small Steps [in the Right Direction]

The wines sell pretty well, I was told, which is of course what I hoped to hear. The Salmon Creek store is testing the concept of what you might call premium fast food wine. This store was apparently chosen because it has a large and well organized dine-in area that made it possible to meet regulatory requirements. (Don’t look for wine at the drive through window just yet, although with Le Froglet I suppose it isn’t completely out of the question!).

The democratization of wine? We’re not there yet — wine is still more difficult to buy, sell and consume than it needs to be — but Le Froglet and Burgerville show what we are headed in the right direction. Wagnerians, rejoice!

Secrets of Argentina’s Export Success

June 14, 2010 By Mike Veseth in Argentina, decanter, economic crisis, Economic impact, emerging wine regions, Supply and Demand, wine exports, wine investment, wine markets, wine price 4 Comments

#1 Wine

Argentina’s wines are hot here in the United States. Recent Nielsen Scantrak off-premises data show a 38.7 percent dollar value rise in sales of Argentinian wines for the 52 weeks ending April 3, 2010. That’s an enormous percentage increase, much greater than the total market (up 3.5 percent) and a good deal above the next biggest gainer (New Zealand with a 17.2 percent rise).

What’s Argentina’s secret?

The secret? As usual, there is no one simple answer. There are important factors on both the supply side and the demand side: good products, the right products at the right time and favorable economic policies.

Argentina produces excellent wines. Decanter magazine recently (June 2010 issue) published a report on Argentinian Malbec that featured the largest tasting in their history — a record 255 wines. Four of them received five stars, the highest designation. The Achaval Ferrer Mendoza 2008, which often sells for less than $20 here in the U.S., led the pack with 19/20 points.

Argentina is fortunate to be producing wines for the times. Many Argentinian wines are good values at a time when consumers are careful with their money and they represent good choices for ABC (anything but Chardonnay) and ABS (anything but Shiraz) buyers.

International Influences

#1 Export Brand

Argentina’s economic policies are another consideration. The favorable dollar/peso exchange rate contributes to Argentina’s competitiveness on the export market. And although I don’t know very much about them, I think that barriers to foreign investment in the wine industry must not be very high because so many important producers have international connections.

Bodega Colome is owned by Donald Hess of Switzerland, for example, who also owns The Hess Collection in the United States. Achaval Ferrer is a joint venture with a Montalcino winemaking family. Bordeaux wine investors are players in Diamandes and Clos de los Siete. O Fournier’s owner is Spanish. Cheval des Andes is a joint venture of Moët Hennessy’s Terrazas de los Andes and St-Emilion’s Cheval Blanc. Bodega Norton is owned by the Swarovski family of Austria (famous for their crystal.) Dig deeper and you’ll find even more international money and talent at work.

Top Export Brands

These are good reasons for Argentina’s recent success, but a recent article on WineSur.com titled “The Top 5 Export Brands” got me thinking that there might be other factors at work. I was particularly intrigued by the table showing the top bottled wine export brands to different markets. I’ve pasted the table below so that you can analyze it along with me. Click on the table to read the full article and view a larger image of the data.The first thing I noticed is how heavily weighted Argentina’s recent exports are toward the North American market. Britain, still the most important wine market in the world, has much lower export volumes as shown here. I suspect that one reason for this, however, is that these data are for exports of bottled wines (including bag-in-box and Tetra-Paks) and I’ll bet that Tesco and some of the big supermarket chains import their Argentinian value wines in bulk and bottle them in the U.K as house brands. Those export sales don’t show up here.

The second thing that caught my eye was the wide range of export prices. Alamos, the U.S. leader, sells for $30.57 per case export price, about the same as #2 Don Miguel Gascon. Marcus James, the top export wine in volume but only #3 in value, sells for just $12.54 per case. Catena, the #4 brand, exported just 39,000 cases in the time period under consideration, but received an average of $64.97 for each one. Argentina’s exports to the U.S. (and the other markets shown here) span the price spectrum — another advantage.

Location, Location, Location?

Finally, I became interested in the particular brands that topped the export market tables and I think I discovered another secret weapon: distribution. It’s a cliche that in business the three most important things are location, location, location. Location is important in wine, too (ask any terroirist), but efficient distribution sure makes a difference and Argentinian producers have been wise in making good use of the most efficient distribution networks in each country.

Alamos has the highest export earnings by a good margin — why? Well Alamos is made by big gun Bodega Catena Zapata. It is a value line and is imported and distributed by the Gallo company. I suspect that Gallo’s large and efficient distribution network and its marketing prowess are reasons for Alamos’s great success. Significantly, Gallo also handles Don Miguel Gascon, the #2 export brand.

Marcus James, the #3 export brand, is a Constellation Brands product and is also backed by substantial marketing and distribution power. I was actually surprised to see Marcus James on this list because I didn’t realize they sold Argentinian wine. Guess I need to pay closer attention. They used to source their wine from … Brazil!

Fuzion (a Shiraz-Malbec blend, I understand) is the best seller in Canada. It is made by Familia Zuccardi and distribution is one of its advantages, too. In Canada government wine and liquor shops are key sales vectors. The support of Ontario’s Liquor Control Board (in addition to successful viral marketing) seems to have made Fuzion a hit in a market that is otherwise very difficult to penetrate. (At one time the Ontario Liquor Control Board was the world’s largest retailer of wine. I think Tesco is #1 today.) Distribution is key and both Alamos and Fuzion seem to have it.