Flashback: The Scrooge Report on Holiday Wine Gifts

December 20, 2022 By Mike Veseth in Shameless Self-Promotion, wine 1 Comment

Here is a Flashback Wine Economist column, which was published ten years ago on December 24, 2012. Much has changed, but this still seems relevant today. Cheers!

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No wonder economics is called the “dismal science” — sometimes our rigorous analysis threatens to spoil everyone’s fun.

Take holiday gift-giving, for example. The conventional wisdom is that “it is better to give than to receive” and while there is some merit in this if everyone gives (so that everyone receives), I think you can probably see the collective action problem here. Only an economist (or maybe an excitable child) would point out that, strictly from a material accumulation point of view, there are real advantages in being on the receiving end!

A Badly Flawed Process

But it gets worse because some economists suggest that it may be better not to bother with gifts at all. Don’t give gifts, give cash. Or, better yet, keep the cash and spend it on yourself. Gift-giving itself is a badly flawed process. This Scroogish sentiment is in part the result of Joel Waldfogel’s famous article on “The Deadweight Loss of Christmas.” Waldfogel concluded that Christmas, for all its merriment, was actually welfare-reducing because recipients do not generally place a value on gifts that is as high as their cost. They end up receiving stuff they would never have purchased with their own money.

The cost of giving gifts exceeds the benefits, so gift giving is an economic drain. Dismal, huh? Here’s how it works.

Your aunt paid $50 for the sweater that she gave you. How much would you have paid for it? $50? $45? $40? Well, the fact is that you had the option of buying it for $50 and didn’t, therefore you must not have valued it at the full amount. So its value to you is probably less than what your aunt paid. But how much less?

Economists seem to agree that the best case scenario is that there is about a 10 percent average loss in gift-giving, which I call the “Santa Tax,” although the “yield” as reported by survey respondents varies a good deal. The National Retail Federation estimates that Americans will spend more than $550 billion on holiday gifts in 2012. If the deadweight loss rate is just 10 percent, that would be a $50+ billion Santa Tax this year. Yikes!

There are many problems with this way of calculating holiday giving gains and losses. It is pleasing to give gifts, of course, and this should be taken into account. But how much would you be willing to pay for the pleasure? And would your pleasure have been less if you had just given cash? The efficiency loss might be less with a cash gift, but perhaps the pleasure of giving (and thus the incentive to give) would be diminished, too.

Santa Tax Wine Edition

Then we can argue about the size of the Santa Tax. Is 10 percent about right … or do you suspect (as I do) that it might be much higher, especially when you are buying gifts for people who are much older or younger or who have very different tastes or needs from your own? Have you ever received a gift that was 100 percent deadweight loss? If you are honest you probably have. But it’s the thought that counts, isn’t it? How big a Santa tax is too much?

Which brings us to the wine part of the problem. Doesn’t it seem like the Santa tax is probably even larger for wine gifts than for many other things? Most of us have experienced the deadweight loss when a bottle of wine that we’ve paid good money for doesn’t turn out to be worth what we’ve spent. So it is no surprise that the loss rate might be even worse when other people are doing the buying (and giving) for us.

Giving wine as a gift is risky (unless it is someone you know very well) because there are so many different choices and individual tastes differ so much. There are lots and lots of good wine gift choices, of course, but it is easy to get caught in the Santa tax trap. I’m sure that a lot of holiday wine gifts miss the mark badly.

Maybe that’s why wine enthusiasts receive so many “wine gizmo” gifts instead of wine — but those gadgets are subject to the Santa Tax, too. The New York Times‘s William Grimes recently complained about this problem.

Across the land, Christmas trees spread their fragrant branches over packages containing monogrammed Slankets, electric golf-ball polishers and toasters that emblazon bread slices with the logo of your favorite N.F.L. team.

But for some reason, the culture of wine and spirits provides especially fertile ground for misbegotten concepts like these. Year after year, it yields a bumper crop of inane but highly giftable innovations like wineglass holders that clip onto party plates, leather beer holsters and octobongs, the most efficient method yet devised for eight college students to consume a keg’s worth of beer simultaneously.

Tyler Colman, writing on his Dr Vino blog, singled out gifts of fancy automated corkscrews for particular criticism. You can probably think of some high Santa tax wine paraphernalia that you’ve either given or received yourself.

Beyond the Octobong: Wine Economist Gift Guide

OK, I suppose the octobong is out, but some of the wine gizmos that Grimes reviews in the article are sort of weirdly fascinating. I guess I can see why they are given as gifts (even though you might never spend your own money on them). So where does that leave us when it comes to wine gifts?

My first bit of advice is simple: don’t give a bottle of wine to friends or relations, share it with them. There is something about a shared experience that transcends a simple commodity transfer. (From a technical economics standpoint, I think sharing adds some “public goods” elements to the deadweight loss equation that can cushion the Santa Tax loss). Trust me, from an economic theory standpoint, sharing is the way to go.

In fact the more I think about it the more I believe that sharing rather than giving is the key. Sharing a bottle of wine rather than just giving it may seem a bit selfish and is certainly more expensive (since time as well as money are involved) but sharing changes the game from transaction to relationship and this seems to me to be the essence of both the holidays themselves and wine, too.

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P.S. Since this Flashback report is filed under “Shameless Self-Promotion,” let me suggest that any (or maybe all) of my wine books make great gifts. Share them with friends and family and then gather over glasses of wine to talk about what you have learned.

Wine Wars II Receives 2023 Gourmand Award for Outstanding “Wine & Sustainability” Book

November 22, 2022 By Mike Veseth in Shameless Self-Promotion, sustainability 6 Comments

My latest book, Wine Wars II: The Global Battle for the Soul of Wine, has been recognized by Gourmand International as an outstanding “Wine & Sustainability” book. Four books (see list below) were identified for special recognition in this category, and all are entitled to wear Gourmand’s “Winner” logo for promotional purposes.

In the spirit of “shameless self-promotion,” I am proud to say that this is not my first Gourmand award. The Wine Economist was recognized as best wine blog in 2015, for example, and Money Taste, and Wine received the 2016 award for best wine writing.

Wine Wars originally appeared in 2011, when it received several awards, including the Gourmand award for best American wine book. Wine Wars II updates the first volume and expands its argument with a new set of chapters organized around the theme of “Wine’s Triple Crisis.”

I suspect that this new section, which examines the wine industry’s intertwined economic, environmental, and identity crises, may have caught the Gourmand gurus’ attention by extending the idea of sustainability beyond the natural environment to include economic and social factors, too. As we all know, sustainability to a complicated balancing act, with few simple answers and lots of work to be done.

Here is the list of winners in the special “Sustainability & Wine.” Congratulations to these authors and all the 2023 Gourmand winners (click here to download complete award list pdf).

Listen Up! Wine Wars II now available in audiobook format

July 20, 2022 By Mike Veseth in Shameless Self-Promotion Leave a comment

My new book, Wine Wars II: The Global Battle for the Soul of Wine, is now available in three formats: paperback, e-book, and (starting this week) audiobook.

You can find the audiobook version (read by Jonathan Yen) at Amazon.com, Tantor Media, or wherever you go for audio information.

It is 10 hours and 34 minutes of behind-the-scenes reports on the hyper-competitive world wine market scene.

Podcast Alert: Talking about Wine Wars II with Natalie Maclean & Kris Levy

July 7, 2022 By Mike Veseth in Shameless Self-Promotion Leave a comment

Want to learn more about my new book, Wine Wars II? I recently recorded two interviews that are available as podcasts.

Thanks to Natalie Maclean and Kris Levy for taking the time to chat with me about the powerful forces shaping the world of wine. Click on the images below to hear our discussions.

Unreserved Wine Talk with Natalie Maclean.

You can also find Natalie Maclean’s Unreserved Wine Talk interview on

Instagram: https://www.instagram.com/p/Cfq11pHsOko/

Facebook: https://fb.watch/e6vMqVzsgg/

And LinkedIn: https://www.linkedin.com/posts/nataliemaclean_economics-activity-6950412383697723392-W-mf?utm_source=linkedin_share&utm_medium=member_desktop_web

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Everyday Wine with Kris Levy podcast available on Spotify and Apple podcasts.

A Tale of Two Glasses & Wine’s Triple Crisis

July 6, 2022 By Mike Veseth in Shameless Self-Promotion 2 Comments

My new book Wine Wars II has just been released — you can order it in paperback or e-book format from Rowman & Littlefield, Amazon.com, and other online and bricks-and-mortar book sellers. The audio version will be released in a few days. How exciting!

Rowman & Littlefield is offering US and UK customers a 30% discount on Wine Wars II publisher-direct purchases for a limited time. See details below.

This week’s Wine Economist offers you a taste of my new book in the form of two brief excerpts from the first chapter. Cheers!

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It was the best of wines, it was the worst of wines (apologies to fans of Charles Dickens). The global wineglass, it seems, is both quite empty and full to the brim. We live today in the best of times for wine if we evaluate the situation objectively, as economists like me are trained to do. Never before has so much good wine been made and so many wine choices offered up to consumers. For someone who loves wine, the glass is very full, indeed; it is hard to imagine better days than these. The global markets deliver a world of wine to your door. Drink up!

And yet many enthusiasts are anxious about the future of wine. The good news we find in our wineglasses and on the supermarket shelves is often accompanied by disturbing rumors, feelings, and forecasts. It is the worst of times, too, you see—especially if you are a maker of cheap wine in France, Italy, or Spain, the largest wine-producing countries. Everything about wine is wrong for you. Consumption at home has been falling for decades and squeezing your market share, and import competition has increased. The rise in global wine drinking that you counted on to power your export business has unexpectedly stalled at exactly the wrong moment. You find yourself making the wrong wine in the wrong style from the wrong grapes at the wrong price and trying to sell it in the wrong places. You are betrayed at every turn by the markets that once treated you so well. You hold an empty glass, or so it must seem.

Times are troubling in Australia, too, where a wine boom was followed by a wine bust, when consumers around the world have seemingly turned away from the muscular Aussie wines they enjoyed so much just a few years ago. So the Aussies turned to China and, through lots of hard work, turned it into their number 1 export market, bigger that either the United States or the United Kingdom. Then the lucky country’s luck turned again. Driven by political disagreements that have nothing to do with wine, China imposed tariffs of more than 200 percent on Aussie wine, choking off this promising market.

Wine producers are optimists by nature, but they face serious challenges. Recession, pandemic, falling consumption, rising antidrinking lobbies, water shortages, global warming, and even raging brush fires all threaten the livelihoods of winegrowers and producers in many parts of the globe.

It is the worst of times for consumers, too, if they seek that special taste of a place that wine geeks like me call terroir. The wine in your half-empty glass is free of any technical flaw, but so what? Does it have a soul? Does it express any particular place or any producer’s distinct vision of what wine should be? This is the age of McWine, I have heard people say: wine that is all the same. When everything is the same, then it is all nothing! And what’s worse than that?

These are good times and bad ones, too, for the world of wine—what a contradiction! What about the future? Will wine’s tale of two glasses have a happy ending? Or will our (excuse the Dickensian pun) “grape expectations” be crushed? I’m an optimist about the future of wine, but as an economist, I am trained to pay close attention to the dismal side of any situation. I wrote this book to try to find out just how empty or full the global glass really is and how the world of wine is likely to change.

The first thing to understand about wine is that it is many things, not just one, in terms of both wine itself and the economic forces that drive the wine industry, so the story of the future of wine will necessarily be a complicated one. Although hundreds of factors will come into play as the wine world evolves, three big forces will almost certainly shape the overall pattern: globalization; brand-driven commodification; and resistance to these powerful winds, which I call the revenge of the terroirists. Globalization and commodification are economic push forces that are transforming the world of wine. The revenge of the terroirists is all about pushing back.

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WINE’S TRIPLE CRISIS
The global wine industry is in the midst of a triple crisis, and I am not really sure how it will end. The climate change crisis comes first. It affects everything if we consider both direct and indirect effects, so it may seem odd to think of it as a wine crisis. Wine grapes generally can be made to grow under quite extreme conditions; in some colder regions, they actually bury the vines in the winter to protect them and unearth them each spring so that they can come back to life (you might call this Lazarus viticulture). But specific wine grape varieties thrive in only very narrow bands of average temperature, and wine regions defined by particular grapes or wine styles are threatened by relatively small changes in environmental conditions. Wine is, therefore, the canary in the coal mine when it comes to climate change. It will feel the impacts before many other industries, and so it is not a surprise, as I explain later, that wine businesses are among the strongest advocates for progressive environmental action.

The climate change crisis dwarfs everything else in the long run, but because the long run can seem far away and we often misjudge how fast it is approaching, climate concerns do not get the attention they deserve. Indeed, as the global reaction to the coronavirus pandemic crisis has demonstrated, climate change generally isn’t treated with the “drop everything” or “operation moonshot” urgency that real crises warrant. But even if the climate change threat were to disappear tomorrow, wine would still be in trouble.

The second crisis is economic. Wine is magical beverage, but it is a crazy business. Wine’s economic environment is characterized by cyclical, structural, and “wild card” forces that make it difficult to prepare for or successfully execute a business plan.

Global wine consumption grew steadily for the twenty years that ended in about 2008, the date we associate with the global financial crisis. Rising wine sales were important because they slowly soaked up a surplus of wine. Too much wine? Well, for many years the European Union in effect subsidized wine
production to stabilize agricultural economies, especially in France, Italy, and Spain. Wine farmers were paid to grow grapes and to make wine that could not be sold, so some of it was distilled into industrial alcohol. Yuck! Those policies are history, and European winegrowers turned from government subsidy wine to wine aimed at global markets. This is a good thing, but it happened just as wine production increased in other parts of the world, too. The result: a lot of grapes, a lot of wine, and a lot of jobs and incomes at risk.

Rising global wine sales were most welcome in this context, and when sales dropped a bit in 2008, no one was very concerned. “It’s just the economy, dummy,” they said. “Wine will spring back when the economy improves.” But it didn’t, and the next ten years were what I have called “wine’s lost decade.” Why did wine lose its mojo? There are many possible reasons (I explain them later), but the sudden loss in momentum changes the nature of the game from a positive-sum fight, where a rising tide raises all ships, to a zero-sum fight for market share. And the battle isn’t just between Old World and New World or among the growers and producers in these regions; the opponents are now more diverse and unexpected than ever before.

The reason? Wine’s identity crisis. Wine has never been just one thing. It is, after all, both that fancy French Champagne at the top of the wine wall and that big box of Franzia at the bottom. Wine is healthful (think Mediterranean diet) and dangerous (read the government required warnings on wine labels in the United States). It is culture to some and just another commodity to others.

The cartoon character Pogo famously said, “We have met the enemy, and he is us,” and this is true in a way for wine. The biggest threat to wine’s identity is something inherent to wine’s existence: alcohol. You might think that wine is just grape juice with alcohol, but wine doesn’t taste much like the grapes it is made from except for in a few specific cases. Fermentation doesn’t just add an alcoholic kick; it transforms the product in complex ways. It’s the same with the way that fermenting yeast makes bread different from flour and water. So wine as we know it is impossible without alcohol, but it may also be impossible with it if antialcohol forces have their way.

Wine’s identity crisis is significant because it seems like those who see wine as a social or health problem, not an essential element in our culture, have seized the momentum. If wine doesn’t know who it is and what it is and cannot tell its story to the world, then how can it survive?

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Wine Wars II 30% discount offer. Many thanks to Rowman & Littlefield for making this discount available.

US Customers: Order Wine Wars II here and use code RLFANDF30 at checkout to receive your discount.

UK Customers. Use the code RLFANDF30 to order from Rowman & Littlefield International
https://www.rowmaninternational.com/shop?q=wine+wars# or IPSUK: https://store.ingrampublisherservices.co.uk/checkout/025/?isbn1=9781538163832

The Road to Wine Wars II (and a 30% Discount Offer)

June 28, 2022 By Mike Veseth in book reviews, brands, Shameless Self-Promotion, wine, wine markets 6 Comments

My new book Wine Wars II will be released in just a few days on July 1, 2022, and so. in the spirit of shameless self-promotion, let me remind you that you can order Wine Wars II in paperback or e-book format from Rowman & Littlefield, Amazon.com, and other online and bricks-and-mortar book sellers.

Rowman & Littlefield is offering a 30% discount on Wine Wars II publisher-direct purchases for a limited time. Scroll down to the bottom of this page for details.

Tantor Media will release the audio-book version of Wine Wars II (read by Jonathan Yen) on July 19, 2002. It will be available everywhere audio books are sold. Ten hours of fascinating stories about where global wine is going and how it got there.

A Tale of Two Glasses

Paperback, e-book, audio. Wine Wars II is everywhere!

Wine Wars II updates and extends the most important arguments I made in the original Wine Wars and then adds a new set of chapters on Wine’s Triple Crisis. Each “flight” or set of chapters ends with suggested wine tasting so you can consider the arguments using all your senses. What fun!

Here is a brief excerpt from chapter 1 “A Tale of Two Glasses” for your reading pleasure. It talks about the origins of Wine Wars and the development of Wine Wars II. I think it is interesting that the road to Wine Wars II began with a winery visit about forty years ago, when the problems facing the wine business and the economy more generally were a lot like those we confront today.

HOW I STUMBLED INTO THE WINE WARS

People often ask me how I became a wine economist, an economist who studies the global wine markets. The answer is rooted in a particular time and place. Sue and I were still newlyweds, taking a low-budget vacation in the Napa Valley back in the day when that was still possible. We were headed north on the
Silverado Trail late on our last day, pointed toward our economy motel in Santa Rosa, when we decided to stop for one last tasting.

The winery name was very familiar, and I had high hopes for our tasting. If I had known more about wine back then, I would have recognized this as one of the wineries that kicked French butt in the 1976 Judgment of Paris wine tasting. We pulled off the road and went in to find just the winemaker and a cellar rat at work. No fancy tasting room back then, just boards and barrels to form a makeshift bar. They stopped what they were doing and brought out a couple of glasses. If I knew more about wine back then, I would have been in awe of the guy pouring the wine, but I was pretty much in the dark. So we tasted and talked.

I started asking my amateur questions about the wine, but pretty soon the conversation turned around. The winemaker found out that I was an economics professor. Suddenly he was very interested in talking with me. What’s going to happen to interest rates? Inflation? Tax reform? He had a lot of concerns about the economy because his prestigious winery was also a business and what was happening out there in the financial markets (especially interest rates and bank credit, as I remember) had a big impact on what he could or would do in the cellar. Wineries, especially those that specialize in fine red wines, have a lot of
financial issues.

In addition to the initial investment in vineyards, winery facilities, equipment, and so forth, each year’s production ages for two or three years, quietly soaking up implicit or explicit interest cost as it waits to be released from barrel to bottle to marketplace. The wine changes as it ages, but the economy changes, too. It’s impossible to know at crush what market conditions will be like when the first bottle is sold. Wine economics is a serious concern. Few winemakers are completely insulated from the business side, and sometimes the economy can have a huge effect on what winemakers get to make (if they have the resources to stick with their vision) or have to make (if they don’t).

And so a famous winemaker taught me to think about wine in economic terms and to consider that supply and demand sometimes matter as much as climate and soil when it comes to what’s in my wineglass. I should have known.

Although my interest in wine and economics merged on that Napa day, it sat on its lees for a long time, as I waited for an opportunity to link my personal passion with my professional research agenda. The two naturally converged a few years ago when I began writing what turned out to be a four-volume series
on the global economy. My 2005 book Globaloney: Unraveling the Myths of Globalization includes a chapter called “Globalization versus Terroir,” my first attempt to write about wine economics for a general audience. Globaloney argues that complex global processes shouldn’t be reduced to a few simple
images. Globalization and food are more than just McDonald’s, for example, and globalization of wine isn’t just McWine.

The wine chapter in Globaloney gave me confidence that I had more to say about money, wine, and globalization, so I launched a website called The Wine Economist (WineEconomist.com), where I could work out my ideas in public, make connections, and develop a wine voice. After several years and nearly
200,000 words of blog posts, The Wine Economist evolved into the first edition of this book.

THE ROAD TO WINE WARS II

I wasn’t sure if anyone would want to read about the business of wine, but I was wrong. Wine Wars was warmly received by both critics and readers. It turns out that while wine is good, wine and a story is even better, and stories about the business side of wine can be very interesting. A number of wine industry readers have said that Wine Wars helped them connect the dots and see things more clearly. Consumers, who have no particular business connection, say they just like knowing the backstory of their favorite drink.

I’ve spent the last decade on the wine road speaking at wine industry conferences around the world and learning more about wine and the people who make it. It is a tough job, but someone has to do it, and apparently I am that lucky someone! I have recorded my impressions and experiences in hundreds of columns on The Wine Economist.

Wine Wars has been joined by three other books that continue my analysis of global wine: Extreme Wine (2013); Money, Taste, and Wine (2015); and Around the World in Eighty Wines (2017). Wine Wars celebrated its tenth birthday in 2021, and that occasion made me stop and think (as round-number birthdays sometimes do).

The powerful forces that I identify in Wine Wars are still important, but they’ve changed in ways both big and small. Environmental and demographic shifts, for example, re now much more clearly understood as wine industry challenges. There is a lot to think about and to write about. And so I have written this new book, Wine Wars II, which updates the first edition and extends its argument to address wine’s global crisis.

In a way, this journey has brought me back to that dark cellar on the Silverado Trail in Napa Valley, the great wines we sampled that day, and my “aha!” moment when I realized that wine and economics are a perfect pairing. I’ve learned much more about wine and wine economics, and I appreciate now more than ever the many challenges that the world of wine faces. But I remain an optimist, as I show in this book. I still have grape expectations.

Countdown to Wine Wars II

May 3, 2022 By Mike Veseth in Shameless Self-Promotion, wine, wine research 2 Comments

Here at Wine Economist World Headquarters we have started counting down the days until the release of Wine Wars II: The Global Battle for the Soul of Wine. The book’s official release date is July 1, 2022, but it is not too soon to put in your pre-order at Amazon.com or Rowman & Littlefield. Wine Wars II will be available in paperback, e-book format, and (eventually) audio-book, too.

Wine Wars II is a major revision of my best-selling 2011 book Wine Wars. I’ll be honest — I wasn’t really planning to revise Wine Wars, but I couldn’t help myself. I re-read the book last year on its 10th birthday and there were some parts that really made me smile — they held up very well over the decade since release.

But there were other parts that made me shake my head. I wouldn’t write that today, I thought, either because so much has changed in the global wine industry or because I have changed — learned so much from all the people we’ve met on our global travels.

So there was nothing to do but write a revised book, which went into Rowman & Littlefield’s production pipeline last year and will come out in a few weeks.

I asked a few colleagues to read the book and write “blurbs” to help promote it. Here’s what they have to say.

Judy Chan, CEO of Grace Vineyard China:

10 years ago, when I first read Wine Wars, I was excited to see finally someone wrote about the business aspect of wine. As a wine producer in China who was new to the industry (and the industry was also very new in China), the book gave me a global perspective to look at my local market. With the updated information in this edition, it would be refreshing for someone who wants to see how the industry has and has not changed.

Elin McCoy, author of The Emperor of Wine, global wine critic for Bloomberg News and U.S. Editor of The Wine Conversation podcast

No one makes the powerful economic forces behind a bottle of wine more fascinating than Mike Veseth. Yet his easy-going, down-to-earth approach to these complex topics also brims with entertaining stories and humor – who else would analyze the appeal of wine brands named Secret Squirrel or Tussock Jumper? This new, 10-years-later, version two of his classic Wine Wars is filled with pithy insights about the world of vino today, such as ‘identity trumps authenticity.’

If you want to understand the future of wine, this book is a must read. It will convince you that climate change, economic risk, and stronger-than-ever global wine brands threaten the soul of wine itself. Are we headed for a dark age? Spoiler alert: Wine Wars II ends on a slightly optimistic note, in Portugal.

Andrea Robinson, Master Sommelier and author, Great Wine Made Simple

What a timely book for business leaders and their advisers! While the book’s context is the wine and wine grape growing industries, the challenges and opportunities pinpointed and deftly parsed easily apply to so many industries and brands. Globalization, climate change, the economic challenges of labor, supply chain, brand-building and brand equity preservation in a digital world—Mike Veseth’s synthesis of their present-day coalescence, and the ‘so what’ of that, seems almost clairvoyant. Wine Wars II is also a fun, punchy read, ripe with storytelling, along with some cool comparative wine tastings to illustrate the points. As an economics and finance-trained banker-turned-sommelier, I found this book to be invaluable for my work with clients and wine industry stakeholders of all sizes and stripes, as well as a delight to read.

Alessandro Torcoli, Director, Civiltà del bere

I’ve always been amazed by Mike’s ability to clearly describe wine dynamics in a global perspective with a deep understanding of local forces. Wine Wars II is a must-read book to anyone who want to feel like a real expert on our marvelous, but a bit tricky world of wine.

We Are All Terroirists Now

April 27, 2021 By Mike Veseth in Shameless Self-Promotion, wine, Wine Wars 3 Comments

The third section of my book Wine Wars, which is celebrating its 10th birthday this year, is called “the Revenge of the Terroirists.” As I explained in last week’s Wine Economist column, Wine Wars argues that globalization pushes the wine market forward, which is great, but one market reaction to this “creative destruction” is rationalization, which can be both good and bad.

What’s to keep wine from going off the rails and becoming just another branded consumer good? Well, it could easily happen and has happened in some cases, but I’m an optimist and, in Wine Wars, I argued that people who understand wine and appreciate what makes it different from commodity products would be a force strong enough to keep wine safe.

It’s a Wine World After All

I wasn’t the only person to see the wine market as this sort of conflict. Jonathan Nossiter’s 2004 film Mondovino took a decidedly less optimistic view of this battlefield. The forces of globalization and commodification (symbolized by the Mondavi family brand in this poster for the film), are determined and powerful. Can the first terroirist we meet in the film, Giovanni Battista Columbu, guardian of Malvasia di Bosa in Sardinia (shown here below the Mondavis) possibly stand in the way of the global market juggernaut?

If that’s the war — big vs little, money vs traditional values — then it would seem like the wine wars have already been lost. But that’s not necessarily how things have to work out.

Large wine businesses are not all the same. For one thing, only a surprisingly small proportion of wine business are public corporations with professional managements than have to answer to investors with constantly rising quarterly profits and share prices. As I have pointed out before, a great many wine businesses, even the largest of them (think Gallo!) are family firms that think in generational terms. This long term thinking doesn’t guarantee a terroirist attitude, but it at least sometimes points in that direction.

B Corps, Slow Wine

Indeed, a number of important wine businesses are benefit corporations (B-Corps for short). Oregon’s A to Z Wineworks was the first in this growing group and Portugal’s Symington Family Estates one of the most internationally recognized. Fetzer, the California winery long known for its environmental focus, was the world’s largest B Corp wine company … until last Friday! That’s when its parent company, Viña Concha y Toro, announced that all of its global operations had received B Corp certification. Amazing!

B Corps make no specific commitment to terroir, of course, which is natural since they can be found in all sorts of industries (the little coffee shop on the corner hereabouts is part of a B Corp operation). But the values that B Corps commit themselves to supporting are different from those of the stereotypical corporate behemoth.

I’m also encouraged by my study of the Slow Food movement. Founded in Italy but now spanning the globe, Slow Food is a grassroots counterpoint to industrial food and agriculture. It doesn’t confront global corporations directly by, for example, bombing McDonalds restaurants the way French anti-globalization protestors used to do. Slow Food instead works to identify products and practices of tradition and terroir and then seeks to promote and preserve them using the very tools of media and markets that we usually associate with industry. Slow Food uses the weapons of global capitalism against itself, an elegant irony, don’t you think?

Slow Wine is a thing, too, and the guide to Slow Wine USA 2021 has just been released. You should check it out.

We Are All Terroirists Now

To paraphrase a comment attributed to both Milton Friedman and Richard Nixon (see note below), we are all terroirists now. Well, almost all or at least a lot more of us. The reason: climate change. Climate change is real and it is a crisis, even if we don’t treat it like a crisis (compare the reaction to the Covid global pandemic to climate change and you can see that climate isn’t given the same priority). Last year’s wildfires and this spring’s killer European frosts are reminders of the climate’s destructive volatility.

The wine business needs to take account of changing environmental conditions and, while this isn’t the same vision of terroirism that you see in Mondovino, it is a step in that direction. More steps are needed, both to address the environmental risks and to secure the future of wine.

I’m trying to figure out where the natural wine movement fits into the revenge of the terroirists. Natural wine producers often fit the terroirist stereotype that Jonathan Nossiter established in Mondovino. In fact, Nossiter has written a book about them called Cultural Insurrection: A Manifesto for Arts, Agriculture, and Natural Wine.. Natural wine advocates in Nossiter’s telling of the story tend to define wine more narrowly than I do (something that I pointed out in reaction to Nossiter’s book), but they still contribute to the “revenge” I hope to see.

Not Exactly a Manifesto

Nossiter’s vision of wine sees a world of industrial wine versus natural wine and industrial wine needs to disappear because, well, it isn’t really wine at all. It’s just a toxic chemical concoction. A lot of people see wine in terms of a dichotomy — wine of the market versus wine of place, commercial wine versus fine wine, you get the idea. Generally they make this distinction in order to favor one type of wine — almost always the terroirist side of the equation.

My realist perspective is that there many types of wine, including high volume commercial wines. They are all wine and each category fills a consumer niche. What is important to me is that the big doesn’t crowd out the small, that terroir wines and the terroir that produces them endures. And that consumers understand the choices they make and their implications.

It’s a complicated situation, a fact easily illustrated by the case of Canadian billionaire Anthony von Mandl. Terroirist or not? You be the judge!

On one hand, von Mandl is the head of the company that makes Mike’s Hard Lemonade and White Claw hard seltzer. These terroir-free alco-pop beverages are insanely popular and my market research friends tell me that they are partly responsible for declining sales of inexpensive (and, it must be said, also relatively terroir-free) commodity wine.

On the other hand, however, von Mandl is the Robert Mondavi of the Okanagan Valley in Canada. He’s the founder of iconic Mission Hill Winery and, according to a recently VinePair report, is a driving force in British Columbia’s organic wine movement. Six wineries in von Mandl’s Mark Anthony Group are leading the charge, converting about 1300 acres to organic viticulture: Mission Hill Family Estate, CedarCreek Estate Winery, Road 13 Vineyards, Liquidity Wines, Martin’s Lane and Checkmate Artisanal Winery.

Do you appreciate irony here? White Claw money funding a terroirist revenge in the beautiful Okanagan Valley.

Whether you think of terroirism as a broad phenomenon or a narrow reaction movement, I hope you can see its importance in the wine wars of today and the battles of tomorrow. Are we all really terroirists now? No, not really. But the I think the wine world has come a long way from the David versus Goliath world of Mondovino.

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“We are all Keynesians now” is the comment commonly attributed to Friedman and Nixon and if they were still alive they would probably repeat the saying again. I cannot think of any time in the past 40 years when fiscal policy has been more important.

The New Wine Wars

April 20, 2021 By Mike Veseth in economic crisis, Shameless Self-Promotion, wine, Wine Wars 1 Comment

We are celebrating the tenth anniversary of the publication on my book Wine Wars here at Wine Economist world headquarters and I want to use this opportunity to reflect on how the wine world has changed since 2011. As I explained in last week’s column, Wine Wars is organized around a trio of strong forces that together (along with other factors, of course) shape the wine sector and many other industries, t00. In very simple terms …

Globalization drives change. Commodification is a commercial response to these disruptive forces. Together globalization and commodification provoke grass-roots reactions that I call “the revenge of the terroirists.” I think the framework still applies. But things have indeed changed. Here are some notes.

Wine and Globalization

Globalization continues to be a driving force in the world wine sector. Indeed, I think it is safe to say that more different wines from more different places are now available to more different consumers than at any point in history. World wine is truly an embarrassment of riches! Wherever we have travelled in the world of wine we’ve met producers anxiously seeking new opportunities.

But while the globalization pulse remains strong, there have been important qualitative and quantitative shifts. The first is that the fundamental nature of the market has changed from positive-sum to something much closer to zero-sum. As I was writing Wine Wars the world wine market had just come to the end of an era of expanding global wine consumption. I am not sure any of us where really aware of this sea change at the time. It was easy to blame the down-tick in consumption on the global financial crisis. But the recovery up-tick didn’t follow.

As this OIV graph shows, in place of rising year-on-year global wine consumption, we entered what I have called global wine’s lost decade. (The most recent OIV data, which will be released later today, show dramatic further consumption decline in 2019 and 2020.) Global wine consumption reached a high plateau and flat-lined. Demand bumped up and down a bit from year to year, but that rising trend line that was so powerful before had vanished.

This doesn’t mean that wine demand was flat everywhere, of course. Among the major markets, structural demand declines in the old world — Spain, France, and Italy — was offset by rising demand in some new world markets, especially China (from a low base) and the United States (slow growth, but still growth). I profiled what were then the three most important wine markets in Wine Wars: the UK, Germany, and the United States. Today you would need to add China to that list. In Wine Wars I speculated about what the rise of China might mean and some readers wondered why I even asked the question. There are still plenty of questions about China and wine, especially since recently sharp declines in both production and consumption in China ,but no one seriously doubts its importance any more.

Caught in the Crossfire

Global wine has changed in another important respect. Globalization in pre-Wine Wars was all about expanding international trade. Free trade agreements were the order of the day and the more of them that a country could negotiate the better. Chile was a big winner in this competition and its wine industry benefited enormously from easy access to the most important markets.

Now wine is caught in the crossfire of tariffs and trade barriers. The U.S. has imposed tariffs on some European wines, for example, and China has raised trade restrictions on wine from both the U.S. and Australia. U.S. wine sales in China were relatively small, so the economic loss was limited, but China was Australia’s #1 export market and the pain is hard to over-state. In the meantime, the British withdrawal from the European Union — a.k.a. “Brexit is Brexit” — has thrown sand in the wheels of what was once a very efficient set of trading arrangements.

What is interesting about the new political economy of wine tariffs and trade is that it isn’t really about wine at all. Wine is simply caught in the cross-fire in other disputes. Why pick on poor innocent wine? Probably because wine has a clear identity and national association. Sanctions on wine from a particular place send a clear message. And of course with so many wines available from other places, the harm to consumers who are willing to accept substitute products is pretty limited.

Globalization is built on many complex structures including especially global communications networks, so it is easy to forget about supply chains and logistics until they break down — and that’s the most recent challenge that wine and other global goods confront. Global supply chains have recently shown themselves to be less reliable and most costly than many supposed when plans were made just a few years ago. The benefits of global reach must always be weighed against the security of local linkages. How much this trade-off has changed and to what extent it will impact the global wine sector is still to be determined.

Wine and Commodification

Commodity wine is only one side of the industry, but it has been an area of growth in the decade since Wine Wars first appeared. One way to appreciate this is to look at wine branding trends. There are many different types of brands, of course. Champagne is a brand, for example, and the producers are diligent in protecting their brand’s intellectual property. More broadly, there are collective brands (appellations, AVAs, etc.) and private brands (Mouton Cadet, Barefoot, etc.). Brands are successful when they encourage demand by providing an indicator of consistent value and quality.

As the market has become more congested, brands have become more important and evolved in interesting ways. One of the most important trends, which Wine Wars anticipated, is the rise of private label wines (which some call “exclusive label” wines in a nice bit of marketing). The maker’s brand is generally replaced or supplanted by the seller’s brand. British supermarkets like Tesco made private label wine an important category and now it is everywhere. Here in the U.S. Costco, Walmart, and Target have their own wine brands, for example. But the phenomenon isn’t limited to large-multiple sellers. The upscale supermarket down the street (which appeared prominently in Chapter 3 of Wine Wars) is part of a small local chain (nothing like Kroger’s vast network), but it has its own private label Champagne.

As the wine market has stagnated over all in many regions, the demand for private label wine has grown. Buyers look for value, retailers see higher margins. Growers and producers get the business they need even if they don’t control branding. Some of these wines are very high quality. Others, of course, are drawn from lots of generic bulk wine from sources that vary from year to year and lot to lot depending upon price among other factors.

Take It To the Limit

What happens if the trend towards generic wines is taken to its logical extreme? In Wine Wars I joked (sort of) that we’d be left with Bud Red and Bud White — a threat that is more potent today with wine-in-cans gaining popularity. But I could never have imagined that we’d be staring at the specter of hard seltzer!

Wine today competes for a share of the stagnant overall beverage alcohol market. That means the growth in total wine sales need to come from other alcohol categories. And the toughest competitor in this space — the one that has been eating market share for lunch — is hard seltzer, a.k.a. flavored alcoholic fizzy water. I may be wrong, but this seems to me to be the real least common denominator threat to the idea of wine that most readers of this page likely share. Yes, I know that we’ve always had products like wine coolers, which may have served as a first step on the wine ladder. But if hard seltzer is the first step, I’m not sure what the second step might be!

Ultimately Wine Wars counted on what I called “the revenge of the terroirists” to keep wine from jumping the branded goods shark. How has that worked out? Come back next week for my thoughts.

Wine Wars: Curses, Miracles, and Revenge

April 13, 2021 By Mike Veseth in book reviews, Shameless Self-Promotion, wine, Wine Wars Leave a comment

Wine Wars 2011: the first books arrive.

As I explained in last week’s Wine Economist column, this is the tenth anniversary of the publication of my first book on the wine business, Wine Wars. Although the catchy title (suggested by the smart marketing people at Rowman & Littlefield) gets your attention, it is the long subtitle that outlines the book’s argument. This is a story of “the Curse of the Blue Nun, the Miracle of Two Buck Chuck, and the Revenge of the Terroirists.”

Here is a quick sketch of the book’s argument. I’ll return next week with thoughts about how things have changed (and how the argument has held up) in the decade since publication.

Curse of the Blue Nun

Blue Nun was arguably the world’s first global wine brand, so it represents the argument that globalization has been a powerful force in the wine world. What’s the curse? Well Blue Nun began as a very high quality German wine but, as it and other wines like it became more successful, eventually quality suffered. Blue Nun continued to sell, but it wasn’t the same. The curse of globalization is therefore that success on the global market can be double-edged, both creating and destroying.

Globalization has brought a world of wines to our door, which is also good and bad. This is the paradox of choice. No choice is bad. It is like the old Soviet joke where everything is either mandatory or forbidden. But too much choice is bad, too, and can be a particular problem for wine. It is not unusual for upscale supermarkets to have more than 1000 different wines on the shelf at prices ranging from a few dollars to hundreds of dollars. Wow! Not always easy to make sense of such an over-whelming selection.

Miracle of Two Buck Chuck

One way that many consumers react to this, the most confusing aisle in the store, is to confuse price with quality. Cheap wines must be bad. Expensive ones must be good. Clever marketers take advantage of this misconception in all sorts of ways that I discussed in the book. Hence the miracle of Two Buck Chuck. For many years Trader Joe’s stories in the U.S. sold a wine called Charles Shaw for $1.99 (do you see the two buck Chuck in that)? And millions of people who might otherwise have drifted away from the wine wall bought it and enjoyed it. TBC is an important element of the democratization of wine in America.

People think the miracle of Two Buck Chuck is its price, but let me assure you that you can make and sell a wine for $2 if you want to. In Europe I saw a wine that was one euro for a liter in tetra-pack carton. That’s equivalent to one buck Chuck! No the miracle is that consumers would buy it despite its bottom shelf price. They bought TBC because they trusted Trader Joe’s to sell good value products and then, having tried it, they trusted Two Buck Chuck to deliver consistently. Trader Joe’s and the Bronco Wine Company that makes TBC created a powerful brand that has sold millions and millions of bottles.

Commercial brands are one way to help consumers break out of the paradox of choice by economizing on trust. You don’t have to trust the grape variety or the appellation or the vintage year. You only have to trust the brand. That simplifies things for sure. But there’s a risk. Albert Einstein said that everything should be as simple as possible, but no simpler. And that’s true of wine, too. If branding and commoditization simply wine too much and undermine its quality, then the miracle can quickly become a curse!

Revenge of the Terroirists

What is there to keep wine from becoming just another branded commodity? I am an optimist, so I proposed a counter-force that I called the revenge of the terroirists. This term, taken from the French terroir, has caused a little confusion over the years. I am sure that Wine Economist readers know what I mean, but auto-spell programs always try to correct it and there was even one case where a gentleman came to one of my talks thinking that I was speaking about terrorists and wine. Terroir. Terror. Hmmmm. Easy to see how that could happen.

In fact, some terroirists back then were terrorists, or at least they used terrorist tactics to oppose the incursion of industrial wine into the south of France. But I wasn’t counting on violence to hold back the commodification tide. No, I put my money on the dedicated few who opposed industrial wines the same way that the Slow Food movement (which I wrote about in my Globaloney books) opposes industrial food — by fostering an alternative rooted in and celebrating tradition but using the best appropriate modern practices.

Would the terroirist resistance endure? It wasn’t a sure thing then (or now either, I suppose) but I was cautiously optimistic. As the last line of the book says, I still have grape expectations.

A Trip to Napa Valley

Each of Wine Wars’s three sections ends with an invitation to taste some wines that illustrate the relevant part of the argument. The final tasting re-creates a trip that Sue and I took just as work on the book was coming to an end. We were in California for a meeting of academic wine economists at the University of California at Davis. We skipped the sessions one afternoon and drove to Napa Valley. We made three stops: a small family winery, a larger and more famous firm — Frog’s Leap — whose winemaker John Williams is world-famous for his terroirist work. We ended the day at the Robert Mondavi Winery where our academic colleagues had gathered for the conference closing banquet.

Frog’s Leap is still going strong, principles in-tact, with the next generation hard at work. That small family winery no longer exists. The wine business is hard and every year new wineries spring up while old wineries quietly fade away. Robert Mondavi is still there, of course, but it is no longer owned by the Mondavi family. They incorporated their winery in order to get resources for new projects and then lost control of it. Constellation Brands is the owner now.

The China Syndrome

The penultimate chapter of Wine Wars is called The China Syndrome and it provides an interesting perspective on how much things have changed in just ten years. China was best known in the wine world back then as place to sell Bordeaux wines, both the iconic first growths but also lesser wines, even from questionable vintages. The Chinese couldn’t get enough Bordeaux.

Submerged under that sea of Bordeaux, however, was a growing Chinese wine industry — that’s what caught my eye. I reported on my first taste of a Chinese wine and it wasn’t very pleasant. Ashtray, coffee grounds, a whiff of urinal crust. Ugh! Bad Chinese wine was very bad indeed, as bad wine is everywhere.

But I also reported on a much different experience — a bottle of Grace Vineyards Cabernet Franc that we shared at an Open That Bottle Night dinner. Very nice indeed and it made me wonder where Chinese wine was headed (a question that continues to interest me — I’ve written about China in each of the subsequent wine books). Not good vs bad — I was pretty sure that better wine would rise to the top. No I wondered if Chinese wine would try to copy-cat the French as wine has done in so many other places. Or would the wine industry there develop in a way that reflects its particular terroir — wine with particular Chinese characteristics?

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I do think that the overall argument of Wine Wars has help up pretty well, which is a bit of a surprise given how much has changed. What would I change if I were writing it again now? Come back next week to find out.