Wine Tourism Grows Up: A Visit to Washington’s Chateau Ste Michelle

chateau-ste-michelleI am in Kennewick, Washington today and tomorrow to speak at the Washington Winegrowers Association 2018 Convention & Trade Show.  Tomorrow I’ll share some thoughts about wine premiumization in the “State of the Industry” session, but today’s focus is wine tourism. I’ll give a global perspective on wine tourism as part of a program on  “The Business Side of Your Tasting Room.”

Grape Expectations?

Increasingly the tasting room’s business is not just pouring samples, selling wine, and promoting wine club memberships. Although winery visitors clearly expect to taste wines and perhaps tour the winery or walk vineyard paths, they often come expecting (or hoping for) something more.  That’s because sophisticated winery visitors don’t only visit wineries. They have many interests and develop expectations based upon their broader experiences. Wineries that want to attract these visitors need to step up to meet rising expectations.

Wine tourists and their rising standards have always been a priority at Chateau Ste Michelle, Washington state’s largest wine producer. When the current Woodinville production facility was constructed in 1976 the choice was made to locate it close to the Seattle population center, a few hours’ drive from the vineyards on the other side of the Cascade Mountains. The winery was built on the grounds of Hollywood Farm, the old Stimson Estate, and the main building was designed to closely resemble an iconic French chateau.

“The Chateau,” as we call it hereabouts, celebrated its 50th anniversary in 2017 and used that opportunity to give its visitor center a major renovation. Sue and I first visited this facility shortly after it opened in the late 1970s, when it was one of the most welcoming wine tourism destinations we found. But as the years have flown by a lot has changed. The number of visitors has increased and they have become more numerous, more diverse in terms of their wine knowledge  and also more sophisticated in terms of their expectations for a tourism experience. Inevitably, the tasting room itself had to change, too. And it has.

When I say that the wine tourism experience here has “grown up” I mean more than that it has matured and is now able to accommodate more visitors. One element of the growing up is to accommodate more diversity of tourist expectations and experiences.  The result is a textured program with many layers of opportunities.

For first time visitors, for example, the free (free!) tour and tasting is available as it has been here for as long as I can remember.  Visitors can upgrade their experience at the tasting room bar, where a variety of elevated tasting options are available for $10 to $15 per person — a bargain by Napa Valley standards.r-919411-1320418583-jpeg

Are You Experienced?

Winery visits in the old days were focused on tasting (and hopefully buying the wines) — a transactions approach. Now the state of the art is about relationships and creating opportunities to draw visitors more closely into the winery and its story so that they become both long term patrons and active brand ambassadors. I wrote in Around the World in Eighty Wines about the huge variety of experiences on offer at the Napa’s Robert Mondavi Winery and Chateau Ste Michelle has programs to match.

The Chateau Ste Michelle wine experience menu includes the above mentioned tours and tastings and moves on to a special small group single-vineyard and limited release tasting ($30 per person or $25 for winery club members), Cabernet-themed food and wine pairing experience ($100/$85), a”Sensory Sojourn” workshop ($65/$55), and a wine blending experience ($125/$95).

Small groups can also arrange to attend a sparkling wine seminar and tasting with food pairings ($55/$45), an opportunity to taste older vintage of Washington Bordeaux blends and Riesling wines ($55/$45), or grab a chance to learn how to blind taste like a Master Sommelier ($125/$95).

It is also possible to schedule visits to the Col Solare Bottega, where Red Mountain wines  produced in partnership with Tuscany’s Antinori family can be sampled, or a visit to the Enoteca, which highlights wines from Ste Michelle Wine Estate’s wineries and partners in Washington, Oregon, California, and around the world. I was pleased to see some famous Torres wines from Spain on the shelves when we visited. SMWE imports and distributes Torres wines in the U.S. as it does for Antinori, New Zealand’s Villa Maria, and French Champagne house Nicholas Feuillatte among others.

Bottom line: visitors cannot help but be impressed by the beautiful, welcoming grounds and imposing chateau facility and the delightful array of programs on offer. No wonder about 300,000 of them come each year both to visit the winery and to attend outdoor concerts on the big lawn behind the visitor center. Chateau Ste Michelle was conceived as a destination winery that’s what it is today.

The recent remodel has made it possible to expand the offerings to wine tourists so that they can custom-tailor a visit to get the experience that they seek.  Is this a model for the wine industry generally? No … and yes.

The No is easy. Most wineries don’t have the scale of production, volume of visitors, and the financial resources to make the sort of investment we see at Chateau Se Michelle possible. Only a few wineries around the globe can provide this level of service. In the last year of our travels, for example, I think only four wineries in Spain were at the same level: Freixenet, Codorníu, Torres, and Marqués Riscal.

But, Yes, this model is important for the industry to consider. Smaller wineries can offer a smaller range of experiences that are closely linked with locale, their history, and identity. Many visitors will appreciate the taste of authentic engagement as much as they do the wine itself.

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Congratulations to Chateau Ste Michelle on their 50th anniversary and wonderful new visitor center. Special thanks to Lynda Eller and Linda Chauncey for their hospitality during or visit and to Hermes Navarro del Valle for his insights.

Mother Nature Strikes Back: The Big Wine Market Squeeze of 2018

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I’m busy getting ready for the Unified Wine & Grape Symposium, which takes place in Sacramento later this month. It is the biggest wine industry meeting and trade show in North America, with over 14,000 attendees expected for the event’s three-day run from January 23 to 25.

Sacramento Dreaming

There’s a lot to see and do at the Unified. The trade show itself is fantastic, with the full range of wine industry goods and services — from tractors to raptors to bottles and corks to finance and insurance — on display. The seminars are especially interesting this year. Gina Gallo will kick off the program with a much-anticipated keynote address at the luncheon on Tuesday.

Other sessions will look closely at wine-growing and wine-making issues, including a special program on Cabernet Sauvignon, which is the hottest thing there is in California wine these days. There are several parallel programs in English and Spanish, A very timely addition to the program this year is a series of seminars on preparing for and dealing with emergency conditions. Lots to see, hear, and learn.

I will be speaking at and moderating the “State of the Industry” general session on Wednesday morning. This will be a very intense session, featuring analysis by Danny Brager (The Nielsen Company), Steve Fredricks (Turrentine Brokerage), merger and acquisition expert Mario Zepponi (Zepponi & Company), and Allied Grape Growers’ Jeff Bitter. You really don’t want to miss this session — or any of the others.

Mother Nature Strikes Back

What’s ahead for the U.S. and global wine industries in 2018? Looking back at my notes from previous “State of the Industry” sessions, I see that in 2016 I suggested that the wine market looked very good … if the economic clouds on the horizon stayed away. They did and it was a good year for wine. In 2017 I proposed that the issue was more political than economic – lots of political uncertainty with the Brexit vote, Donald Trump’s new administration, and upcoming elections in France, Germany and elsewhere. If the political system can hold together, I speculated, it could be a good year for wine.

I might have been right at the time to focus on politics, but in retrospect it is clear that the real threat to the wine industry wasn’t economic or political … it was Mother Nature herself. 2017 (now extending into the 2018 harvest in the Southern Hemisphere) will be the smallest global wine grape harvest in a generation and, in some areas, the smallest since at least 1945.

Wildfires, both in California and in Portugal and Spain, are the iconic image of the year, but they are not the only or even the principal cause of the global grape squeeze. 2017 produced a perfect storm of different challenges in different places. Heat here, drought there, frost, freeze, hail. Sometimes it seemed like everything that could go wrong did. The impact on the global market will be significant. In fact, as I will explain next week, it could be game-changing.

Winegrowers are no strangers to bad weather or unfavorable conditions. What makes 2017 different is the fact that so many regions were affected during the same growing season – that’s what is causing the Big Squeeze. Typically small harvests in one region of the world are offset at least to some extent by abundant harvests elsewhere. This time was different – most of the world’s important wine growing regions were hit at once, albeit by different factors.oiv

The Biggest Losers

The biggest wine producers were also the biggest losers. OIV harvest estimates released on October showed a global reduction in wine production of about 8 percent compared with 2016 (see pdf here). Italy, France, and Spain – the three largest producers accounting for about half of global wine production – were down 23 percent, 19 percent, and 15 percent respectively.

There were only a few bright notes among major producers. Argentina’s 2017 harvest, for example, was 25 percent greater than in 2016. But the 2016 harvest, while good in terms of quality, was very small and not a really good point of comparison. In fact, Argentina’s 2017 crop was much lower than harvests in 2013, 2014, and 2015.

South Africa’s 2017 harvest was relatively good, up 2 percent from 2016, putting South Africa just ahead of Chile and behind Australia and China in the OIV wine league table. But the good news has not lasted. The 2018 harvest that will begin in just a few weeks looks to be the smallest in years due to very dry conditions through the growing cycle.

If you add the small 2018 southern hemisphere harvest to the northern hemisphere’s weak 2017, you get a dramatic shock to the global wine market environment – a sharp decline of 10 percent or more in global wine grape production.

What are the implications of this Big Squeeze? Your Econ 101 professor taught you that shortages cause prices to rise and that certainly in in the cards. But the wine economy is complicated, so it should be no surprise that the Big Squeeze will have complicated impacts. Come back next week for analysis.

50, 83, 41, 44: There’s a Lot to Celebrate This Year at Chateau Ste Michelle

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Washington State’s Chateau Ste Michelle is celebrating its birthday this year and there is a lot to celebrate, as I will explain below, even if the exact number of candles on the cake is open to debate.

Happy Birthday to The Chateau

The Chateau, as we call Chateau Ste Michelle in these parts, goes for 50 candles — and I think that’s fine. It was 50 years ago, in 1967, that the first varietal wines were released by a little-bitty operation called Ste Michelle Vineyards. The Chateau has released special edition wines that pay tribute to that first label.

The wines, sourced from Yakima vineyards according to the original label, were apparently very good. Howard Simon made them with help from California wine legend André Tchelistcheff, an early proponent of Washington’s wine potential.

Fifty is a good round number, but there are other birthdays we might also celebrate, as I learned by consulting 51na5ps55pl-_sx312_bo1204203200_The Wine Project: Washington State’s Winemaking History by Ronald Irvine with Walter J. Clore (Sketch Publications, 1977).

A Lot of Candles!

Eighty-three candles are hard to blow out in one breath, but that’s the number you would need if you go all the way back to 1934. The end of Prohibition in the United States encouraged the National Wine Company (Nawico) and Pommerelle winery to start up in Washington State. They made mainly sweet wines, as was common in the United States on up into the 1960s.

The two companies merged in 1954 to form the American Wine Company, which eventually created the Ste Michelle Vineyards label for varietal wines as a supplement to the main sweet wine business.

Woodinville Wine Cluster

A Seattle financial executive named Wally Opdycke became very interested in the opportunities that dry wines presented in Washington State and eventually Opdycke and his partners purchased American Wine Company in 1972 and set out to take wine in a new path (even, according to Irvine, as they worked to sell off the sweet wine inventory that they had inherited from the previous owners).

ste-michelle-vineyards-50th-anniversary-columbia-cabernet__31896-1307476275-1280-1280Opdycke and company needed capital for the vineyards and winery facilities they envisioned and in due course two interested parties appeared. The first was Labatt’s Brewery from Toronto, who recognized the potential that the region’s wines presented. The second was a U.S. company — U.S. Tobacco of Connecticut.

The offers were much the same financially, according to Irvine, but Opdycke and partners opted for the UST deal (Altria subsequently acquired UST and is now The Chateau’s owner).

U.S. Tobacco provided the investment capital that was needed and in the process attracted talented viticulturalists and noteworthy winemakers who eventually left The Chateau to work on their own projects. Local farmers planted vineyards to help fill the tanks of The Chateau and then the many other wineries that followed. Thus was the Washington wine industry that we know today born and The Chateau played a leading role.

One of the biggest investments came online 41 years ago — the imposing winery in Woodinville, Washington just a short drive from Seattle. The winery, styled after a French chateau, sits on the beautiful grounds of the Stimson estate and draws so many visitors to the neighborhood that dozens of other wineries and tasting rooms have joined it in Woodinville, creating a dynamic wine cluster.

Where Are the Grapes?

This is a bit of a puzzle to some visitors because the only grape vines they see are mainly for atmosphere, not production.  The gapes come from the east side of the Cascades several hours away. The Chateau’s strategy was to locate the show winery near to the market, not the vines (white wines are made in Woodinville, but red wines are made in Eastern Washington).

The separation works and you can see tanker trucks full of freshly pressed juice arrive at The Chateau during crush along with refrigerated trucks hauling bins of fresh-picked fruit to some of the dozens of other wineries in the neighborhood.

Whichever birthday you choose, The Chateau is worth celebrating.  Under the leadership of Allen Shoup and now Ted Baseler it grew from modest origins to become by far the largest winery in Washington State and an important force in national and even international markets.

But Wait … There’s More

Chateau Michelle Wine Estates is the umbrella organization that brings together The Chateau and the wineries and partnerships that have grown from it. So here’s a final number to celebrate: 44 (and counting). That’s what you get when you add together 18 brands that Chateau Michelle Wine Estates currently operates in the Pacific Northwest, seven more in California, and 19 international partnerships (CMSE is the exclusive importer of Antinori wines, Torres wines from both Spain and Chile, Nicholas Feuillatte Champagne and Villa Maria among others).

The Chateau and the Antinori family are partners in two notable ventures: Col Solare on Red Mountain in Washington and Stag’s Leap Wine Cellars in Napa Valley. And I cannot forget Eroica, the partnership between The Chateau and Ernest Loosen of the famous Mosel Valley wine family.

The Chateau as it has evolved has somehow managed to be both big and small. Taken together these wineries form the eight largest wine company in the U.S. according to Wine Business Monthly’s annual survey. Yet the individual producers retain a good deal of autonomy, part of the company’s “string of pearls” philosophy.

There is another dichotomy that The Chateau has somehow managed to navigate. Although it has corporate ownership and necessarily is influenced by that, it seems to behave in many ways more like a family winery. This accounts in part for its ability to partner with famous wine families like Antinori, Torres, and family-owned Villa Maria.

The Chateau deserves a lot of credit and respect for what it has done to build its own business, to build a Washington wine industry, and to promote American wine at home and abroad.

Happy Birthday to The Chateau and everyone who contributed to its remarkable rise!

Coming Up: Second UNWTO Global Conference on Wine Tourism in Mendoza

unwtoThe second United Nations World Tourism Organization (UNWTO) Global Conference on Wine Tourism is coming to Mendoza, Argentina on September 28-30, 2017. You can view the preliminary program here).

Sue and I had the pleasure to participate in the first UNWTO global wine tourism conference in the Republic of Georgia in 2016 and are excited to take part in the Mendoza conference. I am scheduled to give one of the keynote speeches. My topic will be “Wine Tourism for Sustainable Development: Opportunities, Strategies, Pitfalls.”

The UNWTO has declared 2017 “The Year of Sustainable Tourism for Development,” explicitly linking tourism to the United Nations’ 17 sustainable development goals.  Tourism is a big global business with great potential to contribute to sustainable development if thoughtfully approached and carefully managed. Wine tourism can and does play a role, here, too.

2017

The UNWTO explains it this way:

Tourism is an important driver of economic growth, inclusive development  and environmental sustainability. It can make a huge contribution to the global efforts to deliver on the 17 Sustainable Development Goals agreed upon by 193 nations to reduce poverty and foster sustainable development worldwide.

2017 is the International Year of Sustainable Tourism for Development (IYSTD), an invaluable opportunity to broadcast to a global, high-level audience the potential of our sector to deliver on these universal Goals.

I am looking forward to the opportunity to discuss wine tourism as a path to sustainable development with the elite group who will gather in Mendoza. Mendoza offers fantastic opportunities for wine tourism, of course, but it is important that its benefits are broadly shared to contribute to economic and social development.

One problem with sustainability is that it can be approached in a way that is so vague that everyone agrees that it is important but no one does much to actually achieve it. I think the conference will present an opportunity to drill down into useful specifics and to share concrete examples of success and failure.

Hope to see some of you in Mendoza next month!

Try It, You’ll Like It: What Can Wine Learn from the Cruise Ship Industry?

cruiseI keep finding cruise brochures folded into the weekend newspapers that arrive here at Wine Economist world headquarters. Ads of various sorts for wine clubs associated with those same papers show up frequently, too. That got me thinking, which is usually a mistake. What do ocean or river cruises and those wine clubs have in common? Intrigued? Read on.

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They come in the mail and stuffed in weekend papers — brochures for ocean and river cruises and barge-and-bike tours. It is hard to resist the temptation to thumb through them and imagine visiting all these far-away places. You’ve done it, haven’t you?

Thousands and thousands of full-color printed brochures — this seems like a pretty expensive way to solicit customers. There must be something about having those pages and pictures in your hands that is especially important. Or maybe it is that the demographic that still reads a physical weekend paper and can afford to pay for it is a juicy target.

Experience Deficit Disorder

Several things about the tours strike me as important and relevant to wine. The first is that tours are “experience goods” — you cannot really know if you will like river touring, for example, until you actually try it. And then, if your experience is a good one, the odds of a second trip go way up (and the cost of customer acquisition way down).

The most important thing in marketing an experience good is to get people to try it the first time. The cruise industry seems to be good at this, so perhaps there is something to be learned by studying their strategies.

Wine is obviously also an experience good. Hard to know if you will enjoy a wine (or how much) before you pay the bill and open the bottle. If you like it, you are likely to come back for more. No wonder winemakers go to so much effort and expense to hold tastings of their wines.

The Olive Garden restaurant chain has a very successful wine program that is built around their practice of offering free tastes (as allowed by local law). One taste makes a customer more often than not.

Those colorful cruise brochures and television videos (think  PBS’s “Masterpiece Theater” sponsorship) try do the same — they give potential customers a “taste” of what cruise life is like. But for the most part neither wine now cruise ships can entirely overcome the obvious experience deficit disorder. So they need a strategy around it to give buyers confidence to take the plunge.

A Little of What You Fancy

Since cruise lines and independent “professionally curated” wine clubs of the sort that are often associated with newspapers and airline mileage programs cannot give all their potential customers actual samples of their products, they both seem to sell the glamour and exotic nature of the experience and hedge their bets in an interesting way.

Cruise tours seldom spend more than a few hours in any single port of call. If you love today’s stop, you can always come return on your own, but if you find you hate Venice (is this even possible?), don’t worry. You’ll be back on the boat and headed for another destination before you know it.

Some of the wine clubs that advertise in the weekend papers seem to work in the same way. Don’t worry about getting a case of even a six-pack of a particular wine you don’t like. Each case has at least six and sometimes twelve different wines. Don’t like this wine — don’t worry, because it is gone just like that. But you can order more of anything you fall in love with.

The fact that the details of the experience — the particular wines, the particular travel route — are made by experts, not the buyer, seems important, too. You buy the package and leave the rest to the experts. The modest commitment comes with relatively modest effort and emotional investment.

The low commitment strategy doesn’t appeal to everyone (see my personal note below) among either tourists or wine buyers, but its persistence in both spaces suggests that there is a market for it. Especially when there is a big discount involved.

Affordable Luxury

Nice wine and ocean and river cruises are luxuries from an economic point of view. No one has to buy them and there are always cheaper alternatives. The trick to getting the weekend newspaper-reading public to try them seems to be to make them simultaneously very luxurious and a tremendous bargain.

Thus the cruise lines advertise stratospheric rack rates for their services, which are then deeply discounted. The “full brochure fare” for the cheapest stateroom on a 10-day Mediterranean cruise in the flyer that arrived a few weeks ago is $9,999 (including economy airfare from certain gateway US airports). Wow, that’s a lot of money. Must be quite a cruise.

But wait, if you act now this wonderful experience can be yours for just $2,999 (airfare included) or $1,999 if you book your own flight. Lifestyles of the rich and famous at a fraction of the list price. Who can resist?

For the record the full brochure price of the most expensive cabin for this 10-day cruise is … wait for it … $33,998! But your price is just $14,999 or $13,999 if you pay your own airfare. Needless to say, this top-of-the-line listing makes the $2,999 of that bottom-tier inside stateroom seem an even better deal than before. Or maybe you would like to upgrade to the $4,599 veranda stateroom?

Wine club ads (and most supermarkets) adopt a similar strategies. Wine club ads seem to stress both the high retail value of the wines and the low low price that you will pay. Sometimes the introductory offer prices are so low that they must be intended solely to entice buyers into the first “experience” purchase, counting on repeat order for profits.

Foot in the Door?

I don’t see anything wrong with how cruise lines and wine clubs market their services. If this low-commitment affordable luxury strategy is successful in introducing people to wine and travel — and if they enjoy themselves — then that’s a plus.

Remember this. Most consumers don’t drink wine (here in the U.S. about 40% of adults don’t consume any alcohol at all). And most of those who do drink wine do it only a couple of times each month. There is much work to be done to introduce these consumers to the pleasures of wine and if thinking about wine as if it were a luxury river cruise can help, I am all for it.

The point of this that sometimes those of us in the wine space think that wine is so special that we fail to see how it relates to other products and experiences. It’s a good idea to pay attention to how other  experience goods present themselves to consumers and to note how those consumers react.

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For the record, Sue and I don’t seem to fit the wine club/cruise ship profile. We signed up for one of those wine clubs years ago and never ordered again. The wines were fine, we just wanted to make the choices ourselves. We’ve taken just one cruise: a Holland America Inside Passage cruise to Alaska. We had a great time and met many nice people, but were never were tempted to repeat.  Chacun a son gôut, I guess.

At least we had good experiences, unlike the diner in this vintage television commercial.

 

Which Brexit? Good, Bad & Ugly Scenarios for Global Wine Markets

41njy9jreolAs last week’s column explained, Britain’s exit from the European Union (a.k.a. Brexit) will disrupt global wine markets in a variety of ways. British wine drinkers will be affected, of course, but so will consumers and producers in other countries as global markets react, redirect, and seek out new market equilibria.

How much will the global wine market be disrupted? It depends upon exactly how Brexit unfolds. There are good, bad, and  ugly scenarios (although, as in the famous Sergio Leone film, the good is really only not-so-bad compared with the bad and ugly story lines).

The British Pound’s swift fall has increased UK wine prices already, as I said last week, but this isn’t the end of higher prices. I expect tax increases to be the next shoe to drop.

Mind the Gap: Higher Wine Taxes

Why would the May government raise wine (or alcohol) taxes? Brexit is going to be expensive. Really expensive. The UK will be on the hook for as much as £50-£60 billion of obligations for EU projects that are currently in progress. These payments may be negotiated to some degree, and are sure to be a point of contention, but they won’t go away. So outflows to the EU will continue.

In the meantime, the UK government will need to staff up domestically to replace government functions currently handled by EU personnel. One estimate suggests that 30,000 new government employees will be needed. Some of the first to be hired will be the trade negotiators needed to negotiate Brexit. Incredibly, the now-defunct Cameron government that called the referendum on EU-membership had no contingency plan for Brexit or staff to implement it ready in case it passed.

Higher expenses will come on line just as the British economy weakens (growth estimates for 2017 have been halved already — from 2.2% growth down to 1.5% — although the economy help up very well in 2016), so tax increases will be needed to span the budget gap. I expect wine/alcohol taxes to be part of that package. Such taxes already account for about 50% of the cost of inexpensive supermarket wine in Britain.

Beyond the exchange rate and tax effects, the impact of Brexit on wine depends upon what kind of Brexit is finally agreed — and there is a wide range of possible agreements (and disagreements!).ap-frame-622-good-bad-ugly-sergio-leone-italian-movie-poster-1966

Too Good to Be True: Buffet Brexit

Many in the UK would prefer what I call “Buffet Brexit” where the UK government picks and chooses what it wants from the relationship (access to the Single Market, please, and special considerations for the London financial sector) and what it prefers to skip (free labor movement and immigration).

Buffet Brexit would be not-so-bad for wine. The British market would retain free access to European wine markets and also the existing system of tariffs and trade agreements with outside countries. The tax and exchange rate issues would not go away, however, but might be less severe.

Buffet Brexit is, however, the least likely outcome. Probability = zero. If the EU lets Britain dine at the buffet, other members will want the same options and benefits and the union could quickly collapse.

Not-So-Bad: BFF Brexit

I call the second option BFF (Best Friends Forever) Brexit but the more common term is “Soft Brexit.” The UK formally leaves the EU but both sides pledge to stay best friends forever and so exit expenses are minimized and spread over many years, “passporting” agreements are made to allow the UK to remain a major financial hub, and access to EU markets, perhaps through customs union membership, allows continued access to EU markets.

Precedent (the Norwegian model) suggests the Britain would have to pay for the privilege of having market access, however, and remain subject to EU regulations without a voice in setting them.

BFF Brexit might not dramatically change the UK wine market depending upon how trade relations are negotiated. UK sales would still fall, however, creating a global surplus that would spill out into other markets, increasing competition and lowering margins elsewhere.

But even BFF negotiations are problematic. In case you haven’t noticed, trade agreements these days are detailed and negotiations take a long time — some believe it will take 10 years to reach complete agreement!

Even if the UK and EU remain BFFs through all this, the uncertainty the comes with these negotiations will be bad for wine and bad, really, for most sectors the British economy. Probability of BFF Brexit = only 10 percent, mainly because the exit cost conflict is likely to turn friends into enemies. That’s what often happens when couples divorce, isn’t it? And this divorce is very complicated and there is a lot more than custody of Fido at stake.

The Bad: Break-Up Brexit

Break-up Brexit (a.k.a. “Hard Brexit”) is a more drastic option and would have important impacts on global wine. Significantly, this is the option that Prime Minister May seems to favor. Britain would cut ties to the EU, with free access to the single market replaced with WTO “most favored nation” status which, according to the Economist, is a best understood as an open can of worms and not a simple process. Britain would need to start from scratch negotiating deals with its trade partners.

Interestingly, President-elect Trump, who says he hates trade deals, has recently said he would push through a UK-US trade agreement quickly in the case of a hard Brexit. Apparently he hates the EU even more than he hates trade deals. Go figure.

The cost of wines from France, Italy, Spain and other EU countries would jump in the UK as would those from non EU countries when existing trade preferences end. Chile, which has a preferential trade agreement with the EU, would be a big loser at least until a separate trade agreement with the UK is agreed after Brexit talks are concluded.

Break-up Brexit would give UK “Leavers” what they want most — control over immigration and trade barriers — but at a very high price.The impact on the UK wine market would be very substantial and the side-effects around the wine world would be quite large as the markets adjust to the loss of British sales. The UK’s central place in the wine industry would clearly change. Probability of Break-up Brexit = 40 percent.14565124

The Ugly: Train Wreck Brexit

Financial Times columnist Gideon Rachman argues that the most likely outcome is what he terms “Train Wreck Brexit” and I will give it a 50 percent probability, although that’s just a guess.

The train wreck occurs, in Rachman’s analysis, when EU and UK negotiators realize that they just can’t agree on critical elements of the exit deal throwing some issues into the courts (the International Court of Justice in the Hague might have to decide how much the UK owes for transition payments) and other issues into limbo. It could take years and years before the smoke completely clears and in the meantime the uncertainty would have terrible effects.

The train wreck scenario isn’t good for anyone and certainly not good for wine, which would suffer all the problems of hard Brexit plus others due to the lack of a clear path ahead. The stress and uncertainty levels would be high. Scotland might vote to exit the UK to gain some control over its destiny, which would add to the crisis.

Perhaps the threat of the train wreck will be enough to convince the parties involved to find a better solution. Interestingly, it is not clear that the Brexit process can be reversed once Article 50 is invoked. Like the doomsday machine in Dr. Strangelove, the idea seems to be to deter EU exit by making it a total and inevitable disaster. But, that doesn’t work if no one knows about doomsday plan (the Dr. Strangelove scenario) or if voters don’t believe it or just don’t care (Brexit).

Bottom Line

As you can see from my speculative analysis, the most likely options are also the most disruptive for the wine industry. Wine prices are likely to rise dramatically in the UK due to the falling Pound, rising taxes, and higher trade barriers. Price-sensitive British buyers will react accordingly, creating a surplus of wine on the global market and disruptive market arrangements generally.

EU wine producers will be hurt the most by lower UK sales and others like Chile, with its preferential access undermined, will also suffer. But the impacts will extend far beyond as the wine not sold in the UK looks for a home elsewhere in the global marketplace. Winemakers in California who never gave a thought to UK sales will find themselves the unintended victims of increased competition.

The odds are that Brexit will be a game changer for wine, but it is hard to know for sure what the new game will look like. Stay tuned.

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The Wine Economist takes a break next week — I’ll be at the Unified Wine & Grape Symposium in Sacramento moderating the “State of the Industry” session and talking about Brexit and other wine market issues. Hope to see you there!

In the meantime, enjoy this clip from Dr. Strangelove.

The Beat Goes On: Kevin Zraly’s Windows on the World Wine Course

9781454913641_p0_v2_s192x300Kevin Zraly Windows on the World Complete Wine Course (revised & updated edition)New York: Sterling Epicure, 2016.

I don’t know if Kevin Zraly has a theme song — a tune that they play when he enters the room or takes the stage — but if he doesn’t have one I would like to suggest “The Beat Goes On.” I think it fits him like a glove.

Windows on the Wine World

Zraly was instrumental in getting the wine beat going here in the United States through his work at the Windows on the World restaurant in New York and his high-impact teaching at the Windows on the World Wine School.

Zraly’s tenure at the restaurant lasted from its first day of business in 1976 (a key year for wine in America) until September 11, 2001. You know that date, I am sure, and it will make sense when I remind you that Windows on the World was located at the top of One World Trade Center.

The restaurant was gone after 9/11, but the beat went on. The school moved uptown, but didn’t really miss a beat until Zraly decided to retire from teaching this fall, after 40 years and more than 20,000 students. So now the school is gone, too, but the beat still goes on in the form of the latest edition of this book.

A Confidence Game

The Windows on the World Complete Wine Course is the closest thing that most people will have to taking the actual course with Kevin Zraly and it is valuable resource both for the wine novices that it was written for and for wine veterans, too.

Newbies learn enough about wine to develop the personal confidence they need to enjoy wine and not be unnecessarily intimidated by it. This confidence is vital to wine sales in restaurants and shops, too. Remember: no one has to buy wine and many do not because they are afraid of making a mistake.

Wine veterans will appreciate the book, too, because Zraly’s enthusiasm is totally contagious and reading it reminds us of why we fell in love with wine in the first place.kevin-zraly-sm

What’s new for this edition? The basic structure remains the same, which is a good thing. Zraly’s brilliant original strategy was to organize the class and then the book around a typical restaurant wine list — whites on this side, reds on the other, sorted by regions and so on.

You get key information about the regions and the wines plus suggested producers, food pairings, comparative tasting prompts and a lot more. Where some books seem to be written for technical WSET exam prep classes, Zraly aims to prepare his students for real world exams — choosing and enjoying wines at restaurants and shops.

More. Give Me More

The text has been updated along with the graphic design and I think both are great. Wine is changing so fast that it is hard to keep up (and impossible to be really complete), but this edition does a good job in both respects. The graphics work because the bright colors stimulate the mind’s eye and are used to convey information in a consistent style. Sue noted that the design allows a great deal of information to be packed onto each page. It is attractive and useful, not distracting as is so often the case.

I have always admired previous editions of this book, but I wanted more. More countries and regions and maps and — most important — more Kevin Zraly. More Zraly because it is his dynamic personal relationship to wine (and his student/readers) that makes this book great.

I think I will always want more in terms of wine regions, etc. — love to see information here about Portuguese wines besides Port and maybe Georgian wines now that I have visited here. But I understand that this isn’t an encyclopedia and, at 360 pages, it is already pretty big.

But what makes me happiest is that the sense that you are listening to Kevin Zraly, learning from him and getting excited by his excitement — that sense is fuller than ever before. More Zraly? Simply irresistible! That’s what makes the Windows on the World Complete Wine Course essential reading for all wine lovers.

Congratulations to Kevin Zraly on his achievements, awards, and contributions to wine in America. And thanks for this book, which extends his influence into the future. The beat goes on!

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“The Beat Goes On” is a Sonny and Cher tune (Sonny Bono wrote it), but I thought you might enjoy this version by the Buddy Rich band — it really swings. Cheers.