Jerry Lockspeiser recently interviewed me for Harpers Wine & Spirits, the UK drinks industry publication. You can read the online version here. Enjoy!
Jerry Lockspeiser recently interviewed me for Harpers Wine & Spirits, the UK drinks industry publication. You can read the online version here. Enjoy!
The audiobook version of Wine Wars has just be released by Audible.com. Click on the book cover image to go to the Amazon.com page where you can listen to an excerpt, purchase the audiobook or get it free with a with a 30-day free trial of Audible.com.
Wine Wars is my first audiobook and I am interested to see how paper translates into an audio file. It turns out that 261 pages of text take 8 hours and 31 minutes to read! Veteran narrator Clinton Wade is the reader and I think he does a great job.
Many of you who know me or have heard me speak have commented that you can almost hear my voice when you read the book, so I wonder if that holds up with the audiobook format?
If you have a chance, I’d appreciate it if you’d click on the image and listen to the audio sample for a few minutes. Use the comments section below to let me know if you think the book’s voice comes through effectively.
Plans are in the works for an audiobook edition of Extreme Wine, too. Watch this space for details.
My new book Extreme Wine is now officially available and Wine-Searcher.com has just published an excerpt, so you can get a sense of the book’s style and content, both of which will be familiar to regular Wine Economist readers.
The editors at Wine-Searcher picked part of Chapter 4, which is titled “The Invisible Wine” and deals with wines that are for various reasons so scarce (or in some cases so ubiquitous) that they are nearly invisible. I probe a number of extremes in this chapter, but the editors asked to reprint the section on “Twenty Dollar Bill Wines.” Here’s how the piece begins …
Twenty-dollar-bill wines don’t really cost twenty dollars, so you can put your wallet away. The name comes from a joke that is popular among economists and therefore essentially unknown to the rest of the world. The joke goes like this.
A non-economist walks into a bar and says excitedly to the bartender (who is an economist). ‘Wow, this is my lucky day! I just found a twenty-dollar bill on the sidewalk in front of your bar!’ The bartender takes a long look at the fellow, who is waving the bill in the air. ‘No, you didn’t,’ he says. ‘Yes, I did!’ replies the customer. ‘See, it’s right here!’ ‘Can’t be—you’re wrong,’ the economist-bartender coolly replies. ‘You’re ignoring rational economic theory. If there had been a twenty-dollar bill on the sidewalk, someone would have already picked it up. So it is logically impossible that you could have found one.’
‘But look—here it is!’ the customer exclaims. ‘Look, buddy,’ the bartender says, turning away, ‘What do you think I’m going to believe—your bill or my theory?’
The joke of course (sorry, but economists always explain jokes, even the obvious ones) is that economists tend to believe their theories even when they can clearly see refuting evidence with their own eyes. You would think that this makes economists different from regular folks, but in the case of rare wines, we are all pretty much the same.
There are many ‘cult’ wines that are famous for being impossible to buy. They are so scarce, the story goes, that they are all invisibly absorbed by the lucky few folks who years ago gained access to the wine-club distribution list. No one else ever gets a shot. They are as rare as rare can be. I call these the twenty-dollar-bill wines because if you saw one (at a wine shop or on a restaurant wine list), you would probably rub your eyes. Impossible! How could that be? Must be a mistake (or maybe a fake!). If they really had that wine for sale, they would already have sold it.
Now the dirty little secret of these wines is that they are sometimes quite reasonably available, but the myth of impossible scarcity is maintained because that’s how myths work and because no one can believe their eyes. …
Click here to go to Wine-Searcher.com to read the rest of the selection.
By the way, if you still think of Wine-Searcher only as a website that provides information on particular wines, their ratings, prices and availability (see this search for Opus One, for example), then you need to think again because the editors have created a really exciting website with news, features and a wide range of other wine enthusiast information.
There’s more to Wine-Searcher than the searcher part, so you should check it out. (And, yes, they do also publish my column on wine investment, so I have filed this post under “Shameless Self-Promotion.)
Thanks to Wine-Searcher for publishing the Twenty Dollar Bill wine excerpt. Enjoy!
There really nothing that The Wine Economist loves more than data about global wine markets. Solid information about price, quantity and production, consumption and trade flows is critical to an understanding of how the world of wine is changing.
But consistent detailed world market data are difficult to find and sometimes expensive to access.
One of my favorite data sources over the years has been the Global Wine Markets Statistical Compendium series published by the Wine Economics Research Centre at the University of Adelaide. Only two problems: it hasn’t been updated for a while … and the last time I bought a copy it wasn’t exactly free.
So I want to pass on this great news: a new volume co-authored by Kym Anderson and Signe Nilgen has just been released in two forms: a relatively inexpensive paperback (AUD35) and a free downloadable pdf.
The price is right and the data is well organized and incredibly interesting. An essential resource! Click here to download the pdf. Thanks to the Wine Economics Research Centre for making this resource available.
Tyler Colman, Wine Politics: How Governments, Environmentalists, Mobsters and Critics Influence the Wines We Drink. University of California Press, 2008.
The French have a word for it: assemblage. It is the act of blending wine from different barrels and when it works the result is full and round, delicious. Tyler Colman (a.k.a. the internet’s Dr Vino www.drvino.com) has assembled stories about the social forces that affect wine in order to round out our understanding and appreciation of this glorious product. It is a very readable revision of Colman’s Ph.D. dissertation on the politics of wine and I think it’s a blend that will appeal to a lot of wine enthusiasts.
The contrasts between the Old World (France, especially Bordeaux) and the New World (California, especially Napa Valley) form the book’s main axis. Alexis de Tocqueville famously noted that a distinguishing characteristic of the young United States was the unexpected vitality of its voluntary associations. Americans didn’t look always to the state, he wrote, they worked together to solve collective problems. Nothing like it in France, with its strong state controls. But wine is different, Colman explains. Regional wine associations (like the groups behind the appellations d’origine contrôlée system ) play a strong role in France while the heavy hand of the state (the French call it dirigisme) is seen in America’s rigid regulation of wine (and alcoholic beverages in general) and the complex and cumbersome three-tier distribution system that makes it all but impossible for some wine enthusiasts to legally purchase products that are readily available just across the state line. Colman’s history of the political process that brought us to this situation makes good reading.
Green power politics is part of the blend, too, as Colman contrasts the influence of environmentalists in California with the biodynamic movement in Europe. The politics of the palate – and the influence of wine multinationals and critics like Robert Parker (and Dr. Vino himself?) — rounds out the final product, Colman concludes on a upbeat note: the relationship between wine and society here in the United States is complicated, a mixture of politics and economics, wealth and power, science, tradition, religion and environmentalism and there are a lot of problems to be solved, but he’s optimistic – we have more and better choices and a growing wine boom to push the process along.
It’s not really surprising that I would like this book. It’s called Wine Politics but there’s a lot of wine economics here, too. You have to be a little bit of a wine nerd to want to study the political economy of wine when you could just spend your time and money sniffing, swirling and slurping and I guess I fit that profile. The broad themes are important and there are plenty of interesting historical tidbits that you can work into conversation at your next wine tasting party. Now, for example, I know why Two Buck Chuck, which costs $1.99 in California, sells for about a dollar more here in Washington.
Thinking critically, I would have appreciated a bit more depth on some of the topics (many of the chapters are strings of short blog-length entries) and I wish that there was a stronger central theme. Yes, wine is affected by many social forces. Well, so what? A long memorable finish is something I look for in a wine … and a wine book.
Congratulations, Dr. Vino, on a successful first cuvée. I’m looking forward to your next book, which is due out this fall.
Family. It is one of the distinguishing characteristics of the wine business, at least according to some scholars. But today’s news from Vinum Capital LLC makes we wonder about the future of the family winery business model.
Family businesses are supposed to be disadvantaged in the big time business world. Their family-ownership structure is supposed to limit access to capital and make expansion and effective management difficult. And yet some of the most famous names in the wine industry are family-owned firms. Some, like the Gallos of California, have kept ownership closely held for years. Others, like the Antinori of Italy, have experimented with outside capital only to return, at considerable expense, to the family model. Still others, like the Mondavi, illustrate just about everything — the problems of family businesses (the family feud that caused Robert Mondavi to strike out on his own), the benefits of family business (the rise of the Robert Mondavi brand) and problems of taking a family business public (the eventually takeover by Constellation brands).
All in the Family
Why does family ownership seem to be an advantage in wine where it is seen as a disadvantage almost everywhere else? One theory is that it is all about trust. Family firms are forward-looking high-trust environments where long term relationships can grow. The wine industry, people say, uniquely benefits from the long term commitment and close trusting relationships (with correspondingly low transactions costs) that family relations can provide.
It is said that the success of [Yellow Tail] wine is due to the fact that the Casella family (Australian winegrowers) and the Deutsch family (American distributors) were able to work together effectively to promote the brand because both sides of the deal were high-trust family firms. I am not sure how much faith to put in this idea (economists are trained to be suspicious of “cultural” explanations of economic outcomes), but I recall that Steve Smith, the celebrated New Zealand winemaker I interviewed a few years ago, felt it was very important for his family-owned business (Craggy Range — owned by the Peabody family) to work mainly with family-owned distributors in export markets. Smith is smart, so maybe there is something to this family business thing.
But the family-owned wine business may be an endangered species according to a recent study by Silicon Valley Bank, a major wine industry financial institution. They report that as many as 51% of these family wineries (in the western U.S.) will likely be up for sale in the next decade as the founding generation retires and is not replace by younger blood. One limitation of the family business model is that it only works if generations of family members want to run the business. Wine is glamorous but hard work, so it is perhaps not surprising that heirs might prefer cash.
A New Business Model
Vinum Capital has established a $250-million private equity fund (Vinum Capital Partners I LP) to acquire certain family wineries as they come on the market, invest in them so that they grow to be large enough to be of interest to larger firms (Constellation Brands?) and then sell them at a profit. The basic business model is shown in the image above.
“Our objective is to help provide liquidity for family-owned businesses,” according to Vinum’s press release, “Many of them have been in business for 20 to 40 years and there may not be a second generation willing or able to take on the business.” Large wine companies are interested in operations that produce at least 300,000 cases per year, according to Vinum, which sees itself as being able to muster the resources to get some family-owned firms to that level.
The fund’s managers certainly have a lot of experience, both with family businesses and at the corporate wine level, so maybe this is a good business plan. I know that a number of high-profile family wineries have recently “transitioned” to corporate control including Erath in Oregon, purchase by Ste Michelle Wine Estates and Stag’s Leap in Napa Valley, sold to a Ste Michelle – Antinori partnership.
A Natural Experiment
I’m pretty interested to see what happens because I view this as a natural experiment. Vinum’s plan will work best if people are wrong about family wineries — if the particular advantages of the family form of business organization are not really important factors in winery success after all (or if they lose their effectiveness above a certain scale). If the plan works it might mean that wine is doing more than passing from one generation to the next — perhaps it is transitioning from a special type of business where long run relationships and trust are key to one where traditional business factors such as economies of scale, distributional effcieincy and brand strength matter more. Stay tuned for the results!
Rating the Wine Rating Systems
People turn to wine critics to tell them what’s really inside that expensive bottle (or that cheap one) and how various wines compare. Some critics are famous for their detailed wine tasting notes (Michael Broadbent comes to mind here) that provide comprehensive qualitative evaluation of wines, but with so many choices in today’s global market it is almost inevitable that quantitative rating scales would evolve. They simplify wine evaluation, which is what many consumers are looking for, but they have complicated matters, too, because there is no single accepted system to provide the rankings.
I’m interested in the variety of wine rating systems and scales that wine critics employ and the controversies that surround them. This blog entry is a intended to be a brief guide for the perplexed, an analysis of the practical and theoretical difficulties of making and using wine ranking systems.
Wine Rating Scales: 100-points, 20-points, Three Glasses and More
The first problem is that different wine critic publications use different techniques to evaluate wine and different rating scales to compare them. Click on this image to see a useful comparison of wine rating systems compiled by De Long Wine(click here to download the pdf version, which is easier to read).
Robert Parker’s Wine Advocate, the Wine Spectator and Wine Enthusiast all use a 100-point rating scale, although the qualitative meanings associated with the numbers are not exactly the same. It is perhaps not an accident that these are all American publications and that American wine readers are familiar with 100-point ratings from their high school and college classes.
In theory a 100-point system allows wine critics to be very precise in their relative ratings (a 85-point syrah really is better than an 84-point syrah) although in practice many consumers may not be able to appreciate the distinction. Significantly, it is not really a 100-point scale since 50 points is functionally the lowest grade and it is rare to see wines rated for scores lower than 70, so the scale is not really as precise as it might seem. ( Any professor or teacher will tell you, there has been both grade inflation and grade compression in recent years and this applies to wine critics too, I believe.)
The 100-point scale is far from universal. The enologists at the University of California at Davis use a 20-point rating scale, as does British wine critic Jancis Robinson and Decanter, the leading global wine magazine. The 20-point scale actually corresponds to how students are graded in French high schools and universities, so perhaps that says something about its origins.
The Davis 20-point scale gives up to 4 points for appearance, 6 points for smell, 8 points for taste and 2 for overall harmony, according to my copy of The Taste of Wine by Emile Peynaud. The Office International du Vin’s 20-point scale has different relative weights for wine qualities; it awards 4 points for appearance, 4 for smell and 12 for taste. Oz Clarke’s 20 point system assigns 2, 6 and 12 points for look, smell and taste. It’s easy to understand how the same wine can receive different scores when different critics used different criteria and different weights.
A 20-point scale (which is often really a 10-point scale) offers less precision in relative rankings, since only whole and half point ratings are available, but this may be appropriate depending upon how the ratings are to be used. Wines rated 85, 86 and 87 on a 100-point scale, for example, might all receive scores of about 16 on a 20 point scale. It’s up to you to decide if the finer evaluative grid provides useful information.
Decanter uses both a 20-point scale and as well as simple guide of zero to five stars to rate wines, where one star is “acceptable”, two is quite good, three is recommended, four is highly recommended and five is, well I suppose an American would say awesome, but the British are more reserved. Dorothy J. Gaiter and John Brecher (who write an influential wine column for the Wall Street Journal) also use a five point system; they rates wines from OK to Good, Very Good, Delicious and Delicious(!).
The five point system allows for less precision but it is still very useful – it is the system commonly used to rate hotels and resorts, for example. ViniD’Italia, the Italian wine guide published by Gambero Rosso, uses a three-glasses scale that will be familiar to European consumers who use the Michelin Guide’s three-star scale to rate restaurants.
Which System if Best?
It is natural to think that the best system is the one that provides the most information, so a 100-point scale must be best, but I’m not sure that’s true. Emile Peynaud makes the point that how you go about tasting and evaluating wine is different depending upon your purpose. Critical wine evaluation to uncover the flaws in wine (to advise a winemaker, for example) is different in his book from commercial tasting (as the basis for ordering wine for a restaurant or wine distributor or perhaps buying wine as an investment) which is different consumer tasting to see what you like.
Many will disagree, but it seems to me that the simple three or five stars/glasses/points systems are probably adequate for consumer tasting use while the 20- and 100-point scales are better suited for commercial purposes. I’m not sure that numbers or stars are useful at all for critical wine evaluation – for that you need Broadbent’s detailed qualitative notes. Wine critic publications often try to serve all three of these markets, which may explain why they use the most detailed systems or use a dual system like Decanter.
In any case, however, it seems to me that greater transparency would be useful. First, it is important that the criteria and weights are highlighted and not buried in footnotes. And I don’t see why a 20-point rating couldn’t be disaggregated like this: 15 (3/6/6) for a 20-point system that gives up to 4 points for appearance, 6 for smell and 10 for taste. That would tell me quickly how this wine differs from a 15 (4/3/8). Depending upon how much I value aroma in a wine and what type of wine it is, I might prefer the first “15” wine to the second.
Wine and Figure Skating?
So far I’ve focused on the practical problems associated with having different evaluation scales with different weights for different purposes, but there are even more serious difficulties in wine rating scales. In economics we learn that numerical measures are either cardinal or ordinal. Cardinal measures have constant units of measurment that can be compared and manipulated mathematically with ease. Weight (measured by a scale) and length (measured in feet or meters) are cardinal measures. Every kilogram or kilometer is the same.
Ordinal measures are different – they provide only a rank ordering. If I asked you to rate three wines from your most preferred to your least favorite, for example, that would be an ordinal ranking. You and I might agree about the order (rating wines A over C over B, for example), but we might disagree about how much better A was compared to C. I might think it was a little better, but for you the difference could be profound.
To use a familiar example from sports, they give the Olympic gold medal in the long jump based upon a cardinal measure of performance (length of jump) and they give the gold medal in figure skating based upon ordinal judges’ scores, which are relative not absolute measures of performance (in the U.S. they actually call the judges’ scores “ordinals”). Figure skating ratings are controversial for the same reason wine scores are.
So what kind of judgment do we make when we taste wine — do we evaluate against an absolute standard like in the long jump or a relative one like the figure skating judges? The answer is both, but in different proportions. An expert taster will have an exact idea of what a wine should be and can rate accordingly, but you and I might only be able to rank order different wines, since our abilities to make absolute judgements aren’t well developed.
This is one reason why multi-wine social blind tasting parties almost always produce unexpected winners or favorites. The wines we like better [relative] are not always the ones we like best [absolute] when evaluated on their own.
Ordinal and cardinal are just different, like apples and oranges (or Pinot Gris and Chardonnay). Imagine what the long jump would look like if ordinal “style points” were awarded? Imagine what figure skating would look like if the jumps and throws were rated by cardinal measures distance and hang time? No, it wouldn’t be a pretty sight.
Economists are taught that it is a mistake to treat ordinal rankings as if they are cardinal rankings, but that’s what I think we wine folks do sometimes. I’ve read than Jancis Robinson, who studied Mathematics at Oxford, isn’t entirely comfortable with numeric wine ratings. Perhaps it is because she appreciates this methodological difficulty.
Lessons of the Judgment of Paris
Or maybe she’s just smart. Smart enough to know that your 18-point wine may be my 14-pointer. It’s clear that people approach wine with different tastes, tasting skills, expectations and even different taste buds, so relative rankings by one person need not be shared by others. This is true of even professional tasters, as the Judgment of Paris made clear.
The Judgment of Paris (the topic of a great book by George M. Taber – see below – and two questionable forthcoming films) was a 1976 blind tasting of French versus American wines organized (in Paris, of course) by Steven Spurrier. It became famous because a panel of French wine experts found to their surprise that American wines were as good as or even better than prestigious wines from French.
A recent article by Dennis Lindley (professor emeritus at University College London – see below) casts doubt on this conclusion, however. Read the article for the full analysis, but for now just click on the image above to see the actual scores of the 11 judges. It doesn’t take much effort to see that these experts disagreed as much as they agreed about the quality of the wines they tasted. The 1971 Mayacamas Cabernet, for example, received scores as low as 3 and 5 on a 20-point scale along with ratings as high as 12, 13 and 14. It was simultaneous undrinkable (according to a famous sommelier) and pretty darn good (according to the owner of a famous wine property). If the experts don’t agree with each other, what is the chance that you will agree with them?
Does this mean that wine critics and their rating systems are useless and should disappear? Not likely. Wine ratings are useful to consumers, who face an enormous range of choices and desperately need information, even if it is practically problematic and theoretically suspect. Wine ratings are useful commercially, too. Winemakers need to find ways to reduce consumer uncertainty and therefore increase sales and wine ratings serve that purpose.
And then, of course, there is the wine critic industry itself, which knows that ratings sell magazines and drive advertising. Wine ratings are here to stay. We just need to understand them better and use them more effectively.
Dennis V. Lindley, “Analysis of a Wine Tasting.” Journal of Wine Economics 1:1 (May 2006) 33-41.
George M. Taber, Judgment of Paris: California vs. France and the History 1976 Paris Tasting that Revolutionized Wine. Scribner, 2005.