Flashback Friday: A Rainy Day in Porto

We have been in Porto this week and so it seems right to flash back to my first visit there in 2014. It had been raining in Portugal that year. Lots of rain. For a long, long time. It was pretty wet!

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fp0621 I had one free day during my recent visit to Porto and as much as I wanted to go up the Douro to the vineyards, a torrential downpour kept me in the city. So I set out to see what sort of wine tourism experience Porto had to offer and I learned a lot. Here is my report.

Sign of The Don

There is much to see and do in Porto itself, but serious wine tourists need to cross the bridge spanning the Douro and enter Vila Nova de Gaia where the Port houses are found lined up along the river and up the hillside.

The riverside was brightly decorated — a welcome touch given the weather — and featured many of the small boats that traditionally transported the wines from the vineyard areas down to the city, where they are aged and blended and sent to market. The wines are moved by more modern means today, although there is still a gala race, with much honor to the Port house with the winning boat.

My first stop was Quinta do Noval, where I took refuge from the rain and tasted through the wines while drying out. I have to say that there cannot be a better way to warm up than this! No tour or museum or sophistical wine tourist presentation at this stop — just nice wines, friendly and well-informed staff.

My next stop was Sandeman, one of the oldest and best known Port houses. You see “The Don,” the famous Sandeman logo, everywhere in Porto. Founded in 1790 by George Sandeman, a Scottish wine merchant, Sandeman has interests both in Portugal (Port) and Spain (Sherry). The Don’s distinctive outfit pays tribute to both sides of the business — the Spanish hat paired with the cape worn by university students then and now in Porto (I saw them myself on exam day). If you thought the logo was a tribute to Zoro, think again.

Tree Ages of Port

The wine tourism experience at Sandeman begins as you enter the house, which feels and smells exactly like what it is — a great old warehouse where wines wait patiently in their barrels, often for decades, for the moment when they will be bottled and go to market. Very atmospheric, immediately communicating a sense of time and place (much like the vintage tv advertisement below).

The first stop once you’ve come through the great doors is a colorful museum dedicated to Sandeman’s great success in branding and marketing. The Don must be one of the most distinctive and instantly recognizable trademarks in wine and the museum tells the icon’s story from the first images in 1928 through the present day. It’s an art exhibit at heart, but with a commercial agenda and it is interesting to see how the images and messages evolved over the years.

Next came the tour through the big building. The young woman who guided us was dressed as The Don, of course, but she was more professor than student as she made sure, though example and strategic repetition, that we all understood the nature of the different types of Port — Vintage, LBV, Tawny and so on — how they are made and how they are best consumed. She was very skilled at bringing her students into the story.

Wine Tourism Keys

Walking through the barrel rooms was like walking back in history (which is what we were doing, I suppose), but this is a working operation not a museum and we would have seen the cellar hands going about their business if it hadn’t been Sunday. The tour ended with an opportunity to taste a couple of wines at long tables adjacent to the cellar door sales room and gift shop.

I spent some time talking with a family from Tokyo who were making a European tour and had spent three days in Porto, enjoying experiences like this. Each of the Port houses seems to tell its story in a different way, some focusing on their history, others on the production process. Many, like Sandeman and Graham’s, offer a variety of tasting experiences in addition to the basic tour. Port pairing seminars (cheese, chocolate) are popular, for example, as well as opportunities to taste Tawny Port blends of 10, 20 and 40 years or more. Something for everyone and a satisfying experience even on a sunny day, I’ll bet.

What should a wine tourism experience do? I think of wine as a relationship business and a winery or tasting room visit succeeds when it helps establish new relationships and deepen or renews existing ones. From the tourists’ point of view, it should be enjoyable and informative — and of course offer the opportunity to taste new wines or to share familiar ones with traveling companions and provide stories to tell the folks back home.

From a producer viewpoint, the goals are to get visitors to slow down and absorb the message and this of course requires that there actually be a coherent message presented (too often it seems the objective is simply to attract numbers of visitors). Cellar door sales and wine club memberships are obviously important, too, but only come if the first goals are met.

The Sandeman experience and others like it in Porto succeed from both standpoints. Certainly there was clear and coherent messaging on my tour — about both Port the category, Ports (the various types of Port wines) and the Sandeman brand in particular. (How can you miss that when your tour guide is costumed like the company logo?) When it works it really works. No wonder the major Port houses have invested so much in wine tourism as a way develop their international brands.

Little Frenchie: A Culinary Side-Trip

Soon it was lunchtime and I could not really expect to top the meal I had the day before at Vinum, the great restaurant up the hill at Graham’s, so instead I went for the distinctive meal of Porto: the Francesinha or “Little Frenchie” sandwich.

My Francesinha started with thin layers of cheese on the plate, which was topped with white bread and then roast pork, sliced ham, a bit of chorizo, more cheese, another slice of bread, more cheese, and then a thin reddish beer-based sauce (think enchilada sauce and you will be in the ballpark).

Because I apparently am not a very good judge of these things, I went over the top and ordered the deluxe version which added a fried egg and a plate of french fries. It was wonderful in the way that Canada’s famous poutaine (french fries, cheese curd, gravy) can be wonderful and I didn’t have room for anything else (except a little Port) for the rest of the day.

I had a great time, learned a lot, met some interesting people. I promise I will get to the Douro vineyards next time, but I wouldn’t miss touring the Port houses for anything. The variety of experiences available if you visit several houses provides something for everyone, from Port novice to seasoned connoisseur.

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Thanks to George Sandeman for his hospitality while I was in Porto and his help with this project. I found this YouTube video that captures a bit of the Francesinha experience. Would I eat it again? Yes, but I’d choose the traditional beer to go with it rather than the red wine I enjoyed at my riverfront restaurant, which claimed to have the best Franceshina in town.

Portuguese Wine Revisited: Respect! (What a Difference 2 Years Can Make)

April 26, 2016 By Mike Veseth in Portuguese wine, wine, wine markets 2 Comments

The next few columns with be shorter than usual because Sue and I are Portugal. I will be speaking at the 10th Alentejo Vine and Wine Symposium in Évora next week.

We are in Porto today and it is great to be back. I was here in 2014 to speak at a symposium sponsored by ACIBEV. I had a great time (look for a “Flashback Friday” about that visit) and made many friends.

I had a number of striking experiences during my 2014 visit, but one really stands out. I met with a senior executive of one of the major wine producers and he wanted to know what Portugal could do to get more respect in the world of wine — and especially in Portugal. evora1

Portugal has great history, great terroir, great wines — but that greatness isn’t always recognized, he said. He was especially dismayed that Portuguese wine was not better respected within the country. Wine is a strong economic sector in Portugal and an effective ambassador for the country abroad. How do other famous regions get the respect that we lack? What can we do to change this situation?

I did not have answers that day, but it got me thinking (which was the idea, I believe). My investigations turned into a lecture that I have given several times on the subject “Secrets of the World’s Most Respected Wine Regions.”

I don’t want to give away the secrets here, but I can tell you that just a few months after the meeting in Porto the missing respect started to show up, at least on the international stage. evora2

Portugal has received lots of great press in the last two years and the wines have earned a growing share of critical and commercial success. As the image up top indicates, three of Wine Spectator’s top four wines of 2014 were from Portugal. And, as the second image shows, Portuguese wines are winners in the U.S. market. If this isn’t a sign of respect, I don’t know what is.

How about at home in Portugal? Does the Portuguese wine industry get the respect (and favorable government policy treatment) it deserves here? I will have to learn more before answering that.

In the meantime, there is much to discuss about Portugal’s wine industry because the market is evolving. Come back next week for a follow-up column that analyzes Portugal’s shifting wine export environment is more detail.

Speaking of respect …

Restaurant Wine Lists: Are Restaurants Leaving Money on the Table?

April 19, 2016 By Mike Veseth in restaurant wine, wine, wine brands, wine price 16 Comments

wine-list-waiter Last week I wrote about the concept of the Overton Window and speculated about what it might be able to tell us about the constantly evolving wine market. This week I follow up with an interesting study that finds a kind of “Overton” effect in restaurant wine programs and suggests that many restaurants may be leaving money on the table by the way they bind themselves to a particular narrow wine “window.”

The Backstory

Briefly, the Overton Window is a concept taken from the world of political analysis. It refers to the range of public policy options that are deemed generally acceptable at any particular moment. Political success, according to this theory, is all about either embracing the window to gain public support or finding ways to shift it in the direction you favor.

Financial Times columnist Tim Hayward applied the Overton Window concept to restaurant food. He noted that many creative chefs find themselves constrained by the customer Overton Window and the need to have “safety food” options like hamburgers, simple fish and chicken dishes, etc. so that customers feel comfortable coming to the restaurant.

If you choose to ignore the window conventions, you risk losing customers and ultimately your job. Hayward speculated that the most successful chefs stick to the window, but work on the edges to express creativity without leaving their customers behind.

I had more to say about this, of course, including some comments about giant hairballs, so you might want to read last week’s column if you haven’t already done so. wine_beer

Wine Versus Beer and Spirits

The Overton Window is a new concept for me, but learning about it instantly reminded me of research that my friend James Davis did for his Master of Wine thesis, “Understanding consumer attitudes to large wine-brands as a purchasing cue in the United Kingdom (UK) multiple on-trade: a comparison of value and premium multiple outlets.”

The thesis is suitably complicated and probes many questions. I am going to simply (and probably over-simplify) and focus on just a couple of the results.

Davis wanted to understand the difference between wine programs in value restaurant chains (such as Wetherspoon’s and Harvester in the UK) and premium restaurant chains (such as Wagamama and Carluccio’s) and while he did not use the concept of the Overton Window, I think you will probably see why I think it applies.

Davis noted that when it comes to popular brands of beer and spirits, consumers expect to find them in both value and premium restaurants. The beer and spirits lists of the two types of restaurants aren’t identical by any means, but popular brands that are available in the shops are likely to be found in both types of establishments. This is consistent with the concept of staying within the consumer comfort and acceptance window.

Davis noted that the conventional wisdom is that wine is different from beer and spirits when it comes to popular brands. Widely-distributed wines like Hardy’s and Jacob’s Creek are likely to be found in the value outlets, but are not typically found in the premium segment. In other words, the restaurant wine windows are assumed to be much different. His research of the chains’ wine lists generally confirmed this finding, indicating that the restaurants treated wine a bit different from beer and spirits in terms of the types and range of brands on offer.

So, if you are following me so far, it seems that restaurants may be using their wine lists to communicate their identities (as value versus premium) more than they do with beer and spirits. Interesting, but is wine really so different from beer, spirits and food? Are the value and premium wine windows so very different? survey-says

And the Survey Says …

Davis then surveyed consumers and he found that many of them would have ordered wine at the premium restaurants if there had been a popular brand on the list. In other words, the windows in the two types of establishments may not be so distinct as conventional wisdom suggest.

Perhaps restaurant wine should be a little more like restaurant beer and spirits and not try to create its own special window? To quote from Davis’s thesis: “Premium outlets that do not list any large wine-brands are missing out on sales according to the findings of the consumer survey and also the wine-list review.”

This seems to me to be consistent with Tim Hayward’s hypothesis about restaurant food. Consumers want those safety options and you ignore them at your peril. Given that a widely available “safety wines” might be pretty popular (think Kim Crawford Marlborough Sauvignon Blanc, for example, or Mondavi Napa Fume Blanc) I am not sure about the logic of avoiding them entirely, even if you want to construct a list that probes the creative boundaries or defines an image.

How Different is Wine?

As I said before, Davis explores more topics and provides more analysis, but this is where I will stop. My purpose is simple: maybe we should re-examine what we think we know about what works best for restaurant wine.

I’m not recommending that fine dining establishments limit their wine lists to what a consumer can find a Kroger’s or Tesco, just suggesting that broadening the list to include more popular (and probably cheaper) wines that fall squarely within the generally accepted wine window might improve wine sales while making customers happy, too.

If a restaurant is willing to offer a gourmet hamburger to give nervous customers something to hold on to, maybe there should be more similar wine choices available. Many do this, of course, but sometimes it seems like all the attention is on other parts of the wine list.

I have written many case studies of different industries over the years and one thing I have found is that each sector confidently believes that it is different from the rest. And of course important differences do exist. But it is wise not to ignore potential lessons from other product categories, especially when consumers see them as part of the same experience as they are likely to consider restaurant food and beverage choices.

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A quick note about limitations. Davis’s study is obviously limited to those value and premium dining multiples that he studied in the UK and the consumers he surveyed there. Use caution in generalizing to other countries and other types of dining establishments.

Also please note (as if it isn’t obvious) that my concern here is increasing wine sales and the restaurants may be more interested in other things. Perhaps there is more profit (or faster table turnover) with beer or cocktail sales.

Flashback Friday: Malbec & Maradona

April 15, 2016 By Mike Veseth in Argentina, book reviews, wine Leave a comment

51gap2blvbgl-_sx332_bo1204203200_ Here is another Flashback Friday column in honor of Malbec World Day, which Wines of Argentina has set for Sunday, April 17. This is a book review from 2012 that links Malbec, Argentina’s signature grape variety, with Diego Maradona, one of that country’s legendary soccer stars.

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

Malbec and Maradona

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

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

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

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

Mount fills us in on the history and serious readers will appreciate the added depth this gives to the appreciation of the wines themselves. It also provides an interesting contrast to neighboring Chile and its wines, whose history is perhaps better known. But that’s only the beginning. ce1509cd596b49b050639487b3d03dcc

Lucky Survivors

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

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

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

After decades of “crisis and glory,” Mount sees a bright future for both Malbec and Argentina. Let’s hope he’s right and the Maradona moment passes. e91c4e409ca6d78d656bc85a82fa6422

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

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

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Editor’s note: The way this 2012 book review ends with the reference to a “Maradona moment” is timely because of the recent election of the Macri government. I wrote two columns on Argentina wine’s prospects for revival back in January 2016. Click here and here to read them.

Here’s a short video about Maradona.

Hamburgers, Hairballs & Cabernet (Oh My!): Opening Wine’s Overton Window

April 12, 2016 By Mike Veseth in wine, wine brands, wine markets 3 Comments

I started thinking about the Overton Window for wine after reading Tim Hayward’s “Food for Thought” column in the Financial Times a few weeks ago (“The steak-and-chips straitjacket” March 26, 2016). Hayward was talking about food but I can’t help thinking about wine.

The Overton Window is a political concept named for think-tank guru Joseph P. Overton (it is also apparently the title of a 2010 political novel by Glenn Beck).

The idea is that at any given time there are policies that the general public finds acceptable and politicians and policy-makers who work within this window will find more success than those on the outside. The window shifts over time as conditions and attitudes change either on their own or in response to the work of political philosophers or entrepreneurs.

Creative Tension

Hayward clearly likes the analytical framework that the Overton Window provides (once you first learn about it, he says, it’s hard to stop thinking in these terms) and his FT column attempts to apply it to the restaurant scene. Many fine dining restaurants like to define themselves by their creativity, he writes, but they risk straying outside their customers’ Overton Window. It’s a difficult situation.

Add a fancy hamburger or steak-and-chips to the menu, he says, and you’ll make your customers very happy because they will know that they can always find something to eat. But will you lose your identity in the process and become just another place with good steak and chips? But, on the other hand, can you afford to ignore the economic benefits of providing widely popular “safety” options?

Hayward knows the British restaurant scene very well and he argues that the Overton Window has broadened quite a lot over the years, which has made it possible for creative chefs to provide a wider range of interesting foods. A good thing!

But he reminds us that the window’s “straitjacket” still holds. Wander too far outside its constraints (without that hamburger or other “safety dishes” to anchor you) and you risk being a critical success but a market failure. The most successful chefs, he argues, don’t think “outside the box” (to mix metaphors, but you get the idea), but rather work at the edges of what is generally acceptable, keeping creativity alive if contained.

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Like a Giant Hairball?

Hayward’s analysis reminds we of one of my favorite management books, Orbiting the Giant Hairball by Gordon MacKenzie. For MacKenzie, corporate bureaucracy, which defines acceptable policy, is a giant hairball and if you don’t fight against its gravitational pull you will be sucked into mediocrity.

But you need that pull to anchor you. Without the hairball and the discipline it imposes, creative people fly off into the cold reaches of outer space (and chefs, I suppose, fly off to bankruptcy court).

The trick, MacKenzie concludes, it to strike just the right balance and to orbit the hairball rather than zooming off into space or crashing into the hairball’s oily net. I think we all know people who suffered the two sad polar fates as well as some lucky ones who got the orbit balance just right, which I guess is equivalent to working happily and profitably around the edges of the window.

Windows and Hairballs in Action

My purpose in talking about windows and hairballs is to try to apply these flexible concepts to wine much as Tim Hayward has done for food. But before I go there it is necessary to circle back to base a bit. The Overton Window was conceived as a political idea and MacKenzie’s hairball was all about business in particular and organizations generally. Before we apply these concepts to wine, we should ask if they still apply on their home turf?

The political climate here in the United States is chaotic, with challenges from the left (Bernie Sanders), the right (Ted Cruz) and … well, where exactly is Donald Trump coming from? Has the Overton Window of acceptable ideas expanded (as Hayward suggests at one point in his column) to include all of this, which amounts to nearly everything? That’s not a window, it’s more like an amphitheater!

Or maybe the problem is that the population has fragmented and there is no single window any more, but rather a mosaic of windows that don’t really connect. Switching frameworks, has the hairball just lost some mass, so that the orbits are wider and more eratic? Or has it collapsed leaving us lost in space?

Isn’t This Supposed to Be About Wine?

Hayward is interested in how and why the restaurant menu Overton Window has expanded and why some previously exotic items are now clearly in the frame (think sushi, kimchi and kale) while others remain locked out (he cites cerviche, for example). We could ask the same sort of questions about wine. I know that Riesling fans always wonder when a broader audience will discover their favorite wine and move it more toward the center of the window.

Another application would be to look at the choices that wine shops and supermarket wine managers make when they decide which wines to stock and which to leave off the shelves. Some store selections are very conservative, sticking to the most widely purchased SKUs from the best-known makers, while others push the edges a bit.

Perhaps wine stores that go bust are, like Hayward’s über-creative chefs, guilty of pushing too far outside of the window, leaving their customers with an inadequate supply of “safety wines?”

But, inspired by Hayward’s analysis of create chefs and their steak-and-chips dilemma, I am particularly interested in thinking about restaurant wine and the choices restaurants make in compiling their wine menus. Come back next week for some interesting analysis.

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I couldn’t find a cool image of an Overton Window for wine, so I used this photo of the Berry Brothers & Rudd window in London when it was decorated with giant corks.This is a memorable image and a reminder that Berry Brothers must understand wine’s Overton Window very well to have stayed in business in their iconic shop at 3 St James’s Street since 1698.

Restaurant Wine Prices: They’re Either Too High or Too Low

April 5, 2016 By Mike Veseth in restaurant wine, wine, wine price 22 Comments

homskrim The final panel discussion at this year’s Professional Wine Writers’ Symposium in the Napa Valley was devoted to restaurant wine lists (students from the Culinary Institute of America’s wine program attended along with the wine writers). “Wine List: Friend or Foe?” was the topic and New York Times critic Eric Asimov was the moderator.

Bottle Shock

There was a lot to talk about because everyone seems to have an opinion or a pet peeve about restaurant wine, but time was limited and when I saw one of the panelists, Andrea Robinson, shortly after she smiled and struck a “wine economist” chord: “I wish we could have talked about price elasticity of demand,” she said.

Price elasticity of demand? Yes! That is how we economists talk about how consumers respond to the prices of different products and it is a fascinating question when it comes to restaurant wine.

The wine world knows Andrea Robinson as a Master Sommelier, wine book author, television presenter and former dean of the French Culinary Institute, but I know her as a keen student of economics and she and I are conspiring to organize an occasional series of Wine Economist columns that explore the fascinating issue of restaurant wines and their prices, which actually began a couple of weeks ago with my piece on “Restaurant Wine Wars and the Curse of the Second Cheapest Wine.”

Warning: Economics Content

You probably studied price elasticity of demand in your Econ 101 class, but in case you are a little rusty about the concept, here is a quick review. Price elasticity of demand is a measure of how responsive a product’s buyers are to changes in price. If the demand is elastic, then a relatively small change in price results in a proportionately greater change in quantity purchased. If the demand is inelastic, on the other hand, that same change in price produces a proportionately smaller change in quantity purchased.

The difference between elastic and inelastic demand is very important, especially when it comes to something like wine in restaurants. If the demand for wine-by-the-glass in your bistro is elastic,for example, then lowering the price results in a big enough boost in sales to increase wine revenues. Money from new purchases more than offsets the revenue lost from lower price on the wine you would have sold at the old price. Does that make sense? So lowering price increases wine revenue if the demand is elastic.

If the demand is inelastic, however, then cutting price is a revenue-losing proposition. The small increase in additional sales is more than offset by the money you lose due to lower per unit revenue on existing sales. You would need to raise price (if the competitive environment allows) to increase total revenue.

Oversimplified bottom line: all else being equal lower prices are worth exploring if the demand is elastic, but higher prices may be a better choice if there is an inelastic demand.

They’re Either Too High …

What is the right strategy for restaurant wine? Are wine prices too high as many consumers complain? Or are they too low? This is a surprisingly complicated question if only because there are so many different types of restaurants in different market environments and competitive situations and of course so many wines to choose from, too.

The case is very far from the economist’s ideal of perfect competition. Finding the sweet spot where both diner and restaurant benefit is necessarily pretty difficult and with alcohol revenues so important to restaurant bottom lines, making a strategic error could be costly.

Restaurants are right to worry that they leave money on the table if they price too low, but they should also be concerned about lost customers and sales if prices are too high. If I go to a restaurant and there are bottles of wine on just about every table, I have to think that the wine program is doing something right.

If you ask consumers about restaurant wine prices, most complain about high mark ups. The rule of thumb, for example, is that a glass of wine in a restaurant is priced at the wholesale price of the entire bottle — this strikes many diners as excessive. And the mark-up on bottle wine can be very high, indeed, compared with retail prices.

Or Not High Enough?

But sometimes the problem is that the price isn’t high enough. I visited a local brewpub a few weeks ago where a well-known local chef was making his famous spaghetti sauce for a limited time. The deep red sauce called out for a red wine, so that’s what I asked for even thought my only choice was the seldom-ordered house wine.

It wasn’t an exceptional wine, but it was better than my other choices for that particular meal and when I got the bill I discovered the wine’s cost: $4.75. Gosh, I haven’t paid that little for a glass of wine in years!

At that price there was no way I was going to get the pairing the pasta called out for. If only they’d brought in some better wines and raised the price! I would buy more wine at the higher price (assuming the higher quality, of course) and dine there more often, too.

The Bargain Wine Curse

This isn’t the only situation I’ve encountered where the wine price isn’t high enough. I spoke at a symposium about Italian wine last year and one session featured a group of sommeliers from high end New York restaurants talking about their trade. One of the panelists explained his job as follows.

The people who come to my famous restaurant, he said, want to have a good time and they want to spend a lot of money on wine. Spending a lot of money on a bottle of wine is part of the luxury dining experience they come for. My role is to make sure that we have a lot of very expensive wines for them to buy. No kidding. That’s what he said and when I thought about it, I decided he might be right for his specific restaurant and its high-roller customers.

The particular focus of the symposium was on wines from the South of Italy and at one point I asked the sommeliers how these wineries could be more successful in the restaurant space? If I was at a winemaking conference I think I would have got an answer about viticulture and winemaking practices and if it was a wine marketing meeting the answer would have looked at branding and positioning.

But instead the answer from one of the somm’s was quite different. If they want to get wine in my restaurant, they have to do something to make it more expensive. Most of the wines are inexpensive and my customers want to spend more than that on wine.

Wow. I guess this explains why the restaurant reviews in the Times sometimes make a note when a wine list features a number of affordable wines, where affordable sometimes means $100 or less depending upon the type of restaurant! Do you suppose there are some diners who avoid restaurants with relatively affordable wines?

It’s Complicated

And so, as the subtitle of my last book suggested, it’s complicated and this is the first in an irregular series of columns that will explore different sides of the wine price question. As you can see, it is not just a question of wine mark-ups but also an issue of which wines are on the menu, since some choices are by their nature cheaper or more expensive.

With Andrea’s encouragement, I am going to put together a couple of columns that look at restaurant wine prices in theory and in practice and report on interesting research done by a Master of Wine.

I would like to test the hypothesis that under certain circumstances a restaurant will benefit from lowering its wine prices either by reducing the mark-up or by intentionally including types of wines that are less expensive (from less famous regions, for example — see Jancis Robinson’s FT column on under-rated wine regions).

I am reaching out to Wine Economist readers for help. I am looking for real world evidence about the impact of different wine price strategies. Can you suggest “natural experiments” that can shed light on this question? Or do you have relevant personal experience as a sommelier, restaurant owner or wine consumer that you’d be willing to share? If so, then please use the comments section below.

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Too high or too low? That reminds me of a tune from the 1940s. Enjoy!

Craft Wine? Craft Beer’s Innovation Edge (and What Wine Can Do About It)

March 29, 2016 By Mike Veseth in brands, extreme wine, wine, wine markets 15 Comments

battle People in the wine business tend to look at each other and see rivals like in the old Mad Magazine Spy vs Spy comic strip. In the battle for shelf space, consumer attention or critical praise, it usually seems like it is wine versus wine.

But hardly anyone lives by wine alone and these days the biggest competition is often less from other wineries (or wine regions) than from other products like craft beer, craft cider and craft spirits that have captured consumer imaginations. The battle for shelf space is real, but its not the only battle.

Keys to Craft Beer’s Success

Craft beer in particular has enjoyed great success in recent years and many of us see the unexpected fall in demand for wines priced at $8 per bottle and below here in the United States as one consequence of the craft beer boom.

Craft beer has many advantages. The margins can be great, for example, and you are not limited to one vintage per year. You can crank out new batches every week or so and it is possible and even desirable to experiment with seasonal recipes or riffs on classic styles from around the world.

Innovation is hot on the craft beer aisle, with literally dozens of different styles, blends and mixes that are constantly rotating in and out of the market. It is kind of fascinating. Wine comes in a world of assorted grapes and styles, too, but innovation tends to take the form of unusual wine brands or packaging, for example, more than experimental products.

Rocky Wine: Don’t try this at home!

Jamie Goode wrote about the time that Randall Grahm experimented with adding “minerality” to his wine by tossing some rocks to the barrels. There was an interesting effect, Grahm said. The stones added “far more complexity and greater persistence on the palate.” But the health department shut the operation down.

Winemakers are like brew-masters in that both groups are constantly experimenting and trying new things, although not all of them are as extreme as Randall Grahm’s rocky vintage. The brew industry seems to be more open to the commercialization of these products.

Maybe wine can bring more of these experiments to market in small or large lots to add another layer of complexity and interest? Well, what about the barrels themselves? Barrels come in many types and are used in a variety of ways in wine.There is a history of product and process innovation both with barrels (think Gaia in Piemonte) and without them (the current popularity of unoaked Chardonnay).

Barrels are a source of innovative inspiration in other parts of the beverage market. I have seen oak-aged ales and ciders and I have seen spirits that were aged in sherry barrels, for example. Working with barrels has always been a legitimate if sometimes controversial variation on wine tradition. Maybe we can do more with them?

Jacob’s Creek Experiments cab

Jacob’s Creek, the Australian winery that is part of the Pernod Ricard empire, has released two new wines that explore this notion. They are called Double Barrel Cabernet Sauvignon and Double Barrel Shiraz. The wines are first aged in traditional oak and then they get a relatively brief second aging in used spirits barrels — Irish whiskey for the Cab and Scotch whisky for the Shiraz.

The idea isn’t to make the wine taste like booze — if you want to taste whiskey (or whisky) the obvious thing to do is to taste whiskey (or whisky) — but as with oak barrels in general, you use them to see what subtle influences they bring to the finished product.

Sue and I were invited to participate in an experiment with these wines and so we received bottles of the two Double Barrel wines plus samples of each wine before the whiskey barrel treatment. We sampled the wines last week with Jacob’s Creek winemaker Ben Bryant via video link-up.

It was interesting to compare the “before” and “after” wines. The “after” Cab (made from grapes sourced from Coonawarra) was richer on the palate than the “before” wine — the biggest difference was more texture than flavor. The delicious Barossa Shiraz was more dramatically transformed and our clear favorite of the two (I think the Cab simply needs to age a bit longer and both wines were probably still a bit shaken up from shipping). I thought I could detect a subtle Scotch whisky influence in the Shiraz, but I suspect that was the power of suggestion. In any case it was an interesting experience. shiraz

“I thought this might be just a gimmick,” Sue remarked when we were finished with the tasting. But she concluded that the whiskey/whisky barrel aging did make the wines more interesting and different without fundamentally altering their identities. Something new — which is just what many (but not all) wine consumers are looking for.

The Next Big Thing?

So are whiskey barrels the next big thing in wine? Should you rush to try to corner the market on used Bourbon barrels just in case? (Too late — Fetzer makes a Bourbon barrel-aged Zinfandel called 1000 Stories.)

No. But these wines are an interesting addition to the menu, don’t you think? I see them as a thoughtful attempt to experiment within the tradition of wine much as the craft beer producers have been doing in their space.

Winemakers have long experimented in the privacy of their cellars and labs. Barrel tasting with a winemaker never fails to uncover something out of the ordinary. It would be interesting to see more of these products reach the market for us to try and to provide wine with an even more dynamic presence.

I guess I am calling for the broader commercialization of what you might call “craft wine.” Fresh ideas, small lots, variations on the traditional themes but with some added flair. Not for everyone, that’s for sure, but the craft beer and spirits boom shows that there are many consumers who are interested in a more dynamic concept and some of them are being drawn away from wine.

Beer has made an effort to learn some of the secrets of wine’s strong appeal. I think those of us on planet wine should return the compliment. Done thoughtfully, innovations like Jacob’s Creek Double Barrel can help wine compete with beer for the palates and pocketbooks of today’s consumers — and do it without undermining the fundamental idea of wine.

Craft Beer Raises the Stakes: PicoBrew

There is even more competition coming from the craft beer world! Earlier on the same day as the Double Barrel tasting I attended a presentation by Bill Mitchell, the CEO of a start-up company called PicoBrew, and angel investor Karl Leaverton. gfc_pico_productimage_1

PicoBrew uses advanced technology to allow home brew-masters to create their own professional-quality craft beers, either using their own recipes or those provided by other users or famous craft breweries. Quality, precision and control are selling points, but so is convenience — the magic happens in a sleek web-enabled counter-top brewing appliance. Wow.

But making distinctive beer is only part of the attraction. PicoBrew uses the web and social media tools to allow home brewers to share their discoveries and their stories. Seems to me that the sort of person who would have a geeky interest in fine wine might fall in love with the advanced DIY possibilities of this product.

Beer has made big strides from the bad old days of the 1970s. Cider has surged and craft spirits are very hot. Wine, as I have written before, needs to up its game to compete in this dynamic market environment, but do it without sacrificing the fundamentals that make wine so special.

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Thanks to Jacobs Creek and Vanessa Dones at the thomas collective for inviting us to participate in this web wine tasting event.

Simply Irresistible? “Second-Cheapest” Restaurant Wine in Theory & Practice

March 22, 2016 By Mike Veseth in restaurant wine, wine, wine price 2 Comments

second Last week I wrote about the theory that you should always order the second-cheapest wine on a restaurant’s list. The second-cheapest wine rule as it is usually explained, is a naive application of game theory to the problem of ordering restaurant wine.

The premise is that the restaurant is trying to gouge its wine-drinking customers and that it does this by putting incredibly high mark-ups on the cheapest wine on the list. Diners are drawn to the cheapest wine because of the high general level of wine prices, the theory goes, and so the restaurant rakes in the dough when diners opt for the least expensive bottle.

So where does the second-cheapest wine theory come in? Well, since you are smart and know that the cheapest wine is a rip-off, you can “stick it to the man” by ordering the second-cheapest wine instead. Second-cheapest wine — the sweet spot in every wine list!

Game Theory in Circles

Now there is a lot that is problematic with this scenario, beginning with the premise (see below), but the game theory is bad, too. It implicitly assumes that restaurants are ignorant of the second-cheapest theory, which they obviously are not, and do not adopt a counter-strategy, which they probably would.

If an evil restaurant wine manager knows the theory and wants to rip you off, he or she can manipulate the situation by simply raising the mark-up on the second-cheapest wine, making it the worst deal of the list. It’s tit for tat, as they say in game theory (economics note: there really is a non-cooperative “prisoner dilemma” game theory strategy called “tit for tat.”)

Your logical response, I suppose, would be to shift to the third-cheapest wine since the second-cheapest is now a loser. But once the restaurant figures out your new strategy you will need to move up a notch again to avoid being ripped off. Play this out ad nauseum and you arrive at ultimate ridiculous rule-of-thumb: always buy the most expensive wine on the list. tumblr_lrp6a2atud1qmxjbzo1_400

And once the evil restaurant masterminds figure that out, your only recourse is obvious — buy the cheapest wine! (Or maybe just buy a beer.) That’s the problem with these rules of thumb — they sometimes lead you in circles until your head spins.

More Than One Way to Play That Game!

The real problem with the second-cheapest rule is the premise — that the restaurant is always out to gouge you. Megan Krigbaum at Punch published an empirical investigation of second-cheapest by-the-glass wines at New York restaurants a couple of days after my column went live last week and she found several sommeliers who play the game by a different set of rules.

These restaurants want to get their diners to try interesting wines that will bring them back again and again and so they price them on the low side to induce otherwise cautious diners to sample them. Sometimes they even intentionally make them the second-cheapest wine because they think some of their customers won’t be able to resist the bait and will be rewarded with a very pleasant surprise.

Does this prove that the second-cheapest rule is valid — always buy the second-cheapest wine? Well, it shows that sometimes it will get you a nice wine at a restaurant that wants you to have a great experience and come back for more. And, to be honest, you probably don’t need a rule-of-thumb to have a great wine experience at a restaurant like that!

An Alternative Strategy

I have a one-word rule of thumb when it comes to restaurant wine: communicate. When in doubt, start a conversation. Talk about what you’d like to eat, like to drink, prefer to pay and challenge your server or sommelier to help find the right wine.

Some people don’t like to do this because they fear it shows their ignorance. They are the same people who won’t ask for directions when they get lost, I suppose.

The conversation strategy doesn’t always work — sometimes it will get you an up-sell pitch or expose a server’s lack of wine knowledge — but it strikes me as a better opening gambit than any price-based rule.

What’s the best way to talk with a sommelier? Read this article by Carson Demmond in the current issue of Food & Wine for some ideas.

Restaurant Wine Wars and The Curse of the Second-Cheapest Wine

March 15, 2016 By Mike Veseth in restaurant wine, wine, wine price 10 Comments

Edmund Osterland, M.S. Wine & the Bottom Line. Washington DC: National Restaurant Association, 1980.

Yes, that is a $100 bill that the corkscrew is drawing carefully from a bottle of wine in the illustration. It is the cover of a book that Master Sommelier Edmund Osterland wrote back in 1980 for the National Restaurant Association.

It was billed as a restaurant training manual, but it is really best seen as a manifesto written by someone who loves wine and who wants to see restaurants sell more wine and their customers drink more wine. Even today more than 35 years later it makes informative reading.

The message, as if you couldn’t guess, is that there are big bucks in restaurant wine if you do it right. But how?

Restaurant Wars

I found Osterland’s guide when I was writing my most recent book Money, Taste and Wine: It’s Complicated and Osterland’s manifesto became the inspiration for a chapter called “Restaurant Wars.” That title in turn was inspired by the Bravo network television series Top Chef.

There are many tense moments on Top Chef, a “reality” show where groups of talented culinary professionals compete in various elimination trials in order for one of them to emerge as the king of the kitchen hill. Perhaps the most stressful Top Chef episode of each season is a team competition called Restaurant Wars.

Randomly chosen teams of the surviving chefs must work together to open a pop-up restaurant for one night. They have to choose the restaurant’s name, the menu, decorate the space, purchase all of the glasses, dishes, and serving gear, train the wait staff and work the house. Oh, and they must purchase and prepare the food as well. The diners and judges compare the two teams’ results and pick a winner.

No one on the wining team can be eliminated, but someone on the losing team must go home, dreams in tatters. The trick to surviving the Restaurant Wars is not to be on the losing team and that means working together with the very people who you fear are trying to throw you under the bus. Easier said than done, which is why this is the episode that viewers love and the would-be Top Chefs hate.

Restaurant Wine Wars

Top Chef‘s Restaurant Wars have something in common with the wine experience in some restaurants. War is Hell we are told and Wall Street Journal columnist Dan Ariely says that restaurant wine is hellish combat. “The first thing to realize when picking from a wine list is that you are in a battlefield. This is a battle for your wallet—a fight between the restaurant, whose interest is to get as much of your money as possible right now, and your savings account.”

And it’s not an even playing field, either, Ariely says. “The restaurant’s owners have much more data than you do about how people make their wine decisions, and they also get to set up the menu in a way that gives them the upper hand.”

Osterland’s book was written to try to shift the combat from a wallet war to one where diner and restaurant work together to defeat the common enemies that keep them from having that enjoyable and profitable wine experience that both clearly desire. The fact that many still think of it as a fight over the bill all these years later shows that, while much has changed in the restaurant wine scene since 1980, much work remains.

Some of the advice could have been written yesterday. “Better informed, and with well-defined tastes, these “new “ consumers of the 1980s will also be very definitely interested in GETTING VALUE FOR THEIR MONEY.” The caps are in the original, which suggests that Osterland thought he needed to shout to get his readers’ attention. “Because they will be vastly more knowledgeable about wine, they will know the approximate costs of varying wines … [t]hey will want to shop for the better values.”That paragraph has a contemporary ring to it, don’t you think?

“For the first time you will experience customers who enter your restaurant and ask to see the wine list before the menu. … YOU MUST MAKE WINE A MAJOR PROFIT CENTER.” Okay, okay – you don’t have to yell. But how?

Bluffer’s Guide to the Second-Cheapest

Osterland called for improved wine knowledge among diners and restaurant staff and a lot of progress has been made here on both sides but much work remains. A WSET survey of British diners, for example, found that almost 20 percent of respondents said they generally bluffed their way through the process of ordering wine. They pretend to study the wine list, they said, and then carefully pick out the second-cheapest bottle.

This “second-cheapest wine” rule of thumb is not limited to just the British, of course, but I was amused when it showed up during a recent trip to London. Our waiter was obviously a bit impatient with the time we were taking ordering wine and so he just cut to the chase. “Why don’t you just order this one,” he advised. “It’s the second-cheapest.” Of course!

Why are diners so timid that they fall back on amateur bluffs and second hand rules of thumb? Wine can be complicated and intimidating, of course, but there is also the price issue to consider.

Perhaps the most radical part of Osterland’s manifesto was his plea for lower wine mark-ups, which he saw as a way to sell that elusive and profitable second bottle of wine to a party that might otherwise nurse the first bottle all night (or not buy any wine at all).

A General Principle?

More bottles, more regular diners, more money. That was Osterland’s message then and it is a message to consider today. Are restaurants leaving money on the table because diners don’t put more wine bottles there due to high prices?

There may be specific cases where the second-cheapest wine rule works, I suppose, but it fails as a general principle. Are lower restaurant wine prices a good general rule, as Osterland proposed? Or are there specific conditions necessary for success? More to follow.

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Read this article to understand why you shouldn’t order the second cheapest wine, then look at this video to understand why people do.

Book Review: Riesling Rediscovered

March 8, 2016 By Mike Veseth in book reviews, globalization, Riesling, wine 10 Comments

John Winthrop Haeger, Riesling Rediscovered: Bold, Bright, and Dry. University of California Press, 2016.

John Winthrop Haeger’s new book is a worthy addition to a growing bookshelf on Riesling wines, including Stuart Pigott’s recent Riesling: Best White Wine on Earth. It is a thorough, rigorous and quite fascinating analysis of Riesling’s world, focusing on dry Riesling production in the Northern Hemisphere.

How Riesling Is Like Bach

Dry Riesling reminds me of J.S. Bach. Both Bach and Riesling are clean and precise without sacrificing a certain deep emotional engagement. And both invite serious study. If you enjoy Riesling (or Bach?) and have a nerdy interest in where it comes from, how it is made, and who is making it, this book is for you.

Riesling Rediscovered is split into two sections, but not Old World and New World as you might expect. The second half is a detailed examination of some of the main Riesling vineyards and producers in Germany, Austria, France (Alsace), Italy (Alto Adige), Canada (Ontario and British Columbia), and the United States (Washington, Oregon, and California).

These profiles, the result of extensive on-site research, are unusually detailed and informative — perfect for the reader who wants to drill down into a particular region or maker’s story.

The book’s first half provides a rather elegant examination of the Riesling experience, with chapter-length analyses of history, sweet and dry wine styles, production methods, the importance of clones, and Riesling habitats in the Old World and the New.

The Sweet and the Dry

At the center of the book are several interesting issues. The first involves style. When you say Riesling to people they will often respond quickly that it is sweet and indeed for many decades Riesling was known and even treasured for its sweetness. Spectacular sweet Rieslings were at one point the most valuable and sought after wines in the world.

And then things began to change, even in Germany and Austria. Now it is the case that most Riesling wines around the world are dry and sweet Riesling is the exception. The rediscovery of Riesling as an elegant dry wine is one of the book’s important points.

Riesling’s reputation for sweetness, however, has been slower to change than the wines themselves, which is a problem for those who would like to see this wine’s domain expand. Consumers are too often surprised that what they pour from the bottle doesn’t match their expectations — either “too sweet” if they expect a dry wine or “too sour” if they expect something sweet.

The United States is a special case in this regard. The U.S. is not just the largest wine market in the world by total sales, it is also an important actor in Riesling. The U.S. is the second largest Riesling producer by volume after Germany, for example, and it is also home to the largest-selling Riesling wine in the world.

That would be Chateau Ste Michelle’s Columbia Valley Riesling from Washington State, which may also be one of the world’s great Riesling bargains. I have sometimes purchased this wine for less than $6 per bottle, a ridiculously low price given the quality.

Wine drinkers in the United States made the move away from sweet and fortified wines surprisingly late, but today by and large they prefer dry wines (the recent Moscato and Sweet Red phenomena notwithstanding). When it comes to Riesling, however, they talk dry but like to drink on the sweet (or “off dry”) side. Chateau Ste Michelle’s off-dry Columbia Valley wine vastly outsells its Dry Riesling twin.

And so the U.S. is the odd one out in world Riesling, according to Haeger — the last line of resistance in the movement from sweet to dry.The rediscovery of Riesling as a dry wine is still gaining momentum here.

Elephant in the Room?

I enjoyed Riesling Rediscovered quite a lot and learned something new on every page. I look forward to diving into the details again and again in the years ahead. But as big and tightly packed as this book is, the world of Riesling is bigger still. It obviously isn’t possible analyze every important vineyard or producer in the world (the vast Wine Atlas of Germany, which appeared in 2014, shows how complicated this is for just a single country).

But the biggest omission — the elephant in the room — is the entire Southern Hemisphere. Any list of the most important dry Rieslings would surely include wines from Australia, for example, along with some from New Zealand, Argentina, Chile and South Africa. Australia does not even appear in Haeger’s index. Pewsey Vale Museum Reserve “The Contours,” one of my desert island wines, is nowhere to be found.

The reason is purely practical, Haeger explains — no disrespect intended! The world of Riesling is gloriously big and growing. Any single study has to draw the line somewhere and Haeger needed to do so here to finish this book in just five years. Haeger chooses depth over geographical breadth and that’s understandable. But I hope he has a second volume in the works!