Has U.S. Wine Industry Consolidation Gone Too Far?

February 8, 2022 By Mike Veseth in Unified Wine & Grape Symposium, wine, wine brands, wine markets 4 Comments

Is the U.S. wine industry becoming too concentrated, with just a few big firms dominating the marketplace? That, more or less, was one of the questions we were asked at the press conference that followed the annual “State of the Industry” session at last month’s Unified Wine & Grape Symposium in Sacramento, California. How would you answer this question?

The query was prompted in part by Mario Zepponi’s excellent presentation about merger and acquisition activity in the wine industry in 2021. Mario is principal at Zepponi & Company, a firm that advises winery and vineyard M&A clients and was very busy indeed last year, when a number of large (for the wine industry) deals were concluded.

How concentrated has the U.S. wine industry become? How competitive is the wine marketplace? The answer you get depends in part on how you look at the data. Wine Business Monthly (which sponsored the State of the Industry session again this year) publishes a report on the U.S. wine industry early in each new year which is required reading. This year’s report appears in the current March 2022 edition, which can be accessed online.

U.S. Wine By the Numbers

Judging by the number of firms competing for retail shelf and restaurant wine list space, the U.S. market is very competitive indeed. For perspective, consider that the WBM report for 2014 found 8,287 U.S. wine producers in total, 3913 in California, 734 in Washington State, 632 in Oregon and the rest distributed across the country. Mississippi was at the bottom of the league table with just two wineries.

Zoom ahead to the just-published WBM report for 2021 and the numbers have jumped. The U.S. winery count rose by 36% in the intervening years, with 11,300 wine producers in total. California again leads the way with 4804 wineries, Oregon comes second with 877, followed by Washington with 875. Mississippi’s winery count increased to six. The Other Washington — Washington DC — is last with two wine producers.

Looking at the data this way, the U.S. wine industry is very competitive, with amazing growth in number of wine producers for such a brief period of time. The increase in winery count in 2021 was slower than in 2020, WBM reports, but that’s not a surprise given the covid and economic conditions we have experienced.

The U.S. market is actually more competitive than these numbers suggest because imports account for about a third of U.S. wine sales, so thousands of international brands are also vying for buyer attention.

Top of the Table Concentration

But number of competitors is not the only factor to consider when assessing industry competition. Market power matters a great deal and the U.S. wine industry features a number of very large players. WBM reported on the top 30 companies in 2014 and the top 50 companies in 2021 along with the lineup from the first report in 2003 and the lists make interesting reading.

The top five producers, ranked by volume of sales, in the very first WBM report in 2003 were as follows: E&J Gallo Winery, Constellation Brands, The Wine Group, Beringer-Blass Wine Estates (now Treasury Wine Estates), and Bronco Wine Company (followed by Mondavi — now part of Constellation — and Trinchero Family Estates).

The 2014 report produced this list: E&J Gallo Winery, The Wine Group, Constellation Brands, Bronco Wine Company, and Trinchero (followed by Treasury and Ste Michelle Wine Estates). The current (2021) line-up is: E&J Gallo, The Wine Group, Trinchero, Delicato Family Wines, and Constellation Brands (followed by Treasury and Bronco).

I think you would have to conclude that the top of the U.S. wine table has been very stable, with a good deal of the movement due to transactions within the industry such as Constellation’s acquisition of Mondavi and more recently its sale of many brands to Gallo and The Wine Group. The steady rise of Trinchero (think Sutter Home, Menage a Trois among other brands) and Delicato (Bota Box, of course, and now also the Francis Ford Coppola Winery) is noteworthy.

The 50 largest wine companies (out of the 11,000 total) account the vast majority of sales volume for domestic wines (not counting the imports) and it is easy to see why because firm size is very large. JUSTIN Vineyards and Winery is #50 in the 2021 table but still produces a very substantial 339,000 cases of wine each year. Gallo is at the top of table with a WBM-estimated 100 million case annual wine output. That’s 1.2 billion bottles. Incredible!

It is interesting to look at how production measured by volume of the top three largest wineries has evolved over the years reported here. In 2014, for example, the big 3 totaled over 187 million cases (not bottles) of wine (Gallo 80 million, The Wine Group 57.5 million, Constellation 50 million). The Big 3 total for 2021 is actually bit less: Gallo 100 million + The Wine Group 51 million + Trinchero 20 million = 171 million total. That is less than in 2014, which could be due to a number of factors including, as I have heard some insider’s comment, a lack of investment in some of the brands involved in the Constellation-Gallo transaction during the long regulatory approval process.

If we assume that the total U.S. wine market was about 450 million cases in 2021, then the Big 3 accounted for about 38% of sales by volume. If imports accounted for a third of total sales, then the Big 3 alone were responsible for 57% of domestic-produced wine sales by volume.

The biggest wine companies are really, really big, but some of the market power has shifted down the line. The 30th largest wine company in 2014 (out of the 30 listed), for example, was Purple Wine Company, which produced 415,000 cases. Number 30 in 2021 is Firstleaf at 700,000 cases. Firstleaf is a direct-to-consumer operation founded in 2016 with more than 75 brands in its portfolio.

What’s Driving Consolidation?

Big is in for U.S. wine and a lot of the bulking-up is taking place in the tiers below the Big 3. What’s driving it? Mario Zepponi presented an interesting perspective in our State of the Industry session. He argued that you have to put wine production in the context of its linkages in the product chain.

A lot of wine is sold in grocery stores, for example, and the top 5 U.S. grocery companies account for about half of total revenues in that sector. Big store chains, with their thousands of assorted SKUs, tend to prefer to work with a small number of distributors in each product segment if possible. So maybe it is no surprise that the top 3 wine distributors account for about 65% of revenues according to Zepponi’s data. Connect the dots here and it is easy to see why distributors might favor large wine companies with broad portfolios.

Big favors big, which favors big. Evolutionary forces point towards increased concentration, even in an industry as fragmented in some ways as wine.

To a certain extent, then, wine consolidation is the result of a process (accelerated by the covid channel shifts) that is affecting retail more generally. Consolidation, in this view, starts at the retail level and works its way backwards.

So has U.S. wine industry consolidation gone too far? It depends upon how you look at it and where you are positioned within the industry — in the Big 3 tier, the broader top 50, or further down the pyramid. And maybe the question should start higher up the food chain with consolidation at the retail and distributor levels. The market sure is competitive even if market power is concentrated at several points.

It is, I am afraid, one of those annoying “on the one hand …” situations that provoked President Harry Truman to ask for someone to send him a one-handed economist.

>>><<<

Thanks to Cyril Penn and his Wine Business Monthly team for the 2022 edition of their wine industry report. A very valuable resource for anyone interested in U.S. wine market dynamics.

Bastille Day Reflections: Libertè, Ègalitè, Rosè

July 14, 2020 By Mike Veseth in wine, wine brands, wine markets 3 Comments

Today is July 14, France’s national day — Bastille Day — and it is a good moment to consider Rosè and the democratization of French wine and wine in general.

One thing that I like about Rosè is that is symbolizes to a certain degree the classic values of freedom (libertè) and equality (ègalitè). There isn’t any fixed recipe for Rosè. Winemakers have considerable liberty in choosing grapes, blends, and styles. And Rosè levels the playing field a bit, too, allowing less well-known regions to compete with the elites.

I have friends who tell me they just don’t like Rosè — and I believe them — but which Rosè offends them? There are so many different styles that it seems like there would be something for everyone. If you don’t like Rosè maybe you just haven’t tried the right one yet. Sue and I have sampled Rosè wine all around the world (see this list of global Rosè wines of note from the recent Decanter wine competition) and enjoyed pink wine’s diversity of hues, flavors, and aromas.

Libertè, ègalitè

French wines are traditionally identified by place, a practice that privileges a few elite regions and their wines. Bordeaux. Burgundy. And especially Champagne. This is not an accident. As I wrote in my book Money, Taste, and Wine: It’s Complicated, the appellation system was more or less invented by Champagne producers to protect their sparkling wines first from copycat wines produced elsewhere and then from sub-standard quality wines made at home. Only Champagne was Champagne, which consigned many first-class French sparkling wines to the third class carriage.

The famous Classification of 1855 established a pecking order for Bordeaux wines. It is not a big stretch to move to the idea that wine in general is rank-ordered, with the most famous names at the top. France has lots of different wines (even more different wines than cheeses, if that is possible), but they are not equal, at least in the marketplace.

This situation is changing. The popularity of Prosecco has weakened Champagne’s hegemony. Besides, the joyous gatherings where special corks are popped are fewer and smaller in the age of Covid-19. Bordeaux, which priced itself into irrelevance in some ciercles, has descended a bit with softer prices flowing out of this year’s unusual en primeur circus.

The Pink Wine Boom

But the biggest force in the growing democratization of French wine is Rosè. Sales of French Rosè were booming in the U.S. before the crisis and continue to be very strong. Indeed, French wine today rides on a pink wave. This is apparently true even within France, where reports suggest that pink outsells white wine in French supermarkets. Incroyable!

Yes, I know there is a hierarchy within the Rosè world. Provence is a first among unequals in the opinion of some. But even taking this into account, I think that Rosè is the wine of French democracy. What is Rosè after all? It is not a region (Rosè is made all over France and the world). It is not a grape variety, either. Rosè wines from all over France and sometimes all over the world are often displayed together in shops and supermarkets, giving humble appellations and obscure grape varieties an opportunity to compete on their own terms, which does not happen very often in the world of wine.

An Arrogant Frog?

Three wines that we received from Paul Mas illustrate these points very well. Les Domaines Paul Mas is an ambitious family wine business rooted in the South of France. Paul Mas reminds me of Jackson Family wines in California. Jackson is best know for its high-volume Kendall-Jackson wines, especially the popular Chardonnay. But when you look more closely you see a collection of focused, high quality wineries that together explore the complex possibilities of the region’s terroir.

Paul Mas is a little bit like that. You might know it best in the U.S. for its popular Arrogant Frog wines. Labels feature a snooty but suave wine-drinking, beret-wearing frog. The wines were fine when I first encountered them, as I recall, but the marketing was the thing that caught my attention. Arrogant Frog is still with us (there is a Chateau Arrogant Frog) and better than ever, but under Jean-Claude Mas’s leadership the firm has grown and focused its attention on the specific terroirs of Languedoc and Rousillion. We tasted and appreciated several of these wines when we visited Languedoc and Roussillon two years ago. So we were pleased to get the chance to focus on the pink wine portfolio.

Three Shades of Pink

We tasted three very different Paul Mas Rosè wines. The first is the Côté Mas Rosè Aurore, a blend of Grenache, Cinsault, and Syrah with the IGP Pays d’Oc designation. You get a full liter of this fun wine for about $12.99. Full of flavor, the packaging (see image above) emphasizes casual elegance and screams “picnic.” Picnics can be rustic or elegant and this wine would work either way. You would not regret opening this bottle on a warm day in the company of friends (social distanced friends, of course).

Next came Chateau Lauriga, a Syrah and Grenache blend, AOP Côtes du Roussillon, with a retail price of about $20. Lighter, more elegant, a very different take on Rosè, which is as it should be since both the blend and the terroir are different. A bit more serious, too, if you know what I mean.

We enjoyed both these wines with early summer meals, but our favorite was the Domaine Lauriga Le Gris. I’m not sure what made this wine stand out, but we just loved it. Could be the grape variety, terroir, or maybe the older vines (43 years old) made the difference. Le Gris is 100% Grenache Gris, designated IGP Côtes Catalanes. At about $14 per bottle, it sits comfortably in the Rosè market sweet spot.

A Mind of Its Own

Do you see why I associate these and other Rosè wines with libertè and ègalitè? Speaking of libertè, there’s one more Rosè wine I want to tell you about.

liberte Our friend Caro Feely (author of several excellent wine books), invited us to zoom into a virtual tasting with members of Chateau Feely‘s wine club. Chateau Feely is a biodynamic estate in Saussignac, about an hour from Bordeaux. Caro’s books document the challenges and satisfactions Caro and family experienced as they worked endless hours to make their vineyard sustainable in every sense. I recommend the books to anyone who is thinking about buying a vineyard to winery.

The subject was Rosè and the intimate internet audience was pleased to sample two of Feely’s fine Rosè wines, an experience that might have changed how they think of Saussignac, Rosè, or both. One of the wines especially caught my attention.

It is called Libertè. Made with native yeasts from Cabernet Sauvignon grapes (one of the approved varieties for Bergerac AOP), the wine exploited its freedom by taking an unusually long time to complete fermentation, thus earning its designation. It is a wine with a mind of its own. Everyone agreed that Liberty’s taste is something special.

So please raise a glass of Rosè and join me in a toast. Libertè, ègalitè, Rosè!

>>><<<

If you want to know more about Rosè you should read Elizabeth Gabay’s recent book on the pink wine revolution. Here is our review.

Two Cheers for Canned Wine

September 10, 2019 By Mike Veseth in wine, wine brands, wine markets 24 Comments

cans Canned wine has been around for a while, but has gained traction in just the last couple of years. Some observers are suspicious that it is just a fad — a flash in the pan — that won’t last for long. If that’s true, then it is an impressive flash. Canned wine sales in the off-premises channels that the Nielsen company measures were $70 million for the 52 weeks ending June 15, 2019. That’s 69% growth for the year. In a market where growth is hard to find, canned wine is a winner.

(The graph above shows Nielsen data for sales through 4/20/2019. I see more canned wine brands and SKUs on the store shelves every week.)

What’s more, Nielsen research suggests that canned wine sales are weighted toward younger consumers — the ones that many observers argue are so reluctant to engage with wine. Fad or trend? I think cans are a thing although there might be some seasonality that will distort conclusions until we have more data.

Too Much of a Good Thing?

Cans have many advantages when it comes to wine. Convenience is often cited and it is true that a can of wine is easy to toss into your backpack or picnic basket if you are headed out for an adventure. But cans are more than the trail mix of wine.

Michelle Williams’s Forbes column “Is the Future of Wine in the Can?” presents an optimistic case for canned wine, giving special attention to wineries in Oregon and Texas, two regions where wine is booming, that have embraced the can.

Amber LeBeau of the Spitbucket blog argues that the traditional 750 ml wine bottle gets in the way for the growing numbers of consumers both young and old who are concerned about limiting their alcohol consumption or avoiding waste. Too much wine to consume at one time can be too much of a good thing.

Smaller bottles are one solution and cans (most of which hold about two glasses each) and premium boxed wine (where you can dispense as much or little as needed) are good solutions. Maybe that’s a reason why the two fastest-growing wine packaging categories are canned wine and premium box wine.

I appreciate the alcohol issue and the fact that smaller container fit a more sober lifestyle. But my friend Patrick the Wine Guy has the opposite worry — that consumers won’t realize that 375 ml cans hold two glasses until it is too late and they have drained a couple of them as if they were light beer. Yikes!

There’s an App for That

Cans also have potential advantages in the world of app-based food delivery. I am not sure how many UberEats orders include a 750 ml bottle of wine in areas where that would be legal (not many, I’m guessing), but I can see the potential for single-serve canned wines here. Simplified wine choices, convenient packaging, drop it in the delivery bag, and out the door.

Significantly, delivery orders are the fastest-growing part of the restaurant business, with some entrepreneurs setting up virtual restaurants and “ghost kitchens” focused just on delivery. Add a can of Pinot Noir or Sauvignon Blanc to that order and you are all set.

There is a lot to like about canned wine once you get over the initial shock of the new package. But that’s nothing new. I’m sure canned beer ruffled some feathers when it first appeared. And, switching products, I’ve read that paperback books were once seen as a threat to serious book publishing. Change is hard — even when it makes sense (Amber LeBeau’s point).

Canned wine has many advantages, but that doesn’t mean that there aren’t challenges to be confronted. Here are three problems to consider.

What Goes In Come Out

When we tell people that we are researching canned wines, they almost always ask, “how is the wine?” Well, the wine you pour out of the can is pretty much the wine that was put into it. That is one thing that canned wine has in common with bottles and boxes of wine. If lousy wine went in, don’t expect anything better to come out.

A recent study of canned wines versus their bottled twins found no significant difference is consumer evaluation. The cans didn’t change the wines in any way that these consumers could notice. can1

Some wineries such as 14 Hands use the same wine brand for both bottle and can, so they leveraging their bottle brand reputation to promote the canned product. They need to make sure that the wine in the cans is the same as the bottles since an inferior experience would reflect on both types of packages.

Many canned wine brands are priced at the entry level ($4.99 or $5.99 per can or less) and are probably filled with inexpensive bulk wine. Some of these are better than others as you would expect.

Only a couple of the canned wines we have tried so far have been “keepers” that we would drink again. Most have been under-whelming and over-priced. Since the canning process apparently isn’t the problem, the disappointing wines that we are pouring out of the cans must have been disappointing going in, too.

Our favorite out of about a dozen we have tried so far is the C’est Le Vin Rosé from Washington State producer Barnard Griffin. The label says it is “good Washington wine that happens to be in a can,” which I think sends the right message. It’s the wine that counts. The can is just a delivery system.

No (Canned) Wine Before Its Time?

I always look at the “best by” date when I purchase milk, yogurt, and a few other grocery items. Now I have started checking for dates on cans of wine, too.

Sue and I attended a presentation about canned wine packaging technology earlier in the summer and I was interested to learn about the special lining that is the key to the can’s success. Wine’s alcohol and acid don’t get along very well with aluminum, so a special liner is needed to make the can work.

These linings are typically approved for 6 to 9 months, we were told, depending on the chemical analysis of the wine. The wine might be OK at 12 months or longer, but they are intended for shorter shelf-life situations. You really don’t want cases of canned wine to sit a warehouse for months waiting to be delivered to a retailer.

Many (but not all) of the cans I have seen have a “canned on” date or equivalent code printed on the container and from now on I am going to check that out just as I would a quart of milk and look for wines with less than 6 months or so in the can.

We tried a can of a carbonated orange-flavored white wine spritz and it was a big disappointment. It sounded refreshing (I was hoping for an Aperol spritz kind of experience), but there was no one home, as Sue said. Not much orange. Not much wine. Plenty of bubbles. Was it the product or was it the fact that it was canned a year prior to our purchase and the can liner had failed in some way?

Confusion Corner

Wine is a famously confusing consumer category, with so many brands and varieties and with such an enormous range of retail prices. Canned wine is not much simpler based on a few retail shelves we’ve studied. There are several can sizes, for example, some sold as singles and others in packs. You’ve got to pay attention to know just how much wine you are buying and its cost per serving.

Some of the wine is labeled by grape variety, but this is less common than with bottled wine. And I don’t think I have seen a vintage date (yet) although, as noted above, the canning date may be more important. This may change if the premium canned wine trend picks up steam.

A lot of the wine is red or white or pink or bubbly. So what’s in the can, Sue asks? What variety or blend of grapes went into the red or white? What should she expect when she pops the top?

At this point, I suppose, the wines are targeting consumers who might find grape blend and vintage date TMI, but that should change if this category doesn’t fall victim to arrested development.

Two Cheers!

Canned wine isn’t going to revolutionize wine, but it seems to have the potential to evolutionize it — to help it evolve in ways that are relevant to today’s consumers. That’s worth a cheer or two in my book.

Why not three cheers? Maybe I am being stingy with my ratings, but it looks like it is still early days for wine in a can and there is a lot of headroom left in all areas including wine quality. I think canned wine has the potential to grow up in ways that will please a broader audience. When that happens, I’ll be the first to add the final cheer.

>>><<<

Thanks to Danny Brager and Genevieve Aronson of Nielsen, Michelle Williams, Amber LeBeau, and Robert Williams for their insights on canned wine. Go to WICresearch.com for updated canned wine market research.

Precept Wine and the Willie Sutton Recipe for Market Growth

March 19, 2019 By Mike Veseth in wine, wine brands, wine markets 2 Comments

At the conclusion of the State of the Industry session at the Unified Wine & Grape Symposium each January Nielsen’s Danny Brager announces his Bronze, Silver, and Gold medal wineries. The medals aren’t for the best wine or even for the most wine (Gallo would win that one every year). The prizes are for market success as measured by sales growth. Here are the 2019 winners.

GOLD – Delicato Family Wines, Riboli Family Wines, Precept Wine

SILVER – Deutsch Family Wines and Spirits, Jackson Family Wines

BRONZE – Duckhorn VIneyards, O’Neill Vintners and Distillers, Zonin USA, Delegat, Winery Exchange, Jam Cellars

Growth was difficult in the U.S.wine market in 2018, when many categories experienced falling volumes or stagnating revenues. To excel in this environment is noteworthy. The Gold medal is especially difficult to earn because Brager’s criteria require both high absolute growth in terms of thousands of cases and also high percentage growth rates year on year.

Gold medal producers have to have some secret sauce that powers them ahead. Delicato has Bota Box, for example. Riboli has hot-selling Stella Rosa.

Precept Wine‘s recipe for success is a bit different and so worth a deeper look. Precept, founded in 2003 by Andrew Browne and Dan Baty, is the largest private wine producer in the Pacific Northwest. Wine Business Monthly rates it as the 13th largest wine firm in the U.S. and, clearly one that is growing quickly.

I like to say that Precept has implemented the Willie Sutton recipe for growth. Sutton, a notorious criminal, was famously asked why he robbed banks. I rob banks, he said, because that’s where the money is. Pretty simple logic, don’t you think?

Precept Wine has grown so rapidly by moving decisively into the market segments where the growth is. This sounds simple, too, but it is not. Anticipating growth opportunities requires close analysis of changing market conditions. And then you must have the resources, flexibility, and determination to seize them. Not easy at all, but when you get it right the results can take your breath away,

If you made a list of growing wine market segments in 2018 it might look something like this.

Sparkling wine
Rosé wine
Alternative packaging (especially cans)
Private label wines
Low calorie / low alcohol wines
Super premium wines
Direct-to-Consumer sales

Precept has made important investments in each of these categories starting with its acquisition of Gruet, the New Mexico-based sparkling wine producer, which has experienced dramatic growth during the recent Prosecco-fueled sparkling wine boom. Gruet sales increased by 25% by value in 2018. Amazing.

Rosé is the fastest growing wine category in the last year and Precept has taken advantage of this with pink wines throughout their portfolio and leveragde for even higher growth by combining pink with bubbles, putting pink in cans, and even putting sparkling pink wine in cans as shown in the image above.

Precept has made a very serious commitment to the canned wine space and I see their House Wine cans in nearly every supermarket. The House Wine cans and Ste Chapelle wine spritz are two of the three top brands in this category.

Private label wines are another area of growth. Many wineries make their own products and also private label brands for retailers. Precept took a major step into this arena last year by acquiring Truett-Hurst’s business. The plan is to ride the wave of private label growth so that it represents 50% of total sales by 2020.

The Truett-Hurst acquisition included a wine brand called Cense, which is endorsed by WW (formerly Weight Watchers). Low calorie, low carb, and low alcohol wines are still a small slice of the total market, but one that seems likely to grow rapidly as production technology and product quality improve.

The Cense line includes a Rosé (of course), a sparkler, and a Marlborough Sauvignon Blanc. Alcohol is around 9 percent. Look for Cense wine spitzer cans in time for summer. You have only to look at the investments that major brewers are putting into low/no alcohol beer to get a sense (or cense) of the potential for wine.

Precept is also experiencing impressive growth in the premium and super-premium wine categories with their lineup of brands that includes Browne Family Vineyards, Canoe Ridge Vineyard, Pendulum, and Waterbrook.

Can the fast growth be sustained? Prediction is difficult, especially about the future, but I would argue that the particular category growth waves that Precept is riding are trends and not fads, and unlikely to suddenly disappear. Times will continue to change, however, so Precept’s challenge (and a challenge for the rest of us, too) will be to remain nimble and entrepreneurial even as scale increases.

The Changing Face of Wine in America: The Cooper’s Hawk Phenomenon

April 10, 2018 By Mike Veseth in wine, wine brands, wine markets 12 Comments

As I noted last week, wine is everywhere in America, or nearly so, and while it is common knowledge that the U.S. is the world’s largest wine market and that wine is produced in all 50 states, the diversity of the wine experience here sometimes comes as a surprise. Case in point …

What if I told you that one of the largest wineries in the U.S., home to what is probably the largest direct-to-consumer winery club program in the world, is based in Illinois, not California?

Illinois? (I can hear you saying this). No way! You’ve got to be kidding? Well, Cooper’s Hawk winery is no joke and learning about it helps us understand how wine is changing in the U.S. and where it could be going.

Top 50 U.S. Wineries

Wine Business Monthly‘s February 2018 issue lists the 50 largest wine companies in the U.S., from #1 Gallo (estimated production 70 million cases) to #50 McMannis Family Vineyards (340,000 cases). Most of the wineries are located in California as you would expect with a few exceptions such as Washington-based Ste Michelle Wine Estates (#8), #13 Precept Wine, and #36 Mesa Vineyards of Fort Stockton, Texas (550,000 cases).

Number 34 on the list with 570,000 case annual production and a wine club that is approaching 300,000 members is Cooper’s Hawk Winery and Restaurant of Woodridge, Illinois. All that wine is sold directly to restaurant patrons and wine club members. It is an interesting case study of wine’s growing (and changing) place in American culture.

A Wine-Centered Lifestyle Brand

The first Cooper’s Hawk location opened in 2005 and the chain, which identifies itself as a “lifestyle brand centered around wine” has grown to 30 stores in the mid-west (Illinois, Indiana, Ohio, Michigan, Missouri, Wisconsin) plus Maryland, Virginia, and Florida. Five new locations are scheduled to open in 2018. A total of 4.4 million guests visited Cooper’s Hawk last year.

A Cooper’s Hawk experience combines several elements. It is a restaurant, of course, with a wide-ranging upscale menu that encourages patrons to think food and wine with a suggested pairing for each dish. Bin 70 (Cooper’s Hawk Pinot Gris) is the suggested match for pan-roasted Baramundi, for example, and red wine braised short ribs are matched with Bin 04 (the Cooper’s Hawk Red, a Cab-Merlot-Syrah blend).

Ordering wine by the numbers rather than listing the wine names on the food menu is a way to keep things simple, rather like many people order by number from an Asian restaurant menu. You don’t necessarily need to speak wine to enjoy it at Cooper’s Hawk.

Each restaurant features a “Napa-style” wine tasting room and an “artisanal retail market,” where various food and lifestyle items are sold along with the Cooper’s Hawk wines. The idea is to bring the feel of a wine-country tasting room and restaurant to customers who are attracted to wine lifestyle experiences.

47 Varieties lux

A total of 47 different Cooper’s Hawk wines are listed on the online wine menu, divided into several categories, including International, Sparkling, White, Red, Sweet Red, Sangria, Fruit Wine, Dessert, Mulled Wine, Barrel Reserve, and top drawer Lux. As the video above indicates, grapes are trucked to the Illinois winery from California, Washington, Oregon, and other regions and the wines made, aged, bottled and shipped to Cooper’s Hawk stores.

Cooper’s Hawk invites its guests to embrace wine and gives them both broad choice and attractive pricing. Bottles of wine sell for what glasses of wine might go for at other restaurants. Retail shop prices begin at under $15 per bottle and top out at $39.99 for the Lux Pinot Noir. Restaurant prices are a bit higher, as you would expect, but the mark-up is surprisingly small. You can have that $40 retail Lux Pinot for $47.99 in the restaurant.

All 47 wines are available by the glass, with prices starting at less than $7. A glass of Lux Pinot Noir or Lux Meritage will cost you $13. How you view these prices depends on context, I think. If you are used to New York City restaurant prices, these wines are incredibly cheap — so cheap you might hesitate to try them. On the other hand, if lower-shelf supermarket wines are your reference, the prices might seem a bit high. It is clear from Cooper’s Hawk’s success,, however, that there is a sweet spot for an upscale casual dining restaurant wine list and they seem to have found it.

World’s Largest Wine Club?

One of the most interesting elements of the Cooper’s Hawk phenomenon is its wine club, which has nearly 300,000 members and is growing at a 25% per year rate. Guests who join the club are offered special “members only” wines plus invitations to various exclusive programs and events. Although there is an option to have monthly wine allocations shipped to your door, the pricing structure strongly encourages members to pick up their wines at the tasting room, which obviously produces repeated visits to the restaurant and reinforces the lifestyle relationship.

I am kind of fascinated by Cooper’s Hawk, which seems to have struck a chord with many American consumers by making wine the central element of a carefully crafted experience. I am therefore disappointed that I have so far been unable to visit one of the locations. Our travels take us many places, but so far the opportunity to belly up to a Cooper’s Hawk tasting room bar has eluded me.

But I have tasted a couple of the wines. The Cooper’s Hawk Lux Pinot Noir was the featured wine at this year’s Screen Actors Guild awards (Cooper’s Hawk is the official SAG wine partner) and we received samples of this wine plus the Lux Chardonnay, which were served at the event’s gala dinner, as part of the promotion of this partnership.

The details of the wines we received are a bit of a mystery — the Chardonnay and Pinot Noir are American appellation (not California or Oregon as you might expect). The Pinot was medium-bodied with a strong oak presence on the nose and palate that eventually faded to reveal varietal character. Perhaps the wine needed more time in the bottle to pull itself together or perhaps this is a winemaking decision to feature more oak on the premium product. The oak was nicely integrated in the Lux Chardonnay, on the other hand, and the wine was very enjoyable.

No one reads The Wine Economist for tasting notes, of course, and I’ve only sampled a couple of the wines. It is clear that these wines appeal to Cooper’s Hawk customers, who order them with meals and come back for more. Very impressive.

Cooper’s Hawk has achieved amazing success by creating or expanding a market that few of us imagined could be so large. Cooper’s Hawk recently announced and growing list of collaborations with famous wineries (Francis Ford Coppola, Boisset Collection) and celebrity chefs (Tyler Florence among others) that promise to expand the brand’s lifestyle appeal.

Is Cooper’s Hawk the future of American wine? No — wine is too complicated to have a single road ahead. But the Cooper’s Hawk phenomenon does suggest several important trails to explore — direct-to-consumer sales, focus on experience not just product, innovative marketing structures, and broadening the consumer base beyond the Wine Spectator reader “usual suspect” base to explicitly include Food Network viewers and foodies more generally. I think there’s a lot to learn about the market for wine in America from Cooper’s Hawk.

>>><<<

The Wine Economist will pause for a couple weeks while Sue and I are in France to participate in Terroir and Millésimes in Languedoc and Roussillion from April 15-22 and Val de Loire Millésimes from April 22-25. Looking forward to meeting fascinating people, drinking wonderful wines, and learning as much as we can. Full report to follow when we return and have had time to digest our experiences.

What’s Ahead for Wine Tourism in Mendoza? Lessons from a Rock Opera

November 28, 2017 By Mike Veseth in Argentina, wine, wine brands, wine tourism 1 Comment

The United Nations World Tourism Organization’s global wine tourism conference in Mendoza, Argentina was full of contrasts as you might expect in a high desert region that is punctuated by isolated vine-filled green oases. The morning sessions featured conventional conference formats — speakers, panels, Powerpoint slides, dark rooms, coffee breaks (and really good simultaneous translation — thanks for that!). And then …

Hardly Working?

The afternoon and evening session moved out of the conference center and into the wineries, so that international participants could take in the landscape, marvel at the wonderful winery architecture, appreciate the warm hospitality, sample the many winery experiences, and of course enjoy food and wine as any wine tourist would.

Does this sound like hard work? Very few of our friends feel sorry for us when we post about these experiences on Facebook, but it really is work because Sue and I are always observing and analyzing both what the wineries do (and how they do it) and the reaction from their guests.

This was particularly interesting at the UNWTO conference because our fellow delegates were mainly tourism people who see opportunities in wine whereas Sue and I come at this more from the wine side, where tourism is one important element. The organized winery visits were interesting to us because they highlighted the tourism offerings rather than the wines themselves.

A reception at Bodega Séptima, for example, showed off its striking architecture and invited guests out to the big patio to stare at the moon and stars through telescopes while sipping wine. Wine tourism and astrological tourism combined.

A visit to Bodega Norton featured an opportunity to ride bicycles through the vineyards followed by a late lunch and then a chance to paint with wine (I saw a rabbit in the vineyard, so that was my artistic contribution). Norton’s program stresses active involvement, which is always more engaging than passive participation.

asado The historic buildings and ancient vines were a highlight of our asado lunch at Bodega Nieto Senetiner, where we were treated to a sensory experience organized around a Torrontes perfume and a Malbec cologne. This was interesting even though it violated the first rule of a wine tasting — don’t introduce any scents that might mask the wines’ aromas. It worked as a tourist experience, but would turn off any serious wine lover.

The Missing Link?

Sue and I enjoyed these experiences, but we noticed that something was often missing. The wineries worked very hard to show off their delightful wine tourist offerings, but they missed many opportunities to tell their stories and reinforce their brands. Perhaps this was by design because of the special character of the UNWTO audience, but it seems to me that it is always important to tell your story and build your brand.

Two of the most effective wine tourism programs we have experienced are Larkmead Vineyards in Napa Valley and Sandeman in Porto. The two wineries differ in almost every way but this: there is a clear story, which is told in several ways, and everyone you meet tells the same essential story, reinforcing the message.

A goal might be for each winery visitor to encounter the defining story three times in three different ways during a visit and to be able to share it with friends. You might call it the “Tommy” tactic (after the rock opera composed by The Who). See me, feel me, touch me, heal me. Stimulate all the visitors’ senses and touch them in a way they won’t soon forget.

The Next Step?

Perhaps this is the next step that Gabriel Fidel hinted at in his conference presentation, which encouraged the Mendoza wine tourist industry as well as the rest of us to think beyond the current focus on creating experiences. The facilities in Mendoza are world class and the experiences, including food pairing sessions, vineyard walks and rides (on both bikes and horses), and so forth are great, too.

All the pieces are here in Mendoza. Now the wineries and local wine tourism officials need to steal a tune from Tommy so that they all come together with the defining stories of the wineries and the region to create an total experience that resonates with visitors from around the world.

amdes

What in the World is Charles Smith Up to Now? A Visit to Jet City Winery

August 29, 2017 By Mike Veseth in washington wines, wine, wine brands 3 Comments

Charles Smith’s Jet City Winery is located across the street from historic Boeing Field in Seattle’s gritty but hip Georgetown neighborhood.

The building started life as a Dr. Pepper bottling plant. The public spaces reflect both the structure’s mid-century roots and Charles Smith’s signature aesthetic, with lots of glass, metal, and recycled wood. The cellar is sleek, efficient, and spotlessly clean.

Sue and I met up with veteran Wine Economist research assistants Bonnie and Richard a few weeks ago at Sisters and Brothers, a hip little restaurant that makes delicious Nashville hot chicken, fried green tomatoes, and other memorable southern fare just steps from the winery. The food was great, but that wasn’t why we were there. Our mission, following up on last week’s column, was to learn what Charles Smith and his team are up to now and where they are headed in the future.

Technical Innovations

I became curious about Jet City Winery a year ago when I read an article about it in Wines & Vines that focused on the technical aspects of the winery. The author, Andrew Adams, interviewed Brennon Leighton, director of winemaking, and reported on many of the innovations and special features of the Jet City facility.

One innovation that especially caught my attention was a set of design features that minimized some of the “heavy lifting” aspects of cellar jobs so that women would not be disadvantaged relative to men. “It’s a pretty male-dominated world on the cellar floor,” Leighton told Adams, “and a lot of that has to do with lots of fairly vigorous, high-labor jobs. I really wanted to cut that labor down so anyone could do any job at any time.”
Our team found that this is just one example of the extreme attention to detail that is everywhere at Jet City.

brennan Brennon Leighton is one of Washington’s most respected winemakers. He was in charge of making the white wines (including some spectacular Eroica bottlings) at Chateau St. Michelle before moving to rising star boutique Efeste. Charles Smith lured Leighton away, first as consultant and then as director of winemaking and viticulture, responsible for a dynamic array of wines. It was a successful move judging by the results.

It is a good thing that Leighton has a lot of energy, because his workload is pretty fierce. Although Constellation Brands has purchased the Charles Smith Wines portfolio that includes Kung Fu Girl Riesling and Boom Boom Syrah, for example, Smith, Leighton and the team are still hands-on involved and will help Constellation scale up production while maintaining quality.

A Winery with a Lot of Wines

There is a lot going on here (and lots of wines to taste at Jet City). The current Charles Smith lineup ranges from the Vino line of “modernist” wines made with Washington-grown Italian grape varieties on up to the iconic and collectible K Vinters single-vineyard wines.

It seems like Charles Smith is always up to something new and with the sleek Jet City Winery facility the pace of innovation seems to have accelerated. We found ourselves especially intrigued by three relatively new wine labels: Sixto, B.Leighton, and Wines of Substance.

The Sixto wines are in part a response to the criticism that Washington has not produced very many great Chardonnays. Sixto Chardonnays highlight great fruit from a handful of carefully managed sites along with precision winemaking to produce surprising and distinctive wines.

B.Leighton is Brennon Leighton’s distinctive personal wine line. Bonnie and Richard were charmed by Gratitude, which is inspired by the wines of Bandol, and a Petit Verdot that we tasted from barrel (Richard left with a magnum).

The Wines of Substanace caught me a bit off guard. Charles Smith has sold wines brands before (House Wine to Precept, Kung Fu Girl and the others to Constellation), but this is the only brand he has ever purchased. Leighton explained how it is developing into something special. He casually suggested that we try to Sauvignon Blanc from the Sunsent Vineyard in Ancient Lakes and … wow! … what a great wine. More France than Washington. Unique.

A Lot of Wine in the Wines

Then he poured the Cabernet Sauvignon, which sells for $17 at the winery (I saw it for less at Costco) but tastes like a lot more. He talked about the special efforts that are made in the vineyard and the careful cellar work, too. A lot of time and trouble for a $17 bottle of wine but, Leighton explained, a lot of people can’t afford to spend $50 or $100 on a bottle of wine. They ought to be able to get a really good bottle of wine at a relatively affordable price.

Not everyone can afford to pay $17, of course, but if they can then this is the real deal. Or as Leighton commented, “There’s a lot of wine in our wines.”

Winemakers (like artists and authors) often have big egos, and while Brennan Leighton has strong ideas, there is an appealing humility to the way he operates. His idea of wine is to work diligently in the vineyard and then let the wines express themselves in the cellar. His success with both large production projects like Kung Fu Girl and small lot wines like Sixto and B.Leighton speaks for itself.

So what’s ahead for Charles Smith’s wine universe? We’ve got new projects in the works, Leighton told us. But I can’t tell you what they are. So I was only a little surprised when, a couple of weeks after our visit, Charles Smith announced a major re-branding. “Wines of Substance” is now the name of the umbrella company that includes K Vinters, Sixto, Vino Casasmith, Substance, B.Leighton, and Charles & Charles.

Is this the new direction that you couldn’t tell us about, I asked Brennon, or just part of it? “Part of it,” he said, without offering any hints. Hmmm. It will be interesting to see what is revealed when the next Charles Smith shoe drops!

>>><<<

Thanks to Brennon and everyone at Jet City Winery for your help and hospitality. Special thanks to Bonnie and Richard for their incisive questions and analysis.

Here’s a video where Charles Smith talks about his Jet City Winery project.

The Genius of Charles Smith and the Land versus Brand Wine Wars

August 22, 2017 By Mike Veseth in Washington wine, wine, wine brands 4 Comments

What do you know about Charles Smith? He’s a marketing genius! Where does he get his ideas? Do you know what he is going to do next?

We were in a restaurant in Yountville, the heart of the Napa Valley, talking with one of the valley’s best winemakers. There was a lot to discuss, but our friend was pretty focused. He was fascinated by Charles Smith.

And that’s not really a surprise. Charles Smith has a reputation as a premier brand builder, a marketing genius. That’s not the whole Charles Smith story, but it is how some people think of what he is and does, especially after the 2016 sale of his Charles Smith Wine (CSW) brand lineup to Constellation Brands for a cool $120 million.

Smith came to Walla Walla to make terroir-driven wines. His first vintage was 330 cases of the 1999 K Syrah made from grapes grown in The Rocks vineyard area supplied by Cayuse winemaker Christophe Baron. The wine was so good, according to an excellent Wine Spectator profile, that it convinced local bankers to help finance the operation. Bankable wine? Quite an accomplishment.

House Wine to Kung Fu Girl

K Syrah is a clever, memorable wine brand (think “Que Sera Sera”), but the commercial branding story really starts in 2003-2004, when a killing frost hit Walla Walla and winemakers like Smith had to scramble to get grapes or bulk wine from other parts of Washington to give them something to sell to pay the bills.

Smith seized the moment to launch the Magnificent Wine Company and its House Wine lineup. The popularly-priced negociant wines with the fun labels sold out. Everyone needs a house wine — House Red, House White, and so on. Sales quickly scaled.

Precept Brands invested in House Wine in 2006 and purchased the brand outright in 2011. The current lineup includes House Red, House White, Steak House, Fish House, and other House wines packaged in bottles, boxes, and cans.

Charles Smith Wines came next — continuing the House Wine philosophy of giving people what they want in a simple but stylish way, but a step or two up the wine market ladder. Boom Boom Syrah, Velvet Devil Merlot, Eve Chardonnay, Chateau Smith Cabernet Sauvignon and who can forget Kung Fu Girl Riesling — each wine had its own personality and offered buyers lots of quality per dollar.

These CSW wines have two things in common. First, they have distinctive graphic design elements provided by the talented Rikke Korff, who has handled all the design work for Charles Smith since the beginning. The labels are instantly recognizable and always make me smile. Nothing like the staid chateau drawings or cute critter images that many wines feature.

94854

The second common feature is that the wines are good and good value. Kung Fu Girl Riesling, the best-selling wine in the line and a frequent recipient of “Top 100” wine awards, sources grapes from the exceptional Evergreen Vineyard. It’s the real deal.

The Modernist Wine Project

There are a lot of ways to think about the CSW wine program, but the winery website likes to call it part of a “modernist” project. The idea seems to be to look at consumers as they really are and then give them a product that satisfies their needs. This means wines that are ready to drink upon release, that are balanced and taste good with food or without it, and that are affordable and carried to market on a relatively simple message relayed through exciting graphical design.

The genius of Charles Smith was to put all of this together — the wines, the message, the design, the marketing — and to get the project rolling in 2006, just before the Great Recession hit the United States. The CSW wines offered recession-shocked buyers an opportunity to trade over to a more casual idea of wine, not just to trade down to something a bit cheaper. Mix all this with a lot of hard work in the vineyard, cellar and on marketing and it is no wonder the wines were so successful.

97948

It is well known that I admire this sort of genius. The subtitle of my 2011 book Wine Wars referenced the “Miracle of Two Buck Chuck.” It was indeed a miracle that Fred Franzia and his team at Bronco Wine and the smart folks at Trader Joe’s markets could give millions of Americans the confidence they previously lacked to try and enjoy wine. Charles Smith built upon this foundation with great success and in a particular “modernist” way, first with House Wine and then the CSW brands.

The modernist project continues. Smith will consult with Constellation Brands on the CSW portfolio to help it scale up successfully. And then there is Vino, which was not part of the Constellation Brands deal, a tasty lineup of Washington-grown Italian-varietal wines that are instantly recognizable as a Charles Smith product by their label design and offer an unexpectedly sincere homage to the Italian origins of their grapes.

The Pinot Grigio, for example, has minerality you won’t find in a lot of other wines of this type and the Moscato will remind you a bit of a nice Moscato d’Asti. These wines probably don’t have to be this good to sell at their price points. But they are.

The Battle of Land Versus Brand

It would be easy to typecast Charles Smith as a brand guy in the battle of Land versus Brand. The fact of the Constellation Brands purchase offers some evidence. After all, Constellation is famous these days for paying big bucks for brands that have no vineyards or wineries attached to them. The Meomi brand was purchased for $315 million and The Prisoner for $285 million, for example.

Viewed in this perspective, Charles Smith’s experience with House Wine and then the CSW brands seems to typecast him as a very successful brand-spinner — a genius at the game as my Napa Valley winemaker friend pointed out. And what you would expect from Smith is more of the same.

But there is more to Charles Smith than brand-building. The K Vintners wine that started it all back in Walla Walla has evolved into a rather interesting collectiomn of single-vineyard wines (Land not just cool Brand), exploring the possibilities of Syrah and Viognier with side-trips to Sangiovese, Tempranillo and Malbec. An all-Chardonnay line called Sixto offers single-vineyard wines plus a multi-vineyard blend.

Washington’s Randall Grahm?

And so the question must be asked, is Charles Smith Land or Brand? The answer seems to be both, which makes him a complicated person (and maybe more of a genius than my Napa friend realized). Is Charles Smith Washington wine’s answer to California’s Randall Grahm? I dunno. What do you think?

To find out what Charles Smith is up to these days and maybe learn about what comes next we paid a visit a few weeks ago to his Jet City Winery near Boeing Field in Seattle to learn about a particular vision of Land and Brand. Come back next week to see what we discovered.

New “Wine by Numbers” + Analysis of Global & US Wine Market Dynamics

August 1, 2017 By Mike Veseth in wine, wine brands, wine markets, wine price 7 Comments

wbn A new edition of Wine by Numbers was released a few days ago and it is required reading for anyone interested in global wine market dynamics. Wine by Numbers presents current data about global wine exports, imports and patterns of trade. It is a free resource provided by the Unione Italiani Vini, the Italian wine association.

Who Buys? Who Sells?

This special edition provides more data and deeper analysis, including essays by leading figures in the Italian wine industry about some of the most important export and import markets. Carlo Flamini of the Corriere Vinicola, which publishes Wine by Numbers, asked me to write an introductory essay for the “Who Buys” issue.

My essay presents a “Big and Hot” analysis of global wine market dynamics based upon the Wine by Numbers data. I invite you to download the pdf and check it out along with the rest of this valuable publication.

Writing the Wine by Numbers essay got me to thinking that it might be time to update my “Big and Hot” analysis of the U.S. market, so today’s column is part of an occasional series here at the Wine Economist where we analyze recent U.S. retail sales data looking for interesting and important trends. The data this week comes from Nielsen reports on U.S. off-premise table wine sales for the 52 weeks ending on April 22, 2017 as reported in the July 2017 issue of Wine Business Monthly.

Here’s how “Big & Hot” analysis works. The idea is to look at which parts of the market are big (in terms of total sales) and which are hot (or not) based upon rates of growth, both over the 52 week period and in the most recent 4 weeks covered by the data.

Sometimes as we see below, big and hot are the same, but sometimes they are very different. There is often something to be learned in either case.

Big and Hot Price Points

The overall U.S. off-premise market for table wines as measured by Nielsen grew by 3.5 percent in the 52 weeks of this study, but grew at a faster 6.1 rate in the final four weeks, showing some welcome acceleration that might be related to Easter and Passover holiday wine sales.

This growth was not distributed uniformly over all price segments. This WBM Nielsen report aggregates price data by three dollar increments ($0-$2.99, $3-$5.99, etc.) up to $14.99 and then $15-$19.99 and $20 and above. The Big price segment measured by total expenditure is $3-$5.99 followed by $9-$11.99. The data suggest that the market is increasingly bifurcated — the $6-$8.99 price segment between the two Bigs is actually shrinking. A tale of two markets?

Value wines are still Big and probably always will be, but they are not especially Hot. The fastest growing price segment is $15-$19.99, where total expenditures increased by more than 10 percent for the 52 week period. Wines priced $20 and above were “Hot Hot.” Sales shot up by 17.6% in the final four weeks of the reporting period. Amazing!

Big and Hot Imports

The Nielsen retail data reported here show that domestic table wines account for about 72 percent of total off-premise sales. Imports are somewhat stronger in restaurants and in the sparkling wine category, too, and if these sales were included the split would be more like 70% domestic and 30% import.

Italy is far and away the largest import wine source in these data (and growing faster than the overall market) followed by Australia, New Zealand, and Argentina. France, which is only #5 by total sales, leads the hot parade, however, with 15% growth for the year and more than 25% 4-week growth. New Zealand, which normally is top of the Hot table, grew almost as fast followed by up-and-coming Portugal.

While Australian sales were essentially flat (an improvement over their dismal performance in recent years), Argentina, Chile, Germany, and South Africa had falling import sales in the Nielsen data.

Big and Hot Varietals

Conventional wisdom has it that American consumer reach for wine based upon brand, price, and grape variety. Chardonnay is the Big grape variety, accounting for 18% of all wine sales in the Nielsen table. Growth in Chardonnay sales rose slightly less than the overall market in this period. Cabernet Sauvignon, however, is only a little behind Chardonnay after a Hot surge and will soon take over the top place.

Sauvignon Blanc is the hottest grape variety, with 10.8% growth. Pinot Noir and Pinot Gris/Grigio are also growing while many varietal wine types (Merlot, Syrah/Shiraz, Malbec, Riesling, Zinfandel) have flat or falling sales.

Where is the growth going if not to these classic varietal wines? Look to the next category, which I call the Wild Card wines.

Big and Hot: The Wild Cards

The Hottest categories in today’s market are those wines that defy the conventional wisdom. Consumers are supposed to be drawn to the security of varietal wines, so it is a bit of a surprise that the “Red Blend” category is so Hot, growing at more than twice the rate of the overall market during these 52 weeks. “Sweet Red Blends” are even Hotter, with sales rise at more than triple the overall market growth rate.

The conventional wisdom also holds that pink wines are a pretty narrow category and that is true in part. Sales of White Zinfandel, once a really Hot pink wine ticket, fell by 5% in this period.

So the Rosé wine boom comes as a bit of surprise. Sales of Rosé table wine selling at $8 and above per 750ml rose at a startling 61.7% for the year and 84.2% for the final four weeks of the survey period.

That last number (84.2%) is especially interesting and not just because it is so big. Remember that these Nielsen data cover the period that ended on April 22, 2017, so the final 4-week period included parts of March and April. Rosé wine was long thought to be “summer wine,” but these surging sales came in early Spring. Maybe Rosé is a Thing now, and not just a summer Thing?

Economists like numbers like these, but what’s the story behind them? Come back next week and I will try to tease out some broader implications.

The Name Game: Porto, Napa Diplomacy and the Fortified Wine Dilemma

November 29, 2016 By Mike Veseth in globalization, wine, wine brands, wine markets 11 Comments

porto The Association of Port Wine Companies roadshow passed through Seattle recently and Sue and I were fortunate to be invited to attend the Porto and Douro Wines Tasting, a ceremony initiating several local wine trade representatives into the Confraria do Vinho do Porto, and a festive dinner hosted by the winemakers.

The events, which involved wines and representatives from eleven Port houses, had two main purposes. The first and most obvious was to introduce or re-introduce local restaurant and trade people to the Porto and Douro wines and to establish or renew relationships. In other words, this was a sales call and I will talk about this aspect next week. But first I want to discuss a secondary purpose: economic diplomacy.

Protecting the Brand

Champagne and Porto have two of the world’s most valuable regional wine “brands.” Sparkling wines are made all over the world, but Champagne can only comes from the Champagne region of France. Ditto Port wine and the Porto region.

When producers in other regions use these terms generically, they potentially dilute or devalue the brand. It is easy to see why this might be a problem. Trade treaties have enabled Champagne and Porto to assert their intellectual property rights here in the U.S., but with pre-existing commercial use “grandfathered” in. Thus Gallo legally sells inexpensive Andre’s California Champagne and Fairbanks Port. 21344

Not all of the grandfathered brands are high volume value wines. Prager Royal Escort Port, made from Napa Valley Petite Sirah grapes, sells for $90 per bottle for the current 2009 vintage release. It may not be real Porto Port, but it is a wonderful wine.

Champagne, Port and the other key regions would obviously like to see there brand rights more strictly enforced and they hoped to accomplish this as part of the big Transatlantic Trade and Investment Partnership Agreement (T-TIP) that has been in negotiation between the U.S. and the European Union for some time.

Shifting Political Winds

But the political winds have changed directions (in case you haven’t noticed) and big trade agreements are now pretty much off the table. The incoming Trump administration seems more likely to dismantle existing trade deals than to encourage new ones. The political environment in Europe is no sunnier.

Even a fairly straightforward trade treaty with Canada nearly collapsed at the last minute when officials in the parliament of the Belgian region of Wallonia raised objections. Reminds me of The Mouse that Roared.

Facing this political roadblock, the Porto producers have turned to the art of persuasion — diplomacy. Thus the photo above, which shows George Sandeman at the October 27 Confraria induction ceremony in San Francisco where Boyd Family Vineyards, Freemark Abbey, Jessup Cellars and Schweiger Vineyards were welcomed into the Brotherhood of Port to honor their commitment to respect the traditional use of the Porto brand.

The Napa-Porto Connection

Napa Valley Vintners was also recognized for their work to protect place names. Napa has particular interest in this issue because the Napa brand itself is very valuable and, like Champagne and Port, is at risk of being diluted in various ways. It is no accident, therefore that the Joint Declaration to Protect Wine Place Names and Origins, which an increasing number of regions are embracing, is also called The Napa Declaration on Place. Porto and Napa were founding members of this initiative.

I asked George Sandeman (the handsome fellow in full Confraria regalia in the photo above) about the situation and he noted that “Napa producers switched away from Champagne on a voluntary basis long ago. Now nobody in Napa Valley produces Champagne, even though they legally may do so according to US law (those grandfathered in the 2006 Wine Accords). The producers in Napa have made that change as a show of respect to the Champagne region.”

“There has been discussion for several years of doing the same for Port,” he continued, “and now the first handful of Napa producers voluntarily made a switch away from the term “port” to something else, even though they weren’t legally compelled to do so. It was a sign of respect to Porto and the Port producers, but also an acknowledgment that it is important to “walk the talk” when it comes to respecting and protecting winegrowing place names.”

Not Port: The Name Game

One problem that the makers of Port-style wines face is “the name game” — how to describe their products and market them without using the forbidden terms. It is a tricky business. Poking around our little cellar, for example, I found two examples of winemakers who make interesting wines and work hard to stay inside the lines. mfw

Hedges Family Estate, for example, makes very small quantities of wine from traditional Port grapes (plus a little Cabernet Sauvignon in the example we have). The back label clearly identifies itself as “Fortified Wine,” which accurately describes the process and is one possible generic descriptor of these wines. Unfortunately, the terminology also emphasizes alcoholic strength and not everyone will see that as a positive.

Mosquito Fleet Winery makes a fortified wine called Griffersen Reserve from Touriga Nacional grapes . As with Hedges, the term “Port” is carefully avoided on the package. Small print on the back label describes the product as “dessert wine,” emphasizing sweetness and the after-dinner occasion instead of alcoholic content or production process. This is accurate (at the winery you are served a taste in a small dark chocolate cup– yum!), but is obviously also vague and somewhat limiting as a category.

If you called either of these wines Port they would be easy for consumers to understand. The diplomatic initiative to protect the Port producers’ brand would be more effective if someone could find a generic term that works as well for these wines as “sparkling wine” does for wines made in the Champagne style and method. The lack of such a term means that honest efforts to respect Porto’s rights in theory frequently fail in practice. While Hedges and Mosquito Fleet won’t call their wines “Port” nearly everyone else does when they refer to them.

What’s the best way to honor and protect the Port brand while also allowing U.S. producers to identify and successfully market their own fine wines? The name game continues.

>>><<<

Seems like Shirley Ellis could solve the Porto name game dilemma.