Wine Critics and their Discontents

The Principal-Agent Problem

You might think that the job of wine critic would be heavenly – traveling the world, tasting wines and talking and writing about them.  What could be better?  But there are downsides and trade-offs to the job.  One is that your credibility depends upon objectivity – if your ratings are thought to be biased, your advice is correspondingly discounted.  But, on the other hand, you need income to work as a critic or to publish magazines and websites and the most obvious source of income is the wine industry itself.  How can we trust wine critics when the potential conflicts of interest are so obvious?

This situation is not at all unlike that faced by candidates for political office, who receive money from “special interests” but still need to serve (and appear to serve) the general interest. It isn’t impossible to walk this tightrope, but it isn’t always easy either.  You probably can think of many politicians who have done it successfully and a few who fell off.

In economics we see this as an example of the principal-agent problem.  You understand the principal-agent problem if you’ve ever wondered if the cab driver was really taking the shortest route back to the hotel.  Although cab driver and rider have entered into a mutually advantageous contract, interests are not fully aligned and the fact of asymmetric information means you may not be sure that you are getting a fair deal.

Wine enthusiasts (the principals) hire critics (the agents) to give us objective advice, but we know that the critics may have their own interests as well as ours in mind.  How can we trust them to place our interests above their own?

It seems to me that all the wine critics I have surveyed confront this problem openly and honestly, although they arrive at different strategies to deal with the problem.  All the examples I will cite below are effective, in my view,  so I have come away from this little study well satisfied, but the fact that they are so different can create some confusion for wine enthusiasts who fail to read the fine print.

Parker and Vaynerchuck

Robert Parker’s solution to the problem of potential economic conflict of interest at the Wine Advocate is simply to refuse all advertising and to charge his principals fees for web access, hard copy subscriptions, books and so forth.  Who does Parker work for?  He works for us.  It is pretty hard to criticize this model, although interestingly he is probably the most criticized wine critic.  People don’t complain about economic conflict of interest, however, but rather that Parker’s particular idea of wine favors particular styles of wine and particular producers.

Gary Vaynerchuck at Wine Library TV takes a different approach.  His family owns a major wine retailer in New Jersey, so in fact he has a very direct financial interest in the sales of some of the wine he reviews.  Rather than trying to build a firewall between the wine critic business and the wine retailer business, however, he tries to be completely transparent about it and to accentuate his personal credibility as an objective reviewer.  Unexpectedly, this seems to work.  Reputation matters. Accepting the conflict of interest and being open about it is a risky strategy, but Gary pulls it off.

There was one case of a potential conflict of interest a few months ago that shows that he is not unaware of the risks.  The top wine in a particular tasting turned out to be a proprietary label of Gary’s store.  Apparently Gary didn’t know this when the tasting was recorded and when he found out he immediately took the video down from the internet so that he could not gain financially from his honest appraisal of the wines. We only know about it now because of his online apology and explanation.  I think this case shows just how very important it is to wine critics to maintain their reputations as honest objective agents.


Worth a Thousand Words

I’ve been studying how wine magazines handle reviews and the images that sometimes appear with them because it seems to me that a review that is shown along with a photo of the bottle or label is a lot more memorable than the plain text, so the choice of which wines to favor with an image is important..  Some of the magazines use these images to generate advertising revenue, others do not.  This is potentially confusing for readers who may mix up editorial content (the review) with paid advertising (the label image).

Britain’s Decanter magazine keeps its paid advertising and editorial wine ratings reasonably separated.  The top rated four- and five-star wines are featured with bottle photographs while the rest (three stars and below) have simple text listings. It is clear that the photos reflect editorial evaluation. Advertising pages bookend each set of ratings, but they are labeled “Decanter Promotion” so it is pretty clear that the wineries have paid for the space.

Wine & Spirits magazine has a different system (clearly explained in each issue).  After it has rated a group of wines it invites the wineries to purchase feature space in the form of wine label images that are included with the relevant reviews.  You might assume that the editors picked the wines to receive more attention this way, but you are wrong — stop assuming!  The label images are product placements and I appreciate Wine & Spirits’ honesty in revealing it.

Wine Enthusiast has a similar policy according to the explanation I found on page 182 of the September 2008 issue.  All the rated wines appear in long unadorned columns of reviews, but some wines also show up along with label images in the colorful pages that precede the main review text.  Some of these are top-rated wines, but others are not.  Like Wine & Spirits, producers are invited to buy image space in this section of the magazine, but only after the wines have been rated so that it is clear that they are buying the image space not the review — a good policy.

Wine Spectator doesn’t sell image space.  There are highlighted pages of wine reviews with labels at the front of the ratings sections, but these are editorial endorsements rather than paid placements.  Otherwise all the listings get equal treatment in the magazine.

Mixed Messages

If you see a bottle or label image alongside a review in Wine Spectator or Decanter, it means that the editors recommend the wine.  Label/review combinations in Wine Enthusiast and Wine & Spirits are product placements. Each publication is very clear about this to protect its reputation – and I believe them when they say that their reviews are not influenced by advertising.  But the fact that there is more than one system means that readers of Wine Enthusiast and Wine & Spirits and other magazines with similar practices may sometimes confuse paid product placement with editorial endorsement.

Solution?  I think all the critics cited above are honest agents and they have the right to choose different strategies to protect their reputations while generating needed revenues.  The burden falls on us, the wine buying “principals,” to understand what sort of “contract” we have with our critic “agents” so that we know when we are viewing paid product placements.

The Wine Spectator Award Hoax

It has been a couple of weeks now since the Wine Spectator hoax hit the news. Robin Goldstein (a.k.a. fearlesscritic.com) “blew the whistle” on Wine Spectator in a session that I happened to chair at the American Association of Wine Economists meetings in Portland. (Robin actually revealed his hoax as an unscheduled prelude to a completely different presentation at the meetings.)

The wine media quickly picked up the story and now it is everywhere. The story has generated a certain amount of embarrassment for Wine Spectator and given Robin and his new book a lot of  publicity.

What Robin did was to create a fake Italian restaurant (Osteria L’Intrepido di Milano) along with a made-up menu and wine list. Then, following directions on the Wine Spectator website, he applied for an Award of Excellence, which is the way that Wine Spectator recognizes and encourages restaurants with strong wine programs. Wine Spectator tried but was not able independently to confirm the facts about the fake restaurant; they took the application on trust as an honest entry and presented it with the appropriate award in the August 31, 2008 special restaurant issue (see page 181). You can read all about it on Robin’s website for the fake restaurant, http://osterialintrepido.wordpress.com/

Where is the Outrage?

How upset should we be to discover that Wine Spectator can be tricked into giving its wine award to a fake restaurant?  Michael Morrell, my chief cheap wine research assistant, was outraged.  Although price is the most important factor for him in choosing wine, he admits that he is also influenced by wine ratings. The award hoax undermines his trust in wine critics in general and the ratings and advice they produce.

I can understand Michael’s concern, so I consider this a very serious matter, but I don’t think the fact that Wine Spectator fell for a hoax is reason for us to doubt its integrity.  Here is my report.

The Wine Spectator Award of Excellence is given to restaurants to recognize their wine programs.  Although the actual criteria for receiving an award seem very modest to me (you can read them on page 97 of the special restaurant wine issue), it is a fact that about 30% of the new entries each year fail to meet them (the success rate is obviously higher for establishments who enter and receive an award year after year).

There are three levels of award.  3254 restaurants received the base level recommendation.  802 second tier “Best of Award” ratings were given to restaurants with more comprehensive wine lists. 73 top of the line “Grand Awards” were bestowed.  The people at Wine Spectator are proud of their award program and believe that it has encouraged restaurants to upgrade their wine programs.

Caution: Economics Content

I’m sure this is true, but I tend to view the matter in economic theory terms.  Consumers have lots of restaurant options and are uncertain which ones might have good wine choices. The restaurants know how good their wine selections are but have trouble effectively communicating this to potential customers. This is the classic economic problem of “asymmetric information” and the classic economic solution is “signaling” – where one side of a potential transaction finds a way to reveal key information to the other side to help seal the deal.

Restaurants that want to attract wine enthusiast customers need a way to “signal” them about their wine programs and the Award of Excellence is one way to do this.  Restaurants that think sending this signal is worth meeting the criteria and paying the entry fee do it and get on the list.  Others, even some that have strong  wine programs, don’t bother. They have other ways to send the message, I guess.

Wine Spectator fell for the Osteria L’Intrepido hoax because it relied upon the honesty of applicants, assuming, I suppose, that no one would go to the trouble and expense of applying without a conventional commercial purpose. This is another side of asymmetric information — Robin presumably knew his motives in setting the fake restaurant “sting” and Wine Spectator could only guess or assume.

In Vino Veritas

Truth is especially important in the wine world and, because of the problem of asymmetric information, it is particular difficult to know with confidence.  We depend upon the honesty of self-interested actors and the truthfulness of their signals. When we read wine ratings or see wine competition awards, for example, we assume that the judges and critics are tasting the same wines that we buy in the market. But it would be easy for a dishonest producer or distributor to put special wines in the bottles sent to the critics or wine award competitions. The easiest switch would be to put some of last year’s highly ranked wine in place of this year’s weak effort. Most wine critics rate products that are sent to them by makers and distributors and rely upon the honesty of the sender.  Only a few – Gaiter and Brecher at the Wall Street Journal come to mind – seek out and purchase their wines through normal retail channels.

Doctored “critic cuvee” wines are a potential hoax problem.  I am not aware of any wine publications that have been hoaxed in this manner, but I have read and heard speculation about special “award cuvee” wines being entered in competitions.  The nature of the situation makes us all vulnerable to hoaxes.

Wine Spectator fell for this hoax but it wasn’t because its editors are dishonest in giving their awards.  I think most of the criticism of Wine Spectator in this situation is a bum rap, especially since the magazine’s editors seem to be unusually careful in avoiding advertising conflicts of interest.  That’s the subject of my next post.

Attack of the Super-Cuvées

I’ve been thinking a lot recently about the different strategies winemakers use to sell their products and I find myself coming back again and again to a particularly good column by Andrew Jefford in the June 2008 issue of Decanter magazine.  Jefford demonstrates how important economic factors are in shaping what gets poured into your glass.

Bordeaux, Burgundy and Super-Cuvée

Winemakers generally find themselves working with variable quantities and qualities of fruit and the individual wines made from that fruit.  What should be done if some of the raw materials are much better than others as is typically the case?  Blend them all together?  That’s what happens sometimes, especially in the less sophisticated cooperatives in Southern Europe.  The result is often a whole that does not exceed the sum of its parts.  Historically, Jefford explains, there are two dominant approaches to the problem of wine quality to take into account variable wine quality.

The first is the Bordeaux strategy.  The best lots are blended into the grand vin — the one that sells for a high price (in good years at least).  Good wines that just don’t make the cut for the grand vin go into a second label.  Lesser wines are sold off on the bulk market or even a third label.  The system is transparent, relatively consumer friendly and the wines are as good as the vintage allows.  In The Wine Advocate’s report on 2005 Bordeaux, for example, the grand vin Latour (96+ points, 12,000 cases) costs $1125 while the second wine Les Forts de Latour (92 points, 10,000 cases) is less than $200.  A third wine, designated simply Paulliac (89 points) sells for about $60.  Something for everyone, I guess, and a pretty clear hierarchy of wines, although not every Bordeaux producer listed in Parker’s guide displays such a clear link between price and apparent quality.

Burgundy provides a second model, according to Jefford.  The top wines are released as individual vineyard-designated wines and the remaining wines are blended together in to an appellation-designated wine.  I am not an expert on Burgundies, but I have seen this in Oregon, where some wineries release a one Willamette Valley Pinot Noir along with several vineyard designated wines.  This makes the wines very interesting if you are able to taste them side-by-side, but it can otherwise be confusing.  I think it shifts a bit of power to the wine critics and specialists.  But that’s fine if the terroir really comes through and the wines are significantly different.

The third strategy, which Jefford links to the Rhône, is to create a tiny amount of a sort of super-wine that is made, more or less, to gain high scores from wine critics.  I know that wine makers always say that they don’t make wines to get high scores, but a few have privately told me that big Parker numbers are so valuable that they don’t hesitate to make some wines to try to impress wine critics like RP.  Most customers won’t have a chance to buy the Parker wine, it is true, because the production is so small, but the benefits to the winery’s reputation may extend down the line and boost prices and sales of the other wines.

Money, Taste and Power

“Let’s set aside the question of income,” Jefford writes, because he is concerned with the effect of the three systems on the quality of the wine.  The Burgundy system, with its stress on terroir, makes sense when there really is terroir, but otherwise he argues in favor of the Bordeaux plan because it produces more complete wines, wines of good “disposition,” as he puts it. Wines that are good to drink.

The Super-Cuvée strategy, he fears, makes wines that are good to taste (and rate), but not to drink because they are wines of “accumulation,” monster wines, where winemakers seek high scores by adding more and more layers of identifiable attributes to the super-wine at the expense of the quality, complexity and completeness of the wines that make up the bulk of production.

On the face of it, Jefford’s critique of super-wines and the rising power of critics associated with them is based upon taste, but as the column continues it is quickly apparent that he cannot leave the wine economics out of it, because it is at the heart of the problem. The Bordeaux model doesn’t just make better wines, he suggests, but also better incomes in the long run for all producers.  The simplicity of the single Grand vin strategy makes wines more understandable and a “perfect building block,” as he says for a reputation.  He credits Bordeaux’s use of this system in part for their consistently strong reputation and ability to attract investment and maintain strong prices.  He contrasts this with the “chaos and frenzy” of the Super-Cuvées and the “false intellectual challenge” of the many single-vineyard offerings.  Pretty strong words, I would say.

The Burgundy and super-wine strategies depend in different ways on the power of wine critics (like some of those who write for Decanter).  Wine critics validate the legitimacy of single-vineyard offerings and create super-markets for the Super-Cuvées.    It would be interesting to study what factors lead winemakers, especially New World producers, to choose one approach over another.  Perhaps it is terroir.  Perhaps it is scale, training or philosophy.  Or perhaps it is access to wine critics and the power they can have in the marketplace.  Watch this space for more research on this interesting question.

Tyranny of the 100 Point Wine Scale

Wine rating systems are like the weather — everyone complains about them but no one does anything. Paul Gregutt thinks he knows why.

Wine by the Numbers

There are many ways to rate or rank different wines and consumers are very interested in trying to understand what they mean and how to use them. That’s why my column on wine rating systems, Wine by the Numbers, is one of the most popular posts in this blog’s brief history.

Twenty-point rating systems are popular in Europe in part, I understand, because that is how papers are graded in French high schools. Here in the United States the 100 point system that Robert Parker popularized and many others use dominates in part, I suppose, because that’s how our papers were graded in school. Any simple wine scoring system is problematic, however, since a good deal of information is necessarily lost when the attributes of a multidimensional product like wine are reduced to a single number. Wine isn’t like gasoline, where the critical components can be captured, like octane, in a single number.

But there are other problems, too. Paul Gregutt (PG), wine critic for the Seattle Times and Wine Enthusiast magazine, explained the limitations of the 100 point scale and the tendency toward “grade inflation” in his recent book, Washington Wines & Wineries:

This practice of promoting wine, a multi-faceted, subjective sensory experience, simply by broadcasting numbers has gradually devalued the numbers while shrinking the original 100-point scale. At first blush, such a rating system sounds generous, allowing room for a lot of subtlety in the grading curve. But in actual practice it’s not a hundred point scale at all, nor even close.

It has become a ten point scale. Wines rated under 85 are ignored completely. Wines rated 85 to 89 must be marketed as value wines – those numbers only work for wines priced at the low end of the scale. If your wine is going to sell for $15 or more, it must hit 90 points at least. One prominent retailer even makes a point of selling (at discount) wines that have scored the “dreaded” 89. Once a wine moves up the ladder from there, it becomes increasingly rare and expensive. As a result, wines scoring 95 or above are virtually unobtainable for the average consumer.

Although the ratings are “devalued” in terms of their utility, they are also “inflated” in terms of their commercial importance. It would seem that consumers might be better served if someone would re-center the scale so that it uses more of the 100 point range and is therefore potentially (and only potentially) a more accurate guide to quality. This would obviously lower the average score, however. Who is going to be the first to break the pattern and give merely good wines average scores, 70 or 75 instead of 85 so that 85 (B+) means something?

Revising the 100-Point Scale

PG decided to try in his book on Washignton wine. Instead of rating individual wines, he rated the wineries themselves in terms of a modified 100-point scale that gives marks for style (30 points), consistency (30 points), value (30 points) and the winery’s contribution to the development and improvement of the Washington wine industry (10 points).

How did the wineries rate? Quilceda Creek, with its perfect 100 Robert Parker point Cabernet Sauvignon, also got a perfect PG score (30/30/30/10). Leonetti ranked second with 98 points (30/28/30/10). So far so good. The trouble comes further down the list where some prominent wineries get scores in the 70s, 60s, and 50s. The scores make sense when you break them down into the four factors that PG evaluates, but the raw numbers are sort of shocking when you see them for the first time or out of context. (My university students know this feeling, I suspect. It happens when they get their first college papers back after several years of high school grade inflation.)

PG writes about the reaction to his winery rating on his website in a column titled “Time to Dump my 100 Point System?

Comments from readers and reviewers have been largely positive. Some have embraced my scoring; others have simply accepted it and moved on to the book’s other assets. But within the ranks of the industry itself – wineries and distributors in particular – there has been an awkward silence.

There is little doubt that this book’s sales have been seriously impacted by 1) the decision not to include 3/4 of this state’s wineries and 2) the scoring system itself. One winery veteran, after some prompting, took the trouble to explain why his winery wouldn’t sell or promote the book, even though I had given them one my highest scores.

“Our problem with promoting your book,” the winemaker said, “is that, in spite of the wonderful written praise, we’d spend all out time explaining our B+ grade.” PG is trying to decide if he should scrap his ratings for the next edition of his book (if you have an opinion you can contact Paul through his website PaulGregutt.com).

The First Mover Disadvantage

It is hard to know what to say about this. On one hand I admit that my first reaction to PG’s winery rating scale was neutral to negative, but then with some encouragement from Karen Wade I looked at it more closely and decided that it was actually pretty useful to me as a consumer — so I guess I am the source of some of the positive feedback PG received. On the other hand, I understand that no winemaker is going to take out an ad that boasts “Rated 72 by Critics!” — even if that’s a very good and appropriate rating by the scale being used.

I think we have to admit that re-centering the 100 point scale is a hopeless task and move on. The first mover in point reform will suffer the sort of criticism that PG reports. The only way to do it would be for everyone to switch scales at once. I don’t see that happening.

So what should we do about the ratings? For my part I’m going to try to get my students, who are very much into wine ratings by the time they come to me, to use the UC Davis 20-point scale. I think it might work because (1) they aren’t used to thinking in terms of 20 points and so they will have more open minds about what scores mean and (2) I like the way it breaks down elements of sensory perception: 4 points for appearance, 6 points for smell, 8 points for taste and 2 for overall harmony, according to my copy of The Taste of Wine by Emile Peynaud. Using the Davis scale will encourage them to make up their own minds about what they see, smell and taste. That’s a good thing.

In the meantime I think Paul Gregutt’s experience suggests both why the 100 point system should die and why it probably never will. My advice to Paul: keep the analysis in your book, which is terrific, but kiss the 100-point ratings goodbye.

The Sub-Prime Wine Crisis

What does the sub-prime mortgage crisis have to in common with the market for wine today? More than you might think! Read on …

Liquidity Problems

Here’s a simplified version of the sub-prime mortgage crisis narrative. A housing bubble masked the inherent risk of the mortgaged-backed securities that financed the bubble itself. Investors were unable to fully assess risk because the complicated financial vehicles were not very “transparent” and the rating agencies did not prove to be trustworthy guides.

When the crisis came, liquidity dried up and the market deflated (crashing in some cases). The solution to the problem, many think, is to increase transparency — to make it easier to figure what is in a mortgage-backed security and how to assess its risk and return.

Some wine buyers will find it easy to relate to elements of this story, according to the Project Genome study recently released by Constellation Brands (I have written about Project Genome in my post “What are wine enthusiasts looking for?”).

According to this study, the largest single group of wine consumers are”overwhelmed” by the choices confronting them and cannot adequately assess the risk they face when staring down a crowded supermarket wine aisle or endless restaurant wine list. Their “liquidity crisis” is a real one — they are afraid to invest in complicated wine products due to a lack of confidence in their knowledge and lack of transparency regarding what’s really in the bottle. Intimidated, they buy a lot less wine than other groups. They lose and winemakers lose, too.

Project Genome estimates that overwhelmed consumers represent 23% of wine buyers, but make just 13% of all wine purchases. They are the “bottom of the pyramid” of wine and many industry people figure that a fortune awaits anyone who taps this market.

Making Wine More Transparent

So what’s the best way to make the wine buying process more transparent and end the overwhelmed consumer’s liquidity crisis? Better information is one approach. Wine critics are the bond rating agencies of the wine market. Their scores give many wine buyers the confidence they need to make what really is a risky purchase. At their best, wine critics serve a useful function of reducing uncertainty about what’s in that bottle and whether it is worth the price.

But there are dozens of wine critics and their ratings, using different scales and ranking protocols, do not always agree and are not always a clear guide. How many disappointing wines have you bought because of the “89-point” rating on the shelf tag? It only takes a few highly-rated losers to discourage an overwhelmed buyer from taking a chance.

Wine critics are part of the answer, but they are also part of the problem. What other options are available? The May 15, 2008 Wall Street Journal included an interesting article by Charles Passy (the “Cranky Consumer” columnist) that examined how some wine retailers are trying to demystify wine. “For Novice Shoppers, a Little Wine 101” describes four retailers, WineStyles, Total Wine & More, The Grape and Costco, and their different marketing strategies (I wrote about Costco’s system in an earlier post, “Costco and Global Wine“).

I’ve been to a WineStyles store so I can give a personal report. The store is arranged according to wine style profiles (crisp, silky, rich, etc.) rather than varietal type, production region or retail price. So if you know you like a crisp wine, you go to that wine rack and you find wines such as Washington Riesling, Chilean Sauvignon Blanc and South African Chenin Blanc. You are directed to the style you like and hopefully encouraged to try unfamiliar types of wine. If consumers can actually figure out what they like about wine and if they develop confidence in the style categories, this system helps them make better and more self-assured choices.

Food and wine writer Cynthia Nims reports on another strategy on her blog, Mon Appétit. Cynthia discovered a line of branded wines called “Wine that Loves” that are intended to simplify the wine-food pairing choice. Are you looking for something to serve with roast chicken? Pick up “Wine that Loves Roast Chicken.” Fish tonight? Look for “Wine that Loves Grilled Salmon.”

The chicken wine is “Predominantly Garnacha” according to the label — not a wine that an overwhelmed consumer would probably risk as a varietal choice, but might try and like in this format. The salmon wine is a Pinot Grigio/Garganega/Chardonnay blend. I like this concept because it links wine to food, which is very important, and encourages experimentation. It will be interesting to see if buyers embrace it or if it is just a novelty that soon fades.

The British System of House Brands

Great Britian is the most important wine market in the world in part because British retailers have developed a number of successful strategies to increase wine buyer confidence. Supermarkets are the big players in the U.K, and house brands are key to their wine strategies. Tesco, Waitrose, Sainsbury’s and Marks & Spencer all have their own brands of wine (sourced from around the world). Buyers are willing to try an unfamiliar wine because their confidence in the supermarket chain transfers over the the wine.

(It doesn’t hurt that at least some of the house brand wines are very good, of course. A M&S house brand wine is one of the highest-rated New World Sauvignon Blancs in the current Decanter ratings, for example.)

Trader Joe’s uses this strategy here in the U.S. (I have written about this in 300 Million Bottles of Two Buck Chuck). Trader Joe’s sells vast quantities of Charles Shaw (a.k.a. Two Buck Chuck) wine each year and the key is reputation. Not the wine’s reputation — the store’s. Trader Joe’s has a reputation for value and quality, which lends credibility to their house brand wine. As I have said before, the miracle of Two Buck Chuck isn’t that you can sell a wine for $1.99, it is that you can get anyone to buy it. The $1.99 price point just screams “rotgut.” But people happily buy wine at Trader Joe’s  at price points they would never think of considering at Safeway or Kroger because they have confidence in the TJ brand.

My local upscale grocer, Metropolitan Market, is trying the house brand route, apparently with success. For the last year or so they have occasionally stocked limited-release house brand wine specials such as the 2007 Columbia Valley “White Selection #1” shown here. The wines go for $8 per bottle or $88 per case and they are stacked in big displays that remind me of, well, Trader Joe’s.

These house brand wines are kind of interesting. The first release of the year was a Rosé — hardly an easy sale given upmarket consumer resistance to pink wines (too close to White Zin!) and the chilly spring we have had — and now a white that turns out on close inspection to be an oak-free Semillon blend. I like Semillon quite a bit, but I don’t think you could sell it by the case at a neighborhood grocery store with a traditional brand name and varietal label. But “Met Market White #1” and the Rosé are products that buyers seem to embrace as safe bets and good values because of the store’s reputation for quality.

They fly out the door, according to the satisfied customers in line with me last week. You might have trouble selling them as ordinary branded varietals, but they go down easy as trusted house brand wines. The British know the wine game really well. We are smart to learn from them.

Confidence Game

Everyone is trying to solve the overwhelmed consumers’ liquidity problem. Here in the Pacific Northwest we have consumer friendly labels like House Wine (produced by the Magnificent Wine Company) and Wine By Joe, an Oregon brand. Like the Met Market generics, these are good quality upmarket answers to the question, what should I buy to drink tonight? The reputations these brands have developed for value and quality makes buying their wines a comfortable experience for many consumers. (My Costco sells the House Wines brands by the case.)

Take a close look at your supermarket wine aisle and I think you will see a lot of products designed to make wine easier to understand and buy. With so much creative energy at work here, I am confident that the needs of overwhelmed wine buyer market are being well served. Maybe they’ll stop being overwhelmed and their liquidity crisis will end. I wish I had the same confidence about the financial markets!

The [New] Emperor of Wine

I met the guy everyone thinks is the New Emperor of Wine last week at the Taste Washington event. He’s a thirty-ish fellow from Belarus via New Jersey. He was walking around in a white and green New York Jets jersey and people treated him like a god. Wine is changing and the New Emperor is part of the story. Here is my report.

The Old Emperor

The Old Emperor of Wine is Robert Parker, of course. That’s the title that Elin McCoy gave him on the cover of her book, The Emperor of Wine: The Rise of Robert Parker and the Reign of American Taste. Parker is often cited as the most influential wine critic in the world. His writing on Bordeaux wines helped make these products objects of global interest. Jacques Chirac awarded him the Legion of Honor for his service to France and her wine industry. Parker is controversial because of the perceived power of his palate. Parker has particular tastes, it is argued, and winemakers who cater to those tastes receive big Parker numbers and are rewarded handsomely in the marketplace. Those who go their own way suffer.

And yet the French hate him. Parker is one of several villains we meet in the film Mondovino. Here’s what he looks like according to an illustration I found in Slate. He looks more like a devil here than an Emperor, shoving his idea of wine down the public’s throat (or over their heads, actually).

Robert Parker is more than a wine critic, he is a business model. Parker scrupulously avoids conflicts of interest, accepting no payment from anyone with a financial stake in wine, so he must sell his knowledge and opinions to pay the bills. He does this successfully in a variety of ways including subscriptions to his magazine Wine Advocate ($75 per year in the U.S.), his frequently updated internet wine site, eRobertParker.com ($99 per year) and sales of his many books and buyers guides ($30 to $75). People will clearly pay a lot to learn Parker’s opinions. They will pay even more to meet him in person. Dinner with Robert Parker appears frequently on charity wine auction lists. I don’t think I have ever seen it go for less than $10,000 although I admit I don’t follow these things closely.

Parker’s reign is coming to an end, however, according to an article by Michael Steinberger in the current issue of The World of Fine Wine ($300 per year in the U.S. – wow!). Parker is getting older and slowing down, Steinberger writes, overwhelmed by the global expansion of the wine industry. He’s slowly turning over the chores to a stable of hired tasters with regional specialization and in the process losing his hegemony over global wine.

The X-Emperor

The New Emperor, the one I met in Seattle, represents a different business model and a different idea of wine. His name is Gary Vaynerchuk and he is director of operations at the Wine Library, a wine store in Springfield, New Jersey that is owned by his family, immigrants from Belarus. This is what he looks like, based on an image that appeared in another Slate story.

You don’t have to settle for the illustration, however, because you can see him in action on the web at his website, Wine Library TV. His daily 10-20 minute wine tasting webcasts draw a growing audience — I have seen estimates that range from 60,000 to 90,000 viewers a day. They come for a completely different experience of wine.

Click on the link above and watch one of Vaynerchuk’s wine reviews right now. Yes, do it now. His real-time reviews may change the way that you think about wine. The narrative is zany and over the top. The “tasting notes” are instant, personal, confident and detailed. I admit they make me wish that I could taste as much in a glass of wine as he does. But it’s his business and he does it with gusto. The surround sound experience (complete with the splurt as he spits into a NY Jets bucket) will either delight you or appall you, but it probably will not leave you unmoved.

Gary Vaynerchuk is to traditional wine criticism as the X-games are to the Olympics. It’s the same game, more or less, but intentionally taken to a new level. Like the X-games, I’m not sure it is to my taste, but it fascinates me. Like the X-games, I suspect it is an experience that will appeal instantly to young people who are drawn by the combination of extreme bungy-jumping pure adrenalin rush and geeky technical detail. Like the X-games, I think it is probably here to stay.

Wine Empire 2.0

The New Emperor embodies a new business model, too. Parker studiously avoids conflict of interest. Vaynerchuk accepts such conflicts as inevitable and moves on. Wine Library TV is given away free on the internet, not sold on a subscription basis (another appealing factor for young people, who often resent being asked to pay for web content). The webcasts generate business for the store, however, and for other enterprises, including a forthcoming book (101 wines guaranteed to “bring thunder” to your world).

One particularly interesting part of the New Emperor’s empire is Cork’d, a wine social networking website (Facebook for wine geeks, I guess). Cork’d aims, like Cellar Tracker, to turn the tables on wine critics by collecting reviews from wine drinkers themselves, many of whom are very knowledgeable, so that the ratings are free, interactive, and reflect the tastes of an (hopefully) informed consensus. Is it working? It is too soon for me to tell — I’ve only been experimenting with Cork’d for a few days.

Cork’d is classed Web 2.0 — shifting power from a small number of content providers to a huge user base. Lead by Emperor Vaynerchuk, the Cork’d army could seize control of the idea of wine from Parker and the others. Imagine what Parker’s staid critics would say about that! I’ll have to watch Gary Vaynerchuk to see how his empire unfolds.

What are wine enthusiasts looking for?

The Search for Wine Drinker DNA

According to the data that WordPress collects about visitors to this website, the three most frequently viewed posts on The Wine Economist are

  • The World’s Best Wine Magazine?, an analysis of Decanter magazine, part of the ongoing series on wine critics and publications;
  • Costco and Global Wine, which examines Costco’s wine strategy in the context of the three most important global wine markets, the U.S., Great Britain and Germany, and
  • Masters of Wine (and Economics), which is about the prestigious Masters of Wine (MW) qualification and the importance of wine economics in its curriculum.

(Other popular posts include my discussions of global climate change, problems in Australia, rising wine prices, and the Hong Kong and Chinese markets.)

What can we learn from the fact that these three posts get the most hits? A closer examination of the WordPress data show that many visitors to this site are looking for information about the “Best” – the best wine, the best wine price, the best wine magazine and so forth. The search for the best and not just the good seems to be very important.

Wine enthusiasts also seem to be searching for credible authorities – people and publications that can guide them and tell them what to buy and drink.

Not unrelated to this is in the interest in Costco (and Trader Joe’s) and other retailers that seem to make the choice concerning good wine or good value wine a little simpler. Costco is now the largest wine retailer in the U.S., as the blog post explains, and it does this in an unexpected way – by giving consumers fewer choices than a typical upscale supermarket (about 120 different wines at typical Costco versus more than 1200 different wines at your supermarket), but also giving them more confidence in the choices that they make.

Project Genome

Visitors to The Wine Economist reflect many qualities that research by Constellations Brands (the largest wine company in the world) has uncovered. The study is called Project Genome, which suggests that it is an attempt to sequence wine drinker DNA. Wines and Vines reports that

The original 2005 study of 3,500 wine drinkers was one of the largest consumer research projects ever conducted by the wine industry. The new study examined the purchases of 10,000 premium-wine consumers–defined as those who purchased wine priced at $5 and higher–over an 18-month period. While the first Project Genome study asked online survey participants to recall their wine purchases during the last 30 days, the Home & Habits study tracked the actual purchases of Nielsen Co.’s Homescan® consumer purchase panel, which employs in-home bar code scanners and surveys to map consumer buying behavior across a demographically balance

Nielsen measured consumer attitudes and purchase behavior within multiple purchase channels, including warehouse clubs, supermarkets, mass merchandisers, drug stores, liquor stores and wine shops. The scan data were supplemented with online interviews to classify consumers by Project Genome consumer segments identified in Constellation’s original study: Enthusiasts, Image Seekers, Savvy Shoppers, Traditionalists, Satisfied Sippers and Overwhelmed.

The largest group of wine consumers are the Overwhelmed (23% of consumers). They are described as

  • Overwhelmed by sheer volume of choices on store shelves
  • Like to drink wine, but don’t know what kind to buy and may select by label
  • Looking for wine information in retail settings that’s easy to understand
  • Very open to advice, but frustrated when there is no one in the wine section to help
  • If information is confusing, they won’t buy anything at all.

The second largest group are Image Seekers (20% of consumers). They

  • View wine as a status symbol
  • Are just discovering wine and have a basic knowledge of it
  • Like to be the first to try a new wine, and are open to innovative packaging
  • Prefer Merlot as their No. 1 most-purchased variety; despite “Sideways,” Pinot Noir is not high on their list
  • Use the Internet as key information source, including checking restaurant wine lists before they dine out so they can research scores
  • Millennials and males often fall into this category.

Traditionalists (16% of consumers)

  • Enjoy wines from established wineries
  • Think wine makes an occasion more formal, and prefer entertaining friends and family at home to going out
  • Like to be offered a wide variety of well known national brands
  • Won’t often try new wine brands
  • Shop at retail locations that make it easy to find favorite brands.

The Savy Shoppers (16% of consumers)

  • Enjoy shopping for wine and discovering new varietal s on their own
  • Have a few favorite wines to supplement new discoveries
  • Shop in a variety of stores each week to find best deals, and like specials and discounts
  • Are heavy coupon users, and know what’s on sale before they walk into a store
  • Typically buy a glass of the house wine when dining out, due to the value.

Satisfied Sippers make up 14% of consumers. They

  • Don’t know much about wine, just know what they like to drink
  • Typically buy the same brand–usually domestic–and consider wine an everyday beverage
  • Don’t enjoy the wine-buying experience, so buy 1.5L bottles to have more wine on hand
  • Second-largest category of warehouse shoppers, buying 16% of their wine in club stores
  • Don’t worry about wine and food pairing
  • Don’t dine out often, but likely to order the house wine when they do.

And, finally, Wine Enthusiasts are the smallest group, accounting for just 12% of all wine buyers. They

  • Entertain at home with friends, and consider themselves knowledgeable about wine
  • Live in cosmopolitan centers, affluent suburban spreads or comfortable country settings
  • Like to browse the wine section, publications, and are influenced by wine ratings and reviews
  • 47% buy wine in 1.5L size as “everyday wine” to supplement their “weekend wine”
  • 98% buy wine over $6 per bottle, which accounts for 56% of what they buy on a volume basis.

The Fortune at the Bottom of the Pyramid

Not surprisingly, Wine Enthusiasts and Image Seekers account for nearly half of all wine sales while Overwhelmed consumers purchase disproportionately little wine. While wine magazines find a ready market at the top of the pyramid, retailers and wine companies probably view the Overwhlemed as the potential “fortune at the bottom of the pyramid.” There is a lot of money that can be made if wine can be simplified (or these consumers educated) so that they move up the wine buying ladder.

Visitors to The Wine Economists seem to fall into three of Constellation’s categories: Enthusiasts, Image Seekers and the Overwhelmed based upon the limited and superficial “most popular post” data reported here. It will be interesting to track further Project Genome results as they are released and to see how Constellation Brands uses this information in its wine market strategies.

Wine in Restaurants: Recent Trends

mainpage_april08.jpgEach year Wine & Spirits publishes a special issue that reports the results of their annual survey of wine sales in restaurants — information of more use to trade professionals, I imagine, than to wine lifestyle readers. Although the sample is relatively small — 309 Zagat -ranked U.S. restaurants participated in the 2008 survey — and restaurant wine sales are probably unrepresentative of broader market sales, I still find the trends reported here to be of interest, especially since many of them reinforce data I have found elsewhere.

More and More.

Some of the trends are unsurprising to any restaurant wine-drinker. The importance of wine in restaurants continues to grow — over 70% of the restaurants reported that wine was a larger percentage of their total sales in 2007 compared with 2006. More restaurants are paying more attention to wine and wine-drinkers and increasing sales accordingly. A second non-surprise is this: restaurant wine costs more. More than 60 percent of the surveyed restaurants reported that the average price of the wine they sold increased in the last year. Personally I have been staggered at the price of wine in some restaurants recently. There are both demand and supply drivers behind this trend.

Restaurants have an incentive to raise wine prices, of course, but nobody forces diners to buy the stuff. Some of the price increase is demand-side — educated (or status-seeking) wine consumers choosing more prestigious and expensive bottles. Smart restauranteurs and their sommeliers take advantage of the wine boom by offering interesting and hard-to-find wines, which attract wine enthusiast diners and generate higher revenues. So higher prices are the result of education, enthusiasm and strategic behavior. We pay more because we are willing to pay more, up to a point at least.

Even Less is More

The falling dollar is another part of this trend. Cheap dollars mean that restaurants have to pay more for imported wines, which drives up costs and prices. The pass through effect of the exchange rate changes is not yet complete, however, so you can expect even higher prices in the future. Rising wine costs are a supply-side driver of higher wine prices generally. The recent trend to more wines from Argentina and Chile is partly a reflection of the fact that the dollar has not fallen quite so far relative to these currencies, so South American wine is a relative bargain.

The weak dollar also affects the demand side. Many of the surveyed restaurants are located in transnational hub cities where international travelers are a significant factor. Foreign tourists and business travelers take advantage of the weak dollar to treat themselves to otherwise more expensive wines when they dine in the U.S., thus driving up the price averages. This is not an insignificant factor for many of the upscale urban eateries that participate in the Wine & Spirits survey.

Prices continue to rise for even the most inexpensive restaurant wines. About 35 percent of the restaurants reported that they have increased the price of the least expensive wine on their list in the last year. In my experience, however, no one ever orders the least expensive bottle on a wine list. The real indicator would be the price of the second cheapest bottle. I imagine that it costs more now, too.With the price of wine edging up relentlessly it is not surprising to find that restaurants and wine drinkers are paying more attention to by-the-glass sales. More restaurants are offering more wines (and more interesting wines) by the glass as well as the bottle. The average price reported by the survey rose to a new high of $11.05.

The trend toward rising wine prices is not likely to slow very much in the future (see my previous post about The End of Cheap Wine), but this trend is not uniform across the entire wine list. Surveyed restaurants reported steep declines in sales of Merlot and Chardonnay, for example, and flat sales of Cabernet Sauvignon. Average sales prices actually declined for Cab and Merlot. Pinto Noir prices and sales have increased again, as you might expect.

Hot or Not?

No sales trend data were reported for two supposed “hot” wines: Riesling and Syrah. Riesling is the sommelier’s favorite, according the Wine & Spirits (and I don’t disagree), because it is so food-friendly, but it does not seem to be an important factor in restaurants sales. I have my own theories about this, but no facts, so I won’t speculate at this time. I’ll try to find out more at the Riesling Rendezvous that Ste Michelle Wine Estates is organizing this summer.

The case of Syrah is interesting, too. Wine & Spirits says that there was a Syrah/Shiraz boom a few years ago, but that it has faded and Syrah has now settled into a minor niche-role on the restaurant wine list. I suppose that this reflects the changing circumstances of Australian wine (see The Wizards of Oz) more than anything else since so many people identify Australian wine with Shiraz and vice versa.

The fact that Riesling and Syrah don’t figure prominently in restaurant sales suggests to me that restaurant buyers as a group are less adventurous than you might think. Rather than using an unfamiliar wine list as an open invitation to experimentation I think they might on average be looking to avoid making a faux pas, either in terms of the wine they choose or the social signals that they send to the others seated around the table with them. Wine trends in restaurants might, therefore, lag behind wine trends generally rather than leading them. Or it could be that restaurants believe that their patrons are unadventurous and wine lists reflect this, focusing mainly on old standbys rather than hot trends. The result would be the same in either case.

If this is true then Riesling and Syrah will move up on the restaurant wine lists, if they do at all, only after they have become more prominent in other wine venues. Or at least winegrowers in Washington State should hope that this will happen. Because, my goodness, we seem to be making a lot of Riesling and Syrah!

The Martha Stewart Wine System

march-2008-cover.jpgWine Enthusiast magazine celebrates its 20th anniversary with the March 2008 issue and editor and publisher Adam Strum reflects on the changing market in “The Enthusiast Corner” column. He writes that

“I’d like to think Wine Enthusiast played an important part in helping to bring wine to the attention of the American public at large, and not just the elite, over these 20 years. Wine magazines, books and the rise of food television have all undoubtedly played a role in making America a wine drinking nation. Other factors abound: American cuisine at home and in fine dining restaurants underwent a renaissance, and wine naturally became an important part of that. News of wine’s health benefits enlarged its consumer base. But most responsible for the growth of wine is the incredible leap in terms of overall quality at the same time that wine became more affordable. How often does that happen? Name me one consumer product that can compare.”

I think he is right in all this. Wine’s vigorous growth in the United States is a complex phenomenon. Many factors have contributed to the rise in per capita consumption in the United States and other New World markets at the same time that wine drinking has fallen dramatically in the Old World. The wine media’s role may be an under-appreciated element of this phenomenon.

The Supermarket as Home Depot with Wine

My friend Patrick works the wine aisle at a local upscale supermarket and he constantly delights me with his original insights into consumer behavior. He sees cable TV’s influence everywhere, for example. People watch Trading Spaces or the home remodeling network HGTV, he says, and run out to Home Depot for wallpaper and remodeling supplies. A huge industry has been built around their media-driven passion to renovate and restore. People watch the Food Network, he says, and run to supermarkets for exotic ingredients — and the wine to go with them. Wine is scattered throughout the store, not just in the wine aisle, to make the idea of a sophisticated meal (one that would please the Barefoot Contessa) a convenient choice.

Wine, in other words, is a lifestyle product that is promoted by lifestyle media like cable TV and lifestyle magazines that encourage and enable consumers to develop adventurous, sophisticated, consumption-driven identities. I don’t mean this in a bad way, although I know it sounds pretty bad. It’s just a fact. The magazine racks at Borders are filled with lifestyle magazines. You probably read a couple of them yourself. Even serious newspapers like the Wall Street Journal and Financial Times now have thinly disguised weekend “lifestyle” sections. Don’t pretend you don’t know what I mean!

Wine Enthusiast is a particularly good lifestyle magazine — there is a reason it has lasted 20 years. One factor in its success is that globalization has helped the wine market expand, providing more choice at affordable prices. Mr. Strum writes that

“New regions such as Australia, New Zealand, Chile, South Africa and others new to a global industry muscled their way on to the world stage. Competition drove improved methods in the winery and the vineyard. Competition also drove prices down at the middle and lower tiers.

“The world wine map has been redrawn so dramatically in the past 20 years it’s almost unrecognizable. Back then, it consisted of France, Italy, Spain and, way off in the margins, California. Now you must include Oregon and Washington State, not to mention the other New World countries I mentioned above. Every state in the union now produces wine. Countries like China and India are ramping up production in numbers that boggle the western mind.”

Martha Stewart Wine

Globalization has certainly made wine more interesting and wine drinkers can appreciate the value and variety. It would be a mistake to think that the wine media are passive observers of this phenomenon, however. It is in their interest to promote the industry that they cover and to try to profit from every aspect of it. You aren’t surprised when cable television networks expand outside the box, are you? They sell advertisements on their programs along with videos of the shows, books, lectures and assorted types of lifestyle paraphernalia. Think Martha Stewart! (And yes, there really is a Martha Stewart wine — made by Gallo).

Wine critic publications do the same thing — they have adapted the Martha Stewart System to lifestyle wine. I will focus on Wine Enthusiast here because it is their anniversary, but they are not an unusual example. Wine Spectator, Decanter, Gambero Rosso and most of the others have commercialized the wine experience in the spirit of Martha Stewart.

Mr. Strum describes Wine Enthusiast’s expansion this way

“Wine Enthusiast, as a company, has evolved dramatically over the past 20 years, too. In addition to the success of our catalog and our magazine, we have created an events division that is an astonishing success. We now annually produce four Toast of the Town events to introduce American consumers to wines that are available in their markets. These walk-around tastings, held in spectacular cultural venues, offer a sample of each city’s restaurants, accompanied by tastes of the portfolios of 70 wine companies. These events help educate and expand the palate of the American consumer, and to reinforce wine’s place at the table.”

Wine Enthusiast is more than a magazine, it is a lifestyle system. It sells magazines, of course, plus wine-related products through their catalog and website, produces wine events and so on. It informs, enlightens, educates and enables. A Wine Enthusiast cable network (or YouTube.com channel) would be the next logical step.

Even the magazine is commercialized in perhaps unexpected ways. Everyone knows that wine magazines sell lots of advertisements, of course. The editors always say that they don’t let advertising dollars influence their ratings, and I actually believe them — although market forces obviously do have some influence over the wines that they choose to consider for their reviews. National magazines need to pay attention to wines that are in national distribution. And these are the wines that are featured in the ads.

Wine Enthusiast takes one more step into commercial waters, however. The magazine includes a monthly Buying Guide that provides 100-point ratings and thumbnail reviews of dozens of wines. (I actually find their reviews to be very accurate, by the way.) But just before the long list of ratings there is section where a smaller number of wines are featured, with images of their labels for easy supermarket identification. These are the wines you will remember if you scan through the magazine quickly. I have always assumed that these were featured wines, selected by the editors for their good value or wide availability.

Imagine my surprise, then, when I started reading the fine print about how Wine Enthusiast rates wines and discovered that the labels are in fact “paid promotions.” Wineries can’t write the reviews or designate their products “best buys,” but they can pay to have them highlighted in the illustrated section! I wonder if that is true of other wine magazines? I’m going to be reading the fine print a lot more closely now so that I have a better idea of what is editorial content in the wine press and what is “paid promotion.”

Martha Stewart has only recently entered the wine business (with Paul Newman close behind), but it seems to me that the Martha Stewart system of total lifestyle marketing is already here. Hmmm. I wonder if that’s a good thing?

Masters of Wine (and Economics)

imwlogo.gifPeople always seem surprised when I tell them that I’m a wine economist, that there is an American Association of Wine Economists and even a Journal of Wine Economics. I don’t know exactly how they think about wine, but they don’t seem to consider it in economic terms — until they start talking to me, of course.

Wine is a business and if you want to understand what’s in your wine glass, where it comes from, how it got here, and why you paid so much (or so little) for it, you have to learn a little wine economics. This is true even for the most famous names in wine.

Masters of Wine

The most respected title in the world of wine is Master of Wine (MW). It is a title that you wear proudly, appending it to your name like this: Jane Hunter, MW. I would say that it is the Ph.D. of the wine world except that it seems to be harder to get than a Ph.D.

The MW is not a degree given by Harvard or Yale. It is a special designation created by the Institute of Masters of Wine, a 50-year old London-based, industry-supported non-profit organization dedicated to wine education. The MW program was originally created for British wine traders, who obviously needed to be very knowledgeable to succeed in their profession, but it eventually expanded both in occupational and geographic terms. Today there are 264 Masters of Wine in the world scattered across 22 countries. Not surprisingly, Britain remains the center of MW membership and activities, reflecting its central position in the world wine market generally.

Some of the world’s most famous wine critics and winemakers hold the MW designation. Jancis Robinson, Michael Broadbent, David Peppercorn and Serena Sutcliffe are famous MW wine critics, for example. Among the winemakers who have earned the MW title are Steve Smith and Jane Hunter in New Zealand and David Lake and Bob Betz here in Washington State.

It’s hard to get a Masters of Wine. You need to work in the wine industry for at least 5 years and take preliminary studies at a major wine research center such as UC Davis, the University of Bordeaux, Geisenheim University in Germany or the University of Adelaide. Then, once admitted to the MW program, you have to pass exams in four theory areas, stagger successfully through three 12-wine blind tastings, and write a 10,000 word dissertation on a topic relevant to the wine industry. (Jancis Robinson’s dissertation, I understand, was a very complete study of the world’s grapes and wines which was published in book form as Vines, Grapes and Wines: The Wine Drinker’s Guide to Grape Varieties. It is one of my favorite wine reference volumes.)

Master of Wine Economics

I’m not planning to apply for a MW myself (I’m quite sure that I would not survive the blind tasting trials), but I’m interested in knowing what wine experts think they need to know about wine economics, so I’ve been reading the MW syllabus. It is full of wine economics.

The first two papers MW candidates must write deal with the theory and practice of wine production. The syllabus says that …

The purpose of this unit is to assess candidates’ knowledge and understanding of wine production. An understanding of the processes of grape growing and wine making should be complemented by knowledge of the science which underlies the practical issues. Candidates should be aware of the implications for wine style, quality and costs of decisions taken at each stage of wine production. An awareness of areas of active research in topics relevant to wine production will be necessary. Whilst region specific questions are unlikely, candidates will require a broad background knowledge of the world’s wine regions and wine styles. The examples given in answers should demonstrate a familiarity with a variety of wine regions. Candidates should know how issues such as finance, economics, law, general management, quality assurance/quality control and the environment bear on wine production.

You can see how much the business of wine enters into the understanding of wine. The third paper is even more closely focused on wine economics:

The purpose of this unit is to assess candidates’ current knowledge and understanding of financial, commercial and marketing aspects of the international wine industry. Candidates should demonstrate the ability to apply their knowledge to a range of business situations including marketing and investment strategies, financial decision making, supplier – customer relationships and strategies for identifying and meeting consumer demand. Candidates will require a broad background knowledge of wine industry structures around the world and how these relate to one another.

The fourth paper is written on contemporary issues. Then comes the blind tasting and dissertation. You can see why the MW is so hard to get and why it is so valuable. MW holders understand wine from the vine roots up to the global market structures. I can’t say that wine economics is the most important element in the curriculum, but it certainly is a key component.

It looks like wine economics accounts for about a third of the MW syllabus. That makes sense to me, both given the MW’s clearly commercial original purpose and more generally given the influence of economics on the wine industry today.

A New Wine Designation

Robert Parker does not have a MW, but he and Kevin Zraly have recently launched their own wine certification program. I haven’t looked into the Parker/Zraly program in detail but it seems to be aimed at wine enthusiasts more than wine professionals and I’m not sure how much wine economics is included. Here is a brief description.

The Parker & Zraly Wine Certification Program consists of three certification levels. After completing all eight examinations of Level I – Aficionado of Wine (AW) (launching September 20, 2007 with the Wines of France exam), wine lovers can gear up for the March 2008 launch of Level II – Connoisseur of Wine (CW). The most advanced, Level III – Expert of Wine (EW), will debut in September 2008 and will challenge even wine experts and professionals. Levels I and II consist entirely of online examinations. Level III will include a written exam as well as a meeting with Robert Parker and Kevin Zraly for a blind wine tasting and oral examination on wine.

I hope Parker and Zraly include a good dose of wine economics in their EW exams. I don’t see how you can really understand the world of wine without it.