Who’s Gaining Ground in the U.S. Wine Market? Georgia, Naturally

January 27, 2026 By Mike Veseth in emerging wine regions, wine, wine history 2 Comments

The opening scene of season eight episode one of the insanely popular Netflix series “Somebody Feed Phil” finds our hero, Phil Rosenthal, breaking a sweat in a Georgian vineyard, trying (and failing) to keep up with the women who are working around him.

Although much of the action takes place away from the vineyards in Tbilisi, the Georgian capital, wine is never far below the surface and it often takes center stage. No surprise. Georgia’s traditional amber qvevri wines symbolize the qualities of Georgian people and culture, rooted in tradition, drawing on deep reserves of resilience and determination. Somebody Feed Phil is really a show about family (don’t you agree?) and wine is integral to Georgia’s family life.

You might be surprised to find Georgian wine on Netflix. If so, you would probably be even more surprised to learn that many of the show’s viewers probably reacted by saying, Georgian wine? I’ve tried that. And I like it.

Georgia, Naturally

Georgian wine is on the rise here in the U.S. market, albeit starting from a relatively small base. Wines of Georgia reports that Georgian exports to the U.S. have increased at a 15.5 percent compound annual growth rate from 2021 to 2024. That’s impressive growth under any circumstances, but especially noteworthy given the overall decline in the U.S. market. What’s behind this phenomenon?

Part of the answer is that Wines of Georgia and its partners are working very hard to tell the story of Georgia, with its 8000 years of wine history. The current campaign, “Georgia, Naturally” draws inspiration from Georgia’s reputation for natural wines (made in the traditional qvervi clay vessels). It does not hurt that images of Georgia highlight the qualities that make it a popular nature and adventure tourism destination.

Wines of Georgia is investing heavily in education programs in the U.S., working to bring Georgian wines and their stories to dozens of events across the country. That’s why I think that many Netflix viewers won’t be discovering Georgian wines for the first time.

Hurdles and Headwinds

Distribution is a major hurdle for imported wines and that is perhaps especially true for small-production wines from unexpected places made with unfamiliar grape varieties. Some Georgian producers have apparently addressed this dilemma by forging partnerships with Total Wine & More through its Winery Direct program.

Our local Total Wine store lists 41 different Georgian wines (most are Winery Direct products) in its inventory. Isn’t that amazing? There is a particular aisle in our local store that features wines from off-the-beaten-path areas and Sue jokes that it has become the Georgia aisle in recent months. Being on the wine wall doesn’t guarantee success, but it is hard to sell what isn’t there.

Sue and I visited Georgia a few years ago for a United Nations wine tourism conference. We arrived full of questions and with a few doubts, but we came away persuaded (you can read about our adventures here). We were impressed with many of the qvevri wines because of the tension we sensed in each glass. They really tasted alive.

But we also learned that there is much more to Georgian wines than we expected, both in terms of style and the many (hundreds!) of indigenous grape varieties that, like Georgia itself, have survived through the centuries. Resilience is an important Georgian quality.

Bubbles, Amber, Red

Sue and I recently hosted a Georgia-inspired dinner for friends who have a particular love for and appreciation of these wines. We tasted three wines. We started with a Mtsvane Estate Pét-Nat from Kakheti, a bright sparkling white wine. This is the second Georgian sparkling wine we’ve sampled (both from Mtsvane Estate) and both were delicious.

Next came the 2023 Vazisubani Estate 3 Qvevri, a blend of the indigenous Rkatsiteli, Mtsvane, and Kisi grape varieties. Fermented and aged in qvevri, this “white” wine is really amber from the extended skin contact and a bit of a trickster. The color suggests strong flavors but the wine is quite subtle in the glass.

The hit of the evening was the 2021 Vazisubani Estate Saperavi Qvevri. Saperavi is the Georgian grape that is probably best known here in the U.S. market (thanks in part to Finger Lakes pioneer Dr. Konstantin Frank, who introduced the Saperavi grape to the U.S. many years ago). This wine was the perfect complement to our meal and, because Vazisubani Estate is part of Total Wine’s Winery Direct program, it is widely available. (Our particular local store, however, was “sold out” when we last checked.)

Saperavi is a good place to start, but the amber qvevri wines might be where you want to finish because these seem to be the wines that Georgians drink most of all (as you can see in this video trailer for a film called “Our Blood is Wine.“)

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But wait. There’s even more!

Georgia was the focus of season six, episode three of the popular video series “V is for Vino.” You can view the episode here or on the V is for Vino YouTube channel.

Dark Clouds and Silver Linings

January 20, 2026 By Mike Veseth in Unified Wine & Grape Symposium, wine, wine history, wine markets Leave a comment

I have been busy getting ready for next week’s “State of the Industry” session at the Unified Wine & Grape Symposium in Sacramento. The theme of the Unified in 2026 is “Reframe the Narrative.” There was a lot of bad news about the wine business in 2025. Where are we headed in 2026 and beyond? How can we get out of this rut?

This is my 15th consecutive year on this panel and I thought it would be interesting to look back at my first presentation, which was in 2012. It took some fiddling to find the files, but here are the slides I presented back then along with my unedited and very rough presentation notes.

If you take a few minutes to read through this material, you’ll notice that while the wine business environment was very different back in 2012 in terms of the headlines, many of the detailed concerns were similar to today. Margins were tight then, for example, and tight now, too, but for very different reasons.

Economics is called the dismal science, so I suppose that dark clouds and silver linings are always on the cards. The more things change the more they stay the same in that regard. I think my final point (Boulding’s Law) has held up pretty well, don’t you? Here’s my 2012 report.

The State of the Wine Industry 2012: A Global Perspective

I study globalization and wine so I am here today to start off this session with a global perspective on the state of the industry.

Wine has always been a global industry, or as global as trade barriers and transportation costs allowed.

It is not an accident that when David Ricardo wrote his economics textbook almost 300 years ago, the example he used to illustrate international trade was the wine trade.

It has always been important to have a global perspective on wine but now more than ever. The wine world has become a tight little world where international and global effects cannot be ignored.

Today’s session will have a good deal of good news — a lot more than in some recent years. As an economist, however, it is my job to channel Alan Greenspan back when he warned about the dangers of “irrational exuberance.”

Silver linings do not always come wrapped in dark clouds, but sometimes they do. And it is important to understand them and to think strategically about them.

A Dangerous Phase

One silver lining is growth. The US economy should continue to grow in 2012, although perhaps more slowly than in 2011. And the wine market should continue to recover.

But the dark cloud that surrounds this is the global economy, which has entered a “Dangerous Phase” according to the International Monetary Fund. The global economy will grow this year but more slowly than before and with the largest single economic area — the European Union — likely falling into recession.

GLOBAL GROWTH SQUEEZE

And so economic leaders will be desperately looking for growth … and where will they find it? Consumers do not seem able to carry the load, especially with the housing crisis still unresolved.

Business investment is also inadequate due to poor future expectations and tight credit market conditions.

Government is handcuffed by its own debt and politically gridlocked as well.

So this leaves exports and we can expect nations to push for every competitive advantage for their products to try to grab the growth they need.

EXCHANGE RATES

This explains why exchange rates will be especially volatile in 2012. The US has successfully run a secret “weak dollar” policy for the past few years and now other countries are following suit. Competitive depreciations or currency wars are likely as more countries try to use exchange rates to grasp the growth they desperately require.

WILD CARDS

There are many wild cards that could turn dark clouds into silver linings or vice versa. The most troubling wild cards are the US and the European Union. Will US growth stall? And how will the election affect economic policy?

The questions are even more serious for Europe. How deep will the recession be and will Germany be part of it? And, of course, will the Euro survive in its present form? Big questions.

A Tight Squeeze for Wine

This combination of silver linings and dark clouds will create a Tight Squeeze for the wine industry. Let me explain how these pieces fit together.

A TIGHT SQUEEZE FOR WINE

These global economic factors in combination with the particular dynamic of the wine industry produce the conditions for what I am calling a Tight Squeeze for wine.

INCREASING COMPETITION

Competition is increasing all along the supply chain. There is more competition for wine grapes and bulk wine and more competition as well for those markets and market segments high decent margins.

THE BIG SQUEEZE

Wine maker margins will feel A Big Squeeze.

You will hear a lot today about the competition for wine grapes and bulk wine. Short market conditions are pushing up prices in many key market segments.

Wine producers naturally want to pass along higher costs to consumers but this is problematic in many market segments. Slow economic growth combined with buyers who see discounted prices as the new normal means that some producers will be squeezed out of some markets because of shrinking or even negative margins.

The squeeze will put increased emphasis on lower cost alternative sources of grapes and bulk wines and on those brands and market segments where margins can be maintained or perhaps even increased.

CURRENCY SHIFTS

The exchange rate shifts I talked about a minute ago will impact the Big Squeeze in several ways, creating both silver linings in the form of lower import costs and also dark clouds due to greater import competition.

The dollar is likely to continue to increase in value, but exchange rates are the most difficult thing to predict in economics and it is impossible to tell for sure how individual currency values will be affected. There will be silver linings for some, I’m sure, and clouds for others.

WILD CARDS: CHINA

There are many wild cards in the Big Squeeze scenario, but the biggest is certainly China. Economic growth will slow this year in China, but how much? The worst case scenario would be for Europe’s recession to be deeper than expected and the US recovery to stall. In this case China’s growth could fall dramatically.

How would this affect wine? Well, the direct effects would be rather small I think – slower growth in an otherwise rapidly growing market.

But the indirect effects would be significant. If China’s industrial production slows so would its raw material purchases, which would hit the Chilean Peso, Australian dollar and perhaps the South African rand particularly hard.

What’s the Best Way to Prepare for the Future?

And finally I suggest for your consideration Boulding’s Law, named for Kenneth Boulding, the great economist. Boulding once conducted a study of the history of the future — he looked back in history to see what people thought would happen in the future and then he fast forwarded to find out if they were right.

His conclusion. When the future finally came around, people were generally surprised — even when it was exactly what they expected.

Hence Boulding’s Law: the best way to prepare for the future is to prepare to be surprised!

Wine and the Ghosts of Christmas Past

December 23, 2025 By Mike Veseth in Oregon wine, wine, Wine Competitions, wine history Leave a comment

I was trying to think what Sue and I could give to Wine Economist readers for Christmas. We decided to re-tell this story about a completely different Christmas gift from many years ago. I’m not sure why, but I think it makes sense. We hope you enjoy it.

Grape Transformations: Oregon Origins

The Wine Economist / November 8, 2011

I had a hidden agenda when I visited McMinnville, Oregon a few weeks ago. Ostensibly I was there to talk about my new book at Linfield College and to the local Rotary Club. Those events were great but I would not have been happy if I hadn’t done one more thing: return a minor piece of Oregon’s wine history to its rightful home.

“To Nick, Cheers for all the years — past & future. David Lett, Christmas 1989.”

That is the inscription I found in a second-hand bookstore copy of Vintage Timelines, a neglected classic book that Jancis Robinson wrote over twenty years ago. The idea of the book was to select a group of the world’s greatest wines and examine how different vintages have evolved (and would be expected to continue to evolve) over time. The research required Jancis to taste trough verticals of each great wine (research is such a drag!) and compare notes from previous years to create complex and quite fascinating graphical timelines.

Darn few American wines were good enough (in terms of their ageing potential) to make the cut and only one wine outside of California — the Eyrie Pinot Noir Reserve made by David Lett. Lett planted the first Pinot Noir vines in the Willamette Valley and he, along with the group they call “the Pioneers,” set Oregon wine on its present course.

Nick’s Back Room

The Nick in the inscription is almost certainly Nick Peirano of Nick’s Italian Cafe. Lett’s audacious egg was incubated and eventually hatched by the Pioneers and others over countless discussions in Nick’s back room. I’ve loved owning the book, but felt it didn’t belong to me. I needed to take it home and give it back. But to whom?

My first thought was my friend Scott Chambers, a professor at Linfield College and a friend of both Nick and the Lett family. He’d love to have the book, I thought, but it didn’t really belong to him any more than me. Maybe Jason Lett, David’s winemaking son who is carrying on the Eyrie tradition and building upon it? Yes, that would make sense.

But then I learned about the Oregon Wine History Project at Linfield College and that sealed the deal. They were pleased to add our copy of Vintage Timelines to their archive as a document chronicling the Eyrie Reserve’s early international recognition as well as the role of Nick’s back room in the region’s early development. Jeff Peterson, Director of the Linfield Center for the Northwest, accepted the book and both Scott and Jason supported the decision.

A Remarkable Story: David Lett (and the Pioneers)

David Lett is one of my heros and I am including him in my “Grape Transformations” list of people who have changed the way people think about wine or wine regions. He was certainly instrumental in the transformation of Oregon from a place known for fruit and nuts rather than grapes to a region frequently mentioned in the same breath with Burgundy.

Lett’s story is remarkable. Trained at UC/Davis, he came north looking for terroir where he could make Pinot in the Burgundian style. The first Pinot vines were planted in 1965; 1970 was the first Eyrie Pinot vintage. After one or two false starts he hit paydirt. Great wine.

But from Oregon? Rainy old Oregon probably seemed like the last place on earth to make world class wine in the 1970s.

Olympic Gold

Then came the Wine Olympics of 1979. This was a competition, sponsored by the French food and wine magazine Gault Millau, that featured 330 wines from 33 countries tasted blind by 62 judges. The 1975 Eyrie Pinot Noir Reserve attracted attention by placing 10th among Pinots. A stunning achievement for a wine from a previously unknown wine region.

Robert Drouhin of Maison Joseph Drouhin, a Burgundy negociant and producer, was fascinated and sponsored a further competition where the Eyrie wine came close second behind Drouhin’s own 1959 Chambolle-Musigny. Thus was Eyrie’s reputation set (and Oregon’s, too). It wasn’t long before Domaine Drouhin Oregon (DDO) was built in the same Dundee Hills as Eyrie’s vineyards — a strong endorsement of the terroir and recognition of the achievement.

The Pioneers founded the Oregon wine industry, but now the torch has been passed to a group that you might call the Sons [and Daughters] of the Pioneers. Some of them appear in the video at the top of this post (don’t be discouraged by the poor audio at the start — it gets better quickly). I’ll have something to say about this group in an upcoming post.

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Special thanks to Scott Chambers and Jason Lett for their hospitality during our stay in McMinnville.

Book Reviews: Sacred Wine, Stikky Wine, Kinda Like Wine

December 16, 2025 By Mike Veseth in book reviews, wine, wine education, wine history Leave a comment

A lot of the wine books we receive fall into a few familiar categories. Here are brief reviews of two “category buster” wine books (plus one about Sake) that give a new spin on tried, true formats.

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Emily Stimpson Chapman, Sacred Wine: The Holy History and Heritage of Catholic Vintners. Marian Press, 2025.

The history of wine and the history of the Catholic church are deeply intertwined. Sacred Wine wants you to understand and appreciate this history and learn a few lessons along the way.

The lure (if wine isn’t enough) is the collection of beautiful photographs that makes this a book that’s probably going to start off on the coffee table. But the stories, which are well told, are so interesting that it is likely to move to your nightstand or reading chair before too long.

Twelve wineries scattered over France, Italy, and Spain provide twelve opportunities to explore church and wine history. All of the wineries have been molded in some way by the Catholic faith, often starting as monasteries, but in other respects they are quite different. Some are famous (Burgundy’s Chateau de Vougeot). Some make wines that are nearly impossible to taste unless you visit the winery, but others (Abbazia di Novacella) are widely distributed. Some of the wineries are very old indeed while others are unexpecxtedly modern. All are beautiful, as these photos demonstrate. Each tells a different story about God, wine, and history.

The Marian Press is the imprint of the Marians of the Immaculate Conception and they intend with this book to inform about wine and the church and to encourage readers to perhaps visit these wineries and to sample their wines or ones like them.

It is kind of inspiring to think, as Sacred Wine encourages you to do, that the liquid in your glass means something more; that it connects you somehow to something altogether more important. Not your typical coffee table wine book.

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Andrea Reibel, Stikky Wine. Laurence Holt Books, 2025.

There are a lot of variations on the “introduction to wine” book genre, but Stikky Wine is a new twist. Or new to me, in any case.

The idea is not to teach novice wine drinkers everything they need to know about wine. It is to give them a few basic tools that they use to each themselves. It is part of a small series of “stikky” books on different topics that focus on information that “sticks” and not the stuff you read and forget.

The concept reminds me of Father Guido Sarducci’s famous Five Minute University, which promised to provide a complete college education in five minutes time. How? By only teaching the stuff that sticks; the things you still remember after five years. As a recovering professor I have mixed emotions about the Five Minute University, but I find the idea of Stikky Wine very appealing.

Stikky Wine introduces the idea of wine tasting through wine’s aromas, initially focusing on fruit aromas that most readers will be familiar with. There are some aromas closely associated with white wines and other for red wines. These aroma ideas are then applied to three red wines (Pinot Noir, Merlot, Cabernet Sauvignon) and three white wines (Riesling, Sauvignon Blanc, Chardonnay). The simple framework permits a number of variations and applications so that the reader has some idea of how wines differ and why. Significantly, readers are encouraged to set their book down and do wine instead of just thinking wine.

The second section builds on this by adding sensory concepts like body, acidity, tannins, and other types of aromas (including those associated with wine faults). Six aroma families, three sensory elements. Pretty basic tools, but important ones. An epilogue ties things together followed by Next Steps with more detailed information and references designed to propel the reader forward.

The format is user-friendly. It is almsot a flip book, with lots of illustrations, minimal text, quizzers, reviews, and so forth. It reminds me a bit of the sort of flash cards you might use to study a foreign language except the focus is on doing, not just memorizing.

Stikky Books says its products are tested thoroughly and really do help readers get from zero to sixty in wine understanding in about an hour. I can’t vouch for that because I’m not a beginner making new discoveries, but it seems like a plausible claim.

The thing to do would be to give the book to someone starting out and see what happens. It might be an excellent $12 investment, don’t you think?

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Eric C. Rath, Kampai: The History of Sake. Reaktion Books, 2025.

Sake isn’t wine. It isn’t rice wine either, although I have heard it explained that way. Sake is Sake.

Sake is one thing, but it is also many things and that’s what makes it kinda like wine (as this article’s heading suggests). Some people are drawn to the complexity and variety. Others are turned off (or even freaked out) by the myriad variations. Wine is the same in many ways. How do we invite the intimidated into the tent without scaring them away? It’s a problem.

Eric C. Rath’s new book opens the door with history, told is an approachable way. Readers get drawn into the story and pretty soon the complications start to make sense. It doesn’t hurt that the heavy coated stocks makes the beautifuyl illustrations pop of the page.

Rath is a professor of premodern Japanese history of the University of Kansas. I’ll bet he is an excellent teacher because his book is clear and interesting and taught me a lot I didn’t know about Sake and about Japan. Rath uses history very effectively to teach about Sake and, I suppose, Sake to teach about history. Sacred Wine (see above) uses wine to teach about history and faith. Glad to welcome both these books to the wine (and kinda like wine) bookshelf.

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Bodegas Tradición & Gonzalez Byass: The Jerez File (Part 2)

July 1, 2025 By Mike Veseth in Spain, wine, wine history, wine markets Leave a comment

This is the second part of our report on the five very different wineries that Sue and I visited during our brief stay in Andalusia. Click here to read the first half of the story.

Bodegas Tradición and Bodega Gonzalez Byass

We’d like to finish with an exercise in compare and contrast involving the smallest winery we visited (Bodegas Tradición) and the largest (Bodega Gonzalez Byass).

Big barrel rooms and small libraries were featured in both wineries. The barrels are easy to understand. Sherry wine ages in ranks of barrels called soleras, which slowly transform the wine and develop its special character. It is impossible to produce great Sherry any other way.

But before we surveyed the barrels we visited the small rooms at both wineries where records are stored. Time is integral to Sherry production and so is history. They recognize that the company records are important historical documents.

Gonzalez Byass, the largest Sherry producer and the only one still in family hands, was founded in 1835 as a shipper focusing on the British market. You will probably recognize its famous Tio Pepe brand. Like Port and Bordeaux, Sherry’s development was shaped by the fact that export markets could be reached by sea more economically than domestic markets that (until the arrival of trains) required costly and cumbersome land transport. Amazingly, the business has remained in the Gonzalez family through seven generations!

All in the Timing

The roots of Bodegas Tradición go all the way back to 1650 when Bodegas CZ (for the initials of the founder) was formed. The records room was filled with antique ledgers that told the story of the winery and the region. Exports were key here, too. The winery was named supplier to the British crown (1771) even before it received the same honor from the Spanish royal family (1887). One entry (I think it was from the 17th century) detailed exports to China!

Bodegas Tradición did not have a smooth journey through the Sherry industry’s booms and busts and was re-founded in 1998 as Bodegas Tradición CZ by Joaquín Rivero, who located the winery in an old building in the historic center of Jerez. It was, as I understand it, an attempt to revive the producer and rescue a particular way of making Sherry and the old soleras necessary for that process. Production is small both because the firm is relatively small (especially compared with Gonzalez Byass) and also because so much volume is lost a little at a time to the “angel’s share” during the long aging process. Time is the essence of Bodegas Tradición.

The Gonzalez Byass campus, Bodega Tio Pepe, sits prominently on a hill, next door to the cathedral and just below the Alcázar de Jerez de la Frontera and Mezquita. Production is spread over a number of big buildings and there are tourist and hospitality facilities along with the Hotel Bodega Tio Pepe, where Sue and I stayed.

From Jerez to the World

It is interesting to compare and contrast the two producers by visiting their retail wine shops. Tradición radiates age and time. The Sherry wines and brandies are old and older (and almost insanely old) and command prices that are high when you think about it in bottle terms and cheap when you consider the time, history, and quality of the experience. It reminds me of a lunch we had in Seville at Bar Casa Plácido, where the proprietor was so proud to serve Tradición wines.

The wine shop of Bodega Tio Pepe is larger and brighter and reveals the company’s depth in Andalusia and breadth across Spain and increasingly around the world. The wall of wine and spirits brands from around the world (and the corresponding list you can find online) is really astonishing. Just as ships once set out from Seville and Cadiz to explore he world, Gonzalez Byass has charted a global course: Austria, Australia, Chile, Spain, France, Hungary, Italy, New Zealand, and South Africa. And that is just for wine. You can add the U.K. if you include spirits such as a Sherry-cask-aged gin!

Final Thoughts

The ships that forged Spain’s Age of Discovery set sail from this region (Seville and Cadiz). There is much exploration going on here now. Bodegas Tradición explores the past without losing touch with the present. Bodega Gonzalez Byass embraces the world of wine while firmly rooted in family and Jerez.

I thought I knew a bit about Sherry before we visited Jerez and maybe I did, but there is so much to learn and we love learning! But maybe the most surprising thing we discovered here is this: I have always seen Sherry as a special wine, something different from others in terms of both production and sensory perception. And it is unique.

But from an economic perspective, the Sherry industry is not so different from wine in other parts of Spain and the world. The booms and busts that the five Sherry houses we visited have navigated and the very different courses they have charted to their current success provide lessons that apply far beyond the Sherry Triangle.

Five Faces of Andalusia Wine (Part 1)

June 17, 2025 By Mike Veseth in Spain, wine, wine history, wine markets Leave a comment

Sue and I recently spent more than two weeks in Andalusia, Spain, about half of the time exploring the wine scene and the other half enjoying the region’s history and culture.

We covered a lot of territory and were a little surprised that the dominant feature of the landscape was not grape vines as you might expect, but olive trees! As far as the eye can see. Olives everywhere! We even visited an olive oil cooperative and learned that the main factors that lead an olive oil cooperative to either success or failure are much the same as those we observe in wine cooperatives.

But we came for wine. We tried to pick wineries that were very different from one another and so would together give us a more complete picture of this fascinating wine region. Let us tell you a bit about each one over the next two weeks.

Bodegas Alvear

Our first stop was Bodegas Alvear in the Montilla-Moriles region near Cordoba. The wines made here are much like Sherry but of course cannot be called Sherry because they are not in the Jerez D.O. (Confusingly, Pedro Ximenez grapes from Montilla can be made into Sherry wine by producers located in Jerez. PX grows really well in Montilla but struggles in Jerez.)

Alvear makes up for the absence of a famous appellation by having a famous brand. Indeed, Alvear is both the oldest winery in this area and one of the most respected in all of Spain. I haven’t seen many Montilla wines at local shops, but I have seen the Alvear PX Reserva, which I remember as the very first Robert Parker 100-point wine we tried (the current release is rated 98 points).

We had an excellent tour and tasting at Alvear and were impressed with the combination of tradition and innovation that we found there. The tradition is obviously the classic wine styles such as Fino and the PX. The innovation takes many forms. Important today is the development of non-fortified wines such as the refreshingly light El Rebate we sampled at the tasting and the complex red Palacio Quemado shown here that we were served a couple of nights before at La Montillana restaurant in Cordoba.

But maybe the most important innovation is the Alvear Vermut. Alvear is one of the pioneers in making Vermouth from Sherry-style wines. Alvear’s Vermut is popular (it was listed as “The Classic” at a Vermut bar we visited in Madrid) and has opened up opportunities for other producers in the region.

Bodegas Williams & Humbert

Bodegas Williams & Humbert occupies a vast industrial space on the edge of Jerez. The barrel room sort of takes your breath away. This is the home of famous brands such as Dry Sack (the go-to aprétif of White House dinners in the 1950s) and Canasta Cream Sherry among others.

We were there because of the memory of a dinner we had 20 years ago at a restaurant called La Madonnina del Pescatore in Senegalia, Italy. At the end of a fabulous seafood dinner we were served glasses of Don Zoilo PX. This was probably our first PX and it simply blew us away. You know how some wines are impossible to forget? That was the Don Zoilo PX and it is made by Williams & Humbert. We had to visit.

(Aside: According to their website, La Madoninna del Pescatore no longer serves the Don Zoilo PX. They offer a Williams & Humbert PX instead. The PX seems to have stood the test of time!)

We toured the winery and tasted through the wines. It was quite an experience because each of the many brands and styles and different aging treatments. Every time we thought we’d found our favorite we encountered something new and delicious. This is not a bad problem to have.

It was at Williams & Humbert that we first saw the light wood barrels surrounded by traditional black barrels. The black casks age Sherry (many of them were signed by celebrities including all four Beatles when they visited the winery years ago). The light wood barrels also contained Sherry, but the point was to condition the wood for eventual use in production of Sherry-barrel-aged Whiskey.

It was also at Williams & Humbert that we first realized the significance of Brandy to many Sherry producers. Sherry is a fortified wine, so stills are a common sight. Brandy is often produced in addition to the spirits that fortify Sherry. This Brandy is popular in Spain and other countries including Mexico and the Philippines. The Brandy market is so important for Williams & Humbert that the company is actually co-owned by a Spanish family and a Philippine firm that markets the Brandy there.

It is interesting to consider how a sip of PX at a restaurant on the Adriatic coast could lead us to such an interesting experience.

Bodegas Lustau

It wasn’t hard to convince us to visit Bodegas Lustau, which is a well-known brand in the United States. The bottles and labels are attractive, the wines are full of character, and the products are well-priced and widely available. Lustau was always on our list and our Jerez friends encouraged us as well because a visit to Lustau gives a glimpse of Sherry history and tradition. Our tour started in a conference room overlooking the big barrel cathedral. That’s got to be one of the best office views in the world.

Originally a family business, Lustau has weathered the booms and busts of the Sherry game. In 1990 it was acquired by the Luis Caballero Group, a Spanish family-owned company specializing in wine and spirits. With strong backing, Lustau has both expanded its Sherry business and also ventured into Vermut, Brandy de Jerez, vinegar, and Sherry casks for spirits.

The Lustau wines are impressive and we spent a very happy hour barrel-tasting with our host. But what I remember best is the importance of branding. Building the Lustau brand was important right from the start, especially in the export market. Indeed, Lustau was better known abroad than in Spain until recently. The advent of Sherry-based Lustau Vermut, wildly popular in Spain and now available in the U.S., too, brought the brand to the attention of the Spanish market.

I guess the success of Lustau Vermut shows that the company hasn’t lost its ability to create and develop successful brands. The winery hosts about 10,000 visitors a year, 40 percent from Spain and 60 percent from abroad.

Last week we analyzed the strategies that Andalusian wineries use to broaden and deepen their businesses while avoiding the boom-bust cycle. It is interesting to see these strategies at work at Alvear, Williams & Humbert, and Lustau. It is even more interesting to see the power of brands in this industry. Each of these wineries has succeeded in part by creating and maintaining powerful brand identities, some with global reach.

How Sherry Went from Boom to Bust to Today

June 10, 2025 By Mike Veseth in Spain, wine, wine history, wine markets 1 Comment

We published an article here at The Wine Economist a few years ago, asking “Can Sherry be the Next Big Thing?” “Probably not,” we said. “But it doesn’t have to be. It is a timeless wine waiting to be re-discovered by a new generation of wine drinkers.”

I’m glad we didn’t go too far in our assessment of Sherry’s potential back in 2017 because Sherry producers who have been around for a while are cautious about booms because they know they can be followed by busts. That was one message we heard when we met with César Saldaña, the President of the Sherry D.O. Consejo Regulador, the industry organization that makes and enforces the rules that govern Sherry production and promotes the product, too.

A Sherry boom? Not a good idea, he told us. Sherry has a history of booms and busts, and what it needs today is stability to build a foundation for the future.

UK Supermarket Boom

Sherry’s most recent boom occurred in the 1980s when British supermarket wine sales were growing so fast. Britain has long been the key export market for Sherry wines, and the surge in sales of inexpensive private label Sherry combined with government subsidies to encourage exports caused the industry to explode. How big was the boom? Vineyard area increased from about 7000 hectares to over 20,000 hectares!

Booms are often followed by busts, and Sherry sales have fallen. The crisis came in 1986-87 when Spain entered the European Union and the flow of subsidies suddenly dried up. Sherry’s diminished reputation made it difficult to command prices necessary to sustain production without government assistance.

It has taken a while, but vineyard areas are finally back in the 6000 to 7000 hectare range again. Consolidation has occurred, with the large bodegas growing and acquiring brands as the number of independent producers has fallen. Cooperatives, which account for about half of total production according to my sources, sell young base wines to the big bodegas where they are aged, blended, bottled, and sold.

Sherry Crystal Ball

What does the future look like for the Sherry industry in this market environment? We will answer this question in more detail next week, when we look at five specific wineries and their particular strategies. But here are some general patterns we observed.

Innovation: Think about Sherry as an ingredient and not just a beverage. Sherry-based cocktails were featured in that Financial Times article about Sherry’s chic appeal, for example, and a popular drink hereabouts is Fino and Sprite or 7-Up. It is called Rebujito.

And then there is Croft Twist Fino Spritz, a delicious white spritz wine that blends Fino Sherry with elder flower, lemon, and mint cordials, along with sparkling water. It reminded us a little of the White Port Spritz drinks we enjoy in Porto. Finally, Sherry can be the base of delicious Vermut (Vermouth) drinks, which is another growing category.

Non-fortified wines. If fortified wines have plateaued, as they have in Spain and also in Portugal, attention naturally shifts to unfortified wines, which are seen as an opportunity for both growth and diversification. As noted last week, Sue and I found the red wines we sampled (made by Alvear and Gonzalez Byass wineries) more interesting than the white wines we sampled with a couple of exceptions (Forlong Blanco from Cadiz, for example).

Spanish brandy. Sherry wines are fortified with spirits, so stills are everywhere in the Sherry Triangle, and brandy production is common. Spanish brandy is popular both in Spain and in the Spanish-speaking world. In fact, I think brandy from Jerez is probably better known and more popular in some places than the region’s signature Sherry wine. It is an important source of revenue for the Sherry producers we met.

Sherry barrels. Forget the wine. Sometimes it is the barrel customers want. If you have ever toured a Sherry house you know that the barrels are painted black, so when you see a bunch of unpainted barrels they really stand out. And we saw many of these barrels because whiskey aged in Sherry barrels is a popular beverage these days. Sherry firms age their wines for a period in new barrels that they profitably sell to whiskey makers. It is interesting that some consumers who would probably not drink Sherry wine want to enjoy Sherry’s influence in this way.

Wine tourism. Jerez is a popular destination with good tourist facilities. The sherry bodegas receive about 240,000 visitors today. The region hosts many fairs and festivals and, when we were there, MotoGP races at the Jerez circuit that once was home to Formula One competitions. You can find Jerez wine tours out of both Seville to the north and Cadiz, a popular cruise ship port, to the south. Many Sherry houses have ambitious wine tours and hospitality programs with restaurants and even hotels (we stayed at the Hotel Bodega Tio Pepe, for example, and dined at the winery’s Pedro Nolasco Restaurant).

Multi-region wine businesses. Finally, we have noticed in Spain (and in Italy, too) the tendency of wine businesses to build a portfolio of wineries across different regions. The ability to fill efficient production and distribution pipelines with a variety of products can be an advantage if done well. The addition of Sherry to a Spanish wine portfolio makes as much sense today as linking Port and Sherry producers together (think Sandeman or Osborne) did at an earlier stage.

César Saldaña is right. Sherry doesn’t need to boom (and bust) to succeed. There are many ways for the industry to broaden and deepen without supercharging sales. Next week, we will examine several case studies to see what paths individual producers are taking to move beyond boom and bust.

Field Notes from a Visit to the Sherry Triangle

June 3, 2025 By Mike Veseth in Spain, wine, wine history, wine markets, wine tourism 1 Comment

Sue and I recently returned from three weeks in Spain. We spent a few days in Madrid (where we dropped in at FEV General Assembly meetings), but most of the time in Andalusia, home of Sherry and Montilla-Moriles wines. Great wines, good food, and welcoming people. We soaked up a lot of information (and wine, too).

This is the first of a brief series of Wine Economist columns about our experiences and what they tell us about these wines and their wine market more generally. We begin with a “field notes” column, a kaleidoscopic collection of observations meant to give you a sense of what we saw and heard on the wine road in Spain. More focused articles will follow shortly.

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Sherry, which is fortified, is from the Jerez-Xérès-Sherry region and made from Palomino, Pedro Ximénes, and Moscatel grapes. The Sherry Triangle is the name given to the Jerez D.O., the only region where true Sherry wines are made. The “triangle” is roughly defined by lines connecting the cities of Jerez de la Frontera, Sanlucar de Barrameda, and El Puero de Santa Maria, where the wineries are located.

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People like to say that wine is made in the vineyard, but in the case of Sherry, what happens in the cellar is key. It is difference in cellar processes more than grape quality or variety that determines what type of Sherry will be in your glass. In this regard, Sherry may be more like Champagne and Port.

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About half of our time in Spain was focused on wine; the other half on the history, culture, and people of Andalusia. We visited five wineries chosen to give us a view of the wine industry’s diversity in this region.

Bodegas Williams & Humbert, the producer of Dry Sack, Don Zoilo, Canasta, and other brands.
Bodegas Lustau, whose Sherry wines are widely available in the U.S. market.
Bodega Gonzalez Byass, maker of a wide range of products both in Spain and around the world, including the famous Tío Pepe brand.
Bodegas Tradición, a relatively young winery making very old wines.
Bodegas Alvear in the Montilla-Moriles region near Cordoba. The Montilla wines are kissing cousins of Sherry, but can’t wear the official Sherry seal.

We enjoyed conversations with many wine industry people including Susana Garcia Dolla of OIVE, César Saldaña of the Sherry D.O. Consej0 Regulador, and Mauricio Gonzalez-Gordon of Gonzalez Byass. We benefited from advice from our friend George Sandeman. Many thanks to everyone who hosted us, answered our questions, and helped us get the most out of our visit.

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We usually taste wines with trade groups, not “civilian” consumers, so we were very interested to see what would happen when we accompanied a typical tour group to Bodegas Alvear. We first tasted a light, fruity unfortified white wine and then three of the traditional wines: Fino, Olorosso, and Pedro Ximenez. At the end of the tasting the question was asked: Which ones do you like? All hands went up for the fruity white. Only a few hands were raised for Fino and Olorosso with a few more for the PX.

The wines were great (Alvear is the oldest winery in Montilla and one of the best in Spain). The wines from Montilla-Moriles focus more on Pedro Ximenez, which grows there the best, with similar techniques but they not generally fortified. Very hot temperatures, very ripe grapes, high natural alcohol levels. That’s the story of Montilla.

The fruity white, which is called “El Rebate” after the step at the entrance of a Montilla house, is meant a welcoming gateway to the world of wine. It was a familiar taste to our touring friends and they loved it.

The Fino and Olorosso presented them with unfamiliar tastes, dryer, nutty, without fruit notes. The excellent PX, an Alvear speciality, was really well balanced, but sweeter than our new friends were accustomed too. Sue and I loved it. Most of our friends didn’t understand it or the other traditional wines very well.

The same wines at a trade tasting would probably have an entirely different ranking from the civilian group. We report these results because they help explain why Sherry (and the similar Montilla) wines are unlikely candidates for broad consumption. They are different and it takes a little effort to understand and appreciate them. It is effort well spent, but a barrier nonetheless.

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Sherry is not one specific wine. Many styles, many aging regimes: Fino, Amontillado, Manzanilla, Oloroso, Palo Cortado, Pedro Ximénez. Cream sherry (made sweet by the addition of rectified grape must or, even better, sweet PX wine) is what people think Sherry is, but isn’t. Lucious PX is sweet but balanced. One of the most memorable tastes of the trip was at a Taberna la Montillana in Córdoba where we were served a Bodegas Toro Alba Don PX 1955 at the end of the meal. Amazing.

However, Sherry is often stereotyped as a sticky, sweet apéritif that granny drinks at Christmas, which might be an insult to Sherry, granny, and Christmas! But most Sherry wine produced is dry, the style preferred in Andalusia. It reminds us of the problem that Riesling confronts. Riesling is too sweet, people say before they have even tasted it. But most Riesling that we encounter today is dry or off-dry.

Some Sherry wines are sweet, of course, just as some Riesling wines are sweet. In Sherry’s case the stereotype probably results from very popular and widely distributed brands like Harvey’s Bristol Cream, which are sweet; people generalize from that experience. Getting people to embrace dry Sherry can be as hard as getting them to try dry Riesling.

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Sue and I had an “ah ha” moment at Bodegas Tradición. We were tasting through their wonderful wines. Did we want to try the Cream Sherry? We hesitated (which is not like us). Maybe not, we said. Cream Sherry has a bad reputation (see above). Well, try our Cream Sherry. And it was great, a blend of Amontillado and PX with superb balance. We had to abandon our prejudice. Back home, we bought and enjoyed some Harvey’s, too. Time to review stereotypes for Sherry and more generally!

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As in the Douro Valley, there is a movement in Andalusia to produce more non-fortified wines using the traditional grape varieties. Sue and I were on the lookout for these table wines during our visit and we were a bit surprised by what we found. We expected white wines because Sherry grapes are white. But we were disappointed with the white wines we found. It seems that Palomino does not ready yield really great wines (I am sure there are exceptions because we only had time to taste a few of them.

The red wines we tried surprised us. First came a Palacio Quemado Crianza produced by Bodegas Alvear from an old vine Tempranillo vineyard north of Seville. Distinctive, wonderful with the traditional foods of Córdoba. Then we enjoyed the Finca Moncloa, produced by Gonzalez Byass in the Cadiz region. It is a special project designed to preserve and promote the native Tintilla de Rota grape. The blend of native and international grape varieties was terrific both times, especially with roast lamb.

From Sharecroppers to Superstars: Family Wineries in Italy

December 10, 2024 By Mike Veseth in Antiinori, Family Wineries, Italian wine, wine, wine history, wine markets 1 Comment

The arc of the Italian wine industry bends towards quality in the 21st century, something that has become increasingly clear to Sue and me as we have visited many of Italy’s important wine regions in recent years.

Quality has not always been Italian wine’s guiding star, however. Piero Antinori’s 2014 book The Hills of Chianti traces the 20th-century transformation of Italian wine from quantity to quality that continues today. The role of forward-thinking family wineries and their intense focus on quality from the vineyard to the cellar and beyond comes through on every page.

We recently sampled wines from two of our favorite regions — Romagna and Piemonte — that illustrate Antinori’s hypothesis about the link between quality and family-owned wineries.

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Rediscovering Romagna

I was reminded of Antinori’s book recently when we were invited to taste wines from Romagna, a region that extends from the Adriatic coast inward toward Bologna. We enjoyed these wines, mainly Sangiovese di Romagna and Albana di Romagna, when we lived in Bologna years ago (I was a visiting professor at the Johns Hopkins center there).

The wines were perfect with the city’s rich cuisine. We look for them here in America, but they are hard to find. I once asked one of the Colli Bolognesi winemakers about the problem and he just pointed over the hill. Tuscany, he said. Tuscany (and Antinori, I guess) get all the attention. We mostly sell our wines at home.

But the bending arc can have many effects and it seems to me that the rising quality of Italian wine offers wine drinkers around the world new opportunities, both within Tuscany (as Antinori’s book suggests) and in other parts of Italy, too.

All in the Family

So we were excited to taste the Romagna wines of Poggio della Dogana and Ronchi di Castelluccio, wineries owned by the brothers Aldo and Paolo Rametta. The Rametta family does not have centuries of history in the wine business like the Antinori family, but they are firmly rooted in the Romagna region. After working in other industries (finance and renewable energy), Aldo and Paolo Rametta found it impossible to resist scratching the itch to return home to work with the land. Wine, of course, but not just wine. They are interested in agriculture and bring family business values to their work.

Poggio della Dogana was their first investment in 2016; then an unexpected opportunity appeared in 2020 to purchase Ronchi di Castelluccio, the very well-known maker of Sangiovese di Romagna. We know the latter winery because their Le More Sangiovese di Romagna is a wine we can sometimes find here at home to pair with Sue’s authentic Bolognese ragu.

Everybody and Nobody

We couldn’t resist sampling the Ronchi di Castelluccio Buco del Prete Romagna DOC Sangiovese Modigliana, made with grapes from a vineyard carved into a forest clearing in 1989. We paired the wine with roast chicken (which we often have with Pinot Noir) and I think the combination made us appreciate the elegance of the medium-bodied wine and the complexity that lingered on the finish. An excellent wine. We can’t wait to try the Ronco della Simia, made with grapes from an even older vineyard.

We loved the Sangiovese, but I admit that the Poggio della Dogana Belladamaa Romagna DOCG Albana Secco stole our hearts. Why? Quality was part of the answer, of course. Albana is a white wine that thinks it is red, with good body and memorable herby notes on the finish in the case of the Belladama.

We often enjoyed Albana wines when we lived in Bologna, but we always thought of it as a simple, easy wine, not something that can be serious. So tasting a next-level Albana got our attention.

But, if I am honest, it is also something that Aldo Rametta said on a Zoom call. Everyone drinks Albana in Romagna, he said, but no one drinks it anywhere else. And it is true. But maybe a wine like this at a time like this can change things. In fact, quality white wines from up and down Italy are now finally getting attention and developing followings in export markets.

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Tenuta Carretta was founded in 1467 when sharecropping arrangements were formalized for the estate north of the city of Alba. As Antinori’s book explains, sharecropping remained the dominant organization for Italian agriculture into the mid-20th century and in wine the turn towards quality only gained strength when the difficult transition from sharecropping was complete. In all its long history the Carretta estate has changed hands only a few times. The winery’s website explains that

In 1811, after 350 years, the property passed from the Marquis Damiano to the Count of Roero, who cultivated it for 120 years. In 1932, he gave the estate to the Veglia family of Turin. In 1985, the property finally passed to the Miroglio family from Alba, founders and owners of the textile group with the same name.

The Miroglio family’s commitment to the winery strikes me as very much fitting into Antinori’s ethos and the Rametta brothers’ work in Romagna. The Miroglio family have roots in the Langhe. Their apparel empire began there before expanding around the world. Their purchase of Tenuta Carretta almost 40 years ago seems to have been about family and tradition and they have invested considerable time and effort to develop distinctive wines that reflect the particular terroirs of Roero and the Alta Langa. Each wine is meant to be unique to its time and place, to bend the arc even more toward the quality pole.

Tenuta Carretta makes the great red wine varieties of Piedmont, so it is noteworthy that the samples they sent us were white wines: the Roero Arneis DOCG Riserva “Alteno della Fontana” and the Langhe DOC Riesling “Campofranco.” Interest is rising in white wines these days and many consumers are searching for distinctive wines, so we welcomed the opportunity to taste these wines.

The Roero Arneis DOCG Riserva was a wonderful wine, refined and elegant. It is a proper reserve wine having spent 24 months aging on lees and a further year resting in bottle. The Riesling was a completely different experience, however.

You might be surprised to see a Riesling from Piemonte, but we know a few other Piemonte winemakers who produce Riesling because they just love this noble grape variety and cannot resist the temptation to see what it will produce here. It seems that a great deal of effort was necessary to make this Riesling a reality. A special terroir was discovered in a long-abandoned vineyard area (“franco” in the name “Campofranco” means “unused”). It is kind of extreme terroir and the cellar treatment is distinctive, too. The result is a wine that Sue said she wouldn’t have guessed to be a Riesling. Lots of minerality, a whiff of petrol that quickly disappeared. Fascinating and delicious. Kinda wild, too. Worth seeking out as are all the Tenuta Carretta wines we have tried.

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At the end of Piero Antinori’s book, he peers into the future and sees the outlines of what is recognizably the wine world of today, where consumption quantities are falling, wine quality is rising, the family wine firms are stronger than ever. He was right about quality and about the challenges he saw ahead for the wine market generally. Time will tell how family wineries fare in the global and local market adjustments that lie ahead. These seem like just the sort of challenges that family wineries are built for.

Bordeaux Bloodbath? Grubbing Up Deja Vu

September 24, 2024 By Mike Veseth in economic crisis, wine, wine history, wine markets 1 Comment

You’ve probably seen the news from Europe. The headline on Politico read, “Bordeaux bloodbath! France pays winemakers to dig up vines.” The French government has allocated €120 million to subsidize the removal of as many as 30,000 hectares of grape vines in the Bordeaux region due to unfavorable market conditions, according to EuroNews. That’s about €4,000 per hectare. The Bordeaux program is part of a bigger plan to take as many as 100,000 hectares (out of a total of 800,000) out of production.

It seems to me that the numbers are both big (100,000 hectares removed?) and small (€4,000 per hectare). American growers will rue the fact that they generally don’t receive subsidies from anyone when they are forced to grub up vines. The French are both lucky and not.

Grubbing up is a hardy perennial. France isn’t the only country that has to pull out surplus vines today and this isn’t the first time, either. I looked back in The Wine Economist archives to see when the topic of grubbing up first appeared on these pages. Here is what I found. You’ll note that I was skeptical about the EU program when I wrote this back in 2008. New Zealand’s earlier vine-pull scheme turned out well, I noted, but ripping out vines is only a temporary fix unless there are associated policy and structural changes to alter the market balance. I expect the same holds true today.

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Grubbing Up / The Wine Economist / May 6, 2008

Grubbing up is one of my favorite wine economics terms. It means to pull the vines up by the roots and replace them with other agricultural crops. It is a harsh term, just as it sounds, because it is the opposite of wine — it is anti-wine. Grubbing up isn’t something that a wine lover contemplates with ease, but sometimes it is necessary. The European Union’s Council of Ministers has recently finalized a grubbing up scheme for the EU and it is probably a good idea, even if it may not work.

Watering Down the Wine Lake

The problem is that EU wine production vastly exceeds demand with the result that thousands of liters of wine must be bought up by the EU each year and distilled into alcohol to prevent prices from dropping through the floor. The distillation price support only encourages continued production, waste and expense. It is a mess — a wine lake, as people say — and it has to stop.

A fairly radical plan was introduced a few years ago, one that would have paid farmers to grub up thousands of hectare of vines and introduced market reforms to allow (by deregulating) and to encourage (through supporting programs) European winegrowers to compete more effectively with New World winemakers who are taking their markets.

The package that the Council of Ministers agreed last week is significant even if it is less radical than the original initiative (Decanter magazine called it “watered-down” — never a good thing when you are talking about wine). The program called for subsidies to encourage winegrowers to eliminate up to 175,000 hectares of vines (versus 400,000 hectares in the original proposal), limit chaptalisation (the addition of sugar in the wine-making process) rather than eliminating it, and market-based reforms that encourage and enable winegrowers to compete on world markets (through varietal labeling of wines) rather than hide behind protective barriers.

I’ve been reading up on the details of the final EU plan and it is pretty interesting. The program includes money for grubbing up, of course, and deregulation of wine labels, removal of some vine planting restrictions (so marketable grape varieties can replace uneconomic grubbed up varietals), funds for wine promotion abroad, and so forth. Like any EU program, it is a complicated balance of economic reality, fiscal feasibility and political necessity.

The idea is to help the European wine industry transition to a new market environment, where export markets are growing, domestic markets shrinking and competition is fierce. It is not unreasonable to think that policies like this could work. They worked in New Zealand in the 1980s, for example.

Lessons from Kiwi Wine History

New Zealand today is famous as one of the great success stories in the world wine market. A small nation in an unlikely location, it punches above its weight in the global wine market, holding the title as champion exporter. Not in quantity, obviously, but in price. New Zealand has the highest average export price of any wine producing country.

But such was not the case 25 years ago. New Zealand suffered from a surplus of mediocre wine that could only be sold domestically behind high protective barriers. The industry collapsed with many failed firms from a combination of bad wine and surplus production. The government paid to grub up vines and then opened the market to international competition. Cheap but better wines from Australia flooded in to fill the domestic bulk wine market, leaving New Zealand producers only one choice — make better wine for export. They have done so brilliantly. Their success inspires the EU reforms.

It would be a mistake to think that what worked so well in New Zealand in the 1980s will work equally well in Europe today. It is unlikely that the EU would be willing to let its wine sector reach the sort of crisis that New Zealand experienced and that motivated the dramatic reforms implemented there. If big change comes from big crisis, as I believe (I wrote a book on this theme), then Europe is unlikely to see big change. The social cost of crisis is just too great. The guiding principle of EU policy is to prevent crisis, which makes change that much harder to effect.

Comparing New Zealand to Europe is problematic in other ways, too. New Zealand’s wine production is tiny — a drop in the bucket, really — whereas European producers account for well more than half of all the wine in the world. New Zealand’s grubbing up program may have been difficult, but only 1500 hectares were uprooted rather than the “watered-down” 175,000 set for the EU.

Changing the Rules of the Game

The principle of the EU wine reform scheme is sound, yet many reports that I have read are pessimistic. I think this is mainly because the final reforms are so much more timid that the initial proposal. But there are other reasons for concern.

One thing that economists have learned over the past 25 years is that institutions matter. This is another way of saying that economic forces do not always produce the same results. If the “rules of the game” are different the laws of economics will produce different results. Institutions are the rules of the game in life. Dani Rodrik, my favorite development economist, makes this point in his recent book One Economics, Many Recipes. The nature of local institutions, public and private, formal and informal, shapes the economic landscape in important ways.

This idea applies to the EU reforms in particular. Take the grubbing up scheme, for example. An incentive to repurpose large but unprofitable vineyards in Australia, for example, might well meet with an enthusiastic response because the institutions of wine growing there are different, with large vineyards and a consolidated industry. But European vineyards are much different and represent a completely different model.

Many vineyards (where much of the inferior surplus wine originates) are tiny inherited plots of a hectare or so, frequently on sites with few viable alternative uses. The rules of the game here are much different. A hectare might produce 20-30 tons if badly overcropped and, at perhaps $500 per ton at the local cooperative, gross revenues are too small for a family to live on but too great (compared to alternative uses) to give up. It’s an institutional trap that might be solved by consolidation, but making large vineyards out of these scattered small plots is necessarily costly and difficult.

Under these circumstances growers are likely to hang on to their vines for years rather than accept a modest one-time payment. Grubbing up might need to be forced, not voluntary, to have much effect.

New regulations to allow wines to be labeled according to grape variety (rather than the traditional local geographic designation) might be attractive to a large and distinctly commercial wine producer, but much wine in Europe is still produced by cooperatives that have little to distinguish their wines from others apart form the local designation. What advantage would they have as simple varietals in a world awash with good varietal wine?

A Certain Vision of Wine

It is possible to envision a future where the reforms can work, where the marginal vineyards have gone out of production, where consolidation has increased efficiency and where branded varietals can compete with the world market. (I have even seen some early attempts at EU branded varietals in the discount bins of a local store — more about this in a future posting.) I think it is possible that this vision may be realized — eventually.

But oh, it is such a big jump. The institutions of the small family vineyard and the local wine cooperative seem to me to make these reforms much more difficult. New Zealand’s success will be difficult to repeat.