Misunderstanding Romanian Wine


It is easy to misunderstand Romania and its wine industry.

Romania is a very old culture but a surprisingly young nation-state. The Great Unification of 1918 finally brought all the historical provinces together under one roof a hundred years ago, an act that Romanians celebrated on December 1, their Great Union Day.

Contemporary Romania is even younger, dating to the end of the Soviet era in 1989. It entered the European Union in 2007 — another important date. Romania is a country with deep roots and vigorous new growth. It is both very old and very new, a work in progress (like the rest of us).

It is tempting to view Romanian wine as both old and new, too. Wine has been made in Romania for six or seven thousand years and the culture both embraces wine and consumes it with gusto.

Romanian wine today is also a work in progress and Sue and I learned as much as we could about its current status and future prospects when we spent a week there last month. We participated in the International Wine Competition Bucharest (held in Iasi this year) and I gave a lecture to students and faculty at the University of Agricultural Sciences and and Veterinary Medicine.

King of Wines

73205One particular Romanian sweet wine — Grasa de Cotnari — has an important place in wine history. Grasa de Cotnari, Tokaji of Hungary, and Constantia of South Africa were once the most celebrated wines in the world. King of wines, wines of kings, they were the kings of the hill in a world where luscious sweet wines were treasured above all others. Time have changed, however, and wines like these no long rule as they once did.

The thing about Romanian wine is that just when you think you understand it, you discover that there’s another layer and you have to start over.  Sue and I wanted to taste a few Romanian wines before our trip and I hit pay dirt at a local Total Wine store where I discovered several wines made by Cramele Recas, one of Romania’s largest producers (and a Total Wine Winery Direct partner). Two were international varieties (Pinot Gris and Pinot Noir) and two were native Romanian varieties (Feteasca Negra and Feteasca Regala). All were inexpensive — typically $5.99 per bottle or $5.39 as part of a Winery Direct six-bottle purchase.

The Recas wines were clean and well made, with good acidity and varietal character. We shared some with our neighbors, who were surprised at the Pinot Noir given its price. The Recas winemaker has lots of experience producing commercial quality wine at affordable prices. He divides his time between Recas in Romania and a winery in Australia that you might have heard of. It’s called Yellowtail.

But Wait … There’s More

So Romanian wine is cheap but pretty good — a bottom shelf bargain. Is that right? Well, yes it is, but as soon as we arrived in Iasi we discovered another layer. There has been a very strong movement to higher quality since the end of the Communist era and especially since Romania joined  the European Union and opened its doors more widely to international competition.

The semi-sweet wines that were a mainstay during the Soviet era remain popular. Sugar can be used to cover up a variety of wine flaws, and so sweet wines are often suspect, but we tasted some that were well-made and delicious.  Many producers make both dry and semi-sweet versions of their wines to satisfy the diverse consumer audience. I don’t think these sweetish wines will or should go away, but dry wines are clearly the future and a lot of effort is going into their production.

But which dry wines? Romania is fortunate to have a wine grape treasury that includes a number of indigenous varieties that make distinctive, delicious wines. In the right hands, Feteasca Regala (white), Feteasca Neagra (red) and Busuioaca de Bohotin (rosé) produce exciting wines, for example, and there are other promising varieties.  I admit that my prejudice is for the native grape varieties and not the international varieties that you see everywhere, but it is important to have an open mind.

davinoWe spent a day in the Delau Mare region near Bucharest, which is known for its excellent red wines. Our last stop was Davino, which was Romania’s second privately-owned winery (S.E.R.V.E. was the first). We tasted the Purpura Valahica, which is made from Feteasca Negra clones specifically selected for the local terroir. It was terrific — a wonderful example of just the sort of terroir wine I had my heart set on finding. Romanian grapes, Romanian soil, Romanian wine-maker, even Romanian oak.

But then we tasted a Cabernet Sauvignon and it was wonderful, too, and impressed me even though I was not really interested in international grape varieties. And then came the Domaine Ceptura Rouge — Cab, Merlot, and Feteasca Negra. It was a fascinating fusion. Bottom line: Romanian wine does and should focus on its native varietals, but in an open context that allows winemakers to make the best wines they can.

No One-Liners in Wine

The wine that fills Romanian glasses represents an interesting mixture of past, present, and future, dry and sweet, native and international. No wonder it is hard to pin it down. But that’s not all. Home-made wine is very important in terms of total consumption and I understand that some of this is made with the hybrid grape varieties that were introduced here after phylloxera.

The popularity of the home-made stuff is a bit of a problem, since it can be so different from commercial production using vitis vinifera grape varieties.  Convincing thrifty buyers to pay more for a very different product is a challenge.

The Romanian case reminds me a bit of the challenge that U.S. winemakers faced in the 1930s when Prohibition finally ended. Home-made wine production had surged dramatically during Prohibition, encouraged by a loophole in the law that allowed limited home wine production. The quality of the wine was, um, variable and its taste is how consumers came to think of wine, which is perhaps why they focused more attention on beer and spirits. It took decades to fully overcome that memory.

Jon Fredrikson always says that there are no one-liners in wine, so perhaps this multi-layer aspect is what makes Romania akin to other regions, not different from them. But the tendency to be misunderstood is particularly powerful in Romania based on our experience. Resist any attempt to over-simplify the country or its wines!

What lies ahead for the Romanian wine industry? The future looks bright, but there will be headwinds. Come back next week to learn more.

Have Some Madeira?

madeiraIt is in a way the most American of wines, even though it actually comes from a Portuguese island off the African coast. When it came time to toast the signing of the Declaration of Independence in Philadelphia, this is the wine that filled the Founding Fathers’ glasses.

Workers at the Liberty Hall Museum in New Jersey recently discovered three cases of the stuff dating from 1796 — too young to be the wine that Franklin, Jefferson, and Adams raised for their toast, but old enough that they might have sipped it a few years later.

Oh, Madeira!

Madeira (because you have already guessed the name of the wine I’m talking about) has a glorious history here in the United States. Once upon a time you could find it prominently displayed on the top shelf of any reputable drinks shop, it was that popular. But when I went looking for a bottle at my local upscale supermarket I had to go deep into the corner where the fortified and dessert wines are kept and then stoop down to the bottom shelf.

O, Madeira. How far you have fallen!

But looks can deceive and Madeira is alive and well even if its not as prominent as it was in 1776. Madeira was America’s wine back then in part because America didn’t make much wine of its own and imported wine often suffered badly on the long sea trip from Europe to North America.

Live Long and Prosper

Madeira’s secret was (and is) its unique production process, where the wine is both heated and oxidized. The wines used to be conditioned by sending the barrels on round-trip ocean voyages in hot cargo holds. The movement of the ship and the heat below deck did the job very well.

Now it’s done shore-side in the lodges. The wines start out with high acidity (the island soils are part of that) and end up both fresh and nearly invincible. A bottle of Madeira has an almost long half-life after its been uncorked. You’ll certainly drink it up before it goes off.

There’s not a lot of Madeira wine produced, which is one reason you don’t see oceans of it in the shops.  Vineyard land is not plentiful on Madeira — about 500 hectares in total cling to the steep mountainsides. Just enough to provide raw material to eight producers.1928

France is the number one market for Madeira wine, where it is a popular aperitif (France is the top market for Port wines, too, for the same reason). Tourists visiting Madeira enjoy enough of the wine there to make it the number two market followed by Germany, the UK, Japan, and the United States. U.S. demand has been slowly ratcheting up in recent years, now accounting for about seven percent of total production.

You Don’t Know What You’re Missing

Sue and I traveled to Madeira about a year ago and learned a lot by visiting Blandy’s and Justino’s, two of the most important producers. We were fortunate to be invited to refresh our memories last month at a seminar and trade tasting in Seattle. We tasted the range of Madeira wine types including the one pictured here from 1928. Here are some impressions from that experience.

If you haven’t tasted Madeira in a while, you need to get to work. Chances are you’ve forgotten the balance and lifting acidity that characterize the wines. These aren’t  sticky sweet fruitcake wines, (although there is such a thing as a Madeira cake,  which is meant to be eaten with a glass of Madeira.)

You can make Madeira as simple or complicated as you like — it is up to you. By far the majority of the wines are sweet or semi-sweet 3-year-old blends. Sweetish or drier — those are your basic choices. Drier Madeira, like Fino sherry, is pretty versatile and might surprise you.

Only small amounts of aged Madeira is made from white grape varieties like the Sercial in the photo and these wines have very distinctive characteristics that anyone who wants to take a deeper dive would appreciate. Because the wines basically last forever once opened, you can pull the cork on several different ones and enjoy the kind of comparative tasting that we experienced in Seattle without being anxious about finishing up the bottles before they goes off. On-trade readers take note!

1776 and All That

I am glad we attended the seminar and tasting, but having said all these positive things about Madeira wines, I have to report that Sue and I came away a little bit disappointed. Not with the excellent presentation. And not with the wines themselves.

We were hoping for something more in the way of a hook to draw consumers into the world of Madeira wines and we couldn’t find one. The history is great and even important, which is why I used it as the hook for this column, but is it enough to make an significant impact in the crowded wine marketplace?

Madeira was once the Big Thing in American wine. Is it The Next Big Thing today? No — can’t be. There’s not enough of it to go around. But it is a unique wine of time and place that deserves a closer look.

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Special thanks to Bartholomew Broadbent for his help with this column.

 

 

Wine Book Review: Getting Up to Speed on Romania, Bulgaria, and Moldova

gilbyCaroline Gilby, MW, The Wines of Bulgaria, Romania, and Moldova.  (Infinite Ideas/Classic Wine Library, 2018).

Sue and I are heading off to Romania in a few days for the 2018 International Wine Contest Bucharest, which will be held in Iasi, Romania this  year.  I’ve been searching for a good book to get me up to speed.

I hit pay-dirt with Caroline Gilby’s new survey of Bulgaria, Romania,, and Moldova. I have only read the Romanian section so far, but I am very impressed. (Gilby says that it is important to read about all three countries because their histories are quite different and inform one-another. I will catch up with Bulgaria and Moldova on the flights to Iasi.)

Gilby’s book has answered many of the questions I had about the Romanian wine industry and given me some new topics to explore while we are there. I like books that make me question and think and this volume really does the job.

Wine books about particular countries or regions often follow a fairly standard format. History, climate and terroir, grape varieties, regions, producers, wines. All these important topics are covered very well in Gilby’s book. But there’s a lot more, too.

The evolution of the Romania wine sector has been punctuated by a number of important events. Phylloxera is one that is common to many regions, of course, and it is noteworthy that many local grape varieties were replanted and therefore preserved while others were replaced with international varieties.

Wines made from international varieties are popular in Romania, while wines made from the indigenous grapes get more attention abroad, where another Sauvignon Blanc is nothing new but Feteasca Regală can be something to get excited about.

The communist era and its collapse have left Romania a real puzzle that I hope to begin to unlock during our short visit. Wine is old in Romania, for example, but the wine industry is surprisingly young, with many important projects dating from just the last 20 years.

Romania’s vineyard area is quite large, but the average plot is tiny. There are more than 800,000 winegrowers, for example, who have less than half a hectare planted to  vine on average. This is a legacy of the collective farm system, where families had tiny plots to farm for themselves. Putting together large enough vineyards for commercial farming has been a struggle, but progress is being made.

International influences extend beyond grape varieties. There are flying winemakers, of course, as there are everywhere these days, but also a good deal of investment from abroad. It is not every country that can count both the Antinori family and also Pepsi Cola as important participants in the wine sector’s development.

Romanians drink a lot of wine (in fact, they have been net importers for the last few years), but they are not always the target market for new projects because much of the domestic consumption is of home-made wine (this reminds me of Georgia). The new winery projects, with higher quality but also higher costs, have to compete with both home-made wine and cheaper imports from Spain and elsewhere.

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Hence a focus on exports to the EU and beyond, which is where we come in, I think, because my book Wine Wars analyzes the forces driving the global wine markets and some in Romania think it can be useful in thinking about strategies for their next step.  They commissioned a translation of Wine Wars titled  Războaiele Vinului  or “War of the Wine.” I’m flattered by the attention and pleased to help out.

I’ll give a talk about Romania and the wine wars  at the university in Iasi in addition to our work at the IWCB wine contest and some cellar and vineyard visits. Should be a good trip! Looking forward to meeting everyone and learning more about Romanian wine.

In the meantime, let me recommend Caroline Gilby’s new book. The stories she tells about Romania are fascinating. She writes with style and authority.  I’m very impressed and looking forward to learning more as I read about Bulgaria and Moldova.

Wine Book Reviews: Colorful Rosé & Dynamic New Zealand

Elizabeth Gabay, Rosé: Understanding the Pink Wine Revolution (Infinite Ideas/Classic Wine Library, 2018). Reviewed by Sue Veseth.

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Once upon a time, “proper” rosé was French, very pale pink, dry, served young and fresh, and not serious. Today, rosé is serious. Consumers can find rosé from all over world; from the palest pink to almost red in color; made from grape varieties that may be familiar or unfamiliar; made in a variety of styles and sweetness levels; and that range from simple to complex. How is a wine drinker supposed to navigate the world of rosé?

A good start is Rosé: Understanding the pink wine revolution by Elizabeth Gabay, MW. This comprehensive study of rosé will open your eyes — and your palate — to the infinite variety and pleasure of rosé. Her book covers the liberal arts of rosé: history, geography, science, political science, economics, art, and literature.

It is impossible in the wine business these days to dismiss rosé, as Gabay makes clear in the chapter of her book on the business of rosé. In the United States, rosé is the fastest growing category and is now a year-round option, not just a summer wine. And, like it or not, what happens in the U.S. wine market can affect wine production worldwide.

The issue of color permeates the book because of the traditional notion that paler is better. And, after all, the name “rosé” is all about color. Gabay’s explorations demonstrate that color does not indicate quality, but style. She goes as far to say, “I am no longer so sure that our division of wine into red, white and pink is appropriate. With some rosé wines almost red in colour and style, and others almost white, the divisions are blurred. Add in rosé made in an orange wine style, and the blurring increases. The obsession with the colour pink should perhaps start to take a back seat.”

Gabay describes her book as a journey of exploration, and she transmits this journey for both the serious wine student and the casual consumer. An early chapter on viticulture and winemaking, for example, has a lot of detail for the science-minded and is also accessible to the more casual reader. Similarly, her discussions of rosé from various parts of the world are presented in detail, with specific examples from the region. More maps would be helpful for the novice rosé drinker.

Rosé: Understanding the pink wine revolution is a valuable addition to the library of any wine lover who is ready for a journey of exploration.

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Rebecca Gibb,  The Wines of New Zealand (Infinite Ideas/Classic Wine Library, 2018). Reviewed by Mike Veseth.

kiwiRebecca Gibb’s The Wines of New Zealand is “designed to provide a comprehensive overview of the New Zealand wine scene,” according to its author, “a reference for locals, international visitors and students alike.” Gibb gets it right on all counts — what a great resource for anyone who wants to learn about New Zealand and its wine industry.

The book’s 300+ pages are packed full of stories, personalities, facts, and figures. The organization is conventional: history, climate and grapes first, then a survey of the regions (10 of them, which will come as a surprise to those who only know Marlborough and its Sauvignon Blanc), then a final pair of chapters on tourism and current issues.

Gibb’s mastery of this material is easy to appreciate, but it is her contagious enthusiasm that comes through most clearly. A chapter on grape varieties could easily become mundane but not here. Each grape is an excuse to talk about history, geography, vine science, and to introduce or reprise some of the noteworthy characters who shaped Kiwi wine history.

What do I like best about this book? The sense of energy and dynamism that permeates it in both style and content. The story of New Zealand wine is a story of change, starting from the early British and French pioneers through the Dalmatian gum-diggers and on to today’s multinational corporations. Gibb sees dynamism everywhere in New Zealand wine and she doesn’t think this is likely to change.

What would I change about The Wines of New Zealand?  Well, the beginning of the book, a fantastic historical overview, is so strong that it makes the end feel a bit weak. Gibb’s final chapter does a great job informing the reader about Kiwi tourism opportunities — both wine and otherwise. But it doesn’t bring the book together the way I would like.

What I’d really like to see — and maybe it will appear in the next edition? — is a chapter that draws together the many strands and looks ahead to where New Zealand wine is headed and what might stop it from getting there. That would end the book on the same dynamic note I enjoyed throughout.

It would also make it a bit less of a reference book, which is its intended function. Maybe the best solution is to DIY — read this excellent book and then make up your mind where you think New Zealand wine is headed next! Highly recommended.

U.S. Wine Sales: Five Surprising Facts

wbm_cover_2018-9-1The September 2018 issue of Wine Business Monthly is out and as usual it is full of interesting articles and useful information. As a wine economist, I have to admit that the first thing I look at with each new issue is the Retail Sales Analysis page, which presents recent U.S. wine market data as reported by Nielsen.

I suspect that many readers skip over this section, seeing it as a big table full of dreary gray numbers. How boring! But not to me. I thought you might be interested in five surprising facts I found as I combed through this issue.

But first a quick disclaimer. My old boss when I worked at a presidential commission in Washington DC used to say that there were three kinds of data: out-of-date, incomplete, and forthcoming. In other words, data is never as perfect as you want. I would add a fourth characteristic: expensive. The Nielsen data in Wine Business Monthly isn’t as complete or timely as you might like (data are for the 52 weeks ending May 19, 2018), but they are free, which I appreciate, and tell an important story. OK, here are the five facts.

#1 America’s Wine?

Europeans think of wine in terms of regions, according to conventional wisdom, but many Americans focus on grape variety. So which varietal wine is #1: Chardonnay or Cabernet Sauvignon?

The answer is … both! Or rather, the varietal that tops the table depends on which table you look at. If you are interested in volume sales, Chardonnay is still number one, and by a large margin — 30.6 million cases in the 52 weeks of the survey for Chardonnay versus 24.6 million cases for Cabernet Sauvignon. Pinot Gris/Grigio comes in third with 17.1 million cases.

But if dollar value of sales is your focus, Cabernet narrowly edges out Chardonnay with about $2.56 billion in sales for Cab versus $2.54 billion for Chard. This result reflects Cabernet’s higher average bottle-equivalent price of $8.66 versus Chardonnay’s average price of $6.91.

#2 Most Expensive Varietal Wine?

Cabernet’s average price is higher than Chardonnay, but it isn’t the highest price that Nielsen reports. What varietal wine is #1 in terms of average bottle price? You might think Pinot Noir and you would be almost right. The average bottle-equivalent retail price of Pinot for the survey period was $10.43.

That’s a good average price, but not as high as #1 Zinfandel’s $11.19! Zinfandel? This really caught me by surprise because Zinfandel’s sales are relatively low. Pinot Noir’s sales by volume are more than four times Zinfandel’s.  But obviously not all the Pinot sales are in the $20+ range and the lower-priced products bring the average down.  I trust the data, but I am still surprised. More research needed here.

#3 France Strikes Back

I might have written “The Empire Strikes Back” because France is the empire of wine in terms of history and reputation. But French wines struggled to compete in the last dozen years and have fallen below Italy, Australia and New Zealand when measured by total sales value and below Australia, Italy, Chile, Argentina, and New Zealand when measured by volume.

But France is surging back into contention, with 17.3% value growth and 14.4 % volume growth in the 52 weeks reported here. France’s average bottle price is $12.85, higher even than New Zealand’s $11.52.

Some of France’s exports to the U.S. market are quite expensive — Champagne in particular and high-end Burgundy and Bordeaux. But the French sales surge is largely powered by Rosé, which is the fastest growing wine category, up 54% by value and 32.7% by volume. Cowabunga — France is riding the Great Pink Wave back into the U.S. marketplace!

#4 Australia’s Real Challenge

Australian wine imports are a puzzle. Australia is the #2 import behind Italy measured by sales value and #1 ahead of Italy in the Nielsen data when measured by volume (12 million cases versus 10 million cases). But both value and volume fell during the 52 weeks measured here, continuing a trend we’ve seen in recent years. Aussie wine got a bad reputation a few years ago, the usual story goes. Buttery Chardonnay, sweet Shiraz. Australian wines went out of fashion.

My Australian industry friends now have the U.S. market in their sights once again, having successfully penetrated the Chinese market. Australian sales to China now outpace their exports to the U.S. and the U.K. markets.

I expect that the new sales effort will yield results, but the Nielsen data suggest to me that selling more wine in the U.S. market is not the real issue. Australia already sells lots of wine here. The problem is price. The average bottle price of Australian wine reported here is just $4.97, which is the lowest average bottle price of any of the countries that appear in the report. Price, not volume, should be the target and raising price is never very easy.

#5 Washington is Like a Foreign Country

Everyone knows that I am a big fan of Washington State’s wine industry, which doesn’t always get the respect that it deserves. It’s that #2 thing. Washington State lives in the shadow of its big wine neighbor, California. California’s 114 million case sale dwarf’s Washington’s 5 million cases in the Nielsen data.

Washington is small compared to California, but it doesn’t seem too tiny if we switch the frame of reference a bit. If we think of Washington as a foreign country, then the perception of its size changes a bit. At 5 million cases sold, Washington’s impact on the U.S. market is less than Australia and Italy, of course, but it is larger than Argentina (4 million cases in the U.S.), Chile (3.9 million cases) or New Zealand (3.1 million cases), and even bigger than Spain and France put together in terms of their U.S. sales volume.

Washington’s importance is also apparent if we look at sales value rather than case volume. With $602 million in annual sales, Washington’s U.S. sales are larger than all import countries except Italy and Australia. Looking just at U.S. sales spins the data to magnify Washington’s impact, of course, but comparing it just with California spins it the opposite way.

What’s the right way to think of Washington’s wine industry? Maybe we should compare it to New Zealand. Both regions have developed vibrant wine industries in just a few decades. Both punch above their weight with average bottle prices ($11.52 for New Zealand and $9.92 for Washington) well above the U.S. average of $7.21 or the California average of $6.85. And both, of course, are important competitors in the U.S. market.

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The Wine Economist will take a short break so that Sue and I can attend an important wine celebration in Italy. We’ll give you a full report when we return.

The Cabernet Boom and Its Discontents

Our recent trip to the Napa Valley provokes two columns: this one about the Cabernet Sauvignon boom and next’s week’s about Zinfandel’s uncertain future.

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What winegrape variety comes to mind when I say “Napa Valley …”? There are lots of possibilities. Chardonnay. Merlot. Sauvignon Blanc, of course! Hey, Larkmead makes a tasty Tocai Friuliano.

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But I’ll bet that your “fill in the blank” answer was Cabernet Sauvignon and there are several good reasons for this. Cabernet is a noble grape and many of the world’s great wines are made from it or with it. American consumers are in love with this winegrape variety. Cabernet Sauvignon has recently overtaken Chardonnay as America’s #1 favorite.

Cabernet is #1

According to recent Nielsen data taken from the August 2018 issue of Wine Business Monthly, sales of Cab wines totaled more than $201 million in the most recent 4-week period, up 3.9% from the previous year. That compares with $190 million and 0.5% growth for Chardonnay, which has for years topped the league table.  Next in line but far behind, is Pinot Gris/Grigio ($96 million / 1.3% growth) and Pinot Noir ($82 million / 2.6%). The fastest-growing category is Rosé, as you might have guessed, with 67% growth on a relatively small $22 million sales base.

Consumers love Cabernet Sauvignon and growers love it, too, because they see it as a potential solution to the their financial squeeze. The costs of land, labor, equipment, and supplies keep rising, but the prices of many grape varieties have been stagnant, putting pressure on profits and, in some cases, generating rivers of red ink.

The Cabernet grape price premium can be substantial according to the 2017 California Grape Crush Report. Cabernet grapes fetched $700 per ton on average in Lodi, for example, compared with $552 for Merlot and Chardonnay. A ton of Cabernet sold for $2209 on average in Mendocino county, $2352 in Lake Country, and about $3000 in Sonoma County.

Premium Prices

Napa county topped the list with an average Cab price of $7,421 per ton. That average translates into a $70+ bottle price using the one-percent rule of thumb. And that’s the average. The very best Napa Cab grapes from exceptional sites sold for $10,000 per ton and more. Lesser Cab grapes sold for less, of course, but still generally for more than other grape varieties. Cab Rules.

And it’s not just a California thing. Cabernet is now the most-planted winegrape variety in Washington state, too, with 62,200 tons harvested in 2017 compated with #2 Chardonnay’s 39,300 tons.  The overall average price of Washington winegrapes was $1200 per ton, with Cabernet selling at a significant premium at $1500-$1600 per ton.

No wonder more and more Cabernet is being planted wherever it might possibly grow successfully. Jeff Bitter, recently appointed President of Allied Grape Growers, presented the results of the 2017 California Nursery Report at the Unified Wine & Grape Symposium meetings in January. Bottom line: Cabernet is big and getting bigger.

The Nursery Report provides insights about what grape varieties are being planted or grafted, which foretells shifts in winegrape production a few years from now when the vines are productive. The 2017 report showed that 72% of new vines were red varieties with only 28% white. Cabernet vines accounted for an incredible 37.4% of all new vines followed by 19.5% for Pinot Noir and 16.7% for Chardonnay.

Cab Pipeline is Full

If you combine Cabernet with other varieties that are often blended with it (such as Merlot, Malbec, Cabernet Franc, and Petit Verdot), they account for over 42 percent of all new California vines. I am not sure what the composition is of the vines they may have replaced, but I suspect the disproportionate emphasis on Cab and Cab blending grapes represents a significant net increase in future production.

Cabernet’s dominance is noteworthy, but the upward trend in Cab plantings is part of the long term trend that Benjamin Lewin MW described in his 2013 book Claret & Cabs: The Story of Cabernet Sauvignon. Zinfandel, not Cabernet, was the most-planted winegrape variety in the Napa Valley in the decades following Prohibition.

Zin was thought to  make the best Claret, according to Lewin, which of course is interesting because Claret is the name the British gave to Cab- and Merlot-based Bordeaux wines. Ridge made a “Claret”  in 1981, for example, from Zinfandel, Petite Sirah and Carignan and I’ll bet it was delicious!claret

Cabernet Sauvignon was a minor player on Napa’s wine scene, Lewin notes, although it made some historic wines including the great Beringer Cabs of the 1930s and the Beaulieu Georges de Latour Private Reserve wines that André Tchelistcheff made between 1938 and 1973.

The Napa Cab boom really picked up speed in the 1970s as new quality-driven wineries (think Robert Mondavi) focused on Cabernet. The Judgement of Paris in 1976 put Napa Cab firmly on the wine world’s radar.

No wonder new investment flooded into Napa Valley and Cabernet plantings expanded rapidly, both in Napa and California generally. Now the steady rise has accelerated, taking on some boom-time characteristics. The cycle of higher Cab prices, higher vineyard valuations, and increased Cabernet plantings continues.

Stein’s Law

Cycles and booms are a common characteristic of agricultural and financial markets, both of which I have studied. There are two things I have learned about the booms. First, they are driven by internal logic that seems bullet-proof from inside the cycle.  People (like me) who try to call turns often end up looking like Chicken Little fools. So don’t expect me to forecast a Cabernet bust!

The other thing I have learned is that Stein’s Law always applies in the long run. Named for the famous economist Herb Stein, Stein’s Law is says that if something cannot go on forever … it will end. And I think that Cabernet prices cannot go on going up forever (especially with new plantings on the rise) any more than housing prices could defy gravity forever a dozen years ago, no matter how how much rising prices might seem baked in the cake at any particular moment.

That doesn’t mean that the boom must inevitably be followed by a bust — there are many possible adjustment patterns as Kym Anderson’s analysis of Australia’s winegrape cycles shows. In the meantime, Cabernet is crowding out other grape varieties, including those Zinfandel vines that were once the pride of Napa Valley winemakers. That’s where we are going in the next column.

Sue and I came to the Napa Valley with Zinfandel on our minds. Circle back next week to find out what we learned.

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The Boom Varietal image above comes from a 2011 Sky Pinnick documentary of the same name about Malbec, which is sort of the Cabernet Sauvignon of Argentina. I was pleased to be part of the cast for this award-winning film. The film talks about the rise of Malbec in Argentina and the understandable concern that the boom could go bust (Argentina has a history of boom and bust).

 

The American Wine Industry’s Achilles Heel: Labor

lodiI tell my friends that the wine business is a people business and it is really true. Relationships matter a lot in wine. One of the reasons that Sue and I so enjoy our work is the opportunity to meet and get to know so many wonderful people.

People are the wine industry’s strength, but they are also its Achilles heel and finding ways to adapt to a world with changing labor market conditions is perhaps wine’s greatest current challenge. We saw several aspects of the evolving labor crisis during a recent visit to the Napa Valley where I spoke at the California Association of Winegrape Growers’ (CAWG) summer conference.

Trouble in the Vineyards

We talked with a number of winegrowers who were understandably focused on their vineyards — how to get the hard work of winegrape farming done and the crop harvested efficiently in the current farm labor environment. Migrant labor policies are the main issue here and the impacts extend beyond winegrapes to virtually all California agriculture.

Farm labor generally means migrant labor, including a substantial proportion of undocumented workers. Current federal policy is decided unfavorable to the needs of farm employers and the progress is very slow to craft useful reforms.

Large-scale grape farming depends upon these workers, which is very risky because their work status and the policies that affect them are so uncertain. Mechanization — mechanical harvesting and also increasingly mechanical pruning — is the most direct response, which reduces labor uncertainty exposure even if it doesn’t eliminate the problem.

Matt Parker, the President of Silverado Investment Management Group, which farms 20,000 acres, told the CAWG audience about the strong mechanization dynamic driven by cost, uncertainty, and technical change. Mechanically-harvested grapes can be as good as hand-harvest grapes and are sometimes even better because an entire vineyard can be harvested quickly (and sometimes at night as in the photo above) with machines, whereas hand-harvest may take many days and grape quality can deteriorate.

Everyone we spoke with wanted to see the migrant worker situation resolved so that the cloud of uncertainty that hangs over their businesses and the lives of the workers might be lifted. But I didn’t hear many optimistic voices. Stay tuned.

Beyond the Vineyards

Harvest and vineyard workers are not the only labor market issue we found in Napa. A friend with talked with runs a business that is a major supplier of packaging products to the wine industry, with a large warehouse and light manufacturing facility south of the city. Labor was on his mind as he showed us around his operation.

Labor constraints limited the efficiency of the business, which was running one shift instead of the two or three that it could handle. Rising wages were a concern, of course, but availability was a bigger long term issue. Housing shortages and cost, transportation bottlenecks, and immigration policy all contributed to the uncertain availability of workers.

His solution was automation and his company is making major technology investments both to increase production flexibility and efficiency and to reduce exposure to labor cost and availability risk.

Truckloads of Trouble

One of the CAWG conference’s most interesting speakers was Yvonne Sams of G3 Trucking, a company that many vineyards and wineries rely upon to get grapes to the cellar quickly and at affordable cost during harvest.

“Do the math,” people say, and here is the stunning winegrape trucking math. California produces about 4 million tons of grapes in a typical year (if there is such a thing). That is equivalent to 170,000 truck loads of grapes over the harvest season, according to Sams, with about 2000 truck loads on peak harvest days. The typical load travels about 40 miles. That is a lot of trucks, highway miles, and driver shifts.

Everything about this process is closely monitored and some elements, such as driver cab-time and break periods, is tightly regulated. Driver regulation is about to get more strict, with the result that each driver will be able to manage fewer loads than in the past. Thus the current driver shortage will likely increase. Sams reported that one trucking company now advertises on television specifically targeting women, who are under-represented in the industry, in the hopes of expanding the potential driver pool.

What’s the solution? No one wants to see their grapes rotting in bins waiting for a truck and driver to appear! Sams reported a number of initiatives. More trailers, for example, could increase efficiency by reducing the time that drivers spend waiting to load and unload. Ideally the truck and driver would appear just as the trailer is filled and then drop it off at the other end, picking up a new load while the trailed waits to be unloaded.

We also heard the basic outline of what you might think of as an Uber for truckers, which would allow truckers with available time to more efficiently match up with waiting loads.

Finally there is Elon Musk’s favorite strategy — autonomous trucks (Musk’s would be electric, of course) that need no driver but do require pretty sophisticated software and, as we heard from a representative of Verizon, would benefit by the roll-out of 5G cellular systems.

Napa at the Forefront

Many U.S. industries are struggling to cope with labor issues today. Agriculture, including wine grapes, struggles a bit more because of the traditional labor-intensive model and the relatively short half-life of freshly-harvested goods compared with manufactured products.

Napa, because of its high housing costs and transportation bottlenecks, is particularly affected. Napa’s wealth insulates it a bit, I suppose, but also provides resources for technological labor-replacing systems. As these case studies show, there is no escaping the wine industry labor crisis because it is not one problem, but many, that all negatively impact production, cost, and profitability.

As I wrote in a 2017 column on vineyard labor issues

Are the machines coming to a vineyard near  you? No, they are probably  already there and, as vineyards — even those in iconic regions — are replanted or renewed, you can be sure that one factor that will be considered is the potential to maximize technological compatibility.

Hand work in the vineyards is not going to disappear and many wineries will continue to rely upon  their teams of highly-skilled vineyard workers for years to come. But what we are seeing is that the business model associated with vineyard labor is changing rapidly. Technology, economics and anti-globalization politics are all part of the dynamic.

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Thanks to Sue Veseth for the photo of workers and machines at a night harvest in Lodi.