Napa Envy? What’s the Secret for Emerging Wine Region Success?

american_airlines_boeing_707_model_aircraft_kits_1bcd6855-5d3b-43ac-b7e9-e4ce13ea59df_largeW.W. Rostow’s famous 5-step theory of the “Stages of Economic Growth” seemed to present a blueprint for less-developed countries thirsty to move up in the global economy league table.

The key step — “take-off” — invoked the image of a powerful modern jet airliner (probably a Boeing 707 back in 1960 when the theory appeared) rising from the runway and soaring into the bright blue sky.

The reality for those who followed Rostow’s map was problematic because his analysis was based on the experience of a previous generation of soaring economies and both the conditions on the ground and the global market environment were often very different. Take-off proved frustratingly hard to achieve and the mistakes were costly both in dollars and in missed human development opportunities.

The Limits of Imitation

Sue and I have visited many emerging wine regions and they all seem to be looking for a blueprint like Rostow’s and for the jet engine that will propel their own take-off into the global wine market’s stratosphere. Everyone wants to be the next Napa (or fill in the name of your favorite successful wine region).

A lot of energy is spent (and probably wasted) trying to emulate the success of one particular emerging wine region that started to soar more than thirty years ago and hasn’t slowed down since. That region is New Zealand and the key to its take off is widely seen to be its choice of a signature grape variety to rally around — Sauvignon Blanc.

New Zealand’s growth is stunning, to be sure, but I argue that its take-off was the product of particular local and global conditions that are unlikely to be replicated in quite the same way today. There are also unintended consequences to consider. The stunning success of Marlborough Sauvignon Blanc has cast a shadow over other NZ regions and wines that deserve more market attention than they typically get.

The Road Not Taken

The signature winegrape varietal take-off strategy is simple and appealing in theory, but difficult and even dangerous in practice. So what works? How do emerging wine regions get up to speed in the fast-paced global market?

My sense is that each case is special and each road different. The only common characteristic I have noticed is quality, which must be found in every bottle or glass. You only have one chance to make a first impression, they say, and reputation is always on the line. With quality much is possible, even if it is not easy or automatic. Sans quality nothing much seems to work.

But that’s a pretty vague road map, so my senses perked up when I heard Jamie Goode talk about the stages growth for new wine regions at a recent British Columbia Wine Grape Council conference and trade show in Penticton, BC.

From Surprise to Enlightenment

Goode has been just about everywhere in the wine world and based on this experience he proposed a five stage evolution (not revolution) development pattern. Surprise comes first, he said. Local winegrowers are surprised when they find themselves making halfway decent wine. Incredible! Maybe this wine thing is possible.

parisCuriosity comes next as dozens of grape varieties and wine styles appear followed by Imitation of famous wine regions and their wines. Imitation leads to Over-Confidence, in Goode’s taxonomy. I suppose this is when those “Judgement of Paris” type events are organized where you elevate your region to the same stage as Burgundy or Bordeaux.

The 1976 Paris tasting is credited with putting Napa on the world stage. If it worked for Napa, how can it fail for everyone else who tries it?

Real Confidence is Goode’s final stage and I am not sure exactly what he means by this but I know what I think it is. Know thyself. Make wines that are yours, not copies of others, that stand on their own, drawing on the practices and influences of others, but not imitating anyone else.

This is a pretty good description of how wine regions evolve, but the stages it proposes are not strictly limited to wine. I’ll bet most artists and musicians go through phases like this before they gain (if they do) the confidence to be themselves. Mozart may have been born a mature musical genius, but the rest of us have to thrash around as best we can until we figure it out.

Significantly, there isn’t a “take off” stage here, which I think is probably a good thing because it avoids the signature varietal dead end and other false trails. Goode’s analysis doesn’t provide much of a road map for an emerging wine region to use to plot their course, only to evaluate where they have been. But then Rostow showed us that road maps can lead to the wrong destination if the terrain has shifted, so maybe this invitation to self-analysis is as good as it gets.

Confidence Game

The stages of growth idea came up again during the Q&A session. You’ve visited British Columbia several times. Where are we in your theory? Which stage of growth best describes us?

Goode thought about this a bit. Between 4 and 5, he said. Between Over-Confidence and Real Confidence. Interesting! That made me stop and think, too. Sue and I have been to the BC wine country many times over the years. Where does the region stand today? Come back next week to find out the answer.

Six Things to Do With Surplus Cabernet Sauvignon Grapes

cabThe wine grape harvest is just around the corner in California and Washington State and, while that’s a great time of the year, it will present economic challenges to some winegrowers. There’s going to be an awful lot of Cabernet Sauvignon harvested this year. Most of these grapes are contracted, but some will be looking for buyers and it might not be so easy.

Cabernet has been the top choice for new plantings for the last several years and it is easy to understand why. It is a noble grape and can make terrific wine. Consumers love it, so growers have responded enthusiastically. The problem, as has been noted here before, is that wine demand generally has slackened just as new supply is reaching the market. For a few years at least there is likely to be a surplus of Cabernet Sauvignon in many regions.

In fact, the surplus is already here, or at least that’s how I read the recent reports from Turrentine Brokerage. Turrentine data show the highest level of Cabernet on the bulk market for many years. Add the 2019 harvest to the current market and you have a problem — not for everyone, but for those who are left with unsold grapes or wine.

Econ 101 Meets Yao Ming

What do you do when you have too much Cabernet? Econ 101 suggests price adjustment — cheaper grapes, cheaper wine, and so on. But there are limits to this strategy, especially since the lower price tiers of the retail market are in decline.

Export sales are another Econ 101 solution and certainly there is an opportunity here, especially if President Trump succeeds in talking the dollar’s exchange value down. But the president’s trade wars have had an offsetting impact on wine exports.

Countries that compete with us in the export markets, notably Australia and Chile, have aggressively sought out free trade agreements to boost sales. The U.S. has recently taken the opposite strategy. U.S. wines are therefore a tough sale today in many export markets including especially China, where Australian and Chilean wines find great success.

Yao Ming, the Chinese basketball legend, has trouble selling his signature Napa Cab back home because of 93% tariffs imposed in response to the Trump administration’s policies. If Yao can’t sell Cab in China, there is not much hope for the rest of us. Export markets are unlikely to absorb very much of the surplus Cab. Other options?

Searching for alternatives, I consulted the most recent Nielsen market figures in the current issue of Wine Business Monthly and found a few ideas to consider if you find yourself holding excess Cabernet this year.

#6 Two Words: Red Blends

Red blends are a useful market category because you can blend away unfashionable or surplus grape varieties without consumers necessarily noticing what’s up. Syrah and Merlot are not as popular as they once were as varietal wines, for example, but blend them together, call the result a Red Blend, and consumers snap them up. Cabernet blends would be very competitive at the right price. This market segment is fairly large but, unfortunately according to the Nielsen data, its growth has stalled a bit this year. That means we need to think about …

#5 Three Words: Sweet Red Blends

See “Red Blends” above but add some residual sugar.  I don’t have a lot of personal experience with these wines, but I see them everywhere. 19 Crimes, which tastes sweet to me, has a successful varietal Cabernet Sauvignon, so this is not uncharted territory. Even better, why not try …

#4 Rosé of Cabernet

Rosé is the fastest growing market segment in the Nielsen table. A lot of that Rosé comes from France, to be sure, but the market is large and fluid.  Picked at the right time, Cabernet makes a nice Rosé and in fact there are a great many produced both here in the U.S. and around the world.

As I noted here earlier this year, there are tricks to the Rosé trade to consider. Rosé is not that easy to make, since color is a concern, and can be tricky to sell because consumers prefer the most recent vintage and demand seasonality is a factor, too. If you like the idea of Rosé of Cabernet, then I think you will also like …

#3 Sparkling Rosé of Cabernet 

Take two fast-growing categories — sparkling and Rosé — make the wines from Cabernet  and you are ready to go. The only thing that could be better is …

#2 Canned Sparkling Rosé of Cabernet 

… because canned wine is also a thing (watch for a report here in the near future) and it is growing fast. Have you seen all the new canned wine displays in the supermarkets? Don’t dismiss canned wine too quickly.

Canned sparkling Rosé of Cabernet leverages three hot trends to use up your excess Cab. It is a perfect storm of wine. What could be better? And while you have the mobile canning equipment hooked up, you might consider …

#1 Canned Sparkling Cabernet + Black Currant Spritz

Seriously!

I am paying more attention to the canned wine displays and one thing I note is that canned wine spritz is generally right beside the other canned wines. These seem generally to be mixtures of wine, fruit flavors, and carbonated water. They sound refreshing and they have less than half the alcohol of regular wine. A Cabernet and Black Currant spritz sounds drinkable to me on a hot day, but you might prefer blackberry or some other fruit flavor.

Since the consumer segment that is interested in low alcohol products is growing, I can see how this trend might persist.  Something to consider.

Seems Like a Stretch?

Bottom line. The U.S. industry is going to need to find uses for its  excess Cabernet Sauvignon if the potential surplus materializes. These examples are ways to take advantage of the small number of growing wine market segments. If it seems like getting Cab products into these segments is a stretch, then it shows how much more pressure there will be on the traditional product markets.

I hope the market can absorb all the Cabernet that’s coming its way. Fingers crossed.

Is Sustainable Winegrowing Sustainable?

Is sustainable winegrowing sustainable? Yes. But there are headwinds and challenges to overcome before this expanding movement will achieve its full potential. Here’s my report.

sonoma

Sustainability is a powerful movement in northeast Italy where Sue and I participated in a program sponsored by the Consorzio Collio. I spoke on a roundtable panel on sustainable winegrowing’s many sides. One of the other speakers had recently converted his family vineyards to organic viticulture and he talked about the experience and his commitment to sustainable winegrowing.

A hand went up. Now that you are spending less on chemicals and so forth, a journalist asked, will be you passing along the cost savings to consumers?

Wow — I didn’t see that question coming. Implicit in the query was the assumption that organic or sustainable wines should be cheaper than other wines, not simply better for the environment. Most winegrowers, however, hope that sustainable practices will be rewarded in the market place — that consumers will be willing to pay higher prices for sustainably-produced wines, not demand a discount. Environmental sustainability needs to be economically sustainable to survive.

Survey Says …

I would like to say that wines that are certified as sustainable or organic or biodynamic do command a price premium, but I don’t have the data to support this broad conclusion. Wine is a complicated product category and it isn’t easy to compare sustainably-produced wines with similar wines made using conventional practices in order to extract the existence and size of a general price differential (more about this below).

Much of the research on this subject, therefore, has involved surveys that ask consumers how much they hypothetically would be willing to pay for sustainablly-produced wines compared to others.

pay-more-for-eco-certified-wines

A good example of this research is a study that Sonoma State Professor Liz Thach MW reported in 2017, which is the source of the graph above. The survey sample of 301 wine consumers, which was weighted towards women (74%) and Millennials (65%), found a generally strong willingness to pay more for wines with sustainable certifications.

payup

Recently Lullie Halstead, CEO of Wine Intelligence, presented the results of a larger study of U.S. wine drinkers that both reinforced a strong willingness to pay and uncovered significant generational diversity among Gen Z, Millennial, Gen X, and Baby Boom consumers. Millennials in the study, for example, were more than twice as likely as Baby Boomers to say they would be willing to pay a $5+ sustainability premium while 43 percent of Boomers said they wouldn’t pay any extra at all.

The study suggests that consumers would be willing to pay about $3 more per bottle for a sustainably-produced wine. What do you think? How much more would you be willing to pay?

Walking it Back to the Vineyard

Since it is hard to determine if sustainable wine actually receives a price premium in the market, I decided to work backwards. If sustainable wine sells for an average $3 premium, then sustainably-grown grapes should sell for a premium, too. How much? The Law of 100 holds that in general if grapes cost $1000 per ton more, then the wine has to sell for at least $10 more per bottle ($1000/100) to pay the bills. It’s a back of the envelope sort of calculation — a long way from rocket science, but useful here.

Working backwards, the Law of 100 rule of thumb suggests that a $3 higher bottle price should translate into a maximum of $300 per ton grape price premium. That could be a substantial incentive for winegrowers to farm sustainably depending on the region.

What is the sustainable premium for wine grapes? Once again it is hard to generalize because there are all sorts of special cases in grape contracts. But I consulted two well-connected California colleagues and the answers they provided were very consistent. In general, sustainably-farmed wine grapes receive a premium of $15-$25 (average of about $20) per ton. That’s a lot less than I was expecting. It implies a very small potential bottle price premium — nothing like the $3 survey result.

Some contracts provide a premium up to 7.5 percent, I’m told, which can be valuable depending on the underlying grape price and yield. In many cases, however, the premium is exactly zero. Grape buyers specify sustainably-farmed fruit, but are not willing to pay extra for it. Bottom line: growers generally farm sustainably because these are sound practices, not (yet) for the money.

Why is the Sustainability Premium So Low?

Why is the sustainable grape premium so low? One answer is that premiums are low because it is a buyers’ market for some grape categories these days. With surplus grape supplies and wine in tanks from previous vintages, buyers don’t pay more because they don’t have to. That is bad news for growers in the short run but better news in the long run because the supply-demand imbalance is likely to adjust over time and perhaps improved prices will follow.

A second answer is that the grape premium is low because the premium for sustainable wines is low — much lower than the $3 per bottle estimate. How can this be? Are the survey-takers fibbing? Well, sometimes people do give “aspirational” answers to survey questions. But there’s another answer. Consumers may be willing to pay more for sustainable wines, but they can’t tell for sure which ones they are.

Organic and biodynamic are very clearly defined wine terms (although consumers may not fully understand them — especially biodynamic), but sustainable does not have a single meaning or certification standard. Most of the regions we visit have their own sustainability certification programs, each tailored to local conditions. So the term sustainable shows up a lot and doesn’t always mean the same thing. This is one reason why it is hard to calculate the price premium for sustainable wines.

My colleague Danny Brager tells me that his team at the Nielsen Company tries to track sustainable wines (by their measure they account for about 2.1 percent of the table wine market by value, growing at a fast 8.1 percent rate), but the lack of a clear definition means that anything that has “sustainable” on the label gets counted. That’s probably as good as most consumers can do because they don’t fully understand the difference between certified and non-certified wines or the variations among certification programs themselves. But it makes deeper analysis difficult.

Why Can’t Wine Be More Like Fish?fish2

The term sustainable is popular in part because of this ambiguity. I found one wine that boasted “Sustainably Dry Farmed” on the front label. On the back label I learned that this meant that the vines were actually irrigated (which seems like the opposite of dry farming to me) … but only as necessary to sustain the vines themselves. The fluid nature of the term “sustainable” makes all the difference.

Does that mean a one-size-fits-all certification program? No. I actually think that the fact that there are many regional sustainability programs is a good thing, even if it confuses consumers a bit, because it increases the proportion of the industry that adopts sustainable practices.

Sue points out that consumers support sustainable practices in other sectors when they understand them and appreciate their importance. Sustainable fisheries are important, for example, and many retailers and restaurants make a point of featuring sustainably-harvested seafood. The existence of different certification programs doesn’t seem to diminish the impact.

What? How? Why?

We meed to make sustainable wine as transparent and appealing as sustainable fish. Perhaps the key is to focus less on the what and how — what we are doing (certification) and how it is done — and more on the why. The why is pretty clear when it comes to sustainable fisheries. Maybe we can make the why of sustainable wine clearer, too.

Sustainability would be more sustainable from an economic standpoint if we could communicate better with wine buyers so that the sustainability premium is greater and trickles down to growers better than it does today. Sustainable sustainability? That’s a goal worth pursuing.

Rediscovering Collio’s Iconic White Wines

 

Collio, the beautiful wine region in Italy’s upper right-hand corner near Slovenia, along with its neighbor Colli Orientali del Friuli, is one of our favorite places to visit and makes some of our favorite wines, too.  We’ve been there three times and each visit has revealed something new.

Flashback to 2000

We were lucky on our first visit in 2000 because we stayed at Venica & Venica, a top producer that was just getting started developing its hospitality program.  We happened to arrive on Cantine Aperte day when all the wineries in the region were open and welcoming guests. Ornella Venica gave us the key to our room and handed us a map. Get going, she said, You have a lot of work to do today! And so we did. What fun.

A few days later we moved to a rustic cabin at the Sirk family’s La Subida. The cabin was great because we could eat at the famous restaurant when we wanted to but also use our little kitchen to create our own meals. This gave us the chance we were looking for to explore the markets and try even more local delicacies.

The wines we found were a revelation — mainly white wines with a few reds (notably Merlot) mixed in. We were especially drawn to Sauvignon (as they call Sauvignon Blanc here), which had a fascinating brightness and precision. We found ourselves on a beautiful island of great white wines in what seemed like a vast sea of Italian reds.

Fast Forward to 2015

Somehow it took 15 years for us to return to this part of Italy, but we finally found an opportunity when I was invited to give some talks at the Conegliano wine school in 2015.  This time we stayed at BorgoSanDaniele in Cormons and then, at the urging of friends, at Il Roncal in Cividale del Friuli. It was not Cantine Aperte day, alas, but we visited a number of memorable wineries, which I wrote about in articles for The Wine Economist.

A lot had changed in 15  years. Revisiting Venica & Venica we discovered a much expanded winery and an ambitious winery resort hospitality complex.  The region was growing into its potential as a wine tourism destination. We tasted more sparkling wines than on our first visit, a reaction to the changing market conditions created by Prosecco’s success. And we encountered more (and I think better) red wines. Climate change at work, we were told.

We still loved the Sauvignon wines (including one from Tiare that had recently been named the best such wine in the world), but this time we were drawn to the native grape varieties, especially Ribolla Gialla, Malvasia, and Tocai Friulano among the white wines and the various varieties of Refosco among the reds.

Enjoy Collio Experience 2019

We vowed not to let so much time pass between visits to this region, so we were delighted to receive an invitation to participate in the Consorzio Collio’s  Enjoy Collio Experience 2019.  We took part in the activities of a press and trade tour and I spoke briefly for a roundtable discussion on sustainability.

We stayed at the elegant Castello di Spessa, which includes vineyards, winery, golf course, restaurants, rooms, and of course a castle all just a few minutes from Cormons. Giacomo Casanova lived here at one point and his name and image are everywhere.

The focus of this event was clearly on Collio, so we were able to explore its special terroir in more depth (see Stephen Quinn‘s excellent video above) and get to know the wines and winemakers at blind tastings led by Richard Baudins and through winery visits, dinners, and other events.

What stood out in these experiences? Well, we were attracted to certain producers we didn’t know before including Primosic, Gradis’ciutta, Livon, Bracco, and Ronco Blanchis. (A tasting of 12 vintages of Friulano at Ronco Blanchis, which has a very special terroir, was memorable.) And we had an opportunity to learn much more about the region’s designated white wine ambassador, which is called Collio Bianco.

Once upon a time Collio Bianco was a simple field blend, but then it evolved into a sort of kitchen sink wine. Winemakers took their native white wine leftovers and mixed them up. I am not sure it was a really bad wine, but it didn’t represent the best that could be done.

Starting in the 1990s, however, there has been a determined effort to remake Collio Bianco into the region’s flagship wine. Winemakers were given more freedom to blend their best grapes in order to produce distinctive white wines that are brilliant when young and have the potential to evolve over time.

The Collio producers are so proud of their Collio Bianco that we devoted one complete morning to blind-tasting 24 of the wines from different producers in different parts of the region, made with different combinations of native and international varieties, and from a number of different vintage years.

How were the wines? And why is Collio Bianco important to the region’s future? Good questions! Come back next week for analysis.

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Video credit: Magic soils of Collio from Stephen Quinn on Vimeo.

Many thanks to the Consorzio Collio for inviting us to participate in Enjoy Collio Experience 2019. Special thanks to Klementina Koren and Matteo Bellotto for their help and hospitality. Cheers to all the Collio winemakers and international journalists we met along the wine road. We hope to see you again!

Pocos, Locos, y Mal Unidos: The Paradox of Sardinian Wine

cervoPocos, locos y mal unidos. This description of Sardinia and its people (often wrongly attributed to Charles V) is a useful way to think about Sardinia’s wine sector and the headwinds it faces today.

Sardinian wine is a relatively small (pocos) player in Italian wine with perhaps 20,000 hectares of vines out of Italy’s vast 750,000 hectare total. The winemakers are crazy (locos), but that’s a given and not meant as an insult. I think we all agree that you’ve got to be at least a little crazy to try to make a living growing grapes or  making wine.

Small (and Crazy) can be Beautiful

Being small and a little crazy is not an insurmountable disadvantage in global wine. In fact, it can be a good place to begin. Take New Zealand as an example.

New Zealand’s wine sector is big in terms of its global reach and reputation, but pocos in other ways. There are more than 35,000 hectares of vines today (data from the Oxford Companion to Wine), but that’s after a couple of decades of rapid growth. Flash back twenty years and Sardinia had more grape vines than New Zealand and produced more wine.

I think the first Kiwi producers to take their wines to international markets (people like Ernie Hunter, who I wrote about in Wine Wars) must have been more than a little nuts to think that wine from a tiny faraway island could ever make an impact. But they brought their distinctive wines first to the UK and then the world and they found a ready audience. Now New Zealand is a wine export machine with market growth every year at premium price points. Being small and crazy worked for the Kiwis.

Is Sardinian Vermentino the next Marlborough Sauvignon Blanc. Well, as I suggested last week, the wines are excellent and distinctive, too. They deserve to be better known than they are. The next New Zealand? No, that’s too big an ask if only because times have changed and that gap in the market has been filled. But there is certainly potential for Sardinia to grow.

surrauVigne Surrau Case Study

Sue and I learned first hand about Sardinia’s potential when we visited Vigne Surrau, an ambitious 400,000 bottle producer located just outside of Porto Cervo in northeast Sardinia.

Surrau’s first vintage was 2004-2005 and it has been part of the recent move from quantity to quality in Sardinian wine. Growth has been so fast they they are now operating in their second-generation winery and tasting facility with room to grow to perhaps 700,000 bottles in the future. Sardinia itself (60%) and the rest of Italy (20%) are the biggest markets, with 20% exported. Demand is strong and export sales are carefully allocated so that the home market can be accommodated.

Wine tourism is a significant focus at Surrau with about 12,000 visitors per year. The beautiful tasting area, which looks out over the vineyards and the mountains beyond, has room for seated tastings, with food pairing if you wish, as well space for local food and crafts and an art gallery. A small conference center provides space for corporate events. Very well designed. Nothing remotely locos about it.

Vermentino di Gallura DOCG, elegant and complex, accounts for 65% of production. Red wines, especially Cannonou but also some Cabernet Sauvignon and Syrah, fill out the line.  Tasting the Branu (Vertmetino di Gallura DOCG), Sciala (Vermentino di Gallura DOCG Superiore from a different terroir than Branu) and Sciala VT (late harvest, but not a sweet wine with only 4 grams per liter of residual sugar) was a delightful introduction to the potential of Vermentino in this part of Sardinia.

Surrau highlighted the positive qualities we found in many of the best wines we tasted in Sardinia. Focus and commitment to quality on the business side. Balance, finesse, and distinction in the glass. They may be small and crazy, but there is great potential here. What could hold them back?

The Mal Unidos Syndrome

That’s where Mal Unidos comes in.  Almost everyone we talked with bemoaned the lack of unity and teamwork in Sardinia. Sue and I were skeptical. Disfunctional wine sectors are not that unusual. We see them all the time in our wine  travels.

No, you don’t understand, people told us. It is much worse here. It’s not just wine. It’s everything. Factions. Dialects. Everything. We have met the enemy and it is us. It is a real problem.  Regional consortio organizations are weak, they say, which is unfortunate since they are one way that reputation is built and sustained, and cooperation of all sorts is limited.

Small and crazy — that’s not necessarily a problem in wine. But discord and fragmentation can be barrier to greater success. Sardinia might not be able to match New Zealand’s tremendous growth, but it has unrealized potential that it would be great to see unlocked.

The new world of quality Sardinian wine has yet to be discovered in many markets. I hope the people who complained to us about the lack of cooperation are either exaggerating the situation or will find a way to work together to solve this problem and raise both regional reputation and the quality standard even higher.

In the meantime, put Sardinia and its wines on your personal radar. You would be locos to pass them by.

First Impressions of Sardinian Wine

porscheSue and I travelled to Sardinia at the invitation of Alessandro Torcoli, editor of the quarterly journal Civilta del Bere (where Wine Economist columns, translated into Italian, sometimes appear). Alessandro organized a series of trade and press workshops and a wine competition to accompany the Porto Cervo Wine & Food Festival this year.

We were delighted to attend to speak about global trends and opportunities, help with the judging,  and to learn more about Sardinia and its wine sector.

Porto Cervo, on the beautiful Costa Smeralda in the northeast of the island, is more luxury resort than sleepy village, so there was a lot going on besides the wine, including an international press launch event for the new Porsche 911 Speedster sports car. I’ll bet the corkscrew island roads made for exciting driving. I admit that I was distracted a bit by that blue Porsche pictured here.

We only visited this one corner of Sardinia over just a few days, so a comprehensive report is impossible. But we met many winemakers and tasted their wines both at the festival and the dinners, so we have some strong first impressions to share. Here they are.

Sardinia at a Crossroads

The idea of a crossroads applies to Sardinia in several ways. As the second largest island in the Mediterranean (after Sicily) it has been an important economic and political crossroads for centuries and the local culture and even the cuisine reflect this fact.

torbatoSardinian wine features a treasure house of native grapes plus many international varieties that have been grown here so long that they are firmly part of the tradition. Sue and I enjoyed tasting wines that we will probably never find outside of Sardinia, such as the Torbato from Sella & Mosca. The origins of Tobato are controversial, with some arguing that it was introduced from Spain in the 14th or 15th century and others insisting just the opposite. It’s that crossroad thing.

The most important red varietal is Cannonau, which you probably know as Garnacha. Sardinians claim ownership of this varietal and we tasted many fine examples. I am not going to wade into the debate as to whether it is native or introduced by the Spanish, but I will say that it is a shame that people don’t take more of an interest in these wines.

Garnacha and Grenache are having a well-deserved moment and Cannonau should share the love. But, one winemaker said with a deep sigh, Cannonau isn’t generally included when Garnacha and Grenache wines are put in the spotlight. That needs to change.

Very Vermentino (and a Surprise)

Vermentino, the most important white grape variety, makes a lovely wine in Sardinia and I think this might be the island’s best opportunity for attention on international markets. Vermentino di Sardegna is pretty much consistently tangy and delicious, with some outstanding examples such as the wines from Pala. Sauvignon Blanc drinkers should give Sardinian Vermentino a try — I think they will be surprised and delighted.

jankaraVermintino di Gallura DOCG, from the northern region near our location in Porto Cervo, takes the quality up a notch, adding complexity driven by terroir. We tasted wines from sandy zones near the beach and rocky soils at higher altitude. We even tasted a vertical that showed the influence of different vintages and an ability to age.

Such an interesting wine with so much to offer! Favorites included Surrau, Siddura, and Jankara. Worth searching out.

Every wine region holds a surprise and for me Sardinia’s surprise wine is its Carignano di Sulcis DOC — Carignan grapes grown on sandy soils on the island’s south-west coast. The best of these wines are simply fantastic, with impressive body, balance, and flavor.

We tasted outstanding Carignano di Sulcis wines from several makers including Cantina Santadi, Cantina Mesa, and Cantina Giba.  The Sulcis region is high on my list of places to visit if/when we return to Sardinia.

Another Crossroads

Sardinia is at a crossroads in another way.  It has long produced wines for export and been whip-lashed by shifting market conditions much like its sister island Sicily (with which is it often confused by the geographically challenged). (See The World of Sicilian Wine by Bill Nesto MW and Frances Di Savio for a comprehensive analysis of Sicilian wine market twists and turns.)

Twenty years ago Sardinia was more or less defined by the commercial quality bulk wine production of large cooperatives. As demand has shifted and new competitors appeared, the market for these wines has suffered. Sardinian wine grape acreage has fallen dramatically and the momentum has shifted from quantity to quality.  That’s a difficult transition to make, especially since reputation generally lags the reality.

As you can tell from this quick report, we were looking for quality in Sardinia, which is the key to success today, and we found plenty of it. But there is still a lot of work to be done before Sardinia can confidently put this crossroads behind it and move forward into the future.

Come back next week for a case study of success and analysis of headwinds.

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Thanks to Alessandro for inviting us to Porto Cervo and to everyone we met there for their help and hospitality. Special thanks to the staff at Cervo Hotel for making our stay so enjoyable. Now if only I had found a way to disguise myself as an auto journalist to get a shot at driving the new Speedster!

The Beginning of the End of the Old World Appellation System?

“Some New World regions are adopting European-style AOC rules,” the Italian journalist I met in Sardinia explained, “Do you think this is an important trend?”

“No. Just the opposite. I think the Old World appellation system is under attack and will need to change to survive.”

He looked at me like I had dropped down from Mars. This was clearly not the answer he was looking for, but I think it is true. I wasn’t able to explain my logic very well in the rush of the interview, so let me try to explain here.

We Have Met the Enemy …

New World wine appellations are geographical indicators that specify a wine’s origin and help differentiate a region’s products. Some of these designations are very valuable (Napa and Sonoma, for example) in terms of price premium. Others are of little economic value, but can sometimes be useful in other ways that I don’t have time to explain here.

The Old World appellation system starts with designation of origin and adds to that a system of rules that restrict grape choices, blend components and ratios, viticultural practices, and other factors. AOC rules can literally fill a book as Jancis Robinson shows us in the classic video above.

AOCs (and Italian DOCs, Spanish DOs, etc.) evolved as essentially protective structures based on the experience in Champagne, which was the model for the current system. (I wrote about this in my book Money, Taste, and Wine). The first goal was to protect regional reproducers from fraud by outsiders passing off their imitation wines as the real thing.

The second goal (and the reason for such detailed regulation) was to protect quality producers in the region from neighbors inside the region who might cut corners and sacrifice quality to increase profit while benefiting from the regional “brand”.

Very high yields, for example, might increase a particular winery’s profit, but the lower quality dilutes the value of the appellation to all others. It is a cut-throat situation. “We have met the enemy and he is us” describes this element of the AOC program.

So AOCs seek to defend the regional brand from threats from the unscrupulous both outside and inside the region. Today, however, there are two powerful forces that threaten this system and will force it to change. Indeed it is already changing.

Shifting Center of Gravity

The first force is the global market, where the fastest-growing segments and categories are not closely aligned with the AOC system and where the premiumization syndrome is strongest. American consumers have shifted their market’s center of gravity to higher price points, but not higher prices for the same products. They will pay more than before but the product has to be differentiated and appealing. So innovation, which is not a strong point of the AOC system, is increasingly important.

Sue and I saw this when we visited the Valpolicella region a few years ago. The AOC system basically provides opportunities for Valpolicella wines, Ripasso, and Amarone in ascending order of retail price (I am leaving out details to simply, but you get my drift).

We met producer after producer who responded to this situation by creating proprietary blends of grapes that were “downgraded” to IGT status (because the blends don’t strictly adhere to the rule book), but upgraded in terms of price because of their effective branding and high quality. These new IGT wines were designed to fit price points created by premiumization that were not easily attainable with existing AOC products.

There is nothing new about the IGT movement — remember when super-Tuscans were controversial, which feels like a very long time ago? But the IGT trend, which basically slips out of the AOC handcuffs, has gathered unstoppable momentum. We see these wines everywhere now — France, Italy, Spain, everywhere. And some of them of fantastic. AOC? We don’t need no stinkin’ AOC?

In a sense the rise of these “super-” wines represents a shift in mentality that is worth noting. If the AOC system if defensive at its core, the IGT movement is entrepreneurial, seeking out new opportunities and breaking rules to get them.

Climate Change Challenges

The AOC system can withstand these market forces, although some regions will find it in their interests to adapt as Chianti did in the face of super-Tuscan success. But a second force is harder to ignore and will be even more threatening in the long run: climate change.

AOC rules are often promoted as an evolutionary pinnacle. We’ve had hundreds of years to figure out what grapes and blends are the very best for our terroir and here they are laid out in the rule book! Best of the best. You cannot improve upon the AOC rules.

It is a nice argument, but what happens when the terroir changes due to new climate patterns? The answer is that the wines need to adapt and evolve to remain at the peak, which is hard to do if the rule book doesn’t change. AOC standards need to evolve with the climate or become irrelevant or, worse, counter-productive.

Bordeaux Adapts

Some Old World regions already see the writing on the wall, as Jane Anson reported in Decanter earlier this year. Bordeaux and Bordeaux Superieur producers now are able to experiment with “accessory grape” varieties that may better withstand climate change than the traditional (and designated) grape varieties such as Cabernet Sauvignon and Merlot.

“The red grapes for trial,” Anson reports, “will be Marselan, Syrah, Zinfandel and Arinarnoa. In white, Liliorila, Chardonnay, Petit Manseng Blanc and Chenin Blanc will be tested.” A recent VinePair article called this “a small revolution,” but I see it as something bigger and this is just the start.

Anson’s article continues,

Veronique Barthe of Chateau la Freynelle, who is working on the project with the Bordeaux and Bordeaux Superieur Union, told decanter.com this was not a form of sacrilege.

‘We are not trying to make 100% Syrah in Bordeaux, but to test which grapes work best on which terroir in the region with the intention of introducing them only if they offer real quality,’ she said.

This sounds like exactly what a winemaker should be doing, don’t you think? “When the facts change, I change my opinion. What do you do?” according to Keynes. When the climate changes, what will the AOCs do?

So the AOC system is under attack from the inside by IGT wines and from the outside by climate change. The system will adapt, but it won’t be the same. We can debate whether this is a good thing or not (I’m on the good thing side), but it is going to happen. And that’s what I wish I had time to explain to that Italian wine journalist.