Deconstructing Rosé: Simplicity is Complicated

rose“Here in France, restaurant wine lists now have a separate rosé section. And this is not confined to Provence … The world seems to have gone pink, perhaps one small sign of an increasing desire for simplicity when we sit down to eat and drink.”

(Peter Mayle, My Twenty-Five Years in Provence, 2018 – emphasis added.)

The world does seem to have gone pink, as Peter Mayle says. Rosé wine is the fastest growing wine category by far here in the United States and Rosé is now transcending the idea of wine by entering other products as a color, aroma, or taste. You can munch on a Rosé chocolate bar, chew on Rosé gummy bears, lick your lips with Rosé lip balm, anoint yourself (or someone else) with Rosé body polish, and … well, Rosé your way through the day and night, too.

The New Pumpkin Spice?

Rosé is the new pumpkin spice. Or maybe it just looks that way from here. Peter Mayle was on the money when it came to Rosé. And while he might or might not be right in thinking that Rosé is a simple beverage choice for over-whelmed consumers, I think it is wrong to think that Rosé is itself quite a simple thing.

Or at least that’s what I think I learned from attending a professional seminar on Rosé wines at the Unified Wine & Grape Symposium in Sacramento (which was followed two weeks later by another seminar at the Washington Winegrowers Convention that I was forced to miss when a snowstorm caused my flight to be cancelled).

Rosé is hot, so wine business people want to learn more about growing, making, and selling it. Sue and I got a heavy dose of Rosé last year when we visited Languedoc and the Loire Valley and met Elizabeth Gabay whose book, Rosé: understanding the pink revolution, is the best resource we have found for understanding everything pink. Herewith some observations as I try to deconstruct the Rosé phenomenon.

A Paler Shade of Pink?

I cannot think of any other type of wine where color seems to matter as much as for Rosé. This is a fact that was stressed in all the presentations we attended. Although the first Rosé wines I can remember tasting here in the U.S. were dark pink in the Tavel style, the fashion today, according to conventional wisdom, is that paler is better — to the point where one wine we sampled could have passed for a white wine!

I don’t know if it is true, but the word on the street is that consumers think pale is dry and darker is sweeter.  Pale and dry is associated with Peter Mayle’s Provence and those wines seem to fly off the shelf.

It is not the case that all French wines fit this profile — Tavel remains a noteworthy outlier, for example. And Rosé from Languedoc and from the Loire Valley come in a range of hues, as Sue’s photo from a Loire tasting makes clear. Rosé wines made here in the U.S. range from dark to light and I was once served a deep dark “Rosé” that was not a Rosé at all in my view — I think it was an attempt at saingée Syrah gone badly wrong.

One Hue to Rule Them All?

Does one (pale) hue really rule them all? I was interested in the presentation by Jason Haas of Tablas Creek at the Unified Symposium that provided some insights into consumer attitudes. Tablas Creek Vineyard makes two Rosé wines, which makes sense given its association with the Perrin family, which make a lot of Rosé wine in France. Together they account for about 20% of total production. One is a pale pink dry wine made as a Rosé using purchased grapes from the local area. It’s a big hit in the by-the-glass on-trade market.

The other wine, made in much smaller quantities, comes from estate grapes and is made using the saingée method, which means that some of the juice is drained off while still pink leaving a more concentrated red wine behind. You might say that the Rosé is a by-product of red wine making, but I prefer to think that the pink and red are co-produced. This wine has more structure and character and demands food. Sue and I thought it was the best wine of the tasting.

The darker wine, which might be a tough sell if it went into distribution because of its color and higher price, is reserved for tasting room and wine club purchases. It sells out every year in part, I suppose, because tasting room buyers can sample the wine and not just look at the color. And also, frankly, because it is different and a bit special and that’s something people look for. Haas thinks having two pink wines, each crafted for its own market, works pretty well.

Hitting a Moving (Color) Target

So pink isn’t as simple as you might think when it is time to sell the wines and it isn’t simple either when they are made. One speaker said that his Rosé was the hardest wine in his portfolio to make. I am not enough of an enologist to appreciate all the technical details that were presented (there were plenty of experts in the room all nodding their heads), but it was easy to understand how color makes things more difficult.

You might think that pink is pink and once you have the color you want, that’s that. But apparently you would be wrong. The color you achieve in the tank, we were told, is just the beginning and as time passes, and especially as SO2 is added at bottling, the wine gets paler and paler. So you need to begin darker than you want and then control the process pretty closely in order to coast into the shade of pale you are aiming for.

This is something that Elizabeth Gabay finds disturbing because it means, at some point, winemakers may sacrifice what’s necessary to make the best wine in order to get the right color of pink. Rosé wines in general might be better, she suggests, and more popular and drinkable, if color wasn’t such a central concern.

Simplicity is Complicated

The complexity increases when other issues such as grape varieties and viticultural practices are considered. Here in the U.S the Rosé wines are made from easily recognizable grape varieties. Barnard Griffin, a Washington State producer, makes a Rosé of Sangiovese that wins gold (and double gold) medals in competitions and flies off the supermarket shelves. Sangiovese is easy to understand and to like even if it isn’t part of the standard Provence recipe. But in the Loire we discovered wines made from unfamiliar grapes that are in fact only grown for Rosé! Who knew?

I guess Rosé is like any other type of wine. It can be as simple (or complex) as you want it to be. Will consumers revolt if and when they discover Rosé’s hidden geeky side? Yes, if Peter Mayle is right and they are fleeing what they see are unnecessary complication. But I’m not really sure that’s true.

Ch-Ch-Changes: Unified Wine & Grape Symposium 2019 Field Notes

unified

The times they are a-changing. In fact, they have already changed, so the wine industry needs to change, too. That was the over-arching theme of the just-concluded 2019 edition of the Unified Wine and Grape Symposium. More that 14,000 wine industry participants from 27 countries came Sacramento to assess the evolving landscape and debate appropriate strategies.

There were so many informative sessions that even working together Sue and I could not attend them all. I am especially sorry we missed the program about cannabis and the wine market — everyone was talking about it.

Herewith some field notes from three sessions that Wine Economist readers are likely to find interesting.

The State of the Industry session

One of the lines in David Bowie’s song “Changes” notes that “pretty soon now you’re going to get older” and that is part of the problem that the California wine industry faces today. Baby boomers, who powered the U.S. into the top spot among wine-consuming nations, are starting to get older and their ability to push consumption higher and higher no longer exists. For a variety of reasons that I have written about recently, Gen-X and Millennials are not stepping up in sufficient numbers to fill the gap.

Wine consumption isn’t collapsing, it is just reaching a plateau. Peak wine? Not sure. Some wine categories are booming — especially Rosé and New Zealand Sauvignon Blanc — but the overall trend is much less optimistic than last year or the year before that.

Wine production has continued to rise, especially in the premium and super-premium wine coastal regions. The value of sales is still rising, especially for higher-priced wine, but volumes are down in many categories. There is a lot of wine in California (plus increased import pressure) and great concern about who is going to buy it and at what price.

Jeff Bitter, President of Allied Grape Growers, shared information from his annual nursery survey that indicates that the problem will not go away soon. Based on nursery sales and analysis of non-producing acreage (vines that have already been planted but are not yet productive), it is clear that grape production will continue to rise in the short term all around California except perhaps the Central Valley.

New vineyards are disproportionately planted to what Jeff called the chocolate-vanilla-strawberry grape varieties: Cabernet Sauvignon, Chardonnay, and Pinot Noir. Since even these very popular wines are already unusually abundant, with falling price trends in the bulk markets, it looks like there are dark clouds on the horizon.

Jeff argued that root of the problem was demand and not supply, and the recent Silicon Valley Bank Report makes clear that selling wine in the changing environment is going to be challenging. But it isn’t a demand problem alone. Someone once asked the great British economist Alfred Marshall (who actually invented demand and supply curves) which force set price — demand or supply? Which scissor blade cuts the paper, he replied? Both is the right answer and that’s true of wine markets, too.

Jeff, Danny Brager (Nielsen), Glenn Proctor (Ciatti), Marissa Lange (LangeTwins Winery) and I all contributed to the State of the Industry session’s analysis, which news reports thought was both realistic in terms of the problems on the horizon and cautiously optimistic that effective strategies were available. But you can’t confront change without changing and expect everything to work the way it once did.

Technology Thursday: From Drones to Chatbots; How the Wine Industry is Embracing Digitalization

The new Tech Thursday session , which I was pleased to co-moderate with Dr. Tom Collins of Washington State University, pushed the change theme beyond the marketplace and well into the future. A dozen speakers told of their experiences with digital technology in wine business operations, grape growing, wine making, and wine marketing. Together they illuminated change in the present, peered at what is just on the horizon, and probed the distant future (which, because this is technology and change happens quickly, is only a few years away).

There were so many different ideas in the air, each presented in only a few minutes, that it was exciting just to be in the room. I especially liked what Dr. Nick Dokoozlian (E&J Gallo Winery) had to say: you must measure, model, and manage. Digital sensors have the potential to flood us with real time data, so we need effective models to organize it and strategies for action.

I am no expert in this field, but it seems to me that it would be easy to put the cart before the horse by asking “what can we measure?” rather than what can we manage and how can data and models facilitate better and more timely actions? Lots of research and innovation here.

Keynote Speaker Luncheon: Lance Winters, St. George Spirits

Lance Winters, master distiller at St. George Spirits, opened the 2019 Symposium as the luncheon speaker. Winters is an entrepreneur who has expanded St. George’s into one of the most innovative craft distilleries in the nation.

What can wine people learn from a successful spirits entrepreneur? I am a firm believer that there is much to gain by crossover analysis, but Winters actually began his talk by saying he wasn’t sure if he had anything relevant to say.  He asked the audience to help him figure it out during the Q&A session.

Winters is right that craft spirits is very different from wine, especially from the production side, but I found some things to take away from his entertaining talk (which included tasting of three of his spirits). He noted that spirits has appropriated some of the terminology and special character of wine. We tasted Winters’ “Terroir Gin,” for example, which was distilled with herbs and spices chosen to give it the character of a particular forest location that Winters discovered. It is sort of manufactured terroir, I admit, since the flavorings don’t actually come from one particular place, but there was a much more rooted- in-place sense than, say, industrial vodka.

Winters also stressed that story-telling was important in marketing his products and, with this in mind, he suggested the wineries ought to consider producing grappa by distilling the pressed skins of their wine grapes. You already have a story for the wine, he said, which you can leverage into the spirits space. This is an appealing idea, especially for small producers, and some wineries are already taking advantage of the opportunity. Perhaps more will follow suit.

Sue and I also attended a seminar on growing, making, and selling Rosé, which will be the subject of an upcoming column. Overall, I have to say that this was one of the best Unified Symposia I have attended. Congratulations to organizers and speakers!

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The Wine Economist will be back in two weeks with a column about the Rosé boom. I will be in Washington state next week to speak at the Washington Winegrowers Conference. I’ll moderate and speak at their State of the Industry session and talk about global market trends in a seminar on “Intentional Rosé.”

In the meantime, here is a version of David Bowie’s “Changes” from the film Shrek 2.

Global Wine’s Lost Decade

consumption_oiv

One of the great puzzles of wine is captured in this OIV chart, which shows global wine consumption from 2000 to 2017. Consumption peaked in 2007-2008, just as the global financial crisis struck. Wine consumption fell sharply after that, as you would expect.

But then the economic recovery began and total wine consumption increased back to its old level and kept rising, right? No, not at all. In fact, wine consumption continued to fall, albeit much more slowly and unevenly, and even the small increases in 2016 and 2017 have failed to restore total sales to the level before the crisis. It has  been a lost decade for global wine.

Wine’s Stagnant Market

Viewed this way — total global consumption measured by volume — wine is a stagnant industry. If you are looking for growth, look somewhere else.  The picture brightens a bit if we were to look at value not volume. The premiumization trend has pushed up total global spending on wine, but not by much.

oivtable

As usual, the plot thickens when we dive a bit deeper, as this OIV table for the last few years shows. While several countries show modest growth in volume for 2013-2017, France, Germany, Argentina, and Russia experienced declines and the key UK market failed to grow at all.

What’s wine’s problem? Why hasn’t wine consumption risen along with income during the recovery? I am sure that there is no single factor that accounts for situation and different factors in different places. In the UK, for example, tax policy and now Brexi’s side effects have discouraged wine consumption in ways that are not experienced elsewhere. And anti-alcohol policies in Europe generally and especially France and the UK, have impacted wine sales, too.

Talking About the Generations

Here in the US, where wine demand is still growing modestly, Rob McMillan and John Moramarco have highlighted generational transitions in the marketplace, with Baby Boomer falling consumption not being replaced by rising Gen X and Millennial demand. McMillan sees some fundamental differences in the generational characteristics while Moramarco believes that the generational cohorts are more similar than not, just at different stages in their wine consumption life cycle, but they both think that slack market is baked in the generational cake.

McMillan’s recent Silicon Valley Bank Wine Report raises the alarm level, arguing that millennials have failed to engage with wine as some analysts have assumed they  would, creating a hole in market demand that will be difficult to fill. As I have noted before,  only a small minority of each generation accounts for the bulk of wine purchases. How boomers behave in general is less important to wine than how that 15 or 20 percent who buy the most wine (and are therefore different from their cohort) behave. The same is true for millennials. McMillan warns us that that loyal wine-drinking subset of millennials hasn’t come together.

Other theories are needed to understand the global trend, however, since wine’s relative decline began much earlier in the old world (and so cannot be solely explained by baby boom ageing and of course there are special cases such as the UK noted above and the rapid emergence of China as a wine consumer and producer.

Wine versus Weed?

The search for explanations turns naturally to alternatives, such as craft beer and spirits or cannabis-infused beverages, which are now legal in certain areas. Is there a fundamental change in demand from wine to beer, booze, and weed?

Constellation Brands seems to think so because they have doubled down on their investments in wine alternatives, especially Mexican beer and now cannabis. This is significant because Constellation seems to me to be a very data-driven company that does thorough research on market trends and then follows through with major strategic shifts.

Given their earlier success moving upmarket in wine and then focusing on imported beer, I have to think that the cannabis moves have been carefully calculated. I would not bet against their success. Significantly, their most recent earnings report projects rising beer and falling wine and spirits sales. That news, plus the high cost of the cannabis investment, sharply depressed its share price.

But it is not clear that beer, spirits, and cannabis are wine’s most serious competition these days. Some researchers note that younger consumers seem to be less interested in all these products than in the past. They are less interested in sex, too. The U.S. birthrate has fallen to an historic low, dropping even below the replacement rate.

Better Than Sex?

What is better than wine and better than sex? Well, I think you know because you probably have one with you right now. It is your smartphone and the apps that are designed to stimulate and engage in an intentionally addictive way. Simply irresistible. If you have your phone (and you almost always do), you have everything you need. Why bother with anything else?

Besides the obvious appeal of the phone itself is its ability to produce entertainment on command and to serve as a convenient purchasing platform for a world of products where wine is not always the most important part of the mix. Trust me, that device in your hands, purse, or back pocket may not entirely be the good friend you thought it was, at least not if your livelihood involves making or selling wine!

Strong Headwinds

The thing about these theories and some of the others I have heard is that they are based on long-term structural shifts and so do not project rapid short term improvements in wine’s market position.

But even if total wine demand doesn’t return to the pre-2007 growth path, there will be opportunities in the regions and market niches that do experience growth as we wait for the structural forces to work themselves out.

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We will be in Sacramento next week for the Unified Wine & Grape Symposium, so the Wine Economist will take a short break. Back soon!

Global Wine Market: Storm Clouds Gathering?

What a difference a year makes! I am preparing remarks for the State of the Industry session at the Unified Wine & Grape Symposium in Sacramento at the end of the month and I’m struck by how much the global wine market environment has changed in just a year. Last year’s relatively hopeful situation has given way to threatening storm clouds. Here’s a sneak preview.

production_oiv

#1: Global Shortage to Surplus

2017 was a terrible year for global wine production. There are always a few regions where wine production falls due to weather problems of one sort or another, but this is usually offset by unexpectedly good harvests elsewhere.  As this OIV chart shows,  however, 2017 saw substantial short harvests in several of the largest producer nations, resulting in the lowest total production in 50 years despite an abundant harvest in the United States.

Shortage is a problem, as I wrote last year, but so is surplus and 2018 brought a return to excess production in a big way. This was especially problematic in the U.S., where finding room for the new vintage was difficult because of the large 2017 harvest already in the tanks.

Because nothing about wine is ever simple, the shortage affected some countries and grape varieties more than others and the surplus does the same. As I wrote last August, the boom in Cabernet Sauvignon planting in California and Washington over the past few years seems to be hitting the market all at once. There is a lot of bulk Cab on the market right now and prices have softened. That’s a problem for growers who counted on prices continuing to rise.

ontheup#2: Synchronized Global Expansion Deflates

Last January I was able to report the rare occurrence of “synchronized” global economic expansion, which the Economist magazine captured with this uplifting cover.

It wasn’t really synchronized, because that suggests some coordinating force, but all the largest economies were rising at the same time. As the year unfolded, however, the picture changed dramatically.

China and the United States have not fallen into recession, but both are slowing with problems in key sectors. The U.S. stock market, which is not a good recession predictor,  closed out the year with substantial losses and the yield curve, which is, is flatter than you might like.

China’s overall growth rate has declined and some sectors (automobiles in particular) have been hard hit. It is not a good thing when the two engines of global growth are sputtering.

Germany and Japan have experienced down quarters followed by a bounce, avoiding the official recession designation, which requires two consecutive quarters of economic decline. The UK and EU economies are fragile, too, and Italy is a big concern.

What accounts for the sudden change? Well, it might be like the wine grape situation above, where conditions just happened to be positive in 2017 and turned around in 2018. But the intensification of tariff wars and trade disputes is an important factor in the global growth downturn since the shrinking of trade and finance flows (and the movement of people, too) tends to reduce efficiency and stifle growth.

The new year begins with the world economy in a much more fragile condition than 12 months ago and more susceptible to an economic shock. Which explains why financial markets are jittery and everyone is concerned that trouble in the U.S. might start the dominoes falling.

recession#3: U.S. Recession Worries

There is a lot of talk about the next U.S. recession even though unemployment remains extremely low and many elements of the economy are positive. To be clear, there will eventually be a downturn, but it is impossible to say when it will be or what it will look like.

This Economist cover shows one scenario — up and then down — but there are many others such as a double-dip or a prolonged stagnant plateau such as Japan experienced. One thing I am pretty sure about is that it won’t be a repeat of the 2008 crisis just because the circumstances are so different and the ability of economic policy makers to deal with problems is different, too.

The reason everyone is so nervous is that the list of factors that could trigger a recession is long, starting with those trade wars mentioned above. The financial markets sometimes focus on monetary policy — the Federal Reserve’s slow rise in interest rates. But short term rates are now just barely above the inflation rate, which means that real interest rates are slightly above zero after years of being negative. By historical standards, interest rates are low indeed. It is scary that near-zero interest rates are seen by many as too high. Maybe they are worried because negative rates have encouraged a debt boom.

The federal budget should be in surplus with unemployment so low. Instead we have the highest annual deficits I have ever seen outside of war time or during a recession. When a recession strikes (or, God forbid, there is a war), the deficit will sky-rocket. Just as already-low interest rates would handcuff the Federal Reserve if stimulus is needed, already-high deficits would constrain the federal government. No wonder investors are nervous.

In the meantime, the cost of interest on the debt is staggering and will grow, especially with positive real interest rates. When did we stop caring about the debt and deficit? Incredible.

Storm Clouds Gathering

There are other risks to consider including especially heightened political instability (US, UK, France, Germany, the list goes on) and Brexit, which is an important concern both to the world economy and the world wine economy.

How serious is the situation? What strategies do industry actors need to consider? These are some of the questions we will try to address at the Unified Symposium.

What’s Ahead for 2019? Wine Economist World Tour Update

51ppzy7bwzl-_sx332_bo1204203200_The Wine Economist World tour continues in 2019 and I thought you might  be interested in the who/what/when/where because I think my speaking schedule reflects some important issues and concerns in the  global wine business. Here’s an annotated itinerary.

Unified Wine and Grape Symposium

The Unified Wine & Grape Symposium is the Big Show, the largest wine industry gathering in the hemisphere. About 14,000 people will come to Sacramento for the sessions, trade show, and networking opportunities. The Wednesday morning State of the Industry session draws a huge standing-room-only audience that will be anxious to hear about this year’s special challenges: slowing economy, plateauing demand, surplus stocks, and useful strategies to deal with these problems.

I will moderate the session and present, too, along with Jeff Bitter, Allied Grape Growers, Danny Brager, The Nielsen Company, Marissa Lange, LangeTwins Family Winery and Vineyards, and Glenn Proctor, Ciatti Company. This is a fantastic lineup of speakers with much to say about the industry today and in the future. Not to be missed.

I will be busy again on Thursday morning as co-moderator with L. Federico Casassa, California Polytechnic State University, of “Technology Thursday: From Drones to Chatbots; How the Wine Industry is Embracing Digitalization.”  The speakers will examine digital technology in the vineyard, cellar, and beyond, revealing what’s already available, what is coming soon, and what the  distant future holds. The distant future, by the way, is only ten years away — the pace of technological change is that fast.

There is much to discuss, so there will be about a dozen speakers including Bob Coleman, Treasury Wine Estates, Nick Dokoozlian, E. & J. Gallo Winery, David S. Ebert, Purdue University, Nick Goldschmidt, Goldschmidt Vineyards, Liz Mercer, WISE Academy,  Miguel Pedroza, California State University, Fresno. and Will Thomas, Ridge Vineyards, California. . Each speaker will have just ten “Ted Talk” minutes, so hold onto your hats!

Washington Winegrowers Convention

I will be a busy guy at the Washington Winegrowers Convention & Trade Show in Kennewick, Washington, February 11-14, 2019. I’ll begin early on the morning of the 12th moderating and presenting at the State of the Industry session, which will deal with some of the economic challenges facing the region’s wine businesses today.

Joining me will be Wade Wolfe, Thurston Wolfe Winery, Chris Bitter, Vintage Economics, Steve Fredricks, Turrentine Brokerage, and Jim Mortensen, President & CEO,  Ste. Michelle Wine Estates.

In the afternoon I will be part of a session on “Intentional Rosé.”Rosé is the hottest category in wine and so it is no surprise that it gets a full session here and also at the Unified.

I will talk about the global market dynamic and be joined by Megan Hughes, Barnard Griffin winery, Rob Griffin, founder of Barnard Griffin winery, Lacey Lybeck , Vineyard Manager at Sagemoor Vineyards, and Vincent Garge, Maison Henri Garde, Bordeaux. Fred Dex with lead a tasting of Rosé from around the world.

Porto Climate Change and Wine Conference

Sue and I are looking forward to the discussion at Climate Change: Solutions for the Wine Industry in Porto on March 6-7. The focus will be on action, not just talk, which is much appreciated. Al Gore is giving the closing address and a host of wine industry leaders will speak on their concrete efforts to address the challenge of climate change. Climate change is such an obvious risk to the wine industry. It is great to see so many rise to meet the challenge.

I will be moderating and presenting at a session called “Efficiency & Economics: Call to Action,” which I assure you will be more interesting than it sounds. Joining me on the panel are Stephen Rannekleiv, Executive Director, Food & Agribusiness Research at Rabobank, and Malcom Preston, Global Head of Sustainability Services at PricewaterhouseCoopers.

Chile’s National Wine Fair

Sue and I are looking forward to being at Viña Viñamar, Chile on May 15-16 for the Feira Nacional Vitivinicola.  I will be speaking about Chilean wine on the global stage, which is appropriate given that Chile is such an important wine exporting nation. Chile is hosting the Asia Pacific Economic Cooperation (APEC) meetings in 2019 and I expect that the National Wine Fair will take full advantage of this opportunity. The U.K. and U.S. have long been Chile’s top export markets, but China became #1 in 2017.

British Columbia Winegrape Council Conference

I’ve been invited to speak about the economics of sustainable winegrowing at the BC Winegrape Council Enology & Viticulture Conference and Tradeshow in Penticton, British Columbia in July  Sustainability is on everyone’s lips (see climate change conference above), but the transition from theory to practice or talk to action is a challenge. Looking forward to discussing this issue with my BC friends and colleagues.

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Change is the common feature of all these programs. Changing economic conditions, changing market focus (who would have guessed that everyone would be talking about Rosé?), climate change and sustainable practices, and technological change, too. Change is always disruptive and always interesting, too. Hope to see you somewhere along the wine road in 2019.

Wine Economist Top 5 of 2018

251626This week’s Wine Economist looks back at the five columns first published in 2018 that captured the most interest among the wine industry audience that frequents this page.

Sometimes it is difficult to find a common thread among the top columns, but not this year. Readers were concerned about U.S. wine sales and they focused on analysis that they hoped might give them insights into the changing market place and especially how to deal with the changing wine consumer base. Take a look at the Top 5 and see if you agree.

#5 U.S. Wine Sales: Five Surprising Facts

Concerns about wine sales were obviously on readers’ minds when this September 2018 column appeared. The premise of the piece was simple: we are all pretty familiar with the conventional wisdom about the wine market but the conventional wisdom doesn’t always hold in a changing world. Sometimes you need to look more closely at the data (Nielsen data in this case) to see what’s actually going on.

There were plenty of surprises to be found (five of them, as the title indicates), including Zinfandel’s high average price (higher than Pinot or Cab), Cabernet’s move past Chardonnay in total sales, the resurgence of French wine (think pink), Australia’s real sales challenge (price, not quantity), and Washington wine’s unexpected prominence when you shift the frame of reference a bit.

#4 Beyond Boom & Bust: Taking a Closer Look at the SVB Report

The Silicon Valley Bank‘s annual wine industry report always gets a lot of attention and with good reason. Timely analysis + innovative thinking + clear presentation = required reading.  But the complexity of the study is sometimes lost in the rush to report the headline conclusions. So I decided to take a deeper dive and shine a light on some of the aspects that weren’t getting the attention they deserved, especially with respect to the generational transition in the wine market.

This also gave me an opportunity to make a point of my own: sometimes the differences within generational cohorts are as important as the difference between them.

#3 Shaw Organic: Is This the Next Miracle from Bronco Wine & Trader Joe’s?

shaw1Organic food has moved from a niche to an important market segment. A lot of us have been waiting for wine to catch up. Bronco Wine, the makers of Charles Shaw (a.k.a. Two Buck Chuck), apparently got tired of waiting and, working with Trader Joe’s stores, introduced Shaw Organic, a line of affordable wines made with organic grapes.

Bronco is the largest vineyard owner in the U.S. (40,000 acres at last count) and has quietly become the largest grower of organic grapes as well. Is Shaw Organic the breakout wine — the wine that will create a critical mass of consumers who look for organic wine the same way that Two Buck Chuck democratized the wine market more generally? Too soon to tell, but it is a trend to watch.

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

Direct-to-consumer wine sales are on everyone’s mind. With costs rising faster than prices in most cases, those full-margin wine club sales have become a very high priority. Some say that many Napa Valley producers couldn’t keep the lights on without their wine club sales.

So who has the largest wine club? Incredibly, it is an Illinois-based restaurant and winery business called Cooper’s Hawk, which counts about 300,000 wine club members who visit their local restaurants once a month to pick up the latest wine. What makes Cooper’s Hawk so successful (and how can wineries reach the market they’ve developed)? And can the lessons of Cooper’s Hawk be applied more generally? Timely questions. No wonder this is the #2 column of the year.

#1 Outlaw Wine: 19 Crimes Succeeds by Breaking All the Wine Marketing Rules.

Millennials. They are the wine market of the future and the future is now. But what do they want and how do you get their attention? This May 2018 column, which is top of the list, looks at an incredibly successful Treasury Wine Estates product that was specifically developed to appeal to millennial men.

It is called 19 Crimes, which is kind of a strange name for a wine, and while I am not a big fan of the wine itself (it wasn’t crafted to appeal to me), I am very impressed with the way it has succeeded beyond all reasonable expectations by breaking all the wine marketing rules.

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This is the final Wine Economist column of 2018. See you next year!

What’s Ahead for Romanian Wine?

cotnariSue and I did our best to learn all we could about the Romanian wine industry during our visit to participate in the International Wine Competition Bucharest in Iasi, but inevitably we only scratched the surface. Romania is a diverse country with a complicated wine industry. Impossible to understand with confidence on the basis of just a few days.

A Wine Region in Motion

So we are operating on first impressions, not detailed analysis, but first impressions can be important. One strong impression was of dynamism. It was hard to resist the enthusiasm of the people we met and their sense that Romanian wine is on the move, reaching new and higher levels.

Indications of this ambition were all around us, but perhaps most clearly visible when the competition crew took a break to visit the Cotnari region. We got a late start getting out of Iasi because the morning’s judging session had gone into over-time (one of the juror groups — mine! — moved much slower than the rest). So the light was fading by the time our coach rolled into Cotnari.

S.C. Cotnari S.A. is one of Romania’s largest wineries and we saw its name everywhere during our visit — on the wines, of course, on banners at lunch, and as sponsor of a wine, food, and music festival in the square in front of our hotel. The big sign above the winery shined like a beacon as night fell.cotnari

Cotnari was founded in 1948, during the collective era of Romanian wine, rebuilt in 1968, and then taken private in a management buyout in 2000. Cotnari dominates the region it is named for, with 1360 heactares of vines. Several ranges of wines, focusing on native grape varieties, are produced starting with box wines and ending with library selections of Grasa de Cotnari wines called Vinoteque.

Thinking Big

The winery was impressive for the breadth of production as well as the sheer scale (our hosts were proud of the rows of big stainless steel tanks we saw). The visitor facilities, which seem to cater to groups, caught our attention. The restaurant was buzzing when we arrived, with live traditional music and generous servings of local dishes (sarmale — yum!) to pair with the Cotnari wine.

The people at Cotnari clearly think big, which is important. But we saw more evidence of dynamism before we entered the restaurant door. Our first stop was actually another winery with a similar name: Casa de Vinuri Cotnari . The Cotnari House of Wine is much  younger than its big brother — founded just a few years ago in 2011 — but represents the next generation of wine here. I say this not just because it focuses exclusively on quality native-variety wines, but also because it is a project of the next generation of the family that runs Cotnari — founded and developed with their parents’ support.

tanksCasa de Vinuri Cotnari is a work in progress, with modern facilities build over and around an old cellar where the barrels are still stored. Walking through the construction site, the ranks of huge stainless steel tanks glimmered in the moonlight. There is scale here, too, with 350 hectares of vines, but clear focus on upscale market opportunities.

Sources of Dynamism

Sue and I were fortunate to learn about several other wineries — Domenile Averesti, Licorna Winehouse, LacertA Winery, Davino, and the exciting Mierla Alba project — that are leaders in various ways of the dynamic movement we sensed. Based on the wines we tasted and the people we met, it is hard to resist the feeling that Romanian wine is on the move.

What accounts for the dynamism? No single factor, of course. Clearly there is a sense that there are opportunities to be seized among those inside the wine bubble. But there are also important investments coming from ambitious individuals and firms outside the domestic wine scene and outside of Romania, too.

Romanians and Italians have a lot in common (you can hear it in the language) and that extends to wine. Vitis Metamorfosis, a leading Dealu Mare region premium wine producer, is an Antinori family wine project.

The European Union is also an important part of the story.  We were frequently shown shiny new tanks and bottling equipment, for example, and our hosts said simply “EU” and smiled. Money from the EU, meant to help modernize the Romanian wine industry and make it more competitive, has funded a fair number of these projects.

Inevitable Headwinds

What factors could push back the rising tide of Romanian wine? Based on first impressions, here is a briefly list of things that I would worry about. The domestic market is intensely important for Romanian producers and it is never easy to guide consumers to more premium products. The fact of high consumption of home-produced wine combined with increased imports makes the local market a tough competitive environment (no wonder Cotnari makes sure their name is everywhere!).

I am not sure how important exports are at this point because the domestic market is so large, but eventually they will be a factor and then Romanian producers will need to be even more concerned about establishing “Brand Romania” and making sure that there is a high overall level of quality since one bad bottle can ruin reputation for everyone.

I won’t open the subject of what “Brand Romania” could or should be, but it is fair to say that building it will require a good deal of cooperation and teamwork. And this is one area where there are obvious challenges. Indeed, every time we asked about teamwork among wine producers or regions we were met with a sad shaking of heads. Hasn’t happened. Not going to happen. It is a shame, they said.

Everyone knows that it is important to work together, but making it happen is still a problem, we were told. Why is cooperation so difficult? It is hard to say and I am sure it is a complicated situation that goes beyond first impressions. Some have written that the stubborn independence of Romanian wine producers is an understandable reaction to the bad old government collective days. But no one we talked with saw that as the source of the problem.

If everyone looks out only for themselves, who looks after the big picture? That’s a question still seeking an answer, but not a uniquely Romanian question. We’ve visited many wine regions where producers are still trying to figure out how to work together toward a common goal instead of arguing over what that goal might be or just turning their backs.

Sue and I are optimistic about Romania’s success. Excellent wines, smart, determined people. We raise our glasses to the future of Romanian wine!