Anatomy of the Rising Import Threat to U.S. Wine

import1

The rising threat posed by imports is a frequent topic of discussion when I meet with California winegrowers. With the volume of domestic sales declining in several market segments (especially below $10 retail), it is natural to be suspicious of the impact of international competition.

Home Court Advantage

Imports account for about a quarter to a third of US wine sales, a proportion that been relatively steady for the last few years but is higher now than it was 25 years ago. Recent Nielsen data, for example, indicate that imports of still wine accounted for about 26% of sales in the channels they measure when calculated by value and 24% by volume. Imports take a larger proportion of sales in sparkling wines and in channels that the Nielsen figures do not measure, such as on-trade sales.

Is this a lot (or too much, as my winegrower friends would have it)? It depends on how you look at it. OIV data tell us that the United States accounted for about 8.5% of world wine production volume in 2018, so a two-thirds  domestic market share is a very substantial “home court” advantage that domestic producers naturally want to defend.

The slowly rising import market share has many causes. The US is the world’s most attractive wine market, so foreign producers put a great deal of effort into cracking the market. Technology is also a factor. The advent of efficient bulk wine shipping has facilitated increased competitiveness of foreign wine producers and allowed domestic brands to efficiently add foreign wines to their portfolios. Some brands, such as Cupcake, have had great success by offering wines from around the world under a single brand umbrella.

A Fragmented Market

The intensity of import competition depends on which market segment you are looking at. The U.S. wine market is incredibly fragmented and so it is dangerous to generalize. This is true in many ways including simple geography. Because it is costly to get distribution in all 50 states, many medium and smaller foreign wine companies have learned that it is better for them to focus on a few local markets, say, New York, Florida, Texas, and Illinois, instead of attempting national distribution. These are among the states with the broadest and most intense import competition.

The tables shown above, which tell more of the story, are taken from the latest edition of Wine by Numbers, a publication of the Unione Italiana Vini that tracks international wine trade. They tell part of the story of 2018 imports in the U.S. market. Looking at bottled wine imports, for example, you can see that import penetration is dominated by three countries, but which three is different depending upon whether you look at the volume of imports or their value.

Globally the top three wine producing nations — France, Italy, and Spain — account for more than half of all wine production, so you would expect that to be true in terms of U.S. wine imports. But it is not, in part because Spain punches below its weight here.

Looking at the volume of bottled imports, Italy is far ahead in first place with more than a third of total wine imports. France is number two, powered by the rising Rosè market, while Australia is in third place ahead of Chile, Argentina and then finally Spain. Italy and France account for more than half of all bottled imports measured by volume.

The picture changes when you look at the value of imports. Italy and France are still the top two import sources, accounting for more than half of all import spending by themselves, but New Zealand rises to third place on the basis of its higher average bottle price — second only to France in the table.

A Tale of Two Wine Import Categories

Looking at the most recent Nielsen figures published in Wine Business Monthly, t is fascinating that wine imports, as measured by dollar value, are so influenced by two categories — New Zealand Sauvignon Blanc and French Rosè. Both categories have experienced rising sales at premium prices.  Obviously sales of these wines come at the expense of U.S. products to a certain extent, but the market is not perfectly competitive here. Marlborough Sauvignon Blanc and French Rosè are powerful brands — differentiated products we saw in economics — that are difficult to challenge, which undoubtedly helps account for their premium prices.

import2

Big in Bulk

Bulk wine imports tell a very different story. Chile, Australia, and New Zealand are the top bulk imports measured by volume in 2018. More Chilean and Australian wine is imported in bulk than in bottle according to these figures.

New Zealand’s higher average price means that it ranks #1 in bulk wine by value despite markedly smaller import value.  About a third of all Kiwi wine imports arrive via bulk shipments.

Are imports a rising threat to U.S. producers? Yes, if I have to generalize, simply because all the important foreign wine producers I have talked with in the last few years are trying harder and harder to move their U.S. export needle. Their efforts have had and will have an impact. U.S. producers are wise to study their efforts and try to learn from them.

But, in practical terms, the actual surge in imports has been more narrow than broad — Marlborough Sauvignon Blanc and French Rosé. And there is something to learn from that, too. The most successful international competition has come at premium prices, with focus on quality, reputation, and product differentiation. Value not volume drives their success.

Field Notes from the Porto Conference on Climate Change and Wine

portoccl

Sue and I were in Porto earlier this month for the global conference on climate change and wine. The event started with a day and a half of presentations and discussions directed at climate change solutions for the wine industry and then concluded with a half-day summit on climate change more generally.

The highlight of the summit was a presentation by Al Gore, the prominent climate change activist and former U.S. Vice President. Gore’s presentation was intense, focused, and inspiring. Sue called it a “stem-winder” of a speech — it really got the audience worked up.

The conference itself featured speakers from almost all corners of the wine world (Asia was the missing corner, with one non-wine speaker, Afroz Shah, a United Nations Champion of the Earth, from India, and Rajeev Samant, CEO of India’s Sula Vineyards, in the audience).

Herewith are some field notes from the eleven sessions. I recommend Richard Siddle’s report on the conference for additional detail and analysis. Videos of the presentations are being posted on the Climate Change Leadership YouTube.com page.

Ground Hog Day?

In a pre-conference column I wrote about the tragedy of the Groundhog Day syndrome — experts meet to talk about climate change, but it is mainly talk and nothing really gets done. The next meeting is pretty much like the last one, repeating with only minor variations, as the in the popular Bill Murray film.

The Porto gathering promised to break out of the Groundhog Day cycle and offer real solutions; I am happy to say that it generally delivered. Starting with Miguel Torres, we were offered concrete examples of determined companies and leaders who backed their talk with action.

One thing I learned is this: the basic outline for progress on climate change issues is fairly clear. Start with an environmental audit to establish a baseline, set specific quantitative goals to reduce emissions and improve efficiency, evaluate results, then repeat the process. Some of the achievements reported here were startling and show just how much can be accomplished once a serious commitment is made.

You could tell that many actors were still struggling a bit with exactly where to put priorities: Try to make progress everywhere? Or focus on a few big goals, either the ones that would be easiest or cheapest to achieve or perhaps the ones that would have the biggest impact? I do not know what the answer to that question is, but it is better to know what you want to do than to thrash around blindly.

The Porto Protocol

Participants were encouraged to sign the Porto Protocol, a platform created last July in the first iteration of this conference (which featured a keynote by Barack Obama).  Those who sign the protocol commit to doing more in the future than they are doing now and to sharing their methods and results with others. The idea is to create an open source database that will help everyone do more, faster, better.

Interestingly, Sue and I ran into several people who confided that their organizations were having trouble deciding whether to sign up, which was puzzling because each of them has developed a strong program to promote sustainability and confront climate change.

What’s the problem? One colleague said that his organization was already doing more than the protocol currently requires, so there was a concern that they might not get credit for what they have done. No one said it, but I think it is possible that the transparency requirement could also be an issue. If that’s the case, I hope we can get past it. As Adrian Bridge, the CEO of Taylor’s and the driving force behind this initiative, has said, “There is no time, and no need, to reinvent things. If we share our successes and experiences, we will all benefit.” He is certainly right.

Does Climate Change Action Pay?

This is the question that I am often asked about both climate change programs and sustainability measures generally.  The gist is that these programs are costly. Who is going to pay for them?

I do not recall hearing anyone say that consumers would be willing to pay a premium for climate change-friendly wine, although some of us talked at dinner about what could be done to draw consumer attention to wineries that are taking climate change action.

Does that mean that the costs fall like a tax on the wineries who fight climate change (and not on those who don’t)? Yes and no. Some of the defensive costs of mitigating climate change, especially in the vineyard, are going to be unavoidable. Better to treat them as a sunk cost and move on.

Some positive actions have the potential to pay for themselves, at least in part. Katie Jackson of Jackson Family Wines, told the story of the decision to move to slightly (one ounce) lighter-weight bottles for some of the millions of cases of wine that they sell. The conventional wisdom is that consumers associate lower bottle weight with lower quality, so there was pushback about this method to reduce the firm’s carbon footprint.

Happily, according to Jackson, consumers didn’t notice the difference and the environmental savings became a cost-reducing part of Jackson’s carbon-reducing program. The world is not filled with free lunches like this, but there were several examples given of actions that paid for themselves, contributing to both financial and environmental bottom lines.

All Along the Value Chain

Antonio Amorim, president of the world’s largest natural cork producer, argued for the environmental benefits of natural cork closures. The cork closure, which captures carbon rather than releasing it, can offset the carbon generated by the glass bottle it seals, he said. Amorim announced plans to expand cork forests, building upon previous innovations aimed at speeding up the long cork harvest cycle and ridding corks of perceptible cork taint.

Other speakers addressed issues up and down the supply chain, illustrating both the challenges and opportunities that climate change action presents.

U.C. Davis professor Roger Boulton’s presentation on “The Winery of the Future” was a fascinating deep dive into what is possible with current technology if you decide to design a winery from scratch to have zero or negative emissions. It is like a Rubik’s Cube in a way, since each action has many reactions, but Boulton showed that a solution is possible, with a super-efficient production facility the result.

Call to Action

Stephen Rannekleiv of Rabobank, Robert Swaak of PricewaterhouseCoopers, and I had the final session of the conference, “Efficiency and Economics: Call to Action” We presented in a “two-minute drill” mode because the earlier sessions went over time and the we had to finish on schedule so that the room could be turned for the afternoon summit.

Rannekleiv focused on the many steps that Rabobank is taking to foster innovation in the food and agriculture sector to address sustainability and climate change issues. Swaak could have touted PwC’s environmental impact assessment practice, but choose instead to add a new dimension to the discussion by highlighting how climate change impacts businesses, and not just wine, through the various often unseen risks that it introduces or magnifies.

I talked about the fact that climate change requires new ways of thinking (which fit in very well with my colleagues’ remarks) and issued the call for action. Wine gets it, I said, but that’s not enough. The wine industry needs to extend its influence across the value chain in order to maximize its impact.

>>><<<

Sue and I want to thank Adrian, Taylor’s Port, Pancho, and David Furer for organizing this conference and give special thanks to Greg for suggesting that we participate.  To everyone we met at the conference: we hope our paths cross again very soon.

Precept Wine and the Willie Sutton Recipe for Market Growth

pinkbubblesAt the conclusion of the State of the Industry session at the Unified Wine & Grape Symposium each January Nielsen’s Danny Brager announces his Bronze, Silver, and Gold medal wineries. The medals aren’t for the best wine or even for the most wine (Gallo would win that one every year).  The prizes are for market success as measured by sales growth. Here are the 2019 winners.

GOLD – Delicato Family Wines, Riboli Family Wines, Precept Wine

SILVER – Deutsch Family Wines and Spirits, Jackson Family Wines

BRONZE – Duckhorn VIneyards, O’Neill Vintners and Distillers,  Zonin USA, Delegat, Winery Exchange, Jam Cellars

Growth was difficult in the U.S.wine market in 2018, when many categories experienced falling volumes or stagnating revenues. To excel in this environment is noteworthy. The Gold medal is especially difficult to earn because Brager’s criteria require both high absolute growth in terms of thousands of cases and also high percentage growth rates year on year.

Gold medal producers have to have some secret sauce that powers them ahead. Delicato has Bota Box, for example. Riboli has hot-selling Stella Rosa.

Precept Wine‘s recipe for success is a bit different and so worth a deeper look. Precept, founded in 2003 by Andrew Browne and Dan Baty,  is the largest private wine producer in the Pacific Northwest. Wine Business Monthly rates it as the 13th largest wine firm in the U.S. and, clearly one that is growing quickly.

I like to say that Precept has implemented the Willie Sutton recipe for growth. Sutton, a notorious criminal, was famously asked why he robbed banks. I rob banks, he said, because that’s where the money is. Pretty simple logic, don’t you think?

Precept Wine has grown so rapidly by moving decisively into the market segments where the growth is. This sounds simple, too, but it is not. Anticipating growth opportunities requires close analysis of changing market conditions. And then you must have the resources, flexibility, and determination to seize them. Not easy at all, but when you get it right the results can take your breath away,

If you made a list of growing wine market segments in 2018 it might look something like this.

  • Sparkling wine
  • Rosé wine
  • Alternative packaging (especially cans)
  • Private label wines
  • Low calorie / low alcohol wines
  • Super premium wines
  • Direct-to-Consumer sales

Precept has made important investments in each of these categories starting with its acquisition of Gruet, the New Mexico-based sparkling wine producer, which has experienced dramatic growth during the recent Prosecco-fueled sparkling wine boom. Gruet sales increased by 25% by value in 2018. Amazing.

Rosé is the fastest growing wine category in the last year and Precept has taken advantage of this with pink wines throughout their portfolio and leveragde for even higher growth by combining pink with bubbles, putting pink in cans, and even putting sparkling pink wine in cans as shown in the image above.

Precept has made a very serious commitment to the canned wine space and I see their House Wine cans in nearly every supermarket. The House Wine cans and Ste Chapelle wine spritz are two of the three top brands in this category.

Private label wines are another area of growth. Many wineries make their own products and also private label brands for retailers. Precept took a major step into this arena last year by acquiring Truett-Hurst’s business. The plan is to ride the wave of private label growth so that it represents 50% of total sales by 2020.

The Truett-Hurst acquisition included a wine brand called Cense, which is endorsed by WW (formerly Weight Watchers).  Low calorie, low carb, and low alcohol wines are still a small slice of the total market, but one that seems likely to grow rapidly as production technology and product quality improve.

The Cense line includes a Rosé (of course), a sparkler, and a Marlborough Sauvignon Blanc. Alcohol is around 9 percent. Look for Cense wine spitzer cans in time for summer. You have only to look at the investments that major brewers are putting into low/no alcohol beer to get a sense (or cense) of the potential for wine.

Precept is also experiencing impressive growth in the premium and super-premium wine categories with their lineup of brands that includes Browne Family Vineyards, Canoe Ridge Vineyard, Pendulum, and Waterbrook.

Can the fast growth be sustained? Prediction is difficult, especially about the future, but I would argue that the particular category growth waves that Precept is riding are trends and not fads, and unlikely to suddenly disappear. Times will continue to change, however, so Precept’s challenge (and a challenge for the rest of us, too) will be to remain nimble and entrepreneurial even as scale increases.

Global Rosé Market Q&A

rose

Interest in Rosé wine is on the rise. The most recent Nielsen numbers (as reported in Wine Business Monthly) show that sales of Rosé wine in the U.S. market is growing by more than 40% per year — the fastest growth rate of any category.

Producers want to better understand the Rosé phenomenon, which explains why both the Unified Wine & Grape Symposium and the Washington Winegrowers convention featured specialized Rosé seminars this  year.

This column aims to add to the discussion by bringing together what Sue and I have learned at the Unified and during recent visits to France, Spain, and Italy, some insights from Elizabeth Gabay‘s recent book, Rosé: understanding the pink revolution, and a 2015 report on the global Rosé market produced by the OIV and the Provence Wine Council (CIVP). Here is a pdf of the OIV/CIVP report.

Who Makes the Most Rosé Wine?

Rosé is made pretty much wherever wine is made and sometimes accounts for a remarkable share of a region’s production (think about how important Mateus and Lancer’s Rosé were for Portugal during their peak years).

France is the largest producer by far today followed by Spain, the United States, and Italy. Production has increased dramatically in Australia, Chile, and South Africa, according to the OIV/CIVP report.

Who Buys It?

Let me answer this question three ways using three different figures from the OIV/CIVP report. The data are from 2014, so current data will differ, but the patterns are still relevant.

oiv1

Rosé wine sales are significant just about everywhere wine is consumed, but France is the market leader. Rosé accounted for 30% of all wine sold in France in 2014 according to the study, consistent with other reports that Rosé outsells white wine in French supermarkets, which feature large sections devoted solely to the pink stuff.

Although France is the largest Rosé producer in the world, it actually imports Rosé from Spain, which is the largest Rosé exporter. I think there is a pattern of inexpensive Spanish imports, which fill supermarket shelves with box wine, although that is only part of the story.oiv2

Is Rosé a wine for women? I have heard this said many times and never really believed it. The OIV/CIVP study casts doubt on this stereotype. Although women drink significantly more Rosé than men in some markets such as Germany, the Netherlands, and the UK, there doesn’t seem to be a strong gender bias in other markets. especially in France but also in the U.S., Russia,  and Canada. Men drink more Rosé than women in Brazil, according to the study.

oiv3

Finally, consider the distribution of sales by age group. Winemakers today are very interested in breaking into the millennial market. So it is significant that the OIV/CIVP study finds a strong youth bias in Rosé consumption.  Young people in every country surveyed here have a higher Rosé consumption than older people. France is noteworthy because all age groups consume Rosé in substantial quantities, even if the younger ones drink a bit more.

Bottom line: the market for Rosé seems to be both broad and deep. No wonder everyone is so interested.

How Much Does Color Matter? Is Rosé Just a Summer Wine?

Wait — that’s two questions. I wrote about color in an earlier column, so I will make that answer short. The conventional wisdom is that pale Rosé sells better than darker Rosé wines. But the fact is that Rosé from around the world comes in many different hues (as Sue’s photo above from a tasting in the Loire Valley shows).

I agree with Elizabeth Gabay that the color issue is exaggerated, but I don’t expect to convince anyone. If someone makes a darker Rosé and it doesn’t sell, I am sure that the color (not other factors) will be blamed.  They used to say that nobody ever got fired for buying IBM equipment and no one’s going to get a pink slip for making too pale a Rosé wine.

The summer wine question is quite interesting and can be answered in two ways. Yes, Rosé is a summer wine in the sense that there is a strong seasonal component in sales. Consumers drink more Rosé in warmer months. But Rosé is not just a summer wine as sales are now significant throughout the year.

Is There Easy Money in Rosé?

The answer to this question is related to the seasonality question above. It is easy to imagine that Rosé is a Chateau Cash Flow kind of wine. You pick the grapes, make the wine, ship the wine, cash the check — all in just a few months. The money pours in on a timeline only a little longer than Beaujolais Nouveau, which is the ultimate cash flow wine.

But there’s a hitch in the easy money Rosé game — you have to sell out to make it work. The residual seasonality of Rosé sales means that moving your product in February is more difficult than in July or August. And although I have had some Rosé that has benefited from a few years of bottle age, the conventional wisdom is that last year’s Rosé is over the hill — Rosé passé!

The consumer preference for fresher Rosé (which is also true for some other wines, such as Marlborough Sauvignon Blanc) creates a problem for producers. If you don’t sell out, then last year’s slow-selling wine is likely to clog up the supply chain, discouraging orders for this year’s wine.  Reliable supply is important to developing customer loyalty, so you want to have enough, but excess supply is hard to get rid of. Rosé producers must navigate complicated currents!

That’s all there is space for this week. Please leave comments with more Rosé questions and answers.

Wine & Climate Change: Groundhogs, Gulliver & the Porto Summit Challenge

portoccl

Porto will host a global gathering next week devoted to the topic of Climate Change Leadership: Solutions for the Wine Industry. Sue and I will attend the meetings, including a session on “Economics & Efficiency: A Call to Action” where I will speak along with Stephen Rannekleiv of Rabobank and Robert Swaak of PriceWaterhouseCoopers.

The program is a who’s who of wine industry leaders who have chosen to have a dog in the climate change fight. The list begins with Adrian Bridge, CEO of Taylor’s Port,  who was instrumental in organizing the event, and continues with Miguel Torres, Cristina Mariani-May, Pau Roca, Antonio Amorim, Greg Jones, Roger Boulton, Jamie Goode, Gerard Bertrand, and on and on. Some guy named Al Gore is giving the summit keynote. Anyone heard of him?

I will be very interested in how the conversation evolves both in the official sessions and in the informal discussions that are sometimes more important. Sue will be paying special attention to the associated trade show because she’s very interested in how talk about climate change and wine translates into action and both the nature of the vendor turnout and the quality of interaction will be a good indicator of potential success.

Groundhog Day Syndrome?

There are lots of meetings and conferences about the environment, sustainability, and climate change. Sometimes in the past they have reminded me of the 1993 film Groundhog Day, where the same talk and motions are repeated as if on an endless loop and little of substance seems to change (until, at last, it does). Climate change has reached a critical moment, however, which demands action over talk.

I’m hopeful that the Porto meeting will avoid the Groundhog Day syndrome and one reason why is the focus on solutions — concrete steps to address climate change issues. And that’s why the trade show will be important, too, because it will an indicator of how seriously the market has embraced the importance of climate change and the opportunity for solutions.

The Gulliver Problem

But then there is the Gulliver problem.  Jonathan Swift’s Gulliver found himself in Lilliput where he was vastly larger and more powerful than the tiny citizens. His every action posed a threat to their world and their only hope was to work together to control the giant. Lacking a massive rope to tie the big guy down, the Lilliputians teamed up with thousands of tiny strands.

Climate change is a bit like Gulliver in that it is a huge force that none of us has the power to stop by ourselves. Top-down initiatives like the Paris Agreement are very important, but need to have bottom-up support. Grassroots. Tiny strands. Addressing climate change head on requires thousands of small concrete actions that taken together can have real meaning.

Why is Wine Different?

So where does the wine industry come in? What is different about wine that makes its Lilliputians think that they can take on Gulliver? This is one of the themes of my talk and, while I don’t want to give too much away just yet, let me share a little of my thinking.

There are many reasons why wine is particularly responsive to climate change issues (you have probably already thought of a few reasons as you read this sentence). But here is an important one. Climate change is an existential threat to civilization and the natural environment, but it is not taken seriously enough by many people because its impacts are uncertain, uneven, and projected into the future.

But wine really is different. The future is now for climate change and wine as the combination of higher temperatures and more frequent extreme weather events redraws the world wine map. Wine is fragile, vulnerable. Ultimately there is not escaping the climate change threat.

Wine people have little choice but to seize their Lilliputian tools and work to save their businesses, their vineyards, and ultimately themselves.  Porto will be an opportunity to see both the small and the big. Hope to see you there.

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!

>>><<<

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.