Category Archives: wine markets

Is Bordeaux Still Relevant?

May 16, 2011 By in economic crisis, wine exports, wine markets 4 Comments

The brand is Bad Boy Bordeaux

Is Bordeaux still relevant? Relevant to those of us in the United States, I mean. It used to define fine wine, but now we don’t seem to buy much of it – the momentum’s shifted to Asia. It’s just another “brand” to many Americans, and not one that is especially successful.

Shanken News Daily recently published Bordeaux export data that suggest that interest in Bordeaux has dropped off sharply in the U.S., now the world’s biggest overall wine market but no longer a powerful player in the Bordeaux game.

Bordeaux By the Numbers

Germany leads the Bordeaux export league table measured by volume with 2.9 million 9-liter cases in 2010. China, Belgium, the UK and Japan follow, with the U.S. and Hong Kong lagging behind.

Things change markedly when the ranking is by value not volume. Hong Kong received €251 million worth of Bordeaux wine followed by the UK, China, Belgium, Germany and then the United States and Japan. U.S. Bordeaux purchases amounted to €99 in 2010, down from €247 in 2008 (when the U.S. was second only to the British in Bordeaux imports).  Outrageous pricing is the problem, the Shanken report suggests, and not just the dismal economic climate.

U.S. importers paid €99 million for 1.3 million cases of Bordeaux in 2010, or about a bit more than €76 per case. Germany, on the other hand, paid €111 million for 2.9 million cases, which works out to less than €40 per case — a very different kind of Bordeaux. By comparison, Hong Kong paid €251 million for 0.8 million cases of Bordeaux for an average of over €300 per case. Obviously there are many Bordeaux wines and markets, not just one. And obviously the United States is not a leading player in any of them.

Vintage Arias

I was thinking about all the fuss that there is about Bordeaux, the annual en primeur circus and the critic ratings of these wines and suddenly I found myself humming an opera tune. What can opera teach us about Bordeaux wine? Maybe nothing! But please read on anyway.

Bordeaux’s problem is that it is so expensive. Opera has that problem, too. Opera is arguably the most expensive form of art. Large capital expenditures are required (have you priced an opera house recently?). The sets and costumes used in high end opera are so expensive that they are stored for future use and rented out to earn a few extra bucks. Opera is enormously labor intensive, too.  You need soloist singers, a chorus and an orchestra and conductor. Dancers are often also required. Most of these artists have trained for years and years, so we might add in human capital costs, too.

There may be some type of regularly produced art that is more expensive to make, but I don’t know what it is. It isn’t a surprise, therefore, that opera evolved as an art for rich elites and the opera houses became gilt palaces of conspicuous consumption. The tunes made it out onto the street, of course, and into the parlor, too, when sheet music publishing caught on, but the focus was on Grand Opera, the elite patrons who watched it and the elite artists who performed it.

Opera video: Champagne not Bordeaux and J. Strauss not R. Wagner, but you get the idea.

Elites and Masses

Opera soon went global as the influence of European elites spread to the Americas and Asia. You can still see evidence of this cultural flow in the beautiful opera houses scattered across the world wherever colonial centers emerged  and in faded news articles about the famous (if fading) touring opera stars who performed in them.

Then technology in the form of broadcast radio and recordings (and then television, dvds etc.) brought opera to the masses. Opera on the radio here in the U.S. began  in 1931 with the first Metropolitan Opera broadcasts. The regular Saturday performances, sponsored for years by Texaco, became  part of the common experience of American life. Opera really meant something.

But technology, which initially democratized opera, eventually became a corrosive force, too. Technology allowed opera to move from free broadcast media to pay-to-listen satellite radio and pay-to-view HD opera showings in movie theaters.  More significantly, however, communications technology opened up an alternative universe of tunes to whistle and performances to enjoy.

Back to Bordeaux

Opera lost its privileged status and became just another artistic niche. Attention was paid, as it must, because of the quality of the works and the sacrifices of those who organized and performed them, but opera’s high cost became harder to justify. Attention became focused on the tried and true “war horses” that would be certain to sell tickets. New operas were still written and sometimes performed, but not as often as one might hope. Opera still means something, but it is not the same.

It seems to me that the attention given to Bordeaux bears more than some superficial similarity to our attitude towards opera, although I naturally do not want to push the analogy too far. Bordeaux, like opera, used to be a signifier of taste both among elites who could afford it and the masses who could not. (And probably still is in Hong Kong and China.)

Like opera, top flight Bordeaux is a victim of its successes and excesses – now so expensive that even rich Americans balk at the prices. The focus is on those wines at the top of the 1855 Classifications and a few others that have been identified by Parker and other critics.

It is What it Is

But Bordeaux is not the only game in town. The globalization that made Bordeaux prices soar has also opened up a world of excellent alternatives. There are a lot of great wines; maybe Chateau Lafite is as great as La Traviata, but only a few will have the money, taste and opportunity to sample either one at its best.

I started this essay by asking if Bordeaux is still relevant and I have decided that it is, but in the particular way that great opera is still relevant.   Opera no longer informs us about music (or culture)  generally as it once did. Opera is about opera now and that is good enough. And Bordeaux is (just?) Bordeaux. At least that’s how it looks here in the U.S.

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Reading this post, I think it is a fair criticism to say that I may have overstated the prior cultural significance of both opera and Bordeaux in order to make their current status seem like a great fall from grace.  This may be true about opera, but I’m not sure about Bordeaux. I see a great disconnect between the attention given Bordeaux and sales here in the U.S.

Another criticism is that I have ignored Bordeaux’s premier status in the wine auction market. This is true, although I am not sure if the fact that Bordeaux has become a prized “alternative asset class” investment necessarily weakens my argument.

Sizing Up Supermarket Wine

May 9, 2011 By in wine distibution, wine markets 4 Comments

I have seen the future of wine. It’s on display right now at your local supermarket — unless of course you live in New York or one of the several other areas where misguided state law forbids the sale of wine and food in the same establishment. Your day will come for supermarket wine, my friends, but not quite yet.

I don’t mean to suggest that supermarket wine is the only direction that wine is heading, but it is a very powerful force. As the world of wine broadens and American wine drinking culture becomes more firmly established in the socio-economic mainstream, wine sales seem likely to become even more concentrated in the vectors where everyday consumer purchases are made. Supermarkets aren’t the only important wine selling space, but they are one of the most dynamic.

The Rise (and Rise) of Supermarket Wine

It just makes sense. The U.S. did not achieve its current status as the world’s #1 wine market (ranked by total not per capita sales) because more people are spending time at specialist wine shops or liquor stores, although I am sure that is happening (note the success of businesses like BevMo and Total Wine). The increased availability of wine at supermarkets, Costco and Sam’s Club and now also drug store chains (all included in my broad definition of “supermarket wine”) is driving the market.

A recent article on Shanken News Daily notes that Yellow Tail wines have been able to keep their U.S. sales high despite wine market problems generally and Australian wine problems in particular by increasing drug store sales to offset declining purchases in other retail segments. Drug stores? Wine next to lipstick, baby wipes and band-aids? Walgreens wine? Yes! Walgreens has even launched a house brand called Colby Red, a California red blend supplied by Treasury Wine Estates.

The British led the way in supermarket wine and for good or bad the world has followed their path. Wine is attractive to grocery store owners because of its relatively high retail margins and its ability to sell other goods at the same time.  The British pioneered house brand supermarket  wines and that trend is continuing, too. Here is the U.S., most major retailers have their own wine brands (generally made for them by large scale producers such as The Wine Group) – even Walmart and 7-Eleven.

In Britain, the venerable Oddbins chain has closed its last store, a  victim in part of pressure from Tesco and other supermarket chains. (Tesco is now the world’s largest retailer of wine.)  Supermarket sales are seen as the key to rising consumption in China, too, although they are not the only growth area in this rapidly maturing market. Torres is expanding its Everwines store chain, for example, an indication that specialty shop sales are rising as well.

Half and Half

Supermarket wine is one of those “is the glass half full or half empty” issues. It is hard not to appreciate how much supermarkets have done to promote wine (where they are allowed to do so), especially compared with the dismal selection and service of just a few years ago, but it is also easy to dismiss them as being part of a trend towards simplified wine from corporate makers.  I think both trends exist: supermarket wine is a business and so for the most part it follows established business practices. But wine consumers are complicated people who appreciate diverse offerings, so consumer interests are strong, too.

I wanted to take the measure of a “typical” supermarket wine department and I was fortunate to get some help. Our local business district partnered with my university a few weeks ago to organize a “Spring Zing” festival designed to get students and their visiting families to connect with local retailers.  Our neighborhood Safeway hosted a book signing by my favorite cookbook author Cynthia Nims and invited me to give a talk in their wine aisle.  This was my first supermarket gig (but I hope not my last), so I felt a little like Roger Miller’s “King of Kansas City” – a  #1 supermarket attraction (see video at the end of this post).

About a dozen students, parents and random curious Safeway shoppers met me for the talk.  I briefed them about supermarket wine then turned them loose to do some fieldwork. I had questions for them to answer — a treasure hunt! How big is the wine section (how many different wines are sold)? How many different countries are represented? How many different U.S. states? And what are the cheapest and most expensive wines on sale? How, in short, does supermarket wine measure up?

Big and Small

They found the answers pretty quickly. Total number of wines? About 750 according to two economics majors (economists are good with numbers!). Is that a big number? No — and yes. No in the sense that it is a small number of SKUs compared with the tens of thousands of wines that are available. This is a tiny slice of the pie in that regard. But it is a big number compared with, say, Costco, which stocks fewer than 150 different wines at any one time. And of course it is a big number compared to any other part of the store. Where else in a modern supermarket can you choose from among this many different options?

A lot of the wine sold here comes from a few large producer portfolios — Gallo, Constellation Brands, The Wine Group, Ste Michelle Wine Estates and so on. So in one sense the diversity is less than it might initially appear and that’s why some enthusiasts, who want to see more small producer labels, are disappointed in supermarket selections. But there are also many wines from high quality medium sized wineries (Hedges, for example, and Frog’s Leap at this store) so it would be wrong to say that supermarket wine is only limited to big players. And some of the big dogs offer real diversity, too — the wines don’t all come out of one big vat in Lodi!

Where in the world does the wine come from? This Safeway store had a strong regional bias in favor of Washington and California wines with smaller  selections from other areas. The usual suspects showed up. Twelve foreign countries (Australia, New Zealand, France, Germany, Italy, Spain, Portugal, Chile, Argentina, South Africa, Greece and Japan — if you count plum wine) —  and four U.S. states: Washington, Oregon, California and New Mexico (Gruet sparkling wine).

High and Low

It didn’t take very long for my crew to sniff out the highest and lowest priced wines and the difference was amazing.

Initially they focused on Quail Oak, Safeway’s house brand wine (made by The Wine Group, I believe) that was in Two Buck Chuck range at $2.99. But then they got out their calculators and discovered that they could purchase 5-liter bag-in-boxed Franzia wine for even less — about $2 per bottle equivalent.  That’s the low tide price point at this Safeway.

The high price? A bottle of vintage Champagne was priced at more than $300 (but only about $220 with your Safeway Club Card discount). It is even cheaper if you buy a six-pack and take the extra 10 percent discount. Very expensive for supermarket wine! But it makes the bottle of Dom Perignon sitting next to it in the display case seem relatively affordable.

The most expensive wine is 100 times the price of the cheapest one! What a tremendous range of price points! I think it is probably impossible to find an equivalent gap between low and high price for products in the same overall category anywhere else in the store.

The supermarket wine phenomenon is very interesting to me because it provides clues as to how the American wine scene is changing. While it is obviously wrong to draw general conclusions from a single specific case, I do think this one store is very interesting in terms of the questions that it raises about price, selection … and the future of wine.

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Reading over this post it occurs to me that a valid criticism would be that I am not demanding enough of supermarket wine. I seem to accept supermarkets for what they are and not press them to offer even more choice and diversity. I think this is half true — I do accept that supermarkets are subject to economic constraints that define their business model. I acknowledge that, as key wine sales vectors, they have power to shape the wine culture if they want to. I am optimistic that they will do so in response to changing consumer preferences. The typical Safeway wine department profiled here is enormously different from what I would have found ten or fifteen years ago. Who knows what I will find ten years hence?

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Thanks to Safeway for inviting me to talk about wine in their store. Thanks to everyone who showed up and participated in my wine treasure hunt game.

Is Malbec Washington’s Next Big Thing?

April 11, 2011 By in Argentina, AVAs, brands, emerging wine regions, Riesling, Washington wine, wine brands, wine education, wine markets 3 Comments

Celebrate! April 17 is Malbec World Day

Every year Seattle magazine publishes a list of Washington’s top wines and wineries and identifies an “emerging” wine variety to highlight and promote. This year it was Grenache and there are some great Grenache and Southern Rhone-style Grenache-blend wines made in Washington state, so I think this was a good choice. The wines we sampled at the Taste Washington Grenache seminar were delicious (see list at the end of the post).

The Big Freeze

But Grenache, as good as it can be here, is probably pretty far down the list in the search for The Next Big Thing in Washington wine. There is only a tiny bit of it planted and I don’t think there are any “old vines” left (old vine Grenache is said to produce more complex wines). Grenache was more widely planted in Washington wine’s early days, but the vines didn’t survive the hard winters that strike the Columbia Valley every few years. Now, with greater attention to vineyard location and management practices, Grenache is making a welcome comeback.

Grenache is an up-and-comer and there are great wines being made already,  but as it is probably best viewed as the Next Next or Next Next Next Big Thing until more and older vines are on line.

But what about Malbec?

When you say Malbec everyone thinks Argentina and, since I’ve recently returned from doing fieldwork in Mendoza, naturally so do I. But what about Washington Malbec? Seattle magazine named it their hot wine variety in 2009 and so I decided to use this year’s Taste Washington event to evaluate the Malbec status quo. (Click here to view a video of last year’s Taste Washington Malbec seminar.)

Mendoza del Norte?

Argentina makes distinctive Malbec wine and there is good reason to think Malbec might do well here in Washington, too. Mendoza and the Columbia Valley are both basically deserts (the Andes and Cascade mountains respectively provide rain shadow effects) where irrigation is a necessity. Both areas get plenty of sunlight although I think vineyard elevations are higher down south.

There are many patches of Malbec planted in AVAs from Lake Chelan to Yakima Valley to Snipes Mountain, Red Mountain and Walla Walla. Statistically Malbec is the fifth most-planted black grape variety after Cabernet Sauvignon, Merlot, Syrah and Cab Franc and ahead of Sangiovese, Pinot Noir and Lemberger (according to Washington Wine Commission data).

The vines are relatively young, reflecting Washington’s comparative youth as a quality wine producer. Most of the wines I tasted were made with grapes from roughly 10 year old vines, but I know there have been recent plantings that should begin to appear in forthcoming wine releases.  Argentina has some old vine Malbec (80 years and more) in Luján de Cujo, but a lot of the vineyards (especially those in the Uco Valley) are about the same age as Washington’s.

When I ask Washington winemakers why they started making varietal Malbec they usually say that it was because the wine was too good to hide in a blend and, while I don’t dispute this, I suspect Argentinean Malbec’s market success did not unnoticed.

Malbec was originally planted here to use as a blending grape — Malbec is one of the five classic Bordeaux varietals along with Cabernet Sauvignon, Merlot, Cab Franc and Petit Verdot. Seven Hills released a what I think was the first varietal Malbec (from very young vines) in 2001, but most other makers restricted it to blends until more recently.

Price and Cost Differences

If Washington and Argentina share certain aspects of geography, they differ tremendously in terms of production cost and retail price. There are precious few Washington Malbecs below the $20 price point. The most frequently observed Malbec price at Taste Washington was $28 and many more were priced above than below this figure. Reininger’s 2007 Walla Walla bottling was the highest priced Malbec on the published listing at $51 and I think that the Eliseo Silva was the cheapest at a listed $10.

Argentinean Malbecs can be found at all price points from about $10 up, but they are biggest in the sub-$20 arena. In other words, Washington and Mendoza compete in the Malbec market, but exactly not head-to-head.

Cost differences account for some of the price difference. Malbec is in short supply at the moment in Washington (only 1100 tons were crushed in 2010 compared with 31,900 of Cab Sauv). Malbec is Washington’s most expensive wine grape according to USDA average price data. Malbec cost $1,540 per ton on average in 2010, putting it ahead of Cab Franc ($1,325) and Cabernet Sauvignon ($1,297).

Malbec is in short supply in Argentina, too, but land and labor costs are a lot less there. High quality Malbec costs 5-6 pesos per kilo in Argentina these days and good quality costs 4 pesos (both figures have risen significantly in the last two years).  At an exchange rate of 4 pesos per dollar and figuring 5 pesos per kilo, that converts to about $1100+ per ton, a lot less than in Washington.

Taste Washington Malbec

There was a lot of Malbec at Taste Washington, mostly from small producers.  Nineteen wineries listed Malbec on the program but I think there may be nearly 100 different Malbecs made in this state by the 700+ large and small registered wineries.

I am not an expert wine taster (which is why you won’t find wine ratings on this website), but I sampled enough quality Malbec in Argentina to begin to understand it a little. In general I found the Malbecs at Taste Washington to be very good representations of the varietal, with well integrated oak in most cases, and able to reflect the different vineyard terroirs. I think they compete very well with the Mendoza wines in the same price ranges, which is a high complement.

My favorites, for what it is worth, were from Fidelitas, Gamache, Hamilton Cellars, Nefarious, Reininger, Saviah and William Church. Special marks go to Hamilton Cellars for making Malbec in three styles: Rose, straight Malbec and a Malbec-heavy Bordeaux blend.

So is Malbec Washington’s Next Big Thing? Not yet — not until there are more vines on line and Chateau Ste. Michelle or  Columbia Crest get into the market and help develop it. Interestingly, Columbia Crest’s newly-appointed chief winemaker, Juan Muñoz Oca,  is Argentinean and Columbia Crest recently released it’s first Malbec — maybe that’s a sign! I’m looking forward to finding out.

Cost is still a big issue and perhaps Washington cannot compete with Argentina at the key price points. But in terms of quality? Yes, it could happen. Malbec could be Washington’s NBT.

[Thanks to Sean Sullivan and Guillermo Banfi for help tracking down Malbec grape prices in Washington and Argentina respectively.

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Taste Washington Seminars: Washington’s Emerging Varieties: Grenache Panache
Presented by Seattle Magazine

The rising popularity of this new-to-the-Washington-scene grape variety in recent times is a boon for wine drinkers.  Seattle Magazine recognizes that Washington State’s offerings with this amazing grape are truly delicious, having awarded it Best Emerging Varietal in their 2010 Best of Washington Wine Awards. Bob Betz MW, an admitted Grenache fiend, will join Seattle Mag’s wine columnist Shannon Borg and an esteemed panel as they help you discover why our region’s Grenache offerings are fast becoming some of the New World’s most distinctive and respected.

Moderator:
Bob Betz MW (Betz Family Winery)
Panelists:
Shannon Borg (Seattle Magazine)
Brian Carter (Brian Carter Cellars)
Sara Schneider (Sunset Magazine)
Sean Sullivan (Washington Wine Report)
Wines:
2008 Milbrandt Vineyards “The Estates” Grenache, WS $25
2009 Maison Bleue “La Montagnette – Upland Vineyard” Grenache, SM $35
2008 Darby Winery “Stillwater Creek Vineyard” Grenache, CV $45
2009 Betz Family Winery “Besoleil” Grenache, YV $50
2007 Brian Carter Cellars “Byzance” Red Wine, CV $30
2008 Syncline Wine Cellars “Cuvée Elena” Red Wine, Columbia Valley $35
2008 Rôtie Cellars “Southern Blend” Red Wine, WA $35

What’s The Next Big Thing in Wine?

March 21, 2011 By in Argentina, Australian wine, Barefoot wine, Economic impact, Supply and Demand, The Next Big Thing, wine brands, wine markets, wine price 18 Comments

Is Moscato The Next Big Thing (TNBT) in wine? That’s the question Liza B. Zimmerman asks in an article in the March 2011 issue of Wine Business Monthly titled “A New White Zin is in the House.”

Moscato wines sales soared by 91.4 percent by dollar value according to Zimmerman’s article, compared with 4.9 percent overall market growth (Nielsen off-premises survey data for the 52 weeks ending October 16, 2010).  That’s a big surge in sales, albeit from a relatively small base.

Move Over White Zin

Some of the increase probably comes as consumers switch over from White Zin, as the article’s headline suggests. The decline in White Zinfandel sales is accelerating as measured by Nielsen, with a 7.4 percent decrease in the most recent month reported in the same issue of WBM. Since White Zin sales are huge (almost double the sales of Red Zinfandel, for example, and slightly larger than Sauvignon Blanc in the Nielsen rankings), it wouldn’t take many consumers switching from White Zin to Moscato to generate big growth numbers.

Wineries have been quick to respond to the trend. Sutter Home, the White Zin king, has a popular Moscato Alexandria. Robert Mondavi Woodbridge and Gallo’s Barefoot Cellars are in the market, too, and yesterday I saw an advertisement for a Moscato from Columbia Crest. Now that I have started to pay attention, I am seeing Moscato everywhere.

I associate Moscato with low-alcohol fizzy Moscato D’Asti wines from Italy, but Zimmerman points out that Moscato can be made in a variety of sparkling and still styles, which she sees as a plus. The fact that the wines do not typically cost an arm and a leg is an advantage, too. I will be interested to see to what extent Italian producers will benefit from the Moscato boom or if American wineries will capture much of the market growth.

TNBT Effect

Now to be honest, I don’t really care if Moscato becomes The Next Big Thing — I’m more interested in TNBT wine phenomenon itself.  Many of the winemakers and winery executives I talk with around the world display an understandable fascination with TNBT. White Zin, which once defined TNBT here in the United States, shows that fads and trends can at least sometimes develop staying power, as the huge sales figures make clear. But TNBT of today cannot afford to get too comfortable — there’s always another NBT on the horizon.

Some of my contacts in Italy worry about Pinot Grigio (PG), for example, which was TNBT for a while and continues to grow in the U.S. market. Nielsen reports sales of Pinot Grigio/Pinot Gris totalled $751 million in the sales vectors they monitor in the 52 weeds ending January 8, 2011 — much higher than White Zin’s $425 million for the same period. The Italians are glad that PG sales are growing, but they worry that their share of this market may be crowded off the shelves by U.S. PG wines (from Sutter Home, Barefoot Cellars, Columbia Crest and Woodbridge, for example).

And, of course, they are concerned that the market will swerve and TNBT will shift in some other direction entirely, leaving behind a smaller market niche.

Is Torrontés TNBT?

So when I was getting ready to visit the wine country in Argentina I found two groups interested in the question, is Torrontés TNGT?  — the hopeful Argentinean producers and fearful makers of Pinot Grigio back in Italy!

Torrontés is an interesting candidate for TNBT. Some people see it as Argentina’s signature white grape variety, ready to take its place along side Malbec in the market place. While Malbec has its roots in France (it is one of the classic Bordeaux blend varieties), Argentinean Torrontés is thought to be theirs alone —  a cross between Muscat (think Moscato) and the Criolla or Mission grapes planted by the early settlers. It is or can be intensely aromatic and some of the wines I’ve tasted (the Doña Paula, for example) seem to be all about flowers more than fruit or minerals. Distinctive, but everyone’s cup of tea.

Having read so much here in the U.S. about the amazing TNBT potential of Torrontés, I was a bit surprised at the reactions I found in Argentina. Some of the wine people we talked with were clearly enthusiastic and ready to ride the wave if and when it came, but others had doubts.

The optimists view Torrontés as the next wave of distinctive “Blue Ocean” Argentinean wines. Malbec paved the way, then Torrontés broadens the market, then Bonarda and so on each filling a unique market niche.

More than one person talked about the potential for Torrontés in Asia, pointing out how well it pairs with Asia food. Of course everyone in the world who makes white wine with good acidity dreams about selling their wines in Asia, so this is hardly an uncontested market. And it is also useful to remember that while you and I might like the taste of Torrontés (or Alsatian Pinot Gris) with Pad Thai or Kung Pao Chicken, most Asian consumers believe that wine should be red and that it is not necessarily meant to be consumed at meals. So caution is warranted.

Parallel (and Ambiguous) Universes

I was surprised at the number of wine people who were Torrontés sceptics. Some were concerned that Torrontés lacks the quality to be an important grape varietal. They would rather focus on quality international varietals like Chardonnay and Cabernet Sauvignon, to complete directly based on quality and price rather than trying to develop a new but possibly marginal market segment.

Torrontés is like Pinot Grigio, only it’s good, one expert told us with a grin — and  with obvious disdain for both wines.  Although Italian Pinot Grigio can be excellent, its reputation is influenced by simple basic products that flood the market and I think there is  concern that this could happen with Torrontés in Argentina.

The parallels with Italian Pinot Grigio are interesting. The best of the Torrontés and Pinot Grigiot wines come from particular geographic areas (Salta in Argentina, for example, and Alto Adige in Italy), but expanded production would probably  come from other zones where the quality is not as high.  As TNBT effect strikes, if it does, the initial quality could be undermined as output expands. The concern is that Argentina is not as established as Italy in world wine markets and its reputation might not be able to withstand a wave of mediocre wines.

But perhaps it is the nature of TNBT phenomenon that hot products simultaneously exist on many levels, simple and complex, highest quality and no-so-good. Perhaps that is the key to their success. Maybe it is the diversity (or is it ambiguity?) that allows fads or trends to evolve into TNBT.

Although wine snobs almost universally reject White Zinfandel, for example, some good wines of this type have been made, including an early vintage by Ridge Vineyards that I talk about in Wine Wars.

If this is true, then maybe Moscato and Torrontés have a chance!

Everything Old is New Again: Wine in Mexico & Turkey

February 12, 2011 By in BRICs, emerging wine regions, history, wine exports, wine history, wine markets 2 Comments

This is the seventh  in a series of articles on wine in the BRICs and the New BRICs. Today we examine Mexico & Turkey.

Old Old and Old New

What in the world do Turkey and Mexico have in common? It is easy to generate a list of differences ranging from geography to history, language, and religion. Jim O’Neil probably included them on his list of the New BRICs because they both have relatively large populations (107 million in Mexico, 75 million in Turkey) and so substantial market potential as their middle classes expands

From a wine standpoint, Mexico and Turkey are linked by the term “oldest.” Turkey may be the oldest Old World wine producer, with evidence of wine production going back more than 6000 years. You cannot get much more “Old World” wine than Turkey, even if most people in the Old World never give Turkish wine a second thought.

Mexico is the oldest wine producer in the New World. Spanish soldiers and priests brought wine grapes with them,  The first evidence of wine production dates from 1521 (I see a 500 year anniversary celebration on the horizon). Conquistador Cortés ordered that new settlers plant grape vines (1000 vines for every 100 persons, according to the Oxford Companion to Wine), thus spreading Spain’s wine culture throughout the New World empire. Wine production in Mexico grew so successful that King Felipe II of Spain order a stop to new production in 1699 in an effort to protect Spain’s domestic wine industry.

Red and White vs Raki and Brandy

It is ironic that we don’t associate wine production with these two countries today given their deep historical roots. Turkey? It’s a Muslim country, of course, so we don’t think of alcohol or, if we do, it is raki, the fiery anise flavored drink. Mexico brings images of tequila (and wasting away in Margaritaville), beer, and perhaps Mexican brandy, the national liquor. Casa Pedro Domecq’s Presidente brand is said to be the best selling brandy in the world. Domecq is now part of the French drinks group Pernod Ricard.

Both Mexico and Turkey are important grape and wine producing nations today. Mexico produced a little over 1 million hectoliters of wine in 2007 according to OIV data — about  as about as much as New Zealand made in 2005 before its recent boom. Turkey is the world’s sixth largest table grape producer, surpassing Italy in this area, but only a small fraction of its output is made into wine. Turkey makes roughly the same amount of wine (213,000 hl) as Israel (218,000 hl).

Wine production in Mexico has fallen by almost 50% since the 1980s according to the OIV records while Turkey’s production levels have been more stable. Both Turkey and Mexico have the potential to rise up in the world wine rankings, but they each face particular challenges.

The Taste of Turkish Wine

Turkish wines can be stunningly good. Jancis Robinson’s tasting notes (from a 2009 research trip) find many peaks among wines make from international grape varieties. A Corvus Corpus 2004 received a rating of 17/20, for example. “This right bank style wine is really quite rich and full, verging on overripe. Extremely opulent and velvety.” A Robert Parker kinda wine, she said.

Ron and Mary Thomas, my senior Turkish wine correspondents, reported similar success on their 2010 tasting trip. “We found the wines of Turkey to be ubiquitous, great values, and extremely enjoyable,” they write. Among the reds they found the Syrah  wines hard to beat — some of the best Syrahs they have tasted anywhere — high praise. But the highest peak came from an unexpected source.

Our greatest discovery was the varietal called Emir.  We found it from several different producers in each area of Turkey where we stayed, most of the producers (or the fruit) located in the area we first stayed (Cappadocia—central Turkey).  This stony, flinty land produced this wonderful grape that is unlike anything I’ve tasted.  Think about a cross between a flinty sauvignon blanc from the Loire and a very dry viognier.  It had a light golden color and a very crisp finish.  Some lemony-apple notes, wonderful minerality, and pleasing to sip while it stood up well to fish and the ever-present smoky-roasted aubergine (which I had at every meal in Turkey).  This was a favorite wine we would drink anytime.  We found the same bottles to cost anywhere from about 15 Turkish Lire in the winery, to 30-90 in a restaurant (depending on the scale of the restaurant).  That’s a range of about $10 USD to $65.  We sometimes did not find it on the wine list, and started asking for it:  in all cases but one, they found a bottle in the back and presented it to us, and no matter who produced it, it was great.  It went beautifully with the bronzino in Ephesus and Istanbul, and was perfect with the stuffed zucchini flowers in Cappadocia.  Emir is king.

Indeed. And that’s part of Turkey’s problem. As the Oldest of the Old World countries, it has perhaps the richest treasury of native grape varieties. But who has heard of them, of King Emir and his court? Very few, I think, and this is problematic in a world where so many consumers are already confused by wine and have trouble mastering the basics.

The domestic market for wine in Turkey is relatively small and its international exports are limited. Belgium is its largest international customer according to a government report (Belgium?) followed by Northern Cyprus, Germany, Britain, the USA and Japan. A local search for Turkish wine uncovered a few bottles at a Mediterranean restaurant and not much else.  As the report says, there is much work to do for Turkey to realize its great wine potential.

More Than Margaritaville

“Baja — the New California?” was the title of Jancis Robinson’s review of Mexican wine after her visit to Baja California in 2010. “I am excited about the potential for wine in Mexico,” she said. And indeed some of her tasting notes are enough to make anyone excited. Here’s what she had to say about Union de Productores Textura 1 2007 (a blend of Tempranillo, Zinfandel and Grenache): “Deep crimson. Very sweet and dusty and ripe berried. Very Mexican. Very rich. Sweet spicy then nice dry finish. There’s a real beginning, middle and end to this wine. Good refreshing stuff on the finish.”

Very Mexican! I like that. Not a me-too wine. Not all the wines are big or sweet, of course, which is just as well. Lots of variety. Lots to look for and to like.

The biggest challenge? Climate, according to Jancis. Not enough rain. And, while I’m sure she is right in the long run, I think that infrastructure is probably an even bigger short term problem.

People who taste the wines of Mexico at wineries rave about their quality. But then when they order them in restaurants in the cities they are sometimes puzzled. Is this the wine I liked so well? I wonder what’s happened to it, they ask?

The answer, in many cases, is that Mexico’s transportation system of poor roads and long rides in hot trucks has baked the freshness out of the wine and left just a  hollow shell behind. Mexico can produce excellent wines, but it must also find ways to get them to market in good condition. This is a wine problem but of course it is much more than that.  It is a symptom of a general challenge to Mexico’s continued development.

Wine Myths (and Reality)

January 25, 2011 By in book reviews, Masters of Wine, wine education, wine markets, wine research, wine science 4 Comments

Benjamin Lewin MW, Wine Myths and Reality. Vendage Press, 2010.

They say that you shouldn’t judge a book by its cover (or a wine by its label?), but does weight offer any clue to quality? Some winemakers apparently think so — they put their best wines (or at least their most expensive ones) in the heaviest imaginable bottles to give them physical heft to match their presumed sensory impact.

If you take Benjamin Lewin’s latest book as a sample of one, intellectual heft and physical weight are pretty highly correlated, too. At 634 pages and 1.9 kg this is indeed a weighty tome — and a very valuable one for anyone really interested in wine.

Wine: Myths and Reality is a great book for people (like me) with a geeky interest in wine. I like it so much, in fact, that I am going to make it required reading for the students in my university class, The Idea of Wine. They may not appreciate having to carry it around in their backpacks, but I guarantee they will thank me when they sit down to read it.

DIY Master of Wine?

I was tempted to title this post “Dr. Lewin’s DIY MW.” As I was reading the book I couldn’t help thinking about the Master of Wine exams and how closely the book seems to follow the syllabus. (I found a copy of the 2008/09 syllabus on the MW website — click here to view the pdf file). I am sure that reading Dr. Lewin’s book isn’t adequate to pass the MW exam, but I think it gives you a sense of the depth of knowledge that Masters of Wine are expected to master.

The Master of Wine was invented to help educate and prepare wine professionals — people who make their living in the wine business as buyers, sellers, advisors, writers and critics. The exam’s structure reflects the need to understand not just wine but its entire commodity chain.

The first two papers deal with the production of wine.

Paper 1 will examine candidates’ knowledge and understanding of ‘Characteristics of the vine and wine’ up to and including ‘alcoholic and malolactic fermentation’.

Paper 2 will examine candidates’ knowledge and understanding of ‘Wine maturation, blending and bottling’ up to and including ‘quality assurance and quality control’.

The first half of Dr. Lewin’s book does a rather masterful job of covering the material for the this part of the exam. Clear, organized, detailed, interesting and provocative — just what the doctor (or aspiring MW) ordered.

Getting Down to Business

The third MW theory paper is on wine business, which makes sense since so many MWs are in “the trade.”

Theory Paper 3: The Business of Wine.   The purpose of this unit is to assess candidates’ current knowledge and understanding of financial, commercial and marketing aspects of the international wine industry. Candidates should demonstrate the ability to apply their knowledge to a range of business situations including marketing and investment strategies, financial decision making, supplier – customer relationships and strategies for identifying and meeting consumer demand. Candidates will require a broad background knowledge of wine industry structures around the world and how these relate to one another.

I have argued in the past that the Masters of Wine program was been very important to the development of the global wine market by its efforts to create a highly trained group of industry leaders. Reading Dr. Lewin’s book you can understand why. Dr. Lewin is not quite as comprehensive in this part of his book, which is understandable since this material will be of less interest to a general audience, but his analysis of global wine market trends and issues is still very interesting and useful.

The fourth MW essay is on “contemporary issues” and I think Dr. Lewin does a great job of raising and analyzing important issues throughout the book. As someone who writes and uses textbooks all the time, I appreciate that Dr. Lewin provides us with his opinions (not playing the old “on one one hand, on the other hand” game), but he does so carefully, citing evidence after having outlined the issues clearly.

The final third of Dr. Lewin’s book is a world tour — an introduction to the regions, the wines and the relevant controversies, with special focus on Burgundy and Bordeaux, which is understandable given their place in the world of wine and especially because of Dr. Lewin’s particular interests and expertise.

Breaking with Tradition

I was initially surprised by the organization of the regional wine survey chapters. Traditionally the Old World comes first and the New World trails along behind. Dr. Lewin reverses the order. Why?  I believe that it has to do with the theme of the book. The title, Wine Myths and Reality gives a strong hint of the book’s over-arching argument.

The myth is that Old World wines are unmanipulated natural products and that New World wines are highly processed industrial ouput. Dr. Lewin argues throughout the book that all wine is manipulated — how could it be otherwise?  Left to itself, wine is just a stop on the liquid road to vinegar.

It is hardly surprising that Benjamin Lewin would take this stand on wine. He is a renowned cell biologist who understands better than most the role of science in wine. To dismiss “manipulation” is to ignore wine science, which seems like a foolish, ignorant attitude.

Embracing Dr. Lewin’s argument raises the true question — what do we want wine to be and how best can we achieve this goal? Everyone manipulates (or else makes spoiled wine) — the question is how, how much, why and to what effect? Telling the story of the New World first puts this argument in context and highlights the real issues effectively.

This is a very fine wine book — one of the best I’ve read — and certainly worth a place on your bookshelf — even if you have to reinforce it to bear the extra weight!

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This book’s color illustrations  — maps, photos and graphs — are simply excellent. I think one reason the book weighs so much is that it is printed on special high gloss paper to make these illustrations unusually clear and useful.

The BRICs: Suprising Wines of India

January 17, 2011 By in BRICs, India, wine markets 3 Comments

This is the fourth in a series of articles on wine in the BRICs – Brazil, Russia, India and China.  (Note: According to today’s Financial Times, Jim O’Neil, who coined the term BRICs has decided to expand the list to include Mexico, South Korea, Indonesia and Turkey. Hmmm. I will be expanding the Wine BRIC list myself in an upcoming post!)

India’s wine markets are full of surprises for anyone who hasn’t been following them closely in recent years. The only previous Wine Economist post on wine in India dealt with that country’s misguided tariff policies that I argued stifle the wine industry in an attempt to protect it (a view I still hold).

Because most people don’t associate wine with India, you might think that wine is quite new in India — and it is as you will see below, but it is also very old. Like the other BRIC nations, wine in India is going through a dramatic transition today, but one that is quite distinct because of India’s unique history, politics and culture.

The Roots of Indian Wine

Persian conquerors brought grape vines to India nearly 2500 years ago; wine consumption is first mentioned in a text on statecraft written about 300 b.c.  Wine was a beverage for elites, not the masses (who apparently wanted stronger stuff), and lived a shadowy existence that continues today due to concerns about alcohol consumption. The influence of British colonizers contributed to the growth of Indian wine production in the 19th century, before the scourge of phylloxera hit India’s vineyards in the 1890s with predictable results.

Table grapes are a major crop in India and wine grapes are grown in several regions, generally at altitudes of 200m – 800m, although vineyards at 1000m exist in Kashmir. Growing conditions are surprisingly good using viticultural practices that take humidity and rainfall patterns into account (harvest must be complete before the monsoon). Two crops per year are common.

Since independence in 1947, wine has been caught in a crossfire in India. On one hand, it is a heavily controlled substance.  Article 47 of the constitution makes it a function of the state to discourage alcohol consumption (Gandhi and some other early leaders were teetotalers), so wine imports are highly taxed and advertising is forbidden. Individual state governments within India tax and regulate wine sales much as in the United States, creating a distributional crazy quilt. At the same time, however, some state governments promote viticulture and wine making as an economic development tool. It’s a push and shove situation for wine.

The surprising state of wine in India today reflects this condition. On one hand wine (especially imported wine) is highly taxed and the national market fragmented by uncoordinated state regulator regimes. At the same time, pro-development government policies seem to have led to an over-expansion of supply by encouraging new vineyard plantings.  Wine consumption is growing rapidly as India’s expanding middle class embraces the fruit of the vine, but for the moment at least there’s a shakeout taking place among producers who find themselves out ahead of demand.

A Tale of Three Winemakers

The contemporary history of Indian wine can be told through the three most important wineries, Chateau Indage, Grover Vineyards and Sula Vineyards.

Chateau Indage is generally credited with starting the quality wine industry in India in the 1980s.  Bombay investor Sham Chougule sought to produce sparkling wines, mainly for export (40% foreign sales today). Piper-Heidsieck, the French Champagne house, provided technical expertise for site selection, grape variety choice and wine making. The result was India’s most famous wine, Omar Khayyam, a sparkling wine praised by Jancis Robinson among others. Chateau Indage was until recently India’s largest wine producer, offering two sparking wines, a pair of reds (Cabernet Sauvignon blended with indigenous varietals) and two white wines. Chateau Indage today is expanding globally, having acquired wineries in Australia and a distributor in the UK.

Grover Vineyards came next, a collaboration between Kanwal Gover  and French wine maker George Vasselle. Their ambitious goal was to bring Bordeaux to Bangalore — to make French-style wines in India using only French varieties. This they have achieved to a very considerable extent. With the help of flying winemaker Michel Rolland, Grover’s signature red wine La Réserve has gained an international reputation.

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Sula Vineyards recently overtook Chateau Indage to become India’s #1 wine producer. Sula is the project of Rajeev Samat, who left home to study at Stanford and work in Silicon Valley before returning to manage the family enterprises. His Tuscan-inspired winery and associated vineyards in Nashik, a few hours drive from Mumbai, is part of an elaborate economic development plan that includes vineyards, wine production and wine tourism.

Having introduced a value range to complement its premium wines in 2008, Sula is expanding rapidly on all front (see the video above for more information), adding 1000 acres of new vines to supplement their current 1200 acres.  A new winery is in the works to handle the increased tonnage. Sula now has more than 300 employees and a 70% market share, making it the Big Dog in Indian wine.

Sula is a big part of the movement to make Indian wine part of the mainstream middle class lifestyle using all the techniques of modern marketing. It is worth taking a detour to visit the Sula website to see how they tell their story and position their products. Like its colorful label (and Rajeev Samat, its enthusiastic owner), Sula combines Indian roots and international influences.

SWOT Analysis

The Indian wine market has obvious potential that has attracted investors to the domestic industry and international firms seeking markets for their products. The U.S.  Wine Institute commissioned a 2008 report on the Indian wine industry (the link takes you to a pdf of the report) that makes good reading. Only a very small percentage of India’s total population has the right combination of religious views, legal age, location in states where alcohol can legally be sold, disposable income and exposure to wine to be considered potential customers, according to the report. However this tiny percentage amounts to 24 million people, a considerable and growing market!

The study’s SWOT analysis provides an effective summary of the situation.

Strengths

  • Indian wine consumption has grown 25-30% annually over a 5year period.
  • Good climate for grape growing
  • Urban population is increasing.
  • Youth are craving an alternative to hard liquors and developing a more refined taste.
  • Wine is becoming more acceptable to women and youth.

Weaknesses

  • Wine remains an elite taste.
  • Wine is difficult to store in India due to lack of cellars and refrigeration.
  • Less than 50 percent of the population is legally old enough to drink (25 yrs. old).
  • 400 million persons are 18 years old or younger.
  • Poor awareness of wine and infrastructure.

Opportunities

  • 100 million persons will be legally allowed to drink alcohol (25 yrs. old) in the next 5 years.
  • Supermarkets are emerging to support wine distribution infrastructure.
  • Domestic market with increasing disposable income.
  • Growing tourism industry.

Threats

  • The Indian constitution discourages alcohol consumption.
  • Wine viewed as a “sin” by some.
  • Indians still prefer whisky.
  • Advertising for alcoholic beverages is banned.
  • Domestic wine production is coddled by state governments.

While there are many challenges to the development of the Indian wine industry, I suspect that the biggest obstacle will be reforming government policies that fragment the market and create counter-productive domestic incentives and barriers to foreign competition. After that, serious infrastructure limitations must still be addressed.

It is pretty clear that good wine can be made in India and that a large and growing potential consumer market exists. A lot of work remains to realize India’s grape potential (sorry about the pun!).

Liquid Assets: Fine Wine versus Crude Oil

January 11, 2011 By in Supply and Demand, wine investment, wine markets, wine price 2 Comments

So … which do you prefer? Great Bordeaux or bulk crude oil?

The answer depends on your perspective, I think. For drinking there is no choice — red wine trumps black gold. No doubt about it.

Demand and Supply Always Apply

But how about if you look at the choice from an investment perspective? The surprising answer is that it makes little difference. The prices of fine wine and crude oil have been highly correlated in recent years.  Or at least that is the conclusion of two economists at the International Monetary Fund, Serhan Cevik and Tahsin Saadi Sedik, as reported in their recently published paper “A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Markets?” (click on the link to download a pdf of their working paper).

The graph shown above indicates that price indices for crude oil and investment-grade wine are highly correlated. Wine follows the twists and turns of oil prices, although it is somewhat less volatile in terms of peaks and troughs. The conclusions are more or less the same if real data are used instead of nominal measures. Who would have guessed?

How is Oil Like Wine?

What do oil and fine wine have in common? Darn little, from the drinking standpoint, but quite a lot in terms of supply and demand. Both commodities have relatively inelastic supplies, according to the study authors (although for very different reasons, as you may imagine), so that changes in demand account for the majority of price movement effects.

The authors find that the same macroeconomic factors that push up the global demand for oil are associated with rising auction prices for the fine wines in the Liv-Ex index. Certainly in recent years it must be true that China’s fast growth has impacted the relatively narrow investment wine market and the much broader global commodities markets in the same way, albeit for different specific reasons.

Shifting Center of Gravity

So what?  Well, the study tells us a number of interesting things. First, it indicates that economists at the IMF have not entirely lost their sense of humor– a good thing, I suppose, since they are part of the glue that holds the global financial system together (hey Mr. Euro, I’m talkin’ ’bout you!). It is comforting to know that they think about the real world and are not limited by the formal constraints of their charts, graphs and equations.

Second, as the Financial Times points out, it shows that adding wine to an investment portfolio does not necessarily usefully diversify it if oil is also in the mix. You might not have guessed this correlation, but there it is. Always good to do research and not rely upon common sense or intuition.

Finally (and here you need to actually read the paper by following the link above), the authors note an important shift in the global economic center of gravity. Whereas only a few years ago the changes in both oil and wine prices would have been explained by U.S. and Western European economic variable, now it is the emerging markets that have the most clout. The driving forces of world commodity markets have new postal codes. You don’t need to read tea leaves to get the new address — wine and oil both point the way!

Vertical (Not Necessarily Sideways)

January 10, 2011 By in book reviews, Pinot Noir, popular culture, Sideways, wine festivals, wine markets 11 Comments

I’ve been reading Vertical, Rex Pickett’s sequel to his novel Sideways, which was the basis for the 2004 film Sideways that changed the world of wine. The rise of Pinot Noir in recent years and the slump in Merlot sales is often attributed to the Sideways Effect.

I didn’t read Vertical for pleasure (I’m more of a non-fiction kinda guy) or to evaluate it as a work of literature (my colleagues over in the English department will breathe a sigh of relief). I wanted to see if Pickett would do it again – create a scene or storyline with the potential to connect with wine enthusiasts and change the way they think about wine.

Dump Buckets & Dunk Tanks

What sort of scene would that be? Well Sideways the film had a number of memorable moments. (I’ll focus on the film Sideways here rather than the novel since I think people are more familiar with the film.)  Some are famous for being outrageous, like the scene where Miles has just received bad news about his book project and self-medicates his depression with wine – tipping a dump-bucket full of secondhand wine over his head and face, soaking his clothes and getting a lifetime ban from that particular tasting room. Yuck! If  you’ve seen the movie I guarantee you remember the sequence.

Vertical has its share of outrageous scenes, including a reprise of the dump bucket experience. There are several other scenes with a high Yuck! Factor including one where we learn what happens when you take too many Viagra pills all at once and another, set at the International Pinot Noir Celebration in McMinnville, Oregon, that features a dunk tank filled with Charles Shaw Merlot and two  over-sexed (there’s a lot of sex in this book), matronly wine lovers determined to get “sideways” with Miles.
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Getting Personal About Wine

I loved the dump bucket in the Sideways film, but that’s not the scene that created the Sideways Effect. It was this one, of Miles and Maya on the back porch, talking while Jack and Stephanie were getting “sideways” in the bedroom.

Miles and Maya are chatting about wine and why they love it and about Pinot in particular, but they are really talking about themselves, don’t you think? They are really talking about who they are and who they want to be and the words they use to talk about wine express something deeper that goes to what it means to be a human being.

Who doesn’t sometimes feel fragile, like Miles, and need a little TLC? Who wouldn’t want to grow and change, as Maya suggests in the concluding part of  the scene (not shown in this brief excerpt), even if it means eventual decline?

Who indeed? It seems to me that almost anyone can identify with the longings expressed here indirectly through wine. And so the Sideways Effect was born as some people projected their longings onto Pinot Noir and others just went along for the ride.

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It’s Not About the Wine

Did I find a similar game-changing scene in Vertical?  Well, no. There are some scenes that make you stop and think, that make you reflect a bit on life, but most of them come late in the book, after a whole lot of sex, drugs and Pinot Noir, and they don’t really have very much to do with wine. I would give away the plot of the book if I told you more, so I will draw a line here.

A Vertical movie, if they make one, will certainly be feature a lot of wine (especially Willamette Valley Pinot Noir), but I don’t think there will be a Vertical Effect on the wine markets to rival the Sideways Effect.

But why did I think there would be? After all, Sideways wasn’t really about wine, it was about people and relationships — as you can plainly see from the movie trailer I’ve inserted here.  Sideways just happened to strike a chord with wine lovers. Pickett builds on that chord in Vertical, as any sequel author does, but it’s not and never really was really about the wine.

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By the way, there is a Japanese version of the film Sideways — have you seen it? It’s set in Napa Valley, not Santa Barbara. Frog’s Leap and Newton are the featured wineries and Cabernet Sauvignon, not Pinot Noir, is the wine obsession.

To the best of my knowledge this film did not produce a Sideways Effect in Japan. Why not? Well, for one thing it focused on wines that were already well-known and popular in Japan, so it was using the wine to sell the film not using the film to change the way people think about wine.

Besides, I think, the Japanese version is even less about the wine and lacks that critical back porch scene. They did keep the dump bucket, however, as you can see in the trailer that I’ve inserted above.

The BRICs: Russian Wine Market Report

January 5, 2011 By in BRICs, health, Russia wine market, wine fraud, wine markets 5 Comments

This is the third in a series on wine in the BRICs – Brazil, Russia, India and China.

Just Say Nyet!

The BRIC nations used to be characterized as “emerging” or “transition” economies and in the case of Russian wine these terms still apply, but in a complicated way. Russia is an important wine country (the vineyards are down south, on the Black and Caspian Seas); it produced about 7.3 million hl of wine in 2007 according to OIV statistics, which puts it just behind Chile and ahead of Portugal in the world wine league table. But the domestic industry today is just a shadow of what it was 30 years ago.

Gorbachev’s 1980s anti-alcohol campaign (which included propaganda posters like this one) targeted wine along with spirits and both production and consumption of wine declined dramatically. The Global Wine Statistical Compendium indicates that per capita wine consumption in Russia more than doubled from 6.2 liters in the early 1960s to about 15 liters in 1970s (consumption of other forms of alcohol also rose — wine makes up less than 10% of Russia’s total alcohol intake) then fell dramatically as Gorby’s program gained traction.

The Gorbachev crackdown and continuing anti-alcohol efforts pushed wine consumption down to just 3.7 liters per capita by the late 1990s. It has risen since then, up to about 7 liters per capita today. Wine is only now reemerging and is still stained by its association with spirits and alcoholism.

Good Russian Wines Exist …

I have not visited Russia nor sampled any of the wines on offer there, but the reports I’ve read  make it sound like I am not missing too much.  There is fine wine in Russia, including some excellent domestic products as you will see below, but the good stuff is mainly imported and very expensive.   And the bad stuff is really really bad.

In fact I think the theme for this post should be that classic spaghetti western, The Good, The Bad and The Ugly. The good wines are certainly there. Jancis Robinson’s tasting notes from her 2009 visit to Russia include some tempting wines. A Myskhako Organic Red Cabernet 2008 from Kuban, Russia’s warmest wine producing region, received 16+ points out of 20 with the descriptive note, “Sweet and very wild and direct. Different! Very lively. Really wild tasting. Explosive.” Sounds like something I’d like to try.

A Fanagoria Tsimlansky Black 2007 Kuban (16 points) is “Dusty, bone dry, rather interesting flavours with good round tannins and acidity and plenty of fruit weight on the palate. Very dry finish with good confidence.” I’ll have a glass of that, please!

Along with the Bad …

Bad wines, and there are many of them, reflect Russia’s sorry wine history. It seems like every country has experienced the stage where wines are simple, sweet alcohol, sometimes to cover up faults and disguise poor wine making.  These bad wines still figure prominently in Russia.

Wine for the masses sells for less than $1 a liter in many cases and it seems to be sourced in bulk from whoever offers the least cost supply. Imported bulk wines from countries as varied as Spain, Ukraine, France, Argentina, Bulgaria and Brazil are shipped to factories near Moscow and St. Petersburg where they are mixed with sugar (to appeal to local tastes) and water ( to bring the alcohol level down to 10.5 percent), packaged and sent to market.

Traditionally much of the wine came from Moldova and Georgia, but these countries are on the Russian government’s political black list and Moldovan wines are currently banned, causing great hardship for a country that is very dependent upon wine for export earnings. Low quality is the official excuse — a Russian health official says of Moldovan wine “it should be used to paint fences” – but it is hard to see how Moldovan wines can be worse than the sugar water wines I just described. I think it’s politics.

But Then it Gets Ugly

The ugly wines are frauds — not even made from grapes in some cases. This video report suggests that perhaps 30% of the bottled wine on offer in Russia is counterfeit. This is bad for consumers, of course, but particularly bad for legitimate producers whose reputations suffer from unhappy experiences with fake wine.

Thinking of trying to sell your wines in Russia? Despite all that I’ve said, many people see great potential in the Russian market. Some are just interested in the “bad wine” bulk market, but others have grander plans. Russia is a BRIC, after all, one of the fastest growing major economies in the world. Russia will host the 2014 Winter Olympics and the 2018 soccer World Cup; this international exposure may accelerate changing domestic tastes. It is a major market for Champagne, with more than a million bottles purchased annually.

The Future of  Wine in Russia

As Russia’s middle class expands, a larger market for quality wines can be expected to emerge. So it is not surprising that winemakers are testing the waters and negotiating joint ventures of various sorts.

There are reasons to be cautious, however. Alcoholism is still a major concern in Russia and the expanding wine sector will have to swim  against a prohibitionist tide. Tastes and social attitudes will change as better quality becomes available, but the transformation will not happen overnight.

And then there’s the “oil patch” problem. Petroleum is a major driver of the Russian economy and this introduces an element of economic instability. Exporters will need to be able to ride out falling oil price effects in order to benefit from high price periods.

Finally, there is the Russian legal and administrative systems, which make it difficult to bring wines into the country and to assure payment. The fact that some in the Russian government would prefer that the wines stay away – because of the alcoholism problem – probably contributes to this problem.

It is easy to be very pessimistic about wine in Russia given its current state and recent history, but I believe that cautious optimism is warranted for the long run.  There are many cases of countries that have opened up their wine markets with positive results and perhaps Russia will follow this path. In the meantime, it looks like a difficult project.