Wine Economics 101: the Three Vs of Wine

August 27, 2024 By Mike Veseth in cooperatives, economic crisis, wine, wine markets 3 Comments

We often talk about trends and problems in the wine industry, but I think we all know that wine isn’t a single business about which it is easy to generalize. Different countries or regions have different business characteristics, for example, and making and selling multi-million case brands like Gallo’s Barefoot differs greatly from much smaller and more local operations.

The wine industry doesn’t come in one size or shape that fits all and doesn’t run at a single speed. Significantly, while all or most parts of the “wine patch” face challenges from climate change and declining consumption of beverage alcohol, the specific conditions vary and can change quickly.

So when a journalist asks me about what’s happening in the wine industry, as happens frequently, I have to stop, pause, and think. Which wine industry are we talking about?

Wine and the Three Vs

The Financial Times recently published an interview with Stephen Cronk, co-founder of the Provençal Rosé producer Maison Mirabeau, about the perils and rewards of starting a wine business more or less from scratch. Mirabeau has achieved great success in just a few years. How did it happen? Here’s an excerpt of the Q&A.

Was there a seminal moment in your business? Probably when I met a British Master of Wine in the Languedoc in 2008. He told me about the three Vs: viticulture, vinification and vendre, farming vines, winemaking and selling. Up until then I thought I would focus on buying a vineyard. He said don’t buy a vineyard yet: build a brand. Looking back, it was absolutely the right advice.

The idea of the Three Vs is important. There is a romantic image of winemaking that looks like this. Lovingly hand-tended grapevines surrounding a modest winery, with a cozy tasting room next door where most of the wine is sold (often by the winemaker herself) to loyal customers. This is the idea of wine that defines the industry for many people. But, from an economic standpoint, it is a bit misleading because it suggests that wine is a single business when it is really, as the Financial Times story points out, it is really more like three.

Growing grapes is agriculture. It is a risky capital-intensive business that requires specialized equipment and knowledge. Growing wine grapes successfully and profitably is a considerable achievement. Making wine is also a risky capital-intensive business. It requires specialized equipment, some of which is only used once a year.

Finally selling wine is a risky capital-intensive business, too. It is risky because selling wine like selling anything else is affected by market forces beyond individual control. It is capital intensive because building a brand or establishing networks of personal or professional relationships to facilitate sales can consume a good deal of time and money. Many winery owners have told me that, going into the business, they thought that growing grapes or making wine would be their biggest challenge, but selling wine and tending to customers sometimes is the hardest part.

Specialization and Exchange

Because all three businesses are capital heavy and all three are risky, there is a strong incentive for specialization at the firm level and for the industry to take advantage of Adam Smith’s principle of the division of labor. Smith said that the division of labor was determined by the extent of the market and so it is not surprising that it is most fully realized in the wine business by very large wine companies that specialize in one or two but seldom all three wine industry segments.

Some of the largest winemaking facilities here in Washington, for example, are mainly engaged in contract wine production for other firms, which market the wines under their own brand names. And some large wine firms sell big volumes of wine with few direct employees, relying upon purchased grapes, contract production, and bulk wine purchases to feed their efficient marketing and distribution pipelines.

Specialization and exchange is Adam Smith’s recipe for efficient production, but the situation is never as simple as that (and nothing is ever very simple in the wine industry). Remember that each of the V-factors is risky and the risks are very different. Engaging in just one V-function means you only have to account for one set of risks, not all three, but from an industry viewpoint the risks are always there. And in some cases division of labor can magnify them.

Risky Business

All three wine industry functions are risky in part because they involve lags. The final market for wine is constantly evolving, for example, but firms that specialize in marketing have to make plans many months or even years in advance, so there is always the risk that the last quarter’s market plan is no longer relevant. That’s a problem.

Wine production involves lags, too, and they can be much longer. The wine that a producer can sell today is based on decisions made one, two, three, or more years in the past. Time lags mean that costly shortages and surpluses are more likely, creating instability. The viticulture V is also subject to lags and they are much longer than the previous ones just because of the time it takes to bring grape vines into production or to alter the product mix on existing vines.

One implication of this situation is that, while sometimes the Three Vs are in synch and tell the same story, sometimes they are not and you get a different reading on the health of the industry depending upon which V you consult. Arguably this is the case today, when the disruptions of the pandemic era and rapid inflation are working their way through the system at different speeds.

Market Dynamics

There is a certain degree of instability baked into each wine industry segment’s cake. What happens when we fit them all together? Under some circumstances, the result can be benign or even beneficial as cycles offset one another the way that the sound waves your noise-canceling headphones emit silence the racket around you. But it is also possible for cyclical factors to compound, making the overall wine industry riskier than its individual segments.

Is this one of those times when risks are compounded because instability in each segment feeds the others? Risky business(es).

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I recently discussed some of these wine economics themes and more with “Wine Behind the Scenes” podcast host Laurel Simmons. Click on this link to listen to our 30-minute conversation.

Is Wine a Good Value?

August 13, 2024 By Mike Veseth in economic crisis, Economic impact, wine, wine markets, wine price 4 Comments

These are challenging times for many (but not all) consumers. Rising housing and interest costs are squeezing budgets. Pandemic-era stimulus check bank balances are going or gone. Student loan payments, paused for a time, are back again.

Faced with tight budget constraints and rising debt costs, consumers are struggling to cut costs without sacrificing their standard of living, which means they are more and more focused on value for money. Perhaps the most obvious indicator of this trend is the surge in purchases of store-brand supermarket products at the expense of similar but more expensive name-brand products. But, as the financial news reports, the changes in buying patterns go far beyond that.

Do You Want Fries with That?

Two recent news reports suggest that consumers want value, not just lower prices. A Wall Street Journal story about casual dining restaurant chain Red Robin (see article link below), noted a two-prong strategy to get diners back. Step one was to improve food quality. Step two was to expand the number of “bottomless” offerings so that there is a sense of abundance and value, even when (like me) diners rarely ask for free extra servings. Menu prices have not declined, but business traffic is up. Value sells

The Economist newspaper’s “Schumpeter” business columnist recently compared fast-food king McDonald’s value strategy with casual Mexican chain Chipotle (see article link below). McDonald’s has struggled in the post-pandemic era and recently introduced $5 meal deals in an attempt to regain its lost reputation for good value. Chipotle, on the other hand, has actually raised its prices. Which strategy do you think would be more successful?

Chipotle wins, at least according to the Economist columnist, who argues that Chipotle is better value despite being more than twice as expensive as the McDonald’s meal deal. Maybe, as the column notes, the demographics of the two food chains are too different to make a comparison valid. But perhaps restaurant dinners look beyond price in calculating value. Schumpeter reports having two generous meals from his Chipotle order, but not wanting to even finish the salty McDonald’s $5 meal.

Price vs Value?

If value for money is a rising priority for many consumers it is fair to ask if wine provides good value? Or is wine’s value proposition one of the reasons the industry is facing headwinds these days?

This is an awkward question because different people have different ideas of what makes something a good value and also because wine comes in so many different price/quality combinations. When I asked my university students to do an economic analysis of the wine wall at a local Safeway store, for example, they found wines as cheap as about $2 per bottle equivalent and as expensive as about $225 per fancy glass bottle.

How can you generalize when there is such wide variation? One way is to look at average cost per serving of wine and other alcoholic beverages. Every study that I have seen suggests that wine is more expensive per serving than either beer or spirits using average price data. So there is reason to believe that consumers might see a value problem with wine.

The way that wine is packaged is a value problem, too. Many consumers hesitate to open a 750 ml wine bottle for only one or two glasses because they are afraid that what’s left will quickly go bad, making the bottle purchase an even worse deal than the per-serving averages suggest. (By comparison, beer comes in single-serving containers and spirits can keep for a long time, so they don’t suffer the same wasted money problem.)

Well, you might say, if this wine is too expensive, trade down to cheaper brands. Indeed, wine can be very cheap (per bottle or per serving) if that’s what you really want. But, good value isn’t the same as cheap price, as McDonald’s problems show.

And, indeed, consumers have for several years moved away from inexpensive wines, calculating perhaps that they are not worth even the low price charged. The premiumization trend has plateaued, too, suggesting that perhaps higher price doesn’t always mean better value.

It’s in the Bag?

If consumers are feeling the budget squeeze (and many are) and looking for value in wine as they are, apparently, in fast food and casual dining, where will they go? Some will abandon wine and indeed cut ties with beverage alcohol, generally. Some will drink less but focus on quality when they do. Others will try to find the spot on the wine wall with the best value proposition. Where is that?

NIQ market data reported in Wine Business Monthly finds only a few bright spots on the wine wall, one of them is for “premium” 3-liter bag-in-box wine selling at about $5 per bottle equivalent. Sales of wine in this format have held up pretty well while sales of glass bottle wine at about the same price point have fallen. Maybe that Red Robin sense of abundance applies here, too.

Clearly, the economic side of the wine market equation, with its focus on disposable income, consumer budget constraints, and value for money, is not the whole story when it comes to today’s challenging environment. But I am convinced that it is part of the story and one, perhaps, that should be taken more seriously. The people who are having trouble selling other consumer goods have got the message.

What is wine’s value proposition? Food (or maybe drink) for thought?

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Blake Gray’s recent Wine-Searcher.com column is one example of what a value-driven wine marketing strategy might look like.

Here are links to the articles referenced above.

Economist newspaper “What Chipotle and McDonald’s say about the consumer slowdown.”

Wall Street Journal “Bottomless Fries, Floats, and Broccoli. One restaurant chain’s bid to get diners.“

Collio DOC: Wine, Brand, & Identity in Italy

August 6, 2024 By Mike Veseth in Italian wine, wine, wine markets 2 Comments

[This is the third and final article in a series inspired by our recent visit to Collio DOC in north-east Italy. Click here to read the first report and click here to read the second.]

What does it take for a wine region to stand out in today’s crowded market? Excellent wine, of course, but good wine isn’t enough because there are lots of quality wines around the world; consumers need a reason to buy one instead of another.

Brand and Identity in Wine

What else does it take? There are many ways to think about it, but in my book Wine Wars II, I focus on two necessary (but perhaps not sufficient) factors: brand and identity. Brand is the image that distinguishes your wine from the competition. Identity is the quality that defines the brand. Many wines suffer from the lack of a memorable brand. Others may have a brand, but its power is limited because it doesn’t actually stand for anything. Put wine, brand, and identity together and much can be achieved.

Sometimes an iconic wine can define a region, giving it a brand and identity. The market for wines from Bolgheri on the Tuscan coast, for example, was shaped by Tenuta San Guido’s famous Sassicaia, Bolgheri, Sassicaia, Super-Tuscan.

Sometimes a singular event can provide the spark. Here in the United States, for example, the Oregon wine industry’s rise to prominence was at least partly due to success at the Wine Olympics of 1979. I wrote about this in the Wine Economist on the occasion of the Eyrie Vineyards’ fiftieth birthday:

The Wine Olympics was a competition, sponsored by the French food and wine magazine Gault Millau, that featured 330 wines from 33 countries tasted blind by 62 judges. The 1975 Eyrie Pinot Noir Reserve attracted attention by placing 10th among Pinots, a stunning achievement for a wine from a previously little-known wine region.

Robert Drouhin of Maison Joseph Drouhin, a Burgundy negociant and producer, was fascinated and sponsored a further competition where the Eyrie wine came close second behind Drouhin’s own 1959 Chambolle-Musigny. Thus was Eyrie’s reputation set (and Oregon’s, too). It wasn’t long before Domaine Drouhin Oregon (DDO) was built in the same Dundee Hills as Eyrie’s vineyards — a strong endorsement of the terroir and international recognition of the achievement.

Oregon wine was a thing, the Willamette Valley was the brand, and Pinot Noir was the identity. Oregon produces other good wines besides Pinot Noir. And Pinot Noir grows in other parts of Oregon. But the wine, brand, and identity were established anyway.

Building Brand Collio

Collio DOC, which hugs the Slovenian border in north-east Italy, has long been known for its excellent wines and it is home to many strong private wine brands. Sue and I visited Livon on our recent trip, for example, enjoying the delicious wines and the amazing view from the tasting room deck. The sleek wines are easily identified by the distinctive art nouveau-style label, which is just risqué enough to have been banned by authorities in at least one state in the American South!

A strong regional brand benefits all producers, so the Collio Consortium, which celebrates 60 years in 2024, has worked diligently to establish the image and reputation of the region and its wines.

Sue and I encountered the “SuperWhites” campaign about 20 years ago at an event in Portland, Oregon (not “Porland” as printed on the event poster shown at the top of this page). Sponsored by Slow Food Friuli and supported by a range of regional organizations, the promotion was inspired by the success of “Super Tuscan” red wines. The idea is that Friuli (and Collio) are to Italian white wines what the Super Tuscans are to Italian reds.

Although the Super Whites theme seems to have run its course, the commitment to collective effort persists, along with the color of the Collio wine region, bright yellow, is still very much alive. (I think of it as Tour de France Yellow Jersey yellow, but that’s just me). Yellow is Collio’s color, featured in all the promotional literature, the capsules found atop many of the wines, and even a bright yellow Vespa scooter that seems to show up in many photos of the region. If you are in Collio and you see yellow, you can’t help but think Collio wine.

More recently there has been an effort to promote a trademark Collio wine bottle shape, which is also shown in the photo above. The distinctive bottle actually requires a special cork to seal it properly. Adopting it is a serious decision from a practical standpoint.

The Collio bottle shape is instantly recognizable on store shelves and when you look around at what is on tables at a restaurant. Although its use is strictly voluntary, not mandated by consortium rules, we saw it almost everywhere and sensed a certain pride in the identity. It makes a strong statement about the Collio brand project.

Collio’s Identity Quest

If Collio has been purposeful and successful in building a regional brand, the road to a specific identity to back up the brand is less clear. Indeed one person we met told us he thought that Collio was still searching for an identity.

Thirty or forty years ago Collio was pretty much synonymous with a wine they called Tocai, made from the Tocai Friulano grape variety. The grape variety’s name is still the same, but the wine can’t be called Tocai anymore because of objections from Hungary’s Tokaji region. Now the wine is Friulano and if you ask for a glass of local white wine at a bar or restaurant, it’s what you’ll get (and happily drink, I think).

Having lost control of its signature wine’s name, some winemakers in Collio looked in a different direction for a regional identity. The result, we discovered when we visited in 2019, was an emphasis on white wine blends under the name Collio Bianco. The wines we tasted on that trip were terrific. White wine blends are under-appreciated. But aside from their high quality, the wines didn’t have enough in common to be the foundation of an identity. Some were blends of native grape varieties. Others were blends of traditional grape varieties like Chardonnay, Sauvignon, and Riesling. Others combined native and traditional grapes.

The Collio wine identity remains a work in progress and perhaps that’s how it always will be. What all the wines really share is not color or grape variety but sense of the place, shaped by the local ponca soils and hillside vines. If I had to pick a grape variety it would probably be Tocai Friulano, but why do that? It seems like it would exclude so many great wines and accomplish very little.

No, I think Collio isn’t any particular wine. As we suggested in the first two articles in this series, it is best to think of it as a particular place and a deep experience. You don’t just drink Collio DOC, you experience the place through the wine. I know that that’s inconvenient when it comes to marketing, but important indeed when it comes to the wine.

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Sue and I recently received a very thoughtful gift, a copy of The Food of Italy by Waverly Root (1971). We turned quickly to the section on Friuli and found this:

“Our wines,” laments a writer from Friuli, “are more exquisite than renowned.”

More than 50 years have passed and I think the wines are even more exquisite, if that’s possible. Renowned? Not as much, but the word is getting out there and Collio’s reputation is fast catching up to its reality.

Leveraging Wine & Tourism in Collio DOC

July 30, 2024 By Mike Veseth in Italian wine, wine, wine markets, wine tourism 1 Comment

[This is the second in a series of articles inspired by our recent visit to Collio DOC in north-east Italy. Click here to read last week’s introductory report.]

When Sue and I first visited Collio in 2000 we stayed in the newly opened agriturismo rooms at Venica & Venica and in a rustic cabin at La Subida. We dined well at several memorable restaurants including Trattoria al Cacciatore at La Subida and Trattoria al Giardinetto in Cormons.

Wine Tourism and Economic Development

Guided by articles in Gambero Rosso and La Cucina Italiana (and Ornella Venica’s wise personal recommendations), we found great food, wine, and many fun things to do. The foundations of today’s wine tourism industry were already in place. We returned to Collio in 2015, 2019, and now in 2024. We’ve discovered new hospitality and wine tourism opportunities each time.

A strategic focus on wine tourism makes good sense for Collio and the Friuli-Venezia Giulia region generally. The vineyard area is relatively small compared to the Veneto, for example. Yields are necessarily limited to protect quality. From an economic development standpoint, the two ways to grow for the region are to increase price (through rising reputation, for example) and to leverage the wine’s magnetic pull through tourism development. Both forces are powerful in Collio and they can work together to drive the region forward.

Casanova & Castle, Wine & Golf

More and more high-quality hotels and restaurants can be found today, which is necessary but not sufficient for the growth strategy. This time we stayed at the Relais Russiz Superiore, for example, adjacent to the famous winery (which is now owned by a partnership between Marco Felluga and the Veneto’s Tommasi Family). One of our favorite wineries, Gradis’ciutta, offers visitors the opportunity enjoy the hospitality of Borgo Gradis’ciutta, a cluster of buildings that date back to the 1500s with nine rooms and three apartments. Engaging visitors beyond the tasting room counter is clearly a priority today.

The most ambitious investment in tourism and hospitality is probably Castello di Spessa, where we stayed during our 2019 visit. The business combines the historic castle (famous for its connection to the notorious Casanova!), hotel rooms, dining and event facilities, well-kept vineyards, a substantial winery operation, and even a golf course. We ran into California winery owners in Collio on holiday, who said that they came for the golf and stayed for, well, everything else!

Collio was a great place to visit 20 years ago and it has grown in every way, but without losing the characteristics that drew us to it originally (and have kept us coming back). But this is just the beginning, according to Ornella Venica, who challenged us to consider how much more Collio and Friuli have to offer to visitors interested in food, wine, history, culture, and nature.

The Vine Academy

Our first stop on this trip to Collio was lunch at the recently opened restaurant at Accademia Vine Lodge. The food and wine were delicious and the setting beautiful, but what sticks in my mind is the fact that this attractive wine tourist destination is also an education institution. When wine tourists are not filling its rooms, groups of earnest students move in.

The Accademia Vine Lodge has a double personality. It is both an attractive venue for visitors like us and also the home of the famous Simonit&Sirch vine pruning institute. The restaurant’s wine list includes bottles from Collio and the region, of course, but also from some of the more than 150 Simonit&Sirch clients around the world.

The vine lodge fascinates me because it reminds us that wine tourism can spring up in many ways. It isn’t just wineries with food or rooms, for example. Here is a case where globally respected technical expertise in the science and art of vine pruning has grown into a venue that has broad appeal.

Collio & the Beach

A highlight of our visit was an evening event called Collio & the Beach, set on a broad shaded patio beside the beach at Baia di Sistiana near Trieste. Could a seaside party draw a different demographic profile than typical winery tasting rooms? This was a wine event, but not just a wine event. Bustling booths were pouring local wines, for example, but the longest lines were for delicious foods such as porchetta, frico, watermelon, and hand-carved local Prosciutto d’Osvaldo.

We sampled from the different wine stations, eventually focusing on Friulano because it is so popular in this region. We were surprised, however, that the longest line was for Pinot Grigio! In fact, the line never ended because some folks got their pour and moved directly to the back of the queue so that they could try another wine.

Pinot Grigio? Really? Here in America, Pinot Grigio is often made in unexceptional styles, designed more to avoid offending than to develop distinctive characteristics. But these Pinot Grigio wines were different because many of them were made in that traditional Ramato style, with lots of skin contact. These wines, which are both old-fashioned and cutting-edge in terms of style, had appeal that spanned the generations. And they matched up perfectly with the traditional food and festive venue.

The 70 Percent Solution

Sue and I keep returning to Collio because offers so much that we enjoy and appreciate in terms of food, wine, culture, and nature. It seems to us that Collio today is doubling down on the “Collio Experience” and not just the wine. That was the case at Collio & the Beach and Castello di Spessa. And the experience especially stood out at Subida di Monte in Cormons.

Once upon a time, this was a small family winery, but new owners saw the “experience” potential to leverage the winery with hospitality investments, including Locanda alle Vigne. The restaurant features traditional dishes in a fabulous setting. We were there on a late June Thursday night and the place was packed with guests of all ages.

The winery anchors the operation, of course, but the hospitality business generates 70 percent of the revenues, bringing more and different consumers to Collio and its wine.

Back to the Future?

Our Collio journey began at Venica & Venica and La Subida and both are still leading the way. The plans for a wine resort that Giampaolo Venica showed us in 2000 are now very much realized, for example. Very impressive!

La Subida has created a more casual restaurant called Osteria la Preda de la Subida that’s become one of our favorite places to eat. It is popular with tourists, but delights locals, too, with its celebration of the traditional food and wine of the region. It’s where we had our last meal (for this trip) before heading for our airport hotel near Venice.

Collio shows that wine and hospitality are two industries that can leverage each other to generate both happy visitors and also economic development opportunities. Other regions should take note!

Chilling Out: The Red & White of Austrian Wines

July 9, 2024 By Mike Veseth in wine, wine markets 5 Comments

Austria’s colors are red and white. Those are the colors of the national flag and the uniforms of the country’s football team, too. You can see them clearly on the bottles of many Austrian wines because a seal atop the bottle continues the red and white theme.

Blessings and Curses

Red and white. That’s Austria and its wines. But what do people think of when they think about Austrian wines? Not the red. Just the white. Riesling, of course, and increasingly Gruner Veltliner. Delicious wines that are Austria’s vinous ambassadors to the world.

That’s the blessing and the curse of “signature” grape varieties. They help define a region or country in a crowded wine market, but they also make it difficult for any other type or style of wine to break out. This is the wine variation of the economic principle of the “Dutch Disease,” which holds that, under some circumstances, great success in any one sector of the economy creates barriers to success elsewhere. Austrian red wines are victims of the Gruner Veltliner’s curse.

Cool Reds

The Austrian Wine organization aims to lift the curse by giving Austrian red wines a strong identity of their own. The theme is “chillable reds,” which is a category of wines that I see mentioned more and more (today’s email includes a note from California’s Ridge Vineyard is promoting its varietal Valdiguie as a “chillable red”).

You can chill any red wine, I suppose, and it is conventional wisdom among wine geeks that most red wines are served too warm (and most white wines too cold). But what makes a red wine particularly suitable to this category? Think light body, low alcohol, fruity, juicy, refreshing. What’s not to like?

Sue and I enjoyed many red wines of this type when we lived in Prague for a couple of summers (back in my professor days). The red wines (from Slovakia, Czechia, and Austria as I recall) were great with a bit of a chill at the end of a warm day.

Austrian’s “chillable red” category is quite diverse, beginning with wines made from the Zweigelt grape variety (which accounts for 45 percent of red vineyard plantings). Other winegrapes to look for include Sankt Laurent, Blaufrankisch (a.k.a. Lemberger here in Washington state), Pinot Noir, and Blau Portugieser. The wines differ in many respects, but share a common thread of light body and good acidity. You would not be a fool to spend the rest of the summer exploring these wines and others like them.

Austrian Wine sent us a couple of wines to sample and they showed the diversity of this category very well. The Sankt Laurent from Christina Wines was light and fresh, with sour cherry and cranberry flavors. Reminded me a bit of Beaujolais, which makes sense because of whole-berry fermentation. A fun wine and only 11% abv.

The second wine was a Pinot Noir “Langenlois” from Weingut Jurtschitsch. Pinot Noir is familiar territory, so it was interesting to see how this wine captured the essence of its cool climate terroir. Here in Washington state this is the type of wine we enjoy chilled down a bit with grilled sockeye salmon because it has structure but without weight. There are lots of situations where that’s just what we are looking for. I have to admit that the “chillable red” category includes some “swimming pool” wines, but they aren’t all so simple.

The Big Chill?

What does chilling do to red wine? I suppose it depends on the wine. I remember tasting one very popular wine with lots of tannins and residual sugar. I needed to chill it way down just to drink it. But with nice wines like those we tasted from Austria I most appreciate how chilling affects the texture and reinforces the juicy appeal.

What does chilling do for Austrian red wines in terms of their market appeal? I think the Austrian producers hope it will help their wines carve out a distinct identity and guide buyers interested in this style of wine to the part of the wine wall where the red and white bottle tops can be found.

Book Review: Exploring China (and Chinese Wine) One Banquet at a Time

June 25, 2024 By Mike Veseth in book reviews, China wine, popular culture, wine, wine markets 1 Comment

China in Seven Banquets: A Flavorful History by Thomas David DuBois (Reaktion Books, 2024).

It doesn’t always work, but sometimes you can learn something about wine by busting out of the wine box and looking back in to see what people think about wine in a different context.

This practice is always interesting but sometimes disappointing, too. For example, reading Andreas Viestad’s book about the world seen through the lens of a single meal in Rome was full of fun facts and great insights. But it made me sad when his chapter on wine missed all the cultural elements I was looking for and focused almost entirely on wine as alcohol. How sad! But I have to admit that’s how some people see wine. Good to remember that!

I was hopeful, therefore, but also cautious in approaching China in Seven Banquets. I quickly turned to the index when I received my review copy of Professor DuBois’s new book. There were references to wine throughout the book, which came as a pleasant surprise. I couldn’t wait to start reading.

China in Seven Banquets is a fascinating book. DuBois promises to provide scholarly insights without the dry prose or interminable footnotes that might stop you from turning to the next page. He succeeds very well in balancing depth and accessibility.

DuBois takes us through China’s history via the seven banquets promised by the title, but it is not as simple as that. As the book’s summary explains:

From the opulent Eight Treasures feast of ancient times to the Tang dynasty’s legendary “Tail-Burning” banquet, and the extravagant “complete Manchu-Han feast” of the Qing court, these iconic repasts offer glimpses into China’s rich food history. Delving further, the book invites us to partake of lavish banquets immortalized in literature and film, a New Year’s buffet from 1920s Shanghai, a modern delivery menu reflecting the hyperglobal present, and it even offers a peek at the tables of the not-so-distant future.

The text is liberally seasoned with recipes, which give a sense of not just what was prepared, but how, and with what ingredients. (Trigger warning: Sue says that some of the early recipes didn’t exactly make her hungry.) The food is the focus, of course, but not necessarily for its own sake. DuBois links changes in Chinese cuisine to broader themes. You end up learning a lot more about China (and the world) than you thought you would.

I was particularly struck by a short paragraph at the end of a chapter about halfway through the book. At this point, DuBois explains, banquet cuisine has evolved into what you recognize as the “Chinese food” of today as seen on restaurant menus around the world. What is striking, he points out, is that virtually none of these dishes began in China. They are all the results of foreign influences embraced and then shaped by the people of China.

Sue points out that China is far from the only country with a culture or cuisine that is more or less an amalgam of imported influences. Tyler Cowen’s book Creative Destruction traces these effects, and their unintended consequences, through case studies that range from rock and roll to Navajo rugs.

So what about all those references to wine in the index? Well, it seems that wine is a generic term for fermented (as opposed to distilled) beverages. Wine can be made from lots of things. Fruit. Rice. And even grapes (although I remember seeing only one reference specifically to grape wine). Wine is everywhere in Chinese cultural history. Grape wine not so much. Until recently.

I was disappointed, but what could I expect? Grape wine’s surprising 21st-century rise and then sudden recent fall is perhaps too much of a bump in the road to be featured in this account of Chinese cuisine’s long journey. Maybe it is too soon to know how the Chinese wine culture and market will develop in the future.

But then I remembered DuBois’s point about China’s propensity to assimilate foreign culinary influences and make them so much a part of the tapestry of Chinese cuisine that it is impossible to unravel them. Maybe, just maybe that’s what’s going on. If so, wine might have a bright future in China (and on Chinese food delivery menus, too). But don’t be surprised if the result isn’t exactly what you expected.

Thanks to Professor DuBois for a delicious and thought-provoking book. Highly recommended.

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If you are interested in learning more about Chinese drinking culture and how grape wine fits in, consider Li Zhengping, Chinese Wine 3/e (translated by Shanghai Ego — really!), Cambridge University Press, 2011. The Wine Economist review appeared in 2011. Grape wine is only part of the story, of course, but it is discussed in good depth both in terms of history and recent events. I especially appreciate the sections on Chinese drinking culture.

Cantina Tramin: Strength in (Small) Numbers in Alto Adige

June 18, 2024 By Mike Veseth in cooperatives, Italian wine, wine, wine history, wine markets Leave a comment

Your first impression when you arrive at Cantina Tramin is that you’ve entered some sort of space portal. Here in the lush Alto Adige hills, you expect to see a sturdy old building housing Cantina Tramin winery, but it’s not there. Or rather it is there, but it is hidden by a very modern addition that was completed only in 2010. Old and new.

The new Tramin is striking. You feel like you are approaching a space ship when you drive up. And you feel like you are peeking out among the vines when you look out from inside. It is quite an experience.

Quite a Surprise

The wines are quite an experience, too, especially the white wines. Bright, bold, complex. They fit the image of the winery perfectly. The surprise comes when you learn that this sleek, modern winery with its terrific wines is a cooperative, born from crisis more than 100 years ago.

Sue and I have visited the Alto Adige several times and we are always impressed by the great wines we taste and the tiny vineyards we encounter. The vineyards cling to the hills in this region with the valley floor given over in many places to the tree fruit for which the region is well known. There are about 5000 hectares of vineyards and about 5000 winegrowers tending them. Even if math isn’t your strong suit I think you can tell that the average holding is pretty small and the smallest of them are like grape-strewn postage stamps.

1898 and All That

The Cantina Tramin cooperative took flight during a crisis in 1898. The many small growers lacking market power relative to a few large buyers, facing ruinously low prices, and led by Tramin’s parish priest, pledged to work together rather than run a race to the bottom. This is how wine cooperatives spring up. But as anyone who has served on a committee can tell you, it isn’t always easy to make collective enterprises succeed.

Cantina Tramin followed the well-traveled road in its early days, producing bulk wines (mainly red wines from the Schiava grape) and selling them off at low prices to be bottled, marketed, and sold by others. Then in the 1980s came the realization that competition for basic wines in the bulk wine market might not be economically sustainable, especially for a region with such fragmented vineyard ownership.

So the decision was made to radically change the cooperative’s model, moving from quantity to quality, from bulk wine to branded wine, from red to white. It was an expensive decision because it meant replanting by individual cooperative members and cellar investment by the group. The fantastic new winery that opened in 2010 was the crowning touch, but it came after much hard work and investment by the 160 families and their 270 hectares of vines.

Bold DNA

Bold moves seem to be in Cantina Tramin’s institutional DNA. Creating and later expanding the cooperative was a risky decision, albeit one that was more or less forced upon the grower families at the start. Breaking away from the quantity-driven bulk wine model was a big step, too. I am sure there were doubts and second thoughts at the time, but that bet has paid off very well.

You get a sense of the strategic thinking at work here when you look at the winery’s Chardonnay program. Chardonnay does really well here and there is a lot planted, but it wasn’t suited to the kind of buttery Chardonnay that was in fashion 20 years ago. So rather than release a 100% Chardonnay, Tramin created “Stoan” (stone), a blend of Chardonnay, Sauvignon, Pinot Bianco, and Gewurtztraminer. Only some years later, when tastes had changed, did Tramin release “Troy” (trail), a pure Chardonnay that spends a year on the lees.

Big Bets Pay Off

Maybe the biggest bet of all is Tramin’s signature wine, the Nussbaumer Gewurtztraminer. Although it is difficult to know for sure, many think Gewurtz originally hails from this region. It sure does well here, whatever its origin. It is an easy wine to enjoy when done well, as it is at Tramin, but not necessarily an easy wine to sell. There’s the name, which some consumers are afraid to pronounce, and then there are the different styles of Gewurtz that you find, from austerely dry to sweetish and flowery.

The Nussbaumer is more about minerality than flowers. Made from very ripe grapes, which account for the surprisingly high 14.5 percent abv, it is all about balance. The winery’s food pairing recommendations are speck (the delicious smoked prosciutto product this region is known for) and saffron risotto with licorice powder.

Winebow represents Cantina Tramin in the United States and a look at its online catalog shows a surprisingly wide range of wines including other white wines like Pinot Grigio (an important export to the U.S.) and reds, too, including Lagrein, Schiava, and Pinot Noir.

Cantina Tramin is a great success. Could it be a model for other regions? Definitely yes if you are looking for a business model for cooperative success. In terms of organization, Cantina Tramin does everything right, especially in terms of creating strong incentives for winegrower members to produce the best possible grapes and no sacrifice of quality for quantity or collective reputation for individual gain.

It is never easy to get collective agreement for such systems and many cooperatives failed in the past precisely for this reason. One key, we were told, is that Cantina Tramin is not too big so the families know one another and the social contract that binds the members together is as tight as the legal contract. (Not for nothing are Italian cooperatives called cantine socialle). So there is strength in numbers … so long as the numbers are not too big!

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Here are the Cantina Traminb wines we tasted for this report:

Pinot Grigio Classico 2023

Unterebner Pinot Grigio 2022

Stoan Bianco (70% Chardonnay, 20% Sauvignon, 5% Pinot Bianco, 5% Gewurtztraminer) 2022

Troy Chardonnay 2020

Nussbaumer Gewürztraminer 2022

All of the wines were distinctive and delicious. The biggest surprises were the Chardonnay, which was complex with a long finish, and the two Pinot Grigio wines, which set a high standard for wines made from this grape variety.

Second Thoughts on Sustainability?

June 11, 2024 By Mike Veseth in sustainability, wine, wine markets 5 Comments

This is one of those annoying “devil’s advocate” columns. It seems like everyone I meet in the wine business is talking about sustainability and with good reason. Regional sustainability programs have had great success in bringing the industry together. Given all the attention, however, maybe it is no surprise that some people are starting to have second thoughts.

What Does This Mean?

Sue and I were at a meeting of winemakers and regional wine media when one of the most respected people at the table challenged the group. “I don’t know what ‘sustainable’ means,” he proclaimed.

He was trying to make a point. The “S” word gets thrown around so much and in so many contexts that it doesn’t seem to mean anything in particular anymore. It’s almost a belief or an “-ism” (sustainabl-ism?) in practice, whatever its formal definition.

Sustainability certifications like the Sustainable WA program here in Washington, have specific criteria, but the term “sustainable” itself is very flexible, a fact that one of my university students taught me in his senior thesis, which argued that “sustainable development” was a popular goal precisely because it was ambiguous in practice and could be used to justify all sorts of policies.

Sustainability claims are flexible in wine, too. Sue and I can’t forget a Chilean wine we bought a few years ago that claimed to be “sustainably dry-farmed.” Dry-farmed means no irrigation to me. But, doing a little research, I learned that “sustainably dry-farmed” in this particular case meant that they irrigated the vines, but only when they really needed to. So it could have been called “sustainably irrigated” too. That’s crazy!

Unbearable Heaviness?

I still had this conversation on my mind when I opened up the newest issue of the noteworthy Italian wine journal Civiltà del bere (the civilization of drinking). Alessandro Torcoli’s editorial addressed “The unbearable heaviness of sustainability” (L’insostenibile pesantezza della sostenibilità). Sustainable viticulture is critically important to the wine industry, Torcoli argues. But there is so much talk, talk, talk, talk, that it becomes a bit boring and unable to support expectations.

Although Torcoli is weary of long discussions about sustainability, he clearly appreciates its importance. He is concerned that wine’s sustainability conversations are so inwardly focused that they don’t make much of an impact on consumers. “It has never happened in the history of oenology,” he writes, “that there has been such a disconnect between the commitment of companies (because being sustainable involves an enormous bureaucratic, financial, organizational effort…) and consumers.”

Unnecessary Heaviness

It is easy to see how consumers could become confused about what sustainable wine means. Sometmes you only have to pick up the bottle to start to have doubts.

One of Sue’s pet peeves is wineries that broadcast their commitment to sustainability but then undermine the message by using heavy-weight glass bottles. It is not unusual to find bottles that weigh more than the wine itself (750 grams). One recent bottle (a Malbec from Argentina) weighed in at nearly a kilogram on Sue’s digital scale. That’s a lot of weight to haul around and an unnecessary addition to the wine’s carbon footprint. Wine critics are increasingly sensitive to bottle weight. Karen MacNeil will no longer review heavy-weight bottles, for example.

That extra weight just isn’t consistent with a sustainability message at our house. We recently enjoyed Domaine Bousquet’s Virgen Malbec, a USDA certified organic wine (organic grapes in the vineyard plus organic winemaking practices in the cellar). The bottle weighed in at just 402 grams. It is possible to go even lighter.

Theory vs Practice

Surveys say that wine consumers are willing to pay a premium for sustainable products, but when I tried to find a market link a few years ago, I came away empty-handed. If buyers are really paying more for sustainable wine (and not just giving “aspirational” answers to survey questions), I posited, then sustainably grown grapes should be worth more than conventionally grown grapes. I wasn’t able to find a sustainability premium. This is important for several reasons but perhaps especially because winegrape growers in many parts of the world currently receive economically unsustainable prices for their grapes. A sustainability premium could potentially bring a double benefit.

I couldn’t even verify that the average price of sustainable wine was higher than similar wines because “sustainable” is used in so many ways. There are many certified sustainable programs. Then there are wineries that act sustainably (and say so), but don’t go through certification. Then there is the widespread unregulated common use of the term (see “sustainably dry-farmed” above).

Worn-Out Words?

No wonder Torcoli sighs that “We are (almost) all convinced of the need to think about sustainability, but the word is wearing out.” He’s right. Maybe we need to unpack this term and explain what we are trying to sustain, how, and why. It might be unrealistic to expect a single word to hold all that information and to convey it persuasively to consumers.

A recent Wall Street Journal article, for example, reported that a UK supermarket chain sold more of its private label chocolate bars, despite raising the price, when it made a specific pledge. The cocoa for the bars only comes from sources that do not exploit child or slave labor, which is an issue in the cocoa supply chain. This made the more expensive ethically-sourced chocolate bars different from products that make more general sustainability claims or no claims at all.

According to one study cited in the WSJ article, 80 percent of survey takers said they cared about sustainability, but less than seven percent of them actually paid extra for sustainable products. That’s just one survey and the chocolate bars are just one product, but it gives us sonething to think about, doesn’t it?

So what is to be done? More talk? Torcoli concludes, “But the question remains: how can we sustain the unbearable heaviness of sustainability? Making it more rock or sexier, as the Americans would say? Unfortunately, another conference on the subject is needed.”

The wine industry has come a long way on the sustainability front. Now, what’s the next step? That’s the annoying but inevitable question.

A Tale of Two Wine Regions: Willamette Valley & Virginia

June 4, 2024 By Mike Veseth in wine, wine markets 2 Comments

The best way to sell wine is also the best way to enjoy it: a personal experience with the winemaker, the wine, and the stories that connect the two and form a memorable bond. That’s why winery visits are so powerful.

Not everyone can come to the winery, however, so what’s the next best thing? By happy coincidence Sue and I have recently been involved in two efforts that succeed in different ways.

Willamette Valley: The Winemakers’ Lunch

The Willamette Valley, like many regions, sponsors periodic road shows where winemakers and their wines travel to meet media, the wine trade, and consumers in person. It is sort of an exercise in bringing the mountain to Mohammed, which in this case meant bringing Oregon producers to Seattle. There were walkaround tastings for trade and consumers, individual meetings with distributors, tastings at wine shops, and a media lunch at Matt’s in the Market that we were lucky to attend.

Sue and I were excited about the lunch both because we could taste the wines with food, which is one of our tasting preferences, but also because we could meet the winemakers in a small group setting and get to know them and their stories a little better. As good as the wines were, the people and the stories, especially about their relationships with their farms and their customers, were the best part. I have listed the wineries and wines we tasted at the end of this column.

The wines told stories both expected and new. Every winery brought a Pinot Noir, for example, which was no surprise since that is the Willamette Valley’s signature wine grape variety. Each was distinctive, all were delisious. The big surprise was the Pinot Noir wine from El Fille, which was white, not red, and packaged in a refillable bottle, part of a program to recycle and reuse bottles, not just recycle the glass. The wine was refreshing and, from a market standpoint, a smart development because white wines now outsell red wines globally.

The Willamette Valley is Pinot Noir, but not just Pinot Noir. That was one of the storylines, so each winery also brought something else that they are proud of, starting with Pinot Gris, the most-planted white grape variety, to Dry Riesling and Chardonnay, Trousseau and Gamay Noir. I think you could spend a weekend in the Willamette Valley without ever tasting Pinot Noir and have a great time because the other wines are so interesting.

People ask why this region doesn’t produce more Chardonnay since Pinot Noir and Chardonnay are best friends in France (this question actually came up at the luncheon)? Jancis Robinson and Linda Murphy give an answer in their 2013 book American Wine. The early Chardonnay vineyards were all planted with a Davis clone best suited to a much warmer climate. The wines made from these grapes lacked character and so Pinot Gris, better suited to cool climate conditions, won out. But eventually Dijon clones arrived on the scene and great wines with distinctive character appeared. You could probably spend a weekend tasting nothing but Chardonnay and not regret it!

Virginia: The Governor’s Cup Case

Oregon and Virginia have a few things in common when it comes to wine, but the differences are most important. Both wine industries took root about fifty years ago (this year the Willamette Valley celebrates the 40th anniversary of its AVA) and both were influenced by the international investment they attracted in the early days. The Drouhin family brought a lasting French accent to Oregon, for example, and Italy’s Zonin family’s 1976 investment in Barboursville Vineyards jump-started the modern wine industry in Virginia.

The Virginia wine industry organizes a Governor’s Cup competition each year, and hundreds of wines are entered by the nearly 400 wineries in the state (Oregon boasts nearly 900 wineries). For 2024, the Virginia judges tasted over 750 wines, awarding gold medals to 137 wines from 79 wineries.

A winning wine is named each year and a Governor’s Cup Case of wine created with twelve top wines, six from the Monticello AVA and six from elsewhere in the state. Monticello is like the Willamette Valley in that it is the center of the state’s industry, but a lot is happening elsewhere, too.

This year we were fortunate to be on the media list for a Governor’s Cup Case and to be invited to meet the winemakers via webinars hosted by the skillful Frank Morgan. We’ve met the people, heard the stories, and now we are slowly working our way through the wines.

Vive la Différence!

The obvious difference between the Willamette Valley and Virginia is that Virgina doesn’t really have a signature grape variety. There was one Pinot Noir wine in the case, but Pinot isn’t easy to grow in hot, humid Virginia. CrossKeys Vineyards gets away with it in part because its Shenandoah Valley (near the Blue Ridge mountains) location is friendlier to Pinot than is Monticello, but mainly because they harvest very early and make a sparkling wine.

We are working our way through the Governor’s Cup case (hard work, but someone has to do it) and learning a lot in the process. Matching grape variety to terroir is important everywhere, but perhaps especially so in a hot, humid region. The first white wine we tasted was a Petit Manseng from Paradise Springs Winery in Northern Virginia. The wine was fermented and aged in a concrete egg.

Petit Manseng is a grape variety most closely associated with Jurançon in Southwest France where it makes delicious well-balanced sweet wines. You find it in Virginia and even further south because it retains its acidity in hot weather and the loose bunches of thick-skinned berries can tolerate high humidity better than many grapes. That’s exactly what winemakers need in Virginia. The wine was delicious and very well balanced, enjoyed through the meal and even with Sue’s rhubarb upside-down cake dessert.

The characteristics that make Petit Manseng a good grape variety for Virginia also apply to Petit Verdot. So it is no surprise that most of the red wines in the Governor’s case are either varietal Petit Verdot or include it in the blend. This was true of this year’s winning wine, King Family Vineyards 2019 Meritage, a blend of 48% Merlot, 28% Petit Verdot, 20% Cabernet Franc, and 4% Malbec.

The King Family Meritage was delicious, but not exactly what I was expecting. The Petit Verdot component lifted the wine and made it juicier than most other Meritage blends we have tried. This sort of red blend might be a signature style for Virginia (just as Cabernet/Merlot/Syrah works in Washington). It might not be an accident that there are four red blends featuring Petit Verdot in the Governor’s Cup case and a 100% Petit Verdot wine, too.

We tried the “Traditional Red Blend” from Afton Mountain Vineyards, for example. Although it followed a a slightly different recipe, the Petit Verdot came through clearly. You would not mistake it for a California BDX blend. When it comes to “traditional red blends,” Virginia is creating its own traditions.

Tannat is another wine grape that can stand up to warm contitions. It is famously at home in Madrian in Southeast France. It makes sense that it might work the right spots in Virginia, too. We were therefore excited to try the “L. Scott red blend” from Michael Shaps Wineworks. A Virginia appellation wine (because the different grapes came from specific vineyards in serveral parts of the state), this blend of 50% Tannat and smaller amounts of Merlot, Malbec, and Cabernet was terrific from start to finish. A fantastic example of what is possible in Virginia.

Take-Aways

Virginia and the Willamette Valley are about the same age in terms of their modern wine industries, but it is obvious that the Oregon region has matured more quickly. The Virginia winemakers we met on the webinar acknowledge that they are still experimenting with terroir and grape varieties (and probably in finding their markets, too).

Two things the regions have in common are quality and diversity. Tasting the Virginia Governor’s Cup wines demonstrated the quality of the best wines. The growing emphasis on grape varieties in addition to Pinot Noir shows the diversity of the Willamette Valley’s offerings. The Willamette Valley has embraced diversity by choice. They can grow many types of winegrapes and are exploring the possibilities.

Virginia is exploring new pathways both by choice and be necessity because of climactic conditions. The experiments are on-going and the best results are attention-grabbing. What fun!

Both regions have much to offer wine enthusiasts, with something new around every corner. Can’t wait to see what’s new next year.

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Willamette Valley Vintners’ Lunch wines

Et Fille White Pinot Noir (bottled in Revino refillable bottles)
Sweet Cheeks Estate Dry Riesling & Willamette Valley Pinot Noir
Belle Pente Willamette Valley Pinot Gris & Willamette Valley Pinot Noir
Resonance Découverte Vineyard Chardonnay & Resonance Vineyard Pinot Noir
Hazelfern Trousseau Noir & Three Cedars Vineyard Pinot Noir
Division Gamay Noir “Gala” & Willamette Valley Pinot Noir
Winderlea 2019 Vintage Sparkling Brut & Winderlea Vineyard Pinot Noir

Virginia Governor’s Cup case: Monticello Region

Afton Mountain Vineyards 2019 T: Monticello AVA – 42% Merlot, 29% PetitVerdot, 29% Cabernet Sauvignon
Barboursville Vineyards 2019 Paxxito: Monticello AVA – 50% Moscato, 50% Vidal Blanc
Hark Vineyards 2019 Spark: Earlysville, Monticello AVA – 46% Cabernet Franc, 30% Merlot, 24% Petit Verdot
King Family Vineyards 2019 Meritage: Crozet, Monticello AVA – 48% Merlot, 28% Petit Verdot, 20% Cabernet Franc, 4% Malbec
Michael Shaps Winery 2020 L. Scott: Charlottesville, Monticello AVA – 50% Tannat, 33% Merlot, 17% Malbec
Mountain & Vine Vineyards: Faber, Monticello AVA – 100% Chardonnay

Virginia Governor’s Cup case: Other regions

Bluestone Vineyard 2018 Petit Verdot: Bridgewater, Shenandoah Valley AVA – 100% Petit Verdot
Breaux Vineyards 2019 The Fog Nebbiolo Reserve: Purcellville, Northern Virginia – 100% Nebbiolo
Cave Ridge Vineyards 2019 Fossil Hill Reserve: Mt Jackson, Shenandoah Valley AVA – 60% Cabernet Franc, 20% Cabernet Sauvignon, 20% Petit Verdot
CrossKeys Vineyards Blanc de Noir: Mt. Crawford, Shenandoah Valley AVA – 100% Pinot Noir
October One Vineyard 2022 Albarino: Leesburg, Northern Virginia – 100% Albarino
Paradise Springs Winery 2022 Petit Manseng: Clifton, Northern Virginia – 100% Petit Manseng

The Big and Hot Guide to Wine 2024

May 21, 2024 By Mike Veseth in wine, wine markets 3 Comments

When you’re hot, you’re hot (and when you’re not, you’re not). That’s the way it is in the wine market today.

One of the most interesting charts at the “State of the Industry” session at this year’s Unified Wine & Grape Symposium was Danny Brager’s analysis of what I call the U.S. wine market’s “Big and Hot” situation.

The gist of the slide was that the market categories that are the biggest are not very hot (indeed, most of them are shrinkingly cold) and that the market categories that are hot and growing are relatively small. Under these circumstances, it is hard to see an “engine” category that might pull the overall market out of its current slump.

It has been a while since we published a Wine Economist “Big and Hot” column, so let’s take a closer look using the NIQ data for the 52 weeks that ended on February 24, 2024, taken from the May 2024 issue of Wine Business Monthly. NIQ captures the big chunk of the U.S. wine market that flows through distribution channels that large wineries depend upon, but doesn’t include everything, especially DTC sales that many small and medium-sized wineries depend upon.

Reference Points

The NIQ data report both volume and value numbers. Total measured sales for the 52-week period were $15.4 billion on 142 million 9-liter case equivalents. That was down 2.9% by value and down 4.2% by volume over the previous year.

The “Big” wines in various categories measured by value are as follows:

Domestic $11.1 billion vs Imported $4.3 billion
Among imports: Italy $1.4 billion, New Zealand $690 million, France $637 million.
Among domestic: California $10.0 billion, Washington $509 million, Oregon $290 million.
By grape variety: Cabernet Sauvignon $3.1 billion, Chardonnay $2.6 billion, Pinot Noir $1.5 billion, Sauvignon Blanc 1.4 billion.
Blends: Red blends $1.9 billion, Rose blends $608 million, White blends $237 million.
By price point (glass): super-premium ($11 to $14.99) $3.7 billion, Premium ($8 to $11.99) $2.5 billion, Popular ($4-$7.99) $2.4 billion.

What’s Big and Hot?

The Big and Hot winners are easy to identify because there are only two Big categories that experienced positive growth during the period under consideration and they are so closely related that they are nearly the same: New Zealand (+2.1% by value) and Sauvignon Blanc (+4.1%)! Indeed, tiny New Zealand accounts for almost half of all U.S. Sauvignon Blanc sales by value.

If you’ve noticed a lot of Costco shopping carts filled with Kim Crawford or Kirkland Signature Marlborough Sauvignon Blanc, you are not hallucinating. That’s the Big and Hot effect.

Three-liter boxes are pretty big ($856 million) and growing by 2.4%, but no other “Big” category grew during this period, although some declined by less than the overall market (which is sort of damning with faint praise). Chardonnay sales fell by only 1.9%, for example. A rising tide doesn’t always raise all boats, but this ebb tide seems to be dragging almost everyone out to sea with it.

Hot But Not Big

As Danny Brager noted at the Unified Symposium, the market is growing in smaller, niche categories, not the large segments. Red blends, a Big, are down more than 5%, for example. White blends are up slightly (0.3%), but are a small category by comparison. Two countries have experienced good growth recently, but from a relatively small base:

South Africa 5.5% growth ($37 million)
Portugal 3.4% growth ($53 million)

Two very different categories that experienced growth with substantial sales present something of a puzzle. Luxury glass ($20-$24.99) 0.6% growth ($867 million) beat the market average despite an overage price of $22.24. Chile 2.5% growth ($373 million) did much better in terms of growth, but sits at the other end of the market with average price of $4.93. It is hard to see the thread that connects these two wine segments.

Do these trends drawn from the NIQ data apply to smaller wineries that rely more on wine club and cellar door sales? I would be interested in reader reactions to this question. I am especially interested in the shifts among wine grape varieties and price points. As always, please keep comments short and to the point.

Starbucks and the Wine Market: An Update

Last week’s Wine Economist column compared the current wine market situation with the problems being faced by Starbucks, the super-premium coffee chain. Tighter consumer budgets seem to be cutting into the sales of both wine, which is expensive on a per-serving basis, and Starbucks, which isn’t exactly a low-cost option either.

This week’s Economist newspaper features an article that compares Starbucks problem to that of President Joe Biden. You can evaluate this argument for yourself, but what interests me is the more detailed breakdown of Starbucks’ declining sales, which might be relevant for wine.

Starbucks has at least two types of customers. There are the committed regulars who most often visit in the morning. They load money on their Starbucks app, which they use to order coffee and other Starbucks products. I have read elsewhere that the “float” on the money that has been put on the app but not yet spent is a significant revenue stream for Starbucks, so these are really important customers.

Then there are the “occasional” customers, who more often show up in the afternoon and don’t necessarily use the app. Both the regulars and the occasional customers are important to total sales, just as they are to wine sales. And sales for both groups of consumers are down at Starbucks.

Regular customers are leaving more incomplete orders on the app, the article notes, changing their minds at the last minute. Is it because of unexpected long wait times? Are some of the millions of permutations of the chain’s drinks unavailable? I want what I want when I want it! Or is it because, once they see the total cost of their order, consumers, even regulars, hesitate to hit the order button? Probably some of all three explanations.

The Economist speculates that the decline in occasional customer business is due mainly to tigher economic conditions, because similar reports are coming from McDonald’s, Shake Shack, and other businesses. It will be interesting to see how Starbucks responds to these challenges and if there are any lessons for wine is the results of their efforts.