Wine Book Review: Invisible Pignolo Revealed

Ben Little, Pignolo: Cultivating the Invisible. 2021. Available exclusively from The Morning Claret Shop.

Pignolo: Cultivating the Invisible is quite a fantastic multi-media exploration of one of Italy’s (and the world’s) nearly forgotten grape varieties. My first impression of the book was fascination — so playful, so colorful. I just had to thumb through it to discover what was on the next page. Then there was puzzlement, because I would read short passages and it wasn’t really clear what was going on.

First fascination, then puzzlement, then — finally — enlightenment. Ok, that might be too strong, but I went back and read it from the start and it all made sense.

First comes the history of Pignolo in the context of the history of its native region, Friuli Venezia Giulia in Italy’s upper right-hand corner. A really interesting explanation of how Pignolo, wine, and the region evolved. Then the history shifts a bit to author Ben Little’s personal experience with Pignolo, which started only a few years ago (2016) but developed quickly and soon involved many others. There is much of a technical nature to learn through Little’s first person reports.

And then there are the lessons that Pignolo teaches us, inspirations, meditations, not sure what to call them. But by the time you get there you are ready to slow down, let the flow carry you, and absorb them, which might not have been the case at the start. Colorful graphics act as signposts along the way.

Little’s notion that Pignolo is an invisible grape variety works. It was always there all along, you just didn’t see it. That’s how it happened for him. At first he thought that there were just a few people in Friuli growing the grapes and making wine. But once word got out that there was interest, more and more plantings and producers began to appear until there were enough to fill a room (which Little did, with a little help from Pignolo’s friends).

Pignolo might be invisible to you, too. That’s how it was for us. Did we ever taste Pignolo during our trips to Friuli? I had to think and use the ample resources of Little’s big book. We might have tasted Pignolo when we visited the Cormons cooperative, but there were so many wines there it is hard to know. Possibly when we stayed at Il Roncal. Bastianich makes an IGT blend called Calabrone, which is includes a splash of Pignolo as a key ingredient. When we didn’t have time to taste it at the winery Wayne Young wrapped up a bottle for us to take home and I’m very glad he did. Amazing.

We staying in one of the rooms at Borgo San Daniele and I remember distinctly the tasting where Mauro Mauri poured his Arbis Ròs Pignolo from magnum. What an amazing wine. I tried to get him to sell me some bottles, but it was all gone. Only that magnum was left. And the memory, too.

Our final taste of Pignolo was at Paolo Rodaro and that’s when we met Ben Little. Little was nice enough to help with some difficult translations, but you could tell even then, not too long after his Pignolo journey had begun, that his focus was on the particular wine and Rodaro’s version was especially intense and interesting. There was another connection that I only learned about by reading this book — like me, Little is a recovering student of economics and can’t resist adding his insights to the blend.

Having read Little’s book, I want to go back to Friuli and visit the small region of Rosazzo, which seems to be Pignolo’s spiritual home. Pignolo was pretty much invisible to me a few days ago, now that I see that it has been there all along, I want to ask it a few questions.

In the meantime, I couldn’t resist trying to track down a bottle of Pignolo here in the U.S. and refresh my memory. I was able to find the 2005 La Viarte Pignolo Riserva at Kermit Lynch‘s online store. We pulled  the cork and paired the wine with Caesar salad and a prime-grade dry-aged steak — clearly this was a special meal. The wine lived up to the occasion. The first glass was a bit wild, but it settled down and developed along several axes over the next two hours. Sue said that the wine really pulled itself together when the food arrived just as it was meant to do, I think.

Some wine experiences are delicious but not especially interesting — you know what you are getting. Others are interesting, but not necessary delicious — you are happy to stop after the first glass. The Pignolo was both, so it is easy to understand Little’s fascinating with it.

Pignolo: Cultivating the Invisible is a highly personal memoir of and tribute to a very distinctive grape and the people who have nurtured it as it nurtured them. More than a book, it is an experience. Highly Recommended.

Too Much, Too Much, Too Little: Solving the Canned Wine Puzzle

Sogrape, a leading Portuguese wine producer, recently sent us samples of their new entry into the canned wine market: Gazela. Gazela is characterized as a “refreshing white wine” and it certainly lives up to that billing. A really nice wine for those casual summer outdoor occasions and a strong entry into the booming  canned wine market segment.

There is a lot to like about Gazela, but I am especially interested in the way that it addresses three problems in the popular canned wine category: too much (alcohol), too much (cost), and too little (wine quality).

Too Much

Forget about what you read on the label, American consumers are trained to see a beverage can as a single serve container. I know, I know that this is wrong — 5 ounces is more appropriate for a serving of wine than 12 ounces. But if you are drinking directly from the can, as people often do, the can is a serving. And that’s way too much alcohol.

Gazela addresses this in two ways. First it’s a smaller 250 ml can. That’s still more than one serving according to the “Nutrition Facts” panel on the can (which also lists calories — 87 per serving). But the smaller can plus low 9% abv means that consumers who empty the can aren’t getting nearly as much alcohol as they might. That’s progress.

Less is more when it comes to wine in cans from the alcohol standpoint and Gazela leans in the right direction.

Too Much

Price is another hurdle to canned wine success. Consumers are used to paying maybe $10 or so for a six-pack of canned beer or hard seltzer, so you can imagine how they react to wine priced at $5.99 or $6.99 per individual can. Seems like a really big price difference unless you do the “per serving” math in your head. Even so canned wine isn’t bargain wine from the consumer cost standpoint.

Gazela is priced at $2.99 per can, which I think will make a difference. I have seen one or two other 250 ml cans at this price point.  It will be interesting to see if a lower price point can help unlock the untapped growth potential of canned wine.

Too Little

A third problem with canned wine is that sometimes the wine itself is disappointing — there’s no there there, if you know what I mean. Sue has complained that the taste and aroma often fade very quickly and there’s not much left to enjoy by the end of the glass. This is certainly not true of all the canned wine we have tried and I am not sure if the problem is mediocre wine to begin with or too much time in the warehouse.

The Gazela was different, Sue said. Better. The first sip and the last told the same story. And that’s what wine needs to do to be successful. Otherwise, hard seltzer is going to win in the long run.

How did the Gazela taste? Well, the Gazela brand is all about Vinho Verde when it comes to their bottled wines. The can, as noted above, identifies the contents as “refreshing white wine” which makes sense since, as I understand it, wine in cans isn’t allowed for the appellation designation.

It is refreshing and white, as the can claims, which is how Vinho Verde should be. We tasted it alongside Broadbent Vinho Verde, which is our go-to wine of this type. The Gazela was fizzier and tasted like Vinho Verde to me, but the Broadbent had sharper acidity. Sue liked the Broadbent better,  but we’d be happy to have the Gazela when the occasion is right.

Taylor Made Solution

Although we haven’t been able to taste yet (it’s rolling out nationwide just in time for summer), it looks like another Portuguese winery, Taylor Fladgate, has also figured out a canned wine success strategy. Taylor’s recently announced its new Chip Dry and Tonic premium RTD cocktail. It is a combination of 1/3 Taylors Chip Dry White Port, 2/3 tonic, with a bit of lemon and mint.

If you have ever visited Porto and the Port lodges just across the river, you’ve probably had a White Port and tonic. It is totally refreshing on a warm day. Seriously, you need to try this. Taylor’s Chip Dry Port is seriously good on its own, too, chilled or on the rocks.

Taylors cans hit the right notes. Small 250 ml can? Check. Low 5.5% abv? Check. Competitive price? Check — SRP $17.99 for a 4-pack should work in the premium RTD cocktail space. I hope Kobrand, Talylor’s U.S. importer, brings in enough to keep the store shelves stocked this summer.

I notice that the label is Chip Dry and Tonic — the word Port doesn’t show up, except the trademarked brand “Portonic”. I think this is probably due to the same sort of Portuguese regulations that affected the Gazela can. In this case, I think the omission might benefit sales. People think of Port as heavy and sweet, but Chip Dry sounds just the opposite. Many know that Port is fortified and alcoholic, whereas this beverage is in the same abv range as hard seltzers. Not many people know what White Port even exists. Chip Dry and Tonic stands well on its own.

And the can is beautiful, don’t you think? Who wouldn’t want to find out what’s inside?

Congratulations to Sogrape and Taylors for these refreshing new entries in the canned wine market.

 

Wine Book Review: Rescuing Roussillon’s Identity

Rosemary George MW, The Wines of Roussillon (The Infinite Ideas Classic Wine Library, 2021)

It’s not easy to write a book about a complicated wine region like Roussillon — a place with such varied terroir and interesting history. It is especially hard when the approach is personal and intimate. But it must be nearly impossible to do this when the necessary fieldwork is interrupted by a global pandemic.

And yet Rosemary George MW has managed to do all of this and to do it really well in her newest book, which I highly recommend.

The heart of The Wines of Roussillon is a comprehensive analysis of “Who’s Who,” which takes us through Roussillon’s wine regions, visiting many of the most important producers. The winery profiles are very personal and I often had a sense that I was visiting the winemakers with George, which is a welcome feeling after months of relative isolation. Her deep knowledge of the regions and wines provides context and perspective on how things are changing and what has remained the same.

Roussillon’s Identity Dilemma

One of the continuing themes — the elephant in the room that is outlined very well in a chapter on wine business in Roussillon — is identity. What is Roussillon in the broader world of wine? For older wine enthusiasts, Roussillon is an appendage — the trailing part of Languedoc-Roussillon, the term sometimes used to identify the huge vineyard area of the French south. This geographical simplification is unfair to Roussillon, however, which has a distinct character, more Catalan than French (whatever that means, since France itself is so diverse).

Sue and I only dipped our toes into Roussillon wine, food, language, and culture during a media tour a few years ago, but it was impossible to miss (and to appreciate) the differences. Roussillon’s unique character is clear and deserves to stand on its own.

And what about the wines? Well, when we were planning our trip to the area I told some friends and one of them dismissed the enterprise, saying that he hoped that we liked cheap, sweet wines, because that’s what we’d find in Roussillon. The unfavorable reference was to the Vins Doux Naturel wines that the region is known for. The wines are like Port in that their sweetness comes from sugar that remains after neutral spirits are used to prematurely stop fermentation.  Sweet wines like these were highly prized before sugar was cheap and plentiful and sweetness a glut on the market.

The wines don’t have much in common with Port apart from the method of halting fermentation, which makes sense since the grapes are different and the terroir different, too. If you haven’t tasted a Vin Doux before (or you haven’t done so recently) you might make a point of doing so now. You’ll have to search for them a little, but they are there. See what you’ve been missing.

The Sweet and the Dry

One thing Port and Vins Doux share is the ability to age and we were fortunate to taste many quite old wines during our visit. They were stunningly delicious. A wine from 1949 was especially memorable. Amazing. But not all Roussillon’s sweet wine have been amazing and my friend’s comment about “cheap, sweet wines” come from the fact that there was once a robust market for such wines to serve as aperitives that the Vins Doux once filled alongside inexpensive Sherry and Port. It was a good market, I suppose, and a pleasant drink before dinner, but it isn’t the identity that Roussillon needed or deserved. But there you are.

And now, of course, sweet wine generally is hard to sell and so sweet wine with a questionable reputation is especially problematic.  Producers in the Douro have responded to the slump of the market for sweet fortified wines by shifting to non-fortified table wines and they’ve achieved some success, albeit with considerable effort.

Rousillon producers have responded in a similar way with vin sec, which has a larger potential market than the sweet wines. But the French domestic market is not very welcoming to Roussillon dry wines, so emphasis is on developing exports. China, George tells us, became the #1 export market for both the dry and the sweet wines in 2017.  But, as good as they can be, these dry wines have not yet established a clear identity.

The Old and the New

So the elephant in the room is the problem of selling both the sweet and the dry and it seems that this issue comes up whenever George gets into a conversation with a Roussillon wine grower. The problem has had a visible impact on the region — both vineyard area and total product have declined dramatically over the last 30 years. Old identities are hard to dislodge and new ones tricky to establish in a wine world full of where much is changing at once.

I wrote about the identity problem after our visit three years ago and noted a certain refreshing optimism.

The Roussillon producers we spoke with saw old reputation as less of an issue mainly because their region is not so well-known as Languedoc. Roussillon is often lumped in with Languedoc or left out altogether. They see today’s market as an opportunity to build a strong reputation from scratch.

We enjoyed all the wines, both sweet and dry, and sensed important shifts, from older cooperative members to younger independent producers

When we arrived at Domaine de Besombes we met winemakers from the region and shared a delicious Catalan barbecue lunch. And we tasted their delicious stereotype-breaking dry red and white wines, too. Sue was particular fond of the wines made by Laurent Pratx of Serre Romani. The grandson of the man who founded the local cooperative, Pratx returned to Roussillon after working in the Rhone Valley committed to taking his wines in new, independent directions.

So a lot of factors are at work, but the problem remains to establish Roussillon’s identity in today’s environment. Tourism, George suggests, might be part of the answer (once pandemic restrictions have passed). Visitors who learn about Roussillon’s distinct identity can become ambassador’s for the wines. So there is much work to do and you can tell that George appreciates the challenge and believe that the wines are worth the effort and will succeed once they are better known and understood.

Elizabeth George’s The Wines of Roussillon is a rewarding survey of the Roussillon wine landscape and the people who are driving it ahead. Highly recommended.

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I thought you might be interesting in this menu from a gala dinner with the winemakers during our visit to Roussillon. It was quite fantastic and showed the versatility of the Vins Doux wines.

Magical Mystery Box: Emerging China Wine Market Strategy

The Chinese economy is booming, recovering from the pandemic sooner and stronger than any other country, although the pace of recovery seems to have slowed. The wine economy in China is still struggling, however, with high inventory levels remaining due to last year’s lockdowns. Selling off the surplus stock without eroding price points and reputations is serious concern. Recently reports highlight creative solutions to the problem.

Doubling Down on China

Concha y Toro, the famous Chilean wine brand, is doubling down on its success in China according to The Drinks Business. CyT is strengthening its already strong presence in China by investing in its Shanghai operations, now part of its network of global offices, and taking advantage of Australia’s current crisis. China has imposed punitive tariffs on Australian wine, creating space for upmarket wines from Chile, which continues to have good relations with the Chinese government.

Concha y Toro is launching two upmarket brands in China, which may well appeal to buyers of super-premium Penfolds products, for example, who are put off the the new 200+% tariffs. What do you think of the label designs?  The Cellar Edition wines feature a shell (concha in Spanish) framing a bull (toro). Direct and memorable, don’t you think? It should become the global logo for the brand in my opinion.

The Master Edition label is a playful nod to Boticelli’s “Venus on the half-shell,” as we used to call the famous “Birth of Venus” painting in art history class, paired  with a Greek mythology minotaur (half bull, half man). Half-shell, half-bull, not half bad!

Meanwhile, Accolade, the big Aussie producer currently owned by private equity investor The Carlyle Group, is pivoting in response to Chinese tariffs on Australian wine. It will focus on non-Australian wines, including some from Chile, to keep its Chinese pipeline as full as possible.

Exploiting Opportunities

A recent China wine market report by Rabobank analyst Stacie Wan titled “Staying Alive in the Chinese Market” reveals three unusual strategies that distributors and retailers are using to cope with current problems. Distribution systems work best when pipelines are full of product, but with wine sales down, inefficiencies are exposed. So some distributors are adding non-wine products such as sauce aroma baijiu to their portfolios, to build critical mass and keep their networks busy.

Community group buying is a rising trend in China. Groups of consumers band together to purchase larger quantities of various products and gain better terms. Communal buying in bulk is apparently especially popular in lower-tier cities. Several important wine producers, both domestic (ChangYu) and import (Yellow Tail) are taking advantage of these opportunities, especially with their lower-priced brands.

Some wine companies are exploring opportunities to develop special low price products specifically for community group sales — much as some clothing producers make special products for off-price and outlet retailers. Interesting!

Magical Mystery Box

A final strategy cited in the Rabobank report involves “mystery box” sales. Consumers are offered mixed cases of unidentified wines at bargain prices. Buyers get wine, good prices, and a (hopefully) pleasant surprise. The mystery box idea struck a note for me because we purchased a mystery box from a well-known producer a few months ago and were delighted. There was a mix of wines we knew, private label wines we hadn’t seen before, and several limited-production wine club or tasting room only wines. Some of the wines were really terrific and none were losers. We were happy overall and recently purchased again when the limited-time opportunity re-appeared.

The Rabobank report notes that mystery boxes appeal to adventurous consumers, but the main point is how useful they can be for retailers and distributors. They are a good way to clear out excess inventory without dumping wines in traditional market channels. Consumers know that they are getting a lower price for the case they buy, but since price isn’t broken down by bottles, the integrity of any particular price point is not seriously undermined.

One limitation of the mystery box strategy is that it can backfire if you offer the boxes constantly. As Rabobank notes

Furthermore, this is not the most effective strategy for building long-term consumer brand loyalty. As a result, most players currently prefer to promote their mystery box wines as limited editions, rather than as quarterly or annual subscriptions. After all, a constant surprise ceases to be a surprise.

Will mystery box become an important part of the wine market? Too soon to tell, but rising internet sales make this sort of niche strategy feasible. It is one indication of the innovation taking place in China as players deal with adverse market conditions.

We Are All Terroirists Now

The third section of my book Wine Wars, which is celebrating its 10th birthday this  year, is called “the Revenge of the Terroirists.” As I explained in last week’s Wine Economist column, Wine Wars argues that globalization pushes the wine market forward, which is great, but one market reaction to this “creative destruction” is rationalization, which can be both good and bad.

What’s to keep wine from going off the rails and becoming just another branded consumer good? Well, it could easily happen and has happened in some cases, but I’m an optimist and, in Wine Wars, I argued that people who understand wine and appreciate what makes it different from commodity products would be a force strong enough to keep wine safe.

It’s a Wine World After All

I wasn’t the only person to see the wine market as this sort of conflict. Jonathan Nossiter’s  2004 film Mondovino took a decidedly less optimistic view of this battlefield. The forces of globalization and commodification (symbolized by the Mondavi family brand in this poster for the film), are determined and powerful. Can the first terroirist we meet in the film, Giovanni Battista Columbu, guardian of Malvasia di Bosa in Sardinia (shown here below the Mondavis) possibly stand in the way of the global market juggernaut?

If that’s the war — big vs little, money vs traditional values — then it would seem like the wine wars have already been lost. But that’s not necessarily how things have to work out.

Large wine businesses are not all the same. For one thing, only a surprisingly small proportion of wine business are public corporations with professional managements than have to answer to investors with constantly rising quarterly profits and share prices. As I have pointed out before, a great many wine businesses, even the largest of them (think Gallo!) are family firms that think in generational terms. This long term thinking doesn’t guarantee a terroirist attitude, but it at least sometimes points in that direction.

B Corps, Slow Wine

Indeed, a number of important wine businesses are benefit corporations (B-Corps for short). Oregon’s A to Z Wineworks was the first in this growing group and  Portugal’s Symington Family Estates one of the most internationally recognized. Fetzer, the California winery long known for its environmental focus, was the world’s  largest B Corp wine company … until last Friday! That’s when its parent company, Viña Concha y Toro, announced that all of its global operations had received B Corp certification. Amazing!

B Corps make no specific commitment to terroir, of course, which is natural since they can be found in all sorts of industries (the little coffee shop on the corner hereabouts is part of a B Corp operation). But the values that B Corps commit themselves to supporting are different from those of the stereotypical corporate behemoth.

I’m also encouraged by my study of the Slow Food movement. Founded in Italy but now spanning the globe, Slow Food is a grassroots counterpoint to industrial food and agriculture. It doesn’t confront global corporations directly by, for example, bombing McDonalds restaurants the way French anti-globalization protestors used to do. Slow Food instead works to identify products and practices of tradition and terroir and then seeks to promote and preserve them using the very tools of media and markets that we usually associate with industry. Slow Food uses the weapons of global capitalism against itself, an elegant irony, don’t you think?

Slow Wine is a thing, too,  and the guide to Slow Wine USA 2021 has just been released. You should check it out.

We Are All Terroirists Now

To paraphrase a comment attributed to both Milton Friedman and Richard Nixon (see note below), we are all terroirists now. Well, almost all or at least a lot more of us. The reason: climate change. Climate change is real and it is a crisis, even if we don’t treat it like a crisis (compare the reaction to the Covid global pandemic to climate change and you can see that climate isn’t given the same priority). Last year’s wildfires and this spring’s killer European frosts are reminders of the climate’s destructive volatility.

The wine business needs to take account of changing environmental conditions and, while this isn’t the same vision of terroirism that you see in Mondovino, it is a step in that direction.  More steps are needed, both to address the environmental risks and to secure the future of wine.

I’m trying to figure out where the natural wine movement fits into the revenge of the terroirists. Natural wine producers often fit the terroirist stereotype that Jonathan Nossiter established in Mondovino. In fact, Nossiter has written a book about them called Cultural Insurrection: A Manifesto for Arts, Agriculture, and Natural Wine.. Natural wine advocates in Nossiter’s telling of the story tend to define wine more narrowly than I do (something that I pointed out in reaction to Nossiter’s book), but they still contribute to the “revenge” I hope to see.

Not Exactly a Manifesto

Nossiter’s vision of wine sees a world of industrial wine versus natural wine and industrial wine needs to disappear because, well, it isn’t really wine at all. It’s just a toxic chemical concoction. A lot of people see wine in terms of a dichotomy — wine of the market versus wine of place, commercial wine versus fine wine, you get the idea. Generally they make this distinction in order to favor one type of wine — almost always the terroirist side of the equation.

My realist perspective is that there many types of wine, including high volume commercial  wines. They are all wine and each category fills a consumer niche. What is important to me is that the big doesn’t crowd out the small, that terroir wines and the terroir that produces them endures. And that consumers  understand the choices they make and their implications.

It’s a complicated situation, a fact easily illustrated by the case of Canadian billionaire Anthony von Mandl. Terroirist or not? You be the judge!

On one hand, von Mandl is the head of the company that makes Mike’s Hard Lemonade and White Claw hard seltzer. These terroir-free alco-pop beverages are insanely popular and my market research friends tell me that they are partly responsible for declining sales of inexpensive (and, it must be said, also relatively terroir-free) commodity wine.

On the other hand, however, von Mandl is the Robert Mondavi of the Okanagan Valley in Canada. He’s the founder of iconic Mission Hill Winery and, according to a recently VinePair report, is a driving force in British Columbia’s organic wine movement. Six wineries in von Mandl’s Mark Anthony Group are leading the charge, converting about 1300 acres to organic viticulture:  Mission Hill Family EstateCedarCreek Estate WineryRoad 13 VineyardsLiquidity WinesMartin’s Lane and Checkmate Artisanal Winery.

Do you appreciate irony here? White Claw money funding a terroirist revenge in the beautiful Okanagan Valley.

Whether  you think of terroirism as a broad phenomenon or a narrow reaction movement, I hope you can see its importance in the wine wars of today and the battles of tomorrow. Are we all really terroirists now? No, not really. But the I think the wine world has come a long way from the David versus Goliath world of Mondovino.

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“We are all Keynesians now” is the comment commonly attributed to Friedman and Nixon and if they were still alive they would probably repeat the saying again. I cannot think of any time in the past 40 years when fiscal policy has been more important.

The New Wine Wars

We are celebrating  the tenth anniversary of the publication on my book Wine Wars here at Wine Economist world headquarters and I want to use this opportunity to reflect on how the wine world has changed since 2011. As I explained in last week’s column, Wine Wars is organized around a trio of strong forces that together (along with other factors, of course) shape the wine sector and many other industries, t00.  In very simple terms …

Globalization drives change. Commodification is a commercial response to these disruptive forces. Together globalization and commodification provoke grass-roots reactions that I call “the revenge of the terroirists.”  I think the framework still applies. But things have indeed changed. Here are some notes.

Wine and Globalization

Globalization continues to be a driving force in the world wine sector. Indeed, I think it is safe to say that more different wines from more different places are now available to more different consumers than at any point in history. World wine is truly an embarrassment of riches! Wherever we have travelled in the world of wine we’ve met producers anxiously seeking new opportunities.

But while the globalization pulse remains strong, there have been important qualitative and quantitative shifts. The first is that the fundamental nature of the market has changed from positive-sum to something much closer to zero-sum. As I was writing Wine Wars the world wine market had just come to the end of an era of expanding global wine consumption. I am not sure any of us where really aware of this sea change at the time. It was easy to blame the down-tick in consumption on the global financial crisis. But the recovery up-tick didn’t follow.

As this OIV graph shows, in place of rising year-on-year global wine consumption, we  entered what I have called global wine’s lost decade. (The most recent OIV data, which will be released later today, show dramatic further consumption decline in 2019 and 2020.) Global wine consumption reached a high plateau and flat-lined. Demand bumped up and down a bit from year to year, but that rising trend line that was so powerful before had vanished.

This doesn’t mean that wine demand was flat everywhere, of course. Among the major markets, structural demand declines in the old world — Spain, France, and Italy — was offset by rising demand in some new world markets, especially China (from a low base) and the United States (slow growth, but still growth).  I profiled what were then the three most important wine markets in Wine Wars: the UK, Germany, and the United States. Today you would need to add China to that list. In Wine Wars I speculated about what the rise of China might mean and some readers wondered why I even asked the question. There are still plenty of questions about China and wine, especially since recently sharp declines in both production and consumption in China ,but no one seriously doubts its importance any more.

Caught in the Crossfire

Global wine has changed in another important respect. Globalization in pre-Wine Wars was all about expanding international trade. Free trade agreements were the order of the day and the more of them that a country could negotiate the better. Chile was a big winner in this competition and its wine industry benefited enormously from easy access to the most important markets.

Now wine is caught in the crossfire of tariffs and trade barriers. The U.S. has imposed tariffs on some European wines, for example, and China has raised  trade restrictions on wine from both the U.S. and Australia. U.S. wine sales in China were relatively small, so the economic loss was limited, but China was Australia’s #1 export market and the pain is hard to over-state. In the meantime, the British withdrawal from the European Union — a.k.a. “Brexit is Brexit” — has thrown sand in the wheels of what was once a very efficient set of trading arrangements.

What is interesting about the new political economy of wine tariffs and trade is that it isn’t really about wine at all. Wine is simply caught in the cross-fire in other disputes. Why pick on poor innocent wine? Probably because wine has a clear identity and national association. Sanctions on wine from a particular place send a clear message. And of course with so many wines available from other places, the harm to consumers who are willing to accept substitute products is pretty limited.

Globalization is built on many complex structures including especially global communications networks, so it is easy to forget about supply chains and logistics until they break down — and that’s the most recent challenge that wine and other global goods confront. Global supply chains have recently shown themselves to be less reliable and most costly than many supposed when plans were made just a few years ago. The benefits of global reach must always be weighed against the security of local linkages. How much this trade-off has changed and to what extent it will impact the global wine sector is still to be determined.

Wine and Commodification

Commodity wine is only one side of the industry, but it has been an area of growth in the decade since Wine Wars first appeared. One way to appreciate this is to look at wine branding trends. There are many different types of brands, of course. Champagne is a brand, for example, and the producers are diligent in protecting their brand’s intellectual property. More broadly, there are collective brands (appellations, AVAs, etc.) and private brands (Mouton Cadet, Barefoot, etc.). Brands are successful when they encourage demand by providing an indicator of consistent value and quality.

As the market has become more congested, brands have become more important and evolved in interesting ways. One of the most important trends, which Wine Wars anticipated, is the rise of private label wines (which some call “exclusive label” wines in a nice bit of marketing). The maker’s brand is generally replaced or supplanted by the seller’s brand.  British supermarkets like Tesco made private label wine an important category and now it is everywhere. Here in the U.S. Costco, Walmart, and Target have their own wine brands, for example. But the phenomenon isn’t limited to large-multiple sellers. The upscale supermarket down the street (which appeared prominently in Chapter 3 of Wine Wars) is part of a small local  chain (nothing like Kroger’s vast network), but it has its own private label Champagne.

As the wine market has stagnated over all in many regions, the demand for private label wine has grown. Buyers look for value, retailers see higher margins. Growers and producers get the business they need even if they don’t control branding.  Some of these wines are very high quality. Others, of course, are drawn from lots of generic bulk wine from sources that vary from year to year and lot to lot depending upon price among other factors.

Take It To the Limit

What happens if the trend towards generic wines is taken to its logical extreme? In Wine Wars I joked (sort of) that we’d be left with Bud Red and Bud White — a threat that is more potent today with wine-in-cans gaining popularity. But I could never have imagined that we’d be staring at the specter of hard seltzer!

Wine today competes for a share of the stagnant overall beverage alcohol market. That means the growth in total wine sales need to come from other alcohol categories. And the toughest competitor in this space — the one that has been eating market share for lunch — is hard seltzer, a.k.a. flavored alcoholic fizzy water. I may be wrong, but this seems to me to be the real least common denominator threat to the idea of wine that most readers of this page likely share. Yes, I know that we’ve always had products like wine coolers, which may have served as a first step on the wine ladder. But if hard seltzer is the first step, I’m not sure what the second step might be!

Ultimately Wine Wars counted on what I called “the revenge of the terroirists” to keep wine from jumping the branded goods shark. How has that worked out? Come back next week for my thoughts.

Wine Wars: Curses, Miracles, and Revenge

Wine Wars 2011: the first books arrive.

As I explained in last week’s Wine Economist column, this is the tenth anniversary of the publication of my first book on the wine business, Wine Wars. Although the catchy title (suggested by the smart marketing people at Rowman & Littlefield) gets your attention, it is the long subtitle that outlines the book’s argument. This is a story of “the Curse of the Blue Nun, the Miracle of Two Buck Chuck, and the Revenge of the Terroirists.”

Here is a quick sketch of the book’s argument. I’ll return next week with thoughts about how things have changed (and how the argument has held  up) in the decade since publication.

Curse of the Blue Nun

Blue Nun was arguably the world’s first global wine brand, so it represents the argument that globalization has been a powerful force in the wine world. What’s the curse? Well Blue Nun began as a very high quality German wine but, as it and other wines like it became more successful, eventually quality suffered. Blue Nun continued to sell, but it wasn’t the same. The curse of globalization is therefore that success on the global market can be double-edged, both creating and destroying.

Globalization has brought a world of wines to our door, which is also good and bad. This is the paradox of choice. No choice is bad. It is like the old Soviet joke where everything is either mandatory or forbidden. But too much choice is bad, too, and can be a particular problem for wine. It is not unusual for upscale supermarkets to have more than 1000 different wines on the shelf at prices ranging from a few dollars to hundreds of dollars. Wow! Not always easy to make sense of such an over-whelming selection.

Miracle of Two Buck Chuck

One way that many consumers react to this, the most confusing aisle in the store, is to confuse price with quality. Cheap wines must be bad. Expensive ones must be good. Clever marketers take advantage of this misconception in all sorts of ways that I discussed in the book. Hence the miracle of Two Buck Chuck. For many years Trader Joe’s stories in the U.S. sold a wine called Charles Shaw for $1.99 (do you see the two buck Chuck in that)? And millions of people who might otherwise have drifted away from the wine wall bought it and enjoyed it. TBC is an important element of the democratization of wine in America.

People think the miracle of Two Buck Chuck is its price, but let me assure you that you can make and sell a wine for $2 if you want to. In Europe I saw a wine that was one euro for a liter in tetra-pack carton. That’s equivalent to one buck Chuck! No the miracle is that consumers would buy it despite its bottom shelf price. They bought TBC because they trusted Trader Joe’s to sell good value products and then, having tried it, they trusted  Two Buck Chuck to deliver consistently. Trader Joe’s and the Bronco Wine Company that makes TBC created a powerful brand that has sold millions and millions of bottles.

Commercial brands are one way to help consumers break out of the paradox of choice by economizing on trust. You don’t have to trust the grape variety or the appellation or the vintage year. You only have to trust the brand. That simplifies things for sure. But there’s a risk. Albert Einstein said that everything should be as simple as possible, but no simpler. And that’s true of wine, too. If branding and commoditization simply wine too much and undermine its quality, then the miracle can quickly become a curse!

Revenge of the Terroirists

What is there to keep wine from becoming just another branded commodity? I am an optimist, so I proposed a counter-force that I called the revenge of the terroirists. This term, taken from the French terroir, has caused a little confusion over the years. I am sure that Wine Economist readers know what I mean, but auto-spell programs always try to correct it and there was even one case where a gentleman came to one of my talks thinking that I was speaking about terrorists and wine. Terroir. Terror. Hmmmm. Easy to see how that could happen.

In fact, some terroirists back then were terrorists, or at least they used terrorist tactics to oppose the incursion of industrial wine into the south of France. But I wasn’t counting on violence to hold back the commodification tide. No, I put my money on the dedicated few who opposed industrial wines the same way that the Slow Food movement (which I wrote about in my Globaloney books) opposes industrial food — by fostering an alternative rooted in and celebrating tradition but using the best appropriate modern practices.

Would the terroirist resistance endure? It wasn’t a sure thing then (or now either, I suppose) but I was cautiously optimistic. As the last line of the book says, I still have grape expectations.

A Trip to Napa Valley

Each of Wine Wars’s three sections ends with an invitation to taste some wines that illustrate the relevant part of the argument. The final tasting re-creates a trip that Sue and I took just as work on the book was coming to an end. We were in California for a meeting of academic wine economists at the University of California at Davis. We skipped the sessions one afternoon and drove to Napa Valley. We made three stops: a small family winery, a larger and more famous firm — Frog’s Leap — whose winemaker John Williams is world-famous for his terroirist work. We ended the day at the Robert Mondavi Winery where our academic colleagues had gathered for the conference closing banquet.

Frog’s Leap is still going strong, principles in-tact, with the next generation hard at work. That small family winery no longer exists. The wine business is hard and every year new wineries spring up while old wineries quietly fade away. Robert Mondavi is still there, of course, but it is no longer owned by the Mondavi family. They incorporated their winery in order to get resources for new projects and then lost control of it. Constellation Brands is the owner now.

The China Syndrome

The penultimate chapter of Wine Wars is called The China Syndrome and it provides an interesting perspective on how much things have changed in just ten years.  China was best known in the wine world back then as place to sell Bordeaux wines, both the iconic first growths but also lesser wines, even from questionable vintages. The Chinese couldn’t get enough Bordeaux.

Submerged under that sea of Bordeaux, however, was a growing Chinese wine industry — that’s what caught my eye. I reported on my first taste of a Chinese wine and it wasn’t very pleasant. Ashtray, coffee grounds, a whiff of urinal crust. Ugh! Bad Chinese wine was very bad indeed, as bad wine is everywhere.

But I also reported on a much different experience — a bottle of Grace Vineyards Cabernet Franc that we shared at an Open That Bottle Night dinner. Very nice indeed and it made me wonder where Chinese wine was headed (a question that continues to interest me — I’ve written  about China in each of the subsequent wine books). Not good vs bad — I was pretty sure that better wine would rise to the top. No I wondered if Chinese wine would try to copy-cat the French as wine has done in so many other places. Or would the wine industry there develop in a way that reflects its particular terroir — wine with particular Chinese characteristics?

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I do think that the overall argument of Wine Wars has help up pretty well, which is a bit of a surprise given how much has changed. What would I change if I were writing it again now? Come back next week to find out.

Back to the Future of Armenian Wine

The mission of Boston-based Storica Armenian Wines is to introduce U.S. consumers to the pleasures of Armenian wine and they seem to be off to a good start.

Just last week, for example, Wine Bible author Karen MacNeil‘s Instagram #TasteWithKaren webinar featured Vahe Keushguerian, founder of Keush wines, for a tasting of three of his Armenian traditional method sparkling wines. One of them, the Keush Origins, was our Open That Bottle Night 2021 wine. A delightful wine from an unexpected source, made from indigenous grapes that we’d never before experienced. A great introduction to Armenian wine.

Armenia’s Deep Roots

We are only now getting to know Armenian wine a little but, but already I can see that this is a topic full of fascinating puzzles and paradoxes. Wine in Armenia is both very old and very new.  Landlocked Armenia’s latitude is a bit too low, but its high elevation compensates and creates a sort of grape vine Eden. It is impossible to prove, of course, but Armenia just might be the place where Vine Zero was born, the ultimate source of the vitis vinifera grapes that fill most modern wine bottles today. The oldest known evidence of a working winery was found here.

Armenia’s neighbor Georgia shares some of this history and sometimes calls itself “the cradle of wine” (Armenians like to say they are the “birthplace of wine”) and I rather naively assumed that, because we have visited Georgia and tasted many of their wines, that this might give me a head start in understanding Armenia and its wines. But that’s not how it worked out at all.

No Escaping It

Wine is inescapable in Georgia. It is integral to the national identity. Home-production is so important that it has taken a while for commercially produced wine, most of it aimed for export markets in the former Soviet state markets, to attract a critical mass of local consumers.  Georgia is now investing to develop new markets in China, Europe, and North America in order to reduce their dependence on former-Soviet state exports.

Wine grapes are inescapable in Armenia, as near as I can tell from my research, but wine maybe not so much until quite recently. The World Atlas of Wine estimates at more than 80% of wine grape production goes to make brandy, the national drink.

The wine sector is relatively small, according to this source, with about 50 wineries in 2018, 30 of which only appeared in the last ten years, driven in part by investment from members of the vast international Armenian diaspora and technical “flying winemaker” expertise.

Armenia’s wine past is a mixed bag, as I’ll explain below, but its future is simply irresistible according to winemaking superstar Alberto Antonini. He rates his Zorah project in Armenia (along with his Otrona project in Argentine Patagonia) as the most interesting opportunities in today’s wine world.

Stalin Did It

Why was there so little attention to wine in its birthplace? It is complicated, of course, but one line of reasoning traces the situation back to Stalin’s Soviet Union. The Soviet system was all about exploiting the efficiencies of division of labor to generate maximum output with scarce resources. Thus was Georgia (Stalin’s birthplace and source of his favorite wine) selected to supply wine for the Soviet bloc while Armenia was assigned to specialize brandy production despite the fact that good wine was made in both countries.

That Armenian brandy is excellent and has been compared favorably to Cognac might make Stalin’s policy credible, but the impact on Armenia’s wine sector remains. The production and market structures established in the Soviet era have been slow to change, but change they have and the wines that Storica is introducing to the U.S. market is part of the story.

Terroirist’s Territory

Sue and I enjoyed our OTBN selection of Keush Origins sparkling wine, a traditional method blend of indigenous grape varieties: Voskehat, the most-planted white grape, and Khatoun Kharji, a grape variety that is rare even in Armenia. Sourced from 60-100 year old vines planted at 1800 meters above sea level. An extreme wine with character and finesse. It was an impressive start our Armenia research.

Next in line was Zulal Voskehat 2019, a dry white wine with medium body, good balance, and a very interesting finish, which evolved as we enjoyed the wine with pasta primavera. Vineyards planted on volcanic soils at 1400 meters in the Vayots Dzor region near the Azerbaijani border supplied the grapes for this wine.

Zulal, which means “pure” in Armenian, is a project founded in 2017 by Vahe Keushguerian’s daughter, Aimee Keushguerian. The focus is on indigenous grape varieties and own-rooted vines so old that they pre-date the Soviet era. They are, I suppose, a pure expression of Armenia’s wine past but made using modern cellar practices. It is part of a movement to bring wine back to the center of Armenian culture.

Areni, named for its home village in Vayots Dzor where evidence of the world’s oldest known winery facility was discovered, is said to be Armenia’s signature grape variety and, based on our sample bottle of Zulal Areni 2018, it is a sound choice. Grapes from vines at 1400-1750 meters elevation (wow!) were vinified in stainless steel to produce a fresh, medium-bodied red wine that one tasting note placed somewhere between Pinot Noir and Sangiovese, although I think it is something all its own. We enjoyed the spice and plummy flavors, which went especially well with our dinner of chicken and sautéed spinach with peanut sauce. A keeper for sure.

There is a Zulal Areni Reserve, which is aged for a year in used Caucasian and French oak, that we are setting aside to share with our Armenian-American friends Z and G. It will be a great pleasure, when the pandemic clouds have finally passed, to share with them this is wine as well as a Keush Blanc de Blanc traditional method sparkler. I am confident it will be worth the wait.

Armenian wine has a lot to offer and these first tastes are just the beginning. The Keush and Zulal wines are a fascinating introduction to the Armenian wine renaissance.

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WorldWineRegions.com has created a fascinating website with interactive maps of the world’s wine regions. Here is a link to the map of Areni in Vayots Dzor. Zoom in and out to see both the vineyard areas and the overall terrain.

Climate Change Risks: Reading Between the Wines

Climate change is a threat to the global wine industry — there is not much disagreement about this fact. But what are the specific risks to the wine product chain and what are wine businesses doing about them?

Climate Change Risk: Timely Idea?

This is a complicated question if only because the wine product chain has so many links that are vulnerable to climate change’s direct and indirect effects. One way to begin to answer the question, I proposed in last week’s Wine Economist column, is to focus on the concept of material risk. Climate change is not just an abstract threat to wine, it poses a threat to the material operations of wine firms, which are required, therefore, to disclose and analyze them for the benefit of current and potential investors.

I didn’t come up with this idea myself. As I noted last week, I was inspired by Robert Swaak’s comments at the Porto Climate Change and Wine summit. And I was interested to see climate change and material risk featured in articles in both the Wall Street Journal and the Economist newspaper reporting on Biden administration investment disclosure policy.

And now the Financial Times reports that the European Central Bank is undertaking a climate change stress test to determine the risks that European banks need to take into account in their operations. Climate change risk (and the use of risk disclosure to stimulate action) is an idea that is in the air just now. Let’s see what we can learn from it.

I’ve chosen four quite different firms in different parts of the wine business to discuss here.  This analysis is not especially deep or sophisticated, but hopefully it tells us something about how these businesses think about climate change and perhaps how wine businesses in general see these risks.

Constellation Brands

I start with Constellation Brands because it is a very large publicly-traded company, which therefore has many investors who will look closely at its analysis of risk. Constellation is an important wine and spirits producer, but it derives much of its income from Mexican beer imports and has cannabis interests, too, and each business is subject to a number of significant risks. Constellation identifies four categories of risk: operational risk, strategic risk, financial risk, and “other risks,” which includes risk stemming from the fact that the company has a dual share class structure and is effectively controlled by the Sands family.

Seven pages of the report are devoted to the operational risks (pandemics are risk #1 in the 2020 report) and each risk receives relatively detailed analysis. Climate change is next to last on the list, with discussion focusing on risks to wine supply (through the impact of climate change on vineyard production, for example), and the potential costs of environmental regulatory compliance.

My key take-away form the Constellation annual report is perspective. Climate change is a business risk and environmental advocates would like it to be the top priority. But, in practice, there are a great many risks and, although climate change is taken seriously, it must necessarily compete with other risks for attention and resources.

Treasury Wine Estates

Treasury Wine Estates is a large multinational wine business with substantial assets in Australia and the United States and key markets in China, the UK, the US and around the world. Its Penfolds brand is iconic. It published both a summary Annual Report in 2020 and a supplementary Sustainability Report,  so clearly the importance of environmental issues isrecognized. I focused on the main annual report for this summary.

TWE’s annual report identifies 12 categories of material risk. Changing geopolitical risks is #7 on the list, but I suspect that it is close to the top of the minds of the company’s leaders right now. Political friction between China and TWE’s home country Australia resulted in high Chinese “anti-dumping” tariffs on Aussie wine imports and the collapse of TWE’s #1 export market. Treasury is working on a re-structuring plan and shifting focus, at least for now, to other export markets. That, my friends, is an example of how a seemingly low-probability material risk can strike suddenly and with major impact.

Climate is listed as the #1 material risk, which is described as

The impacts of climate change may lead to adverse effects on business operations and performance.
Restrictions on access to and/or an increase in the cost of water and energy, and the inability of
third-party suppliers to adapt to and mitigate against climate change, could impact on TWE’s ability to effectively source grapes and wine for production.

In addition, governmental actions to reduce the impacts of climate change, for example packaging
waste and emission reduction targets may also impact  TWE’s cost base.

The report lists a number of mitigation strategies.  Treasury’s report suggests that its management recognizes both the direct and indirect impacts of climate on their business and, like Constellation, also anticipate changing regulatory environments as governments address climate change issues. Much more detail is provided in the Sustainability Report.

Tesco

Tesco, the big British supermarket chain, is an incredibly important link in the global wine product chain. Indeed, in my book Wine Wars I list its headquarters on Delamare Road in Cheshunt, Hertfordshire as the center of the wine universe if we think in terms of retail sales. But wine is just one of many products and services that Tesco sells.

The annual report presents what it describes as “a robust approach to risk, ” with a long list of risks, each assessed according to movement (increasing, decreasing risk) and key controls and mitigating factors. Going through the list, I began to worry when I didn’t see a category for climate change. Then I turned to page 20 and discovered that climate is so important to Tesco that it has its own special risk task force.

In addition to general climate risks, Tesco seems to be undertaking specific studies of key product categories and risk areas, which makes sense. Wine is not one of the focus areas in the current report, but it is interesting to look closely at what’s there. Some UK stores and distribution centers, for example, are at risk from flooding due to climate change. And supplies of produce from outside the UK are threatened by climate effects in the countries of origin. South Africa, Egypt, Spain, and Peru are noted as particular concerns.

The supply chains for protein (beef, chicken, etc.) are concerns, too. But there are also demand-side impacts. Tesco expects that climate concerns will shift consumers to plant-based proteins that have less environmental impact than animal-based foods, so building those supply chains and anticipating demand is on the agenda. Very interesting.

Amorim

My final case study is Amorim, the world’s largest producer of cork closures. Amorim is well known for its commitment to sustainability, so I was sure that climate change would factor into its business plan.

Amorim categorizes its business risks as short-term and long-term potential threats. In the short time frame, anything that can affect its two main markets — the world wine industry and the construction sector — will have major impact on the business. The list of things that Amorim must worry about is thus nearly endless.

Long run risks include foreign exchange shifts, competition from alternative closures, and of course the environment.  The cork forests in Southern Europe and Northern Africa that supply Amorin’s raw materials are environmentally significant for their ability to take carbon out of the system and lock it away. As climate concerns intensify, the report suggests, the value of the forests for this purpose will grow.

But, ironically, the cork forests that help mitigate climate change are also threatened by it, which gives the need to address climate issues a particular urgency both for Amorim and, I think, for wine more generally.

More Questions than Answers

The question is what are the climate change risks to the wine industry and how are wine businesses responding. Inevitably this brief study has uncovered more questions than answers, in part because of its inherent limitations. I’ve looked at just four firms, examined their material climate change risks through the lens of annual reports, and of course only had space for fairly superficial summaries here.

Critical readers would have been suspicious of definitive answers or broad conclusions in the context of these limitations. That said, the actual complexity of the problem starts to show through as you read the reports. And the urgency shows through, too.

Given the Biden administration’s new SEC climate change material risk emphasis and the ECB’s climate change stress test program, I think we can expect climate disclosures to be taken even more seriously soon. Much too soon for a victory lap, but good news for wine and the environment nonetheless.

Climate Change and the Wine Business

It is difficult to over-state the potential impact of climate change on the global wine sector. Recently, I was part of a panel on this topic. My task was to get a handle on how climate change is likely to impact the business side of wine. I developed an analytical framework to consider this question based on the concept of material risk. I wasn’t able to develop my ideas fully during the brief webinar, so I will do so in this space over the next two weeks.

Unpacking the Wine Product Chain

How will climate change impact the wine business? This is a hard question because the wine product chain is global and complicated and because climate impacts can be foreseen at all the product chain links.

One approach — and a good one — is therefore to develop a taxonomy of effects.  Start with nurseries and vineyards (an obvious climate impact point) and move to the cellar, where water availability is key, then through logistics — getting necessary inputs into production process and the final goods to market — and then distribution, sales, and final consumption. Climate change is a factor, either directly or indirectly, at each and every stage.

This is already pretty complicated, but we need to consider direct effects, financial effects, and regulatory responses and their costs. Indirect effects and what we might think of as counter-party impacts add more complexity.  No wonder the Porto Climate Chain conference featured speakers on so many elements of wine production, distribution, and sales. You can’t really address climate change and wine without taking a broad, deep perspective.

Many of the Porto participants were justifiably proud of their contribution to addressing climate change, but in my remarks I challenged them to do more. You need to own your product chain, I said, and take responsibility for whole process. If not you, who?

A Material Risk Approach

Stephen Rannekleiv of Rabobank and Robert Swaak of PwC joined me on that Porto panel and each made an important contribution. Rannekleiv, as he often does, focused on concrete steps that his bank,  its clients,. and other groups were taking to address climate change issues. Swaak, who is now CEO of another big Dutch bank, ABN AMRO, made an important point about climate change risk.

Because the climate change impacts discussed above are complex and uncertain, they are properly considered business risks. Businesses confront lots of risks in their operations, some more tangible than others, and they are expected to reveal and analyze them so that investors understand the business implications.

Confession: reading what firms have to say about risk in their annual reports is one of my guilty pleasures (along with reading really really negative wine reviews). Often the risk analysis is hidden in the back pages of annual reports, almost always in fine print. But it is always there because regulators are serious about requiring businesses to reveal to investors the risks that they are taking. You cannot evaluate risks and return if you don’t know the risk.

I like to think of these risk disclosure statements as being like the fine print you are given when you get a new prescription drug. Do you worry about possible side-effects? If so, be careful about reading drug disclosure statements because it can make imagination go all out of control. Lots of bad things can happen, although the probabilities are low enough relative to the benefits to justify a drug’s regulatory approval.

Swaak’s point in Porto was not just that climate change poses risks, it was that these are material risks — risks that can affect the material operations of the firm — which is a more serious category that requires deeper consideration and fuller disclosure. Swaak hoped that that this status would encourage firms to take climate change more seriously because they would be accountable to their investors for this actions or inactions.

As the Wall Street Journal reported yesterday, the Biden administration’s Securities and Exchange Commission is poised to require the firms its regulations cover to make their climate-change disclosures more comprehensive. The era when climate change risks could be over-looked may be coming to and end.

The Risky Business of Wine

Swaak’s Porto insight made me realize that one way to assess the likely effects of climate change would be to view them through the lens of material risk. Analysis of the material risk sections of corporate annual reports is one way to learn what climate change risks businesses see ahead of them and perhaps also what they are doing to prepare for them. At the very least it is a way to see if climate change is taken seriously.

I admit that this is not deep analysis. The firms might be myopic and not see climate change risks clearly. And there may be differences in the priorities listed in the report and those reflected in their actions. Getting values, priorities, and actions aligned is a universal problem, not limited to just corporations or to climate change.

As an article in the current Economist newspaper suggests, disclosure won’t by itself solve climate problems, but the requirement is at least an incentive to move away from climate-damaging practices and investments. With this in mind,  I made a quick study of four wine sector firms which I had hoped to discuss in that webinar. The four are

(1) Constellation Brands, a very large beverage alcohol company and at one time the world’s largest wine maker.

(2) Treasury Wine Estates, a firm with global interests and product chains.

(3) Tesco, the largest wine retailer and so a key product chain link.

(4) Amorim, the largest cork closure producer, known for its sustainability commitment.

What did my analysis reveal? Come back next week to find out.

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Videos of the Porto Climate Change conference presentations mentioned above are available. Click on these links for presentations by Mike Veseth, Stephen Rannekleiv, and Robert Swaak.