Thinking Outside the Wine Box about Climate Change & the Future of Wine

ccMiguel Torres recently warned that the wine industry is not doing enough to fight climate change and there is no doubt that he is right. There is a lot happening, as the recent Porto conference on climate change and wine makes clear. Wine is ahead of most other global industries. But it is not enough.

Inconvenient Truth

One reason climate change does not get even more attention in our industry (and I think that this is true of other sectors as well) is that we tend naturally to focus on the direct effects on our businesses, assuming that these are the most important ones to us. So climate change is seen as something to mitigate in the short term using appropriate viticultural techniques and other strategies.

In Australia, for example, there is a shift from French to Spanish and Italian wine grape varieties and investment in cooler regions including especially Tasmania. The fact that firms can adapt in this way lessens the sense of risk and urgency. Climate change is seen, to draw from the title of Al Gore’s film, an inconvenient truth. Inconvenient and sometimes expensive, but not necessarily an existential threat, especially since some elements of climate change actually benefited winegrowers in the not-too-distant past.

Taking the Heat Off

Not everyone thinks this way, of course. Torres has gone all in to combat climate change and he is not alone. But the fact that mitigation techniques exist and more are being developed tends takes the heat off the sense of urgency that might otherwise prevail.

But these direct effects of climate change are not necessarily the most important ones.  In order to properly assess the climate change threat to wine we must look deeper into the future and broader to the impact on the overall economic environment in which wine is embedded.

So what does the future hold, assuming current trends continue in some form? There has been a lot of research on how changing climate will affect the viability of wine grape growing in the traditional regions. Some areas will suffer minor impacts that can be mitigated through changing viticultural practices. Other regions will remain viable, but perhaps need to re-graft vines with different grape varieties more suitable to the new conditions. Old World appellations will have to rethink many of the regulations that current define them.

Other regions will will cease to be viable for quality wine grapes – period – while elsewhere we’ll see areas in the spotlight as emerging wine regions. All this will take place in the context of increasing instability of weather patterns, which most of us have already observed.

Outside the Wine Box

All these factors are important, but I think it is necessary to think further outside the wine box. Climate change will impact all of agriculture in one way or another and a great many other industries, too. The problem of feeding the world (and earning an income in it) will not grow easier overall if trends continue. This will put a squeeze on living standards and wine, because it is far from a necessity, will be squeezed harder than some other products.

At some point, and I hope it is sooner rather than later, coordinated action to slow or potentially reverse climate change is in the cards. Economists like me have long advocated a carbon tax as part of the package. Carbon taxes exist today, but in a patchwork quilt of policies and regulations with widely varying tax rates.

Carbon Tax and Wine

A coordinated carbon tax works by raising the relative price of goods and services that contribute to climate change problems. Consumers are discouraged from purchasing them by the higher price. Producers are given an incentive to innovate products and processes that replace old systems to lessen tax burdens and climate change impacts at the same time. Economists favor a carbon tax because it creates incentives for private actors to reduce emissions whereas direct regulation creates incentives to get around the regulations (see VW diesel emissions fraud).

A well-designed broad-based carbon tax might be the best way to counter climate change. It would harness private self interest to combat climate change in a way that other solutions cannot.

If climate change will affect wine as noted above, how would the carbon tax impact the industry? Well, the modern globally-integrated wine industry has a substantial carbon footprint and a carbon tax would be a big shock. Even firms that are carbon neutral in the vineyard and cellar face the fact that the supply chain is a problem.

Take glass bottles, for example. Glass of course takes a lot of energy to make, which is an important issue, but that’s not the end of the story. The U.S. wine industry is dependent on glass bottle imports from China. The ships that carry containers full of glass bottles are significant sources of pollution. Transportation from bottling plant to warehouse to retailer to consumer adds to the carbon footprint, too.

Beer and spirits might well be less affected by a carbon tax since they can more efficiently be produced close to major markets using ingredients such as grains that can be shipped efficiently by rail. The fact that wine is mainly produced close to the agricultural source and then shipped to far away markets is a disadvantage in a carbon tax system compared with products where weight and bulk (in the form of water) can be added closer to the final consumer.

Need to Do More

I have obviously just scratched the surface here, both in terms of the broader impact of climate change on the wine industry’s economic environment and the potential impacts of policies designed to resist or reverse current trends. But I hope my point clear. The impact of climate change on your wine business goes beyond what you see in your vineyard or cellar and the cost of inaction now in terms of future consequences is likely to be pretty high.

Climate change creates losers and some winners and the policies that are eventually adopted to deal with it will be the same. It is difficult to imagine a scenario where wine will be among the winners and we can already see the negative effects. It’s time to join Miguel Torres and the Porto Protocol team who ask us all to do more.

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An earlier version of this article made referenced to a report in The Drinks Business about Richard Smart’s views about climate change and hybrid grapes. Smart disagreed with the way his views were reported and the interview was removed. Here is the explanation.

Which Wine? Navigating the Retail Wine Wall’s Fluid Map

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What’s the best way to organize supermarket products to facilitate consumer purchases? Over in the canned vegetable aisle, the system is pretty simple. All the canned green beans there. All the canned corn here. Easy to find what you want. Easy to compare.

Over in the breakfast cereal aisle an entirely different geography applies. The corn flakes are found here, there, and elsewhere, not all in one spot. That’s because most of the products are organized by producer. All the Post cereals here, all the Chex products over there.

Thousands of SKUs?

I have been trying to figure out what works best for wine for quite some time, but I am still a bit stumped. The wine wall, the name I have given to the space where wines are put on display, probably has the greatest number of SKUs of any single section of an upscale grocery store. You will find 1000-2000 in many stores today and the big box alcohol superstores like Total Wine and BevMo have about 5000 wine choices at any given time.

So much choice! Consumers need all the help they can get to navigate this crowded retail archipelago.

Canned Veg + United Nations

I used to think that I knew the wine wall map and I wrote about it in my 2011 book Wine WarsThe domestic wines are often arranged like the canned veg aisle — all the Zinfandel here, all the Pinot Noir there. Imports are mapped like the United Nations. France, Italy, Germany, and so on. Sometimes groups of countries get lumped together (Spain + Portugal, Chile + Argentina). I have seen the entire southern hemisphere reduced to a couple of shelves. Ouch!

There is often a sort of Siberia over in the corner for “other” wines, sweet, fortified, alcohol-free, kosher, organic, and so on. Sparkling wines from wherever are all collected together in one place, something that is often true of Rosé wines, too. Alternative packaging rates its own section with box wine and now also canned wines holding forth. You will also find smaller wine displays here and there in the store — near the cheese, meat, fish, and deli counters, for example. Wine, wine, everywhere. Organized chaos!

QWERTY and the Wine Wall

There are lots of variations on this canned veg – United Nations system, so your favorite store is probably a bit different. But does the general outline sound familiar?

This is the hybrid system I know best, but I don’t think it works very well. It is a bit like your computer keyboard. The QWERTY layout is familiar, but inefficient. It was originally designed to slow down users in order to prevent them jamming the mechanism. Now it is the industry standard.

Here’s one problem with the standard system. If you want to browse Pinot Noir wines, for example, you need to visit a number of different locations (Pinot Noir, for domestic wines, plus France, and New Zealand and maybe also Chile, Australia, and others if the store’s selection is strong). You can waste a lot of time and effort tracking down your Pinot choice.

Of course this doesn’t matter much if all you want to do in find the 1.5 liter bottle of Barefoot Moscato you buy every week. Find it once and you are set for life.

The RAM Wine Wall

You can imagine my surprise, then, when Sue and I recently visited a new store, part of a national supermarket chain that takes wine seriously, where all our experience navigating the wine wall was rendered useless. I wonder if this the result of marketing research or just an accident?

We were looking for Chilean wines, not an unreasonable thing to search for, and we never found them if they were there. Apart from a big bunch of Cabernet Sauvignon in one spot, the general organizing principle seemed to be RAM. In computer talk that means Random Access Memory and the wines seemed pretty random to me — no United Nations, not much canned veg. There was a section for Local Wines, but looking there we stumbled upon the Port. There are lots of Ports here in the Puget Sound area, but none of them are the source of Port wine.

Who would find the RAM system helpful? Not someone who knows what she wants. But maybe it was designed for the overwhelmed consumer who is content to browse for something with a clever or colorful label. I know that a lot of wine is purchased this way and that brands, including some private label brands, work hard to attract these customers. I never knew it would come to this!

Alphabet Wine

A recent visit to a local alcohol superstore (again looking for Chilean wine) revealed a system that is the opposite of random, but still pretty difficult to navigate.  The basic canned veg – United Nations approach prevails at the store we visited, but in a different way. Italy and France have their own sections, of course, and are also organized by region, which I find helpful. And other wine producing nations get their UN seats, too, but not all of them. Chile, for example, and South Africa are represented, but not all in one place.  Instead their wines are mixed in with individual grape varieties on the canned veg principle.

Chilean Carmenere was relatively easy to find — we stumbled onto it next to the Malbec section. But Chilean Cabernet, Sauvignon Blanc, and Pinot Noir were found in the long aisles for those varieties along with producers from around the world. The wines were organized alphabetically by brand name! Wow, I didn’t see that coming. If you know the brand and the grape variety you are golden (and, I must say, staff was happy to help us when we asked), but if you don’t know the details and you want to browse the different Chilean Pinots, you are pretty much out of luck.

(The store website can help here, giving you the current stock of your store and the location. It is not seamless, but it works.)

Like a Rolling Stone?

Canned veg, United Nations, RAM, ABCs. What’s next? The Dewey Decimal System? With so many wines to choose from and such complicated ways of organizing them, it is no surprise that many shoppers don’t buy wine or buy it only on special occasions.

And maybe it is no surprise either that some of the stores that sell the most wine are the ones that keep it simple like Trader Joe’s and Costco. Costco, which sells more wine than any other U.S. retailer, intentionally limits the number of wines available at any moment, changes stock frequently, keeps prices low, and uses a very simple system. There are more expensive wines and less expensive wines. There are red, white, pink, and sparkling wines. Go for it.

It’s the Rolling Stones system, really. You can’t always get what you want at Costco, in terms of a particular wine, but you can usually get what you need. The wine flies out the door.

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I keep track of wine walls with unusual geographical patterns. One of my favorites was at a now-defunct discount supermarket in our neighborhood. The wines were displayed according to price. Less than $3, $3 to $5, $5 to $7, and so on. Since price is such an important factor in supermarket wine purchases, and since most buyers have a specific price comfort zone, this system made some sense.

Another local store features a lot of Italian wines and since Italy is so diverse in terms of regions and grape varieties, organizing that single section presents a challenge. The current strategy, which appeals to wine geeks like me, is to mimic the map of Italy itself on the wine wall.  Piemonte is upper left, Friuli and the Veneto upper right. Tuscany has a big section near the middle. Sicily lower left. Puglia lower right. Beautiful!

Please feel free to use the Comments section to talk about your experience with the wine walls in your area.

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

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

Home Court Advantage

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

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

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

A Fragmented Market

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

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

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

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

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

A Tale of Two Wine Import Categories

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

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Big in Bulk

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

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

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

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

Rethinking the Business Side of Climate Change and Wine

 

Last week’s column about the Porto conference on Climate Change and Wine struck an optimistic note. Powered in part by the Porto Protocol the big international gathering showed that the wine industry is moving the needle on climate change, both in terms of mitigating the impacts and addressing causes.

Sue and I learned a lot from the experts who spoke on the science and technology aspects of climate change and wine, but of course it was the business side we were most interested in.  If you have a little time, for example, I recommend watching the video of the session on “Consumer Expectations and Sensible Marketing” featuring Marks & Spencer’s Paul Willgoss, Antonio Amorim of Amorim Cork, and moderator Richard Halstead.

“Economy & Efficiency: Call to Action” was the title of the final session on the second day, which featured Stephen Rannekleiv of Rabobank, Robert Swaak of PriceWaterhouseCooers, and me as speaker/moderator. I led off the discussion, focusing on the need to rethink the relationship between economics and the environment and issuing a call to action.

Stephen was next up, showing how Rabobank has gone beyond its traditional role as an agricultural lender to creating platforms where innovative solutions can be tested and developoed.  He followed up with a program on this subject on the popular Rabobank beverage industry podcast Liquid Assets.

Robert’s powerful talk covered several important points, but was especially effective in developing the notion that climate change introduces or magnifies a number of risks, which wine businesses need explicitly to take into account and act upon.

 

As I wrote in the run up to the conference, Sue and I were interested in the trade show that took place along side the sessions. We were hoping to see a showing of the products and services that vendors provide to firms that are committed to climate change action. What we found was different from our expectations. The trade show mainly gave conference sponsors (see graphic below) an opportunity to demonstrate their commitment to the cause. sponsors

We were a little disappointed, but I think we harbored unrealistic expectations. Vendors are  more likely to put their efforts into meetings that attract thousands, not hundreds, of wine industry actors. The Unified Symposium in the U.S., for example. Or SIMEI in Milan. We will look closely when we are at these and similar events to see to what extent climate change is being integrated into the daily business of wine.

Field Notes from the Porto Conference on Climate Change and Wine

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

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

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

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

Ground Hog Day?

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

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

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

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

The Porto Protocol

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

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

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

Does Climate Change Action Pay?

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

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

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

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

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

All Along the Value Chain

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

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

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

Call to Action

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

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

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

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

Precept Wine and the Willie Sutton Recipe for Market Growth

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

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

SILVER – Deutsch Family Wines and Spirits, Jackson Family Wines

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Global Rosé Market Q&A

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

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

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

Who Makes the Most Rosé Wine?

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

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

Who Buys It?

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

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

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

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

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

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

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

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

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

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

Is There Easy Money in Rosé?

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

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

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

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