Vino-ligopoly: Zero-Sum Wine Game Strategies

Last week’s Wine Economist column was a thought experiment. What if the Covid recession was a game changer like the oil crisis of the 1970s? Both crises undermined fundamental economic assumptions and generated long-lasting impacts. In particular, drawing upon the work of MIT economist Lester Thurow, the oil crisis changed the nature of the game from positive-sum growth to zero-sum competition for shares of the pie.

Maybe the parallel is off base and maybe the game hasn’t really changed. But let’s think about the future the wine industry in the sort of slow growth, low inflation, high debt economic environment that many see on the horizon, with a focus on gaining market share in a stagnant economy.

Wine’s Zero-Sum Dilemma

Zero-sum market environments are nothing new for wine. As this OIV graph of wine demand volume shows, growth in the global wine market pie was once quite strong. Imagine a trend line for 2000-2007 and you’ll see what I mean.

Now draw a trend line for 2008- 2019. It’s pretty much a flat line, isn’t it?  The picture improves if we look at value and not volume because of the premiumization trend, but the the weight of stagnant volumes is still heavy.

So the focus is on gaining market share or raising margins rather than taking advantage of a growing overall market and this creates winners and losers. New Zealand has been a victor for many years. Marlborough Sauvignon Blanc sales have increased year after year, a trend that has continued in the Covid crisis environment. Imports from other countries have struggled here in the U.S. market with even powerhouse Italy under pressure. But the Kiwi wine wave rolls on.

Trading Spaces: On and Off

Perhaps the most obvious example of Covid’s zero-sum impact on the wine market is in the shift from on-premise to off-premise sales. Bars and restaurants have suffered both because of government restrictions on opening and also because concerned consumers have avoided crowded places in general even when not officially restricted. Wine consumption overall has not changed very much, but where consumption takes place and where products are purchased has shifted significantly.

The shift to off-premise consumption has many impacts, especially for wine companies that have worked very hard to place products on restaurant wine lists and for emerging brands that use on-premise sales to get a foot in the door. Shifting your restaurant sales to shops and supermarkets is not as simple as throwing a switch. Supermarkets especially favor big brands and broad product lines and there is some evidence that consumption patterns have moved in this direction, too.

One important impact of this shift, as I explained in an April 2020 Wine Economist column, is consolidation throughout the supply chain. Consolidation is a trend that extends far beyond the wine sector, of course. In an increasingly zero-sum market environment, large firms want to get even larger both in order to reduce margin-sapping competition and also to be able to negotiate better terms and lower costs. It’s not exactly wine-opoly — more vin0-ligopoly (insider joke for economics majors who remember the difference between monopoly and oligopoly, which is competition among a few big players).

Wine Wars / Price Wars

Econ 101 teaches us that one way that firms try to gain an advantage in a zero-sum game scenario is by cutting prices. This can quickly degenerate into a price war, of course, which is the ultimate negative-sum game for sellers (and a bonanza for consumers), especially if overall demand is price inelastic.

Are we seeing price wars on the wine aisle? As I explained in a May 2020 Wine Economist column, wine prices may be falling and rising at the same time, making it tricky to pick out net effects. If you are like me, your email inbox or Facebook news feed usually contains at least one discount offer from a winery or wine club — sometimes at incredibly low prices.

Looking narrowly at off-premise data, it appears that price premiumization continues. Sales of $25+ wines surged early in the pandemic period, for example. But, as I noted in May, these high price sales replace even higher-priced on-premise purchases at least in part. Those consumers were actually trading down as they shifted from restaurant meals and wine to home consumption. This is not a price war because it is cross-channel consumer behavior, but it will have that feel for wineries that cannot easily shift sales from on- to off-premise markets.

Game Changers

It isn’t easy to win if you think of the market in zero-sum terms (although not everyone agrees on this — President Trump famously proclaimed that trade wars were easy to win). Although there are many different strategies to consider, three stand out in my mind.

The first strategy is to analyze changes in market conditions and focus closely on growth segments. There is no single wine market, so a stagnant environment can a bit like a duck on a lake — quiet on the surface, but turbulent underneath. I wrote about Precept Wine in 2019, for example, highlighting their “Willie Sutton” strategy of putting resources into growth segments.

The second is simple: accept that the game is zero-sum and play hard to win on those terms. This means being very aggressive in terms of cost and price and making sure you are on the winning side was consolidation unfolds. Being big doesn’t guarantee success (small can be beautiful in a profitable niche), but there is no great advantage to being middle-sized.

The final strategy is to try to change the game. If wine vs wine is zero sum, try to shift the game to one with better odds. Don’t sell wine, sell a lifestyle. Don’t sell wine, sell community, culture, celebrity, or culinary connections. Ship the wine, sell the dream. Hitch your wine to a horse that can carry it to new market niches. Product differentiation — that’s what it’s all about.

What’s new about this? Nothing. The most popular wine magazines, for example, have long featured food, travel, and lifestyle as hooks for their wine stories.

In fact, using product differentiation to create and protect a profitable market niche is standard “monopolistic competition” theory.  But now might be a great time to think about what makes your wine’s offer distinctive and what you can do to protect yourself from head-to-head zero-sum competition.

Wine, Covid-19, and the Zero-Sum Dilemma

Last week’s Wine Economist column presented a “Guide for the Overwhelmed” that analyzed the current crisis in terms of its perfect storm of component parts. This week begins a short series of articles that try to put the pieces back together in order to better see the outlines of the future of global wine in the post-Covid era.

Zero Sum Economics

MIT economist Lester Thurow’s 1980 book on The Zero-Sum Society argued that America and the world had reached a turning point. An era of growth, where an expanding social and economic pie made it possible for many to gain without corresponding losses for others, was coming to an end, Thurow argued. This change in the economic environment would have broad and lasting consequences.

Example? Under the right circumstances (which can be tricky), open trade is a recipe for positive-sum growth while protectionist trade wars are zero-sum at best and negative-sum at worst. The 1980s proved to be a fertile decade for trade barriers, competitive currency devaluations, and other protectionist policies.

What caused the sudden shift from positive-sum growth with rising overall living standards to zero-sum stagnation? It was complicated, of course. But the 1980 answer in a single word was oil or rather the oil crises of the 1970s and the higher costs and restricted supplies that resulted.

The world, it seems, had organized itself around the assumption of cheap, plentiful petroleum. Scarcity and higher costs shocked the system in ways that few even imagined and helped set the stage for a generation of stalled living standards and frustrated expectations.

The focus of the zero-sum society, Thurow argued, would shift from equity and growth to distribution and conflict. Everyone would struggle for an increased share of the stagnant or shrinking pie and some would succeed better than others, increasing inequality. I recall that Thurow grew up in Montana and he must have imagined his Big Sky world of open opportunity closing down around him.

Covid Crisis / Oil Crisis

It is easy to see in retrospect that the 21st century B.C. (Before Covid) world was organized around the assumption that people could safely gather together and cheaply move about. Spending on travel and tourism, for example, increased dramatically as a proportion of total expenditure in the past two decades. Wine tourism and cellar door sales were important sources of growth in our industry. The post-Covid world will be different indeed, although just how different and for how long remains to be determined.

Is it reasonable to compare the Covid-19’s world economic shock with the oil crisis of the 1970s and its aftermath? Everyone knows the oil crisis was a game changer. The Covid crisis is different in many ways, so it is not a simple apples-to-apples comparison. From a macroeconomic standpoint, the oil shock was a supply-side event that produced stagflation. The Covid shock is more of a demand side disruption that risks a deflationary cycle. It is obviously too soon to know what the final picture will look like, but I would argue that Covid could prove in the end to be the bigger crisis in the long term.

The New Zero-Sum

Even if you accept that the Covid crisis shock is as serious now as the oil crisis shock was in its today, you might still disagree with the idea that the new world that it is creating will be more zero-sum than in the past, with a greater focus on how the pie is divided than in its growth. Why is the future likely to be a zero-sum environment?

One argument is that many parts of the economy are already zero-sum and that Covid simply magnifies and accelerates existing trends.  The recovery from the initial Covid recession in the U.S., for example, wasn’t the V-shape that many hoped for but more of a K-shape. Some parts of the economy (especially the financial sector) recovered very quickly. Other sectors continue to struggle, a situation made worse by the lack sustained economic stimulus. The rising tide did not lift all boats and the financial pages are full of multi-billion dollar M&A deals as businesses bulk up to grab market share.

If you saw the strong Q3 U.S. GDP figures that were released last week, you might think that the economy has rebounded and will resume previous growth quickly. But those numbers are the result of literally trillions of dollars of stimulus (and debt), which are unlikely to be sustained. And they don’t take into account the Covid second wave tsunami, which seems to be sweeping across the globe.

The second argument for stagnant economic growth can be found in the financial news, where the yield curve hugs the zero axis for at least a five year time-frame and monetary policymakers have pledged their support for the foreseeable future even if fiscal actors hesitate to renew stimulus measures. The overall economy is on life support and monetary authorities who lack the power to shock it back into life are determined to at least prevent flat-lining.

The likely result, according to the most recent Q4 2020 global forecast by the Economic Intelligence Unit, is the “zombification” of the global economy characterized by slow growth, low inflation, and high levels of debt. Does this sound like a zero-sum environment?

Wine and the Zero-Sum Economy

It goes without saying that the economic environment I’ve just described is not favorable to the growth of the global wine industry. This is especially true because of the importance of on-premise wine sales, which are most directly affected by the Covid pandemic.

Is the global wine market now zero-sum? And what are the implications if it is? Come back next week for thoughts and speculations.

Wine 2020: A Guide for the Overwhelmed

I’ve been thinking about what the global wine industry will look like when 2020 finally draws to a close and I’m feeling overwhelmed. So many challenges. So much to digest. Maybe you feel overwhelmed, too?

I did an internet search for “Tips for the Overwhelmed” and, well, it only made things worse.  So many tips for so many problems. One website had 44 ideas for what do to when you are feeling overwhelmed. Too much!

Here’s what has provoked these thoughts. Rabobank’s Stephen Rannekleiv and I will be having a conversation about the state of the wine business on November 4 in the first of a series of webinars on challenges and opportunities for wine. The webinars are meant to develop ideas that will be discussed at WineFuture 2021, an important global wine industry virtual conference set for February 23-25, 2021. (Use the links to learn more about the developing webinar schedule and the upcoming conference.)

Pre-Existing Conditions

My go-to coping mechanism has always been to break down problems into component parts, which can be somewhat easier to deal with, and then try to put them back together again. This is the break-down column where I’ll look at the challenges the wine industry faces. Next week’s Wine Economist will try to put things back together. As always, use the comments section below to suggest things I’ve left out or got wrong.

As we entered 2020, global wine confronted a number of serious challenges including …

 

Stagnant Long-Term Wine Demand.  As I noted in 2019 (in a column titled Global Wine’s Lost Decade) the relatively strong growth in global wine demand of earlier years peaked in around 2007-8 and has been relatively stagnant since then. (See OIV data above.) There are a varieties of demographic and economic theories for this condition, but the important fact is that no important wine region (with the possible exception of New Zealand) can be confident today that rising demand will smoothly absorb increased production.

In a way, the positive-sum game of the past has been replaced by a zero-sum situation depending on how the market is defined. That’s a big change.

The American wine industry entered 2020 with a lot of wine in the tanks and stagnant overall wine demand. Although wine sales revenues were increasing modestly, due to premiumization, the volume of sales, especially at lower price points, has fallen. Younger generations of consumers were not picking up the slack as baby boomers reduced consumption.  Hard seltzers and similar products accounted for most of the growth in beverage alcohol sales.

Climate Change Challenges. The supply side of the global wine industry is increasingly affected by climate change, both the global warming that we normally think of when “climate change” is mentioned and also the increased instability of weather that accompanies it. The 2017 global wine grape harvest was the lowest in a generation due to unfavorable weather conditions in key regions, for example. The 2018 harvest, however, was abundant.  Meanwhile global temperature records continue to be set year after year.

The bottom line is a boom-bust pattern due to climate change within a general environment of excess supply and rapidly evolving growing conditions.

2020 Perfect Storm

The events of 2020 (so far) have added additional challenges and headwinds. Chief among the events are …

The Coronavirus Pandemic  and Channel Shifts. The public health impact of the coronavirus pandemic is the most important thing, of course, but the closures and lockdowns designed to reduce contagion disrupted wine sales channels dramatically, too. There was a major shift in where people were located, with work-from-home replacing on-site work for many. Home was also the default location for those who lost jobs due to closures, suffered reduced employment hours, or simply needed to be at home to tend to family members including children engaged in remote learning.

Eating and drinking are now more home-based, too. Bars and restaurants were ordered to close or, if allowed to remain open, experienced vastly lower customer counts.  These factors resulted in a dramatic channel shift for wine sales, with on-premise replaced by booming off-premise sales. Overall wine consumption decreased little if at all, depending on locality, but the composition of demand changed, especially favoring high volume brands. Wineries that depended disproportionately on cellar door and on-premise sales were forced to pivot quickly to direct-to-consumer sales and other channels.

The Recession and Economic Policies.  Fear of contagion plus the policies necessary to safeguard public health created a global recession. Heroic economic stimulus in many regions lessened the short term impact of the initial economic crisis, but it is unclear that stimulus can be sustained as the health crisis continues.

There has been much discussion of the “shape” of the recession, with optimists anticipating a short V-shaped downturn and pessimists fearing a long Japanese-style L shape. At this point the two shapes that seem most relevant are W — initial decline and recovery followed by a second wave decline — and K — quick recovery in some sectors such as finance but continued decline in others, increasing economic inequality.

Needless to say, wine demand is conditioned by who has lost or gained income, how much, and how they see the future.

Wild Cards

Every important wine region has wild cards that make the situation more complex. Chile faces social unrest, for example, and Argentina must deal with financial risks as it walks the tightrope between international debt default and domestic financial crisis. Australia has entered its first recession in a generation and finds relations with China, a key market, under unwelcome pressure.

Europe and the UK seem locked in a Brexit death spiral, with wine caught in the middle. Wine is also in the crossfire in the EU-US trade war tit-for-tat, with US tariffs in retaliation for Airbus subsidies now followed by EU tariffs in retaliation for Boeing subsidies.

Wild cards abound in the US starting with wildfires in wine country and ending with the election, which has drawn every topic into the culture wars. What a mess! The wildfires, which seem to grow more destructive every  year in terms of direct impacts on vineyards and cellars, smoke taint issues for grapes and wine, and impact on wine tourism operations.

Winegrowers in the US are also anxious to know how the Constellation-Gallo deal, which should close in November, will work out. The deal is finishing in a wine market environment that looks very different from the one when it was first struck.

Add all these factors together and, well, it is no wonder that  you feel overwhelmed.  Pretty much no matter where you are in the world of wine or what position you have in the supply chain, you confront change and challenges on multiple fronts.  Tune in next week when I will begin a short series of columns that try to sort out what the future might hold.

Save the Dates: Wine2Wine 2020, WineFuture 2021, Unified Symposium 2021

The Wine Economist’s World Tour will be back on the (virtual) road in the next few months. Here are preliminary details about upcoming events that might be of interest to readers of this newsletter.

Wine2Wine 2020

The 7th edition of Wine2Wine, Focus 2020, will take place November 23-24, 2020. Usually held in beautiful Verona, this year’s program will be virtual.  The wine business in the post-COVID-19 era is the over-arching theme.

Focus 2020 features a quite fantastic group of speakers and topics. The program is wide-ranging and of course economic topics are accorded due attention. I will be talking about the problem of unstable exchange rates in the new normal economic environment, for example, and another session will analyze the prospects of peace in the US-EU trade war, where wine is caught in the crossfire.

WineFuture 2021

WineFuture 2021 is an ambitious event designed to help wine industry actors make sense of the perfect storm caused by simultaneous economic recession, COVID-19 pandemic, and global climate crisis. The event is scheduled for February 23-25, 2021.  I’ll be speaking about economic challenges and opportunities. The list of speakers is a who’s who of the wine world, so I’m flattered to be invited to participate.

Although the official event is a few months away, the important issues that need to be discussed won’t wait, so WineFuture is organizing a pre-conference series of free weekly webinars on key topics. Rabobank’s Stephen Rannekleiv and I will analyze some of the key economic issues in the first webinar on November 4, 2020.

Unified Wine & Grape Symposium

The Unified Wine & Grape Symposium is North America’s largest wine industry gathering. Both the conference and trade show, scheduled for January 26-29, will be on-line in 2021. The program, still in development, will be released in a few weeks and I get the impression that it will be even more ambitious than in previous years if that’s possible.

I will once again be moderating the State of the Industry session and making brief comments about the global wine economy. I wish we could all meet up in person in Sacramento, but that’s not really an option this year. So I look forward to seeing everyone on-line.

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Use the links above to learn more about these events and check back frequently to get updated information.

Book Review: Getting to Know Saké

Brian Ashcroft (with tasting notes by Takashi Eguchi), The Japanese Saké Bible (Tuttle Publishing, 2020).

Saké has always been a mystery to me. I have only been served it a couple of times and never with much in the way of introduction. Lacking background and appreciation, I have generally defaulted to beer on occasions when Saké might have been the more interesting choice.

Getting to Know You

I never got over the first hurdle. The upscale supermarket down the street (the one that I wrote about in Wine Wars) displays Saké over in the corner next to the Port, Sherry, Madeira, and Vermouth. This is not necessarily a poor organization, since Sakés are generally fortified, but there is a certain ghetto effect, too.

I was surprised when I looked closely at the Saké wall and discovered more than two dozen choices, including two craft Saké selections by Momokawa in Oregon. Lots of choices –big bottles and very small ones at all sorts of price points. And while some of the terms on the bottles were familiar enough, the language barrier was impossible to ignore.

Clearly a resource like The Saké Bible  is needed to open the door to understanding and appreciation. The book, colorfully illustrated and written in a casual, engaging way, provides a good introduction for newbies like me without ignoring the interests of  more experienced Saké drinkers.

Getting to Know All About You

We begin at the beginning. What is Saké? It isn’t beer even though it is brewed and it isn’t rice wine as is sometimes said. Saké is Saké. It is made with five ingredients, according to Ashcroft, but in ten thousand ways. The ingredients are rice, water, koji, yeast, and soil (so terroir is part of the story for some Saké). Koji is a fungus that breaks down the rice’s starch into sugar during the brewing process.  Each ingredient has many variables and options, adding to the product’s complexity.

I found something interesting on every page of this book. Some of my favorite parts are the chapters that trace the evolution of the Saké industry from  temple to small breweries to producers with global reach. Craft Saké is a thing now, as you might guess, and so both tradition and innovation are flourishing in Japan and around the world (Saké is brewed in Brooklyn these days — of course!).

I was also fascinated by the chapter on tasting Saké and pairing it with food as well as the detailed tasting notes for 100 top drawer products. The tasting notes encouraged me to think in terms of wine, which I found comforting. But there were some complications because Saké can be enjoyed at many different temperatures — and getting the chill right can be important.

One of my favorite tasting notes explained that a particular Saké  displayed a brightness when chilled, but evolved with syrupy apricot sweetness at warm room temperature. Served piping hot it had a mellow silkiness like milk chocolate. But in between room temp and hot was a no fly zone — “rather unpleasant” according to the notes. Interesting.

Getting to Know What to Say

The Saké Bible tells you everything you need to know about Saké in theory, but where do you begin in practice? From a practical standpoint, which of the many Sakés on the shelf is best for a newbie consumer? The cheapest? The most expensive? The one with the prettiest bottle or label? (Some of them are very attractive).

I wrote to author Brian Ashcroft for advice and he told me to begin at the beginning, just as most of us did with wine when we were starting out.

The drink itself is incredibly approachable and unintimidating. To be honest, start there. Try sake. Drink it. Don’t get bogged down. Find what you like. If you enjoy a specific type or brand, make a note and remember it for next time. But as with wine, always be willing to try more. For any food or drink, your senses are your best guide, and the more experience you have with the drink, the more you’ll appreciate the various brands and styles. The good thing is that there is lots of breathing room in how you enjoy the drink because one of the best things about sake is just how flexible it is–you can drink brews at a variety of temperatures, in different style cups and glasses, and with a range of food. Experiment. Explore. Have fun.

Have fun! That sounds like good advice. So, armed with The Saké Bible, I returned to my upscale supermarket in search of a particular style of Saké called Ginjo. Ginjo is made with highly polished rice, giving it a more delicate and refined flavor. It is good both at room temperature and chilled. Expect fruity or floral flavors.

Getting to Like You

The clerk at my store told me they sold quite a lot of Saké. My choice was a 300 ml bottle of Shirayuki Junmai Ginjyo Saké made by Konishi Brewing Co. in Hyogo Prefecture, Japan, which is a historic center of Saké production. Ginjyo is the style, Junmai means that it is made with rice only in the classic tradition.

Served chilled, the nose was full of melon aromas, with melon and cream on the palate. Creamy texture. I could sense the warmth of alcohol, but no harshness. Surprising and much different from my vague memories of previous Saké experiences.

I don’t know how far I’ll go in my exploration of Saké.  I feel like I have only scratched the surface of wine and that wine not Saké is likely to be my focus for years to come. But, for me, trying to get up to speed with Saké is important because I think it might help me understand something about the barriers that wine consumers face when they start out.

Things I’m Learning About You

Think back to your first experience with wine. Unless you had a patient guide you probably stumbled over hurdles of various sorts and sizes, including vast number of choices, wide range or price points, foreign terminology, government health warnings, and the occasional need for specialized equipment just to open the bottle.

Everyone is a newbie at some point and maybe the wine industry needs to give a bit more attention to lowering hurdles for the next consumer generation. Jamie Goode recently pointed out that, for most people, the first taste of wine wasn’t a thrilling experience. How can we give newbie consumers the confidence they need to take a second sip?

Two Buck Chuck worked a miracle drawing a generation of cautious consumers into wine. Now I wonder if they might go for hard seltzer instead, which is far from a gateway to wine.

Have fun! Are there other things we can learn from the success of Saké and its growing global following? Food (or maybe drink) for thought!

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Getting to know you? Here are the singing Lennon Sisters, just in case you didn’t catch all the musical references above. Enjoy!

Book Reviews: A Hedgehog and a Fox Walk into a Wine Bar …

So a hedgehog and a fox walk into a bar and they naturally fall into a debate about wine.

The clever fox, as anyone who has studied Isaiah Berlin’s famous essay will remember, knows many things and sees wine in terms of its complex contradictions. The hedgehog knows one big thing and returns to that again and again. The conversation ebbs and flows and many insights are revealed as the glasses are drained and refilled.

That’s the way I imagined this book review column developing although, as you will see, the plan breaks down a bit (for the better, I think) in the end.

The Fox: 50 Shades of Red

The fox in my story is Jamie Goode, the respected wine authority who frequently draws upon his science background to help us analyze and understand the world of wine. That’s what he did in his 2016 book I Taste Red: The Science of Wine Tasting.  The literature on sensory science is broad and deep and Goode does what he does better than just about anyone — he makes the science clear and applies it to questions that wine enthusiasts will find interesting and important.

The title of the book — I Taste Red — teases the reader a bit. How can you taste Red? Red is a color, not a flavor. How can that be? But taste is pretty complicated (a foxy kind of thing) and, while we assume that it is all about what goes on in your mouth, sipping and slurping, the brain actually uses a lot of clues to come up with what we think of as flavor.

Sue and I have experienced this in simple but memorable terms on a couple of occasions. We put clothes-pin devices on our noses during a multi-sensory perception demonstration at The Shard in London for Wine Vision 2014, for example, and popped jelly beans into our mouths. Nothing. No taste whatsoever. Then we removed the pins and suddenly flavor overwhelmed us. Where did that come from?

On another occasion we listened to music selected by post-modern winemaking guru Clark Smith. He switched tunes while we were tasting a particular Chardonnay and the flavor of the wine changed in our mouths from sweet to bitter. Incredible. I guess the part of the brain in charge of tasting wine overlaps with the part that enjoys music and sometimes they work in harmony but other times (like this one) dissonance erupts.

Topics covered in Goode’s book include wine and the brain, wine flavor chemistry, individual differences in flavor perception, and why we like the wines we like. He even analyzes the language of wine to see if what we say about wine affects what we think and what we taste — and if cultural differences enter into the picture. This chapter reminds me of my newspaper editor friend David who, upon tasting a particularly nice wine, complained that he couldn’t fully appreciate it until he developed a richer vocabulary.

So the science of taste is pretty complicated and interesting and I recommend Jamie Goode’s book to anyone who wants to know more about it. Which brings me to the hedgehog in this story, who is Nick Jackson MW, author of the new book Beyond Flavour: The Indispensable Handbook for Blind Wine Tasting.

The Hedgehog: To Flavour … and Beyond!

Nick Jackson worked very hard to prepare for the blind tasting part of the Master of Wine exams, but he was unhappy about his progress. He was pretty good at getting the right answer, he tells us, but he wasn’t confident. He couldn’t shake the sense that he was often just guessing. Flavor was his guide and, as the fox knows, flavor is not a simple reliable thing. But what else is there to serve as a guide in identifying wines?

His ah-ha! moment came when he realized that tannins (for red wines) and acidity (for whites) were fundamental building blocks. White wines can be known by their level of acidity, for example, the type of acidity, and the shape of the acidity. Chenin Blanc, for example, has high, bracing acidity with a crescendo shape. Crescendo! Think about that.

Chardonnay, on the other hand, has a more linear acidity structure — it remains the same during the act of tasting, pulling the fruit forward with it. Sauvignon Blanc, on the other hand, has jagged acidity.  Think about your experiences tasting these wines. Do these descriptions make sense? Jackson provides similar analysis for tannins in red wine. Structure, in Jackson’s able hands, is a tool that reveals important wine traits — grape variety, region of origin, even vintage, with special sections on sparkling, sweet, fortified, rosé, and orange wine.

Jackson’s book is intended as a guide for wine enthusiasts who are studying for blind-tasting exams like those in the Masters of Wine program. That would seem like a pretty narrow audience, but a peek at the book’s Amazon.com page reveals strong high sales ratings and more than four dozen reader recommendation. Maybe the world of people who need to identify wines in a blind tasting situation is bigger than I thought.

Or maybe there is another reason this book is so popular. I find the focus on structure instructive and that it adds to my enjoyment of wine. I rarely taste wines blind, but I always like to think about them and acid/tannin structure adds a new dimension.

Contradictions?

I said at the beginning that the fox and hedgehog dichotomy doesn’t completely hold here and it is true. I’m not disappointed, however, because that’s actually an important point in Isaiah Berlin’s original essay. While Jamie Goode tells us all the different perspectives that science reveals about wine taste, in the end he has some doubts. All these factors are there, he says, but isn’t a person’s taste  ultimately a single thing? Does it really help to break down taste into so many pieces when the actual experience of wine is or should be a harmonious whole? The fox theorist is drawn haunted by a hedgehog ideal.

Jackson makes a convincing case for his focus on structure and his students, many of whom are studying for the MW exam, benefit and sing his praises. But, towards the end of the book, he moves beyond identifying a wine to assessing wine quality. Is this wine good? Excellent? Great? He tells us that many students struggle with moving from objective to subjective. It is a more complicated issue that needs to be approached in a different way.

A hedgehog and a fox walk into a bar and come out a few hours later understanding more than  you might guess about wine … and themselves.

Book Review: Wine & the White House

Wine and the White House: A History by Frederick J. Ryan, Jr. (White House Historical Association).

wh2President Trump doesn’t drink beverage alcohol and neither does Vice President Pence, and yet wine is a constant at White House state dinners and similar events.  What’s served is nice wine, too, according to records found in this rather fascinating new book.

A state dinner for French President Macron on April 24, 2018, for example, included Domaine Serene Chardonnay (Oregon), Domaine Drouhin Pinot Noir (Oregon), and Schramsberg Cremant Demi-Sec sparkling wine (California).

Apart from the Prohibition years (when, if there was wine in the White House, it wasn’t served in public settings), wine has always been a White House staple and having your wine served at a state dinner has been the ultimate celebrity endorsement.

Wine and the White House is a big book (more than 400 pages), beautifully produced, generously illustrated, and full of information. It is not a book to read from cover to cover, but rather something to dip into and enjoy. There are wine-driven profiles of each president in one section, an examination of the White House collection of wine glasses, decanters, and other wine paraphernalia,  and even surveys of the different wine regions (and some of the producers) that have featured at White House events.

The author, Frederick J. Ryan, Jr., is Chairman of the Board of the White House Historical Association, a perch that gives him access to important source material. He was Assistant to the President under President Reagan, the founding CEO for Politico, and is currently the Publisher and CEO of the Washington Post. 

This book was created with a diverse audience in mind. There are sections on wine basics, for example, for history buffs who might not know a lot about wine. And there are other sections to guide wine people who might not have brushed up on their American history in a while. And, of course, there is a lot of material that both wine people and history people will find new and interesting. You can pretty much open any page at random and find something you are happy to look at or read.

The chapters that I like best focus on the wines that presidents served to their guests at state dinners and similar events.  There are menus going back to 1877, for example, with relatively complete data (including reproductions of the actual menus) starting with the Eisenhower White House years. I’m interested in these documents because they give a sense of how Americans and their leaders thought about wine in the postwar years and how those attitudes evolved.

f4758b03499942eadac83252f0119173Fine wine meant European wine in the 1950s. Eisenhower’s guests were only very occasionally served anything else. A typical Eisenhower state dinner started with Dry Sack Sherry, Spain, and then moved on to  Chateau Climens Barsac, France, and what is listed as Beaune Greves Burgundy, France. Pol Roger Champagne, France, brought the evening to a close. There were variations, of course, for particular guests. German Rieslings for Chancellor Adenauer and Lafite for Winston Churchill.

The Kennedy years saw the the range of wines broaden (more Rieslings and Soave, for example), but generally within a classic old world frame. Noteworthy: increasing presence of American wine (especially Almaden and Inglenook) and I noted Lancer’s Rosé from Portugal served at a luncheon for the Danish Prime Minister. Inglenook “Pinot Chardonnay” appears several times, a reminder that Chardonnay was still little planted in California in the 1960s and often went by this now-forgotten name on bottle labels.

LBJ’s White House dinners embraced American wine wholeheartedly, a trend that has continued. It is as unusual today for an international wine to be served as it was 70 years ago to see a domestic bottle on the table. The White House wine people were ahead of consumers more generally, especially early on, in their willingness to serve American wines to important guests.

It is also interesting to note that the range of American wines, once the trend got started, rather quickly moved beyond California (although that state’s wines still dominated). White House wine selections make a statement and it seems that this is intentional at least some of the time. Can you guess which president first served Texas wine or Michigan wine? Washington and Oregon have joined California as White House regulars.

Wine and the White House is a book that it would be fun to give or to receive.  Pour a glass of fine Madeira (a wine that Jefferson bought by the pipe according to a reproduction of his inventory sheet) and enter this unique world. Wine and history pair very well indeed.

A Modest Proposal for American Viticultural Areas

Are there too many American Viticultural Areas (AVAs)? Or not enough? Herewith a modest proposal for maximizing the benefits of American wine appellations.

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Whenever a  list of newly-approved  American Viticultural Areas is released I find myself shaking my head in disbelief. Bah humbug! You see, I’m a true dismal science Scrooge and so my first reaction is always to think about the economic value of the new designations and sub-designations.

Only a few American appellations have substantial economic value in the sense that a bottle of wine is worth more if the magic name appears than if it doesn’t.  Napa is a good example of an AVA that pays. 

Many if not most AVA designations add little monetary value and sometimes they might actually subtract value generally by confusing consumers who wonder what it all means and how one is different from another.

Not (Just) About Money

It took me a long time to get over my focus on money and to think about other factors. In many cases the goal of an AVA is simply identity — the desire to be something particular in a generic world. There might be a bit of FOMO (fear of missing out) in that, too. I get that. We live in the Age of Identity in many respects. Why should wine be different?

Another result if not a goal can be solidarity, since having an AVA application approved is not an easy thing and requires wine growers to work together.  Once they’ve worked together to create an appellation, perhaps other opportunities to cooperate can be found, too. That’s not a trivial thing.

The role of AVAs in creating or strengthening identity and solidarity made me think of a little-known political-economy theory called the North Dakota Plan. The creator was the famous economist  John Kenneth Galbraith and the idea was this. The nation-state is a good thing in part because it gives its citizens sovereignty, which is important as we now realize from the way that it is highlighted in the current UK Brexit policy debates. More states would mean more sovereignty and more benefits. OK so far?

The North Dakota Plan

But sovereignty is troublesome because one state’s sovereign actions can sometimes threaten another state’s sovereignty and, in worst case scenarios conflict and even war break out. How can the world maximize the good of sovereignty while minimizing the bad of war?

The solution, Galbraith proposed back in 1978, tongue firmly in cheek, was the North Dakota Plan. Divide the world up into dozens of nation-states each about the size and shape of North Dakota. North Dakota is more or less a rectangle, if you haven’t looked at a map recently, so the new borders wouldn’t necessarily take into account geography or demographic patterns. They’d be completely arbitrary.

There would be lots of small states — so lots of Presidents, Prime Ministers, Foreign Ministers, and sovereignty. But each country would be too small to have much of an army or navy, so conflict would be limited. Their focus would have to be more on how to live together, since their ability to meddle in other countries’ business would be limited.

I think I recall a variation on the theory where each country would be given one small nuclear device to deter enemies. The idea was that no one would ever use their nuke because, with it gone, they would be defenseless. Peace would reign supreme.

To the best of my knowledge no one ever took Galbraith’s modest proposal for a world of North Dakotas seriously, which is probably just as well. But it inspires me to propose my own satiric plan for American AVAs, which you can probably already guess,

North Dakota AVA System

Why not maximize the number of AVAs by covering the wine country map with hundreds and hundreds of them in arbitrary shapes and sizes.  I’d shape them like pieces in a jig-saw puzzles, but you can have squares or triangles if you prefer. Each one would have a name, of course, and an identity.  More AVAs, more identity, everyone is better off. What could go wrong? 

Each would face a challenge, too, which would require solidarity to solve.  With completely arbitrary borders — unlike the border lines today that are sometimes determined by a mixture of terroir and politics– geography could not be relied upon to make an AVA distinctive. The growers and winemakers within each block would have to work together to create a real identity — a common blend, style, or signature wine grape variety, for example. They’d have to work to make the AVA mean something because, otherwise, it would be just another meaningless, soon-forgotten shape on the map and name on the label.

The Thing About Modest Proposals

The thing about Modest Proposals is that they are not always what they seem. The most famous Modest Proposal — Jonathan Swift’s suggestion that impoverished Irish parents should eat their starving children — wasn’t intended to encourage murder or cannibalism. It was meant to shock readers into recognizing the harsh and heartless treatment of Ireland’s poor and the dire conditions they experienced. It worked, too, waking up English citizens to the reality of their government’s Ireland policies.

John Kenneth Galbraith’s North Dakota Plan probably reflected his experiences as a diplomat in the Kennedy administration (he was US Ambassador to India). He knew that big, powerful states were no guarantee of peace and prosperity — in fact, they were often just the opposite (think Cold War mutually-assured destruction). His North Dakota thought experiment flipped reality in search of a better solution to world problems.

No one would seriously consider my “North Dakota” plan for AVAs. It is ridiculous. But this is what American wine could more or less look like in 30  years if current trends persist. It won’t happen all at once, just a couple more AVAs here and there. But it will add right up all the same and then, well, there you are.

Maybe AVAs were the best way to establish identity back when there were only a few of them — remember that the very first AVA granted back in 1980 was not Napa (it came a few months later) but Augusta in Missouri. Maybe today, when the AVA count is in the hundreds, there are better paths to follow. If not, then the future could be a jig-saw puzzle world of wine.

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Wine jig-saw puzzles can be quite entertaining if done right. Check out the wine and spirits puzzles that Rebecca Gibb MW has created at Bamboozled Games!

Just to show that I am not a complete Scrooge, here’s a musical tribute to names, songs, and dreams. Enjoy.

Wine Book Reviews: Three Faces of Global Wine

Here are brief reviews of three recent books that approach global wine from very different perspectives. Each makes a distinctive contribution to our understanding and appreciation of wine. Together they suggest what a complex world it is and why so many of us find it endlessly fascinating.

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https__m.media-amazon.com_images_i_41tumphtglHugh Johnson’s Pocket Wine Book 2021 (Octopus Publishing Group, 2020).

Hugh Johnson’s pocket guide to the world of wine has been a hugely popular standard reference ever since it was first published 43 years ago. Updated annually, it packs a lot of content into a compact package. The Hugh Johnson pocket wine book is required reading for consumers and trade alike.

You will find something for all interests here: a vintage guide, new wines to try in 2021 (think Austria and the Iberian Peninsula),  a survey of grape varieties, a pretty interesting primer on pairing food and wine (what do you suppose goes best with haggis?), and for the new edition a special color section on terroir.

The foundation of the book and its success is a survey of world wine organized along classical lines, which means vintages, countries and regions, the wineries, and the wines. The wineries are rated on a four-star scale with brief commentary and noteworthy wines  are singled out. Obviously it is impossible to cover every winery and every wine, so it is interesting to go through the book to see if favorite wineries made the cut or not.

newyorker_mar291976_1What does the world of wine look like from Hugh Johnson’s classic perspective? Well, it reminds me a bit of that famous Saul Steinberg New Yorker magazine cover that showed a NYC resident’s view of America.

The first thing that Johnson sees when he surveys the wine world is France, and it is hugely important. Indeed the section on France is 80 pages long, of which 20 pages are devoted to Bordeaux. By comparison Asia, which includes China, India, and Japan, has one single page. All of South America wine — Chile, Argentina, Uruguay, Brazil, and more — fills less than 10 pages. No doubt about it — France rules the world of wine and readers who want to understand and appreciate wine need to start there.

The United States gets about 30 pages (with individual sections for the most important wine-producing states), which is about the same as Italy even though Italy produces much more wine and has a much more complex regional wine structure. Given everything, I have no complaints that wine from my home state Washington gets only about four pages — that’s more or less the same as the space given to Cyprus, Israel, Lebanon, Turkey, and North Africa … combined!

Is this a distorted view of the world of wine? Well, yes. But the lesson of the old New Yorker cover was that any single perspective on a complicated subject is arbitrary and distorted. Johnson’s perspective has served him and a great many others very well because, page counts aside, the detail provided in each section is quite remarkable given the compact overall format.  Your mileage may vary, of course, but I think  you’ll find Johnson’s classic viewpoint useful and interesting even if your interests aren’t exactly aligned.

This is a fascinating little book, packed full of information and insights. It you haven’t looked at a copy in a while you don’t know what you are missing.

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f28420adc2e634602079d783a8f823480a43eb91Lucia Albino Gilbert and John C. Gilbert, Women Winemakers: Personal Odysseys (Luminare Press, 2020).

The professors Gilbert view wine from a different perspective that I find particularly interesting. Wine is made by people — men and women — but not in equal proportions.  Men have traditionally dominated the winemaking field and women have only risen significantly in the last generation or so. 

The Gilberts want to understand this phenomenon and their book provides observations based on interviews with selected  leading women winemakers in California; Champagne, France; Piemonte, Italy; Rioja, Priorat, and Penèdes, Spain; the Douro Valley, Portugal; and Hawke’s Bay, New Zealand.

The authors identify several waves of women winemakers in California, which allows them to see how conditions have changed over time. My reading here is that certain important individuals and networks were key to opening doors for others.

The interviews make good reading on their own as they give a sense of the barriers and opportunities that each woman confronted. The Gilberts synthesize their fieldwork results to establish four typical pathways that women have followed: family, science/agronomy, enology, and sensory analysis.  Chapter 9 summarizes advice for women who seek a career in wine.

There are lots of stories here, but the big story is simply to make these women winemakers visible — to shine a light on them — and so to inspire other women to follow in their footsteps (or maybe forge their own paths).

This is a scholarly volume, but not a stuffy or boring one. The Gilberts are careful to allow their subjects to speak for themselves as much as possible. These are important voices and the Gilberts do a great service by giving them this opportunity to be heard.

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Anderson, K. and S. Nelgen (2020), Which Winegrape Varieties are Grown Where? A Global Empirical Picture (Revised Edition), Adelaide: University of Adelaide Press. Freely available as an e-book at www.adelaide.edu.au/press/titles/winegrapes, and in Excel format at https://economics.adelaide.edu.au/wine-economics/databases.

which winegrapes

Kym Anderson and Signe Nelgen have released a new edition of their survey of global winegrape production and it is available as a free download (see link above) or for purchase in paperback from Amazon.com.  It examines  global wine through a third lens — that of the grape vine itself — and it sees a world that is changing very rapidly.

One paradox found here is this. When I survey the retail wine wall I get the sense of a greater variety of wines made from a greater variety of grape varieties. More of these wines make it to the broader market today than in the past or at least seem to be more visible.

But, as data shows here, this casual empiricism disguises the fact that grape plantings are actually becoming less diverse. More of the world’s vineyards are planted to a handful of grape varieties.

In Spain, for example, Tempranillo is the only red variety that has increased in vineyard area (and it has done so massively). All the others have decreased. As Spain has reduced its overall vineyard acreage it has also shifted to its most marketable red grape variety. Fascinating.

One of the most important new features of this book is found in Section VII, where climate data for each of 800+ winegrowing regions is provided thanks to studies by Prof. Gregory Jones. Climate change data are combined with winegrape planting statistics to estimate to what extent winegrowers are mitigating climate dynamics through their grape variety choices.

This is a big, dense book that invites casual browsing of its many clear charts and diagrams but really rewards close study of the detailed tables. The price is right for the ebook version.  You should check it out.

Book Excerpt: On the China Wine Trail

chinaI thought you might enjoy using your imagination to travel to China along with Cynthia Howson and Pierre Ly via this excerpt from their new book Adventures on the China Wine Trail: How Farmers, Local Governments, Teachers, and Entrepreneurs Are Rocking the Wine World, which won the 2020 Gourmand Awards gold medal for wine tourism books.

Many thanks to Cynthia and Pierre and to Rowman & Littlefield for giving permission for publication here. This selection is from Chapter 2: Sea, Sand, and Shandong. Enjoy!

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It was serendipitous that we ended up on the beautiful coast of Shandong, with its sandy beaches and romantic restaurants, on Qixi, the Chinese version of Valentine’s Day. We were travelling with our colleague, Jeff, an adventurous traveler with enough Chinese to get into trouble. This is even more so since Jeff’s then wife had stayed in Seattle and no matter how much he emphasized he was married, he seemed to get quite a bit of attention. That he found himself declining offers at 4:00 a.m. in the Qixi-themed night club was to be expected. The unsolicited calls to his hotel room from would-be escorts took him by surprise. We probably also got such calls, but since we didn’t understand them, we assumed a wrong number. For us, the city of Yantai was brimming with kitsch and romance. Our hotel bathroom was adorned with stickers with cute animals and hearts. And on the bed, we found towels folded into heart-shaped kissing swans.

We made the mistake of overfilling our schedule and requesting a meeting with renowned Chinese wine journalist, Jim Sun, just as he returned from a business trip on the erstwhile romantic evening. Of course, he and his wife were incredibly gracious as he led us through a tasting to showcase some of China’s best wine regions. It was only later that we considered the couple may have better things to do than a 7:00 p.m. meeting with economists.

His shop was in the perfect romantic space, near Yantai’s “World Wine Walk.” The pedestrian path connects the road to the crowded sunny beach and it’s lined with facades of shops named after world wine regions. A young man with a burgundy-colored shirt and black pants held his fiancée, whose red dress was a great match for the red circle shaped sign of a shop referencing wines of . . . Niagara. We never figured out why the gate that led to it was behind a giant yellow rubber duck, but this, too, was photo-worthy. In any case, Yantai is a must-see capital for a wine tourism enthusiast in China.

winewalk

Yantai’s World Wine Walk: a great place for wedding pictures

What makes the city so special? It turns out that this is where Chinese wine began, longer ago than you might think, in the late nineteenth century. When we prepared for our first China trip, we jumped straight to the index of our brand-new 2013 Lonely Planet China, and searched for the word “wine.” Of course, this was no California or France travel guide. But we were pleased to find at least one mystery wine destination: the Changyu Wine Culture Museum, in Yantai. Back when we began our China wine adventure, that was the only place the Lonely Planet sent English-speaking tourists looking for wine in the country.

Changyu was the first winery, and to commemorate this, in 1992, they built the Changyu Wine Culture Museum. Only a short walk from the waterfront, conveniently located near other top sights, bars and restaurants, the museum attracts large groups of tourists who are happy to take the guided tour and hear the story. Since then, a booming wine industry has developed in the province, including many wineries designed as attention-grabbing tourist attractions.

When Changyu opened the first modern winery in China, founder Zhang Bishi had help from an Austrian Vice Consul and winemaker, Baron Max von Babo.i It is one of the first names you learn on the tour, but it could have been someone else. When the company was founded in the early 1890s, the first foreign consultant, an Englishman who had signed a twenty-year contract, fell ill before he was due to arrive and died of a toothache gone wrong. The Dutch winemaker that followed him turned out not to be qualified. Von Babo got the job and the rest is history.ii “Babo” might ring a bell for dedicated Austrian wine enthusiasts. It is another name for KMW, the standard measurement of grape ripeness still used today to classify Austrian wines. KMW was invented by Max’s father, August Wilhelm Freiherr von Babo, an important figure of Austrian viticulture and enology.

The place was designed to promote Changyu’s brand, of course, which is well known thanks to its overwhelming market share and supermarket shelf space. But there is a clear effort to teach visitors about wine and viticulture, with details on each aspect of production. Armed with knowledge from the museum, tourists can head out of the city toward Chateau Changyu Castel, a joint venture with the Castel wine group from Bordeaux. It’s close to a popular water park and the new construction we saw in 2013 gave a sense of ever-expanding options. There is a museum component here too, but this one is a ginormous working winery. Unlike our Beijing Changyu trip, there were large buses of tour groups, exiting en masse, walking through the vineyard (“Don’t Pick!” one sign said). They took the guided tour of the winery, observing the large stainless-steel tanks and taking pictures of the long rows of oak barrels, or in front of the display riddling station for sparkling wine bottles. On the way, our taxi driver told us he didn’t drink wine, but he recited with pride how the winery got started in 1892 by Zhang Bishi. We invited him along, and he enthusiastically took even more pictures than we did.

The winery tour included a tasting in the bar with views over the vineyard, as well as a percussion set, two foosball tables, and coin-operated barrel dispensers. Families seemed to have fun with the tasting, studiously following their guide’s instructions. But tastings weren’t presented as the highlight of the tours. At the museum, the tasting was in the underground cellar, with pre-filled glasses lined up and covered with plastic wrap, leaving the white wine samples awkwardly warm. Unlike in Napa, no one came here hoping to get tipsy. As one Chinese expert told us when we asked about these tours, if the tasting is deemphasized, it’s probably not the best part. We knew that Changyu wine had won international awards, so why did they serve underwhelming wines to visitors? These museums did a good job promoting wine culture in beautiful spaces, but the wines themselves seemed to be extras on the set rather than main characters. Three years later though, on a return visit to the museum, the wines on the tour were good. Did this reflect a renewed focus on wine quality, or did we show up on a good day? Time will tell.

Changyu and wine street are just the beginning of a wine tourist route along the coast. We drove north to see where thousands of families plan their beach vacations, just a short hop from Beijing, Shanghai, and Seoul. Our hotel lobby was filled with an all-ages crowd, geared up with matching hats. The group was among two million visitors hoping to see a magical mirage at the Penglai Pavilion, one of the four great towers of China. Add glorious beaches, an ocean aquarium with dolphin shows, fresh seafood and nightlife opportunities, and you can see why investors see wine tourism dollar signs in the making.

Adventures on the China Wine Trail: How Farmers, Local Governments, Teachers, and Entrepreneurs Are Rocking the Wine World by Cynthia Howson and Pierre Ly. Rowman & Littlefield, 2020.  Reprinted by permission of Rowman & Littlefield Publishers.

Notes:

i His employment contract, in English, is an auction item at Christie’s. See Christie’s, “Wine in China,” Christie’s, January 16, 2014, https://www.christies.com.
ii Michael R. Godley, The Mandarin-Capitalists from Nanyang: Overseas Chinese Enterprise in the Modernisation of China 1893-1911 (Cambridge: Cambridge University Press, 2002); Jonathan Ray, “Wine: Is China the New Chile When It Comes to Wine?,” Telegraph, January 18, 2008, https://www.telegraph.co.uk/.