Global Market Trends: Is White Wine the New Red?

October 22, 2024 By in wine, wine markets 13 Comments

The global wine market is in flux these days and much of the attention is focused on falling consumption in the post-pandemic era. Global wine consumption actually peaked a few years ago, as the graph above shows, but the trend was disguised for a while by Covid pantry-stocking and other factors.

The falling sales volume is a stark fact that concentrates the mind, but it isn’t the only wine market change to consider. The strong trend of premiumization seems to have lost momentum, too, which may be related to a growing affordability crisis affecting many products including wine. (It is noteworthy that both Burberry’s luxury stores and Dollar Tree budget stores are experiencing sales declines associated with strained consumer budgets.) Do consumers think wine is good value for money?

Bottle of White? Bottle of Red?

Another trend that bears watching is the shift (in both production and consumption) from red to white wine (increased rosé sales are also part of this pattern). The change is so dramatic that last year the  OIV produced a special report on the topic. The OIV data for wine production shows a dramatic shift from red to white (see below). Like the decline in global wine consumption, this trend started a few years ago but has picked up steam (and attracted attention) recently.

The figure below provides a demand-side picture of the situation. Global white wine sales (by volume) held up better in the current climate than did red wine sales, so white’s share of the pie has grown. Changing production is a response to shifts in demand. Good news for white wine producers like New Zealand. Not-so-good for red wine producers like Argentina and Spain.

The changing color of wine shows up in both the data and on the store shelves. We have encountered more examples of white wines made from red grapes, for example, as producers look to align production with demand within the constraints of existing vineyard varieties. White Malbec from Argentina? It was the surprise hit of one of our tastings. White Pinot Noir from Oregon? Yes, that’s a thing now, too, and it can be very nice.

The China Syndrome

Part of the global decline in red wine production and consumption is no doubt due to the collapse of the Chinese wine market in the last ten years (wine production and sales in China are disproportionately red) as shown in the graph below.

French Paradox?

The pattern of changing red-white consumption differs considerably among the largest consuming countries. In France, for example, the volume of red wine sales has trended down for many years, with white and pink wines holding their own.

Do you remember the “French Paradox”? That was the title of the 60 Minutes program segment about how the French stay healthy in part by drinking red wine. It helped power a red wine boom in the U.S. Well, it looks like we have another paradox on our hands now as French red wine consumption slip slides away at the same time, we are told, that consumer interest in health has increased.

American Exceptionalism?

In the United States, on the other hand, red wine sales by volume have been stagnant (premiumization has pushed value up, however). White wine sales (and pink too, to a lesser extent) have risen modestly as measured by volume (see below) The red shift in U.S. wine consumption is less pronounced than in China or France … so far.

(Note that the OIV data shown here end in 2021, before U.S. wine consumption began to sharply decline.)

The NIQ sales data for the U.S. (found in the most recent issue of Wine Business Monthly) suggest that this red-to-white trend may be accelerating.  Total sales value for the most recent 52 weeks, for example, was $9,172 million for red wine and $7,857 for white wine (red still leads by dollar value). But this pattern changes when you look at the most recent four survey weeks, where white wine’s $619 million outpaces red wine’s $583 million. Seasonal factors surely account for some of white wine’s lead, of course, but it still comes as a surprise.

The shift is more dramatic when measured by volume of sales. For the most recent 52 weeks the numbers are 72.9 million cases of red wine versus 79.9 million cases of white wine. White’s lead lengthens for the most recent four weeks. Measured white wine sales were 6.2 million cases compared with 4.7 million cases of red wine.

The patterns of red-to-white sales shift differ by country, but the fact of the global trend seems pretty clear. What’s behind this surprising change in consumption patterns? Every time I come up with a simple answer to this question I quickly find a reason to dismiss it, so I won’t bore you with my theories. I note that the OIV report is long on factors but shorter on analysis, too.

The Curse of Corporate Wine-Think Déjà Vu?

October 15, 2024 By in economic crisis, family wine businesses, wine, wine markets 3 Comments

The global wine industry continues to adjust to the “new normal” market environment, with recent news stories focusing on strategies to support demand (Come Over October), grubbing-up programs to reduce grape supply, and restructuring wine winemaking businesses (Vintage Wine Estates bankruptcy, Duckhorn Vineyards acquisition, etc.) after a surge of consolidation fueled by cheap money came to a sudden end.

The restructuring has sometimes returned wineries to the people and families that founded them. In other cases (here I am thinking specifically about Stags Leap Wine Cellars and Col Solare in Washington State) a family-winery partner (the Antinori family) has acquired control from its unintended private-equity co-owner. I hesitate to generalize, but the situation suggests that the advantages of family ownership and control in the wine business are becoming clear again.

I wrote a series of columns about family versus corporate wine regimes back in 2015 and I thought it might be useful to re-publish excerpts from two of them now because the issues they addressed seem relevant again today. Hope you find them interesting.

The Curious Dominance of Family-Owned Wine Businesses in the U.S.

May 5, 2015

Last week’s column about the rise and fall of the Taylor Wine Company of New York raises a number of interesting issues and one of them is the singular importance of family-owned and privately-held businesses in the U.S. wine industry and the very mixed record of publicly-listed wine corporations. In retrospect, a case can be made that Taylor’s downfall began when they made the initial move from family ownership to public corporation.big10

The conventional wisdom holds that family-owned and privately held firms can be very successful, but their scale and scope are necessarily limited. Corporations, it is said, can have better access to capital and may be able to negotiate risk more successfully because of limited liability structure. You might expect the largest firms in any given industry to be corporations and this is true in some industries, but not in others.

Wine Exceptionalism

Wine is one exception to the dominant corporation rule. Here (above) is a table of the ten largest wine businesses in the U.S. market (measured by estimated or reported volume not value of sales) for 2014 and 2003. The data are from Wine Business Monthly, which publishes an analysis of the 30 biggest U.S. wine firms each February.  I’m looking at just the top ten to keep the analysis simple, although I should note that these ten firms collectively account for about three-quarters of all wine sold in the U.S.

Looking at the 2014 data, you will note that only four of the top ten firms (those in italics) are public corporations or subsidiaries of public corporations. The other six are family-owned or, like The Wine Group, privately-held and together they produce more than half of all the wine sold in America. [editors note: There was a typo in te graph, which should list The Wine Group not The Wine Company.] The bias towards private- and family-ownership is even stronger if we look at the next 20 wineries where only a few corporate names like Pernod Ricard make the list.

Looking closely at the 2014 numbers it is hard not to be impressed by the growth of family firms Delicato and Jackson Family Estates and also the success of Ste Michelle Wine Estates, which seems to behave like a privately-held firm even though it is a subsidiary of a public one, albeit in a different line of business (Altria specializes in tobacco products, not drinks).

All in the Family

Family- and private-owned wine companies are if anything more important today than they were before the Great Recession. Why are family-owned wineries so vibrant despite their structural economic limitations?

The conventional answer to this question — and there is in fact a substantial academic literature dealing with family businesses and even family wine businesses — stresses the ways that family businesses take a multi-generational approach and are able to negotiate the trade-off between short run returns and long run value. Corporations, it is said, are sometimes driven too much by quarterly returns and end up sacrificing the long term to achieve immediate financial goals.

When business requires a long run vision, it is said, families gain an advantage. Wine is certainly a business where it is necessary to look into the future if only because vines are perennials not annuals like corn or soybeans and successful brands are perennials, too.

Another school of thought examines issues of trust and transactions costs within the firm and the ways that family ties can reduce internal barriers and make interactions more effective.  It is commonplace to say that wine is a relationship business and family firms may have advantages in this regard. I have knows some family wine businesses that even go out of their way to work with family-owned distributors and so forth.  I think one author saw family-to-family links (the Casella family and the Deutsch family) as keys to the success of Yellow Tail brand wine.

Maybe the Real Question Is …

There are good explanations for the success of family-owned wine businesses, but sometimes they feel a bit ad hoc, tailored to explain a particular case and less capable of generalization.  And they often fail to fully account for the fact that many family businesses (and family-owned wine businesses) either fail or, like the Taylor family, end going over to the dark corporate side. Family relationships can be good, bad or ugly — you cannot think of the Mondavi family story without channeling an episode of Family Feud) and not every new generation wants to stay in the business. So there must be something more here than simple families think long-term. But maybe we are actually asking the wrong question.

Maybe the question isn’t why family-owned wine businesses are so strong and instead why corporate owned wine businesses are sometimes so ineffective. Is there something about wine that turns smart corporate brains to mush (not all of them, of course, but maybe some of them)? Come back next week for some thoughts on this provocative question.

The Curse of Corporate Wine-Think?

 May 12, 2015

Protecting Assets versus Leveraging Them

One difference that I have noticed about family wine businesses versus some of the corporations regards the role of key assets such as brand and reputation.  Many family wineries that come to mind seems to see their role as protecting brand and reputation so that they will continue to provide benefits well into the future. Some corporations that come to mind, on the other hand, seem to focus on leveraging brand and reputation in order to increase short run returns.

What’s the problem with leveraging a brand? Leverage has the potential to increase returns in any business, but it also increases risk. And one risk is that the integrity of key assets can be undermined by the leverage process itself.

An example? Well, I hate to pick on Treasury Wine Estates because they have seen enough bad news in the last few years, but one of my readers emailed me in dismay when a news story appeared about Treasury’s latest market strategy. I’ll use this as an example, but Treasury isn’t the only wine corporation that I could pick on and maybe not even the best example

One element of Treasury’s plan is to develop brands for the “masstige” market segment, which means taking a prestige brand and levergaing it by introducing a cheaper mass market product that rides on the iconic brand’s reputation. 

Masstige? Sounds like something from a Dilbert cartoon, which means of course that it is a totally authentic contemporary business term. Prestige fashion house Versace, for example, seems to have developed a masstige product line for mass market retailer H&M. The line was launched in 2011 and I’m not sure where it stands today. Maybe it was a big success? If  masstige  worked for shoes and dresses, how could it be a bad idea for wine?

I’m sure a prestige association helps sell the cheaper mass market products, but I can think of some examples in the wine business (Paul Masson? Beringer?  Mondavi?) where it might have undermined the iconic brand itself a little or a lot, which seems self-defeating. I know that has happened in the fashion field (think about how the Pierre Cardin brand was diluted by cheap logo products) so I imagine it could be a factor in wine, too.

Think Global, Source Global

Here’s another example. Regional identity is more important in wine than in some other industries and Treasury owns some famous “wine of origin” brands — wines associated with particular regions, which are valuable assets.  But my worried reader was concerned about Treasury’s plan to source globally to expand the scale of some of these regional brands.

“Building scale via sourcing breadth is one of the most critical platforms necessary for the globalization of wine brands,” according to the report. Gosh, that even sounds like corp-speak, doesn’t it? Logical, I suppose, but maybe locally-defined brands need to be locally sourced to maintain authenticity? Maybe consumers would be suspicious of a Stags Leap wine, to make up an example, that is sourced from Australia or some other distant place as a way of leveraging its brand power? I wonder just how flexible these terroir-based brand concepts are in the real world where consumers are the ones who decide what is authentic and what is bogus.

Global Market Moral Hazard

Some big wine corporations that have had troubles in recent years seem to have made the mistake of thinking that big global markets will soak up all that they (and the other big firms) can produce. It’s a matter of global-think. The global markets are huge. There’s always a market for another dozen containers somewhere in the big world of wine, or so it might seem, and so the risk of failure is misunderestimated, to use a GW Bushism.

In finance we would say that the false sense that the global market is always there to bail you out leads to moral hazard and this is probably true in wine, too.  Moral hazard encourages excessive investment and promotes booms and the busts that often follow. What seems to be true for an individual company is not necessarily true for an industry and misunderstanding this sort of risk is downright dangerous in an industry like wine, which is by its nature subject to cycles and booms and busts.

If private- and family-firms avoid the tendency to think global when their markets are local and thus avoid misunderestimating risk and if they really do work to preserve rather than leverage key assets it might help explain their lasting power and influence. Lots of “ifs” there, but its a theory. What do you think?

Alcohol and the Idea of Wine

October 8, 2024 By in wine, wine education 4 Comments

A brief rumination inspired by the Come Over October movement.

I was very fortunate to be appointed to an endowed university chair about 20 years ago, which afforded me great freedom in what I could teach, so long as the classes contributed to the college education goals. My first new class was called “The Idea of Wine” and it quickly became the school’s most popular course, with a waiting list longer than the class list itself, even though the students knew it wasn’t a wine-tasting course and certainly not a wine-drinking course.

That’s the Idea!

Why did I call the course “The Idea of Wine”? Because ideas are important and how we think about things affects how we act. Many people seem to think about wine in terms of its alcoholic content and it is true that alcohol is critical to wine production. Wine isn’t just grape juice with alcohol added. The process of fermentation transforms the grape juice into a very different product. That’s why non-alcoholic wines must first be fermented and then the alcohol removed. You can’t avoid that alcohol step if you want to have wine.

So alcohol is part of wine, but if your idea of wine is alcohol, then it distorts the situation. I noticed this when I wrote a column a few weeks ago questioning whether wine is a good value in today’s marketplace. A couple of readers wrote to me suggesting that I had missed the obvious point. If you think of wine as alcohol, then it can be an excellent value, with a cost per unit of alcohol lower than beer or spirits for inexpensive commercial wines. OK, that’s probably true. Many people probably think of wine as just cheap alcohol, and they are entitled to their opinion, but that’s not the way I see it.

Prohibition’s Long Shadow

You can see where thinking about wine as just an alcohol delivery system can lead if you look at the U.S. experience with Prohibition. Beverage alcohol in general was prohibited during the Great Experiment in sobriety (although illegal booze was available, of course). But one loophole in the law allowed for home production of up to 200 gallons of wine per year for “non-alcoholic” family use.

Home-made wine, therefore, became a ready source of alcohol and, it must be said, alcoholic content was often all it had in common with quality pre-Prohibition wine since it was produced by amateur vintners in make-shift facilities with grapes that often traveled long distances in trucks and rail cars before processing. The idea of wine for most people was pretty sorry indeed.

Wine changed when Prohibition was repealed, but the idea of wine as alcohol didn’t suddenly disappear. Alcoholic content was still very important (sales of cheap fortified wines soared). State-controlled and sometimes state-operated distribution systems treated wine as a dangerous substance. It has taken almost 100 years to change the idea of wine in America and now we confront the possibility that the pendulum has started swinging back again.

The Hunt for Grape October

The idea of wine as alcohol has gained primacy in recent years. It may be a bad idea whose time has come, as they say, but it behooves those of us who love wine to put forward altertnative visions.

And so I am glad that we are celebrating Come Over October (COO) this year because it is built on a bigger idea of wine. The idea of COO isn’t about what wine is or what it’s made of or what ten aromas and flavors you should try to pick out. The idea of COO is to focus on what wine does (bring us together) and how wine makes us feel when we share it with old friends and new ones, too.

Ideas are important. John Maynard Keynes wrote that ideas are powerful for good or evil. If alcohol is a dangerously bad idea of wine then COO is a dangerously good idea, don’t you think?

Is October the Month You Finally Try Non-Alcoholic Wine?

October 1, 2024 By in wine, wine markets 2 Comments

Is October 2024 the month you finally try non-alcoholic (NA) wine? Maybe you’ve never sampled NA wine before or perhaps you have and were disappointed. In either case, this might be a good time to see what’s going on.

The Case for NA Wine

The NA wine market in the U.S. is growing, which is worth noting since the overall wine market continues to struggle. NA wine sales have grown by more than 25 percent over the last year, albeit from a relatively small base.  On an anecdotal level, we have watched as the NA part of the wine wall at our local upscale supermarket has grown from one lonely bottom shelf to two shelves and now three. Given the competition for shelf space, that says a lot.

Sue and I got interested in non-alcoholic wine a few years ago when a good friend of ours was in a severe cycling accident. Recovery from the concussion she suffered was slow and the doctors said no alcohol, not even wine. But a glass of wine in the evening lifts the spirits, so the search was on for an alternative with the taste and feel of wine, but without the alcoholic kick.

Our initial research was a bit disappointing because NA wines were not always easy to find and the selection was generally limited. This was especially true in on-premise situations. There was almost always NA beer available, but NA wine? Not so much.

Since then the NA category has exploded, especially for NA beer and NA spirits. At one point, for example, U.S.-made Athletic NA beer was the best-selling brand of beer at Whole Foods stores. NA brews from Europe are popular, which makes sense because the combination of active anti-alcohol movements in Europe and strict drink-driving laws pushed up the demand for these products early on.

A recent shopping trip revealed three or four varieties of a single inexpensive California NA wine brand at the local Safeway store. But the Metropolitan Market across the street offered nearly 20 different NA wine SKUs ranging from about $10 to nearly $30. The wines came from the U.S. (Washington and California), Germany, New Zealand, and South Africa.

The Second Glass Test

Writing in The Wine Economist in December 2023, I proposed “The Second Glass” test for NA products.  NA beer and wine ought to remind you of the regular product and not be, like the sparkling apple cider we used to serve non-drinkers at our parties, a liquid placeholder for wine. And it should be tasty enough that you’d want a second glass and not just nurse the first one until it is time to go home.

Good NA beers satisfy the Second Glass test, but so far we have not found many wines that do. Either they don’t remind us of the equivalent wine (a NA New Zealand Sauvignon Blanc, for example, ought to remind you of a NZ Sauvignon Blanc) or they just don’t make you ask for that second glass. The growing interest in NA wines is such that the Second Glass test article is by far the most-read single article on Wine Economist so far this year!

The NA wine section at your local upscale supermarket probably isn’t as large as the equivalent NA beer space, but at least it exists (I still haven’t seen NA wine on a by-the-glass on-trade list), so maybe it is time you checked it out. October is just around the corner. Maybe that’s the time.

Why October?

October has sort of evolved into a month to think about how wine fits into your lifestyle. It started, I think, with the advent of something called Sober October, which is sort of an echo of Dry January. Why October? Because it rhymes with Sober, I suppose. Sober October provoked the creation of a movement called Come Over October (which only rhymes if you have a pretty bad head cold), which stresses the sort  of social gatherings that are wine’s natural environment.

Water keeps us apart, I like to say, but wine brings us together. That’s the spirit of Come Over October to me and the program is receiving lots of support from wineries and retailers that are happy to remind consumers that wine is about people and sharing, not alcoholic content.

Since Come Over October is about bringing people together, alcohol is neither necessary nor sufficient to participate and it seems to me that this is your opportunity to give NA wine a test run if you haven’t tried it or a second chance if you have. I know some readers will object to bringing NA wine into the conversation, but if consumers are interested in NA products and if wineries can profitably make good ones, then it seems like we should embrace the opportunity. Imagine if cola makers rejected the idea of sugar-free colas or if coffee producers turned their backs on caffeine-free coffee. You’d think they were nuts.

Meet ZERONIMO and Dr. LO

Our most recent NA wine experiments have involved brands from ZERONIMO and Dr. LO. The ZERONIMO wines are imported from Austria. Although they are produced in relatively small quantities, they have found markets in both Europe and America. Production has expanded from 3000 bottles to 60,000 bottles of four different wines.

White wines and sparkling wines are the types of NA wines we most often see on store shelves, so we were interested to try the ZERONIMO Sparkling Select ($39.30), a blend of Pinot Blanc, Chardonnay, and Sauvignon Blanc. It was very dry and refreshing. It passed the second glass test for me, but Sue said it was on the edge for her because of the acidity.

We have not seen or tried many red NA wines. The highly-rated (98 points!) ZERONIMO Leonis Red Blend ($69.40) is a blend of Blaufränkisch, Zweigelt, and Cabernet Sauvignon that spends two years in oak.  It is light-bodied, as you might expect from an Austrian red, and showed oak influence without tasting woody. It is the first red NA wine we’ve tried to pass the second glass test, but I wish I had been more successful in teasing out the fruit.

Dr. LO is a line of NA wines from Loosen Bros., the well-known producer of Mosel wines. There is both an alcohol-removed Riesling and an NA carbonated Riesling in the portfolio. Sue and I are predisposed to like Mosel Riesling wines in general and we admire Loosen wines in particular. And it seems like they might be a particularly good base for NA treatment since the regular wines start out with relatively low alcohol levels. The alcohol is removed using the vacuum distillation method which, Loosen argues, creates a more balanced NA wine, when combined with the low initial alcohol level.

We really wanted to like still Dr. L Riesling (and we did) but it didn’t fully pass our second glass test. It was tasty and refreshing, giving us the fruit we missed in the earlier tastings, so we’d happily have another glass, but to be honest it didn’t remind us of Riesling wine. That’s a subjective assessment, of course, but that’s our finding. Your mileage may vary.

Come on Over

If October is the month when we make a point to invite friends and family over to share wine, food, and fun, then it is not a bad time to try out some of these non-alcoholic wine products. There will be some folks who want to avoid or limit alcohol consumption for health or religious reasons or who have volunteered for the role of designated driver.

They are going to be looking for something tasty to drink while avoiding alcohol. Why shouldn’t it be wine?

Bordeaux Bloodbath? Grubbing Up Deja Vu

September 24, 2024 By in economic crisis, wine, wine history, wine markets 1 Comment

You’ve probably seen the news from Europe. The headline on Politico read, “Bordeaux bloodbath! France pays winemakers to dig up vines.”  The French government has allocated €120  million to subsidize the removal of as many as 30,000 hectares of grape vines in the Bordeaux region due to unfavorable market conditions, according to EuroNews. That’s about €4,000 per hectare. The Bordeaux program is part of a bigger plan to take as many as 100,000 hectares (out of a total of 800,000) out of production.

It seems to me that the numbers are both big (100,000 hectares removed?) and small (€4,000 per hectare). American growers will rue the fact that they generally don’t receive subsidies from anyone when they are forced to grub up vines. The French are both lucky and not.

Grubbing up is a hardy perennial. France isn’t the only country that has to pull out surplus vines today and this isn’t the first time, either. I looked back in The Wine Economist archives to see when the topic of grubbing up first appeared on these pages. Here is what I found. You’ll note that I was skeptical about the EU program when I wrote this back in 2008. New Zealand’s earlier vine-pull scheme turned out well, I noted, but ripping out vines is only a temporary fix unless there are associated policy and structural changes to alter the market balance. I expect the same holds true today.

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Grubbing Up / The Wine Economist / May 6, 2008

Grubbing up is one of my favorite wine economics terms. It means to pull the vines up by the roots and replace them with other agricultural crops. It is a harsh term, just as it sounds, because it is the opposite of wine — it is anti-wine. Grubbing up isn’t something that a wine lover contemplates with ease, but sometimes it is necessary. The European Union’s Council of Ministers has recently finalized a grubbing up scheme for the EU and it is probably a good idea, even if it may not work.

Watering Down the Wine Lake

The problem is that EU wine production vastly exceeds demand with the result that thousands of liters of wine must be bought up by the EU each year and distilled into alcohol to prevent prices from dropping through the floor. The distillation price support only encourages continued production, waste and expense. It is a mess — a wine lake, as people say — and it has to stop.

A fairly radical plan was introduced a few years ago, one that would have paid farmers to grub up thousands of hectare of vines and introduced market reforms to allow (by deregulating) and to encourage (through supporting programs) European winegrowers to compete more effectively with New World winemakers who are taking their markets.

The package that the Council of Ministers agreed last week is significant even if it is less radical than the original initiative (Decanter magazine called it “watered-down” — never a good thing when you are talking about wine). The program called for subsidies to encourage winegrowers to eliminate up to 175,000 hectares of vines (versus 400,000 hectares in the original proposal), limit chaptalisation (the addition of sugar in the wine-making process) rather than eliminating it, and market-based reforms that encourage and enable winegrowers to compete on world markets (through varietal labeling of wines) rather than hide behind protective barriers.

I’ve been reading up on the details of the final EU plan and it is pretty interesting.  The program includes money for grubbing up, of course, and deregulation of wine labels, removal of some vine planting restrictions (so marketable grape varieties can replace uneconomic grubbed up varietals), funds for wine promotion abroad, and so forth. Like any EU program, it is a complicated balance of economic reality, fiscal feasibility and political necessity.

The idea is to help the European wine industry transition to a new market environment, where export markets are growing, domestic markets shrinking and competition is fierce. It is not unreasonable to think that policies like this could work. They worked in New Zealand in the 1980s, for example.

Lessons from Kiwi Wine History

New Zealand today is famous as one of the great success stories in the world wine market. A small nation in an unlikely location, it punches above its weight in the global wine market, holding the title as champion exporter. Not in quantity, obviously, but in price. New Zealand has the highest average export price of any wine producing country.

But such was not the case 25 years ago. New Zealand suffered from a surplus of mediocre wine that could only be sold domestically behind high protective barriers. The industry collapsed with many failed firms from a combination of bad wine and surplus production. The government paid to grub up vines and then opened the market to international competition. Cheap but better wines from Australia flooded in to fill the domestic bulk wine market, leaving New Zealand producers only one choice — make better wine for export. They have done so brilliantly. Their success inspires the EU reforms.

It would be a mistake to think that what worked so well in New Zealand in the 1980s will work equally well in Europe today. It is unlikely that the EU would be willing to let its wine sector reach the sort of crisis that New Zealand experienced and that motivated the dramatic reforms implemented there. If big change comes from big crisis, as I believe (I wrote a book on this theme), then Europe is unlikely to see big change. The social cost of crisis is just too great. The guiding principle of EU policy is to prevent crisis, which makes change that much harder to effect.

Comparing New Zealand to Europe is problematic in other ways, too. New Zealand’s wine production is tiny — a drop in the bucket, really — whereas European producers account for well more than half of all the wine in the world. New Zealand’s grubbing up program may have been difficult, but only 1500 hectares were uprooted rather than the “watered-down” 175,000 set for the EU.

Changing the Rules of the Game

The principle of the EU wine reform scheme is sound, yet many reports that I have read are pessimistic. I think this is mainly because the final reforms are so much more timid that the initial proposal. But there are other reasons for concern.

One thing that economists have learned over the past 25 years is that institutions matter. This is another way of saying that economic forces do not always produce the same results. If the “rules of the game” are different the laws of economics will produce different results. Institutions are the rules of the game in life. Dani Rodrik, my favorite development economist, makes this point in his recent book One Economics, Many Recipes. The nature of local institutions, public and private, formal and informal, shapes the economic landscape in important ways.

This idea applies to the EU reforms in particular. Take the grubbing up scheme, for example. An incentive to repurpose large but unprofitable vineyards in Australia, for example, might well meet with an enthusiastic response because the institutions of wine growing there are different, with large vineyards and a consolidated industry. But European vineyards are much different and represent a completely different model.

Many vineyards (where much of the inferior surplus wine originates) are tiny inherited plots of a hectare or so, frequently on sites with few viable alternative uses. The rules of the game here are much different. A hectare might produce 20-30 tons if badly overcropped and, at perhaps $500 per ton at the local cooperative, gross revenues are too small for a family to live on but too great (compared to alternative uses) to give up. It’s an institutional trap that might be solved by consolidation, but making large vineyards out of these scattered small plots is necessarily costly and difficult.

Under these circumstances growers are likely to hang on to their vines for years rather than accept a modest one-time payment. Grubbing up might need to be forced, not voluntary, to have much effect.

New regulations to allow wines to be labeled according to grape variety (rather than the traditional local geographic designation) might be attractive to a large and distinctly commercial wine producer, but much wine in Europe is still produced by cooperatives that have little to distinguish their wines from others apart form the local designation. What advantage would they have as simple varietals in a world awash with good varietal wine?

A Certain Vision of Wine

It is possible to envision a future where the reforms can work, where the marginal vineyards have gone out of production, where consolidation has increased efficiency and where branded varietals can compete with the world market. (I have even seen some early attempts at EU branded varietals in the discount bins of a local store — more about this in a future posting.) I think it is possible that this vision may be realized — eventually.

But oh, it is such a big jump. The institutions of the small family vineyard and the local wine cooperative seem to me to make these reforms much more difficult. New Zealand’s success will be difficult to repeat.

Wine Film Review: SOMM Cup of Salvation

September 17, 2024 By in wine, wine history Leave a comment

SOMM Cup of Salvation is a new release from the talented team at SOMM Films who have already given us SOMM, SOMM: Into the Bottle, and SOMM III. Their wine-film catalog now also includes a streaming channel called SOMM TV. If wine is your passion and video is your medium, you can have it all pretty much 24/7.

SOMM Cup of Salvation is now available via Apple, Amazon, and SOMM TV streaming platforms and is scheduled for limited theatrical release very soon. Here is a link to the new film’s official trailer. It is worth seeking out. Sue and I approach wine films with caution because we’ve seen so many disappointing ones, but Cup of Salvation gets our top score, two wine glasses (sort of like two thumbs up, get it?). Here is our review.

What’s the Story?

Cup of Salvation unfolds in several layers. In the broadest terms it is the story of wine’s cultural importance. Wine might be just a casual drink to many people, but its meaning runs deep and what happens to wine can be a mirror of what happens to society. This is wine as religion, philosophy, and identity.

The Cup of Salvation story takes place mainly in Armenia, sometimes in Iran, and a little bit in Oregon. Armenia, which along with Georgia is arguably the birthplace of wine, is struggling today to restore wine to its rightful place. Armenia suffered repeated invasions and abuse at the hands of outsiders over the centuries and the historical vineyards have suffered, too.

When Armenia came under Soviet rule about a hundred years ago many of the ancient vineyards were destroyed, replaced by industrial farms growing grapes for brandy production. In the Soviet system of specialization, Moscow dictated that Georgia (Stalin’s home) make wine and Armenia make brandy. So the old vineyards, winemaking traditions, and wine culture survived on the margins and under the radar. This is wine and ideology, geopolitics, and James C. Scott’s theories of oppression and resistance.

With the collapse of the Soviet Union, the opportunity appeared for Armenian wine and society to emerge, but the road was not a smooth one.  This is where things get personal as we meet the bold and charismatic Vahe Keushguerian (creator of the Armenian sparkling wine brand Keush)  and his more cautious but very brave daughter Aimee (who makes Armenian wine from indigenous grapes under the brand Zulal).

Vahe and Aimee Keushguerian (shown here in a still from the film) are part of the returning Armenian diaspora who seek to preserve Armenia’s wine history and create its future. The story of what they do in Armenia, why they do it, and what it means to them and to others, is at the heart of the film.

Risk is a strong theme. Some of the very old, very high-elevation vineyards are in an Armenia-Azerbaijan war zone (Vahe’s winemaking cellar/bunker is fortified to resist bombs. Yes, that’s a flak jacket he’s wearing in the photo.)

And then, as if there isn’t already enough risk, there is the crazy idea that punctuates the film. Iran is right next door. Iran has a long history of wine growing. Grapes are still grown, but no wine. The authorities would never hear of it. So, why not smuggle grapes across the border into Armenia and make the first Iranian wines in 40 years? What could go wrong?  It would be, if you could do it, maybe the riskiest wine in the world (although there are vintages from Syria and Lebanon that would compete for that title).

The tale of the smuggled Iranian grapes makes up the last third of the film. Tensions and emotions are revealed and released.  The meaning of wine is shown, not explained, and it is hard not to be moved.

Where Did the Idea Come From?

I asked the film’s director, Jason Wise, how the pieces of SOMM Cup of Salvation came together. The answer, he told me, is that he was in Armenia working on a completely different project (set for release next year) and met Vahe Keushguerian. Vahe’s story of Armenia’s wine renaissance was compelling and seemed to demand a film of its own.

And then Vahe’s Iranian wine project came on the radar and I think that lights must have started flashing. Wise knew about Moe Momtazi from another film project. Momtazi and his wife Flora are Persians who fled Iran many years ago, eventually settling in the Willamette Valley, where they founded Maysara Winery and Momtazi Vineyard. They carried with them as they escaped across the border an understanding of Iranian wine and its potential.

Momtazi’s Persian origin story is well known in Oregon (I wrote about the Momtazis in my 2013 book Extreme Wine, for example), but Wise was talking with him about something else. Momtazi is well-known for his commitment to biodynamic wine growing. Once Wise learned the Iranian backstory, the dots started connecting and the new film’s story emerged.

Why the Film Works

Cup of Salvation works for many reasons. First, it is beautifully filmed and that is always a good thing. The story is strong, too, especially the Iranian connection. But it is the characters that dominate the film, Vahe and Aimee  Keushguerian most of all, but also Iranian-American winemaker Moe Momtazi and his daughter Naseem.

The characters are strong and the emotions authentic. It is hard not to connect with the people and through them the wines. There is even the subtle thread of daughters worrying about fathers to think about. Memorable.

Sue and I have to admit that some factors probably predisposed us to like this film. We first tasted the Keush and Zulal wines last year thanks to samples provided by Storica Wines, the U.S. importers.  And we know and like Moe Momtazi, whom we met when I spoke at the International Pinot Noir Celebration in Oregon several years ago.

Even without these personal connections, however, I think we would be sympathetic to the Armenian wine story because of what we learned when we visited Georgia when I spoke at the UNWTO conference there. Georgia, remember, was lucky to get the Soviet wine franchise while Armenia was assigned brandy production. But it wasn’t really a gift because the Soviet wine system was focused on industrial production of sweet wines. As in Armenia, the task of preserving the essence of Georgian wine was left to families tending their grapes and making traditional wines. Our sympathy for the Georgian producers trying to revive their industry is, I suppose, part of our reaction to this excellent film about Armenia and Iran.

I know a critic who sets a pretty high standard for the wines he chooses to write about. They must be delicious, of course, but that isn’t enough. They also need to tell a story and to reveal something meaningful about people and places or maybe values and ideas. We are not wine critics here at the Wine Economist, but the Armenian wines we have tasted were both delicious and told interesting stories. Everyone we’ve shared them with came to the same conclusion.

We are not film critics, either, but we set something of the same standards when it comes to wine films. They should entertain, but that’s not enough. Somm: Cup of Salvation is a pleasure to watch, that’s for sure, but the stories it tells, the questions it asks, and the truths it reveals make it something special.

Raise two glasses (or more if you have them) to SOMM Cup of Salvation.

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Storica Wines is currently offering a “Sip & Stream with SommTV” package that includes a 4-pack of Armenian wines featured in Cup of Salvation bundled together with free access to the SOMM TV channel for the rest of 2024. Here is a link to the offer details.

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There is a fine film about the Georgian wine struggle, which we reviewed here in the Wine Economist back in 2018, “Our Blood is Wine.”

Second Thoughts on Pinot Grigio?

September 10, 2024 By in Italian wine, wine 4 Comments

Sue and I find that we are having second thoughts about Pinot Grigio. And that’s a good thing.

I am not quite sure where and when it began, but we must have had a series of disappointing Pinot Grigio (PG) experiences. Maybe we were at too many receptions where PG was offered as the white wine alternative to Chardonnay. The wines seemed designed to avoid offending anyone, with no distinctive characteristic to raise eyebrows or draw attention and no rough edges either.

Pinot Grigio became a reliable cooking wine at our house, but not something that we’d go out of our way to drink.

Suddenly this Summer …

Then suddenly this summer something changed and now we find ourselves on the lookout for interesting PG wines to try. I think it started when we flew to northeast Italy to visit the Collio DOC region. We spent two mornings blind-tasting dozens of Collio wines: Ribolla Gialla, Friulano, Malvasia, Sauvignon, Collio Bianco. All of them were interesting and delicious.

But it was the Pinot Grigio that surprised us. We spent an hour happily working our way through 14 different Pinot Grigio Collio DOC wines. The wines were different from the stereotype imprinted on our memory. The differences in terroir and vintage came through clearly. If this was Pinot Grigio, we decided, we needed to pay more attention.

Then we started tasting Friulian Pinot Grigio wines made in the traditional copper-color Ramato style, which someone described as somewhere between Rosé and an Orange wine. These wines were recognizably still Pinot Grigio but taken in a different direction. How interesting.

Serious Fun with Pinot Grigio

Back home, we started looking for Pinot Grigio with character and we found interesting Pinot Grigio wines at a local tasting of Elena Walch and Cantina Terlan wines from Alto Adige. Different from the Friuli wines and different from one another. Fascinating. A trip to Total Wine gave us more to drink and think about. It was interesting that Ramato-style wines were featured in the Pinot Grigio section.

We even enjoyed a sort of “back to the future” Pinot Grigio from Friuli producer Eugenio Collavini. Their delicious Villa Canlungo Pinot Grigio DOC Collio is the result of Manlio Collavini’s mad experiment. It is a white wine, one of the first white Pinot Grigio wines made in Collio back in the day when Ramato set the standard. Now white is the norm and Ramato gets attention. Funny how things get all topsy-turvy!

We re-discovered an old favorite at a wine dinner that our friends at Ricardo’s  Kitchen & Bar in Lacey, Washington, organized. It was Julia’s Dazzle from the Long Shadows winery. They let their Pinot Grigio grapes get very ripe indeed, and the dazzling result is more like a Rosé.

But wait, there’s more. The Graziano family was among the first to plant Pinot Grigio in California and their wine stood out as we began exploring American products. Grapes from old vines in Mendocino are barrel-fermented and sur lie-aged for their Monte Volpe PG. It turns out that if you treat Pinot Grigio like a serious wine, you can make a serious wine with character and complexity. Who knew?

All Along the Wine Wall

Sue was prowling the wine wall at the Proctor Metropolitan Market and stumbled upon a wine with “Ramato” in big letters. But it was from Washington, not Italy. So we had to try it. The deeply colored and intriguing wine is made by Sage Rat wines in the Rattlesnake Hills AVA near Yakima, Washington. It is an example of how the idea of interesting Pinot Grigio (and the traditional Friulian skin-contact method, too) is rapidly spreading.

We’ve changed our minds about Pinot Grigio and are now on the lookout for interesting PG wines. So what’s the point? Well, there are a lot of wines that have been stereotyped in one way or another (think post-Sideways Merlot, post-Yellow Tail Syrah/Shiraz, or post-Blue Nun Riesling). Stereotypes and fashions are powerful forces, but once you break through them you often discover a more complex and interesting world. That applies to Pinot Grigio … and a whole lot more.

No one likes a wishy-washy person, but sometimes it is good to have second thoughts.

Asti: the OG LA Wine

September 4, 2024 By in Uncategorized 2 Comments

Over in Beer World, the NA (non-alcoholic) category is booming. Sales by market leader Athletic Brewing Company continue to grow while more and more other brands introduce NA products. There is a lot of interest in NA here in Wine World, too. The most-read single Wine Economist article of this year so far is an essay on “Non-Alcoholic Wine and the Second-Glass Test.”  However, NA wine remains a niche product compared to NA beer.

More of the Wine World focus is on LA (low-alcohol) wine, which is promoted variously as “light,” low-calorie, “better for you,” and so on. Many new products have been launched to take advantage of interest in LA wines. Some producers seem to think this is a new category, and it may well be to some consumers.

Everything Old is New Again?

We recently received a story pitch for a brand that seemed to think it invented the idea of LA wine. That rubbed the wrong way because low-alcohol wine has a very long history. German Rieslings, for example, have long featured their moderate alcohol (they might have been the first “session” wines). Stella Rosa wines, which have alcohol levels so low that they have to include nutritional data on the labels in addition to the usual alcohol warnings, are very popular and widely distributed. Riunite Lambrusco, once the most popular imported wine in the U.S., is low-alcohol, too.

The wines from Asti — still Moscato d’Asti DOCG  and sparkling Asti DOCG (aka Asti Spumante) — must be included on the list of OG LA wines here in the U.S. market and around the world, too. The abv for Moscato d’Asti DOCG hovers around 4.5 percent, considerably lower than most white wines, and Asti DOCG is a bit higher but still relatively low at 7.5 percent. Residual sugar levels are higher because the wines are not fermented dry, of course, but the best of these highly aromatic wines achieve good balance with higher acidity, although I admit I have sampled a few over the years that were unbalanced on the sweet side for my taste.

The Asti Consortium sent us a sample of each wine and they represented the region very well. Bava Bass Tuba Moscato d’Asti DOCG and Gancia Asti Spumante DOCG  were well-balanced and delicious. We sipped the Gancia Asti sparkler as an aperitif on a warm summer day and the Bava Bass Tuba Moscato d’Asti paired very well with a fresh fruit dessert. We tried  Moscato d’Asti DOCG along with some other wines paired with chocolate last year and were surprised by how well they worked with Chocolate Moonshine French Vanilla Fudge.

Global Interest in OG LA

Who drinks the LA wines of the Asti region? Judging by the ready availability of the wines, I would say that the market is quite large here in the United States. Costco regularly features its own Kirkland Signature brand of Moscato d’Asti, for example, in addition to other labels of this wine.

I asked the Asti Consortium for sales data and the results surprised me a bit. The pie chart above shows 2023 sales for sparkling Asti DOCG. Most is sold in Italy and the rest of Europe but the Russian market is very large, which makes sense because sparkling and sweeter wines are very popular there. In fact, 2023 might have been a particularly good year for Russian sales. The Economist reports that Russian government stimulus helped spending on imported sparkling wine increase by 80 percent that year!  The Americas and Asia take their share of the Asti DOCG pie, tool.

The sales pattern is very different for still Moscato d’Asti DOCG. The U.S. market is by far the most important followed by Italy, Greece, South Korea, and Switzerland. No wonder these wines are so easy to find on U.S. store shelves. U.S. consumers drink about two of every three bottles sold in the world! Amazing.

The sudden surge in attention given to LA wine may be new, but consumers have been enjoying LA wine for a long time. There are lots of new brands and concepts, that’s for sure, but the OG LA wines like Moscato d’Asti DOCG and Asti DOCG endure for a reason.

Wine Economics 101: the Three Vs of Wine

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

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

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

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

Wine and the Three Vs

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

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

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

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

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

Specialization and Exchange

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

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

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

Risky Business

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

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

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

Market Dynamics

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

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

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

What’s New? Portuguese Translation of “Around the World in 80 Wines”

August 20, 2024 By in globalization, Shameless Self-Promotion, wine, wine tourism 5 Comments

The Portuguese translation of my 2018 book Around the World in Eighty Wines is here. A Volta ao Mundo em 80 Vinhos was released last month by the Brazilian publisher Editora Valentina.  The new book is available from the publisher as well as through the usual online sellers including Amazon.com here in the United States.

What’s the book about? Well, here’s a brief excerpt from the summary to test your Portuguese language skills! (The English language summary can be found on the book’s Amazon.com page.)

Inspirado no clássico romance de aventuras de Júlio Verne, Mike Veseth nos leva à sua Volta ao mundo em 80 vinhos. A jornada começa em Londres, metrópole histórica da enologia. Logo viajamos pela França e pela Itália, para, em seguida, darmos uma guinada em direção a irresistíveis relatos sobre o vinho na Síria, na Geórgia e no Líbano. Toda taça de vinho conta uma história, e assim cada um dos oitenta vinhos aqui selecionados tem algo importante a revelar. Sem mais delongas, seguimos pela África do Norte até a Argélia, um dos maiores exportadores de vinho do mundo, e atravessamos o Mediterrâneo para chegar à Espanha e a Portugal. Acompanhando as rotas comerciais portuguesas, desembarcamos na Ilha da Madeira e depois na África do Sul, onde fazemos um rápido desvio para saborear o mais famoso Pinot Noir do Quênia. Como assim? Pinot Noir no Quênia? É isso mesmo? …

Authors don’t get rich from translation rights, but it’s exciting to see the new edition because it promises to expand the global audience for my book. Brazil and Portugal are important wine-producing and consuming countries and the Portuguese-speaking world is, well, worldwide. It seems like I find Portuguese and Brazilian influence wherever I go. Europe, Africa, Asia, the Americas, everywhere!

A Volta ao Mundo em 80 Vinhos is the third of my wine books to be available in translation. It joins “Вокруг света за 80 бутылок вина.”  (the 2019 Russian translation of Around the World in Eighty Wines) and “Războaiele Vinului” the 2017 Romanian translation of the 2011 edition of Wine Wars,. on the Wine Economist foreign-language bookshelf.

“Obrigado” to Editora Valentina and my other international publishers for their creativity and hard work. Thanks, as well, to all the readers for their support.