The 2007 Outlook

Do "Chick Wines" Really Exist?

On Taste and Big Wines

The 2005 California Grape Harvest

Musings on Appellation and Terroir

Odds & Ends from the 2004 Crush Report

P.S. I Told You So - the renaissance of Petite Sirah (commentary)

Quotes of the Month Archive

About Those Scores...

"The most powerful critic of any kind, any where," (LA Times); "a critical comment...can be financially devastating to the producer." (Atlantic 2000); "his influence over the industry is akin to Alan Greenspan's sway over financial markets" (MSNBC); "consumers no longer buy wine, retailers no longer sell it; instead they buy and sell scores" (Slate). Trumpeted in the media outside the wine world, parroted by some retailers and wine collectors, pilloried by others, quoted and mocked even on the silver screen (think Mondovino); the one thing most people in the U.S. wine business or observing it seem to agree on is that the leading wine critics, in particular Robert Parker and the Spectator's stable of writers, really matter. A lot. 

Salespeople want scores to help them sell wine. Store managers and restaurant buyers use scores as an excuse to stock or reject wines. In a recent posting on Mark Squires' Wine Board, one enthusiast seriously proposed that Robert Parker's retirement would have a greater impact on the wine industry than any other event. Sure puts climate change, vine diseases, prohibition and global depression in their place!

All of this is backed with the power of a zillion anecdotes and not very much hard data. 

I'll set aside the esthetic arguments about the "international" wine style and whether quality is linear. I'll ignore for now the statistical silliness of the 100 point scale. I just want people to stop thinking that these scores control the wine market.

Some fun facts:

The Wine Opinions panel tracks core involved wine drinkers (roughly 18 million consumers who dominate purchases of over $15 wine in the U.S.). Among them only 12% read Robert Parker reviews. About 48% read the Wine Spectator or some extract of it, or visit its website. The magazine with the largest readership, Food & Wine, still reaches only 61% of these people. (Note that this is readership in any form, not subscriptions or sales). Among those who report reading any of these media, 52% say that Robert Parker has little or no influence on their wine purchases and 31% say the same for the Wine Spectator. Only 29% of them agree there is a big quality difference between an 88 point wine and a 92 point wine, while 42% disagree.

In a study for the NVGGA, we asked a representative sample of high end wine consumers to rate their likelihood of buying four different wines, distinguished only by their reviews. All the reviews were complimentary. However, two of them were mid-80 point reviews with adjectives like "delicate", "understated" and "balanced". The other two were mid-90 point reviews with adjectives like "bold and ultraripe" or "rich and opulent". One might expect the latter two reviews to obtain much higher interest from consumers. And one would be wrong. Consumer intent to purchase was fairly close for all sets of reviews. The largest percentages either showed strong intent to purchase at least one mid-80 and one mid-90 wine (43%) or were indifferent to at least one mid-80 and one mid-90 point wine (48%). The greatest difference appeared to be between those who believed reviews (a substantial minority) and those who did not (a slightly larger group). The type of the review and wine style only affected the answers of 15-23% of the consumers, depending on the review.

As someone who used to review financial and accounting data from many different wineries,  I can assure you there are plenty of successful wines selling at high prices with scores below the sacred 90 point line. This fact was also illustrated by results of the most recent CoreTrack report from Wine Opinions. A section of the report focused on consumer perceptions of "old guard" Napa Cabernet producers vs. the newer "cult" wineries, which have received rave reviews from the critics and obtained eye-popping scores and prices. Four Cabernets from each type of winery were compared in consumer awareness, trial, and image.  When we asked respondents (regular high end wine buyers) which wine they would choose for a special occasion dinner, the rankings did not at all correspond to the Wine Spectator numerical ratings:

In fact, it looks like a clean sweep by the old-fashioned, lower-scoring, decidedly uncultish wineries. Of course, part of this difference may be due to greater familiarity and part of this is due to price differences. But that's just the point.  There  are other factors that outweigh critics' scores in the marketplace. It's time to wean ourselves off of the wine scores.

ZINFANDEL STYLE – A CONSUMER RESEARCH PERSPECTIVE

Excerpts from presentation at Unified Wine & Grape Symposium 2007

  Why did a market research guy talk at a tasting session on clones and field selections? Because research shows us that flavor, and wine style, does matter. And also because consumer perception of flavor is more subtle than the trade and media pundits would have you believe. Winemakers and grape growers have more opportunity to “be themselves” than you might think. The rest of this presentation will focus on these topics, first let’s consider two other aspects of clonal variety and field selections to think about.

 Clonal selection and field cuttings provide some trade talking points, particularly for high end restaurants and wine shops. This is more information than all but the geekiest of consumers want to know, but it can provide you with ways to distinguish and explain a wine style to the trade – why you replanted to this or that field selection, how a certain blend of clones provides complexity or balance, and so on.

            Typicity is something to be taken into consideration when making clonal or field selections. For example, if your region or winery is well-regarded for big rich jammy Zin, how much of your blend do you really want to devote to a vine that emphasizes spice over ripeness and weight?

             Last year I completed a major study of the Zinfandel market, from production to consumer perspectives, for ZAP. The complete results are available to members, but I will be drawing on some of the data here. The study included among other things a survey of Zinfandel producers, and one of the questions was “what do you perceive as the major issues facing Zin wineries?” These were the top 5 answers, and you can see that #1, #2 and #4 are directly impacted by the perception and reality of the wine style or flavor.

 Top 5 Zinfandel Issues (according to wineries)

1. Perception of Zin as high alcohol, ultraripe (57%)

2. Lack of consumer understanding (32%)

3. Lack of restaurant support (31%)

4. Trade confusion from too many styles (28%)

5. Competition from mainstream varietals (20%)

             Let’s take a closer look at the Zinfandel consumer. We surveyed the ZAP members (the core of core Zinfandel fans) and the Wine Opinions panel (explanation). I also broke out High Frequency Zinfandel drinkers (HFZs) to analyze separately. Only a very small percent of HFZs were ZAP members.  The Wine Opinions panel represents roughly 16 million core involved wine drinkers. These people are the ones driving the market for wine over $15/bottle today and represent a substantial amount of the volume under $15 as well. HFZs are high frequency Zin drinkers, roughly 2 million consumers. Sounds like a lot, but these people drink wine several times a week to daily, so even drinking Zin once a week still allows these people time to drink other stuff the rest of the week.

 Demographically there was little difference between High Frequency Zin drinkers and the typical Wine Opinions panelist. In income, gender and age they were equivalent. This tells us that preference for Zinfandel is one of taste and style, not demographics.

The survey data gives us some indication of the consumer lack of understanding of Zin. Much depends on the consumer’s familiarity with Zin. In the chart below, we show responses to the question “I’m often unsure about what flavors or style I will get when I buy Zinfandel.”  Responses are broken out into ZAP members; HFZ = High Frequency Zin drinkers (only a small % of whom are ZAP members); and the WO panel representing the core involved wine consumer. Over 1/3 of the WO panelists indicate they are unsure of what flavors they will get with a Zinfandel. Perhaps the wider market of consumers need more explicit information on the styles and flavors of Zin?

            The #1 concern of Zin producers we surveyed was the alcohol and ripeness issue, which has been batted around in the media and trade with increasing frequency. This is clearly an issue that is affected by choice of vines, rootstock and planting decisions. The findings of our research on Zin drinkers reveal a very different consumer perspective than what you often hear in the trade and media.

 We asked survey respondents to check of f on a list of descriptors those that they associated with Zinfandel. Descriptors such as “heady, high in alcohol”, “heavy, full-bodied” and “jammy flavors and aroma” are more likely to be associated with Zin by Zinfandel fans than by the typical core wine consumers. Zinfandel is not particularly associated with these characteristics by the average core wine consumer.

 Moreover, to the extent that such characteristics do reflect hang time and higher brix and alcohol, they do not appear to be taken as negatives by Zinfandel enthusiasts.   As you can see in the chart below, the description “heady, high in alcohol” is positively correlated with frequency of drinking Zinfandel. However, the descriptors “too ripe and alcoholic” and “overripe, cloying” rate low among both Zin fans and mainstream core consumers. The alcohol and hangtime issues are not currently a problem for Zinfandel fans and may even contribute to Zin’s appeal for some. Zin does not seem particularly or uniquely associated with this style of wine by typical core wine consumers.

 However, a word of caution - this issue needs to be monitored closely in the future. Other research shows that most core wine consumers are quite unaware of the relationships between picking times, alcohol and flavor styles, so their opinions on this matter are still evolving.

             For example in a study of perceptions of hangtime and ripeness in Napa wines, we asked “Which of three Zins would you choose?”. It was specified that they had the same vintage, price, and the wineries all had a reputation for high quality. Only the alcohol level on the label varied between 13.1%, 14.4%,  and 15.7%. Among respondents, 24-29% agreed that they “don’t know/no difference.” Both Core & High End consumers tended to pick the middle level (14.4%), indicating uncertainty. Many who said they preferred “bold” “rich” and “ripe” wines in other questions nonetheless picked middle or lower alcohol. When asked if “…alcohol level over 15% is too high…”, 50% were undecided, 29% agreed and 20% disagreed.

             This issue is evolving. People are not in the habit of deciding wines by alcohol level, they have not yet made the connection between alcohol level and wine flavor or style. However, more articles are appearing and at least some of the trade is onto the issue. This may eventually translate into consumer opinions. Already in this study high end buyers were more likely to agree than disagree that 15% was too high (39%).

 Trade perception may be another matter. Though many wholesalers and retailers will tell you they know what the consumer wants, because they are closer to them, research has demonstrated this is not always the case. For example, research has demonstrated that the trade has a far lower opinion of Merlot than consumers.

We should always remember that tastes are diverse. Controlled sensory evaluations of wine by consumers have shown this, with consumers tending to clump in various sensory groups, often with substantial numbers in each. At least ¼ of high end consumers prefer to buy wines in a variety of styles, rather than gravitating towards one style or another. In addition, there are millions of core wine drinkers who don’t pay any attention to the major critics or writers.

The 2007 Outlook

   As the old curse goes, "may you live in interesting times." Actually, things are pretty good on the demand side of wine industry, it's the supply side that might be cursed. Whatever your outlook, it's pretty clear that 2007 will include some interesting times.

   The Wine Market Council is about to release it's latest research, the closely-watched General Sessions of the Unified Wine & Grape Symposium are coming up and wine seems to be everywhere these days; being planted, harvested, marketed, invested in and featured in media from books to television. Here are some of the trends I'm going to be keeping an eye on in the near future:

The deepening of the American consumer market - the official figures aren't out yet, but it appears that the main reason sales are healthy is an increase in the numbers and purchasing frequency of the core wine consumer. Among marginal wine drinkers, there was some decrease in numbers, but this effect was offset by the transition of many to more regular wine drinking. If the trend holds, we are heading towards a nation with a much larger number of "real" wine drinkers while the rest of the population rarely drinks wine. Scan data and trade anecdotes indicate 2006 was a great year for wine sales...

The fracturing of American Wine Shopping - more wine from different grapes and regions is available in a wider variety of retail channels than ever before. Substantial long-established brands struggle while brand new labels and wineries come out of nowhere to rack up huge sales within a couple of years. The new millennial generation wine drinkers are skipping many of the traditional introductory wines, while an older generation of brand or type-loyal wine drinkers is becoming less and less relevant. There are even some signs that the Parkerator's lock on critical perceptions is weakening. For wineries offering a difference in quality, style, packaging or story, if you can get through the distribution bottleneck there's a niche for you.

Will the Millennials live up to their advance billing? Research on the initial wave of twenty-something wine drinkers in the Millennial generation was tantalizing, showing that they were not only adopting wine faster than their predecessors but also more diverse in taste and demographics and more likely to splurge for quality. Was this just a fad or will the Millennials begin to shape wine demand the way the baby boomers did in the 1970s and early 1980s?

Supply Woes - as I have stated consistently over the past two years, much of the press and industry was overoptimistic in declaring the glut over. The fact was that some varietal/price segments were in oversupply to the tune of millions of cases of wine. Pulling out even thousands of acres of older jug and last resort grapes in the southern Central Valley wasn't going to have much effect on the troubles of the uncontracted Cabernet grower in Paso Robles or Lake County. In addition, the glut of 2001-2003 didn't even feature the peak potential supply - the last wave of plantings hadn't yet reached full production maturity and wineries have been keeping the lid on yields-per-acre in many of the Coastal regions. Average grape prices will start climbing again when we either pull or graft over some coastal and Lodi/Delta acreage or when demand really catches up with supply. This will happen on a region-by-region, varietal-by-varietal basis. And global oversupply may continue for even longer, since everyone and their mommy has heard about how wine brings in more money that commodity crops. Good thing demand is healthy, huh?

Do "Chick Wines" Really Exist? 

 “Chick Lit” seems to have been a recent trend in literature, or at least in publishing house PR. I guess it’s another trend that I missed or didn’t really get. (Are the Brontes Chick Lit? Eudora Welty? Toni Morrison? They all bring a feminine perspective, but somehow I have a hard time thinking of them as Chick Lit). Then the concept of “Chick Films” seems to get plenty of mention in popular culture from radio to critics to water cooler talk. So are there “Chick Wines” or is this another urban myth?

This concept has a fairly long cultural history in the U.S. wine business, from notion that red wines are drunk by men and white wines by women to the idea that wine in general was a women’s drink and men preferred beer. These cruder and more basic notions have been generally discarded, but our preference for easy generalities still pops up in ideas about differences between what men and women want in wine. The fact that there are genuine biological differences in sensory perception between genders helps fuel these ideas.

We’re getting some answers and insights into this issue at Wine Opinions. Wine Opinions is a research company that has created a panel of over 2000 core involved wine consumers, geographically and demographically representative of the wine buyers who really drive the market for fine wines. We do market research for a variety of wineries, and grower/winery organizations. During the course of this research, we often look for patterns or trends by gender in consumer opinion.

First, a few basic facts. Core wine drinkers – those who drink wine once a week or more often - are 46% male, 54% female. This group consumes over 80% of the wine in the U.S. However, the gender ratio more than reverses in California , where the majority of core wine drinkers are men. Males are more likely to state they drink mostly red wine, 40% to 27%, but this ratio evens out among newer, younger wine drinkers.

So to add fuel to the fire, here is some data on the women vs. men and wine, based on some of our recent studies.

Do varietal preferences differ between males vs. females?

Not very much. In a recent study of Merlot, 36% of females named Merlot “one of their favorites”, whereas 24% of males did so. But 51% of males stated that they “liked it, although it was not a favorite” vs. 38% of females. Meanwhile neutral or negative views of Merlot showed no statistical difference between sexes. So the overall proportion with a positive view of Merlot is even between males and females.

When given a hypothetical choice among $10 varietals for having on hand at home, the same skew was seen in Merlot. In addition females were more likely to choose Pinot Noir, but the other varietals showed no gender differences. When the choice was changed to picking a wine over $20 for a dinner party, females again were slightly more likely to choose Pinot Noir than males, but the Merlot differences evened out. Females were slightly more enthusiastic about Zinfandel, but otherwise there were no significant gender differences.

In an earlier Wine Opinions study of Pinot Grigio, consumption was about equal between the sexes, although females tended to rate Pinot Grigio from Italy or California slightly higher than males.

One finding that has been consistent is that male core wine drinkers do seem more experimental, and to have tried a wider variety of wines.

Are there “Chick Brands”?

Presumably purchase or consumption of some brands skew male or female, but based on a recent study of “fun brands” in the $8-12 range, it’s not obvious. We measured trial and opinions on 15 different brands with fanciful or “critter” labels, where a sense of humor was part of the packaging or positioning. Among these, females did tend to favor the Rex Goliath and Fat Bastard brands, but for the remaining 13 brands there were no significant differences in ratings between males and females, including wines like Little Penguin, Three Thieves, Screw Kappa Napa and Toasted Head.

Are wine geeks mostly men? How about those point-chasers?

If by “wine geeks” you mean people who drink wine frequently, have distinct opinions about wine brands and styles and spring for expensive wines regularly, the answer is no.

Men are somewhat more likely to purchase more expensive wines. In the Wine Opinions panel, those who purchase $40+ wines frequently are 4% female, 7% male; not a statistically significant difference at that sample size. Those who report buying such wines occasionally are 19% female, 31% male. This difference shrinks considerably for $20-40 wines and disappears below $20. However, since females constitute a larger number of core wine drinkers overall, the actual number of $20+ wine drinkers in the population is quite close, only slightly favoring males.

The gender difference does grow starker as you go up the price spectrum. When asked if they ever have bought wines priced $100 or more, 45% of Wine Opinions males say yes vs.24% of females. And among those who do purchase such bottles, men bought on average bought more. Furthermore the wine collector skews clearly male. They are much more likely to have 100 or more bottles at home, whereas females are much more likely to have 1-12 bottles at home. BUT there is a big asterisk on these numbers. Income has a strong influence on high end wine purchases, and females on average report lower household incomes than males. In fact, when you correct for income distribution, female and male purchasing patterns are substantially the same except for those 100+ bottle collectors, who still skew male.

Parker and Spectator readers skew male, 4-1 for Parker, 2-1 for Spec. Males also stated higher influence on buying decisions for these publications, so it is reasonable to assume that the “point-chasing” is a more of a male activity.

Is this whole big/high alcohol/ultraripe wine style a guy thing?

The Wine Opinions panel can only answer what people think about such wines, since you can’t run actual controlled tasting panels over the internet. However, the answer based on perceptions appears to be no. In one study, we gave people a choice of Zinfandels, with the only significant difference being alcohol levels. Men were less likely to pick the highest alcohol wine, although the difference was borderline statistically. In addition, men were more likely to agree with the statement that wine over 15% was too high in alcohol.

When various wine descriptors were tried on the panel, there were no gender differences between preferences for wines described as light, balanced or heavy. Similarly, there were no differences by gender in reacting to different types of wine reviews, ranging from “huge, ultraripe, intense” to “elegant, silky, understated, harmonious.”

In sum, there are taste and style differences between male and female wine drinkers but they tend to be quite subtle once you remove the effects of income, age and other factors. Collecting wine seems to be more of a male activity, males are more likely to be swayed by reviews and they tend in surveys to me more opinionated in general regarding wine and wine-related topics. However, actual taste preferences are less obvious, and brands that might seem aimed at a particular gender don’t necessarily end up on target. In short, you better do your homework before assuming someone’s taste in wine based on their gender.

On Taste and Big Wines

I recently finished up a survey of Zinfandel producers for the board of ZAP, who wanted to find out what members (and non-members) were thinking about the state of Zinfandel. (Thanks again to all 222 wineries that responded just as harvest was starting, a terrific effort.)  One of the questions asked on the survey was what did wineries feel were the most important issues facing Zinfandel. Top of the list was a question about consumers – worries about whether they perceived Zinfandel as high alcohol, ultra-ripe wines. There were other consumer-related issues, such as lack of consumer understanding of Zin and lack of support in restaurants, but the alcohol-ripeness issue was perceived as #1, and we will be finding out more about this when we finish our Zinfandel consumer survey in 2006.

The whole late harvest and alcohol issue is a fascinating and complicated one. It involves changes in viticulture and winemaking, the influence of certain critics, the demographics of wine drinkers and the differing ways that we smell and taste. Unfortunately, consumer research is way behind winemaking and critical trends in this case and there is relatively little public information on what the consumer perception of the trend towards later harvesting, riper grapes and higher alcohol levels. However, I do have some insights to share on this topic, thanks in part to a project done for the Napa Valley Grape Growers last year. This project measured consumer opinions and beliefs on the topic of later harvesting, flavors and descriptors associated with these wines, and alcohol levels. While a variety of questions were asked, I will focus on two that give us some interesting insights into the alcohol issue for Zinfandel.

One question was really quite simple – we asked which of three Napa Valley Zinfandel wines consumers would purchase, based solely on the stated level of alcohol in the bottle. The actual question was: “Suppose you are considering three Napa Valley Zinfandel wines for purchase.  They are all from the same vintage, they are the same price, and they are all from wineries that produce high quality wines.  The only difference you can see by looking at the labels is their alcohol level.  Please select the one wine you are most likely to purchase.”

                    13.1% alcohol                    14.5% alcohol                    15.7% alcohol

There were a significant number of “don’t know/makes no difference” responses - 29%. Core wine consumers, who drink wine at least once every week, slightly favored the 14.4% alcohol wine, with 28 percent choosing it, compared to 21 percent favoring the 13.1% alcohol wine and 22 percent selecting the 15.7% alcohol wine.

High end consumers, those who frequently purchase wines over $20/bottle, favored the 14.4% alcohol wine by a higher margin, with 33 percent making that selection, 23 percent choosing the 13.1% wine, and only 14 percent choosing the 15.7% alcohol wine.  Many of these same high-end consumers had stated that they prefer bold, rich, ripe, mouth-filling wines and expressed a preference for riper grapes and later picking in other questions in the survey. The fact that the majority of them picked the wines with the lower alcohol level indicates that these consumers do not yet correlate alcohol level with the other style characteristics. They may see higher alcohol as a negative in the abstract, while preferring that style of wine in practice.   

In the eyes of many wineries, one of the factors driving the trend towards late harvest, high alcohol wines is critical acclaim for many of the wines in this style. Assuming some major critics favor these wines, the question is: are they dragging the consumers along with them? When we analyzed consumer responses to reviews of different styles of wine, the results were surprising and contradict some of the common wisdom about consumer tastes.

For this test, we asked consumers to react to hypothetical reviews that illustrated wines resulting from the two sides of the harvest date issue. (The reviews were in fact composites of various reviews in some leading wine publications). We presented four reviews ranging in style from “Understated, silky and harmonious with black cherry flavors and lively acidity.  Delicately balanced and graceful through the finish” to “Bold and ultraripe… with layers of blackberry, currant, and mocha flavors leading into an intense and persistent finish.” For each review, we asked consumers if they were “very interested”, “somewhat interested” or “not interested” in purchasing the wine.

One of the unstated assumptions of the debate over whether consumers like the extended hangtime style is that consumer taste is linear. Supposedly most red wines of a given varietal or type can be put somewhere along this scale. 

        Higher acid, greener,    <<<<<<<<   >>>>>>>>    Lower acid, riper fruit, 

        fresher fruit flavors                                                           smoother phenolics, fatter jammy flavors 

It is then assumed that a consumer will tend to favor one end of the spectrum or another. For example, Susan might like bigger, riper wines while Pierre might prefer tangier, greener, fresher wines. Typically critics and wineries retort to complaints about the current wave of big ultraripe wines with “that’s what the buyers want.” In other words, they think there are a lot more Susans than Pierres.

Similarly, the fictitious reviews from this survey might be considered as located on opposite ends of a scale, for example.

        “Understated… lively acidity”       <<<<<<<<   >>>>>>>>   “Bold and ultraripe…”  

By the same logic, Pierre would favor the wine reviewed on the left and Susan the wine on the right.  Confronted by a single binary choice (pick this one or that one), many consumers might choose one style or another or something in between.  However, over time consumers have the option of purchasing multiple wines and many of them will choose wines from both ends of the spectrum.

How do we know this? If it were not true, then most of the consumers picking the “Bold and ultraripe…” wine would be less inclined to purchase the wine with the “understated…lively acidity” review. And vice versa. In fact, in our test nearly the opposite happened.

Almost half (43%) of the people who were very interested in purchasing “understated” were also very interested in purchasing “bold.”  Only 14 percent of the people who were very interested in “understated” were not interested in purchasing “bold.” A much larger number of consumers wanted to buy both than just one, even though they are described as very different wines. 

Conversely 48% of the people who were not interested in purchasing “understated” were also not interested in purchasing “bold.”  Just 24 percent of the people not interested in “understated” were very interested in purchasing “bold."

Note: rows do not add up to 100% because of option to choose “somewhat interested.”

In other words, the number of people interested in purchasing both styles was larger than those who picked one over the other. And the number of consumers who were not very interested in either also outweighed the number of consumers who picked one over another.  

What’s the point? There are two points here:  

1)      Claims that the consumer (or a majority of consumers) wants this or that style miss the point that a large number of consumers are willing to purchase a variety of wine styles.  

2)      The biggest difference may be between consumers who believe and follow reviews and those who don’t, rather than their differences between which reviewer and what wine style to follow.  

Even many sophisticated consumers have much to learn about the relationship between alcohol, ripeness and wine flavors. And we in the business have much to learn about consumers’ preferences too. For now, the main point is not to panic over the alcohol and ripeness issue. There is no clear sign yet of a consumer backlash against the long hangtime style, but there is no reason to believe that you can’t sell lighter, less ripe and more “elegant” styles of wine either.

The 2005 California Grape Harvest

Well, the 2005 California harvest is over. Quality is looking pretty high, but the high quantity seems to have taken people by surprise. Don’t be surprised to hear more about quantity in the months ahead.

There was too much complacency for my taste at UWGS and WIFS this year with regards to the balance of demand and supply for wine. Much of the trade press has been proclaiming an end to the problems of the recent grape glut, due to strong consumer demand and acreage removals plus lack of planting over the past few years. Some things to remember:

• consumer demand doesn’t fluctuate as much as the wine supply. For example, the annual growth in domestic sales of Californian wine ranged from 0% to 7% between 1998 and 2004. Cabernet sales ranged from –1% to +12% during that period. In contrast, the Cabernet grape harvest ranged from –9% to +40% during that same period. Sales in smaller segments such as $10-20/bottle Pinot Noir can jump as much as 30% in a year. But their relevant supply is even more volatile – the supply of Pinot Noir grapes priced $1000 to $3000/ton ranged from -40% to +36% in recent years. Thus much of the price volatility for wine at the retail level in recent years has been driven by excess or undersupply.

• The acreage removals were confined almost entirely to the lower quality regions of the Central Valley. These vineyards only supplied the under-$10/bottle wine segment and in fact the vast majority of their grapes went into wines under $5. These removals will have limited impact on the actual supply of wine over $6. They may reduce competition for the $6-10 mass market segment by capping growth of the “extreme value” segment (two buck chuck and its clones).

• The extreme falloff in new plantings that occurred over the past 2-3 years only affects FUTURE supply. Vineyards that would have been planted in 2002-2004 would not be producing in any substantial way until next year or thereafter. Therefore, wine types that are currently in oversupply will remain so until sales catch up to the surplus, or until the relevant vineyards pull out, replant or graft over. When you compare wine sales vs. their relevant grape supply (not total grape supply) over the past few years, some segments are still in significant oversupply.

Vineyards and wineries should not assume they are out of the woods yet. For most (not all!) price/varietal segments the worst is over, and optimism is justified in the future. But in many segments there will continue to be sufficient wine supply to fuel competition and pricing pressures over the next couple of years. We are far from repeating the shortages of 1998-2000, when every grape could find a home and winery revenues per case boomed.

Is the Californian Wine Business

Finally Getting the Hang of this Appellation-Terroir Thing?

Wineries and their spokespersons have long been in the forefront of promoting appellations and individual vineyards, at least in the high end of the wine business. The establishment of appellations and related trade associations, the marketing of single-vineyard wines and the assertion that certain regions and vineyards are superior for certain varietals has become nearly routine wine talk. We have come a long way from the first vineyard-designates promoted by the likes of Heitz and Ridge in the early 1970s.

But how much has sunk in, at both the trade and the consumer levels? Arguably quite a bit, once you move over $15/bottle and out of the mass-market retail outlets.

The number of SKUs devoted to single-vineyard bottlings has soared in the past 5-10 years. The $15+ Zinfandel market, driven to a large extent by vineyard-designates, grew at a 32% compound annual rate from 1998 to 2004.

Trade surveys indicate that for buyers, appellation and vineyard-designation is increasingly important at the high end, although this varies by varietal. While the vast majority say that brand or winery name is still key, for some varieties the right appellation improves the image of quality and eases the sale. This is overwhelmingly seen as the case for Pinot Noir, but a substantial number of buyers feel that Chardonnay is more brand-driven, “like Champagne.” In general, it can been seen that the leading high-end Chardonnay brands are less likely to be vineyard-designates than leading Pinot Noirs and Zinfandels. Some high-end consumer surveys have also indicated awareness of and value placed on vineyard-designations.

Grape prices by region indicate that higher-priced Chardonnay grapes tend to come from districts with a profusion of high priced wineries marketing estate brands. High priced Pinot Noir grapes are more likely to be sourced from terroirs or appellations with a reputation for quality for that grape, even though many of the purchasing wineries may not reside in the appellation. This lends further support to the notion that the top of the Chardonnay market is more driven by brand while the high-end Pinot Noir market is more strongly related to appellation and vineyard.

The question is, has the notion of terroir really sunk in or is a vineyard-designation this decade’s equivalent of the ubiquitous “Reserve” designation from the 1980s? In other words, do consumers see a vineyard-designation as an indicator of quality and prestige regardless of its appellation or varietal? Are certain highly regarded vineyards in essence brand names?

Now a new wave of cheap bottlings will be testing the meaning and value of the Napa Valley appellation. Thanks to a hefty increase in Cabernet acreage coming into maturity and the wave of bulk wine that hit the market after 2000, Napa Valley Cabernet is available in a number of $10-15 bottlings and the Bronco wine company (source of “Two Buck Chuck”) is saying they will roll out a $3.99 Napa Valley Cabernet. It will be interesting to see if any of this changes high-end consumers’ opinions on the appellation’s identity.

Wineries and trade associations would do well to keep in touch with the meaning to consumers of their appellations and vineyard-designations.

Why We May Never Settle the Terroir Debate

Terroir is a French word referring to the character of wine that is derived from the vineyard location. A Chambertin, for example, is said to show terroir when the flavors and aromas conform to what is believed to be an expression of the site where it was grown. Less favored terroirs are said by some to impose a quality ceiling on wine grown there. The Oxford Companion to Wine (1999 edition) defines it as  “the total natural environment of any viticultural site” but cautions that no precise English equivalent exists for this word.

The term “gout de terroir” has caused some confusion, with some people assuming it means that a wine that tastes earthy or of elements of the soil, while others take it to mean that the wine showcases flavors that are caused by its vineyard location rather than winemaking or viticultural technique. Since what are perceived as earthy and soil-related flavors can be derived from other sources than the terroir, we will ignore the first interpretation and concentrate on the second.

The "terroirist" position is essentially that terroir is a variable that has an effect on wine flavor, that this effect is repeated and predictable for properly-vinified wines, and that it offers some of the most interesting and pleasurable effects and variations on wine flavor. Personally I fall in this camp, although though I have sympathy for some of the objections voiced by "non-terroirists."

 The "non-terroirists" can be divided into two camps:

-     the “agnostics”, who believe that flavors derived from terroir are usually overwhelmed by the effects of other factors such as choice or clones or barrels; and that in any case the main duty of wine is to taste good regardless of its vineyard origin.

-     The “atheists”, who believe that most or perhaps all of the flavors that are seen as characteristic of terroir are in fact the product of viticultural and winemaking traditions and that the pursuit of characteristics of terroir in wine is irrelevant and sometimes a hindrance to achieving top quality.

For our purposes, let’s define the terroir aspect of a wine as being derived from soil composition and topography. Some would include microclimate in the definition too. Including it does not really change the analysis.

To over-simplify:

Flavor (including aroma) is a function of variety, soil, topography, climate, viticultural practice, picking date and winemaking technique.

OR

Flavor = X₁(Variety)+X₂(soil)+X₃(topography)+X₄(climate)+X₅(viticulture)+X₆(harvest date)+ X₇(winemaking)

 The Xs indicate coefficient relationships to be determined (and what a project that would be!). For now, let’s assume they are at least predictable in direction (e.g. later harvest date=more sugar and lower acid). In fact, many of the effects of X₁(variety), X₅(viticulture) and X₇(winemaking) are well understood and documented at the molecular level.

Of course, each coefficient X and each determining variable is much more complicated than the above formula. For example, viticulture breaks down into pruning, trellising, leaf-pulling and other decisions, variations of each having different effects on flavor. If you were to break down each variable into the sub-variables that actually determine flavors, you might have: 

Variety – varietal, clone, rootstock

Soil – drainage, composition, microbiology, fertility

Topography – aspect, slope

Climate – temperature, hours of sunshine, variation, rainfall

Viticulture – trellising, pruning, canopy management, inputs (fertilizer, insecticide, fungicide)

Harvest Date – brix/acid/pH levels, flavor, phenolic development, hangtime, length of growing season

Winemaking – fermentation time, crushing method, cap management, yeast employed, barrel regime, etc.

And most these sub-variables in turn can be sub-divided themselves. For example, there are many different ways to trellis and prune.

For now, let’s leave it at the top level, as in:

F = X₁(Variety)+X₂(soil)+X₃(topography)+X₄(climate)+X₅(viticulture)+X₆(harvest date)+ X₇(winemaking)

Problem #1 – as you can see, this is very complicated, with a huge number of variables that can affect flavor. But it gets worse…

Problem #2 – these are not independent variables. It is very hard to change one variable while holding the others constant, which is necessary if you want to measure the effect of that variable. A change in clonal type may imply changes in viticulture if you want to keep viticultural outcome “constant.” For example, a different clone might grow a heavier leaf canopy, requiring more leaf-pulling or different pruning/trellising to come up with the same viticultural effect (if this is even measurable). Different types of trellising might result in a different harvest dates by accelerating or reducing rate of brix accumulation. But other flavor aspects of harvest date, such as phenolic changes, might remain on the previous “schedule.” The same could be said for terroir-driven aspects such as topography and soil.

Problem #3 – The massive number of variables and their interdependency might be dealt with if you had enough data in all possible variations and combinations. However, this would require either a very large-scale long-term experiment controlled from the original plantings onward, or the participation and measurement of an enormous number of currently operating vineyards.

Problem #4 – Even where individual flavor components (such as grassy/green flavors from methoxypyrazines) can be measured and approximately predicted for the above formula, the perception of these components by a taster is affected by the presence of other flavor components. Many wine aficionados have noticed this with alcohol levels – with two different wines with around the same alcohol level, one may taste hot or alcoholic in the finish and the other not, depending on the other flavor and texture aspects of the wine. Thus even if one were to be able to predict flavor relationships caused by terroir variables as measured in a lab, you might not be able to perceive them in a regular or predictable manner when tasting the wines because of the “noise level” of the other flavor components. This has been one of the difficulties in determining the cause of subtle flavors such as “mineral”. And to top it off, combinations of the same two (or more) types of flavor-causing molecules in different ratios can result in different flavor perceptions.

Given the subtlety of many flavors that experienced tasters associate with different terroirs AND the complexity of even a simplified formula of flavor derivation, the difficulty of pinning down what flavors or aromas are and are not due to terroir is extreme. It looks like the debates over terroir are likely to continue for a long time.  

ODDS & ENDS FROM THE 2004 CRUSH REPORT

Showing Soon in your Local Chardonnay or Merlot?

Grape growers would like to anticipate trends, just like anyone else.  Unfortunately, with a 3-4 year lead time and a lot of growers planting based on hunches, hearsay, and poor data, the balance of supply and demand for many grapes is often way off. What to do when there is simply far more of a grape than is needed for varietal bottlings? The cheapest stuff gets distilled, dumped into generic bulk wines or sold for concentrate. Certain grapes are in demand specifically as quality-boosting blenders, such as Petite Sirah and Cabernet Franc. The rest of the excess gets marketed as part of a proprietary blend if a winery can think of a clever or tasty way to package it, or (more typically) tries to slip in unnoticed as a stretcher for more popular varietals.

Here are some varietals that may be showing up unannounced in your favorite wine in the near future - grapes where the supply is much greater than the apparent shipments or bottlings as a varietal. If your Merlot starts to taste a little like Syrah, or you notice unusually tropical fruit in your Chardonnay, you may find the reason why in the table below.

                 2004 Tons Crushed     Wine Equivalent*            Est. Current Sales as a Varietal**

Viognier                9,053                627,000 cs                            180-350,000 cases

Pinot Gris           48,239              3,344,000 cs                            600-900,000 cases

Malbec                 4,739                329,000 cs                                20-50,000 cases

Syrah                101,108             7,009,000 cs                             2-2,300,000 cases

*estimate by Full Glass Research based on 165 glln/ton, 2.38 gallons per case

**estimate by Full Glass Research based on declared production, BoE, MKF Wine Trends and IRI scan data. California-grown only.

Unusual Varietals in District 11

Grape reporting District 11 covers the area in San Joaquin County north of State Highway 4; and Sacramento County south of U.S. 50 and east of Interstate 5. A large portion of it coincides with the Lodi appellation. It produces a huge quantity of wine grapes, crushing over 524,000 tons in 2004 (that’s roughly equivalent to 36 million cases of wine). The casual industry observer would assume this is fighting varietal territory, where oceans of bland, high yield Chardonnay, Merlot and White Zinfandel is produced.

But there’s more than just filling the pipeline going on here. Many Lodi growers have improved quality substantially over the past 5-10 years and the appellation is increasingly competitive as both a provider of grapes for blending into super-premium wines and as stand-alone wines (particularly Petite Sirah and Zinfandel).

Perhaps the need to distinguish itself from Central Valley generally is leading to more experimentation too. District 11 crushed 40% of California’s Cinsault and 29% of California’s Viognier – two varietals known mainly to Rhone wine aficionados. District 11 crushed 47% of California’s Malbec, a fine quality variety used for blending in Bordeaux that stands on its own merits in Cahors (France) and Argentina. And if Iberian varieties ever take off, District 11 could be ground zero – it crushed 21% of California’s Tempranillo (renowned in Rioja and Ribera del Duero); 34% of the Souzao and 53% of the Touriga varietals (best known from the Porto region).

 

Grape	District 11 Tons - 2004	Total CA Tons - 2004	District 11 Share
Cinsault	270	669	40%
Graciano	5	19	24%
Malbec	2,206	4,739	47%
Malvasia	2,345	8,923	26%
Petite Sirah	10,359	28,611	36%
Primitivo	394	821	48%
Refosco/Mondeuse	479	638	75%
Sangiovese	2,752	9,794	28%
Souzao	118	351	34%
Tannat	818	2,279	36%
Tempranillo	605	2,878	21%
Tinta Cao	27	106	26%
Tocai Friulano	127	227	56%
Touriga	209	393	53%
Verdelho	27	52	52%
Viognier	2,633	9,053	29%

Part of this may be the aftermath of the recent grape glut, which hit the Central Valley worst of all. Surviving the glut required one of two strategies – either pursuing extreme efficiency by growing very high yields of adequate quality grapes at low cost; or moving up the quality ladder in order to retain winery contracts and realize a higher revenue per ton. One way to move up the quality ladder may be to forsake grapes that prefer cool coastal climates (and may be overplanted there too) and develop grapes that provide more interesting and substantial flavor in the Central Valley climate. This may account for plantings of grapes such as Tempranillo, Malbec, Primitivo (aka Italian Zinfandel), and Viognier.

In addition, some of the grapes that formerly went into jug blends have now been rediscovered as contributors to fine wines in the Mediterranean style – Refosco/Mondeuse, Cinsault, Malvasia, and Petite Sirah. The port-type varieties Tinta Cao, Touriga and Souzao may benefit from the same touch of rehabilitated exoticism.

Followup to Petite Sirah

 In last month’s commentary (see archives), I reviewed the success of Petite Sirah as a varietal and blender, which had gone relatively unnoticed until recently. I ended on a note of caution, saying : “A close analysis of Petite Sirah acreage and crush price patterns is recommended when the 2004 data comes out, before you plant any significant new acreage of Petite Sirah.” While the preliminary acreage report is just coming out and has not yet been analyzed, what light does the 2004 crush report shed on Petite Sirah’s fortunes now?

First of all, it is clear that Petite Sirah supply has grown substantially, over 20% annually since 2000. In addition, the share of the supply represented by non-coastal vineyards (primarily Central Valley) has risen from 50% to 63%.

What has happened to prices during the last four years? Generally speaking Petite Sirah pricing has held steady at around $900-1,000 a ton since 1997. Interestingly, when you compare Petite Sirah prices to other leading red varietals, there is a stark difference in the patterns between the interior region and the coastal region.

In the interior region, Petite Sirah far outperformed Cabernet, Merlot and Syrah from 1999 to 2004. Apparently it did not suffer from the massive oversupply that impacted these other varietals in the Central Valley by 2000. This was probably due to a combination of not participating in the planting frenzy of the 1990s and Petite Sirah’s innate qualities as a blender. It is impressive that Petite Sirah pricing has held up over the past four years despite the substantial supply increase.

In the coastal regions, Petite Sirah’s pricing follows roughly the same pattern as Cabernet, Syrah and Merlot, although it has not declined in the same percentage as these other varietals in recent years. It is also worth noting that even in the higher-priced coastal region Petite Sirah is outperforming Syrah, which was seen for many years as its more “noble” cousin.

P.S. I Told You So  (February 2005)

Concerning Petite Sirah, I hate to say I told you so…(actually, like most people, I love to say I told you so but I usually restrain myself). Petite Sirah was officially crowned a prince in the San Francisco Chronicle’s Wine section on Thursday, January 20 2005. This followed by two years the formation of P.S. I Love You, an organization of Petite Sirah producers that was created in Autumn of 2002 and dedicated to promoting the grape, following in the footsteps of ZAP and the Rhone Rangers.

As it happens, in early 2002, when I did the analysis of emerging or secondary varietals for our MKF Grape Trends report, one of the varietals I focused on was Petite Sirah. I titled that section “The Quiet Renaissance of Petite Sirah.” I noted the fact that Petite Sirah had maintained or increased prices in most districts at a time when prices for many varietals in many districts were stagnating or falling. In fact, in the interior regions, Petite Sirah’s average price had surpassed Cabernet, Merlot and Syrah.

In addition, at that time the proportion of Petite Sirah acreage under three years of age (15%) was much lower than for Cabernet (24%), Merlot (35%), Sangiovese (45%) or Syrah (60%), meaning that the growth of supply for Petite Sirah in the near future would be much more gradual.

Petite Sirah Pricing Trends vs. Other Varietals 1991-2001

Source: California Agricultural Statistical Service

In sum, my outlook for Petite Sirah read: “Petite Sirah growers are in a solid position. The grape is in demand as a blender and increasingly on its own. Demand for the grape is demonstrated by its ability to hold price in a competitive grape market. Except in the Lodi-Yolo Districts, only modest increases in supply are foreseen. High quality Coastal or Sierra vineyards should be able to increase prices in the near future. For quality-oriented Interior growers, massive conversion to Petite Sirah would be ill-advised, but it would be a reasonable variety for some diversification.”* 

What about now? Beginning in 1999, the pace of new planting of Petite Sirah picked up considerably. The growth in bearing acreage has increased from 10-11% in 2000-2001 to 22% in 2003.  In addition, under-reporting of brand new planting of Petite Sirah has been substantial in recent years – 30-40% of new plantings appear to go unreported in the first year.

Can the market bear the increase in Petite Sirah supply? Quite possibly – there are currently no reliable estimates of Petite Sirah sales available (it wasn’t part of the original research when I developed Wine Trends model). However, maintaining a few years growth of 15-25% is not difficult for a “hot” varietal. Certainly Syrah, Pinot Noir and high end Zinfandel have managed it recently, as did Merlot in the mid-1990s. In addition, Petite Sirah is much beloved as a blender by winemakers, bringing positive qualities to a wine’s flavor and body. As such, it can obtain a premium price and a more stable market than those blenders sold mainly for price or as “stretcher.” 

Source: California Agricultural Statistical Service 

Still, caution is needed. A close analysis of Petite Sirah acreage and crush price patterns is recommended when the 2004 data comes out, before you plant any significant new acreage of Petite Sirah. In addition, it would be good to have more detailed data on how much Petite Sirah is sold and for what usage – blending or bottled varietal wine. You don’t want to hear me saying “I told you so” in 2008 with a glut of Petite Sirah on your hands.

*MKF Grape Trends 2002 edition

QUOTES OF THE MONTH ARCHIVE

Quote of the Month, February 2005:  “Facts don’t come with points of view, Facts don’t do what I want them to.” --David Byrne

Quote of the Month, March 2005: "Gentlemen, in the little moment that remains to us between the crisis and the catastrophe, we may as well drink a glass of Champagne." --Paul Claudel, poet born in Champagne.

Quote of the Month, August 2005: "Consumers should not purchase wines based on scores alone." --Robert M. Parker Jr.

Quote of the Month, September 2005: "We hear of the conversion of water into wine at the marriage in Cana as of a miracle. But this conversion is, through the goodness of God, made every day before our eyes. Behold the rain which descends from heaven upon our vineyards, and which incorporates itself with the grapes, to be changed into wine; a constant proof that God loves us, and loves to see us happy." --Benjamin Franklin

Quote of the Month, October 2005: No one that has drunk old wine wants new; for he says, "The old is nice."--Luke 5:39

Quote of the Month, November 2005: "That I will give you the rain of your land in his due season, the first rain and the latter rain, that thou mayest gather in thy corn, and thy wine, and thine oil."--Deuteronomy 11:14

Quote of the Month, January 2006: "It is better to hide ignorance, but it is hard to do this when we relax over wine" --Heraclitus, On the Universe

Contact me: cmmwine@pacbell.net; 510-847-5160

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