Consumers Be Heard!

Buying wine with the intent of having it shipped across state lines is a common exercise that illustrates where state lawmakers put their priorities. Contradictory to free trade, this legal product is restricted in a variety of different ways across the country creating headaches for the consumer. The reason for the headaches is that lawmakers create and pass regulations on alcoholic beverages based on input from the most powerful voices in the beverage trade, protecting their interests, while ignoring the consumer. It is a curious and antiquated situation that the AWCC (American Wine Consumer Coalition) aims to change by giving voice to this most important of groups in any economic/commercial relationship, the consumer. The annual membership fee for the AWCC is only $35 and it goes toward correcting what often feels like an economic and social injustice. Make your voice heard!

Article:

http://www.thedrinksbusiness.com/2013/06/wine-consumers-want-a-say-in-the-us/

r.a.h.

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Speculation vs. Consumption in a Landscape of Luxury

Alcohol is generally considered a recession-proof category because drinking is a common human response to the capricious nature of life. Some drink when times are tough, some drink when there is nothing better to do and almost everyone drinks in celebration. This baseline reality assures us that drinking will never go out of style even if the style in which we drink continues to change. When it comes to drinking wine, especially bottles at exclusive price points, changes are being brought about by the explosive growth of both population and wealth in the Asian market.

There is a vinous gold rush happening in China, Japan and Singapore that is rapidly changing the face of fine-wine and simultaneously, but more gradually, the face of wine itself. The most obvious impact of the Asian market is on “luxury” or “prestige” brands. Lafite is the most obvious example because it kicked off the luxury wine craze in China, which from about 2008-2011 was the only market for Lafite. Suddenly anyone who owned Lafite had to reconsidering whether it was still a consumption item or if, because of the prices Lafite was achieving, it had become a commodity to be cashed in on. Consider the mind-boggling purchasing power of a nation with 1.3 billion people against the annual production of Chateau Lafite Rothschild, no more than 20,000 cases, and you get an clear example of fundamental supply and demand economics. So Lafite that what was once being held for drinking was suddenly worth too much money to justify the indulgence. For westerners during the initial rush it was like finding buried treasure and you were a sucker if you didn’t cash in. “Why would anyone drink something for recreation that’s 10 times as valuable as silver, and may become as valuable as gold in a decade?”

The cult status Lafite achieved created a side-market for empty bottles and the most valuable empties were the 1982s, which could go for up to $1,500. Clearly any use for a $1,500 empty wine bottle is dubious at best but it does explain why there is more 1982 Lafite in China than was ever produced at the chateau. It also explains the problematic reality that can overtake such singularly valuable items. But the criminal side of this is a well documented topic and not the point here, what is germane to this discussion is the nearly endless money that is available overseas for the unwavering pursuit of luxury and prestige.

While Lafite is still popular, the inflated prices have come down slightly as a result of Asian consumers diversifying their drinking habits. That is good news for sellers of fine wine. But what are they buying and why? Here there is an important distinction to be made about the impetus propelling luxury wine purchases, whether of chateau/vineyard properties or of finished bottles. We must distinguish between purchases based on speculation, toward profit, and purchases based on the desire to collect and consume. In other words, wine as a speculative asset vs a consumption item.

Luxury purchases made based on speculation, in the name of $$, are a problem for the average wine enthusiast and the average local farmer because the end result is that they are being priced out of that portion of the market. Where once Grand Cru Burgundy was within the reach of many, now Premier Cru or even village wines are the only quality level affordable to the average consumer. Talk to any established wine collector and you will be told how significantly prices have risen since the 80s and 90s when the UK was the financial center of wine, before the US really got going with its buying. This was a time when the Grand Cru wines mentioned above were mere pennies compared to current prices. The US is now an established market and we are watching the rise of Asia along with prices. What is different this time around is that the price increases are on steroids, like so many current professional athletes. In this era of bigger and better much of the price inflation corresponds to a standard within the exclusive circles of the world’s financial elite, expensive for expensive’s sake.  But is the goal of the financially elite buyer to produce/consume, or is the goal speculation and investment in a commodity? If the buyer is motivated by the latter, the results of his/her action are more likely to exert a detrimental influence on the future health of the international wine marketplace.

Consider land prices in the French regions of Champagne and Cognac. A recent AFP article by Sandra Laffont draws attention to a study of the effects that international demand for iconic French luxury products Champagne and Cognac has had on the price of the land from which they are produced. The effect? Prices skyrocketed in 2012. The price for one hectare of land in Champagne country has increased 21.5% and is going for more than $1.3 million amid a rural property market that is otherwise in a depression. Cognac and coveted Bordeaux sites have seen similar increases, making these vineyards all but unobtainable for young farmers. Thomas Diemer, a spokesman for a union representing young french farmers points out that “sales at this level clearly show that some buyers are speculating on land prices rather than using the land as a production tool” and that an “increasing number of transactions are being made by companies and not by growers and farmers.” He continues that while they are not opposed to this “when it’s a matter of facilitating transfers within a family, [they] can be concerned about the consequences when these companies, which are not farmers, start acquiring properties.”

Recently acquisitions of French vineyards by foreign buyers have become relatively common. Hong Kong based Goldin Financial Holdings (owner of Sloan estate in Napa) is the new majority owner of Chateau Le Bon Pasteur (Pomerol), Chateau Rolland Maillet (St. Emilion) and Chateau Bertineau Saint-Vincent (Lalande de Pomerol) as a result of it’s recent deal with international wine consultant Michel Rolland. Also recent, outside the vineyards but very much in the wine world, was the sale of the Wine Advocate by Robert Parker Jr. to, as Reuters put it, “a shadowy group of investors in Singapore.” Japanese investment has also been going on somewhat more quietly in California, France and Germany for quite some time. Whiskey giant Suntory has owned iconic German estate Weingut Robert Weil (Rheingau) since 1988, is partner in a Bordeaux negociant business and owns 3rd growth Chateau Lagrange (St. Julien). Japanese importers Takashimaya have controlled legendary Domaine Leroy ever since Madame Lalou Bize-Leroy split from DRC and aquired the Charles Noellat domaine and iconic Cupertino producer Ridge Vineyards has been Japanese owned since 1987. Other California vineyards that are Japanese owned are Markham, Freeman, Dalle Valle, Clos Pegase and Kenzo. Historically “Japanese discretion and precision are two very positive qualities for wine” and their quiet ownership of iconic vineyards has been a model that should be followed and imitated.

These are just a few examples of the Asian influence that is steadily increasing in the world of wine. To be sure, among these examples there are parities that fall into each category, driven by speculation or driven by desire to produce/consume. These differences in “style” will continue play out in auction rooms, vineyards and across the international wine market. Hopefully champions of consumption will not be priced out of the market and into oblivion by deep pocketed speculators.

Andy Xie for Caixin Online:

http://english.caixin.com/2010-12-07/100205377.html?p1

Jancis Robinson for Financial Times:

http://www.ft.com/cms/s/2/704c1a7e-66dd-11e2-a805-00144feab49a.html#axzz2VouQFxUr

Winesearcher:

http://www.wine-searcher.com/m/2013/06/champagne-and-cognac-push-up-land-prices

http://www.wine-searcher.com/m/2013/06/chateau-bon-pasteur-sold-to-hong-kong-investor

r.a.h.

“What’s in Wine?”

MFW’s April 29th post “Winemaking Recipe for Ridge Vineyards,” which discusses Paul Draper’s pioneering effort at transparency in winemaking came a full month before the attached New York Times article by Eric Asimov discussing the same topic. The lag-time shows that this issue is making a slow but positive move out of the realm of the wine professional and into the public domain, which is a good sign for the end user of what can be a highly manipulated product. Setting aside the implications of Paul Draper’s open letter (http://www.ridgewine.com/Images/Acrobat/PD_ingredient_letter.pdf), theoretically aimed at his direct competitors in relation to “fine wine,” the article by Asimov shows that there is an audience among the wider wine-drinking community that is ready to listen to and engage in discussion about labeling issues and the listing of ingredients on bottles of wine.

Why is it that no one really seems to care what is in the wine they drink? For all of its natural, pastoral connotations, wine can very much be a manufactured product, processed to achieve a preconceived notion of how it should feel, smell and taste, and then rolled off the assembly line, year after year, as consistent and denatured as a potato chip or fast-food burger. Yet we pay little attention to wine’s added ingredients, even as we have become hyper-conscious about what we eat. Twenty years ago, many Americans may have enjoyed food indiscriminately, but now they weigh the nutritional, environmental, humanitarian, aesthetic and even political consequences of what they cook and consume. Isn’t it time to devote the same careful attention to the wine we drink?

There are clearly reasons for certain wineries to resist the type of ingredient transparency that Ridge Vineyards has implemented and while they are legally in the right to do so I find it is surprising that more people are not pushing back to demand a higher level accountability. There seems to be a disconnect for the average wine-drinker when it comes to the composition of their wine vs their dinner. Why is that? Is it lack of knowledge? Do people even realize the amount of allowable additives and processing techniques that are completely legal? Do people realize that even amongst the allowable ingredients in wine few tests have been conducted to analyze potential public health risks?

I have a suspicion that there are at least two major factors at work here and both support the traditionally opaque style under which certain wineries have grown accustomed to operating. The first, as mentioned above, concerns the consumers lack of knowledge. While any lack of knowledge is inherently bad, it is made worse in this case by winemakers who assume this “lack” signifies public approval to continue operating without transparency. These producers know that some consumers make conscious decisions not to buy products when they see what goes into making them and that fact is enough to scare producers of any commercial product. Without legally sanctioned requirements to list ingredients in wine, the less scrupulous and those motivated purely by financial concerns will have no desire and definitely no reason to become transparent. So as Asimov points out, sadly, the responsibility is left largely to consumers to monitor what they buy and drink. For the most part, however, they seem unconcerned.

The second factor, which is related to a general lack of knowledge and may in part be the cause of it, is the passionately romanticized nature of wine itself. Born of human experience, romanticism as related to wine has developed through history as we have evolved. Since wine has, in a sense, been there since the beginning, the way that we relate it has become deeply entrenched in world culture. It has been a part of myth and storytelling lore since the first grapes “magically” fermented and its constant link to divinity reinforces the weight of its impact on humanity. While the literal truth of these myths cannot be supported, the essence of man’s relation to wine continues to be partially informed by the bewitching nature of these stories and the ethereal character of certain special bottles. The mystique of wine has become such an integral part of its appreciation that perhaps for some consumers, to delve too deeply into the details of its production negatively affects its appreciation.

Based on recent news reporting, the time seems right for change. The new steroid scandal being uncovered in Major League Baseball and the “Label It” movement pushing back against the secret inclusion of GMO’s in our food are two examples that seem to indicate Americans are more interested than ever in transparency and what we put in our bodies. Wine should be next, but will it be? Or will most of us continue to remain willfully ignorant?

NYT Article: http://www.nytimes.com/2013/06/05/dining/the-big-question-whats-in-wine.html?ref=dining&_r=1

r.a.h.

1994 E. Sauzet Chevalier Montrachet

Due to its deep color and questions about mid-90s white Burgundy, we were not expecting much from this bottle. However, were pleasantly surprised with what we found. The medium gold color and bruised apple aroma were the most noticeable features right out of the gate. The first sip shows some structural weakness with a strange, abrupt interruption of the flavor profile through the mid palate. There seems to be a beginning and an end, where’s the middle? Time will tell and within a few minutes the wine begins to gain a creamy meringue & pear aroma and starts to fill out. Now the palate shows acidity that gently and appropriately frames the fruit and compliments the nose by offering pear & apple once again. We debate the age of the wine and whether it has aged appropriately. It is almost 20 years old at this point and seems mostly to have held up quite nicely. Is it amazing? No. Is it a wine of complexity and contemplation? No. It is a very lovely lunch wine though.

r.a.h.