Over the past few weeks it’s come up more often than it has previously with both winemakers as well as some sales staff at wineries: people have been asking about the future of the wine industry. Part of the conversation stems from the natural summer lull, grapes are growing on the vines, there isn’t much to do for those who make the wine, if it rains great, you don’t have to water, but there isn’t enough fruit yet to have to worry about mold. It’s also hot, so wine’s not being shipped (heck, even my wine club which prides itself on monthly deliveries, didn’t ship at the end of July….just too hot), so the folks who sell the wine aren’t as busy as they are normally-sure, there’s a lot of tourist traffic, but wineries and wine tasting rooms offer plenty of spots for conversation.
There’s also a general feeling of change afoot in the industry. Sales for the industry as a whole are at their highest point since the Great Recession, sales of wine above $50 per bottle have finally recovered as well, but for an individual winery, or individual wine business, things just seem different to many.
As an example, the fastest growing wine brand in existence reportedly is 90 Point Cellars, whose business model involves buying wine from well known wineries when the well known winery can’t sell it elsewhere, repackaging it and selling it for a fraction of the cost. This is exactly the type of thing that wineries wished would go away once the market found equilibrium once again. To be clear, I had some wine made this year in a similar fashion, so I don’t hate the model at all, negotiants have been active in France for a millenia, but if a winery is having difficulty moving good wine, that isn’t a great sign for the wider wine market, is it? Or maybe you’re more cynical like a few of the wineries I speak with, that simply don’t believe that models like this deliver good wine. (As an aside, I think they can with the right connections, Cameron Hughes delivers outstanding value vintage after vintage, wine after wine and if I had to buy a wine at my local Safeway tonight, it would be a Cameron Hughes). That being said, much of the time, this stuff ends up being crap more often than not. Non descript wine is non descript for a reason. The industry, for all the talk about being disrupted, simply has not been disrupted as of yet. Not even close. There are cracks though & after 5 years in the wine industry, here’s what I see.
My predictions for the future of the wine industry:
We’ll see the rise of another nation wide distributor to rival Southern Wine & Spirits within 5 years.
There’s just too much need and the profit margins can be too big. The next major distributor though, will be paying winemakers to make wines that they’ll market under their own labels, much like negotiants do already in France, in essence creating labels that the distributor will control completely and will push into every retail account they have.
The wine industry is more cutthroat than most people realize. Here’s the deal, take Napa Valley as an example. If you want to open a Napa Valley winery to rival Mondavi, Signorella, Caymus or others, you’ll need to purchase 20 acres of land (the absolute minimum to have a working winery according to the Agriculture Preserve and other laws that are in place is 10 acres, but those parcels simply never come onto the market) and then build the thing out. Reports are that the initial investment for something like that run into the tens of millions-call it 25 million according to a couple of bankers that work consistently with winery clients.
What type of people have that type of cash laying around? Those whom have made a ton of money in other industries mainly, the hyper smart and the uber aggressive. Captains of industry they’ve been called in the past.
Yes, there are about 8,000 wineries in America and almost 90% of them have ownership that has made it’s fortune elsewhere. It’s been said, that it takes a large fortune to make a small one in wine. Well, at times people joke that it takes a large fortune to lose a small one in the wine industry…but the market is good right now and I digress. There are 8,000 commercial wineries and they constantly compete for space with the 4 nation wide distributors and the few brokers and local distributors that actually sell wine and actually pay their bills. You’d all be amazed about the whole paying bills sheninigans that go on in the industry. Net 60 days, isn’t even an issue with most folks. Ok, back to winery owners. Owners of wineries are not accustomed to losing either, after all, they made millions or even tens of millions of dollars in other industries before opening their winery:
I think we’ve seen the rise of a few folks that could rival Southern here locally in San Francisco. I’m not naive enough to think that there aren’t similar outfits in New York, Chicago and LA. Eventually, much like a competitor to Starbucks and their coffee empire, someone will find the right setup and really make it happen. As an example Philz Coffee is great, it hits most of the standard points these days for high end coffee (it’s a pour over) and offers what I think is, a better vibe than your local Starbucks or Pete’s both of which have feet in the history of the Bay Area (there was some transfer of knowledge between the two and a rather historic non compete clause that left Starbucks out of San Francisco for decades, unfortunate given they long considered the City as their best market in America). Alder Yarrow from Vinography (the first wine blog online) agrees, saying that he’s seeing “growing numbers of independent smaller importers and distrubutors.”
Until that second distributor and easier nation wide sales comes though, there are major sales pressures for wineries-that typically can only survive selling a pallet of wine at a time. Plus, direct to consumer sales is damn hard work.
Direct to Consumer sales will continue to rise at least 10% per year, virtually indefinitely, eventually killing the 3 tier system
Those sales pressures have led to the advent of direct to consumer sales. D2C it’s often referred to in shorthand, though only makes up about 5% of the total wine market these days. People seem to think that my online wine club is at the forefront of a movement toward more online sales, that much is to be expected as more and more is sold online (heck, we just bought a couch online a few weeks ago, something that was unheard of a decade ago when we bought our last one), but the online wine market is so small as to barely be a blip on the radar at this point.
If selling wine through distributors and trade channels will continue to be difficult and a continual struggle, then wineries will continue to work to sell a higher percentage of their wine directly to consumers. It’s happening because wineries want more direct to consumer sales, in large part because when a winery sells it’s wine to a distributor, they sell it for about half the cost of the wine. In the industry it’s referred to as FOB, or free on board. The idea is that the winery gives you a better deal than wholesale because they haven’t spent any money marketing themselves. So better pricing. Distributors push for even lower pricing and I have run into wines that run about $4 a bottle to a distributor, while the winery sells the thing for about $20.
The distributor then sells the wine at 2/3rds of retail price to a restaurant, wine bar or wine shop. The 3 tier system as it has been called was created after Prohibition and includes some other interesting protections, such as the fact that someone who owns a winery cannot own a retail store as well (this of course doesn’t make as much sense as it once did given that a winery could open a tasting room anywhere in America and one of the best local retail stores to me, Solano Cellars was once owned by Bill Easton who had to sell the store to open his winery Terre Rouge & Easton Wines).
As you might expect, when a winery sees retailers carrying their wine, that’s a good thing. What isn’t a good thing though, is when they see that wine being sold at a discount, especially because they have absolutely no control over pricing once the wine is working its way through the 3 tier system. Theoretically, a winery could pressure their distributor to not work with the retailer that continues to discount their wine, but distributors make money based on sales so it’s a tough conversation to have. Plus, according to everyone I’ve ever asked about the subject, the distributor or broker will tell the winery exactly what they want to hear and then continue business as usual.
When we opened Uncorked Ventures, we had a single bottle, online store. The idea was to give people a chance to see the exact wines that we had shipped, but every time we spoke to a winery, they flat out didn’t believe us that we wouldn’t be discounting their wines. They’d learned the hard way too many times to trust anyone that sold wine online. That’s obviously a shitty way to do business and sums up exactly why wineries are so interested in direct to consumer sales. We now put our newsletters on our blog so people can see what we do, without selling the wines at a discount.
Another example, in Australia there are more direct to consumer sales than there are 3 tier sales. Part of that is that shipping is cheaper, but there’s also virtually no rules for wine shipments in Australia. Second example, in the UK there are more lax rules for shipping across the entire territory. Despite the prominence of French vineyards, 15% of shipments are direct. It’s pretty pathetic to think that while 90% of American wine is made in California, Australia and the UK have higher percentages of direct sales than we do in the Golden State. To have a truly healthy wine industry, that’s got to change.
Again Alder Yarrow from Vinography, agress, seeing progress in states that have traditionally blocked some wine sales. Some quick background, until a handful of years ago, New York residents couldn’t buy wine at a grocery store and Pennsylvania residents have a state owned chain of liquor steos to purchase from. Reportedly, those state owned stores employ all of 2 wine buyers…..for the entire state. Alder said “I think we’re starting to see chinks in the impenetrable wall of the three tier system. When states like Pennsylvania are seriously considering privatization and voters are pushing to buy wines in grocery stores it’s hard not to see that as progress. Slow yes, but progress nonetheless. ”
Please note, statistics for the above graph came from Wines & Vines.
More sales will take place online.
Those sales will help drive down shipping costs, they’ll help create more innovative shipping programs such as 46 BRIX which is an Amazon Prime style free shipping setup (full disclosure, we’re a member). They’ll also further encourage wineries to compete online with sales, social media attention and actually innovate the way they sell wine.
Wine Searcher recently had a great article on the future of online wine sales, I’ll simply cut and paste the imporant parts here:
“Despite the fact that global online wine sales topped $5 billion in 2012, “that represents less than 5 percent of total wine sales worldwide,” said Bressolles, adding that it will continue to expand.
While Europeans purchased around 8 to 10 percent of their wine online, the figure is just 2 percent in the United States.
“The two percent figure in the U.S. is probably linked to legislative constraints,” Bressolles explained, referring to the country’s three-tier wine distribution system”
Given the relative histories of commerce in the USA and Europe, can you name another industry where the US government has put in place greater restrictions in commerce than has Europe?
I mean, should it really be easier for a French winery to sell their wine in Belgium than it is for me to sell a wine club membership in Pennsylvania? Shouldn’t we be able to do better?
Oh and before you ask, some statistics show the online Chinese wine market as close to half of their sales. Others show virtually no sales at all. Until there’s a reliable system for reporting sales figures out of China, I take everything I read from their local wine industry with a grain of salt. Additionally, 4 wineries make up over half of Chinese wine sales domestically-that isn’t the type of setup that leads to online sales….those 4 wineries are available everywhere from retail to restaurants.
Ever bought an $8 bottle of Mondavi California Cabernet online?
Didn’t think so.
Venture Capital Will Flow Into The Wine Industry
Part of the increase in online sales has led to venture capital companies coming calling for the first time in the world of wine. A few years back Lot 18 ran through some significant venture money and now a competitor of ours has surfaced with a few million bucks of funding, called Club W (they’re actually permitted as a winery and make everything they sell, but market themselves as a wine club, welcome to the fight guys, interesting business plan, the more the merrier, we’re so different in setup and goals, I don’t wish you anything but the best of luck)
In the coming years, we’ll see more venture capital money flow into wine. At last count there are more venture dollars in the Bay Area than the rest of the country combined, Napa and Sonoma are only a short drive away and literally everyone up here drinks plenty of wine. Next we’ll see venture capital companies, buying land and building wineries from scratch.
In 2014, according to the Venture Capital Association, Venture Capitalists spent 48 Billion on over 4,500 deals, with close to 12 Billion of those dollars going into internet only business. All three categories are growing.
Wine Consumption Will Continue to Grow in America
In terms of wine consumption, America has lagged behind France and most of Europe. It was only a few years ago that total consumption for the 350 million American’s passed consumption for the 60 million people living in France. But, that’s contuining to change. Sure, some people freak out about the rise of craft beer, but judging by myself and my friends here’s in San Francisco’s East Bay neighborhood’s….there’s room for both and I won’t drink a Budweiser any sooner than I’ll drink a generic Mondavi that’s marked as a California red. People that are willing to pay $20+ for a bottle of wine, are also a lot more likely to ask for something local on the menu of their favorite brewpub. Sure, there’s going to be some long term competition to be sure, but neither wine like I sell, nor craft beer are nearly at the point that they should care. There’s plenty of space for both to grow almost indefinitely.
A quick note: the 80’s might have been good for Miami Vice, Prince, Madonna, space exploration, Metallica, indepedence from the UK in at least five places, Pac-Man, Super Mario Brothers, Guns N Roses & the Chicago Bulls…but it wasn’t kind to alcohol consumption in America. I was only a kid, but I remember DARE at my school vividly. What I needed to be reminded of, was that there was a complete adult advertising component as well, that basically said that any alcohol consumption was bad for you. With Ronald Reagan and the US government funding the program to no end, it’s been said that parents became embarrassed to have a glass of wine in front of their kids. There was also a movement to stop any direct sales of wine to anyone, anywhere, at any time. All told, the growth of the industry was slowed, but not stopped and eventually the government got back to trying to enforce the laws on the books, not the one’s that they might liek to be.
Rise of cheaper packaging.
An unbelievable amount of the total cost of the bottle you’re drinking at dinner tonight, especially if it cost you under $10, comes from packaging and shipping costs.
Mike Kuhne from Mercy Wines, itself a winery that’s going to ride the wave over the coming years based on its cool climate location (Arroyo Seco) and it’s focus on Pinot Noir, said the following:
Canning. (My Note: putting anything in a can…hey I grew up in San Diego, not the midwest and yes, I looked it up to make sure I knew what Mike was talking about) It’s all the rage in beer with artisan breweries now getting into the game (over normal glass and even larger format glass that used to speak to premium offering). As far as wine would go companies like Union Wine Company trying to capture some early market share… If high end, microbrews (like Ballast Point) keeps gaining momentum, I think it might become a small slice of the supermarket (IRI/Neilson) segment in the future of wine… and one more reason (beyond screwcaps) that cork companies are worried. Just a thought… I don’t know what kind of traction it has but then again I didn’t see Screwcaps and wine kegs moving as fast as they did into the commodity space.
I’ll add some notes here as to why cheaper packaging is becoming more and more important. I’ve already talked about direct to consumer sales are rising, well someone has to pay for those shipping charges, sometimes multiple people actually have to, so it helps everyone if bottles which are going to be consumed quickly anyway (98% of wine is consumed within 48 hours of purchase) don’t add percentage points onto pricing unnecessarily.
Secondly, by volume, 90% of all wine that’s sold retails for under $10. Wouldn’t you want, under those tight margins (think 5% profit, give or take) to eek out some extra? Plus, packaging is something that we know mechanical engineers do well, so it’s only a matter of time.
Madeline Puckette from what I believe might be everyone’s favorite online wine site these days, Wine Folly & the new author of The Essential Guide to Wine adds: “A big part of this movement is going to be centered around education and making wine more approachable to the masses. So many will easily drop $10 on a 12 ounce craft beer, but for some reason, winemakers are unwilling to make their labels and ideals communicate to their american audiences. Oddly enough, the ones that do usually sell out. Need an example? Take a look at Underwood Pinot Noir out of a can.”
The rise of more $2 and $3 wines, despite the fact that they’re probably loss leaders these days.
As millennials, we continue to be a pain in the ass for established brands. We drink less from California. We buy wine from spots like Texas, Missouri and Michigan. We’ll drink anything that’s made locally.
The inverse of that is that we’ll continue to go to the same grocery stores, for years, if they support local suppliers. Locally, we have a high end store called Berkeley Bowl that’s gotten famous enough that the LA Times, about 300 miles south of Berkeley has covered it (has a newspaper from the nations 2nd largest city ever covered your local grocery store if they’re that far away? Not likely. Berkeley Bowl is an institution for a reaosn).
Combine those two factors and you have a market that is likely perfectly suited for the rise of a new style of grocery store wine: those wines made by stores, even as loss leaders, to get folks in through the front door.
It’s worked well for Trader Joe’s and $2 Chuck. Someone else will figure out a way to bring the same idea to other, perhaps larger players as well as your smaller, local ones.
More niche players
Donkey and Goat doesn’t use sulfur. What does sulfur do? The average wine drinker has no damn idea (it’s a stabilizer, suppose to help remove some unwelcome particulates from the wine….very, very little of the stuff is left after the wine is bottled).
But, they’ve got an active following here locally and futher afield. I hear from a few people every year that they cannot drink wine because of the sulfides, however that explanation usually fails on a few different levels. First, there are typically greater levels of sulfites in white wine than in red.
Ever heard of a white wine headache?
Also, I should point out that there are greater levels of sulfides in many other fruits than there are grapes or wine for that matter. If you’re getting a headache from your glass of red wine at night, it’s because of the alcohol, or the dehydrating effects, not the sulfites….unless of course you also are getting a headache from eating dried fruit, or cod. It turns out that cod has about 10x the amount of sulfur as does wine.
Wine will be more expensive because of the California drought.
So here’s the deal, wine from Napa, Sonoma, Santa Barbara, Paso Robles, Lodi and mostly every wine growing region that you’ve ever heard of, is going to not only be just fine…but it’ll cost just about the same, sure it might go up a smidge, but you won’t notice. Minimum wage increases will drive higher prices more so than the drought.
Growing a grape vine, in the warmest environments in California, such as the Central Valley (where almost the entirety of the nation’s cheap wine is produced) requires 8-10 gallons per day, per vine. Standard vineyards have 2,000 to 2,400 vines per acre and given that everyone making cheap wine is trying to maximize production levels, let’s take the highest end of that range (personally, I think the actual number is higher, perhaps much higher, but let’s go with 2,400 here). That means in a single acre of vineyard, you’re going to be using 24,000 gallons of water per day. Let’s start with the complicated facts around water in California: God bless you if you can understand exactly who has access to which water and why. There’s been a series of water rights deals signed over the past 150+ years that make it hazy, at best, to understanding exactly what each farmer is allowed to legally use. Currently there are cutbacks if your water rights extend any time between 1903 and today. As you might expect, unless you’re the city of San Francisco and you have a water rights deal to Tuolumne River water from Yosemite, even this is being called into question these days btw, your chances of not seeing any residual changes here is approximately zero.
In California agriculture, water is sold by the cubic foot. I’ll round a bit here since exact numbers aren’t as important as the general premise, but for 750 gallons you pay about $1.50.
Sounds pretty good right? Well, that means the vineyard in our example is using 32 cubic feet of water per day, paying about $48 for the privilege.
To take a step back, that acre of vineyard is likely to produce, in a good year (and it’s damn hot right now, so yeah, they’re counting on a good year) about 10 tons of fruit. Generally speaking a winery plans on about 60 cases per ton of fruit, so that vineyard is going to produce about 600 cases, or 7,200 bottles of wine.
Back to water costs. If you’re using $48 per day of water and you water throughout the growing season, about 150 or so days, then you’re talking about a water cost of about $7200. I couldn’t have done that if I had tried, but yes, that’s exactly $1 per bottle, strictly based on the cost of water.
It’s easy to see why, if water goes up significantly, retail stores and wineries have an easy choice, raise prices, or simply take larger losses on these cheap bottles.
Before you mention the obvious here-that a 50% increase in the cost of wine is only 50 cents per bottle. The average winery only clears about 5-10% of the price of a bottle of wine. Those additional costs absolutely will be passed on to consumers and an every bottle.
Harvests Will Continually Be Smaller
I should also mention, Uncorked Ventures is a member of 1% For the Planet. That means we give 1% of our revenue to charities that deal with environmental causes. Part of the reason we do that is because wine and the environment are linked perhaps in more ways than are other products and our wider environment. Let’s start by saying that I agree with 99.9% of scientists that global warming is being caused by human action and our burning of excess CO2. About that same ratio of winemakers would tell you that an increase of a few degrees during warmer months, would dramatically alter their wines, or cause them to move to other wine growing regions.
So how are warmer temperatures and smaller harvests connected? We typically think of cold weather as one of the prescriptions to end grape growth, but as temperatures pass the established norms, vines tend to shut down and stop growth of fruit. Much like wild animals who stay in the shade to conserve energy, vines tend to spend their time relaxing, more so than growing when temperatures get out of control. A few degrees of average temperature increase due to global warming does not lead to two degrees warmer temperatures every day, but something more like 6 degrees warmer during the summer and 4 degrees cooler during the winter.
There will be more local wine, no matter where you live
As the wine industry has continued to roll into the modern age, we’ve noticed two things about locally made wine. First, people, millennials especially, are willing to give it a try and taste it next to more established brands. Let’s look at recent history, we’ve seen the continued rise of local wineries in almost every state. To this day, one of my favorite wine tasting experiences was in Wilcox Arizona. My wife and I were traveling to Texas for a family reunion, we couldn’t fly because she was pregnant and we had a number of stops planned along the way. One day took us from Tuscon Arizona to Las Cruces New Mexico. It’s only a 4 hour trip, so we had some time to kill and spent some of it tasting in Wilcox before eating some BBQ. The vintners were small enough that the winemakers still were working the tasting room, giving it a certain family feel to be sure. It was great to hear the stories about what they thought about the future of Arizona wine and where they thought the industry as a whole was headed. New Mexico is hardly a wine hotbed as well, but Gruet is among the 5 best sparkling wine houses in America-so there’s potential in what is the most rugged landscapes I’ve seen anywhere. Mesilla, Las Cruces and western New Mexico are worth a visit.
A couple of months ago, I had the opportunity to sit down to lunch with Meynard Keys, who makes a couple of different wine brands, all from grapes in both Arizona and New Mexico. Keys is a native and if the name sounds familiar, he’s the lead singer of the rock band Tool. I had to look up some of the music, I’m not a fan, although the band’s name sounded familiar, but it was great to hear directly about how a state like Arizona might be able to market its own wine. Part of the reason local wine is rising is that, people, general speaking love local business.
‘But, the sales of established brands have struggled to show same store sales increases during that time period.
To get a feel for how some locals feel about their own state’s wine industries, I asked a few bloggers who don’t live within the standard production zones. First, Jim who writes a blog called Wino4Life:
Until very recently I was very dismissive of Arizona wines. I considered it a novelty that courageous folks from my home state were tackling grape growing and wine making. Although Arizona falls within the magic northern latitudes of other great wine regions in the world, the extremes of climate throughout the State was likely too big a problem to solve. Years ago I did try some wines from the Southern part of Arizona near Sonoita, after a friend visited some of the wineries there and brought back a few bottles. I found the reds to have little character other than oak, which appeared to be over-used to mask issues with the grapes grown there. I didn’t give AZ wine much more thought until, like may wine and/or music fans, the collaboration of Arizona Stronghold winery and Maynard Keenan. I dismissed this as a marketing gimmick without too much thought, and never really tried their wines (although people lined up around the block at our local Whole Foods when Maynard visited for an AZ Stronghold tasting). Stronghold was one of the first labels to start to appear on local restaurant wine lists, and one local restaurant, FnB (Food and Beverage) even went to far as to feature only Arizona wines.
Things changed for me when a wine-passionate friend from Chicago sent me an article about Maynard and his Caduceus winery, asking if I knew anything about his wine. The winery is located in a quaint former mining, former ghost, now tourist town called Jerome. Less than two hours from Chandler, so one weekend we went to visit Caduceus, my Arizona wine skepticism fully in tow. Let’s just say that with one wine tasting experience with a super-knowledgeable host, and one wine club membership later… my attitude about Arizona wine has completely changed. Both the higher end Caduceus label, and the more affordable Merkin label (an awesome nod to the world’s oldest profession which was a key part of Jerome’s mining town days) are both super impressive. I found myself saying something I never imagined I would… “this is fantastic wine”, not “this is fantastic wine for Arizona.” In fact, as a huge fan of Spanish wines, an absolute home run for me was the Caduceus Sancha, made from Tempranillo grapes grown in Cochise County, AZ. This wine was made in a very old world Rioja style, not super ripe, with a real dusty element to the nose… my mouth waters with the memory! Not all of the grapes for all the wine come from Arizona, there are some from New Mexico and even California, but I like that they are not using AZ grapes as any kind of gimmick, and just trying to make really good wine. One of my favorite from the Merkin label is Shinola, a blend of Sangiovese, Refosco, Primitivo, and Dolcetto sourced from New Mexico.
Since this visit I’ve gotten advice on some other wineries to try from other wine-savvy friends, so I look forward to visiting spots like Javelina Leap Winery in the near future. I’m glad that the grape growers and wine makers didn’t give up their efforts because of dismissive consumers like me… and I’m also glad to have such awesome wine right in my home State!
Another blogger, Neil Dubois of Red Wine Please, agrees and adds his thoughts on his local markets:
With regards to New England there has been an explosion of wineries over the past ten years, and that is true of almost every non-traditional area in the country (read that as anything not on the west coast or in the Finger Lakes region of NY). What we see is that New England will continue to produce some nice whites, some decent hybrid based wines and an occasional good red. One local Rhode Island winery makes an estate Pinot Noir that is very Burgundian and quite good. That is the exception. In general they’ll make their money selling tastings, hosting events and selling some wine. They’re not producing mainstream juice for the most part. Just outside New England on the North Fork of Long Island it is different. They do produce some very good estate red, and some New England wineries buy their Merlot or Cab from North Fork producers.
In North Carolina it’s a bit different. Still the proliferation of wineries, but they actually produce some good estate wines. Some are larger as well. The Biltmore Winery dominates, and that is a huge facility which exports around the country. It’s more of an actual industry there, as it is in Virginia, and some of these states will become more of a player on the national stage. Others could include Colorado (Bob Pepi is making wine at Canyon Wind). Still, I don’t see any of them making a significant dent on the mainstream USA landscape – California, Washington, Oregon and maybe NY State.
There will be more urban wineries
I’ve talked a ton about sales and marketing already, but here’s what’s driving the rise of urban wineries. Up until the last decade or two, wineries existed in agricultural regions and barely cared if anyone showed up. Now with more and more wineries fighting for dollars of visitors, the importance of D2C sales and more people looking at wine and winemaking as a career, instead of a part time retirement job, sales pressure has mounted.
Some enterprising souls have decided that instead of fighting like dogs for every last visitor, they’ll simply move to where the visitors already are: plus, we know that millennials like cities better than the burbs or the country anyway, right? A local example, JC Cellars has been a long time Oakland winery, truly one of the first urban wineries to make world class wine. JC Cellars recently moved itself from their cozy tasting room and production facility just a few blocks to the east of interstate 880, to a few blocks west of the same highway. The difference is night and day though. Both are up and coming sections of Oakland, but their new environs are part of Jack London Square. Appropriately named for the author, whom wrote much of his seminal work Call of the Wild while living in a small thatched roof dwelling. Jack London is further along the path to redevelopment than is much of Oakland, famous residents like Steph Curry (well, pre kids) have dotted the landscape and it’s a walkable oasis in a city that’s not quite as walkable from district to district as we’d all like it to be)
There will be a wider range of grapes grown
If you asked about the most popular grapes in California in 2014, your list would include Cabernet Sauvignon, Chardonnay and Pinot Noir. If you would have asked a decade ago, your list would have included Merlot, perhaps above all others. While the movie Sideways definitely hastened the fall of Merlot, I bring up its demise in the marketplace to simply say that, consumer and industry tastes change. Heck, Syrah was almost extinct within California back in the 80’s, only to rise to being the 5th most planted grape today after the big three and Zinfandel.
So what’s next? I’m seeing more and more Albarino planted, both in spots like the Russian River Valley, where some growers are trying to diversify from Chardonnay, but also in spots like Lodi where it’s hot. Those are two dramatically different growing environments, but Albarino seems to like California pretty darn well
On the red wine side of things, there’s two spots where I see room to grow. First, there’s an increasing number of cool climate vineyard spots being planted. Clearly, those all can’t go to Pinot Noir-eventually someone will get bored and want to try something new if nothing else. What’s the second favorite grape in that situation? Personally, I hope it’s Grenache, but anyone’s guess is as good as mine at this point. It may end up being Cabernet Franc as well & that’s just ok with me as well.
Then there’s this bottle of Carignan. It’s only the highest rated version of the varietal according to Wine Spectator ever made. It changed my opinion about a grape that before having to write about, I wouldn’t have been able to tell you much about.
On the white wine side of things, I already mentioned Albarino and quite frankly after a few from Lodi anyone in the region without a few rows of the stuff at least, should plant it tomorrow morning. As much as everyone in Lodi loves their Zinfandel, the industry is moving away from those Jammy styled Zinfandel’s. The acidic almost New Zealand styled Albarino that comes from Lodi, well let’s say….this might be your brand moving forward.
Your mom is going to be able to pronounce Torrontes and she won’t be afraid to order it. When it comes to grapes from South America that have turned into international varieties, the list is short. Well, truthfully there isn’t a list at all, as in it’s yet to happen. Sure, the Chileans and Argentines, have had plenty of success with Malbec, but that’s a French grape that simply enjoys South America more than it’s traditional homeland.
Torrontes may buck the trend for a couple of reasons. First, the white wine side of the ledger, is simply more open currently. Chardonnay has a choke hold on sales, but how many people do you hear say that they are “passionate about Chardonnay”? There’s an Anything But Chardonnay movement here in America, which says all you need to know about the grape. Torrontes doesn’t have any bracing acidity, it’s relatively east to pronounce and there’s enough floral notes that even with the worst cold imaginable, you can tell your friends that it smells like peach!
Madeline from Wine Folly agrees with the assessment of different grapes, adding “I’m enthusiastic about American wine in the next 15 years, because we’ve worked out the kinks and know how to do it right. Now we just need to make more of it and inspire more people to try their hand and winemaking. Of course, not everywhere can grow Cabernet and Merlot like Cali. This simply means that more regions will start championing alternative grapes… I loved a Texas Hill Country Mourvèdre I tasted by William Chris… it tasted surprisingly like a Vosne Romanée which by chance, I had open on the table right next to it.”
I’ll add that if Texas ever really were to craft an award winning, internationally celebrated wine….I doubt we’d hear the end of it. On the bright side, I’m pretty sure that they’d get the Texas flag somewhere on the bottle-
We’ll see a rise in viticulture programs
If you would have asked me when I started Uncorked Ventures about world class viticulture programs within California, I would have told you that there was UC Davis and not a ton else. That wasn’t exactly true then and it’s even less true five years later. We’ve seen plenty of first rate winemakers come out of programs at Calpoly SLO and Cal State Fullerton.
By my count there’s 9 regular players when it comes to viticulture and enology degree programs in America.
California Polytechnic University San Luis Obispo.
California State Fullerton.
Lake Washington Institute of Technology.
Kent State University at Ashabula.
Pretty clearly as more and more wine gets made, that’s not going to do it. Additionally, as an industry, we need to realize that there is truly no average path into winemaking. I’ve met just as many winemakers who had full careers before making wine, as I have those few whom have gone to school with the express intent to make wine. There are even those that have grown up with famous winemaker parents like B Cellars’ winemaker Kirk Venge.
A second option for learning to make wine is a learn on the job type of set up. You get a job at a winery, make something close to minimum wage in the tasting room and spend enough off hours learning the trade that you’re eventually given the job of cellarmaster. That pays a bit better, but it isn’t until a few years after that, when you’re promoted to assistant winemaker that you can make enough money to provide for a family. If you’re thinking that’s a rough go of it, it is. Bodega De Edgar in Paso Robles is a perfect example of what happens when that’s done well though.
Passionate people should be able to find a way to learn to make wine.
There’s a huge group of people interested in making wine, but without the ability to spend a few years in school, or spend a few years as an apprenticeship program. I’ve heard world class winemakers who got their start, with a mail in kit that includes yeast and fruit juice.
We need to give people a way to learn to make wine (after all, it isn’t all that complicated right? Leave a bunch of grapes in a pot and come back 3 weeks later….you’ll have wine waiting for you) in a way that doesn’t cost them a career, but gets them some experience before being able to wade into the deep end and do this professionally.
Walla Walla and it’s local community college is trying. In one of the most innovative programs in the world, the city, Port of Walla Walla and a local community college have combined a 2 year program at the JC, with some dang cheap warehouse space in former WW II bunkers next to the airport. During my time in Walla Walla, almost everyone I spoke with who came out of the accelarator, had some funny stories about times in the bunker. For a few hundred bucks a month, you have a premade tasting room and production facility once you’re done at the JC. Sure, it’s a risk, but it’s exponentially less of one than someone would experience trying to make wine in Napa Valley or elsewhere in California. Every major production region in California should be looking to do something similar, specifically Buellton and Santa Rosa in peculiar given that they have manufacturing spaces close by and plenty of unused warehouse space. Hell, I’d build something like it in Paso Robles next to the fairgrounds myself tomorrow if I could afford it. I’d steal all the traffic off the freeway and then pull in all the hotel guests once some significant hotels start being built in earnest. If you want to know why this could work well in Santa Rosa (or Rohnert Park, or Petaluma, or any of the other towns along the 101 in Sonoma County for that matter) I’ll simply ask you to find yourself a $100 per night hotel in Napa. It ain’t easy and any marketing expert will tell you, gaining the hotel room stays now, will lead to more later.
Organic, sustainable and biodynamic will actually matter to consumers
I’ll deal mainly with organic here since there’s more data, but living in the San Francisco Bay Area I feel like we see these foodie and environmental movements sooner than most, all three are going to be important as time goes by.
Ok, back to the organic movement.
What does organic mean exactly? For produce like wine grapes, they have to be grown without fertilizers, pesticides, radiation or even genetically modified organisms. As an example, it’s out of bounds for a farmer to use genetically modified worms. Yes, evidently that’s a very real issue and a limiting factor for growers.
Wine’s an agricultuiral product, sometimes we all just forget that.
As a consumer I do care about organic, GMO and this stuff, I read a book about milk that changed my opinion probably forever (as an aside, if you don’t want to spring for organic milk, don’t read Cowed). So here’s the deal in regard to milk, organic milk is about 2x less likely to contain ecoli than does conventional milk. Sure, pasteurization is suppose to kill this stuff: but a decade ago doctor’s knew that antibiotics killed MRSA and now 40% of the stuff is immune to antibiotics. How long before there’s a strain of ecoli or salmonelli, or something that isn’t killed by pasteurization? Personally, I don’t want to be part of process of finding out.
Given a similiar price point, no one I know wants to help find out either.
GMO Is Next
Ok, so after we’re all organic, what’s next? Non GMO wine grapes. Of course, non GMO for wine grapes is a pretty easy one to handle, almost, if not all of the cuttings you’re going to be able to find for wine grapes are going to be non GMO. It’s not a big enough market for the big agribusiness to give a fuck. Of course, non GMO is going to go much further than this. Vineyards are going to be certified. Winemakers are going to have to pick additiives based on what’s non GMO, vegan and a whole, whole lot more. Donkey and Goat don’t even use sulfur at this point and they’re in Berkeley, wave of the future. As reminder before you roll your eyes at the Berkeley reference, Chez Panisse opened in 1971. If you have a local baker these days that makes bread, it’s because of the this restraurant. If someone cares about locally sourcing food, they probably read an Alice Waters manifesto. It’s happened for food and it can happen elsewhere.
Ok, so back to GMO stuff: The additiives are where you’ll be scared off first. Wine is inherently flawed. It’s an agricultural product that’s made in huge quantities. Ever bought a perfect peach?
Me neither. Berkeley Bowl might come close some percentage of the time, but if we’re talking about Safway, Kroger and other national stores….there isn’t enough buy in yet to go beyond organic and local, to actually include an additional category like: my 4 year old aspiring foodie wants to shop here because the stuff he asks to buy is always good.
I’ve never seen a perfect set of grapes either. One thing that winemakers will often do, is add a clotting agent of sorts to wine. The clotting agent grabs all the excess lees and other junk and pulls it to the bottom of the barrel. They call it racking, to not scare anyone off. So that stuff goes into the barrel and is suppose to sink to the bottom, without ever getting pumped out.
Do you really think that none of it makes it into your wine?
Now, I don’t think that makes what we drink unsafe. Not at all. But is your wine vegan? Probably not because almost all of these additives are animal by products. Pigs mostly, but we can all talk to Hormel about that. (btw, if you ever want to cure your bacon habit….read Chain by Ted Genoways. I’ll never buy large scale commercial bacon again)
That’s why so many wineries will make sure that a wine that is unfined and unfiltered, says so on the front label.
GMO is going to the be the next big argument and unlike many others in wine, it’s going to pit winemaker against winemaker. Do you fine and filter with an animal made product? Can you prove the animal in question was fed non GMO feed?
Are wineries talking about this stuff on some level already? Yes, they are….I’ve been there for the conversations about where the products they use come from and perhaps more importantly (since the sales guys tend to ask first) what’s the implications for what they’re ordering.
Consumers by in large don’t care yet, but the 1% are starting to….which can be a harbinger for the future.
There will be continued calls for ingredient lists on wine.
So there’s part of me that thinks a complete ingredient list, is an absolute no brainer. Then I think about all the other food industries that don’t play by those same rules. Will breweries have to list everything that is brewed with their beer?
Did you realize that there’s orange in this beer?
That’s a pretty basic ingredient, so shouldn’t they tell you?
What if the amount of something in the end process is virtually non existent. Should it still be included? Should we hold food companies to the same standards? Shared lines, may lead to higher percentages of shared ingredients than you find sulfur in wine.
Sulfur is used as a stabilizer in wine. Other stabilizers help to filter out imperfections, like yeast that remains. When wine is tested in a laboratory, there are minimal amounts of these stabilizers left over in wine.
Should a winery be left to include something like this in a list of ingredients, like a food company lists manufactured in a plant that produces…..or should they add something to the actual ingredient list?
This isn’t as cut and dry as most think, largely because so many of the “ingredients” of wine aren’t meant to stay there long term, they are suppose to be removed before they ever end up in the bottle that you’ve opened. For a food company, that simply isn’t done. (I have a friend or two who is a trained food scientists, white coat and all….they promise no one would ever let something a food package in cereal).
Should food companies have to add an ingredient list of what they use to clearn the lines between packaging runs? That stuff isn’t meant to stick around either.
Do you believe that none of it does?
There will be wine shortages
China and other developing nations are starting to drink the stuff more, likely decades before they’re able to produce it at a quality level sufficient to quench that thirst.
Here’s the best explanation for why China’s so important to so many people that make and sell wine. Their average consumption is trending upward, having increased over 50% in a 3 year term ending in 2012 (this is the most recent data that’s available from the Wine Institute, the only organization I trust with this stuff) but as a country, they still only drink about a bottle of wine per person, per year, if that sounds like your Tuesday…email me for a coupon code……
So why do we care, at all, about a country where they only drink about a bottle of wine per year, per person. Like so many other things with China, it’s based on size. (Thanks Arthur Pazdan for articulating that, but I disagree, the world is pretty damn flat these days….I can more easily ship wine to most of Asia than I can Pennsylvania….#justsaying)
Worldwide wine consumption is about 25 million liters per year.
Now if you’re America, you’re wondering what the hell a liter is…..well there’s 9 liters in a standard 12 bottle case. I only know that because they’re required to print it on the outside label of a case, otherwise I’d be as clueless as everyone else….although it’s labeled a wet liter….so I digress.
Every bottle is exactly 3/4 of a liter. That means that worldwide wine consumption is 33.3 million bottles of wine.
That number has been pretty consistent over the past decade largely because as countries like America have consumed more per capita than they once did, other countries like Italy now consume less than they once did.
As an aside, God I LOVE Italy.
However, if China ever were to consume as much wine as say Belgium, Germany, Argentina, Spain or New Zealand (lots of different cultures there right?) they’d double the amount of world wine consumption by themselves.
If you’re wondering how likely it is that China picks up a consumption habit like that, there’s a few things in the wine industries favor here. First, for the vast majority of Chinese, they either aren’t religious, or are part of a religion where wine and other alcohol are not discouraged. I bring that up because the average consumption in many Muslim nations is either zero, or approaches it. Countries like Iran, Yemen, Saudi Arabia and many, many others simply don’t consume alcohol. Second, the Chinese have shown an affinity for western diet’s and what’s often referred to as a western way of life. Other similiarly growing economies like Brazil and Russia don’t have the constraints based on religions that Inidia might over the long term.
Here’s how McDonald’s has done in China in the past few years:
While the population in China is set to rise for 50 years or so, before beginning to decline (reportedly a remainder of that one child policy) there is one place where population growth is set to continue over an even longer time period:
Once the Chinese market is established, you’ll start hearing about wine’s last major market to come into focus: Africa.
As I mentioned in regard to China, Africa has some positives and negatives when it comes to wine consumption over the long term. First, it’s religious background. Muslim countries simply do not drink alcohol. I want to be clear here: that’s a perfectly valid choice and one that we should be supportive of. To each their own and while I agree with the notion that many more great conversations have happened over a pint, or a Pinot, than a salad, drunkeness hasn’t had any positives for any culture, ever.
Second, it’s important to note that something is happening in Africa that cannot be said for the rest of the world: it’s population is growing, or rather exploding.According to the Washington Post, population on the continent should quadrouple within 90 years.
Currently Africa has a population almost exactly equal to that of China. It isn’t as advanced economically and wineries won’t be able to access swatch’s of that population which are Muslim, but in 100 years this is a larger wine market than is China.
I hate throwing so many countries together in a case like this, certainly someone living in South Africa has a much different culture and outlook than someone in Mali, let alone the Republic of the Congo. But, as the fight for sales becomes more extreme and in Asia, it’s a more cutthroat industry than many expect, someone is going to start looking further afield.
More Celebrity Backed Projects
Ok, so I’ll be honest, I hate the idea of many of these projects. Too often, I’m not going to name names here, but you have a celebrity adding his or her name to a project, to sell crappy wine that would be cheaper if it simply came from a winery.
Luckily, there’s a few exceptions to the rule. I mentioned Meynard Keys earlier and his wines are good to be sure. Another great example, Fergie of Black Eyed Peas fame owns a winery with her dad called Ferguson Crest, but the draw here is that winemaker Joey Tenseley makes the wine. Normally, good luck finding a Syrah from Tensley, they’re sold out months or years in advance. Here’s a back end way to enjoy some of Joey’s wine. Lastly, Drew Bledsoe and Doubleback Cellars out of Walla Walla. Ok, so I was born in Buffalo and Bledsoe was a pretty darn good quarterback, even if his injury brought in the current version of the Patriots for a generation….the guy earned his cash in the NFL. He’s also originally from Washington. He went to Washington State, hardly QB University. Perhaps no other professional athlete with about a hundred million in earnings has as much connection to eastern Washington as does Bledsoe. When I was in Walla Walla I heard a few great stories about Bledsoe, one from the folks at Sleight of Hand Cellars (they make some great wine, but don’t take themselves seriously at all, Doubleback is a serious label in a Napa Valley serious way….which is as serious as it gets in the states) which is about as different from Doubleback as neighbors can get. Of course, the Sleight of Hand folks noted that at a recent Washington tasting in Los Angeles, Bledsoe was pouring his own wines, drinking their Chardonnay and talking up their ability to do right by the varietal. The guy’s all Washington and that’s a cool thing. Fergie’s definitely all Santa Barbara, I remember having a hard time coming to grips with why the Black Eyed Peas played Extravaganza (a free concert in the small college town of Isla Vista that serves as the student ghetto for everyone attending UCSB) for basically free, but by that point she was likely already looking for vineyard space with her dad in nearby Santa Ynez Valley. It was a home game.
That’s where celebrity projects are headed. Increasingly, there is the rise of local wine and celebrities are increasingly able to support local causes (and let’s be clear, I don’t mean local as in Santa Monica or Calabassas) which is going to lead to better wine, simply because investment and good wine go hand in hand. Hey, that’s one thing I’ve definitely learned from looking at Napa.
Wine will be increasing diverse.
I hadn’t given this much thought until the Napa Valley Wine Train kicked off a group of women (predominantly African American) that were enjoying a book club trip to Napa Valley, but that made me realize that I always notice wineries owned by people with slightly different backgrounds than my own. Yeah, yeah I know, I’m not suppose to say that. But, in the wine industry, we’re hurting for outside perspectives on not only wine itself, but marketing and everything that goes into its sales from customer service to website design and beyond. It’s important for the long term health of the industry to encourage people with different perspectives. A generation ago, there were basically no women winemakers. Now UC Davis graduates more women in their viticulture program than they do men-that will have far reaching implications for the industry, almost all of them good.
My wife was born in Central America and quite honestly, the number of women owned wineries, & the number of wineries owned by people of Latino heritage is pretty pitiful. Low, it’s damn low if we’re going to be honest.
The industry isn’t outright racist by other means and I have rarely run into any racial undertones, over five plus years in the industry. In fact, the industry is pretty inclusive already, largely because of the number of foreign born folks that already take part: but, most of them hail from Anglo-American countries like Australia, New Zealand, France and Italy.
What people don’t talk about is that to start a winery, it takes a significant investment. Ceja Vineyards might very well be the first Latino owned winery in California and it started with about a half million dollars, in the early 1980’s. Quite clearly, to have that much cash on hand, you need to make your money elsewhere to begin with, or have a full career in wine before opening your own winery.
That means that we’re likely to continue hearing about programs to encourage people from different backgrounds to get into wine more often than we are already.
There will be talk of Prohibition in some Southern states.
So there’s a pretty rapid movement, for the government at least, toward increased rights for shippers of wine. Organizations like the California Wine Institute and Free the Grapes, are getting after states that continue to prohibit their residents from ordering wine. Ask yourself this: if you live in Salt Lake City Utah and come to Napa Valley-does it make sense that you can’t legally ship yourself any wine home, but you can check a bag of it on the plane?
As far as easier shipments though, not every state is moving the same direction, let alone at the same speed. Thanks to the folks at io9 for putting this little map together, with some information about the wet, dry and in between counties in America. If you’re wondering about some of the in between folks, I believe the most common setup is that alcohol is allowed only from off site establishments, or only at restaurants.
A couple of notes: First, I think Louisiana is entirely too dependent on tourist dollars from visitors to New Orleans to go completely dry. Texas is more a wild card, but if they’re really going to be pushing Houston as the logical next great US city for the next millenia, I doubt they want to antagonize anyone, especially when they keep voltuneering tax breaks for tech jobs from Silicon Valley based companies. Plus, Texas actually studied that rate of DUI crashes and fatalities for its dry vs wet counties a few years back. For the Temperance movement, the results weren’t good. You’re 3x more likely to be killed in a DUI crash in a dry county, than a wet one.
Pennsylvania is pretty darn yellow as well. But, they’ve had state owned liquor stores since Prohibition ended and the movement toward commerce is probably stronger there than it is elsewhere.
Alaska deserves a mention. To start, damn it’s expensive to ship anything up there. It’s also too cold to grow grapes. The native’s don’t drink and quite a few native towns have laws on the books which state that merely possessing alcohol to be illegal. But, the oil, gas and fishing industries pulll in people from further domestic locations, as well as international ones as well. That says, that Prohibition on a large scale won’t be coming back.
If you wanted me to venture a guess at a state that could realistically give Prohibition a real try: Oklahoma. It’s in the Bible belt so there’s lower consumption than there is elsewhere to begin with and the state doesn’t
Thank you for taking the time to read my thoughts on the future of wine. Please feel free to leave me a comment, what do you think I overreached on? What did I leave out? Am I flat out wrong? Was this interesting? Boring? I appreciate the feedback!