The classic way the government tries to regulate alcoholic beverage consumption is through so-called “sin taxes” that raise the price of booze, thus making it harder to people–especially poor people–to drink.
Our own U.S. government does it, and so do state governments. The federal and state governments collectively generated $5.8 billion dollars in alcohol beverage rax revenues in 2009, according to the Tax Policy Center of the Brookings Institution,
That’s the price consumers pay. Wineries in addition pay a tax to the Treasury Department, depending on the alcohol content of their wine: for example, $1.57 per gallon on wines between 14%-21%.
There are few people out there, I think, who would say that no taxes at all should be raised on alcoholic beverages (maybe a few extreme libertarians or Tea Party types). The question that has plagued our government for many years is exactly where to draw the line. How much tax is too much tax?
Years ago, in the early 1990s, there were a series of measures to raise taxes on wine in California. These were largely sponsored by a loose collection of individuals and organizations commonly referred to as “neo-prohibitionists.” Those efforts were opposed most strenuously by the Wine Institute, the San Francisco-based trade group then under the leadership of John De Luca. I don’t know who came up with the term “neo-prohibitionists,” but it was brilliant marketing, as it made the pro-tax side look like a bunch of tight-ass teatotalers led by Carrie Nation-type angry non-drinkers who hated fun, sex and dancing. Needless to say, nothing came of these tax-boosting efforts, and I can’t recall any similar threat so far in the 21st century.
Well, not here in the U.S., anyway. But Down Under, it’s a different story. The Australian National Preventative Health Agency, an official part of the government, is set to propose “that a ‘floor price’ and new taxes be calculated as a way to make alcohol dearer,” according to news.com.au.
And the tax hike would not be a modest one. “The cheapest wine would cost $8.40 for a bottle of white or $9.60 for a red.” (The U.S. and Aussie dollars are pretty much equal in value.)
The Australian Medical Association is pushing the pro-tax plan, while the country’s hotels, retailers and wine industry trade groups are fighting back. It’s a Battle Royale and the outcome isn’t clear.
I obviously hope this tax hike doesn’t go through. Prohibitionist schemes, whether for recreational drugs or alcoholic beverages, never work. Look at this country’s own sorry experience with Prohibition in the 1920s, which gave rise to organized crime’s lucrative choke hold on booze, or to today’s strictures against marijuana, which have turned Mexico into a narco-state whose violence routinely spills over the border into our own country.
Much better, in the case of alcoholic beverages, to teach young people to drink responsibly, at the table with food and companionable company. But I guess that’s asking too much in a country whose culture still has a streak of puritanism running through it.
My digital friend Alfonso Cevola posts on his blog, On the Wine Trail in Italy, about how an Italian culinary and wine education school, the Alma Wine Academy, is selling a “Master Sommelier diploma” for 1,044 Euros (about $1,354). This so-called Master Sommelier certification, it need not be added, has nothing to do with the real Court of Master Sommeliers, the U.K.-based organization whose tough examination parameters entitle 129 North Americans to add the prestigious letters M.S. after their name.
The Court issued a statement denying any link to the Alma Wine Academy and said it is “currently seeking through legal channels to clarify the situation.”
Alfonso learned of this through a post on a blog called Just a Good Little Wine, entitled My Master Sommelier Thesis: Josko Gravner’s Ribolla gialla and the orange wines in the U.S. market. In it, the blogger, Cristina Coari, says she is “proud to announce I’ve recently got my Master Sommelier diploma” on the basis of her thesis on “orange wines…whites so defined by the Americans for their amber and orangish color. Today, this type of wines [sic] are produced all over the world, from France to California, from New York State to Australia, from Georgia to of course Italy.” In her thesis, Cristina writes, she studied the market potential for these wines. Unfortunately, her thesis (available on her blog through a link) is in Italian, of which I speak not a word, except Ciao! and various food terms.
At first I thought Cristina’s post was a put-on, but then I Googled “orange wines” and got quite a few hits. Here’s one that calls orange wines “a current favorite of hipster sommeliers.” Here’s another, from Imbibe Magazine, that describes orange wine as “White wine that has been left to get chummy with the grape skins and seeds,” a technique uncommon in the vinification of white wines. Its introduction in New York State, by Red Hook Winery, “kicked off a whole new facet of New York winemaking and inspired other New York producers,” according to the author. And here’s one, from 2009, from our own Jon Bonné, at the S.F. Chronicle, that calls orange wines the “ultimate reactionary drink.” Jon said that 2009 “seems to be their breakout year,” but I don’t think it was. I haven’t come across any orange wines in California, haven’t heard of them, and if there’s any breaking out, it’s failed to come to my attention.
Incidentally, I looked up Josco Gravner (the subject of Cristina’s thesis) in Wine Enthusiast’s database and found a 2008 review by our Italian bureau chief, Monica Larner, of his 2003 Anfora Breg ($120), a blend of Sauvignon Blanc, Chardonnay, Pinot Grigio and Riesling Italico. She loved its “deep golden color and intense aromas of caramel, butterscotch, mature apricot and chewy caramel,” and gave it 92 points.
Have you heard of orange wines? Are you a somm who serves them? Know any Cali winemakers who make them? Let me know.
There’s been a lot of reporting on the Wine Industry Financial Symposium’s latest wine industry survey, as for instance here and here, so I thought I’d get my two cents in. The WIFS survey was of “wine industry leaders,” and these assuredly are the [mostly] men who literally are paid to figure out the future, and are in the best position to foresee it and, they hope, influence it.
I’m not a wine industry leader. But I do have a certain perspective on things that I like to think is unique in some ways. As a wine writer who’s heavily involved in the California wine industry, and with my own connection to, and insight into, consumers, I see trends in my own way. So I’ll piggy-back on the WIFS survey to share my thoughts on some of its conclusions. (Everything in italics is taken from one of the the two articles cited above.)
respondents…are attempting to improve margins by increasing wine prices where feasible, reducing operating costs, improving operating efficiencies and emphasizing their relationships with growers.
This is always the case and always will be. The trick is to maintain quality while reducing those operating costs. I’m seeing an awful lot of truly bad wine lately, more than usual. Either these winemakers don’t know they’re making bad wine (hard to believe), or they’re being compelled to make and release bad wine because of economic pressures.
Many believe consumers will slowly increase purchases of high-priced brands as the economy recovers…However, others feel that the previous levels of conspicuous consumption will not return.
Sure they’ll return. Nothing changes human nature. People like the feeling of buying expensive things, whether it’s Air Jordans, Diesel jeans or a $75 bottle of wine. The economy, already improving, will continue to do so, and people will return to buying expensive wine. I do wonder how many expensive brands any market can support, even in a roaring economy. We’ve never seen as many triple-digit-priced wines in history. Can there be room for them all?
The executives’ top concerns (in order) include globalization and competition from imports, government regulations (especially of labor and environmental issues), availability of water and distribution and retail consolidation…taxes, competition for land, climate change, packaging innovation and supply cycles of shortage and surplus.
Nothing they can do about any of these, except figure out how to deal with them all. Doing business in America is complicated. The best companies adapt instead of complaining. The government may coerce a company into doing business in a more environmentally-friendly way, but in the end, that redounds to the company’s success.
Three-quarters are focusing more on consumer-direct sales…
DTC is going to be a major factor for wineries, especially smaller ones. The big companies are happy with the distributor system, which isn’t going anywhere anytime soon. (Sorry, Tom Wark.) Nor should it. Distributors play a major role in getting wine to every nook and cranny in the U.S., and they’re also instrumental in keeping the price of wine down. That’s a good thing. But the little wineries that can’t get distributed have no choice but to explore DTC. Which leads us to the next, somewhat controversial conclusion:
Most [industry leaders] don’t find social media very important to their companies. Asked to rate the importance from one to five, they rate Facebook at 2.5, with Twitter and their company blog at 2.27.
You’d think that after so many years of social media adherents lecturing wineries that social media is The Next Big Thing, the wineries would have gotten the message. Apparently not; these ratings are really mediocre. Why would smart leaders brush off something so potentially important? Because they are smart. Smart enough to realize social media isn’t as important as everyone said it was, and most likely never will be.
When you look at the growth of the biggest 16 U.S. wine companies, That doesn’t leave much for smaller wineries. You can say that again. There are at least 7,000 wineries in America, which means that 6,984 of them have to compete for whatever’s left over after The Big Guys take their share. This gets back to direct-to-consumer. I can’t tell you how many small wineries tell me how important their clubs are to sales. I mentioned human nature above; another aspect of it is that people like belonging to like-minded groupings, whether they’re blood families or people who root for the same sports team. Winery club members are loyal. If I had a winery, I’d be working constantly to boost membership in my club. And I’d be using social media as part of the mix.
Finally, the grape shortage (real, impending, rumored, getting worse, getting better, all of the above?) looms large in all these discussions about the health of the California wine industry. Yes, there’s been a shortage for some years, but 2012, from what I’m told, is surprisingly hefty in yield. Of course, we won’t have the official numbers for a little while (the state’s Grape Crush Report doesn’t come out until next year), but hopefully, a bountiful vintage this year will ease the shortage, cutting producers some slack so they won’t have to raise prices.
More proof, by the way, that the economy is rebounding comes from Wine Business Monthly’s salary survey, which paints a pretty rosy picture. Everybody’s getting raises!
I get a fair number of requests from wineries for me to retaste their wines. The way the process works at Wine Enthusiast is that, at some point after I submit my scores and reviews, the magazine contacts the winery. That’s when they learn their score, and I’d estimate that the percentage who are disappointed enough to ask me to retaste is about the same as the percentage of wines I taste that are corked. About 1-2%.
I don’t have to retaste wines. It’s not required of me. The tasting department trusts me, and leaves it to my discretion, as well they should. However, in every case where the winery asks for a retaste, I accommodate. It’s the right thing to do. If the number of wineries asking for retastes starts to climb, I’ll have to reconsider my position, but so far, it’s manageable.
Most of the time when a winery requests a retaste, they offer some excuse for why I might not have found much to like about the wine. It was “off” in some way. They were aware they had some “iffy” bottles. It may have suffered from heat damage. There’s always something.
So what’s my experience with retasting? Actually, pretty consistent. I’d say about half the time I find exactly the same thing. (Remember, I’m tasting blind.) The rest of the time, the wine is better than I’d originally found, although not by much. A point or two, which is not outside the range of petty error. I can only recall a handful of instances where the second taste was worse than the first.
What does it mean when a winery asks for a retaste and says they think I had a bad or off bottle? This is a complex topic. First of all, it’s not a completely insane suggestion. All bottles are not created equal. Bottle variation happens frequently and for a vast array of reasons, more than wineries want you to know (and TCA accounts for only a small percentage of bottle variation). Big wineries, like Bronco or Gallo, are far less likely to have bottle variation than small wineries. Equalizing blends in tanks and bottling is a precision science that big wineries excel at.
There’s little or nothing a winery, small or big, can do about the vagaries of shipping, except to look to the long-range weather forecast to make sure they’re not sending their stuff out as a heat wave approaches. (Actually, lately I’ve been getting more boxes with little icy packets in them that work quite well to keep the contents cool for days.) Wineries are a lot better about checking the forecast than they used to be. It’s been my practice for years, when they ask me how to submit wines, to tell them during the summer months to please check the weather. It can get up to 140 degrees in the back of those metal boxes they call UPS and FedEx trucks.
But I wonder why a winery would send out a wine they later claim they knew was “iffy.” Did they know the wine was compromised and somehow hope that nobody would notice? Did economics trump common sense? Probably so. When your income is on the line, you’re apt to take chances. If I owned a winery, I like to think I’d never send a batch of wine I knew was off in some way–especially to a critic! But I might look at my payroll, my bills, the family’s needs, and figure, Hey, let’s roll the dice. Not all critics are created equal, either. My hunch is that wineries get away with releasing compromised wine because, from their point of view, there’s really no other choice. Of course, there’s always the possibility–I’ve heard it rumored for years–that some wineries, especially culty ones, send people like me wines that aren’t the real wine produced under that label, but special cuvées. I once even heard of a Napa winery that actually was sending certain critics a famous Bordeaux, or so it was said. I’d hate to think anyone in California would do that, but who knows?
At any rate, the main reason wines don’t score high isn’t because they’re compromised, or suffered during a heat wave, or any other unfortunate accident. It’s because they weren’t very good to begin with.
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Packaging is the subject of today’s post. Lowly, decidedly non-glamorous packaging.
Reports surfaced yesterday that UC Davis researchers are “studying the performance – specifically the variability – within different types of closures.” They’re trying to determine if people can tell the difference between wines bottled in natural cork, screw caps or synthetic cork.
Notice that this study, whose conclusions are at least a year away, is not trying to answer that old question of whether wines age better, worse or just about the same in screw tops, natural or synthetic cork. To the best of my knowledge, that question remains an open one. But the UC Davis study will analyze the amount of oxidation that hits Sauvignon Blanc bottled in each type of closure. That should shed a little light on the impact of closures on longterm aging.
The news immediately went national. This morning’s HuffPo reported it, elevating it to the level of drama. “The debate as to whether traditional corks or screw craps produces a better bottle of wine — a controversial one that has divided the wine community — is about to take a scientific turn,” HuffPo said, doing exactly what a newspaper should: taking a dry-as-dust routine announcement of a new study and dubbing it “controversial” and “divisive.”
That’s good writing, my friend.
UC Davis is working on the study along with PlumpJack Winery, which has been using screwtops on some its its high-end red wines for years. This was a forward-looking move on co-owner Gavin Newsom’s part, but then, he’s always been a wonky kind of guy. Personally, as a critic who tastes more wine than the average Joe or Jill, I couldn’t care less what a wine is packaged in. If you had to smell TCA on as many corked wines as I do, you’d feel the same way. (Actually, I’m happy to admit the number of corky wines has fallen over the years. Based on my experience, I’d estimate it as 1 in every 100 bottles. But different people have different levels of sensitivity to TCA.)
The Brits, apparently, don’t much care either about how their wines are packaged, as long as it’s good. The Guardian headlined yesterday: “British wine snobs learning to love screw tops and boxes–Four in 10 wine drinkers now agree the quality of wine in a box or a pouch is as good as the bottled option.” Why the reporter called them “snobs” is beyond me.
Another British newspaper, The Mail, reported on the numbers. “Just 26 per cent of those questioned believed boxed wine was inferior to its bottled counterpart,” and “Screw-top bottles are also gaining in respectability, with just 17 per cent turning up their noses.”
These are good developments. People are learning to judge wines by the content of their character, not the type of packaging. I know, I know, the traditional cork is romantic. That Pop! as the screw extracts it from the bottle is part of wine’s charm. I doubt if the cork will ever go away, not in my lifetime. Or yours, probably, if you’re old enough to read this. But my thumbs–those marvel of evolution–are getting sore after opening more than 100,000 bottles (conservative estimate) over the course of my career. I could use a break. (But please, not synthetic corks. Hate them with a passion.)
David Freed is a really smart guy. I respect him, so when I saw this Q&A with David, by Cyril Penn in winebusiness.com, naturally I read it.
The mark of a great interview is that it gets you thinking. A great interview requires a great interviewer, but not even the best interviewer can get blood from a stone. Fortunately, David is not a stone. He’s a good interviewee because he knows his stuff and is willing and able to talk in solid, direct language that reflects his long years in what my Texas uncle used to call the bidness.
When Cyril asked David, “What sort of deals have you been doing on vineyards?,” David said Napa and Sonoma, but significantly added, “But what’s the headline? We’re in Monterey and Paso.” That’s the mark of an experienced interviewee. He knows journalists are looking for “the headline,” and he gives it right out front. David explained that his company’s stake in the Central Coast is because “It’s an area that is right at the $12-$14 or $12-$15 price point and is very popular.”
Why would a Napa-based company with roots in the North Coast move into the Central Coast at a lower price point? Of course I don’t have to explain it to my savvy readers. That’s where the action is, in a country that’s poorer than it used to be. As David pointed out in the Q&A, demand for wines at these and even lower price points is so fierce, California producers are running out of grapes (a problem compounded by recent short crops, although the Sacramento Bee yesterday reported “the 2012 [California] wine grape crop is expected to reach 3.7 million tons. That amount would tie the second-largest crop ever,” which would help alleviate the shortage). I’ve never seen such demand for inexpensive wines in my life. It’s a challenge for producers, made tougher because consumers still want the same old same old: Cabernet Sauvignon and Chardonnay. Despite the increased plantings in Paso Robles for the former and Monterey for the latter, expect to see lots more California appellation Cabs and Chards coming from the Central Valley. They’ll be inexpensive–and they won’t be bad. Which is good for consumers.
David also predicted California’s share of the domestic market will decline. “I don’t see that California growers are going to be able to maintain their position going forward as a percentage of overall U.S. consumption” is how he put it. California wines accounted for 83% of all domestic wines in 2011, down from the 90% reported in 2005. And that downward trend seems likely to continue.
This will make it even harder for California wineries to battle it out, gain their share of the grapes that are available, and compete against other states and imports. I’ve wondered for years just what the expensive wines are going to do–say, $35 to $60. There are fantastic wines available in that segment, believe me, but they don’t have the cachet of the cult Cabs and Pinots. We’ve been through these worrisome periods before, like the early 1990s, during the dot-com collapse and at the height of the Recession in 2009-2010, and the worst never seems to happen. But we’re going into tremendously uncertain times. David Freed told Cyril he sees “two wine industries” in the near future: “the Top 30 – and everybody else.” The Top 30 will do okay. The cults will do okay (their deep pockets will float most of them for a while). It’s the thousands of wineries in the problematic middle that are going to have to work harder than ever to stay afloat.