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07.22.2009

Wine Signs of the Times

I'm not sure why, but there has been a spate of interesting developments in the wine world in the past few weeks, all of which bear paying attention to by anyone interested in where the wine industry is going these days.

I'm normally not one to simply rattle off lists news stories, but these are all so interesting that I can't pass up the opportunity to share them.

We're Talking Mainstream
The fact that Amazon.Com is getting in the wine business has been old news for a while, but two more giants of American retail just announced they were also going to make a play for wine drinkers. Starbucks will begin selling wine (albeit crappy wine) in it's new concept stores. They will be joined by Walgreens in catering to those folks who want a bottle of wine to go.

Yes, China Will Change the Wine Market
As if we needed any more proof that the Chinese market will have a profound impact on the world of wine, the Chinese government's main investment fund just invested $365 million dollars to buy a 1.1% stake in Diageo, one of the world's largest wine companies, which itself has been investing in opening up the Chinese market for its products. Time to get Vinography translated into Mandarin for sure.

Your Wine Lists Rule Us Like Robotic Overlords
A recent study by the Cornell University Center for Hospitality Research on best practices for wine list creation has revealed that even the tiniest changes to wine lists result in significantly different buying behavior by consumers. You didn't know that you were more likely to buy a more expensive bottle of wine if the price was listed without a dollar sign in front of it, did you? But you are indeed a sheep like the rest of us. The study revealed other interesting tidbits, like the more wines on the list the better it performed up until the number of wines hit 150, after which sales dropped. Or, contrary to much popular belief, the study showed that wine-by-the-glass programs did not lead to a higher number of sales of bottles. And then there were the head slapping common sense facts that were reaffirmed: organizing your wine list by terms like "fruity" "aggressive" or "sweet" was a recipe for lower sales, and having recognizeable high-end wines on your list was a recipe for higher sales.

Freakonomics Folks Drink Too Much Wine
I've been surprised by a rash of wine related articles on the New York Times Freakonomics blog, which indicates to me the possibility that either journalists are drowning a lot more sorrows these days, or statistics become a hell of a lot more fun when you're drunk. In any case, the most interesting of these posts has been an analysis of a recent report from the Society for Wine Economists about the relationships between the adjectives used to describe wine and the perceived (and real) value of the wine. In short, it's not clear whether adjectives common in tasting notes about top wines mean that these are flavors inherent in these wines, or that they are imposed on the wines by critics who know the wine is expensive when they are writing the notes.

Enjoy.

Comments (22)

Glen Ferguson wrote:
07.23.09 at 4:39 AM

I've heard that China is going to change the wine market for a while now but I have trouble believing it. One could consider that country of origin is important to wine buying decisions. China's reputation is in making garbage goods for cheap. The "Made in China" tag is tiny for a reason. I think this reputation will follow on to wine both inside and outside the country. Buying wine is as much a lifestyle choice as it is a preference choice. One could imagine negative country of origin product associations might matter more in such a buying decision. Maybe I'm wrong but this always comes to mind whenever I hear China will change the wine world.

Also, can you recommend a good intro book on sake? I've recently had some good sake drinking experiences and wanted to explore a little deeper.

07.23.09 at 5:30 AM

Alder - what makes you think the wine at Starbucks will be "crappy"? Have they announced the wine list yet?

Thanks for any info you can share.

Richard

Chloe Beard wrote:
07.23.09 at 6:44 AM

I own a small wine brokerage in northern california, and have had at least 4 phone calls in recent memory from businesses starting up to export wine to China. Clearly there is opportunity in China. What does that mean to the average wine consumer in America? Maybe not much, except when you travel to china, you will be able to find better quality wines. Then again, that increased demand may slowly change the marketplace here.

Alder wrote:
07.23.09 at 8:34 AM

Richard -- I saw in one article the target retail bottle price would be between $3 and $7.

07.23.09 at 8:59 AM

Heck, they sell COFFEE by the CUP for that! That's nutty!

Richard

Phil Vogels wrote:
07.23.09 at 9:50 AM

Alder, I'd read the Cornell study a little closer. They did not have the actual sales data for the restaurants used in the study, instead they used the purchasing data for the restaurant from Southern (the distributor sponsoring the study) and only Southern, as well as liquor purchases from Southern, as a proxy for sales. I think the amount of error this introduces means that any conclusions that were drawn cannot be relied upon. They may very well be right about each one, but this study doesn't prove it.

Grant wrote:
07.23.09 at 9:55 AM

Met some Chinese importers in Cape Town this week. One was expecting to at least double sales in 2010. Of course, it is easy to talk things up at the negotiating table but it didn't seem an idle boast.

Cheers

Alder wrote:
07.23.09 at 10:03 AM

Glen,

It remains to be seen whether China can produce good wine, but the change it is having on the wine industry has nothing to do with the wine that it might make. It has to do with the wine it will drink.

07.23.09 at 5:34 PM

I've been predicting the Starbucks trend for about 2 years now. What's fascinating to me is that most people want to remain anonymous when they're hanging in Starbucks - notice how many people arrive alone just to work on their computer - and now they want to introduce a socialization activity.

They might be better off just starting out with Coffee Meet-ups instead.

Tom Bain wrote:
07.23.09 at 7:14 PM

Diageo is not the largest wine company. They control close to 60% of the luxury spirits market. Constellation is the largest wine company. Diageo recently revealed they are phasing out of the premieum French wine business.

Derek wrote:
07.24.09 at 7:46 AM

Agree with Phil on this one--you can't draw many reliable conclusions from the depletions data of one distributor--SWS market share varies across the markets in the study, and their share of each restaurant's wine list is different.

Glen Ferguson wrote:
07.24.09 at 8:05 AM

I certainly didn't mean to imply China can't or won't make good wine, I am sure they will. I just don't know if they will be able to convince anyone the wine is good (at least outside of China). On the point I misunderstood, I think China will consume more wine but I don't know if they will be drinking more international than domestic. I do think China will be making lots of wine sooner rather than later. I'm not sure China will displace England in wine importing anytime soon.

Lee Stipp wrote:
07.24.09 at 8:28 AM

@ Tom Bain

In fairness to the author, he wrote, "one of the largest" not just "the largest"

@ China

Good luck.

JD in Napa wrote:
07.24.09 at 9:33 AM

The Diageo/China thing could be interesting, but wine is a pretty small part of the Diageo revenue stream. Note that Diageo is backing out of wine in India. Spirits and beer have a much higher margin, and could be the play in China. Fun to watch.

Brad wrote:
07.24.09 at 9:38 AM

@Phill

It is interesting that Southern W&S sponsored this study and played such a large role in the data collection. I believe that Southern has been pitching its own competitive depletion tracking software rather aggressively and I wonder what role this new software played in this study.

Phil wrote:
07.24.09 at 9:49 AM

I didn't know that Brad, what help is the software supposed to be? To suppliers or retailers/restaurants?

I imagine that they must of used that software, if it was available. I was impressed when I initially read the news story about the study, since I assumed they had somehow gotten the cooperation of a bunch of restaurants and their sales data. This would be a great study to do with that piece of information added.

Brad wrote:
07.24.09 at 10:03 AM

The software is supposed to track competitive depletions primary used by producers/suppliers. For example I could see that I was depleting such and such wine to account Y and that other competitors, which would be kept confidential, were depleting X number of cases as well. In other words it helps you track top accounts and market share while keeping everyone’s data confidential.

I heard that they invested quite a bit of time and energy into this tool and that it is supposed to be pretty powerful. I have not personally seen Southern’s system but there are several companies on the market that have competitive depletion data and I am assuming that it operates similar to those.

eric wrote:
07.24.09 at 11:54 AM

4600 years of making wine. don't think it's new to the business regardless of how poor the product is at present. check out: http://www.kosmix.com/search/China_%2B_Wine? for all sorts of videos, articles etc. on wine in china

Dylan wrote:
07.26.09 at 4:23 PM

The Diageo deal is certainly a case of putting their money where their mouth is. If you're interested in this Alder, I know Catavino has a correspondent wine team in China right now. Their posts are usually vivid, culturally informative, and very telling with regards to China's presumed rise of power in wine.

Barry Waz wrote:
07.26.09 at 9:28 PM

On my most recent trip to China (early July), noticed a bottle produced by a joint venture between a well-know French producer (cannot recall the name) and a Chinese company. Most Chinese produced wine that I've tasted over the past 4-5 years was truly awful, and their rice wine is in a category all to itself. But, if this venture is any indication, both outsiders and the Chinese are aware of the need to improve the native product. In terms of available selections at the lower end of the market in HK, for example, I tasted some good Chilean and South African wines at about $10usd per bottle. Did not see much from the US other than a couple of Gallo bottles, but that could have been due to where I was looking (Kowloon). Also, in early November, there is a major trade show in HK specifically keyed to the Chinese and Southeast Asian markets, for both wine and spirit producers and producers of wine and bar accessories. The sponsor is the HK Trade Development Council.

Joanna Breslin wrote:
07.27.09 at 12:01 AM

China's "garbage goods for cheap" include fake versions of just about everything people are willing to pay money for. This internationally known but seemingly uncontrollable proclivity will affect the wine industry, which is already plagued with counterfeit wines. The consumption potential of China and its desire for the same sought-after wines that everyone else wants will indeed change the wine industry. Perhaps Diageo can help in the long run by selling stuff that is what it says it is, and by raising the overall quality of wine in China through exposing more people to decent, everyday wine - the way Starbucks did for coffee awareness.

11.21.14 at 11:34 AM

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