October 16, 2008: Inside the bottle: The Wine Business
By Philip Martin
Wine is one of the world's oldest drinks, but production
and consumption remain concentrated in France, Italy and
Spain. These countries have 165 million people, 2.5 percent
of the world’s population, produce 52 percent of the world’s
wine, and consume 43 percent - an average 22 gallons per
adult per year.
Τhere is a battle fermenting between Old World European
and New World producers in Argentina, Australia, California,
Chile, New Zealand and South Africa. Do consumers prefer the
Old World approach to wine making, which involves following
rules for growing grapes and making wines that are rated by
experts, or the New World approach of producing wines from
one variety of grapes? In short, do consumers prefer
consistent input rules or consistent output taste?
Global Wine Production: one gallon per person per year
Europe produces about 70 percent of the world's 6.6 billion
gallons of wine from 8.5 million acres of grapes (Europe has
too much wine, and the EU is attempting to remove 10 percent
of its vineyards). France accounted for 19 percent of global
wine production in 2004; Italy, 18 percent; and Spain, 14
percent. Other major European wine producers include the
ex-USSR, which produces four percent of the world's wine;
Germany and ex-Yugoslavia, three percent each; Romania and
Portugal, 2.5 percent each; and Hungary and Greece, two
percent each.
The US is the fourth-largest producer, accounting for
seven percent of global wine production. Other New World
wine producers are Argentina and Australia, five percent
each; South Africa, three percent; and Chile, two percent.
The Dynamic Trio are Australia, Chile, South Africa; they
produce 10 percent of the world's wine but have just one
percent of the world's people, so they export most of their
wine.
Old World versus New World Wine
In the Old World, grape growing and wine making are often
fragmented. Europe has thousands of growers, many with fewer
than five acres of grapes. Most European wine is made by
cooperatives that crush locally grown grapes (the famous
Chateaux that grow grapes and bottle estate wines are the
exception). Most European wines include several varieties of
grapes, and the wine is labeled to reflect the region in
which the grapes were grown, using geographic indicators
(appellations) such as Bordeaux, Burgundy or Chablis. A long
list of rules govern how grapes are grown and wine is made.
Grape yields are generally low because irrigation is
limited.
In the New World, the winemaker's goal is consistency.
Grape growing and wine making are often integrated
operations, putting the winemaker in control. Many new world
wineries have a portfolio of labels, such as Constellation-Mondavi
(Woodbridge, Opus One) and Southcorp (Lindemans, Penfolds'
Grange). New World wines are labeled with the variety of
grape used.
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Two major events influenced US wine consumption. First was the
Paris surprise of May 24, 1976, when two California wines,
Stag's Leap Cabernet and Chateau Montelena Chardonnay, were
judged by French critics the top red and white wines in a
blind tasting. Second was the "60 Minutes" airing of the
French paradox in November 1991, attributing the generally
good health of the French despite a high-fat diet to red
wine consumption.
Wine Quality and Price
During the 1990s, the price gaps between the major types of
wine widened, even as quality gaps narrowed. Wines are
grouped by their average retail price:
• Ultra-premium wines are those with retail prices over $14
a bottle. The 13 percent of US wine in this category in 2007
generated about 36 percent of wine revenues. Many wineries
make less than 1,000 cases of ultra-premium wines, but with
"buzz" from high Robert Parker/Wine Spectator ratings, there
are often long lists of consumers eager to buy them.
• Super premium wines cost $7 to $14 a bottle and are
usually made from one variety of grape, such as Cabernet,
Merlot and Chardonnay. They are 26 percent of the volume of
wine sold, but 32 percent of wine revenues.
• Popular premium wines that cost $3 to $7 a bottle are a
specialty of New World producers in Australia, Chile and New
Zealand. They represent 33 percent of the volume of wine
sold and 22 percent of wine revenues.
• Jug- and super-value wines cost less than $3 a bottle, and
are often sold in larger than 750 ml bottles. They are 28
percent of the wine sold in the US and 10 percent of
revenues.
Over the past decade, Western European wine consumption fell
and American wine consumption rose slightly.
Wine Making: a Good Business?
Is there a wine glut, as Barron's predicted August 3, 1998
and again June 24, 2000, or is wine different from other
agricultural products? Is wine like potatoes, where supply
tends to increase faster than demand despite new products,
such as French fries? Or is wine like coffee, with segmented
markets that allow Starbucks and Folgers to buy similar raw
materials but sell different products to consumers at
different prices?
Bibliography
Goodhue, Rachael, Richard Green, Dale Heien and Philip
Martin. 2008. California wine industry evolving to compete
in 21st century. California Agriculture. Vol 62. No 1.
Pp12-18. http://calag.ucop.edu/0801JFM/abstracts.html#1
Philip Martin
Προσθήκη:
16/10/2008
Τελευταία Ανανέωση:
16/10/2008
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