Wine Futures: The Declining Importance of Grape and Region

Introduction

Extensive research has shown that in blind tastings, price does not matter. That is, without knowing the price, people are just as likely to prefer a cheaper wine to a more expensive one. Of course, we don’t buy wines blindfolded, and people use brand, region/vineyard, grape, and price to select wines. In what follows, I ask how important region and grape will be for consumers in the future. My conclusion: much less so than now.

How People Choose Wines

For most people, wine choice starts with color. Some like red while others prefer whites. Historically, the next choice criterion was probably region, French regions/vineyards in particular. And now, the grape/varietal has become important. In recent years, there have been periods when Shiraz, Malbec, Pinot Noir, Chardonnay, and Sauvignon Blanc have been the wines of choice.

But what does this really mean? While consumers regularly express preferences for certain grapes or regions, these preferences often do stand up in blind tastings. More specifically, while most consumers in blind tastings might be able to distinguish between a Pinot Noir (light red) and a Cabernet Sauvignon (heavy red), many would not consistently prefer that Cab to other heavy reds – a Merlot, a Shiraz, or a Malbec.

A bit more on wine drinkers – most do not know if Burgundy is a grape or region. And if you ask to name the best wine they ever had, you will find with a little probing that it has more to do with the setting – “it was a beautiful evening and I was sitting on the ‘Left Bank’ with a beautiful woman” than the wine.

The Wine Marketers

Of course, the wine marketers know all this – they are aware of shaky preferences and how important brand, grape, region and price are to wine customers. They also believe they know what wines people like. They “claim” Americans prefer lighter and sweeter wines than Europeans.

 The Wine Producers

As I indicated in an earlier article, major changes are taking place in wine production.

  • Growing grapes is a farming activity. And as with other crops, there are good and bad years. How much easier if wine producers could buy “grape juice” from others in bad years and sell juice to others in good years. Of course, this is a problem for the wine producers whose marketing appeal is based primarily on their region/vineyards.[1]
  • But increasingly, this is how wine is being made: producers are buying juice rather farming.
  • To facilitate this change, the bulk wine industry is growing.
  • Another key feature in this transition: the grape “blenders”, those knowing how to mix grape “juices” to make “tasty” wines are in high demand.

I remember being at a vineyard in Stellenbosch several years back where I saw the vineyard owner tasting wines with someone. That someone turned out to be a “blending” consultant. The notoriety of some of these consultants – Michael Rolland and Paul Hobbs – is impressive. And for the growing cadré of producers that do not grow grapes, e.g., Castle Rock and Yellowtail, their bulk wine buyers and blenders are all-important.

Blends

The growth in grape/varietal blends is one indicator of the changes taking place in the wine industry. Nielson reports: “more than 40% of the new wine entries in 2014 were blends, with more than three quarters of these being reds. No other wine type has even come close to the same amount of new offerings to market…. Having a red blend in a wine supplier’s portfolio is almost a “must have” these days, with consumers seeking them out. And the winemaker certainly likes the flexibility and art that comes with mixing various grape varieties together.

Wine Bulk Trading

As wine production is separated from grape growing, the trade in bulk wine becomes more important. According to Comtrade, the US imported 289 million liters of bulk wine in 2014. That was 29% of total US wine imports. There is also a lot of intra-US bulk trading. For example, Table 1 is a sample of the 1,451 bulk wine offerings for sale on the Turrentine Brokerage’s website. Note that some are listed by the varietal while others are more general – “dry red”, “dry white”.

Table 1. Bulk Wines for Sale

Source: Turrentine Brokerage

Brand Names Moving Away From Region and Grape

 Table 2 illustrates some of what is happening in the wine industry. In addition to sales and average growth rates of selected brands, it also provides the number of wines each brand offers along with the number of its labels where:

  1. No grape is mentioned or
  2. The wine is designated as a blend.

Table 2. – Brand Sales and Compound Annual Growth Rates

Source: The Beverage Information & Insights Group and various brand web sites.

Barefoot is a real phenomenon. It is now the world’s largest wine brand, has no vineyards and sources bulk wine globally. It features Jennifer Wall as its wine “blender.” It has 10 red selections. In 3 of them, no grape is mentioned in the label (Rosa Red Blend, Sweet Red Blend, and Rich Red Blend). It sells 5 whites. And in its line of 11 sparkling wines, 7 do not mention a grape in the label. Barefoot recently came out with a new line – Barefoot Refresh. There are 5 offerings none of which mention the grape. 16 of Barefoot wines mention “California” as the region and 1 lists “Italy.”

Bota Box is also quite interesting. Unlike Barefoot, it mentions the grape in all but two of its offerings. It is also quite specific where its wines come from: its Cabernet Sauvignon and Malbec from Argentina, its Pinot Noir from Chile and its others come from California. Until recently, it had one blend but just offered a new one – Bota Box Nighthawk. No mention of grapes on the label or on its web site. It describes Nighthawk as follows:

“Nighthawk unveils rich aromas of raspberry, blackberry, caramel and hints of vanilla.  With lush flavors of deep berry, fig jam, dark chocolate, toasted marshmallow and baking spice, this smooth, full-bodied wine culminates in a juicy, lingering finish.”

Chris Indelicato, President of Delicato Family Vineyards that owns Bota Box said: “”As revealed by our recent 2015 Delicato Wine Insights study, Premium 3-Liter Box wine enthusiasts are also frequent consumers of 750ml wines priced $8-10.99 – a segment whose growth has been largely fueled by red blends and particularly dark red blends.

Apothic is the most rapidly growing brand in Table 2 – an average annual growth rate of 93% since 2010. It has 3 wines. Its labels: “Red”, “Dark”, and “White”. They are all blends. Its descriptors:

  • “Red” – “Dark red fruit complemented by hints of vanilla and mocha.”
  • “Dark” – “Dark fruit flavors of blueberry and blackberry with opulent notes of coffee and dark chocolate.”
  • “White”: “Refreshing flavors of peach and apricot leading to a crisp, balanced finish.”

Conclusions

 Traditional identifiers of wines – grape, region, vineyard, terroir – are declining in importance both in production and marketing. In production, a growing cadré of “blenders” are determining what to use. In marketing, more emphasis is being placed bottle/label colors and on BS terms[2] such as for Barefoot’s Sweet Red Blend:

“Chill out (no seriously, try this chilled) with the ripe, juicy flavors of raspberry, pomegranate and cherry in our Barefoot Sweet Red Blend. It’s ripe and jammy with explosive flavors of raspberry, plum and cherry for a soft and smooth finish.”

Make no mistake; the marketers of these products are deadly serious. They know how to “create value” and get people to buy their wines. Of course, price, region, vineyard, terroir, etc. will remain important to the “fashion conscious.” For these, wines are like men’s watches and women’s perfumes where price and brand name matter.


[1] And as I suggested in an earlier piece, some quiet trading in bulk wines is probably being done by producers whose appeal is based on their region, vineyard, and/or terroir.

[2] Richard E. Quandt, “On Wine Bullshit: Some New Software?”, Journal of Wine Economics, Volume 2, Number 2, Fall 2007, Pages 129–135.

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