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JWE Volume 8 | 2013 | No. 2

Journal of Wine Economics Volume 8 | 2013 | No. 2

Editorial: Introduction to the Issue

AAWE
Pages: 129-130
Full Text PDF
Excerpt
This issue of the Journal of Wine Economics begins with “Modeling Global Wine Markets to 2018: Exchange Rates, Taste Changes, and China’s Import Growth” by Kym Anderson and Glyn Wittwer. Their analysis employs an econometric model based on 2007–2011 data, to forecast a range of likely global wine market scenarios for the next five years. The authors compute a range of alternative simulations for different real exchange and economic growth rates. In addition to finding a continuing trend toward premium wines, all scenarios also suggest that “China’s place in global wine markets is likely to become increasingly more prominent. . . . Not all segments of the industry are projected to benefit, with nonpremium producers facing falling prices if demand for their product continues to dwindle as projected above. But those exporting firms willing to invest sufficiently in building relationships with their Chinese importer/distributor – or in going into grape growing or wine making within China, may well enjoy long-term benefits from such investments.”

Modeling Global Wine Markets to 2018: Exchange Rates,
 Taste Changes, and China’s Import Growth

Kym Anderson & Glyn Wittwer
Pages: 131-158
Full Text PDF
Abstract

In this paper, we use a revised, expanded, and updated version of a global model first developed by Wittwer et al. (2003) to project the wine markets of its 44 countries plus seven residual country groups to 2018. Because real exchange rate (RER) changes have played a key role in the fortunes of wine market participants in some countries in recent years, we use the model to analyze their impact, first retrospectively during 2007–11 and then prospectively during the period to 2018 under two alternative sets of RERs: no change, and a halfway return to 2009 rates. In both scenarios, we assume a return to the gradual trend toward premium wines and away from nonpremium wines. The other major development expected to affect the world’s wine trade is growth in China’s import demand. Alternative simulations provide a range of possibilities, but even the low-growth scenario suggests that China’s place in global wine markets is likely to become increasingly prominent.

Red Wines of Médoc: What is Wine Tasting Worth?

Victor Ginsburgh, Muriel Monzak & Andras Monzak
Pages: 159-188
Abstract

Winemaking is a highly complex technology. It needs inputs over which there is no control (good weather conditions), initial endowments which can hardly be modified (soil, exposure of the slopes), inputs which take 20 to 30 years before producing good quality outputs (vines), manual operations (picking), mechanical operations (crushing, racking) and chemical processes (during fermentation). In the paper, we disentangle the production technology, and try to quantify the impact on prices (qualities) of each of the many inputs (including weather conditions) and steps used in producing wine in Médoc. We show that technology and weather conditions are able to explain two thirds of the variance of prices; when reputation effects (based on the wine classification made in 1855) are included, this proportion rises to almost 85%. This suggests either that “classified” producers are able to charge higher prices, or that the classification is a measure of quality reflected by prices. We also show that two of the more recent attempts at classifying wines are not as good at explaining prices than the official (and old) 1855 classification.

Reversals in Wine Auction Prices

Ginette McManus, Rajneesh Sharma & Ahmet Tezel
Pages: 189-197
Abstract

This paper investigates reversals in wine auction prices following a series of strong positive and negative returns. Using the Chicago Wine Company’s auction data, we find evidence of reversals after extreme wine price changes. There is a clear asymmetry in the market reaction to wine price increases and declines. Wine price declines after strong price increases are not, in general, as significant as wine price increases after strong price declines. The strongest reversal occurs for wines that have declined in price by more than 30 percent.

Intangibles, Export Intensity, and Company Performance 
in the French Wine Industry

Paul Amadieu, Carole Maurel & Jean-Laurent Viviani
Pages: 198-224
Abstract

Intangible assets can play a strategic role in the implementation of differentiated strategies in foreign markets. The literature has addressed the impact of intangible assets on both exports and financial performance and the effects of exports on company financial performance (profit and risk). This article aims to analyze the effect of exports on the relationship between intangibles and company performance in the wine industry. Empirical studies show that intangibles have a positive but diminishing impact on exports. The effect of exports on financial performance differs depending on whether we consider corporations or cooperatives. While intangible expenses reduce company risk in both samples whatever the level of export intensity, the effects are different with profit. In corporations, intangible expenses have a positive impact on profit only when there is a high level of expenses and a high level of export intensity.

Is there Consensus Among Wine Quality Ratings of Prominent Critics? An Empirical Analysis of Red Bordeaux, 2004–2010

Robert H. Ashton
Pages: 225-234
Abstract

This paper examines the level of consensus, or agreement, among the wine quality ratings of six prominent wine critics for seven consecutive vintages of red Bordeaux. Consensus, a critical component of expertise in wine evaluation, has important implications for consumers’ reliance on critics’ ratings in deciding which wines to purchase or consume. The principal analyses focus on a core set of wines in each year that were rated by all six critics. Additional analyses concern differences in agreement for classified growths vs. nonclassified growths and for critics of different nationalities (American, British, and French). The level of consensus among these prominent critics is contrasted with that among both wine professionals who are not prominent critics and professionals from several other fields.

Book & Film Reviews

Wine for the Table: The Smithsonian National Museum of American History’s Wine Exhibition

By: The Smithsonian National Museum of American History
Reviewer: Stephen Chaikind
Pages: 235-238
Full Text PDF
Exhibition Review

A wonderful photograph at the newly opened wine exhibition in Washington DC’s Smithsonian National Museum of American History shows Julia Child, circa 1970, standing behind a table covered with half a dozen or so bottles of wine, long loaves of French bread, and plates of cheese and hors d’oeuvres. Child is holding a glass of wine at eye level with an expression of analytical judgment on her face. The labels on the bottles were pasted over with apparently handwritten ones saying, in large letters, “Cabernet Sauvignon,” “Médoc Red Bordeaux,” “Pinot Noir,” “Burgundy 1967,” and “Pinot Chardonnay California 1967,” among others. In this scene from her famous television show, The French Chef, Child is teaching Americans how to throw a wine and cheese party.

The photo is particularly apropos of the museum’s newly renovated exhibition, “Food: Transforming the American Table, 1950–2000,” of which wine is a section. Child’s depiction of wine as an integral part of a meal coincided well with the resurgence of quality wine production in the United States during that period and likely did a great deal to encourage its consumer demand as well. That the wine exhibit is just down the hall from the section with the entire kitchen that Child used on her show helps integrate wine as a burgeoning part of American culture.

Living up to its reputation as America’s attic, the museum presents an impressive display of artifacts, along with detailed descriptions of post-Prohibition wine production, technology, innovation, and consumer acceptance—all topics germane to wine economics research. Cramming much information into its modest space, the exhibition is organized by themes of advances in viticulture, enology, marketing, and lifestyle, tracing the emergence of American wine from the end of Prohibition to today. “[I]n the second half of the twentieth century,” the exhibition’s introduction notes, “a community of California dreamers would spark a revolution in a bottle that not only realized Jefferson’s vision [of growing wine grapes in America], but changed the entire world of wine.”

The Paris wine tasting in 1976, immortalized in George Taber’s Time magazine article and subsequent book Judgment of Paris, is seen as a seminal event in the acceptance of American wine. Hence it should be no surprise that the exhibition includes bottles of the two winners of that tasting, the 1973 Stag’s Leap Wine Cellars’ Cabernet Sauvignon and Château Montelena’s Chardonnay from the same year. The labels on these bottles are in good shape, the foil remains, and they appear to be filled with the original wine. An earlier photograph from the 1938 California State Fair, contributed by the University of California at Davis, also emphasizes the importance for the California wine market of wine tastings and competitions.

Changing consumer demand, and the response to it by producers, is a theme repeated throughout the exhibition. An early advertisement focused on America’s initial taste for wine is for a generic “Sauterne,” explaining that “Sauterne, one of the fine wines of California, is a delicious, white table wine.” Another magazine ad by Gallo from 1965 takes consumers on an international wine tour; for France, it suggested “Gallo Vin Rosé of California,” for Germany “Gallo Rhine Garten,” and for Italy “Gallo Chianti of California.” All could be purchased for “[o]nly 72¢ to 93¢ a fifth depending on state taxes.”1 Another display describes a batch of wine in which the yeast died prematurely, leading to the production of a sweet, pinkish white Zinfandel, which Sutter Home decided to try to sell as a test of the market. The Smithsonian has a bottle from an early release of this wine under its original name, Oeil de Perdrix—a name that had to be changed based on the rules of the Bureau of Alcohol, Tobacco, and Firearms. The wine was renamed White Zinfandel, and bumper stickers popped up proclaiming that “Life Is Hell, Without White Zinfandel.” As tastes evolved, though, more traditional dry Zinfandel also was produced, and both are still on the market.

The march of time in production methods in both farming and winemaking is documented in the exhibition. One sequence, for example, shows a box of sulfur strips for cleaning barrels sitting next to a 1964 wine bottled in a reused ShopRite Cherry Soda bottle, along with the requisite old wooden wine press. Mechanizing the harvest (for better or worse) was well under way by the 1970s; we can see a copy of one of the original patents for a harvesting machine. The role of universities and researchers in producing better and more stable wines is recognized, prompting André Tchelistcheff to exclaim: “What we did in forty years, it can be accomplished normally in Europe in four or five centuries.”

After Americans discovered wine, it was inevitable that they would get into their cars and visit wine country. The wine tourism business began to grow, led in large part by the new winery and tasting rooms constructed by Robert Mondavi in Napa Valley. Signage welcoming visitors, wine-themed t-shirts, ads for limousine tours, and posters for wine festivals all are on display. Wine tourism is playing an increasingly important role in the survival of small wineries as well as in regional economic growth.

The Smithsonian also began a wine oral history project in 1997, preserving a record of the modern winemaking process, along with the people, events, and archival documents significant in the growth of the American wine industry. The “Wine for the Table” section of this exhibition includes a series of video clips from these oral histories showing the winemaking process from the bud to the bottle at Stag’s Leap Wine Cellars. These videos are narrated, entirely in their own words, by those performing the work in the vineyard, lab, crush pad, press, and cellar. The winery’s proprietor, Warren Winiarski, talks about challenges in the vineyard, for example, while a budder, Jesus Valdez, discusses and demonstrates both the difficulty and satisfaction of grafting a new varietal onto existing rootstock. Interviews with many others across the wider wine community cover topics such as economic and financial aspects of winemaking, entrepreneurship, auctions, vineyard management, wine collecting, wine writing, and even food and wine pairings.2 Oral histories will be available in the museum’s newly renovated Archives.

Wine’s ubiquitous presence in American life and culture is emphasized by the fact that wine is now produced in all 50 states. In the “Return to Virginia” section of the exhibition, that state’s production is used as an example of this expansion. Virginian wines are highlighted not only because of the state’s growing reputation for producing quality wines but also because of the role played by Thomas Jefferson and other Virginians in the history of wine in America. That visitors to the American History museum can drive an hour or two from the exhibition and visit many outstanding wineries—and taste wines made from the native American (and Virginian) Norton grape—is an added bonus. A brief history of this grape and the efforts to revive it by those at the Chrysalis and Horton vineyards in Virginia is part of this display. But the exhibition’s curators did not forget to mention production in other states as well especially those in historically important Missouri, New York, Maryland, Oregon, and Washington.

This exhibition is scheduled to continue for several years. While not as expansive as the displays at the now-defunct Copia Center in Napa Valley (Copia had a Julia Child restaurant rather than her entire kitchen—and Child’s pots and pans, formerly at Copia, now are part of Julia’s kitchen in this exhibition), it is as interesting and informative as Copia and other wine museums, such as the Museé du Vin in Paris. More information about the entire exhibition is available at http://americanhistory.si.edu/food-the-exhibition. And at the Smithsonian National Museum of American History, unlike other museums, admission is always free.

1Approximately $5.30 to $6.80 in 2012 dollars.

2A summary of these oral histories was provided in a private communication by Paula Johnson, curator in the Division of Work & Industry, National Museum of American History and the exhibition’s project director.

www.americanhistory.si.edu

Stephen Chaikind

Johns Hopkins University
stephen.chaikind@gmail.com
doi:10.1017/jwe.2013.29

Somm

By: Jason Wise
Reviewer: Robert N. Stavins
Pages: 238-241
Full Text PDF
Film Review

There is no point in hiding the headline: Somm, a new film written and directed by Jason Wise, is the best movie about the world of wine since Sideways. One was a work of fiction, and the other is a documentary, but both beautifully capture the passion that characterizes so many wine people – whether amateurs who love drinking wine (Miles and Maya in Sideways), or professionals who love producing and serving it (the sommeliers, chefs, and wine makers who populate Somm). Both films made me laugh; and both films made me cry. With Somm, the production values are so high, the cinematography so beautiful, and the music so evocative that you will forget at times that this is a documentary.

Somm is slang for sommelier, the wine professional typically found in fine restaurants. The sommelier – or wine director – is responsible for all aspects of wine service, with particular expertise in wine and food pairing. But some of the most important responsibilities of the best sommeliers are not in the front of the house, but behind the scenes: wine list development, wine procurement, storage, and cellar rotation, as well as staff training. In the film’s introduction, Chef Michael Mina describes sommeliers as “the new rock-stars of the industry.”

The storyline follows a group of four thirty-something men, three of whom live with their respective wives and girlfriends in San Francisco, and are working as sommeliers in various establishments: Brian McClintic, an affable former baseball player and screenwriter; DLynn Proctor, an intense and self-confident professional; Dustin Wilson, a young man who exudes modesty and warmth, and moved from Montagna at The Little Nell in Aspen to RN74 in San Francisco, with its Burgundy rich wine list; and Ian Cauble, whose life has been dedicated to wine since college, is remarkably knowledgeable about wine, and has an incredible nose and palate for tasting.

As the film opens, each has already been celebrated as one of the best young, up-and-coming sommeliers in the country, and each has gone through significant wine education, having achieved the first three levels of their professional association’s certification: Level I (introductory), Level II (Certified Sommelier), and Level III (Advanced Sommelier). Each now aspires to join the Court of Master Sommeliers, the absolute pinnacle of the profession, a level achieved by only 200 people globally over half a century.

Becoming a Master Sommelier requires passing a three-day exam that is offered only once per year and covers three components: theory, service, and blind tasting. On average, candidates sit for the exam two to three times, and some take it as many as six times. One has three years to pass all three parts. If that is not accomplished, one has to start from scratch. (As Jancis Robinson wrote in her autobiography, Tasting Pleasures: Confessions of aWine Lover, which I reviewed in this journal in 2007, she was the first person outside of the wine trade to pass the exam.)

Every Master Sommelier interviewed in the film says that the exam was the hardest thing they have ever done in their life. Ian is clearly regarded by the other three (and by the film’s writer/director) as the one most likely to succeed at this most challenging of tests. The three sommeliers signify their respect by calling him, “Dad.”

The film follows their days, weeks, and months – indeed years – of preparation for the Master Sommelier exam, and finally follows them from San Francisco to Dallas where the exam is to be given. Ian candidly acknowledges that “every moment of my life has been how am I going to prepare for this exam.” Separately, his girlfriend confirms that “the most important thing in his life is wine, then family, and then me.”

Mixed with the main thread of the foursome preparing for the exam are interviews with other sommeliers and vintners about a variety of topics, ranging from the history of wine production in Europe to techniques of viticulture and oenology. Talking heads quickly fade, their words illustrated by scenes that will warm any wine-lover’s heart, ranging from the gate at Romanee Conti to a hillside castle in Rheingau, Germany, where the cellar master lovingly pulls out a bottle of 1735 Schloss Johannisberg Riesling.

The film begins with three weeks remaining before the exam, for which the four men have been preparing for well over a year. One of the many characters featured along the way is Fred Dame, the first American to pass the exam, who did so in 1964 in the United Kingdom, and subsequently brought the exam and the system to the United States. We watch as he, along with other Master Sommeliers, help the four young men prepare.

The best I could come up with when trying to relate my life experiences to this was to think back to graduate school, thirty years ago, when I was working with my study group at the end of our first year of the Harvard Ph.D. program in economics, studying together to prepare for the “general examinations” that are the culmination of the first year. But, as intense and stressful as that was, it was nothing like this.

Likewise, the four men’s obsessive use of flash cards – day and night – to memorize the most obscure wine facts in preparation for the theory component of the exam reminded me of my experience decades ago teaching myself a tribal language when living in West Africa, but each of these guys has prepared thousands of cards; indeed, Dustin mentions that he has over four thousand!

It is the scenes of the foursome preparing for the blind-tasting component of the exam that will probably be most gripping for the readers of this journal. In the exam, one is presented with six wines—three whites and three reds—and a total of 25 minutes to describe for each: the wine’s structure, body, alcohol, climate, varietal(s), precise geographic location, and vintage.

Why does blind tasting matter? Various people in the film argue that such blind (“deductive”) tasting increases and improves one’s perception. One travels along a road, then it forks, choose a path, then it forks again, choose a path, and eventually the taster arrives at the wine. Ian swirls and sniffs a glass, and then in rapid succession rattles off: “This wine is from the old world. This wine is from France. This wine is from the Rhone Valley. This wine is from the northern Rhone. This wine is St. Joseph. This wine is from 2008.” Along the way, the scents discussed range from comparing fresh violet (a young Nebiolo) with dried violet (an old Nebiolo), to the much more esoteric, such as a freshly opened can of tennis balls versus a new garden hose!

Why all this exhaustive preparation for the exam? The answer comes from an analogy provided by one Master Sommelier. “Who will be a great maker of samurai swords? It will be someone who had a great teacher, who had a great teacher, who had a great teacher.” So, it is with the best sommeliers. It is not a natural talent, but a learned skill. But anyone who is familiar with academic studies of tasting results, and is skeptical of the ability of professionals, let alone others, to consistently identify wines and rank their quality, will find support for their skepticism in several dramatic and key scenes in Somm.

Two-thirds of the way through the 93 minutes of Somm, Brian, DLynn, Dustin, and Ian each makes his way to the exam locale in Dallas, Texas. Fifty people will sit for the exam. We learn later that six will pass.

Watching them holed up in their respective hotel rooms, continuing to cram days before the exams are to begin brought forth memories of another film, forty years ago—the young 1Ls (first-year students) of Harvard Law School cramming in a Cambridge hotel room for their final exams in The Paper Chase, the 1973 film based on John Jay Osborn Jr.’s novel.

Finally, with 20 minutes left in Somm, the exams begin for Brian, DLynn, Dustin, and Ian. The tension matches that found in the best suspense film. With 5 minutes left, each of the four learns the results, and we—as viewers—are present in the room with each as they learn their fate.

My wife and I arrived for a dinner in Manhattan we had been looking forward to for months. We had canceled our reservation at Per Se, so that we could experience Eleven Madison Park, the Three Michelin Star and New York Times Four Star restaurant that has been ranked as one of the five best restaurants anywhere in the world.

Maitre D’ Zach Fischer guided us through the sixteen-course tasting menu prepared brilliantly by Chef Daniel Humm. The menu and execution were sublime, the paired wines were fascinating even for a jaded collector, and the service was absolutely impeccable. Each and every course involved elaborate theater of presentation, was beautiful to behold, and was flavorful beyond words.

The wines? Each was brought to us and lovingly described by Eleven Madison Park’s wine director, Dustin Wilson, one of the four young men from Somm. His lapel clearly featured the small Sommelier pin, the color of which signifies the respective level of achievement: Certified Sommelier, purple; Advanced Sommelier, green; and Court of the Master Sommeliers, red. Dustin’s pin is small, but its color is vivid. To discover the hue, please see the movie, or have dinner at Eleven Madison Park. Neither will soon be forgotten.

Robert N. Stavins
Harvard University
robert_stavins@harvard.edu
doi:10.1017/jwe.2013.30

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