Anyone analyzing the economics of wine will quickly notice the diversity of forces pressuring the industry. Wine’s (alleged) progression towards homogeneity to meet mass market demand, corporate ownership consolidation, often cut-throat international competition, rivers of excess supply, technological manipulation in production, wildly vacillating price differentials and the impacts of global warming, among a host of other factors, may be simultaneously viewed as evil, good or both depending on one’s perspective. These issues also make for a robust research agenda in wine economics. A new book by Mike Veseth, Wine Wars: The Curse of the Blue Nun, the Miracle of Two Buck Chuck, and the Revenge of the Terroirists, nicely captures the essence of these factors affecting the evolution of wine and the agenda for wine economics.
The running theme throughout this book is a search for the future of wine. Written in a brisk and non-technical style, Veseth uses this theme to focus on the competing forces vying for wine’s future, expanding on and unifying essays previewed on his wineeconomist.com website. The overarching influence affecting the current market for wine, and one that will increasingly affect the future of wine, is globalization – albeit wine’s global reach has existed since vineyards were first planted. Entwined with shrinking international borders and reduced barriers to the wine trade are increased efficiencies in wine production, shipping and marketing. These and other changes, in turn, have fostered a gnawing fear and vocal backlash against what these disruptions will bring to the wine world as we know it today.
Veseth takes us on a journey through wine economics via the use of what amounts to case studies exemplifying how wine economic issues are playing out in the marketplace. One learns, for example, about the lingering effects that certain very sweet and often badly made wines of the past have had on current consumer perceptions and taste. We gain insights, too, on the way large international and national retail chains are altering consumer wine buying routines, how new consumer interest in wine is being cultivated, and the ways, means and implications of the world wine glut. Further, we get a sense in Wine Wars of how historical, social and cultural factors in France, China and other countries will likely affect the future of wine. In France, for example, we hear both sides of the “terroirist” debate on what wine should be. And we glean several unique perspectives on how China’s relationship with wine might really shape wine consumption and production there – an analysis that extends beyond the current hyperbole for anything having to do with the Rothschild name among China’s nouveau riche. Veseth explains, for example, the unique workings of China’s production supply-chain, the use of fruits other than grapes in winemaking, and why it might be reasonable for Chinese wine consumers to mix their wine with Coca Cola.
The personal approach Veseth takes in Wine Wars can lead the reader to think of this as an interactive book. In fact, Veseth encourages this by inviting us to “(g)rab your wineglass and follow me . . . ,” calling each of the book’s sections flights, and adding a wine tasting at the end of each section with suggested pairings exemplifying the ideas in that part of the book. If I had not seen Mondovino yet, I would have been encouraged do so when reading Wine Wars. I did, however, take a look at the Japanese soap opera Kami no Shizuku, review Jancis Robinsons’ wine course, and went scurrying to the encyclopedia to find out what a New Zealand Dalmatian gum digger was. While I started reading the book with a glass in-hand of a 2005 Haut-Medoc picked up during one of the recent rounds of Bordeaux “vintage of the century” hysterias a few years ago, Veseth’s book also motivated me to try my first box wine. No such luck obtaining a bottle of Lafite Rothschild, though.
The sometimes invisible hand of globalization is made more visible throughout Wine Wars. The interrelationships that bring wine to the world are truly international in nature today, and will only become more so in the future. Veseth infuses Wine Wars with stories about these connections and conflicts, and in the process we learn much about the business aspects of wine – in addition to enjoying the narratives that inform the economics. The global role of flying consultants and wine formulation in the laboratory to satisfy the tastes of influential wine critics are well-known, for example, but the way huge amounts of wine are shipped around the world in freighter-sized plastic bags inside crates, or the marketing philosophies and German ownership behind the Trader Joe’s Charles Shaw (aka Two-Buck Chuck) wine are less known.
Wine retailing too is a global exercise. It is not only Trader Joe’s and its twin Aldi that are introducing new buyers to wine through their inexpensive but (often) drinkable offerings. Wine Wars introduces many of us who do not live in Britain to Tesco and how this supermarket chain is using its marketing muscle to change the rules on wine shipping, bottling (lighter, with screw caps) and pricing. We also are given the lowdown on methods used by Costco that have helped it become the biggest retailer of wine in the United States, such as how it displays its wine and the rationale behind the selection of wines offered in its “warehouses.”
The consolidation of winery ownership continues as well, with discussions in Wine Wars about the marketing strategies of the large wine conglomerates, such as Gallo and Constellation Brands. Using an inventive allegory of a “wine wall,” with bottom, middle and top shelf wines representing the spectrum of quality and price on their respective levels, Veseth takes us through examples of the range of product differentiation from the large players, indicating both benefits and pitfalls from such corporate consolidation. If you’ve ever wondered, but never took the time to follow, who owns which wines and which wineries remain independent, you will get a good idea from Wine Wars (however, things change so rapidly in this area that reading Wine Business Daily online is necessary to keep current).
All of these changes in the wine industry can and do create conflicts, of course. Veseth covers the evolving tensions, especially in the third “flight” of Wine Wars, and the tone of the book becomes more serious towards this latter part of the volume. Just as terroir is a multidimensional concept, so too are the arguments for and against a “globalized” style of wine – if one agrees that such a style exists at all. In addition to documenting a growing globalization in wine, Wine Wars also discusses events demonstrating the antithesis to globalization; for example, opposition to American and other influences on French wine is being fought by CRAV (Comite ́ Re ́ gional d’Action Viticole), many family wineries continue despite economic pressures, and Michel Rolland’s approach is not implemented in every winery in existence.
Anyone with an interest in wine and wine economics will enjoy reading Wine Wars. While the economics in this book is not presented in the form of econometric models and t-values, there is no mistaking the well of economic theory and knowledge that underlie the chapters in this book, and that hint at part of the future for wine economics research.
Gallaudet University and Johns Hopkins University