 Wine
Politics:
Wherefore art thou, California?
Courtesy of Dr. Vino
Wine Politics
How does wine get made? How does wine make its way from the vineyard
to our table? What seems like a straightforward tale is in fact one
full of politics. In a series of postings, I examine who gets what,
when and how in the world of wine.
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Wherefore art thou, California?
California’s stunning absence from the under $10 category of
quality wines—and why that may become even more important to
consumers.
"Muscleman put in charge of world’s fifth largest economy" read a
recent headline about Governor Schwarzenegger in The Onion. Sadly,
the satirical newspaper found truth funnier than its usual
fictitious headlines that week. For bargain wine lovers, the news
coming out of California has a similar tragi-comic tone. Nothing, it
seems, can prod California producers into making good, interesting
and affordable wines. And the worst part is that as the clouds seem
to be lifting, not only have the lessons of the recent storm have
not been learned but regulatory changes stand to reduce the quality
of wines on retailers’ shelves even more.
While many California wines are excellent, they are not good
values. My value wine recommendations display a stunning lack of
wine picks from California. Spanish and French producers make much
more exciting wines at lower price points. And fortunately there are
plenty of those around.
But you don’t have to take it from a pseudo-critic like me:
Robert Parker, the world’s foremost wine critic, has a similar
conclusion. In the June 2003 issue of his newsletter, he recommended
153 value wines (for this hedonist, value means $20 and under). Of
these, 79 were French, 25 from each the US and Australia and 21 from
Spain. (For those keeping count, the other three were from
Portugal.) Handfuls of these selections from France and Spain are
under $10. From California, there is only one.
The California producers are obstinate in their unwillingness to
produce good cheap wines. Land is expensive in the north coast, but
grapes are cheap. Labor may be more expensive than Argentina, but
the workers are not exactly overpaid. The crises of the past three
years should have sent them a message. But apparently they have not.
To recap what has happened over the recent past in California is
a sad tale. Three consecutive booming harvests have driven wine
grape prices to their lowest levels since the mid-1990s (see
data). This has led many growers to let the grapes rot on the
vine rather than harvest or even to uproot vines and replant other
fruits. The abundant supply has also led to bankruptcies in the
quality growing areas (De Loach, Liparita Cellars, Sonoma Creek
Winery and Buchanan Cellars are a few from the north coast). Some
merger and acquisition activity has also occurred as a leading
industry analyst reckons 5% of the state’s 1300 wineries are
economically "distressed."
But with so much bulk "juice" sloshing around, the biggest impact
of the glut for consumers has probably been "two-buck Chuck."
Charles Shaw, as the wine from the bulk producer Franzia is
officially known, retails for $2 a bottle at Trader Joe’s grocery
stores in California (and $3 at TJ’s outside of California thanks to
mandatory distributor intervention). Two-buck Chuck comes in a few
different styles that are perhaps best described as "flavors":
Cabernet Sauvignon, Chardonnay, etc. And it is forecast to sell over
5 million cases this year. If Darrell Issa was really intent on
starting a recall of something for being bad, starting with Two Buck
Chuck would have been a better use of his money than Gray Davis.
Other factors beyond the control of the California producers have
contributed to the storm clouds over the industry. The slow economy
that coincided with the three big harvests has meant decreased
business travel and entertainment, a big component of high-end wines
from California (and elsewhere). And beyond the flood of "juice," a
pest has threatened the vineyards, although the glassy winged
sharpshooter would have helped reduce the oversupply.
Imports represent, of course, another big factor. Those lush,
cheap shiraz and chardonnay imports from Australia have now made
Australia then second largest provider of imported wines behind
Italy. Yellow Tail is Australia’s answer to Two-Buck Chuck. Complete
with kangaroo on the label, it sells for $5 a bottle and is forecast
to sell 5 million cases this year, a staggering figure given its
launch just two years ago. The producers have now added a "reserve"
wine for $9.
But the storm clouds are lifting over California. The economy
appears to be turning around, which should bring increased travel
and entertaining. The 2003 vintage will be smaller, thanks to
pruning and freakish weather at harvest time, which should lead to
higher grape prices. Indeed, the profits of Robert Mondavi, the
largest publicly traded winery from California rose in the most
recent quarter and the share price has rallied as investors
anticipate brighter days lie ahead.
And will this new period bring better, cheaper wines? No, sadly,
it will bring fudging and protectionism. Fudging will occur as
producers seek to dilute the vintage claims on the label and have
the right to include 15% of wine not from the stated vintage (LA
Times 9/29/03). As consumers become more knowledgeable about wine,
what consumers need on the labels is more precision, not less.
And protectionism appears to take place under the guise of
bio-terrorism. Not satisfied with the weak dollar already
protecting domestic producers from cheap imports, the Food and Drug
Administration now threatens to hold up wine imports, particularly
from Europe, with stacks of bureaucratic filings. Effective 12
December 2003, the 2002 Bioterrorism Act requires any food or wine
exporter to the US to register with the FDA, adding even more
intermediate steps between producer and consumer. We can but hope
that many small (European) producers will not be scared away from
the US market, otherwise it would be "good-bye wine values." (Hello,
gray market?) See the stunning
details of the regulations for yourself.
Bolstering an already oligopolistic structure of production with
protectionism and fudging is not the blend for reducing prices and
raising quality that consumers need.
Since beating California producers over the head with a plank of
oak (better than using it in their chardonnays) seems not to work,
the question remains whether the distributors and big retailers ride
to the aid of value-oriented consumers? Slim hope. The distributors,
for one, are trying to line their pockets with a $234 million tax
break currently before Congress. (NYT 10/30/03)
The big wine retailers are too restrained in using their market
muscle to push for quality bargains from producers. Trader Joe’s
does probably the best job at seeking out value wine from around the
world (to wit, their Argentine La Boca wines at $3 are better than
Charles Shaw). Given the success and poor quality of Charles Shaw,
just imagine how well an innovative wine at $7 would sell? And a
Costco Cuvée? Not to be found. Sam’s Wine in Chicago has arranged
some custom Cuvées to roll out soon but they hover around the $30
mark, so not exactly a good fit for weeknight dinners.
California, a trend-setter in so many ways, needs to follow the
worldwide trend of making good wines at low prices. Terminate
the oaky chardonnays—or we’ll have to put Arnie on to you!
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