I have finally turned the last page of this great book full of great stories about our beloved American wine industry. The book did a great job to lay out the prohibition years and the long lasting impact of the consequences brought by the way the 21st amendment was repealed. The birth of the three tier system is very well explained and so is the rebirth and transformation of the California wine industry. The other regions in the US are also well covered, New York, the Pacific Northwest, Michigan, Ohio and more. It is very interesting to read about how the three tier system was set up and really how unimportant the alcohol business was at the time this was done. Think about it, California was barely the size of the current Washington wine industry and no alcohol had been sold in the country for more than 10 years. No one thought that alcohol sales would grow the way they have, so really it was not a front burner issue and the Federal government gave the right to regulate alcohol to each State as it desired. The results of the repeal are still with us today, 75 years later, a patchwork of different rules, taxes and systems that are a strong barrier to innovation in our industry. A great read.

Quietly Congress is gearing up to hike taxes on wine. They are proposing around $0.50/bottle. That seems small, but the problem is that wineries pay this tax when they ship out of their warehouses to distributors’ warehouses. Therefore the little $0.50 becomes $1.00 on the shelf (accounting for distributor margin and retailer margin). That might not seem like much but in a difficult economic environment that could send many wines above their perceived price treshold ($9.99 becomes $10.99, $14.99 becomes $15.99). With that in mind it is likely that many producers will eat most of the tax hike themselves thus reducing their profit. What wrong with reducing profit? Well, less profit means less investment, less employment, less creativity and in the long run more company failure and increased consolidation. I don’t think this is good, do you?

I have two ideas to help out the wineries with this tax increase (which is likely and in some way is meant for a good cause i.e. financing a national healthdare system): 1) truly liberalize the wine business, go away with the three tier system  2) allow wineries to pay federal taxes 90 days after the wine as left their warehouse to mitigate the impact on our cash flow.

I doubt any of those ideas would fly…

Nicolas

I don’t usually like to talk about m private life on a blog, but I am getting really excited about my July trip to Germany. It will be short (I will be on my way to a family event in southern France) and I am lining up two days of Riesling frenzy. Here is a glimpse of my trip so far:

• Dinner with the Selbach on the 8th;
• Visit of Selbach Oster, Sankt Urban Hof and Schloss Lieser on the 9th (Mosel)
• Visit of Schloss Johannisberg, Von Mumm and two other on the 10th (Rheingau) and fly out…

I have my Audi shift stick with GPS unit rented. feeling just like a little boy going to Disneyland…

Yesterday I had a good chat with the sommelier of a local restaurant called bluehour.  We were chatting about making money with by the glass pouring and he had an interesting take on it. First some facts:

1) Usually restaurants get on average 5 pours per 750ml bottles.

2) Restaurants like to mark up wines up to 4 times (especially for by the glass vs by the bottle).

3) Restaurant buy wines wholesale, sometimes with a special “by the glass price”. Let’s assume that wholesale is about 30% less  than retail.

Now here is the math that most restaurant do: Buy a $9.99 retail bottle of wine ($7 wholesale), mark it up at least 4 times ($7 X 4 = $28), pour 5 glasses out of it and sell them at $6 each. Profit would be: (5 X 6) - 7 = $23 per bottle. Not bad….

My Sommelier friend was arguing that it was crazy math because a) you really rip off the customer (the customer could almost buy a whole bottle at that price) and b) you do not maximize the take home per bottle for the restaurant. Here is his math: Buy a $30 retail bottle of wine ($21 wholesale), mark it up gently 2.5 times ($21 X 2.5 = $52.5), pour five glasses out of it and sell them at $11 each. Profit would be (5 X 11) - 21= $34 per bottle. 50% better than the previous calculation. Not only you got more money per bottle but you also offered a great wine to your customers at a more reasonnable cost (you definitely could not buy a bottle retail of that $30 wine at $11).

I think he has a point….

More than 600 wineries (including Pacific Rim of course) are calling Washington State home. That is more than three times the number of wineries that were in Washington 10 years ago. Of course, many of those wineries are fairly small. Still, this is a testament to the Washington State wine industry’s dynamism. The planted acreage is following up the growth in wineries and has raised to 33,000 acre from 24,000 in 1999 (though the average acreage per winery went from 122 acres/winery in 1999 to 55 acres/winery in 2009). As a comparison, Napa Valley alone has 44,000 acres planted and New Zealand has 70,000 acres planted (that makes Washington looks so small, doesn’t it?). According to the latest Nielsen data, Washington was one of the fastest growing appellation sold in grocery store across the country. I’ll raise a glass of Washington Riesling to that!

The Organisation Internationale de le Vigne et du Vin (OIV) has just released their report on global production and consumption and since I am sucker for statistics I thought I would share the summary of it all.

Global acreage The EU has lost 82,000 acres in 2008 (vs 2007) mainly from France (half of that number). The world is seeing also a reduction in acreage by about 70,000 acres total. New Zealand and Russia are the “growth poles” in 2008. Global acreage stands at 19.6 million acres

Wine Production: The EU has lost about 2.1 Million Hl in 2008 (vs 2007) but the picture is mixed with France and Spain losing big volume while Romania is gaining. EU production stands at 161 MioHl. In the remaining of the world, the USA lost some volume (-0.7 MioHl) and Australia recovered from a serious crop failure in 2007. The world overall was pretty flat to slightly up (+ 1MioHl) at 269.4 MioHl.

Yield in 2008: Thought it would be fun to divide the estimated global production (269.4 MioHl) by the estimated vine area (7.861 Mioh) and get about 34.2 Hl/ha or 2.15 tons/acre. Pretty low I thought.

Global wine consumption: EU was down again (2.2 MioHl) at 125.8 MioHl. That does not compare well to the 2008 production at 161.6 MioHl - whao 35.8 MioHl surplus in 2008 for Europa…  The reverse is seen in the US with a small domestic production (19.2 MioHL) relative to the now #1 worldwide consumption (27.2 MioHl). Guess why everyone is fighting over the US market… Overall world consumption has been eroding and now stands at about 242.9 MioHl (which is about 27 MioHl surplus worldwide). Most countries see erosion in wine consumption except the Netherlands, Sweden, the USA, Australia and the Czech republic (what is going on in the Czech republic?).

There is a section about global wine export showing EU losing share, South America and Oceania eating their lunch. The last two charts show the average price for red and white in the EU and White is ahead!!! Well deserved…

I recommend greatly this book from Neal Rosenthal (the New York wine merchant). I have enjoyed the candid and interesting journey of Mr Rosenthal as he starts his thoughtful wine import business. It helped me to realize how close to the wild west was the wine industry in the late 70’s and what great opportunities folks like Neal Rosenthal, Kermitt Lynch and Terry Theise had in their hand. For all this, they were, and are, true wine lovers and really attracted to the sense of place and family that Europe offered in those days.  I wonder what the next generation of wine importer will be like and who will replace those great wine explorers.  I also wonder if Europe is/will be like this anymore. It really made me think about what we do at Pacific Rim and the value of taking the high road not only for yourself but also for the people that drink your wines.

I think one needs to be careful about meeting with Mr Rosenthal considering the amount of drame, dead partners, car accidents, family feud and failure that he encounters during his European endeavors.

In any case a good read for those who like wines and the wine business.

Yesterday I read this story on the Decanter web site:

“Red wine increases the female sex drive

Red wine increases the female libido, research has found.
According to a study carried out by the Santa Maria Nuova Hospital in Florence, drinking one to two glasses of red wine a day increases female sexual desire. The study investigated 789 Italian women aged between 18 and 50.
Drinking red wine not only helps to release inhibitions, but also has a direct effect on sexual activity. Women who drink one to two glasses of wine a day were found to be more sexually active than those who abstain. Dark chocolate, which is rich in antioxidants, has a similarly positive effect on the female libido. ”

In one way I find the article funny but in another so tacky. The fact that the study was done in Italy adds to both of those feeling. May be this is why I like Riesling so much those days, it is quiet, delicate, complex and refined.

A couple nights ago we opened a delicious Woodward canyon Cabernet 1996 and the alcohol was 12.9% on the label. The wine was still young and just fine.  In many ways it was more balanced that most Cabernet you would find today. I don’t know about everybody but I am really tired of over extracted, over alcoholic wines, may be I am just getting old. It seems that dry wines around 12.5% ethanol and sweet wines below 11% are most attractive and I would think they should be attractive to many food and wine lovers. As we tend to go for fresher, less fatty meals, we need to make wines that match those modern food. This is definitely a theme that runs through all our wines and our winemaking. Nothing is more refreshing than a Sweet Riesling at 8.5% Ethanol with some spring rolls…

A great study was released last week by the American Association of Wine Economist about the validity of wine competitions. Great reading and very interesting to find that competitions are very unreliable according to their study. Steve Heimoff has written a great “summary” on the topic on his blog that is a must read for those of you that are interested. If you don’t have time to read it all, let me bullet point the main bits:

• Wine competitions are found to be unreliable  by the AAWE - not news to me, sometimes you get a gold, sometimes you get nothing…
• Wine competitions are unreliable because humans are unreliable - I knew that as well, my taste changes everyday and sometimes several times a day.
• This raises the question of wine reviewers in general though what can you do about it?
• This raises the question about the use of wine scores and accolades by the wine trade and the consumer - I won’t venture there because I get upset too fast on this.

Fun topic, isn’t it?

kudos to Adam Lechmere (Decanter) for the vote of confidence toward screwcap closure: “It’s official: screwcap is the best closure for the vast majority of wines, both red and white.”

Why are folks still sticking to cork especially for fruity whites? Not sure. Many times I have heard from winery principals: “the consumer is not ready”. Soooo you are knowingly giving the consumer an inferior product because some market data tells you that you won’t sell as much wine… Mmmm what should I think about all your talk about quality now?

Well, we do screwcap and I find it just perfect for our wines. Screwcap is the only closure that always guaranteed 100% freshness to the consumer and they are rated to last for 20 years (at least the ones we use).

I strongly recommend you visit Gary Vaynerchuk’s daily video blog on http://tv.winelibrary.com/.

It is always great enertainment and this fellow is making some good progress trying to bring up front the insanity of our dear wine industry.

Go Gary (and sorry for the Giant’s victory)