Climate Change - A Threat and Opportunity in Established Wine Regions

Many groups in yesterday’s presentations brought up climate change as either a risk to or reason for the “emerging” status of wine regions. Of course, climate change is also affecting established wine growing regions. However, the change is viewed as both an opportunity and a threat, and regions have been responding in different ways.

Take Germany – they just wrapped up the hottest spring and summer on record in 2018. While this hurt other agricultural industries in Germany, winemakers had a record harvest… predicted to be an increase of 33% since the prior year. Winemakers and wine tasters from the region are already predicting it will be “historic”.

Across Europe, these longer and warmer summers are ripening grapes sooner and more consistently. And it’s changing what varietals are being grown. Germany – most well known for its Rieslings and Gewürztraminer – for the first time have the ability to grow reds like Cabernet Sauvignon and Syrah at a quality that demands premium pricing. However, the warm weather is also making it more difficult to grow Germany’s flagship white (Riesling). As the grapes are ripening earlier and more easily, they tend to be too sweet or too alcoholic when harvested.

Then there’s New Zealand – while we heard about the growth of Central Otago yesterday, New Zealand’s biggest region is threatened by climate change. While relatively new to the wine world, Marlborough’s Sauvignon Blanc took off in the 1990s / 2000s because of its unique flavor and acidity, thanks to New Zealand’s long growing season of warm days and cool nights. However, as the climate changes, that may be in jeopardy. As grapes are ripening more quickly and the growing season shortens, it is getting more difficult to maintain New Zealand wine’s signature acidity.

However, New Zealand winemakers are beginning to address this threat head on, experimenting with techniques around water usage, exposure, and yield management to affect the flavor of grapes in the face of a shorter growing season, hoping to maintain as much of its signature flavor profile as possible.

What does this mean on a large scale? Will established regions, well known for specific varietals, begin to adapt the grapes they grow to pursue new opportunities? Or will we see regions pursue scientific intervention to preserve their history as much as possible?

Sources:

NYTimes - ‘Disgusting to Say, but It’s the Truth’: German Winemakers See Boon in Climate Change

NZ Herald - Winemaking in 10 years: How climate change is affecting Marlborough, New Zealand's largest wine region

Family Heritage

Meeting Christina Wente for the second time was the specific type of good luck one may only have at the GSB. Before encountering her in Wine Class, I met Christina in Peter Francis' Family Business Transitions class. During this meeting, I learned much more about the Wente family and the vineyards controlled by the clan. As we went through slides showing family history and present-day marketing strategies, I realized how the nature of a family business built around wine may be much more pleasant than a family business built around manufacturing or media.

Wine is, after all, a source of ease in our society. Almost like sports, people who may share different political or religious views can get together around wine (unless of course, they do not drink). Having a product that encourages community and conviviality strengthens the bonds of the family when wine families gather to reap the harvest. 

Watching the Kingston story only reinforced this belief for me. The Kingston family grows wine out of love and not for the profits. However, having that bond of a shared place, a shared product, and the ability to consume the product for enjoyment is enviable. In the days when farming has long taken a back seat in the modern economy, I think every family should grow wine.

Sipper or a Gulper?

Having never found it difficult to polish off a 750mL bottle in one sitting (... with a friend or two helping), the rise of new startups and product lines aimed at changing the average serving size of wine piqued my interest. From Blue Apron's 500mL bottle to the $2,000 Plum at-home appliance (a venture-backed "fully automatic home wine preservation system and dispenser"), it seems like there is a strategy underway to target American consumers in smaller formats. I wondered: how much wine does the average consumer drink in each sitting?

Aside from this tidbit that, on average, it takes 2 people 2.5 hours to finish a full bottle of wine, it turns out there is not a lot of information out there on wine consumers' preferred size formats (WineFolly). 

Curiously, though, there is a niche body of related research on "micro-drinking behaviors". That is, researchers have studied how various factors (such as wine glass size and shape - see Julie's great post for a primer) affect consumption rate. Using cameras, they have tracked total drinking time, sip number, sip duration, and sip rate - with some interesting findings: 

• Increasing glass size from 250ml to 370 ml had the preliminary effect of increasing total wine sales by 10%
• At the same time, wine served in larger glasses is consumed more slowly (over more sips) than wine in smaller glasses - so customers might tend to linger longer and spend more when drinking out of a large glass
• Beer served in curved glasses has a faster drinking rate with more frequent sips (BMC Psychology)

The case for glassware

As we saw in our first class, over the last decade we have seen a trend towards simplification in home-ware and glassware. The creation of more and more amazing all-purpose glassware, such as the Gabriel Glass, and a consumer trend for simplicity (and limited space) in the home have increasingly become the standard across the world. However, it is still interesting to understand the tradition of tailoring ones glassware to the beverage that is served. This doesn't only apply to wine. Most alcoholic beverage makers who focus on quality, tend to have an opinion on which glass to use to get the best overall olfactory experience.


If we ask the average consumer, they would say there are three different types of wine glasses. The large ones for red wine, smaller ones for white wine, and the narrow long glasses for sparkling wines. And while this is largely true, there's a little more nuance to it.

All traditional wineglasses are designed to have a stem. Not because this really impacts the flavor, but to keep the wine at the right temperature when holding the glass. The shape of the bowl, however, does impact our experience of flavor. The way we hold our head when drinking, the depth of the nose inside the glass, the curvature of the glass as it slopes upwards can all change the way we smell and taste different types of wine.

Let's talk about red wine glasses for example. Traditionally, red wines are served in a glass that has a wider and larger bowl. This because it promotes more oxidation which generally suits red wines better as it brings out the complexities of the wine. Even within the red wine glass category, there are different shapes. Glasses used for Bordeaux are generally designed to direct wine towards the back of the mouth, while glasses used for Burgundy are broader and aim to hit the front of the mouth. As the tongue has different receptors for different types of flavor profiles, the goal is to optimize where the alcohol will hit the mouth.

Other than size and shape, the size of the opening of the glass can also play a factor. A glass that has an opening that is too narrow can hide a lot of the aromas from a wine. Additionally, a sparkling wine glass is shaped the way it is in order to preserve the carbonation in the glass as long as possible, and it's opening is slated inwards for the same purpose.

To give you an overview, the below info-graphic shows a good range of wine glasses.




As an additional example, below you can see the variety of glassware available for beer.







Sources:
https://www.forbes.com/sites/tmullen/2016/08/25/why-the-shape-of-a-glass-shapes-the-taste-of-your-wine/#546fbae26554
https://winefolly.com/tutorial/the-importance-of-a-proper-wine-glass/
https://www.homestratosphere.com/types-of-beer-glasses/

Beyond Grapes - Why Not Jalapeños?

Jalapeños, macadamia nuts, and pineapples - oh my! Turns out, you can create wine out of pretty much anything you can ferment in a barrel. Consider the Cardinal Hollow Winery's 100% jalapeno wine, which pairs well with brie cheese. Or Mill Lane Winery's rhubarb wine, which tastes of peppermint, cedar, and raspberry flavors mixed with a bouquet of Christmas spices and raspberry notes. Exploring these abnormal wine varietals raises the question - why are grapes such a popular choice in winemaking versus other fruits? What forces are at play here?

The short answer is cost-savings. Apparently, grapes and wine are a match made in heaven. Grapes uniquely contain the right balance of sugars, acids, and tannins needed to make a long-lasting and flavorful fermented beverage. Most other fruits simply cannot produce wines that last as long or taste as good without additives - that is, grape wine is cheaper to produce compared to other wines. 

But are fruit wines as inferior to traditional wines as "the market" would have us believe? The EU legislature has ruled - with strong support from major European wine brands - that wine should be legally defined as "a drink made from fermented grape juice". Does this sound at all like the "soy milk can't be called milk" debate raised by dairy incumbents here in the U.S? This is an interesting example of how industry incumbents, particularly in F&D, can raise barriers to entry via the law and labeling squabbles.

The rise of the kiwis

Looking at some wine export data for our paper on Romania, we made this chart showing what percentage of its wine production a few select countries are exporting. We thought the rise of New Zealand in late 90s and throughout the 21st century was pretty remarkable. Pulled ahead by its Suavignon Blancs, New Zealand not only massively grew its production but also exporting almost all of this new production. Helped by its reputation from the historical links to anglosaxon countries, such as the UK, US and Australia, it never struggled to find new demand. At the same time, its citizens own preferences for drinking didn't change and despite massively increasing production, it still imports about a third of its average 20 litres per person per year consumption, a lot more than countries that have a similarly thriving export industry such as Italy or Spain. 

Large fortune to make a small fortune

during my investment banking days, as I zoned out staring at my computer screen and its blinking cursor, I used to dream about an idyllic life owning a small vineyard and making a small wine label.  I never discounted the challenge of learning winemaking from the ground up, but assumed that having a small operation where you could be closely connected to your product and got you more involved with nature would be a nice reprieve from the monotonous hours in a cubicle.

That dream seems untenable these days as I learn more about the Wente and Kingston families and their respective decades-long tribulations in building out a business, and about the growers in the Long Island region.  Even as DTC becomes more prevalent and mitigates some of the onerous requirements from the 21st Amendment, I didn't realize how much investment was required to make half-decent wine, let alone good wine.  I expect that pioneers in new wine regions today have extremely patient timelines, knowing that few will realize a profit or achieve scale sufficient to sustain the business until close to their retirement.