Big Data & Wine

Big data seems to be sneaking into every industry and I was curious how it was impacting the wine industry. After some research, I found some pretty interesting insights:

• Start-ups are beginning to use data analytics to predict customer wine preferences
• A start-up called Bright Cellar leads with its value proposition as the "monthly wine club with the best wine for you". It showcases that the algorithm was developed by MIT grads. When you become a members of the site, the business-model leads you through a quick quiz of preferences (What is your favorite cocktail? Candy? Time to have wine?). For me, the algorithm ultimately suggested two pinot noirs (one from Willamette Valley, which I now know a lot about from the presentations!) and a syrah. 
• Here is the wine quiz link in case anyone would like to take it! https://www.brightcellars.com/wine-quiz/

• Big data is enabling smaller wineries to "fish where the fish are" and better target sales to customers in specific locations. 
• https://www.northbaybusinessjournal.com/northbay/sonomacounty/8527275-181/wine-marketing-sales-big-data

• The EU has funded a big data project called "Big Data Grapes" aimed at helping European producers become more competitive in large-scale international markets
• http://bigdatagrapes.eu/

There is still significant growth potential in the wine industry for robust data analysis. As one data analyst put it -- 'wine at it's core is an agrarian business' so it's not surprising that there is still significant growth for technology and artificial intelligence adoption. 

Wines of the World

Watching the presentations on the different wines from around the globe gives me a feel-good vibe as I remember the process. Wine unites the world. Although there are specific latitudes which are best for wine, the presentations made it clear that grapes prop up cultures of areas with harsh and mild winters.

As we learned about Michigan wine or Greek wine or wine from Eastern Europe, I was hopeful. We currently live in a time that has been characterized as tribal. Wine is truly tribal, a specimen of the environment in which it grows. However, we celebrate wines for these differences. We want to taste a red from Australia or a white from Long Island. We are intrigued by non-Sake wine from Japan or new vintages of sparkling wine from England. For the joy we give the diversity of wine, I see the potential for us to remember the joy we get from the broader cultures represented by wine growing regions. Being able to put a flavor on the place you visited, a smell and a color gives a stronger memory that we can associate with the people and places we travel to and something we can take back with us to cherish.

Besides memories of places we have visited and the people we have met, wine tourism encourages us to expand our personal global footprint. Watching the presentation on wine from Tasmania, I was reminded of a surfing piece I had read about Tassie and was more inspired to plan a visit. Even working on our own Hunter Valley project, I found myself having a strong desire to return to the Australian mainland, as I did not try any of their local wine when I visited there this summer. When I move back to New York in the fall, you can be assured that I will be making my way up to the South Fork of Long Island.

Reaching For a New Audience

Earlier this week I went to a tech conference called Startup Grind, hoping to score some leads on how I’ll be spending my intern summer. Things didn’t pan out quite as I’d hoped, but I did stumble across a winery offering samples and selling their wares in one of the sponsor tents. A wine booth at a tech conference? I’ve been to my share of them, and have never encountered booze at them that early in the day, let alone for free at 10:30 in the morning.

How do new brands make themselves known? This Washington outfit, called Spoken Barrel, thought they’d find some of their audience at this conference. I can see why they made their move - their bottles are light on the labels, with their details printed in bold white lettering on opaque black bottles. It didn’t quite feel like your typical wine branding. If suspected that they were going after millennial-ish men, their website confirmed it. The hero image is a giant gif that heavily feature two men in their 30s, a preview for a short video of a mostly bro dinner that reminds you that “there’s a time and a place for tequila shots, and it’s no longer Tuesday night.”

The New Vine case includes some stats that imply that the male/female ration among millennial wine drinkers was just about split (though this data is from 2004), but I can’t particularly recall wine branding that feels so squarely aimed at young men. 

A shot from their Instagram: https://www.instagram.com/spokenbarrelwines/

As events like the Rosé Mansion and other pop ups proliferate, there's lots of opportunity for more creative thinkings as winemakers go after younger audiences, and I'm excited to see what comes next.

Impact of Trade War on American Wine

In light of our upcoming case discussion covering the potential export of American wine into the growing Chinese market and looming March 1 trigger for additional tariff introductions, I wanted to dig into the impact on domestic wine producers and exporters. As many of us have been following, the Chinese government has tactfully targeted American export industries to exert maximum political influence in an escalating tit-for-tat trade war (think Harley-Davidson or dairy / beef / corn farmers, all largely based in the battleground upper-Midwestern states). Despite domestic wine production's concentration in the largely left-leaning states of California, Oregon and Washington (of course, setting aside the "emerging regions" discussed earlier!), the industry has actually found itself ensnared in the trade war as well.

In April 2018, China implemented a ~15% tariff increase on American wine in April 2018, which raised the effective China import tax to ~66-68% (N.B.: this compares with the statistic in the case that the fully-burdened import tax in China was 48%, which was written prior to Apr '18). [1, 2] Later last year, as a part of China's $60bn tariff announcement in September 2018, wine was among the subjected goods (joining meat, crops, and industrial products), which was vaguely reported as an incremental ~5-10% hike, accompanied with the threat of it rising to 25% by 2019 (presumably if the current "cease-fire" sunsets on March 1 without a trade deal or bilateral extension). Simple arithmetic would suggest a current "all in" tariff on American wine of ~71-78%, with potential of increasing to ~90%+.

As the case discussed, the combination of a 48% import / consumption tax and VAT significantly ate into wineries' profit, "making Chinese market entry financially unviable for more moderately priced wines". Despite the macro / political overhang, US wine exports to China rose 14% YoY in value for the first six months in 2018, suggesting the continued attractiveness of the rapidly growing Chinese market. [3] However, I'm curious to see how the numbers look for 2H'18 (and more importantly, 2019), as tariff fears have shifted from tail risk to a real financial headwind. Tangentially (though related), I'm also interested in the impact of the more recent shifts in the Chinese domestic market (i.e. crackdown on guanxi as part of anti-corruption measures, as discussed in the case, as well as early indicators of the luxury consumption environment rolling over).

[1] https://www.sfchronicle.com/business/article/California-wine-among-60-billion-in-U-S-goods-13239467.php
[2] https://www.bizjournals.com/sanfrancisco/news/2018/09/19/california-winemakers-china-tariffs.html
[3] https://www.farmprogress.com/grapes/wine-industry-frets-over-additional-chinese-tariffs

Is Older Wine, Better Wine?

Interestingly, most wines produced in the world today are made to be consumed in the near rather than far future. On the other hand, the most expensive vintages tend to be aged. Clearly, there is a correlation between wine age and shelf price - but does this correlation also follow with regards to wine quality?

The most critical factor in the aging of wine are tannins, which alter chemically in response to small amounts of oxygen seeping through the cork over time. Temperature, light exposure, and humidity also play a role, resulting in a limited time window within which a given wine is at its peak. Many aged wines stored in cellars and brought out years later for special occasion have passed this peak, and yet consumers continue to be excited by and pay top dollar for older vintages despite their not necessarily being in the optimal taste phase.

Wine can taste better with age, but only in combination with the right creation processes and storage techniques. If there is a connection between age and wine quality, it is more likely to be found in the concept of scarcity: older wines are rarer, and price follows this traditional demand-and-supply driver accordingly.

Taste For Yourself (some spoilers ahead…)

 I always love to extend this class right on into the weekend – and so last weekend, I watched Somm III (the movie). I was a big fan of the first two, naturally. The third installment brought in several of the themes we’ve learned in class: emerging wine regions, the importance of terroir, warming up too-cold wine with your hands, and the challenges that producers face shipping out of state.

The film focuses on three of the most famous and established oenophiles, Jancis Robinson, Fred Dame, and Steven Spurrier. Steven Spurrier is the merchant who organized the “Judgment of Paris” in 1976 – an event famous for putting California wines on the map, when California wines beat out French wines for both white and red categories (a huge surprise at the time). And Jancis Robinson did for wine what Julia Child did for food.

What was interesting is just how much of a pull these three wine experts have had in the past four decades on global perception of wine, and on just what “quality” means. Critic Jancis Robinson even said that she hated blind tastings, because she was afraid she wouldn’t like a wine, say so, and completely tarnish that producer’s reputation. These experts uncovered totally unheard of wines and launched their producers into prominence with the publishing of a single article!

But at the same time, the three get together to open and taste the original bottles that first spurred their own loves of wine. They blind taste all three, and rank their favorites – each ends up with a different favorite, and each describes the wines in uniquely personal ways.

Even if you listen to the critics, remember that wine is a deeply personal experience – make sure to taste for yourself!

In case you’d like to watch, either come to my place, or find Somm 3 on Amazon Video, YouTube or Google Play. You can watch the first 2 installments on Netflix.

When wine doesn't need descriptors

I came across a great piece in Forbes this weekend about a wine writer's experience stepping away from the nuanced tasting components of a wine to embrace its emotional side.  The story made me think about my own memories.  My grandpa in Taiwan is getting up in age, and when I do have the chance to visit him, there's usually some red wine with the meal.  The wine's usually not paired well with the Chinese cuisine we have nor does it really have a lot of depth, but it doesn't matter to me since I realize my grandpa is enjoying it.

Other times, I recall being deep into a meal and enough glasses of wine in that I probably couldn't land a single descriptor if I tried.  Yet the wine's attitude or personality still sticks with me - I feel the transformation of the wine especially if it's an old one as new sensations emerge with time.  It makes me think about how there remains more opportunities for the industry to adjust its tourism packages to bring about wonderful associations even with cheaper, more accessible wines.