Wine, Health, and Changing Perceptions

There was once an age when wine was more commonly consumed than water, as a safer and healthier alternative. Today, particularly among younger demographics, wine is seen more as an indulgent "splurge" than a daily drink. What are some drivers, particularly in the health space, behind this changing trend?

One factor I found interesting was wine's altering health perceptions within the United States in recent years. Red wine was once perceived as a heart-healthy beverage, in no small part due to the "French Paradox". The French Paradox refers to the notion, popularized in the 1980's, that drinking wine may explain the relatively low rates of heart disease among the French despite their fondness for cheese and other rich, fatty foods. This theory helped spur the discovery of a host of beneficial plant compounds known as polyphenols. Found in red and purple grape skins (as well as many other fruits, vegetables, and nuts), polyphenols theoretically explain wine’s heart-protecting properties.

According to the Harvard Health Blog, however, these claims are becoming increasingly dubious. A 2014 study of older adults living in the Chianti region of Italy, whose diets were naturally rich in polyphenos said to protect the heart, found no link between these compound levels and rates of heart disease, cancer, or death. While the benefits are far from being disproven, it is likely that Millennials are less certain of wine's health benefits, adding one other factor behind wine's slow growth among this demographic compared to competing alcoholic beverages.

Wine and Jane Austen, part two

I really wasn't planning on writing a second blog post about Jane Austen and wine (how much can there be to say?!), but I stumbled upon another connection. At home in Portland for midterms weekend, I attended Kate Hamill's clever stage adaptation of Jane Austen's Sense and Sensibility. After poor Marianne has her heart broken by Mr. Willoughby, Mrs. Jennings offers a glass of "the finest old Constantia wine." (Marianne's sister Elinor drinks the wine instead, but that's beside the point.)

The name "Constantia" rang a bell from my reading of The Wine Bible, so I hurried to look it up. It turns out it's a South African winery with a history dating back to 1685: "Constantia produced Vin de Constance, a luscious dessert wine made from muscat blac a petits grains grapes. The wine rose to become one of the most sought-after dessert wines in all of Europe, ordered by the case by Napoleon Bonaparte and never absent from the table of King Frederick the Great of Germany" (895). And some good news: you can still get Vin de Constance today (though it's not cheap)!

Of course, this all set me wondering whether Jane Austen mentions wine elsewhere in her writings. The answer is, yes, often, especially in her letters. Some interesting things I learned about Austen from her comments on wine:

• Austen wasn't immune to overindulgence and its consequences: "I believe I drank too much wine last night at Hurstbourne; I know not how else to account for the shaking of my hand today." (Letter to Cassandra, 20 Nov 1800)
• She was not a fan of orange wine: "The pleasures of friendship, of unreserved conversation, of similarity of taste and opinions will make good amends for orange wine." (Letter to Cassandra, 20 June 1808)
• In Austen's opinion, increasing wine consumption was a definite advantage of getting older: "By the bye, as I must leave off being young, I find many douceurs in being a sort of chaperon, for I am put on the sofa near the fire and can drink as much wine as I like." (Letter to Cassandra, 6 Nov 1813)

[With thanks to the aptly named blog Drunk Austen, most particularly https://drunkausten.com/2017/06/19/jane-austen-the-wino/.]

USUAL wines

USUAL - from the same people that bring us VineBox (https://usualwines.com/) - is taking over instagram feeds and utilizing digital marketing to build their brand. With minimalist packaging (pic below) and an unusual bottle design, they are targeting millennials who want to soak up summer with their own private stash of wine. At 6.3oz, they are describing their offering as a "large glass of real wine, in a bottle" - the standard glass is 5oz (VineBox vials are 3.4oz). With nearly 8,000 followers

(https://www.instagram.com/usualwines/) their instagram features pictures a desirable lifestyle filled with parties, sunshine, and the finer things. There is really not much about the wine at all, they are selling an experience.

It is not until you go to checkout that you even find out that the wine is from California, what the varietals are, and some information about the production. At $48 / 6 glasses of red or rose, they are charging $8 / 'big' glass - which is not very cheap when compared to your average bottle. BUT - how do you put a price on your own potential instagram posts with your swanky looking bottle? Seemingly there is a strong market out there that is willing to either swallow this price or don't care to do the math and are instead buying this wine exactly for how it is marketed to them - for the experience and the lifestyle that drinking it awards them. Who knows if the wine in this $8 glass compares to a similarly priced traditional bottle (on a per glass basis), my theory is that the people buying it don't really care.

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