I was chatting a Boston-born & bred classmate today, and he was telling me about the mafia's connection to wine and alcohol-distribution in the Eastern US post-prohibition ("you don't get that contract without spilling some blood").
Upon further review, it looks like the mafia has been spilling some wine as well, with some stories coming to light - such as the 400K bottles of wine at Conte Vistarino dumped in a nefarious act (more here) or 80K liters dumped at a vineyard in 2012.
60 Minutes reported that work like this is related to the "Agromafia" (touching upon wine, olive oil, cheese) which is a $16B a year business focused on wheeling-and-dealing lower-quality-than-advertised products. And the Financial Times reports this is growing a 10% per year; now accounting for 15% of all Italian mafia activity.
The entire 60 minute segment can be viewed here.
source:
https://vinepair.com/booze-news/italian-wine-drained/
https://www.ft.com/content/73de228c-e098-11e8-8e70-5e22a430c1ad
Wednesday, March 13, 2019
The rise of Rose, Prosecco and ... Rose Prosecco?
During the final group assignment, I've been researching which varietals best appeals to millennials. We know that they have a particular fondness of rose. The Wine Market Council also found that significantly larger percentages of 20 and 30 year olds report drinking sparkling throughout the year vs older people.
We've seen data showing rose table wine dollar sales growing 66% between 2016-2017. We've also seen Prosecco growing at double digits, particularly international brands such as La Marca which grew 25% in 2016-17 according to Beverage Information and Insights Group. Prosecco accounted for 17% of U.S. Sparkling wine sales in 2018 according to BeverageDynamics. Prosecco has been the go to sparkling wine for my half Italian spouse for a long time. We drink it during fun gatherings and she uses it in cocktails a lot. In response to the rising popularity Prosecco DOC consortium, the entity that overseas the production of the sparkling wine, launched the first ever National Prosecco Week in the US in June 2018. Prosecco is increasingly becoming more and more synonymous with sparkling wine.
Consumers, brands and retailers alike are constantly sussing out the next big trend. Could a combination of rose and prosecco be the answer? The Prosecco DOC is allegedly considering certifying a Sparkling Prosecco making process for the 2019 harvest. Watch this space.
We've seen data showing rose table wine dollar sales growing 66% between 2016-2017. We've also seen Prosecco growing at double digits, particularly international brands such as La Marca which grew 25% in 2016-17 according to Beverage Information and Insights Group. Prosecco accounted for 17% of U.S. Sparkling wine sales in 2018 according to BeverageDynamics. Prosecco has been the go to sparkling wine for my half Italian spouse for a long time. We drink it during fun gatherings and she uses it in cocktails a lot. In response to the rising popularity Prosecco DOC consortium, the entity that overseas the production of the sparkling wine, launched the first ever National Prosecco Week in the US in June 2018. Prosecco is increasingly becoming more and more synonymous with sparkling wine.
Consumers, brands and retailers alike are constantly sussing out the next big trend. Could a combination of rose and prosecco be the answer? The Prosecco DOC is allegedly considering certifying a Sparkling Prosecco making process for the 2019 harvest. Watch this space.
1996 Price Spike
During the class discussion of the "Chateau Pontet-Canet" case, a question was raised about the spike in prices across the Five Classes of Bordeaux wine in 1996. Although there were likely many factors at play, some quick research suggests that the spike may have been caused both by high quality vintages and by supply/demand imbalances driven by an increase in demand from Asia. As can be seen in articles such as the first link below, the 1996 vintage was considered especially high in quality. The article notes that high priced wines can often stagnate in price, thereby limiting opportunities to purchase these wines as an investment. However, the article notes that many of the high priced Bordeaux wines from 1996 have continued to appreciate significantly - in many cases, the wines have increased in value over 6x, and some have even appreciated 15x. This suggests that at least part of the spike in price was due to the intrinsic quality of the 1996 vintage.
However, the precipitous drop in prices in 1997 suggests that there may have been some other market forces affecting the 1996 vintage in addition to the intrinsic quality. The second link below hints that the ramp in prices may have been caused by an influx of Asian buyers. Like the more recent bubble from a large increase in Chinese buyers, the spike in the 1990s may have been at least partially driven by an influx of Japanese buyers. The publication notes that the Japanese wine boom began in the 1990s. However, the authors note that Japanese wine consumption fell sharply in 1997, which may have at least partially caused the sharp decrease in Bordeaux prices from 1996 to 1997.
https://www.thedrinksbusiness.com/2015/07/in-focus-1996-bordeaux/
https://www.eu-japan.eu/sites/default/files/publications/docs/japanwinemarketreport-2014.pdf
However, the precipitous drop in prices in 1997 suggests that there may have been some other market forces affecting the 1996 vintage in addition to the intrinsic quality. The second link below hints that the ramp in prices may have been caused by an influx of Asian buyers. Like the more recent bubble from a large increase in Chinese buyers, the spike in the 1990s may have been at least partially driven by an influx of Japanese buyers. The publication notes that the Japanese wine boom began in the 1990s. However, the authors note that Japanese wine consumption fell sharply in 1997, which may have at least partially caused the sharp decrease in Bordeaux prices from 1996 to 1997.
https://www.thedrinksbusiness.com/2015/07/in-focus-1996-bordeaux/
https://www.eu-japan.eu/sites/default/files/publications/docs/japanwinemarketreport-2014.pdf
Kombucha Imitating Wine
Some of our classmates seemed shocked when Michael Preis mentioned alcoholic kombucha, but I've been on the boozy booch train for a while (detox while you retox, am I right?). I believe their is no better mixer and a kombucha cocktail is often my drink of choice.
However, I was surprised to see that one of the flavors in GT's new alcoholic kombucha line is unapologetically imitating wine (if you can even call 3% ABV alcoholic...). Here is the description of their New World Noir™ flavor:
Still, it got me thinking about some of our speakers' comments about millennials' moves toward healthier beverages (often away from booze) and whether drinks like this one will take share away from wine.
However, I was surprised to see that one of the flavors in GT's new alcoholic kombucha line is unapologetically imitating wine (if you can even call 3% ABV alcoholic...). Here is the description of their New World Noir™ flavor:
Inspired by the sophisticated profile of a fine wine, GT’s CLASSIC GOLD New World Noir Kombucha is what sommelier dreams are made of. Elegant like a Pinot with 3% ABV and billions of living probiotics, this sparkling, chilled red pairs our organic & raw Kombucha with a woody oak blend, rich Aronia juice, sweet Blueberry juice, and a hint of Vanilla extract. Cheers to good health!Something I found particularly interesting is the fact that it doesn't even have grape juice! Instead, its deep wine color comes from blueberries. The ingredients are as follows:
GT’s Kombucha* (Kombucha Culture*, Black Tea*, Green Tea*, Cane Sugar*), Oak Blend*, Blueberry Juice, Aronia Juice*, Vanilla Extract*, and 100% Pure Love!!!I've, unsurprisingly, tried it (along with their other 2 alcoholic flavors). While it tasted slightly reminiscent of wine, I think the color and the name reminded me more of wine than the flavor itself. It almost had a mulled-wine-like spiciness to it. It was my least favorite of their 3 flavors.
Still, it got me thinking about some of our speakers' comments about millennials' moves toward healthier beverages (often away from booze) and whether drinks like this one will take share away from wine.
BOOMER'S BLOG: On Wine and the Beauty of Being a Boomer!
Alyssa, Sarah, Jeannine and fellow students - We want to thank you all for welcoming us to the class and sharing your perspective, energy, and all that wine (which you know we love) with us! We finally figured out how to do this "blog thing" and thought we might share a few parting thoughts and "words of wisdom" with you all - better now than at the end of the evening on Thursday.
First, we know that you are smarter, faster, healthier, and more tech savvy than we are. We also know that you have figured out the "buzz ROI" and prefer a stiff cocktail (believe us, our drinking days did not start with wine either), but now - here we are, part of the Boomer generation - and thought we'd share a few thoughts on the benefits of aging.
In the category of "Everyday Wines" the winners are:
Alyssa, Sarah, Jeannine and fellow students - We want to thank you all for welcoming us to the class and sharing your perspective, energy, and all that wine (which you know we love) with us! We finally figured out how to do this "blog thing" and thought we might share a few parting thoughts and "words of wisdom" with you all - better now than at the end of the evening on Thursday.
First, we know that you are smarter, faster, healthier, and more tech savvy than we are. We also know that you have figured out the "buzz ROI" and prefer a stiff cocktail (believe us, our drinking days did not start with wine either), but now - here we are, part of the Boomer generation - and thought we'd share a few thoughts on the benefits of aging.
Why it's good to be a Boomer
- We taste wines in class but don’t do presos or tests (Jim)
- We don’t have to worry about our teenagers getting into our wine stash anymore (Wanda)
- We don’t drink and drive because we hardly ever go out anymore (Wanda)
- Can remember the legendary 1961 Bordeaux vintage on the vine (Jim)
- Still #1 demographic in wine industry! (Jim)
- We’re too tired at night to do anything BUT drink wine (Katie)
- Now that we’re done paying college tuitions, we can afford good wine (Katie)
- It's more fun to be a “wine native” than a “digital native”! (Katie)
In the category of "Everyday Wines" the winners are:
- Lioco Chardonnay (unoaked), $22.99/bottle (Katie)
- Argentine Malbecs - bold, fruity, and cheap (i.e., slutty!) for what you get - of course, this would be Jim's pick!
In the category of "Special Occasion" Wines we propose:
- Harlan Estates Cabernet (Katie)
- Richebourg – 2011 Mongeard-Mugneret great & not crazy expensive (~$300) (Jim)
- Donum Russian River Reserve Pinot Noir (Wanda)
- Chilean Carmenere - varietal "lost" for 100 years & rediscovered (Jim)
- Las Jaras 2017 Sparkling Wine, Old Vines Carignan, Mendocino County, YUM!! (Katie)
We also discussed wine experiences that we have loved and this was (oddly enough) one category where we were all in agreement:
- Taking GSBGEN 356 Dynamics of Global Wine Industry! (Note: since we are not getting credit or a grade this is not gratuitous brown-nosing!)
- A distant second... Spending 2 weeks in Sarteano Tuscany eating amazing food and drinking fantastic wines. If you get a chance to visit and try the following, DO IT! Nostra Vita or Le Chiuse vineyards Brunellos are fabulous and the locations idyllic!
If you have any time over Spring Break and want to continue your wine education with a good read or two, we'd recommend:
- Cork Dork, Bianca Bosker - Wide-ranging and informative, well-written, gives you the sense of the commitment it takes to be really good at tasting wine!
- The Wine Lover's Daughter, Anne Fadiman - Memoir about her father, Clifton Fadiman, who was a critic and bon vivant. Beautifully written and delves into differences in taste.
- In Vino Duplicitas, Peter Hellman - A fascinating true story about a famous wine forgery that ensnared the Koch Brothers and many in Hollywood. Also in movie form as "Sour Grapes."
Enjoy your spring break and let us know if we can help with your wine "research" in the future!
Cheers,
Cheers,
Katie, Jim and Wanda
WineInStyle: one last due diligence
Eberhart’s parable in Japan was truly remarkable. From a foreigner in a deeply conservative society, to disrupting an industry in the face of often criminal opposition and unfair competition. Indeed, his humbleness to leave the company in CEO Khoo’s hands to spend more time with his family and allow the company to grow even further, was just another testament to his business intuition.
Now, facing the latest question, this time about whether to sell the company, do deeper due diligence or follow the advice of half his board and just trust the new buyers, Eberhart should carefully consider his move. After all, it was determination and hard work in the face of infinite challenges that build WineInStyle.
I would argue that he should set out a process of careful due diligence on the buyers before agreeing to any move. And that he aim to sell the company to a set of investors that he would judge able to carry out the mission of the company as well as able to adequately support the new CEO in his challenges.
This is for a number of reasons:
- Eberhart’s trajectory is clearly shifting toward wanting to spend more time at home in Palo Alto, and the sale would allow him to complete that move
- The company, his baby from the beginning, needs not only deep pockets but also solid moral. The numerous examples of unfair business practices mean there is a significant risk of leaving the company with some rather shifty investors
- Lastly, as demonstrated by the change of CEO a few years prior, further growth in the Japanese market would require not only the local knowledge and network that the new CEO provided, but also perhaps local capital to complete the ultimate step to becoming a fully Japanese company and therefore achieving fully acceptance in the local market
Now, facing the latest question, this time about whether to sell the company, do deeper due diligence or follow the advice of half his board and just trust the new buyers, Eberhart should carefully consider his move. After all, it was determination and hard work in the face of infinite challenges that build WineInStyle.
I would argue that he should set out a process of careful due diligence on the buyers before agreeing to any move. And that he aim to sell the company to a set of investors that he would judge able to carry out the mission of the company as well as able to adequately support the new CEO in his challenges.
This is for a number of reasons:
- Eberhart’s trajectory is clearly shifting toward wanting to spend more time at home in Palo Alto, and the sale would allow him to complete that move
- The company, his baby from the beginning, needs not only deep pockets but also solid moral. The numerous examples of unfair business practices mean there is a significant risk of leaving the company with some rather shifty investors
- Lastly, as demonstrated by the change of CEO a few years prior, further growth in the Japanese market would require not only the local knowledge and network that the new CEO provided, but also perhaps local capital to complete the ultimate step to becoming a fully Japanese company and therefore achieving fully acceptance in the local market
D&D&Wine
Since it's winter quarter, and the MBA1s in the class are in the midst of the regression project and finals studying for Data & Decisions, I thought I'd look for some statistical analyses of wine prices. I came across the below study, which provides some interesting statistical (although not really surprising) results on factors that affected Bordeaux wine prices in 1996-1999. The primary conclusion of the study is that Bordeaux wines of the 1996-1997 vintages were priced predominantly on the prior reputation of the appellation where the wine was produced, although other factors such as "taste" and "bouquet" were found to have statistically significant (albeit smaller) impacts on prices. Importantly, all variables in the study were significant at the 5% level, and all but 2 variables were significant at the 1% level.
However, the study notes that the predominance of reputation has decreased since prior studies on 80s vintages, primarily due to "the reduction in information asymmetries between consumers and producers and the increased competition in wine market," according to the authors. Given the study was published in 2004 about 90s vintages, it would be interesting to see an updated analysis, particularly given the increase in popularity of "new world" wines, the increasing oversupply in the market, and the democratizing power of the internet.
https://www.researchgate.net/publication/24068071_What_explains_Bordeaux_wine_prices
However, the study notes that the predominance of reputation has decreased since prior studies on 80s vintages, primarily due to "the reduction in information asymmetries between consumers and producers and the increased competition in wine market," according to the authors. Given the study was published in 2004 about 90s vintages, it would be interesting to see an updated analysis, particularly given the increase in popularity of "new world" wines, the increasing oversupply in the market, and the democratizing power of the internet.
https://www.researchgate.net/publication/24068071_What_explains_Bordeaux_wine_prices
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