Report description

Over the course of the last 20 years new world wine sales have exploded in
international markets. Between 1988 and 2007, new world sales increased
from 7.8m nine-litre cases to 227.6m cases, a CAGR rate of 19.5%.
This growth is underpinned by the development of the international trade for
wine, which again reached a new record of 9.1bn litres in 2007, an increase
of 6.5% on 2006. International trade accounted for 41.8% of all wine
consumption. This is forecast to rise to 42.1% by 2012.

And new world has continued to gain share, from 26.4% in 2006 to 27.6% in 2007. By
2012, new world will grow its share to just under 30% of all international trade.

The global wine industry is in fundamental transition. While overall consumption is rising
slowly, there are big shifts in consumption patterns. The traditional wine drinking countries
are consuming less, while non-traditional countries particularly in the English-speaking
world and Asia are drinking more. It is in these non-traditional markets where new world
producers are winning the battle. The fact that new world producers are performing best in
non-traditional markets is a considerable cause for optimism. The new world producers can
be credited with bringing in millions of new consumers into the wine world in markets such
as the UK, US, Canada and Scandinavia.

Against this backdrop, this report sets the scene for how new world wine has developed
over the last ten years and where likely consumption trends are heading.

At over 90 pages, this comprehensive report focuses on the challenges and opportunities for
the major new world producing countries: Australia, New Zealand, United States, South
Africa, Argentina and Chile.

Chapter 1 Introduction 
The report's introduction reviews key issues and trends such as
demystifying wine with brands, promotional spend, the old world
fightback, the experimental consumer, and how new world is moving
upmarket. All with exclusive interview extracts from the leading new
world brands and producers.

Gallo managing director, Europe George Marsden sums up new world's

market approach: “New world wineries have done a very good job in
branding so they’ve demystified wine and have brands and labels that are
easy to read and easy to understand. They also promote a wine style that
tends to be more fruit forward, with a richer mouth feel. The other thing
is that they have really concentrated on exceptional value. This has made new world wines
very attractive.”

On promotional spend, Foster’s UK commercial director Neil Barker: "The top-ten brands
accounts for a disproportionate share of category advertising and promotion spend.
Increasingly you are finding retailers doing fewer, bigger, deeper promotions. The big
brands are winning. Of those brands in the top-ten there are only two brands in decline. The
rest are all up.” These big brands are, with very few exceptions, new world brands.

The report contains nearly 20 data tables from The IWSR providing a full year-on-year
database of new world wine market consumption and share including: wine consumption
volumes in each major market by country of origin, top export markets for each major
producing country, domestic versus export consumption of each major producing country
and shares of old versus new world volumes by region.

Chapter 2 Supplier country profiles 

Through a combination of exclusive IWSR data and executive interviews chapter 2 of the
report looks at each country's:

 Domestic market trends

 Industry and regulatory structure
 Generic body initiatives
 Production trends
 Emerging wine regions
 Wine style trends
 Leading company profiles
 Export success to date and future medium- and long-term outlook
 Developments in key new world export markets (UK, Scandinavia, Germany and US.
 Opportunities in emerging wine markets - Asia, Eastern, Central Europe and India
 Specific country issues (e.g. water trading in Australia, incoming environmental
regulations in California)

Using the structure mentioned above, this chapter reviews the key supply/production issues
and latest developments in:

 Australia
 New Zealand
 United States
 Chile
 Argentina
 South Africa

Extensive quotes from leading brands are provided throughout each producing region
section, offering a unique and up-to-date analysis of what issues are being tackled and
where opportunities lie.

Chapter 3 Key new world markets

Moving on from the profiles of the producing countries, the report turns to the markets and
profiles the performance of the key export markets for new world, together with a review of
the current key issues facing each market. Again, with exclusive commentary and analysis
throughout, this chapter covers the following markets:

 United Kingdom
 Ireland
 Sweden
 Norway
 Russia
 Germany
 Poland
 Czech Republic
 United States
 Brazil
The great Indian wine challenge - Report

While wine has become the flavour of the day, a lot needs to be done to
make wines reach the Millionaire brands status that many IMFL brand
enjoys. A report.

While alcohol
consumption is generally frowned upon in India even though we find reference to
intoxicating substances like “somarasa” in the ancient religious texts, wine has
gained in acceptance thanks to its health benefits. Over the past years there has
been a significant change in alcohol consumption trends. Although, alcohol has
become one of the commonly consumed intoxicating substances in India, more and
more people are imbibing wine especially in the metros and the smaller cities. It
has won increasing social acceptance among other groups, urban females and even
males being the prime example. While alcohol especially IMFL is consumed to the
tune of two million cases, wine consumption is only one million cases. As it is a
nascent industry the scope for wine is huge provide the right marketing mix is in
place.

The past decade has seen a significant increase in the consumption of alcohol. The
number of drinkers has increased from one in 300 to one in 20. Annual sales of
alcoholic beverages are growing by about 20 per cent annually. Indian liquor brands
have registered significant growth in recent times. The legion of wine drinkers is
also growing as more and more of the major liquor companies venture into the
business.

The varieties of alcohol manufactured for consumption in India are:

1. Beer
2. Country Liquor and government country liquor
3. Indian Made Foreign Liquor (IMFL)
4. Wines

India can boast of an upwardly mobile young population with a propensity to spend.
The country has one of the youngest population, with around 50% of its citizens
below

25 years. With a free media and increasing exposure to western influences India
has become part of the globalized economy. Because of the economic reforms since
1991 there has been a significant increase in the income levels. Rising income
levels have been seen as generally favourable to the alcoholic beverage industry.

A large proportion of the Indian population is in the age group of 25-34 years. This
age group is the most appropriate target for alcoholic beverage marketers. Many
global players have entered the Indian beer sector but wine players are restricted
to Indian companies. Foreign wine companies are not keen to invest in wineries in
India because of the huge inventory of stocks available back home. However, high
import duties are making them think otherwise. Currently they are opting for the
imported route.

A deep-seated traditional social aversion to alcohol consumption has been a

traditional feature of the Indian society. However, as urban consumers become
more exposed to western lifestyles, through overseas travel and the media, their
attitude towards alcohol is relaxing. Social habits are undergoing a transformation
as mixed drinks are becoming more popular. The greatest evidence of this trend is
the increase in beer, wine and even tequila consumption among women. More and
more women are consuming wine and beer – the penetration in metropolitan areas
is almost twice as high as the penetration in other large cities – implying that the
greater tolerance towards alcohol consumption in metropolitan areas facilitates the
consumption of wine and beer. With increasing urbanization, this acceptance is only
going to rise.
All these factors combined make the scenario very promising for the wine and beer
industry. While international players are spending big bucks for promotions to grow
the industry and their brands, the wine players do not have the resources to grow
the industry. They are dependent on government support to the industry.

India is a big and growing market with a weakness for spirits, especially whisky.
This is not surprising considering that in the wake of the reforms, as the social
transformation gathered momentum and global consumption patterns get
increasingly assimilated, the country's moral fabric is loosening. Drinking liquor has
rapidly gained acceptance and is no more taboo -- even among the conservative
middle-class but whose attitudes have changed with improved standard of living
has improved. Liquor companies have been quick to latch on to this trend. In fact,
the youth, women and middle-class -- overlapping segments – are being targeted
by the liquor companies looking for growth.

Strong beer (alcohol content in excess of pronounced, shift of liquor consumers to

the organized sector. The Indian market has traditionally been inclined towards the
unorganized sector, which accounts for two-thirds of the liquor consumption in
India. However, maturing tastes and preferences are making the Indian liquor
market more brand-led. This should promote growth in the organized sector.

Building a strong brand for alcoholic beverage products has had a significant impact
on sales and profitability. Alcohol is a product which is not evaluated on functional
features, it is a product that is subjectively evaluated and hence branding is
essential.

For companies to differentiate building a strong brand is a must. While IMFL and
beer have created millionaire brands, wine labels with their tongue twisting names
are quite a challenge especially in an industry where advertising is regulated.
Perhaps a leaf can be taken out of the marketing books of Jacob’s Creek. 

In India, creating a strong lasting umbrella brand for the various products is crucial
as there is a restriction on promotion of alcoholic beverages. For example: Vijay
Mallya’s King Fisher products cannot be advertised however, through other
promotional activities, the King fisher brand is now promoted through the airlines
and his various sporting activities. SABMiller, for instance, sells a mineral water
called Royal Challenge, not coincidentally the name of one of its lagers. Surrogate
advertising or brand extension as the industry would like to call it has become the
order of the day.

Advertisements have a strong influence in our life. We like them because they
provide information and create awareness about the market. But many times, some
advertisements are accused of misleading people. When such accusations are
proved, some advertisements are scrapped off from media.

Such instances have been reported in the advertisements endorsing alcoholic drinks
and cigarettes. Hence the Government had imposed a ban on advertisements of
these products in the media in the year 2002.

As a reaction to the directive of Government, the liquor & tobacco majors sought
other ways of endorsing their products. They have found an alternative path of
advertising through which they can keep on reminding their liquor brands to their
customers. They have introduced various other products with the same brand
name. Launching new products with common brand name is known as brand
extension, which can be carried out for related products (eg: Kingfisher Airlines and
Kingfisher Beer). In this case, the companies launch other products with the same
brand name for the purpose of reminding their old customers. Heavy advertising is
done so that the customers do not forget their liquor and tobacco brands, for which
advertisements are banned. The advertisements for such new products are placed
under the category of "Surrogate Advertisements". The industry terms it as a brand
extension and Kingfisher Water boasts of enough volumes and has become a brand
by itself.

The industry segment has its own standpoint in defense. The liquor lobby claims
that everything is in accordance to the Government regulations. They clarify that
they have stopped showing liquor advertisements and they are free to use the
brand name for any other products. Even the Confederation of Indian Alcoholic
Beverages Companies (CIABC) advertising code maintains that advertisement of
products (real brand extensions) by the liquor industry must be allowed.

Vijay Mallya who has become synonymous with the Kingfisher brand has set a
precedent which will be a hard act for others to follow. He has already earned the
sobriquet the king of good times and is often compared to Richard Branson, who
similarly promotes the Virgin brand. His association with Formula One, Indian
Derby, Kingfisher Calendar with all the well photographed lovelies in exotic
locations has given the brand a unique hue and has greatly fired the aspirations of
the Indian youth. His regular photographs in all the major media with young girls
has greatly enhanced the fun element of the brand.

Wine is an alcoholic beverage made by fermentation of grapes or grape juice.

Global market for wine is estimated at well over 25 billion liters. Compared to other
countries, wine manufacture and consumption in India is insignificant. This is
attributed to earlier period of prohibition in the country and higher price compared
to spirits like whisky and brandy manufactured in the country, referred to as Indian
Made Foreign Liquors (IMFL).

However, over the last few years Indian wine industry has been steadily growing
over the last ten years. Wine is gradually becoming a part of urban Indian life style.
Rising incomes of Indian population, changing demography and exposure to new
culture is adding to the higher consumption. The market for wine is expected to
grow at over 20 % per annum. The wine industry is both competitive and
challenging. It exhibits the characteristics of the consumer packaged goods (CPG)
industry –aggressive brand building supported by large advertising and event
budgets, combined with high manufacturing costs. But a key differentiation in the
wine industry is the relatively higher packaging costs– glass bottles, labels, foils
etc. So a key

challenge for industry is maintaining lower costs to control the cost of expensive
packaging inputs. Another challenge for the company was to manage the
distribution of the finished goods. Eighty per cent of wine consumption in the
country is confined in major cities such as Mumbai (39%), Delhi (23%), Bangalore
(9%) and Goa (9%). 

There are new players entering the Wine playing field and India can now boast 3-4
large Wine manufacturers with capacity of about a million cases per year. 2008 has
been great year for Indian Wine manufacturers as Indian Wines have won awards
and acclaim in Europe and U.S. Indian Wines however still are not very well
accepted and there is still a resistance to “Made in India” label.

The real challenge for winemakers in India is to develop a domestic market.

Consumption of Wine when we compare it with the other alcoholic beverages is
very small. The younger segments are not drinking nearly as much wine – those
aged 18-24 represent only 6% of wine consumed. They are spoilt for choice –a
proliferation in alternative purchase decision. There has been an explosion in the
RTD (Ready to Drink) market especially Breezers and the options available for
many varied markets. The young customers are very focused on ‘brand’ – they are
‘brand’ savvy. They are open to brand promises, indeed look for Brands as a way of
making the choices they make all the time. Focusing on brand strengthening within
these key markets of tomorrow will be vital. While it is likely that young people of
today will gradually grow their wine consumption, it is by no means assured.
Ensuring that a smooth transition into wine consumption is possible will involve
making wine easily accessible to the average alcohol consumer, who may generally
find making alternative selections such as beer or RTDs easier.

Both the Indian wine market and the indigenous wine industry are in their nascent
stages, but growing by leaps and bounds. Fifteen years ago there was no locally
made wine that was drinkable. Now there are three significant wine makers, all
family-owned businesses, the Chougules, the Grovers and the Samants. There is
also great interest in wine makers from France, Italy, Australia, South Africa,
America, and Chile to enter the Indian market.

The per capita consumption of wine in India is only 9 ml, compared with 400 ml in
China. Since the two countries are often placed in the same economic bracket, this
is being interpreted as a huge latent demand in India.

During the year 2007-08, the total annual production of wine in India was 6.214
million litres, out of this 5.4 million litres was produced in Maharashtra alone. This
is a very small fraction as compared to world’s annual production of 32,000 million
litres. The country also imports 72,000 wine cases (9 litres/case) in a year where
32,000 cases are bottled in origin and remaining 0.36 million litres are imported in
bulk flexi bags and subsequently bottled by Indian wineries.

The biggest consumption up to 80% is however confined to major cities like

Mumbai (39%), Delhi(23%), Bangalore (9%) and the foreign tourist dominated
state of Goa (9%), where as rest of India has only 20% consumption. Some Indian
wine makers have also started importing foreign made wine and bottling and selling
it here in India. Among the importers; ITDC (Indian Tourism Development
Corporation), Sultania Trade, Aspri Spirits, Sansula, Brindco and Mohan Bros
predominate.

There is a huge potential in Indian market itself. For export market, the increasing
popularity of Indian cuisine is an automatic opening. With more and more
professionals visiting India on regular basis, and the fact that Indian wine exports
are going up every year, word is getting spread very fast creating awareness of
Indian wines in International market.
The per capita consumption in India is only 0.09 litre/person/year as against 60-70
litres in France and Italy, 25 litres in US and 20 litres in Australia and even China
has 0.4 litre. The Indian market is way behind major wine drinking countries.
Consumption for Wine in India is also very low when we compare it with the
consumption of other alcoholic beverages like Beer, Brandy, Whiskey, and Rum.
Given the healthy status and growth of alcohol beverage industry on the whole
there is tremendous potential for Wine. There has been much debate about the
precise number of potential consumers in India’s wine market. About half of the
Indian population meets the minimum drinking age of 25 years; however, that
number is greatly increasing as the Indian population matures.

This maturity creates an opportunity for younger generations to acquire a taste for
wine, breaking from a tradition of hard liquor. Although many Indian religions
encourage abstinence from alcohol, few have formally banned its use. Three Indian
states maintain prohibition laws and others have set strict regulatory measures on
alcohol sales. On the conservative side, there are about 24 million potential Wine
consumers, on the more realistic side the number goes upto 74 million.

Consumption of Wine when we compare it with the other alcoholic beverages is

very small. The younger segments are not drinking nearly as much wine – those
aged 18-24 represent only 6% of wine consumed. They are spoilt for choice –a
proliferation in alternative purchase decision

Trends facilitating wine growth in India, include increasing disposable incomes in

the ‘shining’ Indian economy, Changing life styles, an increasing number of
professionals coming back to work in India, a growing awareness of the health
benefits of wine, per-ception of wines as being up-market and sophisticated, low
alcohol: entry into corporate boardrooms, Wine is in fashion and probably the latest
beverage that is “IN’. Wine has also started enjoying the patronage of hi-flyers and
top notch in society. It is more acceptable to women, more and more wine clubs
are mushrooming in key cities

The Indian Market largely can be classified into two Segments – Domestic and
Foreign Tourists. In the domestic market it is important to note that the majority of
India’s population is rural. Most of India’s poor reside outside of developed areas.
Large, densely populated cities; however, account for most of India’s middle and
upper classes and therefore for the majority of wine consumption in India.
The median age in India is about 25 years old, this demonstrates the fact that half
of the Indian population is not yet old enough to drink, and one quarter of the
population is under 10 years old. In the coming years, 10 percent of the current
population comes of legal drinking age, bringing with them new views of wine which
could influence them away from hard liquors. The strength of India is in its youth
who are familiarizing themselves with the world beyond their borders.

The gross national income (GNI) for India has risen to $800 per capita. This
number, however, is greatly skewed because of the outliers in both extreme wealth
and poverty. But a growing middle class which can be gauged by the nearly 500
million mobile connections speaks volumes of the prospects of the Indian wine
industry. The education levels in India correlate with estimates for potential
consumers. Those 24 million who have attained college level degrees make up the
majority of potential wine consumers. The remaining 160 million or so who have
finished secondary school complete the bulk of the rising middle class of India.

The tastes and preferences of the Indian population err towards still wines, and
more specifically, table wines. Though a market exists for champagne and sparkling
wines, these varieties sell at a much lesser rate than the still wines. In general,
slightly sweet wines and the varietals of Sauvignon Blanc and Chenin Blanc are
fairly popular and also pair well with typical Indian dishes. Similarly, rose and blush
have been projected as good fits for the Indian market; however, the majority of
sales have stayed on traditional still red and white wines. In regards to
presentation, wine producers have two different demographics in the Indian market
upon which to focus: the upper class and the general consumer. While the upper
class prefers the classic presentation, i.e. real cork, full bottle size, and dry red and
white wines, the growing consumer class in India gravitates towards approachable
wine packaging, i.e. screw caps, half bottle sizes, and sweet wines.

Current consumers include senior executives, successful business people, high

ranking officials, politicians. People with rich traditional background, i.e. “old
money” and there are those who have had international Exposure and have
travelled the world. There are also prospects for wine collectors, purchase from
wine merchants (London, Tokyo, Singapore, HK) and can own some of the best
wine collections in the world. Many consume wines at fine dining restaurants, at
home.

There are basically three types of wine: Table Wines (Still wines), Sparkling Wines
and Fortified wines.
Wine has also started enjoying the patronage of hi-flyers and top notch in society.
It is more acceptable to women, more and more wine clubs are mushrooming in
key cities

Table wines, also known as still or natural wines, are produced in many different
styles and make up the majority of wines on the market. Traditionally consumed as
part of a meal, table wines contain between 10 and 14 per cent alcohol and are
further classified by their colour, sugar content, and the variety= and origin of the
grapes that were used. Most table wines are fermented until they are dry i.e, all the
grape sugar has been turned to alcohol by the yeast. Slightly sweet or off-dry wines
are made by stopping the fermentation before all the sugar is gone or by adding
grape juice back to the wine afterwards. Depending on the grape variety and wine-
making technique, wines can be white, red, or pink in colour. In the Still wine or
table wine category the Indian market is divided mainly into two major categories:
White wines and Red wines. Further, all the wines available in the above categories
is divided in following three categories: Domestic Indian Wine and Imported Wine.

This is the wine, which is produced from Indian grapes and bottled in India by the
domestic wineries. There is also Foreign Bulk Wine Bottled in India. Few large
domestic producers import bulk wine and bottle it in India. Besides there are
Foreign Wines Bottled in origin that are available in the Indian market. More than
200 brands are currently available in this category that are Imported by Domestic
players, Importers and hotels which are allowed to import directly a certain
percentage of their foreign exchange earnings. Wines are categorized using a
number of different methods. Sometimes they are grouped into different categories
by grape variety, region of origin, by colour, by the name of the wine maker or
viticulturalist, or by production technique. 

Thus, the real challenge for winemakers in India is to develop a domestic market,
and that is where the problem arises. There are a lot of myths associated with
Wine. People believe wine and curry do not go well. Traditionally wine lovers around
the world have some kind of a mental block against Indian wines. They are just not
comfortable with the Made in India tag. There is a lot of confusion about storage
and usage and a lot of education needs to be done on this score. Of course, the
internet is a great source of information and as more and more people go online the
scope for wines is greatly increased.

Some of the Important Wine Varieties include: Red Wine Grapes

Cabernet Sauvignon:
The number One red grape variety of the world. Famous, fabulous and fabled,
Cabernet Sauvignon is responsible for many of the world's greatest wines and is,
arguably, the grandest of all red wine varieties. It is often blended with Cabernet
Franc and Merlot and its flavour is reminiscent of blackcurrants or cedarwood. It
demands aging in small oak barrels, and the best wines require several years of
bottle age to reach their peak.

Merlot
This variety takes second place to Cabernet Sauvignon in most premium red wine
blends. Merlot is fragrant and usually softer than Cabernet Sauvignon. It also shows
best with oak maturation, but usually requires less bottle maturation before it is
ready to drink. Merlot bottled as a varietal is becoming popular in India.

Shiraz
This grape is also known as Syrah. It makes a soft and rich wine often
characterized by smoky and chocolaty aromas. It matures faster than cabernet and
is sometimes blended with it to speed accessibility.

Zinfandel
This variety probably originated in Southern Italy as the Primitivo grape. It is
planted by only a few Indian wineries. The quality of wines have been very good,
especially when they receive enough oak maturation.

Pinot Noir
Pinot Noir may be the toughest grape to grow, but the effort is well worth the
investment. It is a fickle grape that demands optimum growing conditions, calling
for warm days consistently supported by cool evenings. Pinot Noir is a lighter
coloured and flavoured red wine, well-suited to pair with poultry, ham, lamb and
pork. Its flavors are reminiscent of sweet red berries, plums, tomatoes, cherries
and at times a notable earthy or wood-like flavour, depending on specific growing
conditions. There are several clones in pinot noir that show great promise. The
Pinot Noir wines are clean and lively with the flavour of ripe cherries.

Cabernet Franc
This variety possesses qualities similar to those of Cabernet Sauvignon, although
they are a little less pronounced in Cabernet Franc. It is an important part of blends
and is often blended with Cabernet Sauvignon. White Wine Grapes
Chardonnay
It is currently one of the most popular if not the most popular dry white wine
variety in the world. It is planted in almost every wine producing country and is one
of the easiest varieties to grow. Chardonnay generally benefits from oak and is
especially complex when it is barrel fermented as well as barrel aged. However,
over-oaking has been a common fault of some the first Chardonnays.

Chenin Blanc
This grape is the Cape's most popular white variety with about thirty percent of her
vineyards producing Chenin Blanc. It produces a wide range of wines from sweet to
dry, including sparkling and still wines. Its dry wines are fresh and fruity and
Chenin Blanc's sweet wines and botrytis dessert wines are becoming more
fashionable.

Sauvignon Blanc
India now can produce international quality wines of Sauvignon Blanc as evidenced
at few wineries located in Nashik and Pune district. These micro climates in
Maharashtra are suited to the growing of this variety. The Sauvignon Blancs tend to
be dry and grassy. Its plantings have increased though it is a moderate yielder.

Some of the major Indian companies include Chateau Indage, Grovers, Sula Wines,
Vinsura, and many others. The big players like United Spirits, Pernod Ricard, John
Distilleries, ABD Distillers have all got into the wine business and are steadily
growing the business.

Chateau Indage (CI), Narayangaon nested in the high Sahyadri Valley of

western Maharashtra pioneered by Sham Chougule was established in 1984, with
the technical collaboration of Champagne's Piper Heidsieck. Pioneer of French-style
wines in India, CI produces a variety of exquisite still and sparkling wines. It
manufactures 18 types of wine and the main varieties used by the winery are
Chardonnay, Cabernet Sauvignon, Ugni Blanc, Pinot Noir, Gamay, Riesling, Muscat
of Alexandria, Semillon, Sauvignon Blanc, Chenin Blanc, Zinfandel, Viognier, Shiraz,
Malbec and Grenache.

Chateau Indage also sells a range of still wines on the domestic market under the
names Riviera, Figueira, Ivy and Chantilli. The Riviera red based on Pinot Noir is
well made and attractively dry; it takes chilling well. The company's wineries have a
capacity to produce over three million bottles of wine per year. In the Indian
market Indage holds 75 % share of the premium still wine category and the virtual
monopoly in Sparkling wines. Chateau Indage's Riviera label includes a fruity, well-
balanced white blend of chardonnay and Ugni blanc and a soft fresh red made from
pinot noir. The Chantilly label wines; a white (chardonnay) and a red (cabernet
sauvignon) are aged in French oak and show their varietal characteristics

Grover Vineyards
Grover Vineyards, in Dodballapur, 40 km north of Bangalore at the foot of the
Nandi hills, on the other hand, uses French grapes Vitis vinifera in its vineyards in
Bangalore. It exports wine worth $435,000 every year. "The Grover range produced
from high-altitude vineyards north of Bangalore, with help from the ubiquitous
Michel Rolland of Pomerol, is extremely respectable. The reds, particularly the
Reserve red, are a distinct notch above the slightly dull Clairette-based white.

Fifteen years ago, the Grovers took on the task of reviving wine drinking in India.
The company, together with Mr. George Vesselle accepted the immense challenge
of growing for the first time French varieties of grapes, suitable for wine production
in India. Grover Vineyards is jointly owned by Kanwal Grover and Veuve Cliquot.
Kanwal Grover is advised by two top French winemakers, Michel Rolland and
Georges Vesselle. The vineyards are planted at 2,000 feet above sea level and
some varieties can produce two crops a year. Still white and red wines from
Bangalore Purple, Cabernet Sauvignon, Shiraz and Thompson seedless grapes are
made under the supervision of winemaker Bruno Yvon. The white is medium-dry
and fairly bland; the red is cabernet-style with good depth of fruit.

Sula Vineyards
The most recent entrant into the Indian wine market is Sula, complete with labels
of almost California sophistication. This winery was started in 1998 and setup about
seven years ago near the town of Nashik, 200 km north-east of Mumbai, at an
altitude of 600 metres, by Mr. Rajiv Samant.

Although, the potential for wine is huge there are only one or two recognizable
brands. There is a lack of clear brand positioning. None of the brands is targeting
the young wine consumers. We are recommending the launch of a new brand that
would fill the gaping void left by the existing brands. On the flip side, India is the
home of some of the finest hotels and resorts in the world. Every major hotel group
is present in Asia and has an aggressive growth plan in the region. Indian groups
are now expanding in Europe and the US as well (Peninsula, Shangri-La, Mandarin,
Oberoi, Taj). Hotels and resort are a key channel to develop the wine culture as
windows of the western way of living. Hotels will purchase wine from all origins and
from all price points: from house wines to sommelier list.

Trendy bars offer similar type of entertainment experience as in Europe. These are
places to see and be seen, where trends are made, where east meets west. It is a
key channel for communicating with younger consumers. Good opportunity for new
world wines.

The number of wine journalists are also increasing which has increased awareness.
More and more lifestyle magazines are hitting the stand and luxury products
including wines.

However, one of the primary reasons for the low consumption of wine is consumer
awareness. It is one of the primary purpose of a marketer to spread awareness
about their products as well as educate the consumers about their products.
Unfortunately, promotion of alcoholic beverages has been prohibited by the
Government of India, so the marketer has to look to innovative ways of promoting
their brands using surrogate marketing. According to Theodore Levitt, a marketer is
a “mixer of ingredients”. Based on the target market and positioning, marketing
mix is presented here: If you haven’t got the product right all your branding effort
will be in vain. When it comes to Wine, the product is not just about the intensity of
flavor, complexity, balance, texture and length of flavour, it also includes the bottle,
the label, the closure, and cases. The name of the wine should have instant recall.
Indian wine makers too have not got their pricing right. While the cost of
production is still low, marketers are yet to pass on the price benefits to consumers.
Price of a wine glass is nearly Rs. 200/-.

However, with fashion designers like Ferragamo and Roberto Cavalli entering the
wine marketing game, wine will soon be a luxury we can ill afford.

The New “International” Wine Style

Careful tasters and readers may have noticed recently that the style of many wines has
been changing. Whether it’s the new versions of Barolo, Chianti, Rioja, Shiraz, Cabernet, or
even Bordeaux, there is a discernible trend toward uniformity that upsets traditionalists, but
that is otherwise overlooked. The following is an interesting article on the subject and a
response to that article. There is merit to both sides of the argument. As usual, I have
taken minor editing liberties and have added a few opinions [in brackets].

The International Style - by Mark Arvanigian

One thing we frequent tasters all know, yet discuss all too little, is the highly subjective
nature of wine enjoyment. Each of us appreciates different qualities, differently. That which
is “good,” therefore, may not always be better to us all. Professional wine makers and
enologists can find many types of “flaws” and are becoming increasingly adept at
irradicating them. Flavor characteristics that I have enjoyed in premium wines, such as the
mustiness wrought by Brettanomyces, have been minimized or eradicated in modern wines.
Some would say, rightly, that this is as it should be: Brett is technically a flaw in wines.

But is it just me, or are premium wines from all quarters increasingly lacking in personality?
I have recently tasted, from the current or very recent vintages, offerings from very
reputable producers of high-end California red wines. My conclusion is that they all make
the same wine. The essential components seem to be overtly ripe, rich fruit (cassis, cherry,
plum) with varying degrees of depth, and almost nothing else. To add insult to injury, the
fruit is often of the sort that tastes artificial, with an alcoholic or faintly chemical finish. To
my palate and way of thinking, this sort of polished, one-dimensional product is very much
the child of the so-called “international style” of wine making.

“So what?” you say. That trend, with its focus on clean flavors, fruit and polish has
dramatically raised the quality of all varietal wine. Wine writers laud that the across-the-
board increase in quality more than compensates for the boredom of a few erudite wine
geeks.

Well, I’m not so sure, and I am not sure that the wine press has indeed been responsible for
the very real rise in overall quality, particularly at the lower end. This should probably be
attributed to the workings of the market, and to the introduction of new technology to the
winery. The average wine drinker is not, after all, reading the Wine Advocate. Instead, they
are buying grocery store wines, produced in vast quantities, for early consumption. These
people are buying the latest technology in a bottle. Their lot has improved because of it.

For those of us who taste wine early and often, however, the wine press has had an
appreciable effect; the principal disadvantage is tedium. The wines they advocate (and, I
would argue, are making into a stylistic trend) can be full, rich, jammy, silky, whatever -
but they will always lack interest to those who remember the way it used to be. Modern
wine makers (especially in California and Australia, though, sadly, the trend is spreading)
are churning out wines utterly lacking in personality, and which therefore fail to inspire
much interest. They lack individuality, and leave a hollow feeling on the taster’s palate, in
his mind, and, increasingly, in his wallet.

Those of a more egalitarian bent say that the needs of the many (quaffers) outweigh the
pastime of the few (collectors). I respectfully disagree. If the wine novice thinks that he will,
in the years to come, be able to broaden his wine experience easily by trading up in price, I
am sorry to be the bearer of ill tidings. It is becoming increasingly difficult to gain a range of
new flavors and textures not found in lower-end wines by simply spending more money.
There are few California Cabernets in the $25 range offering flavor revelations not found in
a good $15 version. Likewise, turning in your $25 Cab for a $40, reserve-level wine may
leave you with a heightened sense of “no-big-deal.” Caveat emptor is the guiding principle
in today’s wine shop, except among solid brands at low-risk prices. Ironically, it may be that
the wine buyer is safest at the $10 level! [Arvanigian overstates his case here. Most $15
Cabs are seriously lacking, and there are many “big-deal” wines available, albeit at some
big-deal prices.]

I am not exactly a Philistine in this brave new global world. Hungary, New Zealand and
South Africa are and should be considered right alongside Bordeaux, Burgundy and Napa by
writer and consumer alike. By and large, this is a good thing. However, if these new regions
produce wines without any connection to place, which lack any trace of local individuality,
what is the use of introducing them at all, other than economic? By drinking commercially
acceptable, commercial-tasting cabernet-merlot-chardonnay, wine drinkers will gain little
insight into traditional styles. Once the wine-producing world has replanted the countryside,
many traditional varietals may be lost. And replant they most certainly will, for vintners will
realize that the kudos of the press - including the elusive score of ‘90’ or above - and the
money it brings will come most easily that way. And so the cycle spins.

Does this mean that traditional wines fail to achieve high scores and status? Of course not,
but many of the great producers of traditional-style wines that have been embraced by wine
writers were stars long before the press came along. Thus, Heitz Vineyards can accept a few
dis-appointing scores while producing wine like they always have: they were famous for
making great Cabernet before Wine had a “Spectator” or an “Advocate.” Yet most vintners
do not have that luxury. They know that the industry is incredibly competitive. The seal of
approval from important sectors of the wine media is an important part of the marketing
process.

I am not without regard for the press. Wine journalists are valuable sources of information.
In particular, the coverage and reporting on the quality of particular vintages and overall
trends in viticulture have served as the eyes and ears of many of us unable to keep close
tabs on such things. Nonetheless, the press also is responsible for the “100 point scale,”
which argues, curiously, that the qualities of a wine can be quantified numerically. As with
every objectification of the subjective, someone’s preferences prevail, and become
something of a standard. Generally speaking, that preference has been for wines that
produce clean, rich fruit; rich mouth feel; and soft tannins. This has become the benchmark.
The attraction of this approach is obvious: it favors the casual drinker, who makes up the
great portion of the wine market, and who cares little for complexity or true character. This
is aided by the simplicity of the quantification approach, i.e., for most casual wine drinkers,
higher score = “better” wine. The Wine Spectator even calls their tasting section a “Buying
Guide,” so as to erase any confusion over how the consumer should use their scores. Thus,
wines with high scores ring up sales, and the wine world is led a merry chase, in search of a
number.

And so we come to the crux of the matter: are wine makers producing a style of wine which
meets the broad standards of excellence/acceptability set down by the industry’s chief
marketing wing, the media? It seems that they are. Every retailer and wholesaler worth his
salt understands that a ‘90’ in the Wine Spectator is one of the chief signs of a wine’s
marketability. Of course this be overstated: image, price, track record, and value for money
are factors, just as they have always been. Yet increasingly it is the press that is driving fine
wine sales. Can this have any other effect than to modify wine making in favor of a
preferred style? Vintners are increasingly corporate employees. They have generally
succumbed to the lure of The Score, and because these scores can be most easily achieved
by making a certain type of wine, with definable characteristics, many wines are made
which resemble each other greatly.

Just look around at some of the wines you've tasted lately. Can you still find wonderful
traditional-styled Chianti Classicos? Sure. More and more of them, however, are eschewing
structure, distinctiveness, personality - and ageability - in favor of fruit-driven richness.
Many of these wines are absolutely luscious. Fewer of them show an individuality of style,
and fewer still make you think while you taste. These wines tend to resemble one another.
Maybe this makes sense in a world of modern, clinical wine making. I really don’t know. But
I do think that the truth of the existence of this general trend becomes clearer with each
successive vintage, and in most of the world’s traditional wine making regions.
Obviously, the trend toward “blah” should concern the connoisseur of fine wine. However, it
should also be of real interest to the casual consumer. Taken to its logical conclusion, this
trend could be a tangible barrier to his search for high quality, reasonably priced wines that
also display reasonable levels of character and individuality. In short, many who have begun
drinking lower priced wines over the course of the so-called Wine Boom will eventually, we
hope, want to trade up. What they likely find when they make their move will be wines far
inferior in interest and character to those which seduced many of us some years ago. Some
would say that this is already a real problem: price inflation in California wines has not led
to the panoply of interesting wines that had been predicted, just more technically correct
ones. The string of recent outstanding vintages cannot hide the fact that great California
wines are still not as good as their French counterparts. What are being produced in
voluminous quantities there are rich, fruit-driven, sometimes wonderfully tasty wines.
Mostly in the “international style.”

Further Thoughts on the International Style

by Randal Caparoso (corporate wine buyer for Roy’s Restaurants
and wine columnist since 1981 for The Honolulu Advertiser.)

I found Mark’s article to be an extremely thought- provoking analysis of an increasingly

difficult, almost tortuous, question for those of us on the sales end of the wine industry:
that is, what exactly is good, or great, wine in this day and age?

Mark’s opening point is that fruitiness has become pervasive and has blurred regionality.
The observation certainly can lead to the easy conclusion that wine making has become
“internationalized.” The questions remain -- are wine making styles, in fact, becoming
“international,” or is this just indicative of the fact that wine makers around the world are
improving their wine making and growing techniques to the point where the more serious
flaws peculiar to their respective regions are being eradicated? Mark, of course, answers
these questions himself, noting that the wine press, in observing this evolution, have been
lauding “the across-the-board increase in quality.” Alas, this makes for boredom among
“wine geeks.”

So the second set of questions comes up: Is increased overall wine quality preferable to
wines with distinctions which may also be considered flaws? [The two need not be mutually
exclusive.] How important is it for wine producers to appease the “few erudite wine geeks,”
as opposed to, or at the possible expense of, average consumers? And of course, the
answers are rather self-evident: Certainly, it’s far better to have higher quality wine --
especially since it results in greater consumer enjoyment, leading to increased sales (more
visibility and profitability for producers). Why else is wine made? As for wine geeks, it is far
more harmful to the industry to have wines appeal solely to small segments of the wine
drinking population. Are we not all in favor of increased consumption and greater profits?
[Yes, but those of us who love wine are interested in more than just profit.]

Which returns us to our original question: What is good, or great, wine? Mark’s concern is
obviously that cleaner, brighter, fresher fruit flavors in wine leads to loss of regional
distinctions. This is a big negative if one’s measure of a good or great wine is its adherence
to regional characteristics -- sense of terroir, if you will. By this way of thinking, diversity is
defined primarily by regionality. But diversity is also due to the stylistic preferences of the
vineyard manager and the wine maker.
Throughout the history of fine wine, there are numerous examples of quests by individuals,
followed by family generations, who’s labors establish traditions that produce wine of such
high quality and enduring appeal that their products eventually assume identities that go far
beyond regional distinction and sense of terroir. Here are a ten obvious examples which
have gained general acceptance among critics and consumers alike. From old to new:

1. Methode Champenoise -- an enduring style of wine in which craftsmanship blurs

distinctions of both terroir and vintage.
2. Tokaji Aszu -- the use of puttonyos or tubs of botrytised grapes to concentrate
otherwise ordinary dry table wine.
3. Italian Recioto and Passito -- deliberate raisining of grapes to enhance ordinary wine.
4. Eiswein -- the big “game"” among German growers to produce incredibly racy sweet
wines that are less about terroir and more about maximum intensity.
5. Lambrusco -- production of very low alcohol, spritzy, often off-dry style of red wines for
the quaffing enjoyment, first, of Italians, and later, wine drinkers around the world.
6. Chateau Mouton Rothschild -- one family’s movement towards singular varietal
definition (Cabernet Sauvignon) in order to exude more power and distinction than
neighboring crus that continue to follow traditional varietal blending regimes.
7. Chateau Petrus -- the same idea as Mouton, only with Merlot.
8. Penfolds Grange Hermitage -- definitely a glorious concept of producing the finest,
most powerful red wine possible, no matter what the varietal makeup (usually mostly
Shiraz), vineyard sourcing, fermentation and barrel regimes (anything goes, with the results
that count!).
9. Bonny Doon Cigare de Volant -- another movable feast of flavors aimed solely toward
emulation of red Rhone style wine, but not necessarily the techniques and varietals.
10. Chalk Hill Chardonnay -- a widely lauded “white Burgundy” style wine made from
vineyards with no real limestone, in a far warmer climate, yet nevertheless was developed
through adherence to techniques not generally accepted in its own region (i.e., 100%
natural yeast barrel fermentation, 100% ML, zero filtration, 100% new oak, etc.).

Now I ask you: is not the world all the better for just these few examples of wine producers
who, at some point in their lives, decided that they wished to make wine that expresses far
more than terroir, and which go way beyond previously accepted practices?

I think that is why the question -- “how good are today’s wines?” -- is so perplexing to
purists, or geeks or whatever you wish to call them. It is difficult for them because purists
don’t like change or techniques that seem rather manipulative; yet deliberate change and
decisive technique are what has always defined many of our greatest wines. Many of our
great wines, of course, will continue to represent completely unique, almost accidental
growing circumstances -- it is certainly very much a part of Petrus, of course, and
Romanée-Conti, Montrachet, Roxburgh, Scharzhofberger, et al. But if anything, I would say
that loss of some kind of previously recognized distinction is often a necessary, in fact good,
consequence of overall improvement of even wines grown in our greatest vineyards! The
fact is, during the past 5 to 10 years I have observed in my markets and other markets
around the world that:

* Increased quality of both wines and distribution has resulted in a greater consumer
interest in diverse styles and types of wine than ever before. Twenty years ago, few of us
(and far fewer consumers) even knew of wines from Jurançon, Gigondas, Carmignano,
Banyuls, Bourguiel and other small districts, or of wines made from Grüner Veltliner,
Roussanne, Viognier, Spätburgunder, Lemberger, and other varietals. Yet many of these are
now being sold quite successfully. Something not possible just a short time ago!
* Although there has been some attrition owing to the popularity of standard varietals,
there simply has not been a total loss of interest in indigenous or “lesser” varietals on the
part of growers and producers. If anything, the use of these varietals has expanded as
consumers continue their recent pattern of increased variety and sophistication of tastes.

As to Mark’s final question -- will tomorrow’s sophisticates find superior, or inferior, wines at
their disposal?-- I have this to say: quality may very well be synonymous with broader
based appeal and technical correctness. But if the vast majority of consumers and even
critics think this preferable, is this not better? It is certainly far more preferable to the many
flawed and even undrinkable (bad at any price) wines which we had to deal with just 15, 20
years ago.

In fact, if what vintners are doing is improving the quality and expressiveness of their
wines, are they not actually fulfilling the full potential of their vineyards, and thus offering
more diverse product than ever before, while continuing to bring a greater part of the world
of wines to each and every interested consumer? Let me put it this way: if you were present
on the day that the Baronne Philippe Rothschild decided to produce a Mouton with virtually
no Merlot or Cabernet Franc, and to go to strictly new oak barrel élevage, would you have
protested and said, “No, no, you will lose your Pauillac identity!?” Very often, there is some
bad involved with the good; but in most cases, the bad is of far less consequence.

International Style (by Jordan Mackay)

[You may already be satiated by the “International Style”, but this article has an interesting
perspective on a topic that is vital to understanding the wine scene today.]

In the late 1970s, Angelo Gaja, Italian winemaker extraordinaire, became the first man to
plant Cabernet Sauvignon, the classic grape of Bordeaux, in Italy’s Piedmont. In order to do
so, he uprooted a perfectly good plot of Nebbiolo, the signature grape of that region. When
his father saw what he was doing, the old man shook his head and muttered, “Darmagi.” Or
“What a pity.” Gaja named the wine that resulted Darmagi, in his father’s honor.

This anecdote serves not merely as a new entry in the annals of churlish behavior, but more
importantly, as a harbinger of global change. It may be only a few hundred miles between
the towns of Bordeaux and Barbaresco, but Gaja was taking wine much further. Back then,
tradition had it that Italian grapes grew in Italy, French grapes in France, and German
grapes in Germany. Gaja was one of the first winemakers to decide he would grow what he
wanted where he wanted, never mind tradition.

Innovation will always invite cries of “Darmagi,” but what does this disregard for borders
mean for us today? The impact is unmistakable in two critical ways. The first is the rise of
the large corporations I’ll call BIG WINE, the giant conglomerates that aim for worldwide
expansion. The second is the explosive growth -- not simply in California and Australia, but
in Italy, France, and all around the planet -- of a type of winemaking that favors a fruit-
driven, well-oaked so-called New World style, rather than an Old World style that values
subtlety and emphasizes terroir. These two trends are interrelated, but each has played its
own part in changing the old rules of winemaking.

The rise of Big Wine has been nothing short of a revolution. The current era, indeed, may
later be described as one in which Big Wine assumed control of the market. The giant
conglomerates are taking over large wineries, which are in turn buying up smaller wineries.
For example, last year Foster’s Brewing Company in Australia bought California’s Beringer
winery, which had itself recently purchased smaller California properties Chateau St. Jean
and Stags’ Leap Winery. A few months later, Beringer bought the 900-year-old Tuscan
winery Castello di Gabbiano. More recently, the LVMH group, a French corporation that
already owns kingpins Moet, Dom Perignon, and Krug champagnes as well as Hennessey
and Hine cognacs, not to mention the world famous Sauternes Château d’Yquem, added a
majority stake in California’s Newton winery and Australia’s Mountadam to its portfolio.

Mondavi is another big company intent on getting bigger. Instead of buying wineries in
other countries, the California titan decided to trade on its own name and reputation to
foster international alliances. In Italy, Mondavi partnered with the Frescobaldi family to
produce Luce and Lucente, and in Chile with Eduardo Chadwick to produce Seña. Mondavi
also spent a year trying to start a vineyard operation in the south of France, before
abandoning the idea. (Mondavi has also sold Vichon, its Languedoc-based line of wines.)
This kind of approach to globalization seems more in line with the McDonald’s philosophy --
create a worldwide brand name or a familiar face for wine drinkers in unfamiliar territory.

Further blurring the global picture are the “flying winemakers,” an evolving breed of
oenologists who work not for a single winery, but as consultants to many, all over the world.
The term was coined in the 1980s to describe a group of Australian winemakers whose
innovative ideas were powering the burgeoning wine industry Down Under. Turning out
intense and fleshy New World wines that they created using new vineyard techniques, they
brought cutting-edge technology into the winery and notably promoted the use of the now-
ubiquitous small oak barrel.

When these flying winemakers began traveling to spread their ideas, they discovered that
they could make two vintages in one year -- one in the northern hemisphere in the fall and
the other in the southern hemisphere in the spring -- thereby doubling their realm of
influence.

The most famous flying winemaker of all is Michel Rolland, who hails from Bordeaux.
Rolland consults to well over 100 wineries a year, from Bordeaux to California (he recently
signed on with Mondavi) to Chile and even to India! Famous for crafting softer, mostly
Merlot-based wines that are approachable even in their youth, Rolland and his prodigious
influence lead one to wonder whether he is la poule or l’oeuf (the chicken or the egg).

Is Rolland solely responsible for an entirely different style of wines, or is he just one of
several trendsetters. I tend to think the latter, for it’s not just flying winemakers who have
been creators of the wine world’s Zeitgeist. There are also powerful importers such as Marc
de Grazia, who encourages modern winemaking methods in Piedmont, and Robert Kacher,
who has gone so far as to purchase oak barrels for his winemakers in the south of France.
With so many missionaries preaching the same gospel, it’s no wonder a dominant wine style
has emerged.

And Big Wine is showing -- through sales figures and ratings by an increasingly influential
wine press -- that New World-style wines are what consumers want. After all, Big Wine’s
greatest strength is that it can offer wine drinkers an enormous variety of bottles that are
extremely consistent, case after case, year after year. Some of these wines are stunningly
good.

These trends have undoubtedly led to an increase in the overall quality of wine. Today, for
example, $10 buys a far better bottle than it did even a decade ago. For that we have Big
Wine to thank. But while that may be great news for casual wine drinkers, what about
connoisseurs? The ones who relish a hunt through musty old wine shops? The ones who see
the whims of weather and climate as an essential component in the creation of any great
wine?

Will our choice be reduced one day to Soylent red or Soylent white?

I think not. As Big Wine gets bigger, I’m convinced the demand for distinctive and esoteric
wines will also increase. Artisan winemakers may be forced to seek vineyard land outside of
the financially impenetrable Napa Valleys of the world, but their wines will continue to be
sought after. The mercurial marketplace assures us that these boutique winemakers will
keep the more obscure varieties in production and work to create idiosyncratic wines true to
regional style.

This is, after all, what’s happening right now in places as diverse as New Zealand and Spain.
With the advent of the garagistes, the small producers making tiny lots of wine in garages
and tool sheds, it’s even been happening in the holy land: Bordeaux. These guerilla
winemakers are turning up the heat on the classified growths by getting attention and
garnering critical praise with small-production wines like Le Pin and Valandraud that most of
us will never see. Darmagi itself, at $200 a bottle, is one such wine.

Is this a pity? I tend to think not. Elite wine has always been the province of the elite. As for
the rest of us, thanks primarily to Big Wine, there’s never been more good wine that we can
afford. We can still splurge when we get the urge.

Archive for February 2008

[Yellow Tail] Tales
with one comment
Yellow Tail is the best selling imported wine in the United States.
Yellow Tail accounted for 11 percent of all U.S. imports in 2005. This
one wine brand represents about 8 percent of all Australian wine
production and 15 percent of that country’s total wine exports.
Yellow Tail sells more wine in the U.S. than all French producers combined.
This is an aerial photo of the winery, which is located in a small village called Yenda in
the Riverina region of South East Australia. If it doesn’t look like a quaint little craft
winery it is because the volumes are so large. The warehouse structure in the upper
right corner can store 900,000 cases of wine at a time, according to Wine Business
International. The bottling line next door is the fastest and loudest in the world, filling
30,000 bottles per hour (two more lines are planned to increase capacity). Total
production is about 11 million cases, of which about 8.5 million are exported to the
United States.
It is a sophisticated factory, with blending facilities that assure that each bottle tastes
just like the one before. That differentiates it from Charles Shaw wine (a.k.a. Two Buck
Chuck), the Trader Joe’s wine, which people say can vary considerably from case to
case.

Yellow Tail is expanding in every imaginable way: more varietals (an Australian Pinot
Grigio), a Reserve line of wines sourced from cooler-climate vineyards and now
sparkling wines, too. The Yellow Tail’s distinctive yellow-footed rock wallaby “critter” is
everywhere.

Yellow Tale is a phenomenon, but not one you will read about in the supermarket wine
magazines. They don’t waste much ink on wine that costs about as much per bottle as
the magazine itself does per issue. Magazine? Bottle of wine? It’s easy to tell which one
the Yellow Tail customer will purchase! So I’ve been trying to find out more about
Yellow Tail and here is my report.

Wine as a Family Affair

The interesting thing about the Yellow Tail success story is that it can be told in several
different ways. This is not unusual in my experience. Stories of success and failure are
frequently spun into meaningful narratives to try to make particular points. One
version of the Yellow Tail story, for example, focuses on family and the importance of
family businesses in the wine business.

This Yellow Tail Tale begins with the Casella family, winemaking immigrants who came
from Italy in the 1950s and eventually planted their own Australian vineyards in 1965,
selling grapes under contract to larger producers. Keen to make their own wines and
export them, Casella invested in production facilities in the late 1990s and started
looking for ways to crash the emerging U.S. wine party.

The key event in this version of the story is the alliance that was struck between
Casella Wines Ltd, an Australian family business, and an American one, the William J.
Deutsch company. Deutsch is a major U.S. wine distributor — they helped make the
French Georges DuBoeuf wines a major U.S. brand — and they were willing to take a
chance on an unknown Australian wine with a clever label. A partnership was
established, with each family firm owning half of the Yellow Tale brand. Casella made
the wine, Deutsch sold it. U.S. sales soared, from about 60,000 cases in 2001 to more
than 8 million cases today.

Why was Yellow Tail so successful? One theory is that it is family and trust that are the
key elements and that the cooperation and commitment that Casella and Deutsch have
demonstrated would not have been possible if either of them had been a public
corporation, beholden to shareholders and driven to meet quarterly profit targets
Family is the key to Yellow Tail.
Red Ocean, Blue Ocean, Yellow Tail
A second group of business analysts have also appropriated Yellow Tail and made it
the basis of a wholly different narrative, this one told using some unfamiliar jargon
(unfamiliar to me, at least). Here is the Yellow Tail story told in terms of Blue Ocean
versus Red Ocean.

The oceans in question are markets. Blue Oceans are markets for new products. Red
Oceans are markets for existing products. Why are they red? I don’t really know but
based upon what I saw last summer on the Discovery Channel’s “Shark Week” I’m
willing to guess that existing markets are a tough environment to enter. You’ve got to
compete with well-adapted predators who will cut you up badly if you aren’t really
strong (Red Ocean = bloody ocean — get it?). A Blue Ocean, on the other hand, is
uncontested open water. You’ve got a much better chance of profit if you can stake out
the market for a new product before the competition gets there.

So how is Yellow Tale a Blue Ocean product? According to one article it is because
Yellow Tail isn’t wine as we know it — it’s a whole new thing. The Wine Business
International article cited above provides the details. People don’t really like wine, the
article suggests. Even the Casellas don’t like it (is this possible?). It’s very tannic and
acid and people aren’t used to those qualities except in tea. Who wants to pay $6 a
bottle for something that is bitter and sour. The key to Yellow Tail was the realization
that wine without tannin and acid could be very appealing, especially to the majority of
Americans who really don’t like wine. (It was designed to appeal to the 85% of non-
wine drinkers, according to the article, while not offending the 15% who already like
wine. That’s 100%, if my math is correct. No wonder it is so popular). Yellow Tail isn’t
as strong a brand in Great Britain — maybe it’s because the British actually like wine,
acid tannin and all?
The Red Ocean, then, is the market for wine and the Blue Ocean is the market for wine
that doesn’t taste like wine. (You might call it the Blue Nun Ocean in honor of a
popular semi-wine wine of the 1970s.) If this analysis is correct, then you can see why
Yellow Tail is such as success. But you can also see why its success might be short
lived (and why, therefore, Casella may be moving into other markets). The Blue Ocean
of semi -wine was quickly populated by competing predator species. Two Buck Chuck
is an obvious example but there are really dozens and dozens of copycat critter wines
out there. The trick for Yellow Tail is thus how to succeed now that their Blue Ocean is
turning Pink.
Water Torture
Here’s a final Yellow Tail Tale that continues the focus on water. A third explanation
for Yellow Tail’s success can be summarized in a single word: irrigation. Yellow Tail
was made possible by the existence of enough water to irrigate the vast Casella and
South East Australia vineyards. Water made it possible to grow grapes so efficiently
that you could ship the wine half way around the world and sell it cheaply and make a
fortune.

But the environment is changing for Casella’s vineyards. It’s not Blue
to Red, but wet to dry. Australia has experienced several consecutive
drought years, which have caused vineyard yields to crash and
changed the whole business model of Australia wine. Put simply, the
plentiful cheap fruit that has fueled Yellow Tail’s growth is now just a
memory. What is to be done?
Casella seems to be considering several approaches. The first is conservation.
According to their website, they have invested heavily in water recycling facilities,
which will allow them to reclaim 400 million liters of wastewater each year for use in
their vineyards. That’s a good start — and sustainable winegrowing is everywhere a
concern — but I don’t think it will be enough to irrigate all the vineyards.
So another strategy may be considered: outsourcing. There are many places on earth
where inexpensive wine can still be produced. Will Yellow Tail consumers care if their
wine comes from Chile, South Africa, France or maybe even Romania instead of
Australia? My guess is that it won’t matter very much and that Yellow Tail may become
a globally-sourced brand. Boy, that little wallaby gets around.

But the long term threat to Yellow Tail probably isn’t water, it is wine. If Yellow Tail
customers ever learn to like wine (you know — the stuff with tannin and acid?) then the
brand’s days will be numbered! Until then, little critter, wallaby wine is safe.

Written by Mike Veseth

February 26, 2008 at 7:36 pm
Posted in Australian wine, Trader Joe's, Two Buck Chuck, Yellow Tail, sustainability

Masters of Wine (and Economics)

with 4 comments
People always seem surprised when I tell them that I’m a wine
economist, that there is an American Association of Wine Economists
and even a Journal of Wine Economics. I don’t know exactly how they
think about wine, but they don’t seem to consider it in economic terms — until they
start talking to me, of course.
Wine is a business and if you want to understand what’s in your wine glass, where it
comes from, how it got here, and why you paid so much (or so little) for it, you have to
learn a little wine economics. This is true even for the most famous names in wine.

Masters of Wine
The most respected title in the world of wine is Master of Wine (MW). It is a title that
you wear proudly, appending it to your name like this: Jane Hunter, MW. I would say
that it is the Ph.D. of the wine world except that it seems to be harder to get than a
Ph.D.
The MW is not a degree given by Harvard or Yale. It is a special designation created by
the Institute of Masters of Wine, a 50-year old London-based, industry-supported
non-profit organization dedicated to wine education. The MW program was originally
created for British wine traders, who obviously needed to be very knowledgeable to
succeed in their profession, but it eventually expanded both in occupational and
geographic terms. Today there are 264 Masters of Wine in the world scattered across
22 countries. Not surprisingly, Britain remains the center of MW membership and
activities, reflecting its central position in the world wine market generally.
Some of the world’s most famous wine critics and winemakers hold the MW
designation. Jancis Robinson, Michael Broadbent, David Peppercorn and Serena
Sutcliffe are famous MW wine critics, for example. Among the winemakers who have
earned the MW title are Steve Smith and Jane Hunter in New Zealand and David Lake
and Bob Betz here in Washington State.

It’s hard to get a Masters of Wine. You need to work in the wine industry for at least 5
years and take preliminary studies at a major wine research center such as UC Davis,
the University of Bordeaux, Geisenheim University in Germany or the University of
Adelaide. Then, once admitted to the MW program, you have to pass exams in four
theory areas, stagger successfully through three 12-wine blind tastings, and write a
10,000 word dissertation on a topic relevant to the wine industry. (Jancis Robinson’s
dissertation, I understand, was a very complete study of the world’s grapes and wines
which was published in book form as Vines, Grapes and Wines: The Wine Drinker’s
Guide to Grape Varieties. It is one of my favorite wine reference volumes.)
Master of Wine Economics
I’m not planning to apply for a MW myself (I’m quite sure that I would not survive the
blind tasting trials), but I’m interested in knowing what wine experts think they need to
know about wine economics, so I’ve been reading the MW syllabus. It is full of wine
economics.
The first two papers MW candidates must write deal with the theory and practice of
wine production. The syllabus says that …

The purpose of this unit is to assess candidates’ knowledge and understanding of wine
production. An understanding of the processes of grape growing and wine making
should be complemented by knowledge of the science which underlies the practical
issues. Candidates should be aware of the implications for wine style, quality and costs
of decisions taken at each stage of wine production. An awareness of areas of active
research in topics relevant to wine production will be necessary. Whilst region specific
questions are unlikely, candidates will require a broad background knowledge of the
world’s wine regions and wine styles. The examples given in answers should
demonstrate a familiarity with a variety of wine regions. Candidates should know how
issues such as finance, economics, law, general management, quality
assurance/quality control and the environment bear on wine production.

You can see how much the business of wine enters into the understanding of wine. The
third paper is even more closely focused on wine economics:

The purpose of this unit is to assess candidates’ current knowledge and understanding
of financial, commercial and marketing aspects of the international wine industry.
Candidates should demonstrate the ability to apply their knowledge to a range of
business situations including marketing and investment strategies, financial decision
making, supplier – customer relationships and strategies for identifying and meeting
consumer demand. Candidates will require a broad background knowledge of wine
industry structures around the world and how these relate to one another.

The fourth paper is written on contemporary issues. Then comes the blind tasting and
dissertation. You can see why the MW is so hard to get and why it is so valuable. MW
holders understand wine from the vine roots up to the global market structures. I can’t
say that wine economics is the most important element in the curriculum, but it
certainly is a key component.

It looks like wine economics accounts for about a third of the MW syllabus. That makes
sense to me, both given the MW’s clearly commercial original purpose and more
generally given the influence of economics on the wine industry today.

A New Wine Designation

Robert Parker does not have a MW, but he and Kevin Zraly have recently launched their
own wine certification program. I haven’t looked into the Parker/Zraly program in
detail but it seems to be aimed at wine enthusiasts more than wine professionals and
I’m not sure how much wine economics is included. Here is a brief description.
The Parker & Zraly Wine Certification Program consists of three certification levels. After
completing all eight examinations of Level I – Aficionado of Wine (AW) (launching September
20, 2007 with the Wines of France exam), wine lovers can gear up for the March 2008 launch of
Level II – Connoisseur of Wine (CW). The most advanced, Level III – Expert of Wine (EW),
will debut in September 2008 and will challenge even wine experts and professionals. Levels I
and II consist entirely of online examinations. Level III will include a written exam as well as a
meeting with Robert Parker and Kevin Zraly for a blind wine tasting and oral examination on
wine.

I hope Parker and Zraly include a good dose of wine economics in their EW exams. I don’t see
how you can really understand the world of wine without it.

Countries covered: India

The wine market in India has been growing due to changing market scenarios and growing income levels and has
become a part of an individual’s regular consumption basket. Due to changing cultures, consumers are becoming
more aware of domestic and foreign brands which are boosting the consumption levels. Players in the industry are
launching regular and premium brands. A range of price points are being targeted to tap the market potential. Wine
and food pairing events and sessions are also increasing in number which in turn is popularizing the beverage to a
great extent.

The report begins with an introduction section wherein a differentiation of the alcoholic beverages has been provided
on the basis of production with a focus on the wine category. This is followed by the market overview section
providing the size and growth in the market of volume consumed. It also provides the existing and forecasted market
segmentation by types of wine consumed in India and the current region-wise consumption levels. This is followed by
information regarding the market in terms of production of wine showing the number of wineries operating in India
with the break-up of price points of production. A clear description of grape cultivation in India has also been provided
to show the amount of grapes cultivated and used in wine cultivation in India and also the major areas of grape
cultivation. It also shows a break-up of varieties of grapes cultivated. This is followed by the import structure of wine
including the key countries from where it is carried out.

An analysis of the drivers explain the factors for growth of the industry including rising income levels, government
initiatives young population and low penetration, growth in organized retail, changing lifestyles and perceptions,
affordability and growing awareness towards international brands. The key challenges identified encompass
presence of substitutes, variance in state-level policies, advertising ban on alcohol and inconsistent quality. Key
trends in the market have also been analyzed including emerging strategies and business models, new entrants -
domestic and foreign, rising PE activity in wine sector, promotional wine events and wine clubs.

The competition section provides an overview of the competitive landscape of the market with the share of players in
the wine market in terms of sales. A product portfolio matrix has also been illustrated covering all the players. It also
includes brief profiles of the major players in the market.