Thursday, September 9, 2010

The Unique Vineyards of Mendoza, Argentina


I would like to conclude this review of my wine trip to Mendoza, Argentina with an overview of the vineyards (see previous postings for winery details). In all my travels to the wine regions of the world, I have come to recognize that the soul of a wine is within the vineyard. It is the source of all great wines, and each place on earth is quite different and special. This is also true of Argentina -- especially Mendoza with its desert-like climate, sandy soils, and reliance on the snow in the Andes for water.

During our welcome orientation, we were informed that in 2009 Argentina produced 1.6 million tons of grapes with 220,000 hectares of vineyards, but that 80% of all Argentine wine comes from Mendoza. The Mendoza region includes three major areas: 1) Maipu near the city of Mendoza; 2) Lujan de Cuyo (the first and only DOC in Argentina) and the Uco Valley to the south of Mendoza; and 3) San Rafael to the far south. Since this is the Southern Hemisphere the further south you go, the colder the climate.

Vineyard altitude in the Mendoza region ranges from 1800 to 3300 feet above sea level. The soil is sandy with some clay. Climate is continental.

Malbec is the main varietal in Mendoza, but they also produce Bonarda (called Charbono in the US), Tempranillo, Cabernet Sauvignon, Merlot, Sangiovese, and Chardonnay/Pinot Noir for sparkling. A small amount of Torrentes is grown here, but most is imported from Salta. Finally, they still grow a large amount of the bulk wine grapes, Cereza and Criolla Grande.

In the vineyard there is no one rootstock or clone that has been deemed the best. Instead everyone appears to be experimenting with different types. They also use different trellis and spacing systems – the most common being VSP with cane pruning for malbec on 4x8 feet spacing. However, some still use the traditional pergola (very high trellis), and a few were using tightly spaced guyot. Others preferred VSP with cordon.


They are in the midst of pruning now since it is winter, and I was intrigued with the light brown plant fiber they used to tie the vines – instead of the ugly plastic green tape we use in the States. I was told a side industry has started to produce these ties which are made from river tule and is biodegradable (see photo).


The other unique thing about their vineyards is the yards of hail netting used (see photo). At first I thought it was bird netting and couldn’t understand why they had it up during the winter. However they informed me that they often have hail storms in the spring and summer and so they leave the netting up most of the time. Luis told me that they often have hail the size of baseballs, and that it can destroy a vineyard in a few minutes of they do not use netting.


Irrigation is either flood or drip. Jimena told me that for her 3 hectare vineyard she is allotted 45 minutes of water every 10 days. The water is very precious and comes from the snow in the Andes (see photo). Larger more modern vineyards use drip irrigation, and newer ones have had to dig wells, but high salinity in the water can be an issue.


What I didn’t realize until I arrived in Mendoza is that it is actually a desert. Grapes could not survive here without water. In fact when they’ve experimented with dry farming, the vines die because there is no water retention in the sandy soil. The whole landscape reminded me of Albuquerque, New Mexico with the high mountains and desert. It was also similar to the ancient grape city of Turpan in China that I visited last year where they had to bring water from the mountains in underground canals.

Since I was here in September, which is very early Spring (some buds were just forming on the cherry and willow trees), harvest is usually in February/March. Almost all vineyards are hand-harvested, and there is very little mechanization. Workers currently are recruited from Bolivia and Northern Argentina. It is a law that all wineries must provide worker housing – which is more progressive than US law. Though I asked if they were concerned about loss or reduction of their workforce to more attractive jobs, they said no. Indeed the low cost of labor here is one of the reasons they are able to keep their wine prices so low. I was told by Jimena that there are many poor people in Argentina, and that often the locals will also help with harvest and pruning.

Lunch at Bodega Ruca Malen, Mendoza, Argentina


(Sept. 4, 2010)We had an appointment for a winery tour and lunch at Ruca Malen Winery, but when we arrived the hospitality manager recommended we have lunch first because the dining room was filling up quickly. In fact the restaurant is so popular they were completely booked for the weekend, and had reservations through next April 2011.

Once we were seated, I could see why it was so popular. The dining room was small, but is located inside a glass room in the vineyards with a view of the Andes. Once again the menu was amazing – a 5 course meal with 2 ounce wine pairings for $150 pesos (approx. $35 US). They only do lunch – no dinner, because they want people to have the magnificent view.

I was intrigued with the name of the winery, which is actually in the ancient language of the original people who settled in Argentina. It means “Home of Women.” Indeed their logo is a woman with her head thrown back (see photo). Very memorable. I did ask where the native people lived, and the response was that many had moved to Northern Argentina. Some are apparently decedents of the Incas, whereas others are separate tribes. Like California, there do not seem to be many of the original habitants still living in the area.


The first course was quinoa with lemon citric mousse paired with Yauquen Chardonnay 2009. The appetizer was exquisite and also lovely to look at (see photo); whereas the wine was very refreshing. It is an unoaked chardonnay with subtle green apple fruit, crisp acid and a dry finish. We were told that “Yauquen” means “sharing” in the native language.

The second course was a spicy meat brochette with pumpkin and walnut empanada and chimichurri sauce. It was paired with the Yauquen Cabernet Sauvignon 2009 – an interesting choice because the wine was so young that it wasn’t that recognizable as a cab. It was very fruity and fresh, and needed more time in bottle.

Third course was fresh cheese, leek and olive terrine with pine mushrooms. It was served with the Ruca Malen Merlot 2005. In a blind tasting, I would have placed the merlot in Chile because it had the same sweet edge with herbal notes.


The main course was steak - -a grilled tenderloin with cassis sauce. This was served with my two favorite wines of the day: 1) the Ruca Malen Malbec 2007 – a very satisfying dark berry malbec with velvety texture and moderate oak. Simple, but very pleasing; and 2) Kinien Cabernet Sauvignon 2002 – excellent with fine-grained tannins, dark dried fruit, med+ acidity, well –integrated French oak and a long finish. The manager informed us that this course was a permanent fixture on the menu, whereas the chefs had freedom to change the other courses to suit their whim.

Dessert again included two stages. The first was called a pre-dessert and was a delightful chardonnay, lemon and rosemary granitee. This was followed by a banana wrapped in crepe with white chocolate sauce. They served this with a delightful Ruca Malen Chardonnay 2007 with a sweet finish. We concluded with espresso, and discovered that we had run out of time to tour the winery. If we didn’t leave then, I would miss my flight.

We raced back to Club Tapiz to finish packing, and after a flurry of hugs and kisses, I said good-bye and stepped into a taxi. The flight time home was 23 hours from departing Mendoza at 5:30pm and arriving in San Francisco the next day at 12:30 pm (a four hour time difference.) This included a transfer in Santiago again with a 2.5 hour layover; then 9 hours to Miami (arriving at 4:30am – ugh!); a 4 hour layover, and then 5 hours more of flying. It was not enjoyable, but the time in Argentina was absolutely delightful.

Visiting Bodega Catena Zapata in Mendoza, Argentina


(Sept. 4, 2010) The next day (my last day) dawned bright and sunny – of course! After a late and leisurely breakfast, I went into the spa and did a few exercises before checking in for my 9:30 massage. Both Patricia and Angelica had encouraged me to schedule one, and I was very pleased I did. The masseuse was excellent, with very soothing long strokes, and the cost was amazing at 150 pesos, or $35 US.

At 11am, Jimena and her finance arrived to take Isabelle and I to Bodega Catena Zapata. Neither of us had ever visited this very famous winery – akin to Mondavi/Opus One in reputation. It is also part of the largest wine group, Esmeralda, in Argentina. It was about a 30 minute drive from Club Tapiz and we stopped to take several pictures of vineyards with the snow-capped Andes in the background.


Probably the most amazing thing about Bodega Catena Zapata is the architecture. It is a 3 level pyramid shaped adobe building, which looks similar to Santa Fe buildings. Some people say it is based on Inca design – regardless, it is beautiful to behold. The approach is also impressive, with a long dirt road leading through vast vineyards with the winery at the end (see photo).


We did not have time for a tour, so instead we wandered around inside and climbed the stairs to the top level to view the vineyards and Andes (see photo from top level). The barrel room was also impressive, set up in a semi-circle and reminiscent of Opus One’s barrel room. We did not taste any wine, but I have attended a private tasting of their wines in San Francisco hosted by the daughter, Laura. The wines are excellent and sophisticated, with multiple brands. Probably the most well know in the US market is Alamos Malbec.

One point I wanted to mention about Mendoza wineries, is that you are required to schedule an advance appointment before you visit. In this way, they are similar to France. However, what is different are the large security gates with guards that block the entrance to each winery. When I asked why this was the case, I was told that they had problems in the past with tourists being robbed by poor people entering the winery grounds. Therefore, no one is allowed access to any of the large famous wineries without an appointment.

Dinner at Club Tapiz Restaurant, Mendoza, Argentina



(Sept. 3, 2010) After my 90 minute nap, I hit the gym and hot tub at Club Tapiz before getting ready for dinner. We had dinner reservations at 1884 in Mendoza, but everyone was so full from finishing lunch at 5:30 that we cancelled and scheduled a 9:30 dinner at the Club Tapiz Restaurant instead. Four of us attended (Yerco from Chile, Isabel from Spain, Nelson from Buenos Aires and me). As you can imagine, not speaking Spanish was an issue, but they were all kind enough to include me in the conversation and speak a combination of English and Spanish.

I had heard great things about the restaurant from others who had eaten lunch and dinner there before, but this was my first meal besides breakfast. All of the good reviews were correct, because my food was excellent. I started with a glass of sparkling wine from Chandon Argentina (extra brut again!), and had this with a fresh green salad which was excellent. For the main course, I decided to order a steak again – because, after all, I was in Argentina, the land of beef; and I was flying home the next day. Yerco also ordered steak. We paired this with the Mendell Malbec 2007, which was excellent (see earlier review).


Nelson and Isabelle ordered dessert, but I decided to try Fernet instead (see photo), which Gonzalo had told me was all the rage in Argentina. Many young people drink it in nightclubs mixed with coca-cola. It is similar to Yagermeister in that it is made from herbs and is a digestive. Nelson insisted they pour me a large glass (no coke) so that we could all taste it. I was expecting it to taste bitter, and therefore was pleasantly surprised when I found it to be a good after dinner drink. We also tried a “Liquor de Pomelo,” which was like a grapefruit lemoncello. It was very delicious. Wish I could have brought a bottle home.

Tour and Lunch at O. Fournier Winery in Uco Valley, Argentina


(Sept. 3, 2010) The Uco Valley is 120 kilometers south of Mendoza. After driving for about 90 minutes, we turned down a dirt road and eventually arrived at the large and impressive gates of O. Fournier Winery. Beyond the gate was one of the most impressive and unusual wineries I have ever seen in terms of architecture. It looked like a spaceship landing site in the middle of the desert with the soaring Andes rising behind as a backdrop. The winery was started in 2000 by Jose Manuel Ortega and his wife. They are originally from Spain, and also have a winery there in Ribera del Duero as well as one in Chile.

As we drove up the large ramp to the top of the 8 story winery (6 stories buried below the ground in a gravity flow design), Jose came forward to meet us. He is a delightful man with an incredible amount of energy, vision, and a great sense of humor. By the end of the visit, we were all in love with him.

He led us on an hour tour of the winery, starting with the labs and experimental blending tanks on the top floor underneath the amazing flat roof. It was from there that we could gaze out across the vineyards in which he is experimenting with different types of rootstocks, clones, varietals, and training systems. He said they have 263 hectares with very poor sandy soil. They have to dig very deep water wells in order to avoid salinity problems. He said the biggest impact on wine quality is the weather and altitude; they are cooler in temperature and higher in altitude than Mendoza.


We then descended to the next level of the winery which was the grape arrival platform where the grapes were destemmed and crushed 50%. The must then flows downwards to the 3rd level and 4th levels into fermentation tanks, which are below ground. O. Fournier has a large number of the modern conical stainless tanks you see in Bordeaux, as well as large wooden foudres and cement tanks. Jose said they have a 1.2 million liter capacity, but only produce 600,000 liters per year. He says he prefers to keep the wine in tank or barrel 6 months before release because he believes it stays fresher. Definitely not a champion of bottle aging.


With all of the levels we used an elevator to descend, but since the floors were made of see-through grates in some places, you could easily get vertigo if you looked straight down. Descending to the barrel room, museum, and gift shop level was exciting. The barrel room looked like a work of art, and did indeed include art on the walls as part of the art museum. A large red “x” was on the floor in the barrel room (see photo) to signify the Southern Cross, which is also part of their logo on the wing of an ostrich.

Jose told us that the winery was designed to be eco-friendly, and that was why it was 80% underground to save energy. The gravity flow design also helped with this. He was clever enough to have it built during the Argentina financial crisis in the early 2000’s, which allowed him to build it for a mere $4 million. He also used fairly unknown Argentinean architects – who are now well-known—which saved costs at the time.

Around 3:30 we arrived (with stomachs growling and toes frozen) in the impressive dining room with tables looking across a pond to a stunning view of the Andes. The sun was just starting to poke out of the clouds and as we enjoyed our two hour lunch, the sky cleared and became blue. Apparently many wineries in Argentina have beautiful restaurants, and the Urban de O. Fournier Restaurant is quite famous. Jose’s wife is the chef, and is known for her innovative dishes. Unfortunately she could not be there that afternoon, so we did not meet her.

We were treated to an incredible 4 course lunch with 2 ounce wine pairings -- starting with two appetizers of causas (potatoes) and philo pastry with blue cheese in malbec puree. Jose poured two sauvignon blancs, one from his Chilean winery in Talca (which had an intense asparagus nose) and the B Crux Sauvignon Blanc 2009 from the Uco Valley which was fruity and floral. We also had the Urban Sauvignon Blanc 2010, which was lighter and fruiter.

The next course was sliced eggplant with salmorejo, croutons and eggs. This was paired with the Urban Torrentes 2010 from Salta. This wine jumped out of the glass with fragrant white flowers, peach, and a crisp acidity. I was amazed when Jose told me I could buy it for $7 at Cost Plus. This was one of the most delightful Torrentes I have tasted – quite exquisite, and I will be looking to buy a case in the States.


The third course was Argentina beef steak with potatoes. This, of course, was paired with malbec. We started with the Urban Malbec 2008, which was filled with ripe berries and soft tannins – very approachable. Next was the Alfa Crux Malbec 2008, which also was filled with ripe fruit, but had more complexity and spicy oak. Third was the higher-end O.Fournier Malbec-Syrah 2007, which spent 17 months in both French and American oak (20%). This was a big, chewy jammy wine with lots of spicy and depth. I should mention that the steak I had here was the best on the trip (and I had 3!). It was the most tender with lots of flavor.

The dessert course started with a torrentes sorbet, which was not only very refreshing but extremely novel. It was followed by a brownie with coffee ice-cream and red fruit. Of course, we had more malbec with this. In addition, Jose opened a bottle of his Ribera del Duero at our request. It was primarily tempranillo with much ripe fruit, but a touch of the earthiness and higher acidity of the old world. Very enjoyable.


We finished lunch at 5:30, and said a fond farewell to Jose. The visit was wonderful, and we shall all treasure the afternoon as a special memory. On the drive back to Mendoza, I fell asleep in the back of the van and didn’t wake up until we arrived back at the resort at 7pm.

The Pleasant Custom of Drinking Mate in Argentina


(Sept. 3, 2010) We departed Tapiz around12:30 and drove south to the Uco Valley passing many vineyards and small towns. During the drive, Gonzalo introduced us to the custom of drinking mate. He filled his mate (small cup made of a gourd with silver rim and a silver straw – see photo) with a dried green substance that looked like tea. Indeed it is similar tasting to green tea, but has a smoky edge and high caffeine.

He filled the cup almost to the top with the green mate mixture, and then poured a small amount (perhaps ¼ cup) of hot water into it. After a minute, he sipped from the silver straw and then passed it to the next person. That person also sipped, and then passed it around the circle. The straw had a small sieve on the bottom that prevented the mate leaves from going in your mouth. It was also refilled every few sips with more hot water.


At first I was a little appalled at the germs we were all sharing, but Gonzalo explained that it was part of the experience, and that drinking mate brought you closer together. He said that Argentineans would say “let’s go get a mate,” as we might say, “let’s go get a coffee.” It is a chance to talk and get to know people better.

The taste was not great, but I can see how it could grow on you. I did enjoy having a hot drink after freezing in the vineyard, and it was a fun experience. We were all given a beautiful mate with a silver grape leaf as a speaker gift. I’m looking forward to trying it at home.

Llamas in the Vineyard at Bodega Tapiz, Mendoza, Argentina


(Sept. 3, 2010) After a filling breakfast of coffee, eggs, and croissants at the Club Tapiz Resort, we climbed into the van and drove a short distance to the modern Bodega Tapiz winery. It was a very cold and cloudy morning, but the 8 of us were quite excited because it was a winery fieldtrip day.

Arriving at Club Tapiz, we were greeted by the hospitality manager and invited to go on a horse-carriage ride through the vineyards. Four of us climbed aboard and covered up with blankets made of llama wool. We were able to view the malbec vines up close and see the cane pruning with the tule ties on VSP trellis. We also found cabernet sauvignon in a traditional cordon.


Soon we saw the actual herd of about 15 llamas in the vineyard (see photo). Our guide told us that the llamas ate the grass and weeds and also provided fertilizer. However they have to be moved to a separate pasture once the vines produce leaves and grapes, because they eat them. Bodega Tapiz sells llama wool, shawls, and blankets in the winery gift shop. Knitting of the products also provides jobs for some of the local people.

Next was a tour of the 120,000 case winery. It was very modern and we were able to taste sauvignon blanc and torrentes from tank. They are using Lallemand yeast for both varieties, but we didn’t receive a specific number or name of the yeast. Both wines were incredibly fruity and fresh. We also tasted a young malbec from Lujan de Cuyo in tank that would be blended with malbec in barrel. It was ripe and jammy with raspberry and big tannins – an obvious baby which needed more time. Even more structured with grippy tannins was the Uco Valley malbec, which is further south – meaning from a cooler climate in the Southern Hemisphere.

After tank tasting, we were escorted into a beautiful private tasting room with large windows overlooking the tank room. Patricia, the President and Owner, was there to greet us and invited us to sit down to a very elegant tasting of 3 special malbecs. The first was the 2007 Bodega Tapiz Reserve Malbec which had spent 14 months in French oak. It was classic with big velvety tannins and ripe blackberry fruit.

Next was a special bottle of Tapiz Bicentennial 2008 made to celebrate Argentina’s 200 years. It was a very interesting blend of 60% malbec, 30% Bonarda (charbonno), and 10% Torrentes. They were using the Torrentes in the same manner that they use viognier with syrah in the Northern Rhone – in order to provide a floral lift and intensify the color. It was very elegant with more subdued fruit and a nice acid structure.

We concluded with the Tapiz Black Tears 2006 ($30-35 in US). This was a huge, chewy intense malbec with dark berry, anise, spicy oak and velvety tannins. It had spent 24 months in 75% new French oak. This is the kind of malbec that many Americans really enjoy – a huge mouthful of flavor that does not disappoint. Our visit to Bodega Tapiz was wonderful, and we felt very welcomed with the special treatment including a horse carriage ride through the vineyard for llama viewing.

Tapas Dinner and 1974 Malbec at Bodega Norton, Mendoza, Argentina


(Sept. 2, 2010) After the forum, we had time for a 45 minute break at Club Tapiz Resort, and then we climbed back into the van for the short drive to Bodega Norton. I was very much looking forward to this dinner, because Bodega Norton produces my husband’s favorite malbec – the Bodega Norton Malbec Reserve. He has been buying it for the last couple of years at Costco and is very impressed with the taste, price point ($13), and high scores it receives.

We arrived at Bodega Norton around 9:30pm and were immediately greeted with a glass of sparkling chardonnay, extra brut called Bodega Norton Cosecha Especial NV. It was delicious and set off the evening with a nice festive mood. Luis, the CEO, then escorted us on a winery tour through the cellars and barrel room. The winery is quite large – usually ranked 4th or 5th largest in Argentina. Founded in 1895 by an Englishman named Norton, it is now owned by the Swarovski family in Austria (producer of the famous crystals). I was impressed by the custom stainless steel tanks which Luis had designed to match those used by Chateau Haut-Brion in Bordeaux –with the split tanks.

The tour ended in a hospitality suite with a long bar, comfortable chairs and low tables to relax and eat. This dinner was less formal and with fewer people, since many of us were tired after the long day at the forum. However, the mood soon became more festive as wine flowed and food was brought to the table. We started with the Bodega Norton Sauvignon Blanc 2010 (amazing to think 2010 wines are already on the market, since we haven’t even harvested our 2010 grapes in the Northern Hemisphere). It was like drinking a delightful glass of grapefruit juice – very fruity with a cleansing acid, but none of the gooseberry, grassy style you find in Chile or New Zealand. Actually all of the sauv blancs I tasted in Argentina were more similar to the California style.


The first tray of tapas was the traditional meat and cheese selection with many different types of salamis and prosciuttos. Next came some tasty empanadas filled with spinach and spicy meat. There were small bowls of fish chowder, mozzarella balls, and later chocolate petite fours. We paired all of these with a series of malbecs, starting with the Reserva, then moving onto the more distinctive Bodega Norton Malbec DOC 2008. The winery is actually in the center of Argentina’s only DOC, the Lujan de Cuyo region. The wine that really blew me away was the Bodega Norton Gernot Langes Cosecha 2003. It reminded me of a 2nd growth Bordeaux with excellent balance and complexity, as well as elegance with its fine-grained tannins and very long finish.


However the highlight of the evening was when Luis pulled out two dusty old bottles of malbec from the cellar. They were 1974 Bodega Norton vintage and not labeled. He wanted to prove to us that malbec does age well, and by the end of the evening we all agreed with him. However, it took about 10 minutes to open the bottle with two people attempting it (see video at: http://www.youtube.com/watch?v=38bRiGiKHfg). The cork was nearly all black when it finally came out to loud applause and cheers. We all savored the spicy, earthy flavor with a hint of dried berry and leather – almost all secondary and tertiary notes. It was more delicate than modern day malbecs, with excellent acid and smooth tannins. Again, it reminded me of drinking old Bordeaux. It was a perfect conclusion to a very wonderful and special experience at Bodega Norton.

Monday, September 6, 2010

The Secret to Making Great Malbec Wine


(Sept. 2, 2010) During one of the breaks I was fortunate to be introduced to one of Argentina’s most famous winemakers, Roberto De La Mota. He produces a high-end brand called Mendel Malbec ($24, 90+ ratings), which I tasted on my last night in town. It was a very elegant malbec with fine-grained tannins; an excellent balance of ripe fruit, moderate French oak, med+ acid and 14% alcohol, and a long finish.

I asked Roberto the secret of making great malbec, and he said it had to do with two things: picking the grapes at the right time and ensuring the tannins are velvety and not harsh. In order to accomplish this he spends much time in the vineyard and said there was only a 3 to 5 day window in which to harvest malbec. If you missed it, the wine would not be as good.

Once harvested, he sorts it with a sorting table, destems, and then partially crushes the berries. He immediately inoculates with 1118 yeast (in fact everyone I talked to used commercial rather than natural yeast), and ferments in very small cement and stainless tanks at 25 to 26C. Once the ferment starts, he performs pigeage (gentle hand punching) every day, stating that this was the method to get the seeds to the bottom of the tank gently so they didn’t impart harsh tannins in the wine. He added that color was not an issue with malbec, because it was easily achieved due to dark purple skins.

Fermentation lasts 3 to 4 weeks. He said it was important to encourage a slower ferment in order to develop the “texture” and mouth feel for which malbec is so famous. He gently presses with a pneumatic press and ages free run and pressed wine separately. He said ML usually occurred in barrel the next spring. Elevage includes 12 months in 100% new French oak.

Roberto said he prefers to source his grapes from older malbec vineyards, and I was impressed with how many 80+ year old vineyards they have near Mendoza. He believes the older vines produce a higher quality wine.

I should mention that Yerco, an expert viticulturist from Chile, told the group that no other country in the world has been able to duplicate the unique taste of Mendoza malbec. He believes this is because the combination of sandy soil and dry winters/ springs, which cause the berries to stay small. Elsewhere they are usually larger, which results in less velvety texture and less intense flavors. Cahors, the birthplace of malbec in France, produces some wonderful malbecs, but they are quite different from Mendoza malbecs – with more tannin and higher acid. Yerco said that malbec from the USA and Chile is also not as distinctive as that from Argentina. Therefore, he believes they have a unique competitive advantage with their terrior.

6th International Wine Forum & Lunch at La Marchigiana


We arrived back at the resort around 11:30 and several of us decided to share a bottle of Argentine bubbly in the sitting room near the fire. It was 100% chardonnay with an Extra Brut dosage, making it sweeter than I prefer, but I noticed that many of their sparklings were like this. Apparently they sell almost 100% of the sparkling wine to their domestic market and export very little of it.

After only 5 hours of sleep, it was time to get ready and depart for the 6th International Wine Forum to which all of us had been invited to speak. Breakfast was at 7am, and we arrived in downtown Mendoza at the conference center around 8:30am for a 9am start. All of the presentations went well, but it ended up being a very long day as we didn’t finish until 7:30pm.

I did have a lovely lunch with Gonzalo at Restaurant La Marchiagiana downtown. It is famous for both Italian and Argentinean food, so I ordered a local dish of Cordero al Malbec con pure, which is lamb cooked in Malbec. I started with a salad made of local greens, which was excellent. The lamb was very tasty, but a bit tough.

Gonzalo asked me if I wanted to try a traditional wine from Argentina to go with the food. I asked him what he meant, and he said that the newer style is made for the export market, but that many older people prefer a style which is less fruity. Of course I was intrigued, so we ordered a half bottle of Bodega Lopez 2005 Rincon Famoso, which was an intriguing blend of sangiovese, merlot and malbec. It was the color of an older pinot noir – light garnet, with a nose and palate of dried fruit with a port-like taste. It reminded me of an old Reserva from Spain, with the slightly oxidized note that added complexity to the wine.

Impressive Tapas Dinner with Tango at Nieto Senetiner Winery


(Sept. 1, 2010) After another short rest we were transported to Nieto Senetiner Winery for what the Argentineans refer to as a “Cocktail” dinner, but which is actually a stand-up affair with many small dishes (tapas) served over the course of the evening with plentiful wine. Dress was formal so I wore the one black cocktail dress I had brought on the trip. As we climbed into the van that was sent to collect us, it started to snow very softly.

It was dark when we reached the winery around 9pm, but the large reception room was warm and bright with a blazing fire in the fireplace and flickering candles. Waiters served trays of Nieto Senetiner malbec rose, a chardonnay/viognier blend, and the entry level malbec. Later in the evening, they brought out the Nieto Senetiner Malbec Reserva, and eventually the icon wine called Cadus. All three malbecs were excellent with ripe blackberry and velvety tannins, but Cadus had more complexity and a long finish.

There were around 100 people in attendance mingling and talking in shifting groups. A four-piece orchestra played soft tango music in the background. Along one side of the long room a wall of windows looked out on an 80 year old malbec vineyard that was lighted to show-off the ancient twisting vines which seemed like sculptures. Fire pits blazed near the vines, and for a while I thought they were going to have a BBQ, until someone explained to me that the dinner would be composed completely of tapas. These ranged from huge platters of salami and cheese to small dishes of prawns, salads, and other tasty treats. The media was in full attendance taking many photos.

Around 10pm, two tango dancers arrived to delight the group with intricate and sexy tango moves (see video: http://www.youtube.com/watch?v=NDIvg7nYTFI). They also danced an older version of the tango called “criollo,” which I was told was the original dance in which the man wears a hat. A man standing near me said that tango was born from a combination of African and Spanish dances, and that over the years it evolved into the sensuous moves we see today. It was truly a wonderful experience – and a perfect welcome to Argentina.

Staying at Lovely Club Tapiz Resort, Argentina


(Sept. 1, 2010) Club Tapiz is both a winery and a resort which is set in the middle of vineyards with a stunning view of the snow-capped Andes. It is a charming adobe building with 7 rooms which open onto a central courtyard (see photo). Complete with gourmet restaurant, swimming pool, hot tub, sauna, exercise room and a spa where they give great massages for $150 Argentina pesos (about $38 US); it was a wonderful place to stay for 3 nights. Luis helped us to our rooms, encouraged us to rest, and said he would see us at dinner that evening.

I quickly unpacked so that I could be ready for the car and driver that arrived 30 minutes later to transport me back to downtown Mendoza. We arrived at a hotel meeting room where I met Jimena who had organized all of my travel arrangements and was the event coordinator for the conference. She introduced me to the 15 people from Wines of Argentina who were present for the afternoon meeting. After a working lunch of sandwiches, I gave my presentation and we discussed wine export strategy.

I was transported back to Club Tapiz by the president of the winery, Patricia, who entertained me with tales of brand management. She described how she had created the very successful wine brand, Zolo, for the US market because she was so busy as a winery executive that she never saw her husband. The terms “Zolo” means both “solo and lonely,” and so the label shows a lonely man. Patricia says the man represents her husband, and now when she travels, she can take him with her as the wine bottle. The story is so unique that it has captivated distributors and retailers in the US who repeat it to their customers, and now the wine is a huge hit.

After a quick rest in my nice room at Club Tapiz, the 8 of us who had been asked to speak at the Forum were asked to a 5pm meeting to hear an overview presentation on the Argentinean wine industry and receive gifts. We were invited to relax in a living room with a blazing fire, have coffee or wine (I chose wine!) and listen to the presentation. A very gracious welcome.

The City of Mendoza, Argentina


(Sept. 1, 2010) I arrived in Mendoza safely and was met by Luis, CEO of Norton Winery. He also collected Yerco, a viticulture professor from Chile, at the same time and then drove us to our hotel, Club Tapiz. Luis was incredibly charming and welcomed us both to Argentina with much interesting information on the wine industry.

As we departed the airport, I realized it was quite small, with only one terminal. It was a cloudy winter day in the mid-50 degrees with rain in the forecast. Mendoza has approximately 600,000 people and is nestled at the base of the Andes Mountains. They tower over the city with impressive snow-capped peaks, with the largest being Aconcagua at 22,841 feet!

The city of Mendoza, like many large cities, is not as impressive in the winter. It also has many poor sections with shanty houses and graffiti. However, downtown there are many modern buildings with tree lined streets. Many streets are also lined with canals on both sides that bring the water from the Andes. What I didn’t realize is that Mendoza is actually in the high desert, and without the water from the Andes, there were would no wine industry here. The other large industry is petroleum.

After a 30 minute drive south through the city, we arrived in the outskirts of Mendoza in Lujan de Cuyo where many of the famous wineries are located. The vineyards surrounded us – looking impressive in their winter wardrobe of sculptured wood. Most of the vines had been cane pruned and were tied to VSP trellising with tan-colored strips which turned out to be a plant material made from bulrush which was biodegradable and safe for the environment. It looked much nicer than the plastic green tape we use in California.

From San Francisco to Peru, Chile and Argentina in One Day


(Aug. 31, 2010) It’s an extremely long trip from San Francisco to Mendoza, Argentina, and there doesn’t seem to be any quick way to arrive. Most every connection that was affordable included changing planes 3 times. As it turned out, I was not given a choice on which airline or route to follow as my tickets were purchased by my hosts. Therefore I ended up on a LAN 9-hour flight from SFO to Lima, Peru that landed a little after midnight (3 hour time change from the West Coast). It was my first time to fly LAN—the airline of South America -- and I found that the plane was new and every seat had a TV. The food was decent and they served San Pedro sauvignon blanc and cabernet sauvignon. The staff was professional and efficient, but not overly friendly.

Once in Lima, I only had 30 minutes to change planes and go through another security check before I was on another LAN flight to Santiago, Chile which landed at 5:30am – a 3 hour interval during which I slept. Once in Santiago I had a 3.5 hour layover and was completely exhausted because it was 2:30am California time. Fortunately I stumbled across a lounge called Mistral which allowed me access at a day pass rate of $30. They had comfortable leather chairs, and I immediately fell asleep for another hour and a half before having two cups of cappuccino and macaroons. Best of all was the shower, which included all amenities and was very hot. If you ever get stuck in a long layover in Santiago, I would recommend paying the $30 to go to this lounge.

The bad news was when I came out of the shower, someone had taken my coat. I assumed an employee had hung it up, but after inquiring at the front desk and encountering much rapid Spanish discourse amongst several employees, I discovered that someone had stolen it. Security tracked them down using video cameras, and it turns out that a woman who was seated next to me took my coat and stuffed it in her backpack. They tracked her down to my flight to Mendoza, and a group of around 7 LAN employees and security people escorted her off the plane and made her give my coat back. The whole thing was rather embarrassing. I just pretended that she had mistakenly taken it. However, since it is winter in Mendoza with thick snow in the Andes, I definitely need my coat!

So now I am on the third leg of my trip, which is a short 50 minute flight from Santiago to Mendoza, Argentina over the Andes. They are completely covered in snow and are very impressive (see photo). My flight departed at 9am and I will arrive in Mendoza at 11am, because there is another 1 hour time change – which puts Mendoza at 4 hours later than California. Once I land, I’m supposed to attend a lunch and do a 20 minute Powerpoint presentation, so I guess I should stop writing now and review what I’m going to say. Let’s just hope some of the fog and fatigue that are filling my brain will fade away by the time I have to talk.

Wednesday, April 21, 2010

Evolution of California's World Wine Position


By Dr. Liz Thach, (2006). Published in French in Bacchus 2008 by Dunod, Paris.

I often feel guilty that I haven't had time to write more about California's wine regions -- especially since I live in the Napa/Sonoma area. Some day, I keep telling myself....and then travel to another part of the world. So, as a place holder, I am including this article on California which I wrote in the summer of 2006. It was published in French, but never in English. So I thought I would share the English verion.

The United States currently ranks fourth in the world for global wine production, with the State of California producing more than 90% of the wine. However, less than 15% of wine from California is exported to other nations, primarily due to the fact that the majority of California wine is consumed within the U.S. How did California become the largest wine producer in the U.S., and will they be able to achieve a larger market share in the global wine market? These questions are particularly compelling given the forecast that the U.S. is expected to become one of the largest wine consuming nations by 2010 (Long, 2005).

In order to answer these important questions, it is the purpose of this paper to examine the evolution of California’s world wine position. The benefit of doing this will not only provide insight into current and future opportunities for the marketing and sales of California wine on a global basis, but will identify challenges and issues which the California wine industry must consider. Furthermore, it will describe some of the complexities of wine sales within the U.S. market as a whole, which may be useful for other wine producing countries hoping to obtain more shelf space within the lucrative U.S. wine market.

This paper is divided into four sections. It begins with a brief overview of the history of wine in California and then, secondly, proceeds to an analysis of current statistics on California wine production, major regions and sales. The third section describes the current marketing and sales regulations within the U.S. which is not only challenging for the sales of California wine, but other exporting wine nations as well. Finally, the fourth section examines opportunities and issues for marketing California wine on a global basis, and explores such topics as differing consumer perceptions of California wine around the globe, as well as branding of California wine from a state or regional perspective for international sales.

Brief History of Wine in California
It is thought that the first wine grapes were brought to California by Spanish priests arriving from Mexico to establish the famous series of 21 California missions. The first mission was established in San Diego in 1769, and the last and northern most mission was built in the town of Sonoma in 1823. In the grounds of most every mission, the priests oversaw the planting of grapes which could be transformed into wine for religious ceremonies. The primary grape variety they used was called the mission grape, which is a red grape thought to be related to the Pais grape of Chile and originally from Spain. It creates a sweet, jammy tasting red wine, which was planted over much of California in the late 1700 and 1800’s.

It wasn’t until the mid 1800’s that more traditional vitus vinifera grapes from Europe were introduced by Count Hazarathy, a Hungarian citizen who started the oldest continually operating winery in California -- Buena Vista Winery in the town of Sonoma. After a trip to France, Spain, Italy and Germany, he imported many varieties of European grapes and planted them in his Sonoma vineyards. Around the same time, other European immigrants – many from Italy and Germany – descended upon northern California to participate in the legendary California Gold Rush. They brought with them various grape cuttings, including the zinfandel grape from Croatia which was planted throughout the Sierra foothills. It is now one of the most popular grape varietals in California and has become a signature grape. In addition, many of these immigrants settled in Sonoma and Napa Valley after the gold rush, and began planting the varietals they had brought from Europe, including many Italian varietals as well as riesling and chenin blanc. Later, cabernet sauvignon, chardonnay, merlot, and pinot noir became more predominant.

By the late 1800’s and early 1900’s, vineyards were abundant throughout California, spreading from the Temecula Valley in the south and then up through the regions of Santa Barbara, the Santa Cruz Mountains, Napa Valley and Sonoma. In the early 1900’s Sonoma County was the largest wine producer with more than 22,000 acres of vineyards (SCGGA, 2005). During this time California wine production hit an astounding rate of twenty million gallons, and wine was shipped throughout the U.S. and abroad, where it won numerous medals in the 1900 Paris Exposition (Lukacs, 2000). The primary reason that winegrapes grew so well in California, verses the other part of the U.S. where failed efforts to grow vitus vinifera grapes occurred as early as 1619 in Virginia, was due to the Mediterranean-like climate with its cool wet winters and hot, dry summers.

All of this came to an end in 1918, when Prohibition was implemented in the U.S., and the production and sale of wine, as well as other alcoholic beverages became illegal. This lasted for 14 years, until 1933 when Prohibition was repealed. Only a handful of wineries were allowed to continue to operate under a special license to produce sacramental wine. These wineries included Beringer, Beaulieu, Krug, and a few others. The remainders of the wineries were forced to shut down, and hundreds of acres of vineyards were torn out and replaced with prune orchards and other crops.

The unfortunate fallout of Prohibition was that the U.S. and California fell behind the rest of the wine producing nations in terms of expertise and consumer knowledge. What had been a growing and successful industry was nearly lost, and had to begin again. It wasn’t until the mid 1960’s with the advent of Robert Mondavi and his bold vision for California wine, that the industry slowly began to recover.
In 1966, when Robert Mondavi left Krug and started the Mondavi winery, there were only about 30 wineries in the Napa Valley. Today, in 2006, there are over 250 wineries in Napa and 2740 wineries in California, with another 2624 spread throughout the other 49 U.S. states (WBM, 2006). The U.S. has worked its way up to becoming the fourth largest wine producing nation in the world, with California leading the way.

Several drivers have been identified for helping to achieve this position, with the increasing quality of California wine being a major force. This was illustrated well in the 1976 Paris Wine Tasting when a Napa Valley chardonnay and cabernet sauvignon beat out high quality French wines in a blind tasting. This helped to put California wine in the global eye, and allowed for fresh capital to flow into the industry. Other drivers included an increasing American interest in food and wine; more frequent travel to European countries where Americans were introduced to wine; and a burgeoning economy – especially in the late 1990’s – that pushed some California wine prices to astronomical heights. All of these factors, and others, helped California wine achieve its current positive position within the U.S. wine market, and to some extent, on the global market.

Statistics on California Wine Regions, Production & Sales
In reviewing some of the current statistics on California wine, there are four major areas that are useful to examine. The first is an overview of the major wine growing regions and appellations. Next is a look at wine grape acreage and production numbers. Third is a review of wine sales and key markets, including exports. The final section provides an overview of major California wine producers.

Wine Growing Regions and Key Appellations
California is generally segmented into five major winegrowing regions as illustrated in the photo above. The five major regions are the North Coast, the Sierra Foothills, the Central Coast, the Central Valley, and the South Coast. Each of these regions has specific AVA’s – American Viticulture Areas – that must be approved by the federal government. In general, an AVA is a designated wine grape growing region in the U.S. which is defined by soil, mountain ranges, bodies of water, and weather. Currently the total number of AVA’s in the U.S. is 150, with 94 being located in California (Zraly, 2006).

The first region, the North Coast, includes Napa Valley, Sonoma County, Mendocino County, Lake County, and other north coast vineyards. This area is located north of San Francisco, and is known for its high-end cabernet sauvignons and chardonnays in Napa and Sonoma; old vine zinfandel in Mendocino and Sonoma County; sauvignon blanc grapes in Lake County, and wonderful pinot noir and sparkling wines from the cooler coastal regions of Sonoma County and Mendocino’s Anderson Valley. Napa and Sonoma counties are two of the most famous regions, and each includes 14 separate AVA’s. For example, some of Napa’s famous AVA’s are Stag’s Leap, Rutherford, and Howell Mountain. Sonoma County is known for the Dry Creek Valley AVA and the Russian River AVA.

The second region is the Sierra Foothills where some of the oldest zinfandel vines are found. This region includes the counties of Amador, Calaveras, El Dorado, Mariposa, Nevada, Tuolumne, Placer, Butte, and Yuba. It has hot dry summers, but does receive snow in the winter months. It is known for its hearty red wines, including syrahs, zinfandels, and ports.

The third region is the Central Coast, which is a large region stretching from Livermore and the San Francisco Bay area in the north, and then extending south towards the Santa Clara Valley, the Santa Cruz Mountains and Monterrey. It then reaches down through Paso Robles, San Luis Obispo, and ends at Santa Barbara. With so many different geographies, it is not surprising that the Central Coast is known for a wide variety of fine wines. These range from big syrahs and cabernet sauvignons in the hot region of Paso Robles, to delicate pinot noirs and chardonnays from the cooler climates of Monterey and Santa Barbara.

The fourth region, the Central Valley, is the largest wine grape growing region in California and is known for its large-scale production of commercial table wines in multiple varietals. However, it also includes the Lodi/Woodbridge region, which is becoming quite famous for its rich and full-bodied syrahs and cabernet sauvignons.

The fifth region, the South Coast, is the oldest grape growing region in California, but currently one of the smallest. It includes San Diego County, the Temecula region, Los Angeles, Orange, and Riverside. Of these, Temecula currently has the largest number of wineries and is known for its light fruity whites and sparkling wines.

California Wine Grape Acreage and Production
Vineyard acreage for wine in California was estimated to be around 800,000 acres in 2005, with a total wine production rate of 4,328,840 tons – up 20% from the previous year (USDA, 2006). As usual, a large portion of the grape production came from the Central Valley of California where much commercial table wine is produced. Top quality producing regions, such as Napa and Sonoma Valley only produce 4% and 5%, respectively, of all California wine.

Average price per ton for all varieties was $532.78, up 10% from the previous year, with Napa achieving the highest average price per ton of $2989 for a total of $541 million, and Sonoma receiving the second highest at $1868 per ton for a total of $430 million (Press Democrat, 2006.)

The most common grape varietal planted and harvested in California is chardonnay. This reflects the most popular type of wine currently sold in the U.S. at 25% of the market (ACNielsen, 2005). Table 1 below illustrates the grape varietals that were crushed in California for 2005, with chardonnay claiming 17% of the production; cabernet sauvignon coming in second at 12.5% of the production; and zinfandel in third place at 10.4%.

Table 1: Percentage of Grape Varietal Harvested in 2005
(Source: USDA Final Grape Crush Report for 2005
)

TYPE OF GRAPE % Crushed
Chardonnay 17.1
Cabernet Sauvignon 12.5
Zinfandel 10.4
Thompson Seedless (non wine grape) 10.2
Merlot 9.8
French Colombard 7.0
Rubired 3.9
Syrah 3.4
Sauvignon Blanc 2.7
Pinot Noir 2.2
Chenin Blanc 2.2
Other 18.5

California Wine Sales and Key Markets
In 2005, it is estimated that California produced 542 million gallons of wine; and shipped an estimated 535 million gallons of wine to markets within the U.S. and abroad (Wine Institute, 2006). Figure 2 illustrates California winery shipments to all markets for the last seven years, showing a positive upward trend.
Figure 2: California Winery Shipments to All Markets
(Source: Wine Institute, 2006; In Thousands of Gallons)

In 2005 the U.S. wine market had a yearly value at retail outlets of $25 billion and reached the equivalent size of 300 million cases (Cartierre, 2006). Of this, it is estimated that approximately 66%, or $16.5 billion, was California wine. In the U.S. market, roughly two out of every three bottles of wine sold is from California. Major markets for California wine in the U.S. are on the East and West coasts, and include large metropolitan areas such as Los Angeles, San Francisco, Seattle, Portland, New York, Boston, and Miami. However, a few central cities such as Chicago, Dallas/Fort Worth, Houston, and Denver also consume much California wine.
California wine sales by price segment show that 65% of California wine purchased by Americans is less than $7. Figure 3 below illustrates the five common price segments used in the U.S. market. The fastest growing segment is the Super Premium segment with pricing between $7 - $14, which grew by 14% in volume in 2005 (Cartierre, 2006). The Ultra Premium wine segment, with pricing of over $14, recently achieved 10% of the volume, but has 35% of the revenue (Motto, 2006).

Figure 3: California Wine Sales by Price Segment for 2005
(Source: Fredrikson, 2006)


According to the Wine Institute (2005), the economic impact of the California wine industry is $45.4 billion annually. This includes revenues from the wine industry and other businesses it impacts, such as tourism, as well as indirect economic benefits. It is estimated that 14.8 million tourists visit California wine regions and spend close to $1.3 billion each year. In addition, the California wine industry provides an estimated 207,550 full-time equivalent jobs in wineries and related companies, paying wages of $7.6 billion. Because of all of these reasons and more, wine is currently California’s most lucrative agricultural crop.

California Wine Exports
In terms of export shipments, California wine shipments actually decreased in 2005 due, in part, to an increase in the U.S. dollar as well as some wineries shipping bulk wine to Europe for bottling. California wine shipments for 2005 were 95% of all U.S. wine exports and totaled 365 million liters valued at $625 million (USFAS, 2006). The volume was down 16% from 2004.

The major export market for California wine is the U.K, with Canada, the Netherlands, Japan, and Germany being other top markets. Figure 4 below illustrates California’s major export markets and dollar amount for 2004.

Figure 4: California Wine Exports for 2004
(Source: The Wine Institute, 2005)


Major California Wine Producers
Of the 5364 wineries currently in the U.S., 2740 wineries are located in California. Since California is the largest wine producer in the U.S., it is not surprising that they also are home to five of the largest wineries by annual case sales. Table 2 below lists the top ten U.S. wineries, including their headquarters location.

Table 2: Top Ten U.S. Wineries By Case Sales
(Source: WBM, 2006)


Winery Case Sales in U.S. Headquarters Location

E&J Gallo 75 million California
Constellation Brands 54 million New York
The Wine Group 42 million California
Bronco Wine Company 20 million California
Foster’s Wine Estates 17 million Australia
Trinchero Family Estates 9.3 million California
Brown-Foreman 6.4 million Kentucky
Diageo 5 million U.K.
Kendall-Jackson 5 million California
St. Michelle Wine Estates 4 million Washington

Altogether, in 2005, these ten large wineries sold 237.7 million cases of wine in the U.S. market. This accounts for almost half of the wine sold. Therefore, there are many mid-size and smaller wineries within California and other states, as well as imported wine, which make up the rest of the volume. Indeed, though the U.S. wine industry is dominated by a few large players, there are a multitude of small family wineries producing unique and artisan-type wines that are very popular with U.S. consumers. In addition, imported wines from other countries, such as Italy, Australia, France, Chile and Spain, are quite popular in the U.S. and currently maintain 26% of the U.S. wine market.

Marketing & Sales Regulations for California Wine
Since the majority of California wine is sold in the U.S., it is useful to overview the marketing and sales regulations within the U.S. market. Rather than using just one system of regulations for alcohol sales, the U.S. market is instead regulated by each individual state, and in some cases, smaller counties within individual states. This makes selling wine within the U.S. just as complicated, in some instances, as exporting wine abroad.

The U.S. wine, beer, and spirits distribution system is often referred to as the 3-tier system. In order for wineries to get their wine distributed on a national basis, they must sell to a distributor – the first tier. The distributor, in turn, sells to a retailer, such as a supermarket, wine shop, or restaurant – the second tier. Finally, the wine is sold to the consumer – the third tier. At each tier, a mark-up in price is added to the wine. Figure 5 illustrates the 3 –tier system

Figure 5: The 3-Tier System in the U.S. Wine Market
(Source: Wagner, Olsen & Thach, 2006)


Due to the 3-tier system, currently more than 80% of the wine sold in the U.S. is via distributors (Thach & Olsen, 2006) who then sell it to off-premise and on-premise retailers. The largest volume is sold in off-premise establishments, such as large supermarket or retail stores like Costco, SafeWay, Albertson’s, Walmart, Target, and others. In order for California wineries to gain access these off-premise stores, they need to develop partnerships with major distributors who service these accounts. This can be challenging for smaller wineries because shelf and portfolio space is tight, and large volumes with consistent quality levels are required. In addition, assistance with attractive point-of-sales displays is often necessary to introduce the product. In general, only large wineries which can provide volume discounting or well-known established brands can enter this part of the off-premise retail channel.

Other off-premise sales occur in fine wine shops, but less data is available to determine actual percentages. These types of stores can “hand-sell” higher priced wines to customers by personally educating them on the wine, the winemaking techniques, and brand story. They often host wine-tasting events to boost sales. This is an easier channel for small California wineries to access by building relationships with smaller distributors who do business with these types of establishments across the nation. Furthermore, in some states, such as California itself, licensed wineries can directly approach small wine shops and other off-premise retailers and request that they carry their wine.

On-premise sales of wine in the U.S. are growing, due to the increasing popularity of wine bars and dining out in restaurants. In 2005 the dollar amount spent in restaurants exceeded the dollar amount spent on food in grocery stores (Motto, 2006). Some California wineries emphasize this channel more than the large off-premise channels, because restaurants and wine bars are willing to carry more expensive wines. Therefore, they look for and build relationships with distributors who have access to high-end restaurants or wine bars across the nation. Again, in certain states such as California, licensed wineries can approach on-premise establishments directly to sell their wines.

A third method of selling wine that is increasing in popularity is direct to consumer sales which involves selling to consumers in winery tasting rooms, special events, and via the Internet. Though still a smaller portion of the market, this method has grown an average of 14% per year with one out of every ten bottles of wine sold in the U.S. being sold direct (Cartierre, 2006b). Many California wineries sell directly to consumers via their tasting rooms. A related method is to encourage consumers to sign up for a wine club, which enables the winery to ship them wine via mail – if they live in a state that allows for direct shipping. However, since only 32 states currently allow direct shipping of wine to consumers, this method is not always possible (Thach, 2004). Sales of wine via Internet are also hampered by these same conditions. At the same time, there is much pressure from consumers and other constituents to change the direct shipping laws within the U.S., so slowly other states are loosing their regulations and it may be possible to do more direct shipping of wine in the future.

Despite the current restrictions on direct to consumer sales, many California wineries see this channel growing. The other obvious advantage of this method is that wineries do not have to factor in distributor and retailer mark-ups, and can, instead, keep those margins for themselves. This makes the direct to consumer channel the most profitable for California wineries, and a few smaller wineries do sell 80 to 100% direct. However, this method is not viable for larger wineries which depend on volume sales and national distribution for their revenue.

Marketing Opportunities & Issues for California Wine in the U.S. and Globally

Given the evolution of the California wine industry and its ups and downs, such as a late start in winemaking compared to other nations and the setback of Prohibition, California has still managed to make much progress. The question now is how they will utilize their strengths in a very competitive global marketplace to maintain and enhance their position. Fortunately there are many opportunities, but also some issues which they must face. Table 3 below outlines the key drivers that are creating these opportunities and issues.

Table 3: Key Drivers of Opportunities & Issues for California Wine

CHANGING U.S. WINE CONSUMER DEMOGRAPHICS & PERCEPTIONS
 Increase in U.S. wine consumption via Millennial & Hispanic markets
 Aging of Baby Boomer Market in the U.S. (currently largest wine consumer segment)
 Increased consumer interest in innovative labels; wine styles; and containers
 Increased consumer interest in organic & environmental issues with wine

INCREASED GLOBAL COMPETITION
 Increase in wine production around the world
 Increase in foreign wine imports into the U.S.
 Some anti American sentiment in the global market
 Differing consumer perceptions of CA wine in different countries
 Consolidation of global wineries and distribution systems
 Advances in viticulture, enology and wine marketing around the world

U.S. REGULATIONS
 In U.S. cannot advertise health aspects of wine
 Strong anti-alcohol groups with U.S. market
 Fluctuating U.S. dollar on the world market
 Increase in wine production in other states within U.S.
 Conflict between country, regional, and individual winery branding

Increase U.S.Market Share for California Wine
A major opportunity is to capture additional market share within the U.S. market, since it is predicted to be the largest wine consuming nation in the world by 2010 (Long, 2005). This increase in wine consumption rates within the U.S. is driven primarily by the 70-million plus consumers who comprise the Millennial generation – the oldest of which are in their 20’s now and are consuming much wine. They are the children of the Baby Boomers -- an even larger generation of 80 million people currently in their late 40’s and 50’s who also consume much wine. In addition, the Hispanic population within the U.S., which is the largest and fastest growing minority population, is becoming quite interested in wine. All of these changes are spurred on by an increased interest in food and wine; more relaxed and balanced lifestyles; health; and other values.

In order to increase market share in the U.S., California wineries will need to conduct market research to understand these new wine consuming populations. This will assist them in developing wine brands and advertising campaigns that appeal to these consumer segments. Already the Millennial generation has shown a preference for more fruit-forward wines with lower tannins and oak, as well as fun colorful labels that are not traditional in style. The Australians have led the way in appealing to this group, but some of the larger U.S. wineries have recently introduced some new, successful brands that are targeting this segment. In addition, a few wineries have made positive inroads with the Hispanic population by launching promotions in the Spanish language and matching wine with Hispanic foods. Despite these efforts there is still much opportunity in this arena.

In addition to reaching these new audiences, California wineries will need to maintain and enhance their market share with existing customers in the older Baby Boomer generation. This generation is more sophisticated and is willing to spend more on wine, but is now moving into their 60’s. As current consumers, their needs still must be considered, and traditional California wine brands will need to “refresh” themselves to continue to appeal to this group. This calls for a deep understanding of current customers and the ability to be innovative to match changing consumer needs.

A major issue which the California wine industry needs to consider to increase market share in the U.S. is the very competitive global market place. Americans enjoy imported wine as well as trying wine from other states. California wine currently holds a very positive perception in the minds of most U.S. wine consumers, and this image needs to be maintained. This is where a California wine branding campaign may be of use. A similar campaign was developed by the California Cheese Association and has been quite successful in the U.S. in promoting the consumption of California cheese and milk.

In order to address the issue of imported wines, some California wineries have partnered with or acquired foreign wineries in order to import foreign wines into the U.S. This is a positive solution, because Americans appear to enjoy the variety that imported wines provide. Furthermore, with the large increase of vineyard acreage around the world, with huge plantings in Spain, Chile, India, and China, it is expected that there will be an increased supply of wine on the global market in the future. Therefore, large global wineries are rapidly acquiring wineries from all parts of the globe in order to provide an international portfolio of wines for their customers.

Expand Export Efforts
Another opportunity for the California wine industry is to expand their export efforts. In the past there has not been much economic incentive to do so, because they were able to sell their wine so easily within the U.S. market. In addition, strong currency rates within the U.S. and complicated shipping regulations to overseas markets were other deterrents. However, in order to be strategic, long-term players in the global market, it is important for California wineries to invest in global markets. This is happening in some instances with both small and larger wineries, but there is still much opportunity for California to make efforts in this area.

A key issue with California wine exports is the higher cost of California wine. Due to expensive labor and land costs, it is not possible for California to pursue a low-cost strategy. Therefore, they must focus on quality and value. This is a more sustainable strategy for the long-term, but takes more effort and time to implement. This is hampered by the fact that in some countries California wine is still not perceived to be equal in quality with some European wines.

The development of a California Brand campaign may also be useful to help combat these issues. A unified global message about the quality and value of California wine could be useful in explaining the benefits and attracting new consumers. Some initial efforts have been made in this area with the assistance of the Wine Institute in San Francisco in organizing California trade shows and tastings in various countries. However, not very many wineries participate in these events, and many larger wineries prefer to focus on promoting their own brands, rather than a state brand. This is the same dilemma which other countries have encountered in their exporting efforts. However a few countries, such as New Zealand, Australia, and Spain, have developed very laudable country branding campaigns.

Assume Leadership Role in Wine Innovation
Due to advances in technology, new breakthroughs are occurring everyday in viticulture and enology. In viticulture, new methods of mechanization, trellising systems, clonal advances, global position systems, and computerized farming are enabling vineyard managers around the world to plant grapes in new areas and produce higher quality yields at lower prices. In the cellar, similar advance are taking place with techniques such as micro-oxygenation; spinning cone technology for de-alcoholization, and co-pigmentation. Add to this the increased consumer interest in organic and biodynamic farming; sustainable winegrowing methods that are kind to the environment and people; and creative packaging alternatives, and it is obvious that the time of innovation in wine is now.

Because of these advances, there is an opportunity for different wine regions to differentiate themselves. California has always led the way in innovation and entertainment in other industries, so there is an opportunity to do so with wine. In some cases, U.S. and state regulations will not allow certain types of innovation and advertising – such as the ban against advertising the health benefits of wine – but there are other opportunities open to the California wine industry. They have already made some strides by adopting the California Code of Sustainable WineGrowing, which is a voluntary self-assessment to improve environmental and social practices within the industry. Some regions are pursuing certification in this area, which will include a stamp placed on the wine bottle. However, this is just a small step, and there is ample opportunity to do much more in the areas of viticulture, enology, and wine marketing. Currently there is positive innovation occurring in individual wineries, but not a collective focused effort, such as New Zealand with their unified campaign of “wine from a clean, green NZ.” In California, a state with much ingenuity, there is still opportunity to pull together and create a unique and innovative brand message for California wine.

Conclusion – The Future of California Wine
In conclusion, this chapter provided an overview of the evolution of the California wine industry, including history, statistics, marketing and sales regulations, and opportunities and issues for the future. California currently holds an enviable position in the world market of producing a large amount of good quality wine that is easily sold within the U.S.market, and to some extent, in overseas markets. Their current position of possessing the largest market share of the lucrative U.S. wine market is very positive, since the U.S. market is predicted to grow at a healthy pace. California has also made some innovative inroads in wine, and has been a leader in creating the New World style of wine, which is more fruit-forward, higher alcohol, and is filled with complexity and boldness. Their efforts, have in part, spurred the development of an “international style” of wine, which has received a mix of reviews from wine critics around the world. California has also made positive progress on the environmental front with their sustainable winegrowing practices efforts.

All of this points to a positive future for California wine, but it is critical that they remain focused and alert to changes in the global market place. The global wine industry will only become more competitive in the future, with large new tracts of vineyards coming into production in future years. At the same time, wine consumption is declining in certain countries. Increases in consumption are predicted in Asia, but this has not occurred to a large extent yet. Therefore, the profitable U.S. market will continue to be key export target for other wine producing countries. This means California wineries must continue to produce high quality and value-priced wines to maintain and increase marketshare; embrace innovation to create new segments of wine consumers; and explore partnerships with overseas wineries to collaborate on entering new markets. Given their past history of perseverance and regeneration, it is highly likely that they will be successful in doing this.

References
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Thursday, April 8, 2010

Gibbston Valley & Chard Farms – Amazing Wine Tourist Destinations


(Feb. 13, 2010) On our last morning, we slept in until 8:30 and then had a long, lazy breakfast drinking coffee and eating omelets at our table in our suite overlooking the lake and a beautiful sunny day. It was hard to check out of such a lovely resort and leave such a relaxing and beautiful room. Upon our departure, we drove the few blocks into town and found they were having a farmer’s/artist’s market, so we immediately parked. Wandering around the booths set along the lake, we found many charming souvenirs, and I was able to buy small pottery, glass, copper, and silver pieces from different artists. My favorite was a flattened wine bottle made into a clock with an inset of the local mother of pearl shaped like NZ. It now hangs proudly on my kitchen wall at home, and gives found memories of our trip to Central Otago.

Later we took a walk along the lake and found the beautiful Queenstown Gardens with colorful flowers and ancient trees. From there we decided to drive back along Highway 6 to Gibbston Valley and Chard Farms wineries and be tourists for the afternoon. They are only about a 15 minute drive from Queenstown with amazing scenery along deep river canyons. We stopped at Gibbston Valley first and sampled some of the lovely cheeses at their Cheesery. Of course, we brought some to take home on the plane. The winery is a wonderful tourist stop with a big tasting room filled with fun wine merchandise and flights of wine to taste, starting at around $10NZ. They also have a nice restaurant surrounded with flowers. The roses were in full bloom, and it not only looked beautiful, but smelled lovely. Though we didn’t taste the wines, we found it to be a nice place to visit.


Just down the road is Chard Farms Winery, which is not that easy to access, as you must drive along the steep canyon wall on a tiny one-lane gravel road with the raging river far below in the canyon. I can honestly say it is the most amazing and spine-tingling access to any winery I have visited in the world. What a place to plant a vineyard and build a winery – yet it is one of the oldest in Central Otago, and started out as a fruit farm. The winery building itself is a very attractive pink stone structure with sweeping green lawns and a great statue of a bicyclist which is made of grape vines – quite clever.

We tasted through all of their wines and found they were making some delightful riesling and pinot gris. (In fact, due to this trip, I have now found that I enjoy NZ pinot gris; generally I find pinot gris boring and flaccid; these are fresh, floral, and have exquisite acid). Chard Farms also provided a very nice review of their different levels of pinot noir. I was impressed with this visit and the service. The tasting was free, but they asked that you make a donation if you didn’t purchase any wine. Very tasteful!

After Chard Farms, we couldn’t help but stop at the bungee jumping center across the road, and were mesmerized by watching people jump from a high bridge to the river below. You have the option of being dunked in the icy cold water or not! Next door was a restaurant encouraging you to stop, eat, and taste some local wine after your jump. Wow – only in Central Otago!

Reluctantly we headed back towards the airport to catch our 3pm flight to Auckland. There we had a short layover before catching the 7pm non-stop flight back to San Francisco – which was non-eventful and landed a few minutes early. The end of a truly amazing trip to New Zealand….

Felton Road Winery – Biodynamic Wine Heaven


(Feb. 12, 2010) Our appointment at Felton Road was for 2pm with Garrett, the vineyard manager, and one of the most passionate organic grape growers I have ever met (and I’ve met quite a few!). He had so much energy and enthusiasm, he was almost bouncing off the ground. Felton Road has a highly justified reputation of producing one of the highest quality pinot noirs in New Zealand. After this visit, I can verify this is true….and I believe it is almost all certainly due to the incredible care and “love” they relish on their vineyards.

Felton Road is located just 5 minutes down the road from Mt. Difficulty – rather at the end of the road. Since most of their wine is allocated, the tasting room is only open a few hours per week or by appointment. It is quite small – located in a small house with a wrap around front-porch and lovely organic garden with lots of lavender and humming bumble bees. The entrance to the winery is rather hard to find, and we actually accidently entered through the delivery drive-way, but enjoyed winding our way amongst the vines.

Garret was there to greet us promptly at 2pm and immediately asked if we were up for a walk through the vineyards. We happily said yes and started off as he explained that they had 33 hectares of certified biodynamic vines, and they produce 10 – 11,000 cases per year. A large portion – 75% -- is exported to over 30 countries. Garret explained that they have 3 main vineyards, and try to plant chardonnay on the silt soil and pinot on the clay soil. They use 2x1 meter spacing, cane pruning because it grows faster in the spring, and are 85% on mixed rootstock. They plant buck wheat, yarrow and mustard every 10th row, and do all hand-tilling beneath the vines to fight weeds. They also create their own compost, but purchase the biodynamic preps from the Biodynamic Association of NZ.

Garret explained that what makes them so successful is that all of the employees “buy-in” to the biodynamic process. They are proud to work there, and everyone is willing to pitch in. Because of the environment and culture, they attract the best people – and truly have a winning team.

After about an hour wandering through the vines and examining crop load, cover-crop, soil, the insectory, tractors, and other aspects, we headed to the cellar. I was impressed with the large square cement and stainless tanks they are using for fermentation. Garret said they usually do 25% whole cluster ferment for the pinot noir, and use a combination of hand and pneumatic pigeage. We didn’t get much detail on the winemaking because Garrett said all of the “real winemaking” had taken place in the vineyard. Therefore I don’t know if they do cold soak; ferment temp; how many days until completed; extended maceration, etc. The only thing we know for sure is they use natural yeast. After gentle pressing, the pinots are aged in 30% new French oak, where they also go through ML. Elevage lasts from 11 to 18 months – depending on the vineyard and wine tier. They only rack before bottling. The chardonnay is all barrel fermented with racking and sulfur after ML; and aging for 11 to 16 months in 10-15% new oak.

The cellar is attached to the tasting room, so we made a full circle and arrived back at the small, yet charming tasting room. Garret referred us again to the maps that illustrate the different vineyards and soil types. We then started the tasting which included 10 wines. All were wonderful, fresh, vibrant, clean, and very well concentrated – which is what I usually find in organic and biodynamic wines. They seem to have a pure energy, clean fruit, and are never thin.

It is hard to select a favorite, but those that really delighted my palate were: the 2009 Felton Road Dry Riesling, with a ripe peach nose, mouthwatering juicy acid; and long finish. Delightful – dances on the tongue; and the 2008 Felton Road Chardonnay Block 2 – a bright apple nose/palate with spice; complex layers of flavor; and a long finish. Moving into the pinots, they were all so good and unique, it is hard to choose, but some of my favorites included the 2008 Felton Road Calvert Vineyard Pinot Noir which was ripe and explosive on the nose with bursting raspberries, yet deeply concentrated and complex on the palate. Wow! We ended up buying this one. Equally wonderful were the 2008 Felton Road Pinot Noir Block 3 with more intense concentrated raspberry and some savory notes; and the 2008 Felton Road Pinot Noir Block 5 with great acid, herbs and spice adding to the complex and powerful dark berry fruit.


We left Felton Road in a very good mood and excited about our evening ahead in Queenstown. We headed back to the St. Moritz where we hit the hot tubs, then showered and got ready to celebrate our 25 year wedding anniversary. We started with appetizers and pinot in our room, and then headed downstairs to our reserved table with a lakeside view in Lombardi’s. The staff knew it was our anniversary and they treated us to two glasses of NZ sparkling wine on the house. As mentioned in a previous posting, the service was excellent and the food was some of the best we had in NZ. We started with a seafood appetizer with sauvignon blanc, then I had the lamb and Mike had the local venison –both with 2008 Earth’s End Pinot Noir, which was fruity, easy-drinking, and enjoyable. We ended with a wonderful dark chocolate dish with a glass of port. The plates were so artistically presented that I took pictures of several of them (see photos). It was easy to glide back to our room upstairs after such a magical meal.