Thursday, November 22, 2007

What's Red and White and Green All Over?

The answer, of course, is wine.

Perhaps the most interesting trend that I have observed in wine this year is the growth of green wine. By green I mean wine that is made and marketed with attention to the environment (although vinho verde from Portugal can claim to be a green wine on other counts).

What drew my attention to the green wine movement was not the existence of organic wines -- they've been around for a long time -- but the variety of ways that winemakers are embracing sustainability and the environment as an integral part of their work.

I uncovered three sustainability initiatives while doing fieldwork in Oregon, for example. The first was the Low Input Viticulture and Enology initiative, or LIVE for short. This is an a voluntary program with about 70 certified members that, according to the website, aims ...

  • To see the vineyard as a whole system
  • To create and maintain a high level quality fruit production
  • To implement practices that reduce reliance on synthetic chemicals and fertilizers with the goal of protecting the farmer, the environment, and communities at large
  • To encourage responsible stewardship of the land, maintain natural fertility and ecosystem stability
  • To promote sustainable farming practices that maintain biological diversity in the whole farm

  • I haven't studied the LIVE program closely, but my impression is that it is an attempt to both promote sustainable vineyard practices and, at the same time, take local control of the certification process. Why create an organization like LIVE -- why not just go "organic" and be certified organic? I have talked to a number of winegrowers who hesitate to seek organic certification because of the considerable expense and also because the sort of sustainable viticulture they seek to practice goes beyond the avoidance of chemicals. Regional initiatives like LIVE allow groups of growers to define sustainability in a way that is compatible with local conditions and practices and to retain local control of the process.

    Some winemakers are going all the way when it comes to sustainability, which is what the biodynamic wine movement is all about. Biodynamic winemaking is based upon a set of agricultural theories that the Austrian philosopher Rudolf Steiner proposed in the 1920s. The biodynamic idea is to treat the entire vineyard as a living organism and to adopt practices that promote the health of the entire structure -- vines, soil, insects, and so forth. This reminds me of the famous Gaia Hypothesis that the whole earth is a living organism.

    Most biodynamic practices are uncontroversial, but the use of special organic field sprays draws special attention. The sprays are made by burying cow horns full of cow manure or ground quartz in the vineyard for six months and then spraying the estate with the resulting composted product in diluted form at specific times of the day and phases of the moon. The idea is to promote microbial health and the balanced growth of the vineyard. It sounds a little like voodoo viticulture, to me, but there are plenty of good winemakers who have adopted this practice so I am going to keep my skepticism in check for now.

    Several Oregon winemakers including Brick House and Cooper Mountain have gone or are going biodynamic. They join California producers including Frog's Leap, DeLoach and Benzinger and a growing number of winemakers in Europe and around the world. I understand that many winemakers in Chile such as Emiliana Orgánico are adopting biodynamic practices, for example, both on philosophical grounds and, I suspect, in an attempt to differentiate their wines in the marketplace. (Click here to read Emiliana's explanation of the principles of biodynamic viticulture). I haven't tasted enough biodynamic wine to have an opinion about how the process affects the end product.

    The final example from Oregon is the Carlton Winemakers' Studio, a facility that about a dozen smaller winemakers share. This operation was designed to meet recognized environmental standards from the group up. According to the website it was ...

    The first winery registerd with the US Green Building Council, The Carlton Winemakers Studio was designed to be compliant with LEED (Leadership in Energy and Environmental Design) certification, promoting a whole – building approach to sustainability by recognizing five key areas of human and environmental health: sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality.

    Some of the most intriguing environmental building materials and techniques are the following:

    • Below foundation water capture and reuse
    • North roof water capture and reuse
    • Clear roofing materials
    • Daylighting, windows, doors, and hallway
    • Night air cooling
    • Coal byproduct (fly-ash)/concrete mix
    • Recycled mats, paint, office desk materials, roofing metal, carpet
    • Non-conventional material uses: sals-walls, curtains, shade
    • Reused: counter tops (SS & acid resistant composite), light, concrete, sinks
    • Dynamic flow air pocket walls
    • Earth berm / below grade walls for natural cooling
    The Winemakers Studio's strategy suggests that green wine can be good wine, good economics and good for the environment.

    Sustainability is obviously important in winemaking, but it doesn't end there. A growing number of wine brands, such as French Rabbit, are embracing sustainability in wine packaging and transport. Here's how Boisset America, the French firm that makes and markets French Rabbit (and owns biodynamic DeLoach) got into the sustainable packaging business.

    Canada is a good market for wines, especially French wines, and the Liquor Control Board of Ontario is therefore a big buyer with lots of market power. As a state monopoly, the LCBO sets economic, social and environmental goals for its operations. They aim to minimize energy use and maximize recycling. LCBO challenged their wine suppliers to introduce new products to promote these goals and French Rabbit was one result. As Patrick Egan, brand manager for French Rabbit, notes
    "Our real immense success was with Liquor Control Board of Ontario. They inspired the creation of French Rabbit. As a goverment entity they were interested in challenging themselves and their suppliers to reduce packaging waste. They set an ambitious goal of eliminating 10 million kilograms of packaging waste per year. There were no other wines yet available in Tetra Paks when we presented French Rabbit, and they immediately embraced the concept. FR was the most successful launch of a new brand they've ever had, and spawned more than 75 other wines in Tetra Pak packages since French rabbit was launched there in July 2005. The success helped the LCBO reach their packaging reduction goal some 2 years ahead of schedule. Here in the US, there are really 3 primary brands [in Tetra Paks] so far, with more on their way.
    "Turns out, much of the world has been consuming wine from the Tetra Pak package for many years (you must have seen Tavernello on your travels to Italy). Our angle, our raison d'etre, for introducing a new wine in this package to North America has been the ecological benefits to the package. In the age of global warming and increasing interest in sustainability, our package has the benefits of the lowest carbon output per unit of wine sold when the full life cycle of the package is considered. Its lightweight and minimal packaging materials mean immense savings when compared to the glass bottle. So, as wineries make more and more efforts to combat global warming in the vineyards and in their energy consumption, we've gone the angle of actually transforming the package that wine is delivered in to consumers. Just as globalization increases choice for consumers, it also means more and more wine is shipped all over the world. Ours dramatically reduces the impact when wine is shipped, in addition to the savings generated when the package is produced and the package is recycled."
    It seems to me that the wine industry is ahead of the curve with respect to sustainability and the environment. Wine is a product of nature, after all, and there are special reasons, aesthetic, philosophical and economic, why winemakers should wish to emphasize that connection. Green wine, I predict, is here to stay.

    Sunday, November 18, 2007

    The French Connection

    Watching Jonathan Nossiter's film Mondovino gives the viewer the impression that the world of French wine is being overrun with Americans and modern American wine influences. Maybe that's true, but if so it is only half the story. Herewith three stories of French wine and wine-makers in America inspired by recent conversations with former students (thanks to Jeremy, Devin and Patrick for your help).

    Story 1: Pinot Noir is a hot wine in the United States -- the Sideways phenomenon continues for now. The best-selling Pinot Noir in American is called Redwood Creek. Have you seen it? Redwood Creek is a popularly priced Gallo brand; the label says that the wines are "inspired by the Frei Bros. 100 Year Old California Winemaking Tradition."

    "Inspired" is a good word to use here because, although the brand reflects California tradition, the wine itself is from France. The label says "Product of France" and "Vin de Pays D'Oc." So it doesn't come from California's Central Valley, as you might expect from a Gallo product, but France's equivalent, the vast vineyards of Languedoc.

    I expect that many American supermarket shoppers who would never have had the confidence try to pronounce "vin de pays d'oc" much less spend money on some of its wines will be happily opening bottles of Redwood Creek Pinot Noir this Thanksgiving. Moral of the story: American consumers will buy French wine if it is presented in a familiar, understandable way, which in this case means as a branded varietal wine.

    Story 2: I gave the faculty toast to our Phi Beta Kappa graduates at a luncheon last May and I was surprised to discover afterwards that the sparkling wine we drank came from New Mexico of all places. It was called Gruet and I was further surprised to find some of it on the neighborhood Metropolitan Market shelves.

    Gruet et Fils is a prominent French Champagne house, founded in 1952. Champagne is a good business, but a difficult one, too, for an entrepreneur. The business is highly regulated and expansion opportunities are strictly limited. Vineyard yields and locations are tightly controlled. If you want to make more Champagne to take advantage of market conditions, well basically you can't. But you
    can make more Champane-like product, Methode Champenoise sparking wine, if you invest in vineyards outside the Champagne region. It won't be Champagne, of course, and won't earn Champagne's price premium, but people will buy it if it's very good.

    Members of the Gruet family were therefore vaguely searching for vineyard expansion opportunities when they were passing through the American Southwest in 1983. They ran into some fellow European winemakers who were trying to make a go of it in New Mexico and, inspired by their example, ended up planting vineyards at elevation 4300 feet near the town of Truth or Consequences, about 170 miles south of Albuquerque. The winery equipment was shipped over from France along with members of the Gruet family to make the wine and, in due course, a first vintage (1987) was released.

    Today Gruet produces more than 80,000 cases of American sparkling and still wines in New Mexico, which must make them the state's largest producer. Prices run from about $13.50 for the basic sparkler up to nearly $50 for limited release wines -- prices that are significantly lower than for equivalent Champagnes. Moral of the story: Americans will buy French-style wines from unexpected places if they are good, which the Gruet wines are, and a good value.

    Final story: Boisset, Vins et Spiriteux is a major French wine and spirits company. Founded in 1961 by Jean-Claude Boisset, it has evolved into a a top-five producer in France, exporting to more than 80 countries with investments in California (DeLoach Vineyards), Italy, Spain, Uruguay, South Africa and Canada. Their French brands include J. Moreau & Fils (Chablis), Bouchard Aine & Fils (Cote de Beaune) and Louis Bernard (Rhone Valley), all of which are sold in the United States.

    But Boisset America's big push at the moment is a wine called French Rabbit. Like Redwood Creek, it is wine from Languedoc. Unlike Redwood Creek, however, it doesn't pretend to be inspired by anyone's tradition, either French or Californian. It is designed to appeal to modern consumers who want to make wine part of an active, informal, sustainable lifestyle. That's why it is packaged as you see it here, in lightweight eco-friendly octogonal-shaped one liter Tetra-Prisma containers (and 250-ml single-serving untis, too).

    (The wine on the left, Yellow Jersey (think
    Tour de France) is another Boisset America brand. It comes in a PET plastic bottle and will fit in your bicycle's water bottle holder.)

    Is the world ready for wine that looks like this? A lot of my friends cling to tradition, unwilling even to give up corks for screw caps. Will they accept wine in what appears at first glance to be an orange juice carton? Apparently so -- Boisset America sells more than 100,000 cases of French Rabbit in the United States and Canada and is now introducing the innovative brand into what must be the most traditional possible market, France itself. (Watch for an upcoming post about how French Rabbit and its unorthodox packaging was born).

    Moral of the story: French wines can succeed outside of France because of the creativity and entrepreneurship of French winemakers. Who knew?

    Tuesday, November 6, 2007

    Wine Economists Unite!

    You may or may not be surprised to learn that there is an organization called the American Association of Wine Economists. It's headquarters are at Whitman College in Walla Walla, Washington, where Karl Storchmann teaches wine economics.

    The Association publishes the
    Journal of Wine Economics, which features interesting articles covering a range of wine economics topics under the direction of a most distinguished editorial board: Kym Anderson (University of Adelaide and World Bank), Orley Ashenfelter (Princeton), Victor Ginsburgh ( Université Libre de Bruxelles), Robert N. Stavins (Kennedy School of Government, Harvard) and of course Karl Storchmann.

    The Association's first annual meeting took place last year in Trier, Germany (click to view a pdf of the conference program). Karl aims to bring the meeting to Portland, Oregon this summer, probably in mid-August. Check out the links to the Association and the
    Journal if you are interested in how economists apply their technical tools to the analysis of wine markets.

    The University of Wine

    I teach at the University of Puget Sound, one of the northwest's finest liberal arts colleges. But as I work on my book about globalization and wine I'm starting to think of UPS as the University of Wine (or maybe the University of Pinot & Syrah to preserve the UPS acronym).

    It's not that we teach a lot of classes on wine or winemaking (the course I will teach next fall will be the first), it's just that so many of our graduates end up making wine, selling it, or telling stories about it. Must be something in the water ... or in the wine. Herewith a selected list of alumni wine people.

    Winemakers and Winegrowers
    Dick Boushey, Boushey Vineyards, Yakima Valley, Washington

    Tom Hedges, Hedges Family Estate. Red Mountain, Washington

    Peggy Patterson, Hoodsport Winery. Hoodsport Washington

    Chuck and Tracy Reininger (pictured above), Reininger Winery. Walla Walla, Washington

    Michael Corliss, Corliss Estates. Walla Walla, Washington

    Stewart Boedecker, Boedecker Cellars. Carlton, Oregon.

    Joe Davis, Arcadian Winery. Santa Ynez, California.

    Warren Moyles, La Toscana Winery. Leavenworth, Washington

    Julie Strobel Arger, Arger-Martucci Winery. Napa Valley, California

    David Rosenthal, Enologist, Chateau Ste. Michelle. Woodinville, Washington

    Carolyn Lakewold, Donedei Winery. Olympia, Washington

    Mona Hovnanian, Arbutus Winery. Seattle, Washington

    Wine Families (wineries of parents of Puget Sound students)
    Fielding Hills Winery. East Wenatchee, Washington

    Frog's Leap Winery. Napa Valley, California.

    Tres Sabores Winery. Napa Valley, California

    Pepper Bridge Winery, Walla Walla, Washington

    The Wine Business: Marketing and Distribution
    Ken Avedisian, Chief Operating Officer, Cordon Selections wine distributors. Seattle, Washington.

    Jeremy Soine, Brand Manager, Barefoot Cellars. Modesto, California.

    T. Patrick Egan, Brand Manager (aka Chief Hare), French Rabbit Wines. Sausalito, California.

    Devin Visciano, Monterey Bay Wine Company. La Selva Beach, California.

    Authors and Educators
    Michael Moyers, Instructor of Wine Science, Walla Walla Community College and Winemaker, College Cellars of Walla Walla

    Amy Muma, World Wine Program, Central Washington University. Ellensburg, Washington

    Cynthia Nims, Food and Wine Writer and Consultant. Seattle, Washington

    Michael Veseth, Professor of International Political Economy, University of Puget Sound. Tacoma, Washington
    As you might expect, wine research is filled with good experiences. One of the unexpected pleasures has been the opportunity to reconnect with exceptional alumni and former students who are in the business.

    Sunday, November 4, 2007

    Washington Wines & Wineries

    Seattle wine writer Paul Gregutt's new book Washington Wines & Wineries: The Essential Guide has just been published by the University of California Press. It is the kind of wine book that brings immediate pleasure and promises to be a useful companion in the future. I especially appreciate Gregutt's sense of history. Knowing history always helps me make better sense of what I see today.

    The book is organized into three sections. The first provides background in the form of brief surveys of the history of wine in Washington, the AVAs, the grape varieties and the top ten vineyards. The chapter on grapes explains where and how each varietal fits into the Washington wine puzzle and a brief list of "best bottles." This is just about only place in the book where Gregutt (hereafter PG) ranks individual wines, which is fine with me. There are lots of places to go for wine ratings and rankings (including PG's own blog at and a book is actually the wrong place to do this because of the dynamic nature of the wine market and the less-than-dynamic time frame of book publication. Lots of interesting and useful information is presented here in a lively style.

    The second section provides usefully detailed descriptions of more than 100 Washington wineries (out of the 500+ wineries currently producing). An innovation here is the use of a 100-point scale to rate the wineries (not individual wines). PG rates each producer according to style (30 points), consistency (30 points), value (30 points) and its contribution to the development and improvement of the Washington wine industry (10 points). Everything about this rating system is subjective, of course, but I find it interesting nonetheless (although I must admit that my first reaction was not so favorable -- Karen Wade encouraged me to take a second look at it and I am glad I did). Consistency and value in particular are two factors that are important to wine buyers but that do not always show up clearly in the rankings of individual wines. A reputation for consistency and value is a good thing.

    The top winery in Washington? Quilceda Creek, with its perfect 100 Robert Parker point Cabernet Sauvignon, also gets a perfect PG score (30/30/30/10). Leonetti ranks second with 98 points (30/28/30/10). Columbia Crest, a volume producer, earns a surprisingly high 92 points (26/26/30/10), reflecting its good value and all that it (and Chateau Ste Michelle) have done to promote Washington wines in general.

    The part of the book that is most directly relevant to this blog comes at the end, when PG considers the future of Washington wine, asking some pointed questions to industry leaders including Ted Baseler of Chateau Ste Michelle, Bob Betz, Tom Hedges, Allen Shoup and David Lake. One of the questions is, how well do Washington wines compete in the global marketplace (and how can they do better)? Here is summary of some of the responses:

    1. Although Washington wines are currently exported to 40 foreign countries, the export market is not yet very significant. Most Washington wine is sold domestically.

    2. Profit margins on exports are lower than on domestic sales, so at this point exports are done either for personality satisfaction (the ego factor) or as part of a long term market development strategy. There are good economic reasons to privilege domestic over foreign sales now, although that could change in the future as competition for the U.S. market intensifies.

    3. It is difficult to sell Washington wines abroad because no one really knows that they are. Are they like California wines (in which case, why not just buy California wines and be done with it)? David Lake says that he tells people that Washington wines are as different from those from California as New Zealand wines are from Australian products. I think that comparison is both valid and persuasive, but ...

    4) Foreign consumers generally don't know when they are buying a Washington wine because the bottle doesn't say
    Washington except in fine print on the back. New Zealand wines, on the other hand, typically say New Zealand clearly on the front label. New Zealand wines systematically reinforce a regional identity; Washington wines do not.

    The source of Washington wines is usually listed by AVA: Columbia Valley, Yakima Valley, Red Mountain, and so forth. You and I might know that all these wines come from Washignton, but a British supermarket customer or Japanese restaurant patron probably doesn't. The AVA system that individual wineries use to differentiate their products from others in Washignton makes it more difficult for Washington wines in general to develop a clear identity of their own -- the sort of identity that's needed for successful global market penetration.

    5) New Zealand's success in the global wine market is clearly on everyone's mind. New Zealand's growth was made possible by the exceptional quality of one wine: Marlborough Sauvignon Blanc. That wine opened doors around the world for
    all New Zealand wines. That's what we need, several of the experts say, we need one distinctive Washington wine that we can promote aggressively. That signature wine will carry the rest of the industry into the global market.

    Yes, yes, but
    which wine? Jancis Robinson famous said that Washington Merlot is as good as it gets for Merlot, but so what? She didn't seem to think that you could build a global market identity on the back of merely Merlot. (She doesn't have much that is good to say about Chardonnay, either. Don't get her started.)

    6) So what wine
    will it be? Winemakers who have already invested a lot in establishing an identity for their products are unlikely to want to shift attention to a different varietal, AVA or designation in order to help establish an Washignton State Wine brand that is of uncertain value to them. Hard to imagine that a consensus will be easily reached.

    So maybe it will be left to the market to decide. I think that's how it actually happened in New Zealand.

    It would be ironic if Washington's special wine turned out to be Riesling, the varietal on which the industry was built in the 1970s and one that is experiencing a market renaissance today (Riesling is Jancis Robinson's favorite wine, I think). Washington is the world's largest producer of Riesling wines, but they don't get much respect here compared with red wines, even though some of them are very good. (Hmmm. The Germans who make great Riesling prefer to drink red wines, too.)

    Maybe Riesling is
    it and we just haven't realized it. It would be ironic if Washington winemakers and consumers were the last to know what the region's signature wine really is!

    Saturday, November 3, 2007

    Internet Wine Scams

    The internet has done a lot for the global wine industry. It promotes the diffusion of useful marketing and research information, facilitates wine tourism, promotes professional collaboration, and helps individual winemakers and regional groups to establish distinct market identities. Many winemakers and winesellers rely upon internet contacts for a good proportion of their sales. If you are reading this blog entry, chances are that you get a lot of your wine information over the internet, too. It's a good thing, for the most part.

    But not everything about the internet is good for winemakers. Do you remember the old New Yorker cartoon with the punchline "On the internet nobody knows you're a dog?" On the internet we are who and what we pretend to be. Obviously wine marketers can use this fact to tailor the imagine of their wines and winemakers. Nothing surprising there. But, as I have recently learned, there are some predators out there who use the internet to try to take advantage of wine producers.

    Karen Wade, who owns the Fielding Hills winery with her husband Mike, recently sent me an email that she received from someone posing as a wine buyer, writing under the subject heading, "I Need Wine for my Birthday Party."

    My name is Robert Peter, an American .
    I live and work here in Seoul, South Korea.
    Actually when I was around last year for chistmas holiday, I got a a bottle of of one of your wines from a friend and i love the taste .since then , I been planning on getting your wines for my birthday party ...coming up third week of novemebr here in Seoul, South Korea.
    I will be making my payment via my American based credit card .
    You are not shipping the wines ....The wines will be picked up at your winery by a licensed shipping agency .This shipping agency have all the appropriate exportation documents and permits .
    I got your contact thru your website and I want to know if you will be able to supply me some cases of wines for my upcoming birthday .
    Concerning the shipping of the wines , I will refer you to a shipping company that will come for the pick up of the wines in your winery once I have made my payment .
    Kindly get back to me so that I can make my orders .
    Robert .

    Karen writes that

    Mike and I receive almost weekly, very official emails from places in Asia wanting to buy wine. They always offer to pay by American credit card and promise to have the wine picked up by their shipper. I answered once and told them to fax me the credit card info and order and never heard anything back.

    I guess this indicates that the sort of people responsible for those bogus Nigerian email scams have now become more specialized, targeting wine producers. I wonder if anyone has fallen for this? Have any other winemakers received these emails, or are the Wades just lucky? Do other businesses received specialized scams like this?

    On a related note, Mike and Karen Wade received good news this week in the 2008 edition of Tom Stevenson's Wine Report, one of the best annual guides to global wine. Paul Gregutt, the Pacific Northwest contributor to this volume, rated their winery as the number one "new and up-and-coming producer" in the region. He also listed the 2004 Fielding Hills Cabernet Sauvignon as number four on his list of the ten "greatest quality" wines. That's high praise for Fielding Hills.

    Paul Gregutt has a new book out about Washington wines and wineries. I'll be posting a review of it later this week.

    Thursday, November 1, 2007

    Wine, Branded Wine and the Market for Lemons

    I have learned that many people who visit this page are searching for an answer to the question "why are brands so important in the wine market today?" (When I Googled that question this morning, this blog was #3 on the results list). So maybe I should address the question directly.

    It is true that wine brands are a significant factor in the market. The largest wine companies in the world -- Constellation Brands, Foster's, Gallo -- manage large brand portfolios. Just as a mutual fund tries to cover the bases with a diversified mix of investments, the wine giants try to cover the market with a collection of brands of different types of wine from different continents at different price points. Just click on one of the company links I've inserted to see the brand lineups for yourself. They are really quite spectacular in terms of the number and diversity of wines that these companies produce and distribute.

    The emphasis on brands isn't limited to the largest companies. Just look at the brand portfolio of the French firm Broisset, for example, or Ste Michelle Wine Estates. Precept Brands is a good example of how a relatively small regional wine company can successfully assemble a global wine portfolio -- their wines come from Washington, California, Australia, New Zealand, France, Italy, Spain and Germany. Don Sebastiani and Sons is another good example of the global wine portfolio model.

    So why are branded wines suddenly so important? Well, the first thing to recognize is that wine branding (and even portfolios of branded wines) is not a new phenomenon. Although people tend to associate the branding trend with New World wine, especially U.S. and Australia, in fact the Europeans inventing the system and in some respects are still masters of it.

    Branding is really all about product differentiation -- establishing a product identity that stands out in the marketplace. The European appelation system was invented to accomplish this goal. The local and regional classifications that make marketing European wines in the New World a nightmare were invented to be powerful brands (and some of them still are). The difference, of course, is that those brands were created by regional grower cooperative wineries in an attempt to differentiate their wines from those of other regional producers, whereas these brands (Yellow Tale and the like) are created by wine businesses that specialize in selling wine, not making it -- in marketing not viticulture.

    Globalization has been part of the shift in brand strategy. As the global market expands and brings in new consumers, the company-based branding system is simply more successful than the old geography-based grower-driven branding system because it is easier to understand and promote. It gives wine to consumers who are accustomed to purchasing branded products in a format that they can easily understand.

    It seems to me that the French, who famously reject the idea branded products in their anti-globalization rhetoric, are in fact the most successful practitioners of the branding art. If you think of Champagne and Beaujolais as brands, which they are, and not just regions or styles of wine, this becomes instantly clear. Beajoulais Nouveau, the ultimate Coca Cola wine, was purposefully developed as a global brand. And of course, such French firms as LVMH are the most successful purveyors of branded luxury products, including wine, in the world.

    Brands are nothing new and they are more than just a marketing tool. Brands can serve a very useful economic purpose. The Nobel Prize winning economist George Ackerloff wrote about the problem of making a purchase under uncertainty in a famous paper on "the market for lemons." Buying a used car, for example, is difficult because it is hard to tell if a particular vehicle is a "lemon." Some cars, even by reliable manufacturers, are simply plagued by problems and it is not in the seller's interest to disclose this fact. So when you buy a used car, you have to accept the risk that you might be buying a lemon. This uncertainly drives down the price of all used cars, according to Ackerloff, even the good ones. There are a variety of solutions to this problem, many of which are techniques for the seller of a non-lemon to communicate this fact to buyers, thus differentiating good cars from bad and gaining a higher price.

    Do you see where this is going? Although I have never tasted wine made from lemons, I have drunk a lot of lemon wine in my time. The fact is that some wines or some vintages are lemons and cannot be sure if you have a lemon until you open the bottle. Solution? Well, the whole wine rating industry exists because of the lemon wine problem, doesn't it? Robert Parker and Wine Spectator play the same role for wine that Consumer Reports does for cars and washington machines.

    Brands are another solution to the lemon problem. If brands represent a reliable indicator of quality or consistency (these are not always the same thing), then they communicate valuable information to buyers, who are seeking that knowledge. Result (if successful), more confidence among wine drinkers and a higher overall demand for wine. With the market demand for wine growing and becoming more complex in the New World, the value of brands has increased correspondingly. That said, I do not think that some of the hundreds of new brands I have seen really mean anything or communicate any useful information to buyers. There is a brand boom going on, in my opinion, which I suspect will be followed by a brand bust. Keep your eyes open for bins of discounted wine from discontinued brand lines.

    One final reason for rising importance of wine brands is distribution. I have noticed that every industry tends to organize itself around solutions to its biggest bottleneck -- the factor that represents the biggest impediment to efficiency. Distribution is the biggest problem in the United States and some wine makers solve this problem by becoming distribution machines (that's part of the Gallo story) and some distributors have become turned into winemakers, either directly or through strategic alliances (that's part of the Yellow Tail story).

    Here, very briefly, is the distribution story. Retailers prefer to deal with a small number of distributors in each product category, so size matters in distribution. On the wine aisle, these distributors need to provide product at several different price points (because retail wine buyers purchase by price more than any other factor) in a large number of different categories (think of all the different varietals and regions to cover) -- and do it in a way that will reduce consumer uncertainty not increase it, reducing the lemon fear and increasing sales. Brands address the lemon issue, and portfolios of brands are necessary to provide provide wines in different categories at each critical price point and to create the breadth and scale that retailers seek. The distributors what can do this the best become the leading wine companies.