Well, it turns out that, at least in California, things are worse than I thought. So, it is worth writing about this topic again.
In a previous post (Why does world wine production always exceed consumption?), I noted that, in most countries, wine production is not increasing, so that increasing global over-supply must logically involve decreasing consumption. That is, the wine industry presumably sees the situation as “under-consumption” rather than over-production!
As has often been reported, this is happening because younger people currently prefer both beer and RTD to wine. That is, changing consumer preferences are a key driver of the downward trend in the wine industry. Even in French supermarkets, last year beer sales surpassed wine for the first time (How France is turning from wine to beer); and Bordeaux wine has never been cheaper (The only solution for Bordeaux — cut volumes and raise prices).
Since this is a global issue, several national governments have had to address the situation. For example, in France surplus wine has been distilled, at government instigation (and expense). However, the grape growers have argued that this is only a short-term response, so that the economic crisis will continue (French government offers aid to struggling grape-growers, but no long-term solution). So, removing vineyards has been the way to go, and has already started (Bordeaux bloodbath! France pays winemakers to dig up vines).
So, not unexpectedly, there are currently trade tensions between many of the wine export and import countries. This has been tangled with other trade issues — for example, when he was president, Donald Trump imposed tariffs on French wine as part of a long-standing transatlantic feud over subsidies to aircraft makers Airbus and Boeing; but this has now supposedly ended.
In this sense, I would expect the wine-producing countries of the world to follow each other, in terms of reducing production. However, this still leaves the issue of the current global wine lake, and what to do with it. Clearly, it must be sold cheaply, either as wine for retail or as a source of spirits.
If it is sold as wine, then it must be transported to the retail location, presumably in bulk (to cut costs), and then packaged locally. The big question, though, is: how is it packaged? It can be either packaged as is (with its origin clearly indicated), or it can be blended with something else. How familiar are you with the latter concept in the USA?
One might think that the incremental cost of transporting bulk wine to the USA would out-weigh discounts achieved by buying domestic fruit, especially during a wine-grape glut. However, this is apparently not always so (The international bulk wine market: mysterious price drops). This can lead to the situation where any given retail wine can contain both American and foreign fruit, blended.
This is all well and good, so far — but how is the resulting blended wine labeled? According to the US Alcohol and Tobacco Tax and Trade Bureau (Wine labeling: Appellation of origin), the American rule for wine is a percentage:
- If a vintage-dated wine lists a specific AVA, 85% of the grapes must come from the stated year and AVA
- For wines labeled with a state or county, the minimum is 75%
- All wines listing a varietal designation from the USA must be made from a minimum of 75% of the stated grape variety grown in the USA.
Well, apparently the larger US producers know this, and are currently exploiting it increasingly (Global wine glut compounds headaches for struggling California vineyards). That is, it is currently cheaper to blend the foreign and local stuff than to blend just the local stuff. You can read all about it from the Lodi Wine Growers a week ago: Imported foreign bulk wine: the dirty secret no one in California wine is talking about. They pull no punches, and cite the numbers to show just how much of this is apparently going on. *
They don’t stop there, though. The Lodi Growers point out that the local California grocery stores are equally cavalier about the sources of the boxed wines they are retailing. Distinguishing the local stuff from the imported stuff currently takes effort on the part of the purchaser, because the retailer often puts in no effort at all at distinguishing them (see the picture above). This is no way to behave towards one of their most important local industries.
I am an outsider to the industry, in the sense that I am a consumer rather than a producer. In that sense, this is California’s problem more than anyone else’s. And yet, many locals apparently are not putting their money where their mouths are, either at the level of production or the level of retail. So, this is hard to say, but: I weep for them not — they have made their own bed. Sadly, the rest of the locals have to lie in that same bed, too.
* Dan Berger has also looked at this topic, a couple of days ago, after I had written this post, in: The growing wine lake.
