The outrageous prices of modern high-quality wines

Over at The Real Review, Huon Hook recently noted:

We all have our price-limits, whether or not we stick to a strict budget. But it’s always puzzled me that some people’s price limit for wine never seems to increase ... There is this thing called inflation. You don’t expect your other living expenses to stay the same for years, do you? So why wine?

While this is all true, there is no good reason to expect that any price increases are restricted solely to the value of inflation. This is a topic worth having a quantitative look at, particularly for non-necessity goods, like wine. These products may well have different economic behavior to necessity (or staple) goods (for another example, see: How pharmaceutical companies price their drugs).

The American Association of Wine Economists has now published this report:

Neal D. Hulkower (2020) What can I still afford to drink? AAWE Working Paper 254.

This report discusses the data used for Neal’s Wine-Searcher article on The cost of drinking wine history, in which he reflects on the sorts of wines he used to drink back in the 1960s and 1970s. In particular, Neal comments on the prices of wine back then compared to now, pointing out in no uncertain terms that, across the board, the increase in price has gone way beyond any possible increase due solely to inflation.

Now, Neal is a mathematician, so we can be sure that he kept quantitative records of the prices he paid for the wines back then, and that he has updated those prices based on the recorded annual inflation since then. For those of you who are interested, the U.S. Bureau of Labor Statistics has a graph showing inflation since 1963 (which is reproduced above).

Neal’s report produces a nice set of tables summarizing all of the data, because that is how it is done in this business. He even has available some pictures of his notebooks and the associated wine labels. A mathematical wine enthusiast, to be sure.

However, I am not a mathematician, I am a biologist. I don’t think in terms of numbers — I use pictures, instead. A picture of a set of numbers is a graph. So, here is my picture of Neal’s numbers. Each point represents one of his 92 wines, with the price for the currently available vintage shown vertically, and Neal’s calculation of the price he originally paid plus the adjustment for inflation (cumulative, up to now) horizontally.

Should wines cost the same now as they did way back when, then the points would lie along the pink line. As you can see, very few of them are anywhere near this line. Indeed, they are all well and truly above that line, meaning that their current prices are outrageous compared to what they were half a century ago, relatively speaking. Put another way, high-quality wine is much less affordable these days.

Let's leave aside the 10 pink points for a moment, and look at the 82 other wines. These points are scattered around the black line on the graph (their line of best mathematical fit). This shows that the current price is related to the original price (accounting for 41% of the variation in price). However, it has been multiplied by a factor of 12, plus an across-the-board increase of $40. That is, to get the modern price of these wines, we need to: increase the original price by inflation, add $40, and then multiply by 12. Times have, indeed, changed.

Now, okay, we need to recognize that Neal drank rather well in his youth. These are not bag-in-box wines we are talking about here. Instead, they are the sorts of wines that a wine enthusiast would have considered good, and worthy of a special occasion. Sadly, I was a bit young to have afforded them back then, and I cannot even think about affording them now.

That leaves us with the 10 wines shown in pink, at the top of the graph. These are what are called “unicorns”, these days. Their prices have no connection at all to their original prices. The modern prices are apparently either set by divine providence, or they are whatever prices their producers thought they can get away with. The people who buy these wines have no sense of value-for-money. I am not one of these people, and apparently neither is Neal.

It is now tempting to try the same thing for myself. I do have some records of the prices of my Australian wines from the 1980s — this would give me 40 years’ worth of inflation to examine, for those wines that are still produced. It might make an interesting comparison.

Recent wine power brands

In my last post (Why have spirits brands been "more powerful" in the marketplace than wine brands?) I discussed a few wine brands that have consistently done well in the marketplace, in terms of dominating their segments. However, the data finished in 2015, which is hardly recent. So, now we should look at some more recent information.

For each of the past 3 years, Wine Intelligence has produced what they call the Global Wine Brand Power Index, assessing the worldwide performance of various wine brands. This lists the top 15 of “the world’s strongest wine brands from a consumer point of view” (ie. based on consumer feeedback).

They describe their effort this way (Power brands: the back-story):

Over the past 15 years, the team here at Wine Intelligence has closely monitored the performance of a number of wine brands across the 32 markets that we cover in terms of wine consumer usage and attitude ... The Global Wine Brand Power Index is the result of on an algorithm developed by Wine Intelligence using data from our wholly-owned Vinitrac® surveys of respondents in key wine markets. As well as measuring the consumer’s consumption behaviour and attitude towards wine, the surveys also determine the health of a brand by asking respondents the following questions:

• Which brands they have heard of from a list of 40 to 60 brands (we tailor each brand list for each market)
• Which they have purchased in the past 3 months
• Which they would consider purchasing
• Which they feel an affinity towards.

An index is then calculated at a global level as well as at a country level.

The size of the surveys differed across the 3 years. For example, the first survey (2018 report, based on the 2017 survey) covered c.16,000 respondents in 15 wine markets, including Australia, Canada, Chile, China, France, Germany, Great Britain, Ireland, Japan, South Korea, Sweden, and the USA. The other two surveys expanded these numbers to c.20,000 respondents in 20 (2019 report) and 21 (2020 report) wine market mix, while also changing the markets (eg. for 2020: Chile, Denmark and Switzerland were removed, and Colombia, Finland, Hong Kong and Mexico were added).

I have compiled the data for the Global Index from the press releases, and combined them. Here is a set of plots of the rankings from the three lists. Each point represents one wine brand, showing its rank in the lists. There are three pairwise comparisons, each of them shown twice. For example, the middle-left graph has the 2018 ranks horizontally and the 2019 ranks vertically, while the middle-top graph has the same information the other way around.

The most interesting thing to note here is that the 2018 and 2019 lists are very similar in order, in spite of the expanded scope of the second survey. However, the 2020 list is somewhat different from both of these — clearly, there was some movement of wine brands near the middle of the list. We can look at this in more detail by looking at the actual Power Scores, rather than just the rank-order list. I have the data only for the 2019 and 2020 reports, which are shown in the next graph (each point represents one wine brand).

This shows us that six of the top brands had similar scores in both years, as did the four bottom brands. However, the other five brands notably changed scores, which severely affected their ranking in the list.

We should now look at the actual brands that did well across all 3 years. This table lists those 14 wine brands that appeared in all of the years, in their average rank order. Note that four of these brands have very similar ranks (8.0–8.7); and it is these that changed rank between years. The two brands that appeared only in some of the lists are Torres (2019, 2020) and Woodbridge (2018).

1.0 2.0 4.2 4.8 6.2 8.0 8.3 8.7 8.7 9.7 10.2 11.3 12.3 13.8

Yellow Tail Casillero del Diablo Gallo Family Vineyards Jacob’s Creek Mouton Cadet J.P. Chenet Gato Negro Carlo Rossi Robert Mondavi Barefoot Beringer Frontera Lindeman’s Santa Carolina

Only the top two brands maintained their position across all 3 years, and these may therefore be considered to be the most powerful (or strongest) wine brands in the world.

You will note that this list is dominated by brands from Australia and Chile, in spite of the fact that these two countries account for less than 10% of world wine production. Marketplace power is not the same thing as volume of sales.

Why have spirits brands been "more powerful" in the marketplace than wine brands?

Commercial alcoholic beverages have all sorts of marketplace characteristics, one of which is their ability to dominate their markets. This feature was investigated in a survey of the world’s leading drinks brands, published annually from 2006-2015 by the international company strategists Intangible Business. This was called The Power 100, in which each brand was given a power score, allowing them to be ranked.

Intangible Business apparently researched c. 10,000 spirit and wine brands across the globe, to assess both the financial contribution of each brand and its strength in the eyes of the consumer. To do this, they combined scores from a panel of drinks industry experts along with global sales data (see Methodology, and Panelists).

The Brand Score (out of 100) was produced by the panelists, who scored each brand for these characteristics (each a scale: 0–10):

• Share of market: a volume based measure of market share
• Future Growth: projected growth based on 10 years of historical data and future trends
• Premium Price Positioning: a measure of a brand’s ability to command a premium
• Market Scope: number of markets in which the brand has a significant presence
• Brand Awareness: a combination of prompted and spontaneous awareness
• Brand Relevancy: capacity to relate to the brand and a propensity to purchase
• Brand Heritage: a brand’s longevity and a measure of how it is embedded in local culture
• Brand Perception: loyalty and how close a strong brand image is to a desire for ownership.

This Score was then turned into a Total Score (out of 100) by multiplying it by the brand’s weighted sales volume — the weighting was apparently designed to adjust the volumes to a comparable level. It was the Total Score that was used for the final Power list, with the top 100 being listed each year.

Across the 10 years, 141 brands appeared at least once, although only 68 (48%) of them appeared in all 10 surveys, with another 8 appearing in 9/10 years. That is, only half of the brands had any sustained Power — these are listed at the bottom of this post. In the other cases, the brands either appeared in the early surveys only, or in the later surveys only — very few came and went from year to year (implying that they were just on the border of the top 100).

Perhaps the first thing to note about the results is that Power comes mostly from sales volume. This is illustrated in the graph, which plots Brand Score (horizontally) and Total Score (vertically). Each point represents the results for one brand in one year (ie. there are 1,000 points).

Note that Total Score increases very rapidly — indeed, this increase is greater than exponential. Those brands above the dashed line (eg. Smirnoff vodka, Johnnie Walker whisky, Bacardi rum) have their Brand Score massively enhanced by sales — this makes them consistently by far the most powerful brands. However, also note that it is only brands with a high Brand Score that have large sales volumes, and therefore a high Total Score.

To consider which types of brands make it into the lists, we can categorize them:

• Wine (Champagne, Other Sparkling, Still Light Wine, Fortified Wine)
• Whiskey / Whisky
• Spirit (Cognac, Other Brandy, Gin / Genever, Rum / Cane, Tequila, Vodka)
• Flavored (Aniseed, Bitters / Spirit Aperitifs, Light Aperitif, Liqueurs, Alcopop).

The results for these categories are listed in the first table.

Number of brands Average no. years /10 Occur in all 10 years (%) Average rank /100

Wine 39 6.0 26 61.0

Whisky 31 8.2 65 46.6

Spirit 49 6.8 47 44.3

Flavored 22 8.0 68 53.9

Note that the Wine category does very poorly. There are a good number of brands, but they do not have much power, compared to the spirits categories. That is, fewer brands appeared in all 10 years, and their ranks were mostly lower than for the other categories. [Note: in the wine world, the word “brand” is often used to refer to the company, while “label” refers to what are here called brands.]

This is not necessarily unexpected, if real power comes from sales volume. There are many more wine brands on this planet than there are spirits brands, and therefore they split the market between them into much smaller segments. Competition ensures that none of these segments is very large. Making matters even more extreme, many wineries market wines from a series of different vineyards each under their own name (citing the supremacy of terroir in the wine world), even if they use the same overall brand name — this potentially fragments the market even more.

Many larger wine companies have been acquiring small independent producers with a high reputation, but this consolidation would result in brand power only if they are marketed under the same brand name. However, the plan generally seems to be to keep them as boutique brands within a large premium portfolio.

So, which wine brands did consistently made it onto the Power lists? This next table shows how many of the wine brands appeared in all 10 surveys. For example, for the Still Light Wines, 20 brands appeared at least once, and 6 of these appeared in all 10 years. The table then lists the average rank across the surveys for those brands that did make it all 10 times. So, for example, Moët fared best (had the best average rank), followed by Gallo and Concha y Toro, who all managed to crack the top 20 (out of 100).

Still Light Wine   Gallo   Concha y Toro   Hardys   Robert Mondavi   Jacobs Creek   Blossom Hill Champagne   Moët et Chandon   Veuve Clicquot   Mumm Other Sparkling   Freixenet Fortified Wine

6 / 20   19.0   21.0   29.4   32.6   54.4   66.9 3 / 14   16.5   27.7   80.3 1 / 2   51.0 0 / 3

This list may not impress you very much. Notably, there were none of the premium wine brands included in any of the Top 100 lists, except a few from the Champagne region of France. The wines of Bordeaux, Burgundy and the Napa Valley, for example, simply do not sell enough volume to achieve any real market power. The media write about them a lot, but most consumers know little about them; and real power rests with the masses, not the media.

Conclusion

Simply put, there are more wine brands in the world than spirits brands, so that none of them can have a sufficient part of the market to achieve great market power. That is, diversity and power are inversely related. So, spirits continue to rule in the global power game.

Note that these 2006-2015 surveys are not particularly current. However, since then, things have not improved to any extent for wine volume sales. Millennial and Generation Z consumers increasingly favor spirits and, more recently, hard seltzers. And remember, the Millennials have now officially taken over the marketplace (Millennials overtake Baby Boomers as America’s largest generation).

---

Brands that appeared in all 10 of The Power 100 lists.

Wine Moët et Chandon Mumm Veuve Clicquot Freixenet Blossom Hill Concha y Toro Gallo Hardys Jacobs Creek Robert Mondavi

Whisky Glenfiddich 100 Pipers Ballantine’s Bell's Chivas Regal Dewars Famous Grouse Grant’s Scotch J & B Johnnie Walker Teacher's Jameson Black Velvet Canadian Club Canadian Mist Crown Royal Jack Daniel's Jim Beam Maker's Mark Wild Turkey

Spirit Courvoisier Hennessy Martell Rémy Martin Dreher E & J Brandy Beefeater Bombay Sapphire Gordon's Gin Seagram Gin Tanqueray Bacardi Captain Morgan Havana Club Cuervo Sauza Absolut Finlandia Grey Goose Ketel One Skyy Smirnoff Vodka Stolichnaya

Flavored Ricard Campari Bitters Fernet-Branca Jägermeister Cinzano Vermouth Martini Vermouth Baileys Bols Liqueurs Cointreau De Kuyper Disaronno Grand Marnier Kahlua Malibu Southern Comfort

Lifetime alcohol abstainers — where in the world are they?

In my last post, I wrote about a medical experiment regarding the effects of alcohol consumption on longevity (Wine and health — why is there so much argument, pro and con?), with lifetime abstainers not faring so well. By coincidence, a few weeks ago the American Association of Wine Economists’ Facebook page, highlighted the available data for Lifetime Alcohol Abstainers. For each of 189 countries in 2010, it listed the percentage of adults (15+ years) who reported having refrained from drinking alcohol throughout their life. The data source was the World Health Organization Global Health Observatory, via the Our World in Data web page.

Here, I thought that it might be worth looking at the geography of these data — these people are not always where you might expect. Obviously, the first thing to do is actually map the percentage data, as shown here.

As we might expect, the abstainers are not randomly distributed on our planet — they are concentrated in Africa and Asia. In particular, Muslim-dominated countries have reported abstention levels greater than 85% — it cannot be 100%, because not everyone in these countries is a practicing Muslim. Also, South America has a higher percentage of abstainers than do North America, Europe or Australasia.

North America and Australasia are dominated by English-speaking peoples, frequently referred to as part of the New World. Here, alcohol abstention is not popular among the people:

United States Canada New Zealand Australia

12.0% 11.1% 11.1% 10.0%

Aside from these two regions, only one other major population center outside Europe has such low levels:

Japan

12.0%

Here, of course, sake is a traditional (and popular) rice-based alcoholic beverage.

Within South America, which is the non-English-speaking part of the New World, only two countries have relatively low levels of abstention:

Paraguay Chile

17.9% 16.1%

Most of the other countries in South and Central America have 20-35% of their people reporting abstention. Note that these are much higher abstention rates than in either Spain or Portugal, where much of the modern culture originated.

This brings us to Europe. For those of you not familiar with its local geography, here is a map showing the location of the relevant countries. Note that Russia west of the Ural Mountains has traditionally been treated as part of Europe, while Siberia is treated as part of Asia. Also, Turkey west of the Black Sea is traditionally part of Europe, with the rest of the country being part of the Middle East, in Asia (or Asia Minor, as it once was called).

Within Europe, there is quite a large range of abstention levels, as illustrated in this graph, which shows three main clusters of levels plus three much-higher outliers (each vertical line represents one country).

The three outlying countries are:

Slovenia Georgia Azerbaijan

55.6% 51.3% 38.7%

The latter two countries are geographical outliers within Europe, to the south-east, along with Armenia (at 23.0% abstention). This is ironic, since this area, between the Caspian and Black Seas, is now considered to be where the technique of making wine from grapes originated.

This leaves only the Slovenians with some explaining to do, as their abstention level is more than three times that of any of the other former members of Yugoslavia, as well as higher than the levels of their other neighboring countries (Austria, Hungary, Italy).

The three main clusters European abstention (0-10%, 10-20%, 20-30%) do not show any obvious geographical patterns. For example, within the Nordic countries, Denmark (4.5%) and Norway (5.5%) are in the bottom group, while Sweden (12.1%), Finland (14.0%) and Iceland (14.1%) are in the second group. Within Iberia, Spain has only 12.6% abstainers, while Portugal is much higher, at 22.5%.

Nor do socio-economic criteria seem to offer much explanation. For example, the levels in the major wine-making countries vary from France (2.0%) to Italy (25.7%). Indeed, these two countries are also the extremes of those European countries with Romance languages — on the other hand, the Romance-language countries of Central and South America vary from 17.9% (Paraguay) to 36.1% (Guatemala) abstainers. The German-language countries of Europe vary from 3.8% (The Netherlands) to 18.1% (Austria); and the Slavic-language countries vary from 2.6% (Czechia) to 27.3% (Poland).

The only thing I have found that correlates even partly with the variation in rate of abstainers in Europe is from the responses to the Gallup Poll question: “Is religion important in your daily life?” (see Wikipedia). Across all of the countries of Europe, there is a positive log-linear relationship between abstention and religion of r² = 23%, as shown in the next graph (where each point represents one country).

Conclusion

Lifetime abstainers from alcohol are not randomly distributed across our planet. They are principally concentrated in the Muslim-dominated countries of Africa and Asia, along with higher percentages in South / Central America compared to North America, Australasia, and Europe. However, even among the countries of Europe there is a surprising diversity of abstention rates, although this does not appear to have much relation to any socio-economic factors.