Last week, I presented some data showing that, in the alcohol industry, one-quarter (wine) to two-fifths (beer and spirits) of the makers cannot put a legal label on a bottle properly (Regulatory compliance is not something that the alcohol industry is good at). To me, this raises a more general question about social responsibility within the industry.
One of the biggest pressure points is, of course, the potential negative effects of alcohol on people. Historically, we have experienced everything from having alcohol banned, by governments as well as religious groups, to a laissez faire approach — neither of these extremes seems to have been very successful. However, the pressure will always be on; and the industry will be accused of irresponsibility if it does not respond in what is perceived to be a suitable manner.
In thinking about this, the comparison with motor vehicles seems inescapable. Automobiles are involved in the death and maiming of countless people every year, worldwide; and yet we continue to use millions of them, every day. This activity threatens the safety of drivers, passengers, pedestrians and cyclists, among others. However, our societal response to this situation has been to focus on the vehicles, not on the drivers. We continue to make cars safer and safer, for the driver and passenger, with seat-belts, air-bags, anti-locking brakes, and even road temperature warnings; but what have we done about the drivers?
What do we do, for example, about people falling asleep at the wheel (eye-facing cameras have been suggested)? Or, using a hand-held phone while driving? Have we ever installed alcohol meters as compulsory equipment (there is an Ignition Interlock system that requires a breathalyzer test before the car can be started)? After all, alcohol and cars are literally a deadly combination. No, we have not installed them; because this targets the people directly, as the responsible agents. This does not mean that the tech industry cannot do it, in general: Monitoring alcohol in your bloodstream via your phone will soon be a reality.
Have you ever driven on a German autobahn, in the days when there was no speed limit? For example, you are driving along at 70 mph, slowly passing a truck that is doing 60 mph. Suddenly there is a car behind you, flashing its lights frantically at you, doing twice your speed. It is approaching you like you are a brick wall that it is approaching at 70 mph! This is terrifying, take my word for it, because there is nothing you can do — you can’t accelerate out of the way, and you certainly shouldn’t put your brakes on. Have you ever seen skid marks that are half a mile long? At the end of one set that I saw, the car had clearly launched itself over the roadside barrier. People were loading the wreckage onto a flatbed truck as I passed — the car was about two feet high, having concertina-ed on impact with the ground. They would have needed a can-opener to remove the human remains. (I did wonder whether the body was still in there.)
Do we place responsibility here on the car manufacturer or on the driver? Apparently the onus is on the former, but we all know that it should be on the latter. And so it also seems to be in the alcohol industry. Alcohol itself does not kill, but you can kill yourself and others by being irresponsible with it. The parallel attitude here looks to me to be fairly obvious. This viewpoint does not, however, exempt the alcohol industry from taking action; and the pressure will always be on.
This does not mean that we should go to the other extreme, of course. I have noted before that Wine and health is never a simple topic. What is good for one part of a human body is not necessarily good for any other part (and vice versa); and, since every person is different, each of us can react differently to any given health situation, alcohol-related or not. This means that advertising incentives encourage trying to get away with almost any claim on a label. Governments have not been kind in response: Alcohol regulators rain on “good for you” labeling claims. It would be wise, I think, for the industry to shy away from too many positive statements about the benefits of alcohol, lest there be a societal back-lash. This actually applies to all foods, of course (Why you shouldn’t trust research which claims that a single foodstuff has amazing health benefits).
So, what might we conclude from this navel gazing? For both the car industry and the alcohol industry, society blames the tools not the people. However, the car manufacturers seem to get away with it in a way that the alcohol producers do not.
That is, the alcohol industry is certainly not perceived as being near the top of the pecking order, with regard to social responsibility. Perhaps we should be grateful that we are not at the bottom, with the gambling industry. While games like poker can be viewed as an exercise in understanding probabilities in a rational manner (eg. Game Theory), and thus they can form part of a valid professional activity, most participants are merely gamblers — they want the thrill, not the mathematical analysis. For alcohol, some people consume it as part of a social lifestyle, but far too many just want the alcohol itself. This is what creates the social problem.
Monday, May 30, 2022
Monday, May 23, 2022
Regulatory compliance is not something that the alcohol industry is good at
There has been some attention recently on what information should be mandated for the labels of alcohol containers (New wine label rules are making alcohol content more accurate ; Portman Group updates alcohol labelling guidelines). Personally, I think that alcohol can reasonably be treated as “food” (I put it in my body, with the intention of metabolizing it), and so it should contain all of the same information as other food, with the same levels of accuracy. How can anyone argue for an exception?
Anyway, this leads me to ask whether the alcohol industry has, in the past, been trustworthy to put accurate information on their labels, even given the very little they have been asked to put there. Interestingly, there are official data that can tell us, at least from the USA.
The US Alcohol and Tobacco Tax and Trade Bureau (part of the Department of the Treasury) has, at least in the past, run a Market Compliance survey, which they describe this way:
The results are shown in the graph. Each point represents one alcohol type, for each year sampled (horizontally), along with the percentage of the bottles that were deemed to be not compliant (vertically). Note that any given bottle could have more than one non-compliance issue. There were an average of 1.16 issues per non-compliant bottle for spirits, 1.27 for malt beverages, and 1.19 for wine bottles.
This is not too good, is it? In fact, it is terrible.
Things start off at their “best”, in 2011, with less than one-quarter of the bottles deemed to have at least one compliance issue; but how can this be the best that the alcohol industry in the USA can do? Moreover, it seems to get worse through time, with spirits reaching a limit of two-fifths (ie. going from 25% to 40%), although wine manages to stay at one-quarter. The malt beverages start off similar to wine (20%) but end up being like spirits (40%). Note that the malt beverages also have the highest number of issues per non-compliant bottle.
The most common issue for the distilled spirits was alcohol content that was greater than that stated on the label (55.3% of the 521 issues). The most common issues for the malt beverages were also alcohol content that was greater than stated on the label (27.8% of the 400 issues), plus non-mandatory information that differed from the COLA (ie. not an allowable label revision; 20.8% of issues). For wines, the most common issues were this same one about revised non-mandatory information (32.1% of the 209 issues), plus an alcohol content that put the contents into a different tax class than that stated on the label (22% of issues). [Note: this tax issue applies only to wines, not to spirits or malt beverages.]
Conclusion
So, the US wine industry can sit there knowing that they are doing better than their compatriots, in terms of not misleading the public with regard to the presentation of their alcoholic product. However, they cannot be too smug about this, can they? After all, they apparently succeed only three-quarters of the time. A 75% success rate may have been acceptable (or even good) when we were back at school, but it can hardly be acceptable in one’s profession. Prior to drinking, the label is all that the customer has, in terms of information. Wine commentators tend to take things at face value, so they cannot help us in this regard, either,
But, boy do those brewers need to get their act together — the spirits industry is not one for them to start emulating, in this case.
[Aside: Part of the problem here is that regulatory compliance is self-monitored — the people doing the work are the same people who are checking for compliance. This does not happen where human safety is concerned — for example, structural engineering requires that an independent group check for design compliance, not the group who created the design. This is supposed to stop bridges collapsing.]
Information (9)
Anyway, this leads me to ask whether the alcohol industry has, in the past, been trustworthy to put accurate information on their labels, even given the very little they have been asked to put there. Interestingly, there are official data that can tell us, at least from the USA.
The US Alcohol and Tobacco Tax and Trade Bureau (part of the Department of the Treasury) has, at least in the past, run a Market Compliance survey, which they describe this way:
Established in 2008, TTB’s Alcohol Beverage Sampling Program (ABSP) is a random survey of products in the marketplace, where we:The readily available data cover the years 2011—2016, listed separately for: distilled spirits, malt beverages, and wines. Over these six years, the TTB reports listed a total of 25 different non-compliance issues, involving: the label information, the bottle contents, and the actual label / container. I have listed these issues at the bottom on this post, so that you can see what is officially expected from the alcohol industry. The average number of distilled spirits examined per year was 230, the number of malt beverages was 182, and the number of wines was 138.Each year we purchase products from the marketplace and bring them to our offices for label assessments, where we first evaluate them for compliance with our labeling regulations. Following the label assessments, we send the products to our laboratories for a series of chemical analyses, to assess whether the products themselves comply with the information displayed on the product labels.
- Verify that the labels on alcohol beverages contain adequate descriptive information,
- Confirm that the labels are not likely to mislead consumers, and
- Determine where compliance issues exist.
The results are shown in the graph. Each point represents one alcohol type, for each year sampled (horizontally), along with the percentage of the bottles that were deemed to be not compliant (vertically). Note that any given bottle could have more than one non-compliance issue. There were an average of 1.16 issues per non-compliant bottle for spirits, 1.27 for malt beverages, and 1.19 for wine bottles.
This is not too good, is it? In fact, it is terrible.
Things start off at their “best”, in 2011, with less than one-quarter of the bottles deemed to have at least one compliance issue; but how can this be the best that the alcohol industry in the USA can do? Moreover, it seems to get worse through time, with spirits reaching a limit of two-fifths (ie. going from 25% to 40%), although wine manages to stay at one-quarter. The malt beverages start off similar to wine (20%) but end up being like spirits (40%). Note that the malt beverages also have the highest number of issues per non-compliant bottle.
The most common issue for the distilled spirits was alcohol content that was greater than that stated on the label (55.3% of the 521 issues). The most common issues for the malt beverages were also alcohol content that was greater than stated on the label (27.8% of the 400 issues), plus non-mandatory information that differed from the COLA (ie. not an allowable label revision; 20.8% of issues). For wines, the most common issues were this same one about revised non-mandatory information (32.1% of the 209 issues), plus an alcohol content that put the contents into a different tax class than that stated on the label (22% of issues). [Note: this tax issue applies only to wines, not to spirits or malt beverages.]
Conclusion
So, the US wine industry can sit there knowing that they are doing better than their compatriots, in terms of not misleading the public with regard to the presentation of their alcoholic product. However, they cannot be too smug about this, can they? After all, they apparently succeed only three-quarters of the time. A 75% success rate may have been acceptable (or even good) when we were back at school, but it can hardly be acceptable in one’s profession. Prior to drinking, the label is all that the customer has, in terms of information. Wine commentators tend to take things at face value, so they cannot help us in this regard, either,
But, boy do those brewers need to get their act together — the spirits industry is not one for them to start emulating, in this case.
[Aside: Part of the problem here is that regulatory compliance is self-monitored — the people doing the work are the same people who are checking for compliance. This does not happen where human safety is concerned — for example, structural engineering requires that an independent group check for design compliance, not the group who created the design. This is supposed to stop bridges collapsing.]
Information (9)
- No Certificate of Label Approval (COLA)
- Mandatory information differs from the approved COLA
- Non-mandatory information differs from the COLA (labels that did not match their approved COLA due to changes that were not allowable revisions)
- Mandatory information is missing
- Mandatory information is incorrect
- Mandatory information is on wrong label
- Government Health Warning Statement has errors
- Class, type, or statement of composition is incorrect
- Statement of average analysis or serving facts statement is missing or is incorrect
- Tax class (alcohol content that places the product in a different tax class than indicated by the label)
- Alcohol content: over (alcohol content that did not match the label and was outside regulatory tolerances) **
- Alcohol content: under (ditto) **
- Fill: over
- Fill: under
- Prohibited practices
- Adulterated
- Pesticides
- Sulfites
- Formula issue
- Type size / legibility
- Label not firmly affixed
- Label covered by another label (label is pasted over)
- Permit address issue
- Organic certification issue
- Distinctive liquor bottle
- Distilled spirits generally allow for a loss of 0.15% alcohol by volume; however, no tolerance is allowed for an increase in alcohol by volume.
- Malt beverages generally allow for a tolerance of 0.3% alcohol by volume, either above or below the alcohol content stated on the label.
- Wines are allowed a tolerance of 1% alcohol by volume, either above or below the stated label alcohol content, for wine containing more than 14% alcohol by volume. Wines falling between 7% and 14% alcohol by volume are allowed a tolerance of 1.5% alcohol by volume. If at any point a wine crosses into a different tax class, the tolerances no longer apply — for example, if a wine is labeled as 13.5%, but is found to actually be 14.2%, we would consider this a violation.
Monday, May 16, 2022
(Let’s complain about some parts of) wine marketing
Quite a few of the emails and Comments submitted to this blog are of this type: “I want to use you to advertise my product.” The writers don’t put it in those exact words, of course, but that is the essence of what they are saying. So, believe me, I am very happy about those other people who also write to me, instead of these particular people.
There is nothing intrinsically wrong with these advertising people, of course, nor with advertising itself. These people simply live in a world where they want you to do things their way, rather than the other way around. Boy, they can sometimes be annoying though, can’t they? Let’s talk about this, today.
As I emphasized, I am not discussing advertising or its usefulness, but am concentrating on the way that it is done far too often (at least in my experience). I am not going to specifically name names in the wine industry, of course, since there is little that is specific to trying to sell wine, as opposed to any other product or service.
For example, we could start with YouTube, instead. Leaving aside the blatant breaching of worldwide copyright laws relating to musical compositions, which so many channels seem to base their entire content on (unless the original content creators are being vigilant, and issue a Take-Down notice), how do we get treated, as customers? After all, the content providers are actually trying to make money from us, in one way or another.
Well, we are often subjected to two consecutive lots of 15-sec ads, before we can even evaluate the content of a video. Do these people really think that I am going to bother with this? There are thousands of other videos to view, so I simply move on. If they were actually treating us like customers, their money-raking activities would occur at the end, not the beginning — we should get some content first. Perhaps even worse are those channels that have ads as well as being sponsored — the latter involving a break in “programming” while the presenters themselves try to flog hair-restorer or insurance to us. Infuriating!
Does this apply to wine advertising on the internet? Well, not directly, as far as I can see. After all, YouTube is banning alcohol, gambling, and politics from its ‘most prominent’ ad slots; so that is tough for the alcohol industry.
But the principle of not letting us even get to the content without an interruption certainly does apply, no matter what web page you go to. Perhaps the most prominent interruption is having a popup appear before you can even read the first few words of content, telling you what the page’s author wants from you. The most common request is for us to subscribe, of course. Subscribe to what??!! We haven’t yet seen anything worth subscribing to!
Receiving an endless series of emails is the most prominent infuriation, in the modern world. That is, of course, precisely why we have to subscribe in order to get to the content — so they can subsequently send us emails. I long ago created a “junk” email account just for this purpose. I use it to subscribe to things that I have no interest in, but am forced to subscribe to, just to read some piece of internet content. The emails sent to that address are, of course, regularly trashed, unread. Emails from organizations that I have chosen myself are another matter, of course (Twitter is for show, but email is for dough).
Actually, I once used to have a Facebook account, too, solely for the purpose of viewing a friend’s photographs — this was before the days of Instagram. Anyway, one day I discovered that I had “liked” a whole bunch of commercial products, most of which I had never heard of. So, I laboriously deleted all of the Likes, one by one. Two days later, most of them were back again. So, I tried to delete my account, instead. Boy, was that an effort! Registering for Facebook is easy, but de-registering is a whole other thing. I succeeded eventually; but it has given me a jaundiced view of the anti-social media, ever since.
On the matter of visiting websites, there is the thorny issue of the use of personal information — gathered by logging every keystroke while you are visiting the site, and later using this to target you. People are not happy about this, which is why we have to explicitly “agree” to the use of cookies before we can get to the website content. Almost all cookies are unnecessary for a successful visit to most webpages; and so, in most cases, agreement is simply an admission of guilt. The statement: “We use cookies to improve your website experience”, is often utter rubbish — if they weren’t tracking us, then we would not have to agree to anything. *
Furthermore, do many Americans know that huge numbers of USA webpages cannot be viewed in the European Union? The EU has very strict laws about the use of private information, and many US webpages blatantly violate those laws. Therefore, the owners of those pages must, by law, block access from EU residents. We residents get a message something like this, instead:
Do these annoyances apply to any great extent in the wine industry? To find out, back on March 23, 2022, I checked the situation for the Wine News Fetch, at Wine Industry Insight. There were links to 66 wine-related news articles listed, arranged in 26 sections. When accessing each of these 66 links, 27 required a cookie agreement from me (40%), at the beginning, and 11 had a “subscribe” pop-up, also at the beginning. Furthermore, two of the sites could not be accessed from the EU, and one required me to complete a Captcha. So, the answer is: Yes, it applies. ***
If you would like an example of perfect irony, try reading this recent article about the very topic at hand (Large spam fine for online wine store) while you have your web-browser's ad blocker switched on (as I always do). You explicitly have to White-List the site (so that the ad-blocker is never used) before you can read more than one sentence of the article.
Apart from direct marketing, as discussed above, much wine advertising is alternatively about brand placement in public. That is, we cannot legally advertise wine directly in many parts of the media, so the ads occur as part of publicly broadcast events (eg. the Casella half-time wine ads during the American Super Bowl). However, there is also the matter of what are politely referred to as “virtual product placements” (aka subliminal advertising). Given YouTube’s alcohol policy, people are starting to take note of what is happening in the movies (Virtual product placement - your wine in their movie) and on television (Reality TV ‘bombards’ young people with alcohol marketing, study says), as well.
Well, what is the moral from this blog post? Don’t annoy your customers, or they won’t be customers for long. There is an old saying that: “The customer is always right”. This is not a definition of “right” but instead is a definition of “customer” — people will not be your customer if you don’t think that they are right, and treat them so.
* I once visited a webpage that was quite honest about this:
*** Lewis Perdue has reminded me that there are websites that will scan other websites, and tell you what those sites are up to, in terms of tracking. Perhaps the best known is: The Markup's Blacklight, if you want to try it.
There is nothing intrinsically wrong with these advertising people, of course, nor with advertising itself. These people simply live in a world where they want you to do things their way, rather than the other way around. Boy, they can sometimes be annoying though, can’t they? Let’s talk about this, today.
As I emphasized, I am not discussing advertising or its usefulness, but am concentrating on the way that it is done far too often (at least in my experience). I am not going to specifically name names in the wine industry, of course, since there is little that is specific to trying to sell wine, as opposed to any other product or service.
For example, we could start with YouTube, instead. Leaving aside the blatant breaching of worldwide copyright laws relating to musical compositions, which so many channels seem to base their entire content on (unless the original content creators are being vigilant, and issue a Take-Down notice), how do we get treated, as customers? After all, the content providers are actually trying to make money from us, in one way or another.
Well, we are often subjected to two consecutive lots of 15-sec ads, before we can even evaluate the content of a video. Do these people really think that I am going to bother with this? There are thousands of other videos to view, so I simply move on. If they were actually treating us like customers, their money-raking activities would occur at the end, not the beginning — we should get some content first. Perhaps even worse are those channels that have ads as well as being sponsored — the latter involving a break in “programming” while the presenters themselves try to flog hair-restorer or insurance to us. Infuriating!
Does this apply to wine advertising on the internet? Well, not directly, as far as I can see. After all, YouTube is banning alcohol, gambling, and politics from its ‘most prominent’ ad slots; so that is tough for the alcohol industry.
But the principle of not letting us even get to the content without an interruption certainly does apply, no matter what web page you go to. Perhaps the most prominent interruption is having a popup appear before you can even read the first few words of content, telling you what the page’s author wants from you. The most common request is for us to subscribe, of course. Subscribe to what??!! We haven’t yet seen anything worth subscribing to!
Receiving an endless series of emails is the most prominent infuriation, in the modern world. That is, of course, precisely why we have to subscribe in order to get to the content — so they can subsequently send us emails. I long ago created a “junk” email account just for this purpose. I use it to subscribe to things that I have no interest in, but am forced to subscribe to, just to read some piece of internet content. The emails sent to that address are, of course, regularly trashed, unread. Emails from organizations that I have chosen myself are another matter, of course (Twitter is for show, but email is for dough).
Actually, I once used to have a Facebook account, too, solely for the purpose of viewing a friend’s photographs — this was before the days of Instagram. Anyway, one day I discovered that I had “liked” a whole bunch of commercial products, most of which I had never heard of. So, I laboriously deleted all of the Likes, one by one. Two days later, most of them were back again. So, I tried to delete my account, instead. Boy, was that an effort! Registering for Facebook is easy, but de-registering is a whole other thing. I succeeded eventually; but it has given me a jaundiced view of the anti-social media, ever since.
On the matter of visiting websites, there is the thorny issue of the use of personal information — gathered by logging every keystroke while you are visiting the site, and later using this to target you. People are not happy about this, which is why we have to explicitly “agree” to the use of cookies before we can get to the website content. Almost all cookies are unnecessary for a successful visit to most webpages; and so, in most cases, agreement is simply an admission of guilt. The statement: “We use cookies to improve your website experience”, is often utter rubbish — if they weren’t tracking us, then we would not have to agree to anything. *
Furthermore, do many Americans know that huge numbers of USA webpages cannot be viewed in the European Union? The EU has very strict laws about the use of private information, and many US webpages blatantly violate those laws. Therefore, the owners of those pages must, by law, block access from EU residents. We residents get a message something like this, instead:
451: Unavailable due to legal reasonsThis notice is often followed by some platitude such as: “We are working to fix this, to ensure that your data is protected in accordance with applicable EU laws.” Sure — pull the other leg! To add insult to injury, some websites will also put up a Captcha, insisting that I prove to the computer that I am a human being, before I am allowed near the hallowed webpage content. This is the wrong way around — you do not put the onus on the customer to prove that they are an actual customer (or want to be). **
We recognize you are attempting to access this website from a country belonging to the European Economic Area (EEA) including the EU which enforces the General Data Protection Regulation (GDPR) and therefore access cannot be granted at this time.
Do these annoyances apply to any great extent in the wine industry? To find out, back on March 23, 2022, I checked the situation for the Wine News Fetch, at Wine Industry Insight. There were links to 66 wine-related news articles listed, arranged in 26 sections. When accessing each of these 66 links, 27 required a cookie agreement from me (40%), at the beginning, and 11 had a “subscribe” pop-up, also at the beginning. Furthermore, two of the sites could not be accessed from the EU, and one required me to complete a Captcha. So, the answer is: Yes, it applies. ***
If you would like an example of perfect irony, try reading this recent article about the very topic at hand (Large spam fine for online wine store) while you have your web-browser's ad blocker switched on (as I always do). You explicitly have to White-List the site (so that the ad-blocker is never used) before you can read more than one sentence of the article.
Apart from direct marketing, as discussed above, much wine advertising is alternatively about brand placement in public. That is, we cannot legally advertise wine directly in many parts of the media, so the ads occur as part of publicly broadcast events (eg. the Casella half-time wine ads during the American Super Bowl). However, there is also the matter of what are politely referred to as “virtual product placements” (aka subliminal advertising). Given YouTube’s alcohol policy, people are starting to take note of what is happening in the movies (Virtual product placement - your wine in their movie) and on television (Reality TV ‘bombards’ young people with alcohol marketing, study says), as well.
Well, what is the moral from this blog post? Don’t annoy your customers, or they won’t be customers for long. There is an old saying that: “The customer is always right”. This is not a definition of “right” but instead is a definition of “customer” — people will not be your customer if you don’t think that they are right, and treat them so.
* I once visited a webpage that was quite honest about this:
We and our partners process data to analyze website performance and to do the following:** I am not going to go into the problems caused by me having an older computer, the web browser on which makes most websites laugh at me, and breaks many of these sites completely. Apparently, I will also have to buy a new computer, just to access much of the future hallowed content.
Create a personalised content profile. Store and/or access information on a device. Develop and improve products. Create a personalised ads profile. Personalised ads and content display, ad and content measurement, and audience insights. Precise geolocation data, and identification through device scanning.
*** Lewis Perdue has reminded me that there are websites that will scan other websites, and tell you what those sites are up to, in terms of tracking. Perhaps the best known is: The Markup's Blacklight, if you want to try it.
Monday, May 9, 2022
Too many eggs in too few wine export baskets
In the past week, the International Organisation for the Vine and Wine (OIV) has told us that Global wine exports have rebounded, after the downturn during the Covid-19 pandemic, with value up 16% and volume 4% (both of which are records: Global wine exports reach record high). However, while export increases are generally seen as A Good Thing, value and volume are only part of the picture.
In particular, I have recently highlighted the potential problems with lack of financial diversity in some parts of the wine industry (The wine industry needs to say: “Cheese”). In particular, wine exports are a potentially very serious source of financial problems (Which countries rely most on wine exports?). As I discuss in this post, some countries are sailing pretty close to the wind, when relying on too few wine export markets.
The data that I will use come from The Observatory of Economic Complexity (OEC). This lists, for each exporting country, the wine value (in $US) exported in 2020 to each of their top-five receiving countries. I have restricted my data to the biggest wine-producing countries by value, plus Moldova, Armenia and Serbia (as discussed below). Other large exporting countries that are mainly re-exporters (not producers), such as the Netherlands, Singapore, and Denmark, have been excluded.
For each country, I have calculated the percentage of wine exports going to the top import country, plus the combined percentage going to the top three importing countries. This will tell us how many of their “eggs” each country is metaphorically putting into their wine basket.
These data are shown in the graph, with each point representing a single country, located horizontally based on export amount to the top country and vertically to the top three.
For most countries, 10—20% of the exports go the main import country, and a bit less than 40% to the top three combined. So, the seven countries at the bottom-left of the graph may be considered to be “situation normal” for what a balanced export portfolio looks like. Indeed, the bottom three countries are all very well placed (12% vs 35%), which they need to be, as big wine industries. Note that Spain and Portugal have almost identical numbers, even though their wine industries are actually quite different.
The next four countries up the graph have fairly similar data (17-20 % vs 37-42 %), but once again they all have very different wine industries. They do, however, seem to have converged on a common approach to wine exports, which they presumably consider to be financially responsible behavior.
The other ten countries are more extreme than these seven. It seems to me that >50% of wine going to just three export countries is getting financially and politically risky; and >50% of wine going to just one export country is quite mad. Four of these countries are grouped together (24-30% vs 50-55%), and all four of these are quite big wine exporters. One hopes that they know what they are doing, although that might be a naive assumption, politically.
The remaining six countries are really rather extreme. That this can be a risky situation has been demonstrated by several of these countries.
For example, Australia put far too many of its wine eggs in the China basket, so that this became far and away its biggest export market; and Australia similarly became the biggest importer into China (Where China get its wine, these days). This is risky in two ways. First, wine consumption can vary through time, and it has definitely done so in China (So, why has China gone off the boil?), and this will eventually catch up with you (Will the slowdown in the Chinese wine market catch up with Australia and Chile?). Second, trade relations can turn sour pretty quickly; and the imposition of Chinese trade tariffs on Australian wine, back in November 2020 (imposed after the data presented above), has hurt the Australian wine industry pretty badly (Australian wine exports fall 26% due to China tariffs and ‘challenging’ conditions ; Aussie wine exports: the pain continues), and continues to do so (Tonnes of grapes ‘left to rot’ as Australia struggles to shift wine).
This has required some pretty fast footwork to find other markets (Challenging market conditions continue but value is starting to flow in some markets). According to Wine Australia, during April 2021 to March 2022, China (including Hong Kong) dropped to the third wine export market (10% of exports), behind the UK (22%) and the USA (20%). These new data (22% to the top country, and 53% to the top three countries) put Australia in the middle group of countries discussed above, which may be a better situation in the long run.
The other prominent recent example of too many eggs in too few baskets concerns the current conflict between Russia and the Ukraine. These two countries are important export markets for several eastern European countries (Exposure to the Russian wine market ; Main wine producers’ wine export dependency on Russia ; Main wine producers’ wine export dependency on Ukraine); and this is A Bad Thing during a war. Several of the affected countries are prominent in the graph above: Georgia (57% of exported wine goes to Russia, 11% to the Ukraine), Armenia (55% to Russia, 4% to the Ukraine), and Serbia (37% to Russia). Moldova is somewhat different — although it relies heavily on wine exports, only 8% goes to Russia. There is only one long-term way out for these exporting countries — develop broader wine markets. Note, incidentally, that these problems are not reciprocal, because Russia’s exports of alcoholic beverages are very small.
This brings our attention, finally, to the remaining two countries at the top of the graph. Austria's main wine exports go to Germany (44%), Switzerland (11%), and the USA (8%); so it is Germany that constitutes their main risk. This assocation is hardly surprising, historically; but Austrian wine deserves a wider audience.
To me, it is New Zealand that is the surprise. There are many things in common between the New Zealand and Australian wine industries, as I have noted before (Australia and New Zealand wine comparisons ; Australia versus New Zealand wine exports), and so I should not really be surprised. However, the Kiwis should have more sense — their industry has grown rapidly over recent decades (The rise and rise of New Zealand wine), but it has apparently not yet diversified. The main current wine export markets are the USA (32%), the UK (25%), and Australia (19%), which shows a distinct cultural and political lack of diversity. Those New Zealanders need to seriously take note of the current problems in the Australian industry.
In particular, I have recently highlighted the potential problems with lack of financial diversity in some parts of the wine industry (The wine industry needs to say: “Cheese”). In particular, wine exports are a potentially very serious source of financial problems (Which countries rely most on wine exports?). As I discuss in this post, some countries are sailing pretty close to the wind, when relying on too few wine export markets.
The data that I will use come from The Observatory of Economic Complexity (OEC). This lists, for each exporting country, the wine value (in $US) exported in 2020 to each of their top-five receiving countries. I have restricted my data to the biggest wine-producing countries by value, plus Moldova, Armenia and Serbia (as discussed below). Other large exporting countries that are mainly re-exporters (not producers), such as the Netherlands, Singapore, and Denmark, have been excluded.
For each country, I have calculated the percentage of wine exports going to the top import country, plus the combined percentage going to the top three importing countries. This will tell us how many of their “eggs” each country is metaphorically putting into their wine basket.
These data are shown in the graph, with each point representing a single country, located horizontally based on export amount to the top country and vertically to the top three.
For most countries, 10—20% of the exports go the main import country, and a bit less than 40% to the top three combined. So, the seven countries at the bottom-left of the graph may be considered to be “situation normal” for what a balanced export portfolio looks like. Indeed, the bottom three countries are all very well placed (12% vs 35%), which they need to be, as big wine industries. Note that Spain and Portugal have almost identical numbers, even though their wine industries are actually quite different.
The next four countries up the graph have fairly similar data (17-20 % vs 37-42 %), but once again they all have very different wine industries. They do, however, seem to have converged on a common approach to wine exports, which they presumably consider to be financially responsible behavior.
The other ten countries are more extreme than these seven. It seems to me that >50% of wine going to just three export countries is getting financially and politically risky; and >50% of wine going to just one export country is quite mad. Four of these countries are grouped together (24-30% vs 50-55%), and all four of these are quite big wine exporters. One hopes that they know what they are doing, although that might be a naive assumption, politically.
The remaining six countries are really rather extreme. That this can be a risky situation has been demonstrated by several of these countries.
For example, Australia put far too many of its wine eggs in the China basket, so that this became far and away its biggest export market; and Australia similarly became the biggest importer into China (Where China get its wine, these days). This is risky in two ways. First, wine consumption can vary through time, and it has definitely done so in China (So, why has China gone off the boil?), and this will eventually catch up with you (Will the slowdown in the Chinese wine market catch up with Australia and Chile?). Second, trade relations can turn sour pretty quickly; and the imposition of Chinese trade tariffs on Australian wine, back in November 2020 (imposed after the data presented above), has hurt the Australian wine industry pretty badly (Australian wine exports fall 26% due to China tariffs and ‘challenging’ conditions ; Aussie wine exports: the pain continues), and continues to do so (Tonnes of grapes ‘left to rot’ as Australia struggles to shift wine).
This has required some pretty fast footwork to find other markets (Challenging market conditions continue but value is starting to flow in some markets). According to Wine Australia, during April 2021 to March 2022, China (including Hong Kong) dropped to the third wine export market (10% of exports), behind the UK (22%) and the USA (20%). These new data (22% to the top country, and 53% to the top three countries) put Australia in the middle group of countries discussed above, which may be a better situation in the long run.
The other prominent recent example of too many eggs in too few baskets concerns the current conflict between Russia and the Ukraine. These two countries are important export markets for several eastern European countries (Exposure to the Russian wine market ; Main wine producers’ wine export dependency on Russia ; Main wine producers’ wine export dependency on Ukraine); and this is A Bad Thing during a war. Several of the affected countries are prominent in the graph above: Georgia (57% of exported wine goes to Russia, 11% to the Ukraine), Armenia (55% to Russia, 4% to the Ukraine), and Serbia (37% to Russia). Moldova is somewhat different — although it relies heavily on wine exports, only 8% goes to Russia. There is only one long-term way out for these exporting countries — develop broader wine markets. Note, incidentally, that these problems are not reciprocal, because Russia’s exports of alcoholic beverages are very small.
This brings our attention, finally, to the remaining two countries at the top of the graph. Austria's main wine exports go to Germany (44%), Switzerland (11%), and the USA (8%); so it is Germany that constitutes their main risk. This assocation is hardly surprising, historically; but Austrian wine deserves a wider audience.
To me, it is New Zealand that is the surprise. There are many things in common between the New Zealand and Australian wine industries, as I have noted before (Australia and New Zealand wine comparisons ; Australia versus New Zealand wine exports), and so I should not really be surprised. However, the Kiwis should have more sense — their industry has grown rapidly over recent decades (The rise and rise of New Zealand wine), but it has apparently not yet diversified. The main current wine export markets are the USA (32%), the UK (25%), and Australia (19%), which shows a distinct cultural and political lack of diversity. Those New Zealanders need to seriously take note of the current problems in the Australian industry.
Monday, May 2, 2022
Which countries rely most on wine exports?
A couple of weeks ago, I discussed the need for wine-makers to start thinking laterally, about what else they could be doing with their grapes, in the face of declining wine sales (The wine industry needs to say: “Cheese”). We cannot expect the commercial world to stand still, and so we must chase a moving target, by diversifying.
The basic point, here. is that relying on one product is a commercial risk. However, this same principle applies at much broader scales, as well. The one I will look at here is the national scale: How much do various wine-producing countries rely on wine for earning export dollars?
The data I will use come from the UN Comtrade International Trade Statistics Database, via the AAWE Facebook page (Leading wine exporting countries: value and share of wine exports in 2020).
For each country, we have data for 2020 on the amount of wine exports (in dollars) and the percentage that this constitutes of the total national exports across all products (in dollars). This will tell us how many of their “eggs” each country is metaphorically putting into the wine basket.
These data are shown in the graph, with each point representing a single country (or commercial region), located horizontally based on export amount (on a log scale) and vertically based on the reliance on wine alone.
For most countries, wine makes up less than 0.1% of national income from export dollars, irrespective of how much wine they export (from 5 million to 2,000 million dollars’ worth). However, 12 countries are labeled in the graph, each having wine make up more than 1%. There are a number of countries labeled here that you might not expect, such as Moldova, Montenegro, Togo and Macao (a part of China).
However, Georgia should definitely be on your mind, being one of the suggested birthplaces of wine-making. Indeed, I have written an entire blog post about the situation there (Current wine production at the birth-place of wine). Needless to say, things are not looking good just at the moment, given current events in nearby Ukraine (Georgian wine takes a pounding as Russia invades Ukraine). The increasingly dire situation arises, at least in part, because of the extent to which Georgia relies in wine export dollars, but mostly because their main export markets are actually both Russia and the Ukraine. By the way, the export percentage may have increased recently, because, according to the Annual Database of Global Wine Markets, the average for 2006—2016 was 3.6% (minimum 2.3%, maximum 6.3%).*
Moldova is much smaller than Georgia, but it is actually the Ukraine’s south-western neighbor; and so it has every reason to be concerned about current events. Interestingly, even though the country has a long tradition of wine-making, apparently most of the country’s wine production is made specifically for export (Wikipedia). Indeed, according to the Annual Database, the average exports as a % of wine production volume for 2006—2016 was 77% (no-one else comes even close to this!). Russia is the fourth largest export destination, by value. As an aside, Moldova is home to the largest wine cellar in the world, stretching for 200 km and with 2 million bottles of wine (This massive underground city is filled with wine).
As for Montenegrin wine, 1 million of the 13 million bottles exported apparently goes to Russia; so we are getting a familiar story here. At least the same cannot be said for Togo, where wine exports have literally boomed since 2016, with most of it going to nearby African countries. Lastly, Macao acts as re-export location within China, of course.
The other seven labeled countries are among the “usual suspects”, given that they include the world’s biggest wine-making regions, and are therefore the biggest exporters. However, note that Spain does not rely on dollars from wine exports to anywhere near the same extent as does New Zealand, the latter being 3.5 times greater. However, wine is still only the fifth biggest New Zealand export product, with “Dairy, eggs, honey” making up 29% of the dollars, and “Meat” (mostly sheep) being 14%. [In Spain, beverages are not even in the top 10.]
Note, finally, that Australia, the USA and Germany are all big wine exporters, but wine is <1% of their export income (although Australia is quite close to 1%). This is because these are all big manufacturing countries, resulting in exports; and the USA and Australia also have a large amount of natural resources for export (being large countries, geographically). So, wine is big, but quite small in the bigger scheme of things.
Anyway, most wine-making countries do not rely overly much on wine exports for their foreign income, but instead have a more balanced portfolio. However, the real crunch comes with over-reliance on a small number of export markets, as both the Georgians and Australians have recently found out, to their current cost. We will look at this in the next post.
* The American Association of Wine Economists (AAWE) will be holding their 2022 conference in Tbilisi, Georgia, August 24 – 28.
The basic point, here. is that relying on one product is a commercial risk. However, this same principle applies at much broader scales, as well. The one I will look at here is the national scale: How much do various wine-producing countries rely on wine for earning export dollars?
The data I will use come from the UN Comtrade International Trade Statistics Database, via the AAWE Facebook page (Leading wine exporting countries: value and share of wine exports in 2020).
For each country, we have data for 2020 on the amount of wine exports (in dollars) and the percentage that this constitutes of the total national exports across all products (in dollars). This will tell us how many of their “eggs” each country is metaphorically putting into the wine basket.
These data are shown in the graph, with each point representing a single country (or commercial region), located horizontally based on export amount (on a log scale) and vertically based on the reliance on wine alone.
For most countries, wine makes up less than 0.1% of national income from export dollars, irrespective of how much wine they export (from 5 million to 2,000 million dollars’ worth). However, 12 countries are labeled in the graph, each having wine make up more than 1%. There are a number of countries labeled here that you might not expect, such as Moldova, Montenegro, Togo and Macao (a part of China).
However, Georgia should definitely be on your mind, being one of the suggested birthplaces of wine-making. Indeed, I have written an entire blog post about the situation there (Current wine production at the birth-place of wine). Needless to say, things are not looking good just at the moment, given current events in nearby Ukraine (Georgian wine takes a pounding as Russia invades Ukraine). The increasingly dire situation arises, at least in part, because of the extent to which Georgia relies in wine export dollars, but mostly because their main export markets are actually both Russia and the Ukraine. By the way, the export percentage may have increased recently, because, according to the Annual Database of Global Wine Markets, the average for 2006—2016 was 3.6% (minimum 2.3%, maximum 6.3%).*
Moldova is much smaller than Georgia, but it is actually the Ukraine’s south-western neighbor; and so it has every reason to be concerned about current events. Interestingly, even though the country has a long tradition of wine-making, apparently most of the country’s wine production is made specifically for export (Wikipedia). Indeed, according to the Annual Database, the average exports as a % of wine production volume for 2006—2016 was 77% (no-one else comes even close to this!). Russia is the fourth largest export destination, by value. As an aside, Moldova is home to the largest wine cellar in the world, stretching for 200 km and with 2 million bottles of wine (This massive underground city is filled with wine).
As for Montenegrin wine, 1 million of the 13 million bottles exported apparently goes to Russia; so we are getting a familiar story here. At least the same cannot be said for Togo, where wine exports have literally boomed since 2016, with most of it going to nearby African countries. Lastly, Macao acts as re-export location within China, of course.
The other seven labeled countries are among the “usual suspects”, given that they include the world’s biggest wine-making regions, and are therefore the biggest exporters. However, note that Spain does not rely on dollars from wine exports to anywhere near the same extent as does New Zealand, the latter being 3.5 times greater. However, wine is still only the fifth biggest New Zealand export product, with “Dairy, eggs, honey” making up 29% of the dollars, and “Meat” (mostly sheep) being 14%. [In Spain, beverages are not even in the top 10.]
Note, finally, that Australia, the USA and Germany are all big wine exporters, but wine is <1% of their export income (although Australia is quite close to 1%). This is because these are all big manufacturing countries, resulting in exports; and the USA and Australia also have a large amount of natural resources for export (being large countries, geographically). So, wine is big, but quite small in the bigger scheme of things.
Anyway, most wine-making countries do not rely overly much on wine exports for their foreign income, but instead have a more balanced portfolio. However, the real crunch comes with over-reliance on a small number of export markets, as both the Georgians and Australians have recently found out, to their current cost. We will look at this in the next post.
* The American Association of Wine Economists (AAWE) will be holding their 2022 conference in Tbilisi, Georgia, August 24 – 28.