Thoughts Regarding Wine’s So-Called Decline

 

Given that we’re meeting on a wine website, I’m sure you’ve seen or heard reports of a recent downturn in wine consumption.  Most of these indicate a generational component, with younger consumers preferring other alcoholic beverages or opting against drinking entirely.  Some of those turning away from alcohol are doing so for health reasons (whether based on good information or not—more to follow), whereas others are surely opting against wine in favor of THC edibles or weed.  In any case, demand is down significantly if not quite dramatically.  Multiple reports indicate that some big drinks companies are selling off wine-related assets (whether brands, wineries, or vineyards).  Retailers are feeling notable downturns in sales, and back upstream, some vineyards are either being abandoned, or the current year’s crop left to hang and rot for lack of buyers.  I don’t take lightly the losses experienced by anyone who is being hurt, but with that said, I’m underwhelmed about how consequential the phenomenon is likely to be, finding much of the reporting and many reactions overheated.

As a veteran wine journalist, I know the way to attract eyeballs is to write or yell “Fire!” rather than “um, probably not a big deal.”  However, I also know that the way to maintain respectability is to draw on knowledge and experience to be as accurate as possible.  I’m a columnist rather than a reporter, so I’m going to come at this with some thoughts rather than a whole series of numbers and quotes from wine trade members, though hopefully my thoughts will seem well informed (or at least provocative enough to draw a response from you).

I happen to hold a Ph.D. in one of the social sciences and took a lot of economics while working toward that, which included schooling in something you may have heard about:  The Business Cycle.  This is usually referred to in relation to macro-economics and the alternating swings between recessionary and expansionary phases in a nationwide economy.  However, the concept also applies to firms and particular commodities in micro-economics in a way that helps to explain partly what’s going on with wine.

 

When demand is rising for any particular thing that can be sold in a free market economy, investments will flow toward production of that thing in search of profits for as long as a profitable result seems promising.  Information on when production will bring supply into balance with demand is always imperfect because demand can’t be measured precisely: It ebbs and flows in ways that aren’t perfectly predictable, so over-investment is a very common phenomenon, and those who are late to start pumping the brakes on the supply side always take losses as a result.

Given that it takes three years for a grape vine to begin producing fruit and about five to approach full productivity, those who invest in vineyards (as opposed to widgets or most other real goods or services) need much, much better foresight to know when to pump those brakes without getting burned for being too late when trying to profit from unmet demand.

Over-planting is therefore an extremely well-known and widespread phenomenon in the wine industry, resulting in massive “vine-pull schemes” in many countries to bring supply down so that prices can be maintained (look it up).  The entire European Union is constantly engaged in managing vine plantings, forcing would-be entrants to buy planting rights from others (whose vineyard land then goes fallow) to keep supply from exceeding demand.  The EU also mandates that a portion of juice from abundant growing seasons be distilled rather than vinified, and subsidizes regions that can sell high-value wine while paying growers in less desirable areas to plant something other than grapevines.  Sometimes they’ll enable more planting in nations that need more income, but even then, they never take their regulatory eye off balancing supply and demand.

Consequently, when I read a report (as I did a couple of weeks ago) with a horror-stricken account of vineyards in Monterey County going untended with no intention of picking the 2024 crop…this strikes me as an utterly predictable occurrence rather than something as unexpected as an invasion by aliens.

It is, in its way, analogous to a stock market “correction” when prices have exceeded potential earnings or the values of multiple corporations and there’s a sell-off on Wall Street.  Such “corrections” happen routinely, as you may know, and one happened on the NASDAQ exchange just a few weeks ago before prices bounced back after dropping more than 10% from the exchange’s recent “high.”  Those who know how the major exchanges work are aware that big, “institutional” investors like unions and pension funds work with supercomputers running algorithms that buy and sell based on the slightest twitches in the market.  So, if lots of people working in that field get caught with their proverbial pants down when things turn sour, is it a surprise when there are losers due to a downturn in demand for wine or grapes?

Some might think my analogy is imperfect, but if we stick to agricultural products to address that, we could reflect that wine grape prices are not subsided like corn, soybeans, or milk, so situations when supply and demand get out of whack for grapes are—again—utterly unsurprising.  Should wine grape supplies be more rigidly controlled by legislation and the USA’s Department of Agriculture?  Not in my view, partly because wine grapes are hardly “staple” goods, and partly because almost all agricultural subsidies are lumped into a giant legislative mess called simply “The Farm Bill” that gets debated and passed at roughly five-year intervals.  (Look that up, too.)  What I’ve called a “mess” is possibly the single ugliest scrum engaged in by interest groups and lobbyists in all of American politics, and throwing wine grapes into that congressional mosh pit could be a very bad idea.  

 

 

As things stand, The Farm Bill doesn’t control supply nationwide or support crop prices, and does little more than provide modest funds so the USDA can combat things like Pierce’s Disease and the Spotted Lanternfly to help the wine industry.  My educated guess is that most American wine grape growers would not want an EU-style regulatory regimen, and are happy enough following their best guesses rather than getting into the mosh pit that is The Farm Bill.

I was born and raised in Illinois and have known—and admired—plenty of farmers in my life.  Relying on guesswork when planting and confronting the vagaries of the weather in hopes of securing a profitable crop is a stressful and tough way to make a living.  When we’re talking fine wine, we’re talking about farmers of a somewhat different sort than those we know by general stereotype, but it remains true that all farmers know they win some and lose some—as a matter of course.  

 

 

It is an understatement to note that farmers aren’t given to hysterics, whereas journalists and their producers have a vested interest in hysterics.  A decade ago, I got a call asking me to rush from my home to the downtown DC studios of the BBC for a televised interview by host Katy Kay on “BBC World News America” about an impending global wine shortage.  No kidding.  What did I say in the interview?  Basically, that the “crisis” was mostly hype, and that both shortages and surpluses tend to be very brief in global terms, with things returning to equilibrium in short order.  I turned out to be right, but I think Ms. Kay’s producer would have preferred that I be more worked up during the live interview.

But the question remains:  Where will wine settle in the USA and worldwide, once supply and demand equilibrium is re-established?  Will it be way down from where consumption has been tracking in recent years?  Or will any downturn more likely be modest … if indeed a downturn proves prolonged at all?

The short answer is, I don’t know for sure, just as nobody else does.  But I have some guesses that I can back with reasons you may find worth considering.

 

One guess is that the downturn in demand will be shallow and followed before too long by an upsurge, even if the upsurge doesn’t boost consumption levels to their all-time high.  Here are reasons for thinking I might be correct:

—The Covid years were a boom time for wine, especially for retailers, so the dip in sales is easily overestimated.  Additionally, alcohol consumption generally increased in that gloomy time, but for wine, the bump was not only because of gloominess.  Home cooking also boomed—due to necessity—and guess what?  Wine is a much better partner than a can of White Claw or a glass of Gin for a dinner that required unprecedented effort for novice home cooks to prepare.  As Americans were forced to cook and started paying attention to the sensory interplay of ingredients in their dishes, many also gained attentiveness to the interplay of their drinks with their food.  Consumption may be down from the Covid years, but there was some silver lining in that longstanding cloud.

—Wine is inherently complicated and even intimidating, but also enduringly interesting because of its complexity and dynamism.  Generations don’t differ from one another greatly, but they do differ enough that the concept of “generation” survives on account of being somewhat meaningful.  So, here’s a question:  Is it a controversial proposition that the generation that recently attained legal drinking age is a bit short on attention span due to its absorption in social media, isolation from prolonged contact with others during Covid, and exile during that same time from initiation to wine in restaurants and large family gatherings?  You tell me:  Is it surprising that the current cohort of young consumers would rather tear the tab off a can of hard seltzer or a ready-to-drink cocktail than to delve into the labyrinthine world of wine?  The industry should not write individuals in this cohort off.  But it should cut them some slack and give them time.  Many of them will tire of drinks in cans, and the more curious among them will inevitably be drawn to the intricacies of wine.

—What follows is a tentative side-note to the point immediately above, but I have an interesting question to which I still don’t know the answer.  Recent years have seen an impressive rise in the number of Americans seeking wine knowledge certifications in programs like WSET.  I would never argue that enhanced knowledge is a bad thing regarding wine or almost anything else, but my question is this:  Are those who are coming of age being even more intimidated by wine because now they know that others around them studied, took tests, and are certified in their wine knowledge?  People walking around with certifications may be more intimidating to wine novices than the self-appointed uncles who claimed wine expertise in the past.  Another question is this:  Do those with certifications lure others into wine more frequently than they make wine seem scary just by dint of their studies and test results?

—Turning to the abstinence phenomenon, anyone who declines wine or any alcoholic beverage should be respected for their choice.  If they turn away for health reasons, they should be respected even more, and if they turn away successfully because they worry that they enjoy alcohol all-too-much, they should be admired at a very high level.  However, while it is surely true that excessive consumption of any alcoholic beverage is detrimental to human health, it remains a contested issue among researchers whether moderate consumption with food and adequate hydration is harmful at all—or even beneficial.  Regarding the medical science around this issue, I defer to my friend and WRO colleague Michael Apstein MD, who was quoted extensively on the day when I wrote this (8/20/24) on winesearcher.com by W. Blake Gray (a WRO columnist emeritus who has been among the best reporters on many of the matters I’m addressing here).

—And yet, with proper deference paid to physicians and medical researchers, there are still meaningful observations to be made.  One is that studies on the benefits and detriments of wine for health have been rolling out for decades, often contradicting one another.  This is partly because studies are conducted with differing methodologies (also better or worse methodologies—not just “differing” ones).  Moreover, there is no such thing as a survey research result that interprets itself.  Among the gravest misunderstandings among people who’ve never studied statistics or scientific methodology is the presupposition that scientific research yields “facts,” and that “facts are facts” as though they can speak for themselves and their implications.  This is simply not true.  Respectable science works with hypotheses within proposed explanatory frameworks, and all that any single study can do is either support or weaken a hypothesis until many well-designed studies all converge on mutually reinforcing conclusions.  Even then, the conclusions are always only provisional and subject to further testing and interpretation.  Copernicus was correct about the cosmos until he wasn’t.  So was Newton, until he wasn’t.  So is Einstein, for now, but already only mostly.

—The upshot of this for the wine industry is, simply:  Live by the study, die by the study.  When “60 Minutes” ran the famous “French Paradox” episode, there was a lot of money to be made from it, and the wine industry was on that like a rat on cheese.  Then, when the winds of research shifted away from finding wine as beneficial for health, the industry (as a whole) shifted into denial or just hunkered down in hopes that a countervailing finding would be forthcoming.  All of this is perfectly understandable as a reaction at all levels in the wine trade, either for sample-hauling salespeople or executives who need to answer to boards of directors.  But an “understandable reaction” is certainly not a strategy.

—Even then, is the wine trade really helped by a “strategy” that is anything less than consistently honest rather than self-serving?  Isn’t the smart play for “the long game” to acknowledge the possibility that alcohol in any form can be unhealthful unless enjoyed very responsibly, and to always be on the side of responsible usage—and energetically so?  Some companies have seen the wisdom of this posture and have voiced it in their advertising.  But they are in the minority.  Over the years since the current government health warning was mandated for the back label of wine bottles, I cannot recall hearing a single member of the wine trade comment on it in a way that wasn’t disparaging.  Of course, many trade members never mentioned it at all, and one can’t interpret silence.  Still, I feel confident that many or most wine trade members are dismissive of studies and warnings that threaten demand for their product.  That’s an understandable reaction in the short term, but a detrimental mindset for wine’s role in American culture over the long term.

—Here’s one, last consideration that may seem a bit grim but is nevertheless encouraging for wine, at least in my view.   Let’s say, just for purposes of speculation, that research started to yield converging findings that consuming two glasses of wine with dinner many nights in adulthood would reduce lifespan by 1.73 years.  Would you give up wine based on that?  If so, I would not say one word against your decision.  But I, for one, would not join you in that decision, and I’d make a different choice for multiple reasons.  First, I believe I know how to enjoy wine in a reasonably healthy way, virtually never downing a cocktail before dinner, being hydrated all day and … but I want to stop right there.  

 

I don’t want to speak pridefully about how I enjoy wine.  Most people would be horrified by the number of wine bottles that pass through my house (including my wife), even if many get dumped and most of the contents get spat out.  I still drink a lot of wine by common standards, and though I always ask to have my liver enzymes tested whenever I have blood work done for a physical exam, the bottom-line question is still this:  Would I give up 1.73 years off the back end of my life for wine in the way I enjoy it?  

My answer is…emphatically…yes.  I would never presume to answer that question for anyone else, or even to advise them.  If I were asked, however, I would note that nobody lives forever, and that many life choices unrelated to wine or alcohol have a bearing on life expectancy.  Coffee is among them, and a relevant one for present purposes, since the studies performed over my adult life have fluctuated roughly as wildly as the studies on wine:  One finds coffee harmful, the next finds it healthful, and on and on.  I never stop readying studies or stick my head in the sand, but of course I face a decision every day on what I’ll actually do.  And I start ever day with multiple cups of home roasted coffee until noon, and start pulling wine corks exactly at 6:30 p.m.  If I somehow became reliably informed that my coffee and wine would take 1.73 years off my life, I wouldn’t budge from my routine with the beverages I love.

I know I am not alone in this, by a long shot, and I know I’m joined by a great many rational decisionmakers who aren’t wild-ass risk-takers.  Insurance actuaries are in a profession that is devoted to judging this sort of thing, and though I am certainly not an insurance actuary, here’s my guess regarding how they’d advise me:  “Hey, Franz, you are at much higher risk driving that GTI of yours on the DC Beltway and Interstate 95 than you are drinking wine in the way you do.  If you’re going to give something up to increase your life expectancy, stop driving, sell your sports car (or any car) and just take Uber from now on—sticking with wine instead.”

Although nobody can know how the science will pan out regarding the health detriments or benefits of wine in the future, my hope is that research will produce more robust and reliable findings so individuals can make personal decisions regarding wine with better information.  

 

 

More broadly, while I hope—and believe—that wine will be enjoyed by more rather than fewer Americans in the future, I know that’s not an assured outcome.  To pursue the worst case scenario, how bad would it be if wine consumption settled at a lower level than it was at, say, 10 years ago?  Not that bad in my view, even though my hope leans in the other direction.  Wine is challenging, just as improvised jazz and modern art are challenging, and if wine has hit its limit of penetration into American culture, I could live with that.  Wine won’t go away or decline in quality if it doesn’t gain full mainstream acceptance, and though consumption may go down by 5% or 8% or something, there is a floor to the decline, and a solid one.

 

 

To be clear, I’m not predicting a permanent decline for wine consumption, much less wishing for one.  I don’t want it to be as narrowly appealing as improvised jazz, and know that it need not be.  Explaining to potential new consumers that there are very good values to be had—even among high production, widely-available wines—can do a lot to prevent that outcome, and making wine understandable rather than forbiddingly complicated is an enterprise I’ve been engaged in without a break for decades.

 

 

The good thing about “worst case scenarios” is that what actually happens is almost never as bad, and knowing that the outcome would not be so horrible even if things get somewhat worse can be helpful.  Sales may still get somewhat worse, but wine’s allure has proved stable for centuries.  Looking ahead, we know that wine is peerlessly interesting and endlessly engaging and fabulously beautiful in its highest expressions, and it will still bear all those attributes 10 years from now or 100 years from now.

Whether you’re a wine consumer or trade member or journalist, I’d be very interested to learn of your reactions to this column—in part or as a whole.  Write to me at [email protected]