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Liquid Economic Indicators: The Wine Debacle
Wolf Richter www.testosteronepit.com
With the European Union going into recession, possibly, with the US growing, but not enough, with China booming, or crashing, and with Japan languishing, the worldwide economic picture is confusing. Debt crises have been swept under the rug by voluminous money-printing, directly or indirectly, sterilized or not, at all major central banks so that sovereign bonds, and even California municipal bonds, don’t get hung out to dry. But there is one economic indicator that is particularly ... tasty and, if consumed in sufficient quantity, even more vertigo-inducing than all of the Eurozone bailout mechanisms combined: wine.
"It seems the worst is behind us,” said Federico Castellucci, CEO of the Organization of Vine and Wine (OIV). “The worldwide wine sector can once again grow, though significant positive results will not be immediate," he added as he presented OIV’s report in Paris on March 22.
Despite the well-known medicinal uses of wine when things turn sour—as they did during the financial crisis and the Eurozone debt crisis—consumption actually tanked worldwide starting in 2007. It reached a low point in 2010, and then edged up a tiny 0.7% in 2011—enough to infuse a sense of vague hope into the battered industry.
Well, battered in Europe. The most assiduous wine-drinking continent will continue to cut back, given the economic issues, Castellucci predicted. In Italy, wine consumption declined 6.3%, the worst within the EU. In Germany, where the economy was white hot last year, wine consumption stagnated, and in other countries it was slightly up or down, for an overall decline of 1 million hectoliters. 2012 doesn’t look good either. Other industries have already seen plunging sales in the first quarter, and the worst-hit industry is now begging the EU Commission for help. For more, read.... The Nightmare of the European Auto Industry.
Wine sales in the US, however, were up 5.3% and reached an estimated retail value of $32 billion. Number one in the world. $20 billion came from wineries in California, a 61% market share! The 18th consecutive year of volume growth. Despite California’s economic problems and budget fiasco, there was no recession in the wine industry.
But on a per-capita basis, the French drank more than anyone else, 54.1 liters (14.3 gallons) per year, followed by the Italians with 53 liters (14 gallons). Americans drank a measly 12.1 liters (3.2 gallons) per year—less than a quarter of what the French guzzled.
"The potential for development is enormous," said Robert Beynat about the US market. As director of Vinexpo, which will hold the next wine fair in Hong Kong, he must have felt a joyful frisson as he was extrapolating Franco-Italian drinking habits to the US population.
US wine exports, of which 90% were from California, jumped 21.7% to $1.4 billion in winery revenues. Volume increased by 5.8%. It’s the pricier stuff that’s hot. The EU bought over a third. Other countries took their share. The most explosive growth came from ... China, up 42% to reach $62 million—a mere rounding error in the $273 billion trade deficit that the US has with China. Nevertheless, it made China the fifth largest export market for US wines by value.
Consumption in China exceeded 1 liter (34 oz) per capita, up from about zero not long ago. Following Hong Kong, where wine consumption reached 4.6 liters per capita, China’s should double by 2015. Once consumption reaches 2.7 liters per capita, given the size of the population, China will dethrone the US as the world's largest wine market. And it has been happening in market after market. Even in unexpected sectors, the juggernaut has taken over. For what that did to the worldwide art and antiques market, read.... Chinese Art Bubble Clobbers the US.
In the eighties, the French ventured into China with a load of vines and started some joint ventures. Today China is in tenth place in wine production. And they're apparently making some good stuff. For an astonishing slap in Bordeaux's face, or not, read.... Merde! Chinese Wines Did What to French Wines?
And so life in China goes on in its crazy manner. All heck broke loose when Zhejiang's Provincial Administration announced that 30,000 blood nests, the rarest and most expensive bird's nest delicacy, contained high concentrations of sodium nitrite. It kicked off a huge international scandal that in the end has changed.... nothing. Poisonous Blood Nests: (Still) A Delicacy in China.
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If you live in the country where wine is simply religion you only buy from the small and enjoy AOC, which is artisanal fruit of passion and not industrial concoction of a Bilderburger cloned zombie lost in operational research chemio-therapy histrionics applied to wine-a-nomics gone wonky. Join the silicone tits and botoxed fat lips-lipposuction crowd of nit-wits. I'll have my tits straight from mother nature like my wine.
Had a 2006 Rubicon last night. Im going to have a hell of a time making it through the apocalypse. At least my PMs are not in edible form.
Keep guzzlin bitches! I hear a bottle of wine goes well with some QE.
I've got a second batch of Mead (honey wine, raspberry-flavored) aging in a carboy right now...
With ya bro.. We make blackberry/ prickly pear fruit mead here. Nirvana.
Northern Europe= Opus One Southern Europe = Mateus ( ANY QUESTIONS?)
Great. More wining about the economy.
We hardly drink beer anymore because even the crappy stuff is $7 for a six ( a double in the last 3 years), whereas wine prices have barely moved. I'm amazed that the Aussie wines are only up 10-20% while the $XAD has doubled since 2008. They must be eating a lot of margin.
Beer on the other hand, is made by a few conglomerates, all with executive classes that need their $milions per year from stock options, and made with ingredients controlled by the futures market (CME). Next time you drive by the Coors brewery in Golden, CO, look at the trains of tank cars with "ADM" on them, and the hopper cars full of rice. There are your "natural" beer ingredients!
I pay $16.97 for a 30 pack of Budlight here in NH. I know that's crappy beer but it's all what your tastebuds like. For wine I like Sandeman's Madeira, three years in an oak barrel, if you like oak flavor that is the wine you want to try. 19% alcohol too. For hard stuff give me New Amsterdam gin and tonic, none better in my opinion.
are they still try pushing that screw caps on wine bottles is the best way to go ???......i will never buy a screw cap bottle of wine
Ditto that - corks are fine for storage, but it is hard to store good wine...
Owner of Briceland Winery (a short distance from me - have known Maggie for 40 years) still uses corks, but she says the problem is finding good cork - most of it comes from Portugal and Spain, and the growth of the wine industry in the US has put a real strain on supply - and there is a increase in bad cork for stock out there.
http://en.wikipedia.org/wiki/Cork_Oak
Interesting stuff, cork...
If you want a laugh, Youtube cork soaking on Saturday Night Live with Janet Jackson. Classic.
Corks are important if you want to age your wine or impress someone, but screw caps are just fine for the majority of wine, which is consumed shortly after it's brought home from the store.
You must not enjoy a good Australian Shiraz. Some of the best wines have screw caps these days, but thats ok, more for me.
i will never buy a screw cap bottle
I wouldnt bet on that if I were you.
Great! Every cougar in the US is now is a "wine" groupie. Really she just wants to get drunk and you know what...but the idea of it being a "wine" get together adds some sort of "panache" to her otherwise drab life (and switching kids around with the ex every other week).
Wine was cool in the 80's...been to Napa lately? Full of divorced 60 year women from Cincinati who made the ex buy up a vineyard and put her name on the label. Yea, cool, Kalifornia man...head north to Mendo and don't look back. Like Hollywood movies, just another over blown industry full of hot air.
true dat.....one thing that drives me crazy is all of the 30-40 yr old phony wine snobs that walk around like they can tell the difference between a silver oak and mad dog 20/20....i know i cant and i have had plenty more practice......plus its fun to mess with them....especially the guys, nothing looks more faggier than a guy who thinks he knows about wine
Napa is just like anything that becomes big in Cali, it is ruined by the dumb rich. Go to Oregon, Washington or even where I am, Texas, to see true mom and pop vineyards.
Don't have to go that far - just north of Mendocino County is Humboldt - Emerald Triangle and all that, but also mom and pop vineyards - Briceland Winery, Elk Prairie Vineyards, Whitethorn Winery, Riverbend up in Myers Flat, Phelps Ranch sends its grapes down the hill to Briceland - small, local, very good wines - I know the folks at all these places - they take real pride in their products.
Mendocino has some nice wines too, and really good beer - Eye of the Hawk, Redtail, just the best stuff (if you like real beer).
But I happen to be sippin' California Korbel brandy at the moment...
You know how to make a small fortune in the wine business? Spend a big fortune on a vineyard!
I have designed mechanical systems for years, including some wineries in Napa. When the rich decided wine was sexy, all business sense evaporated. I worked on a fermentation/bottling facility being built by a rich guy who bought the vineyards with old money. I asked him what the deadline was for the facility, expecting it to be several weeks before the next crush. I was wrong. He wanted built in time for his daughter's wedding!
The average vineyard NETS $1,500 an acre per year. Considering the huge investment, there is no business reason to start a vineyard.
Aldous,
I am disappointed that you want oaky messes to drink, rather than real wine.
what calls for wine these days is just alcoholic grape juice.
you can't smell oak, it wasn't aged properly using French Oak barrels for 18+ months.
Chinese just drinking colored alcoholic grape juice.
You want oak? Fine, the modern winery (huge tank farms, fully automated, with professional chemists and remote valving and pumping controlled by a wine maker somewhere else) has bags of oak dust, which they add at the stemmer/crusher right after being loaded by the side dumping semi.
I am not trying to slam modern wineries, which have given us high quality wines for very little money. It just aint sexy, that's all.
Try some Okanagan wines this is my part of the world, there are around 200 cottage wineries most are good to very good in very limited production.
I supply packaging to many of these wineries.
http://www.okanaganwines.ca/wineries/
They can keep their Boons Farm and Mad Dog 20/20. I'm a whiskey man, myself.
I hear you bro, drinking my Evan Williams as I write this post, though, you prob. drink higher quality bourbon, just sayin'
Testo.
You on the juice?
Indeed, sir. My standard is Jack or Turkey. When I need a good sniff I reach for the Redbreast.
I enjoy your posts and all the work everyone does at ZH. Good people.
Thank you sir! I like WT 101, but, alas, the economy has shown me the virtues of the like of Evan Williams and Old Crow.
Cheers!