The next big thing in wine

Talk to people in the wine business, and the subject always comes up: "What's going to be the next big thing in wine?"

The catch, of course, is that people in the wine business are rarely right in making these kinds of predictions. It's not that they aren't smart or don't know their business. It's that they don't have enough perspective. Restaurant types usually don't have a good grasp of the retail market, for example, while winemakers are usually focused on what's going on in their region and nowhere else.

That lack of perspective is why sommeliers always insist that gruner veltliner, an Austrian wine that hardly anyone has heard of, is going to be the next big thing, and why so few people realized what was happening with livestock wines (cheap brands with cute animals on the label) until the trend was well underway.

There's a good example of this groping in the dark in a post on the Wine Economist blog. Which, come to think of it, was probably the point of the post.) What struck me, and especially in reading the comments, is that the speculation about the next big thing, which included torrentes and moscato, was based on guessing what consumers want. What the speculation didn't take into account was whether the supply chain existed for the next big thing. Are there lots of those grapes? Do winemakers know how to work with those grapes? Does the pricing math work? More, after the jump:

Do not be intimidated by the phrase supply chain. It's the post-modern term for the process that describes how goods get to market, starting with the raw materials and finishing with the store shelf. In wine's case, that means the grapes, which are made into wine at the winery (which is sold to an importer if it's a foreign wine), and which is then sold to a distributor, which then sells it to retailer and restaurant. In other words, it's mostly our old friend the three-tier system, with cost accounting thrown in.

So the first question to ask about the next big thing: Are there enough grapes to make enough wine to sell to lots of people? Which is why gruner will never be the next big thing. There are only 60,000 acres or so in Austria. By comparison, there are about same number of acres of merlot in California alone.

This is part of the reason why livestock wines, led by Yellow Tail, became the next big thing. The Australian government offered cheap land and cheap water to boost the wine business in rural areas. This resulted in lots of cheap grapes, which made it possible for Yellow Tail to sell $7 wine in the U.S. when the French were selling comparable wine for $10. Yes, the label had a lot to do it, as did the wines' fruit forward style (and both have been copied ad nauseum). But if Australian grape prices had not been so low, and had Yellow Tail had cost $13, do you think it would have been the next big thing?

Which is the second question to ask about the next big thing: Does the price make sense? Remember when pinot noir, after Sideways, was supposed to become the next big thing, replacing merlot? That never really happened, despite what was portrayed in the media. Merlot's share of the U.S. market by bottles sold has been around 10 percent for years, and though pinot's share has grown significantly in the past decade, it's still half of merlot's. And the reason? There are buckets of decently made $8 merlot, and hardly any drinkable $8 pinot.

So what are the parameters in trying to guess the next big thing? Lots and lots of grapes, which seems to rule out torrontes and moscato. A sensible price. Wine made in a style, both in the way it is marketed and what it tastes like, that is accessible to the market. This paid off for pinot grigio when it was the next big thing 10 years ago.

But even then, it's just a guess. I was there the day that John Casella, who runs Yellow Tail, said he would have been happy to have become a decent-sized Australian winery when the business started. And no, he didn't expect the brand to be the one of the biggest in the world. So even the guys who have the next big thing are often surprised by it.

Comments

[Tina]

Interesting. I usually like to do the opposite of what the masses are doing, so whatever TNBT is, I hope it's NOT something I actually like...

[bburnsey]

Very good theory of the supply side of the next big thing. There has to be lots of it, and available cheaply. Maybe something from S.A.?

[Alfonso]

Lord, I hope it's not anything mixed with chocolate...