The Global Wine Industry I
An Overview
June 1, 2012
Q. D. Truong
Research & Insight Analyst
HighQuest Partners, LLC
300 Rosewood Drive
Danvers, MA 01923
The Global Wine Industry
An Overview
Introduction
From Chianti to cabernet, brut to bottle bouquet and from sec to sommelier, the topic of viniculture has
spawned an extensive and elaborate vocabulary for those who define themselves as wine connoisseurs. But
the prominence of wine truly extends beyond its haute lexicon – wine is a mark of cultural heritage; it is an
ancient and celebrated potation; it is an international symbol of festivity; and lastly it is a global industry
which today represents over $230 billion of trade.
Today, over 26 million metric tons of wine is produced globally. The top five wine producers in the world are
Italy, France, Spain, the United States and China respectively. Italy produces 4.58 million metric tons of wine,
accounting for 17% of the world’s wine production, with France just behind at 4.54 million metric tons.
Combined, the top 5 countries produce over 61% of the world’s wine, demonstrating the strictness in land
arability for wine grapes. But despite the robustness of these figures in recent years, wine production still
remains below the peak production that the industry achieved in the 1970s and 1980s. During those decades,
world production was on average 25% higher than it is today, exceeding 30 million metric tons and reaching a
zenith of 33.3 million metric tons in the early 1980’s. The comparatively lagging figures of today do not
present the full story – most of the fall in production and consumption of wine have occurred in Italy,
France, Germany and Spain – countries referred to
collectively as the Old World. Production and
Top 10 World Producers
consumption have both been increasing in New World
in 2010 (MT)
nations like the U.S., Australia and the Latin American
Italy
4,580,000
France
4,541,820
countries of Chile and Argentina. And the potential for
Spain
3,610,000
future growth is huge – as the newly rich of China and
United States of America
2,211,300
India begin expanding and adjusting their consumptive
China
1,657,500
patterns towards more sophisticated and more expensive
Argentina
1,625,080
beverages, they lay the seeds for fledgling wine
Australia
1,133,860
South Africa
921,700
industries that may one day change the global wine trade
Chile
915,238
entirely. Truly, the future of wine will be just as
Germany
720,000
intriguing as its storied past.
History
Wine has been consumed by human societies for thousands of years. The earliest archaeological evidence of
wine production dates back to the nation of Georgia circa 6000BC. In 3000BC, the Ancient Egyptians
became the first civilization to actually record their consumption of the beverage on hieroglyphic tablets, and
by the first and second millennia BC, wine is thought to have been developed in China.
Both the Greeks and Romans consumed significant quantities of wine, inventing new cultivation techniques
and improving upon old technologies including the invention of the wine press. Even after the fall of Rome,
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wine making and drinking survived, and wine became the beverage of choice for all social classes as well as
remaining a central mainstay in the celebration of Catholic mass. During the medieval ages, the European
nobility began planting vineyards as a sign of wealth – fine wine produced from these vineyards added
prestige to their estates, and thusly, the ensuing competition created the
first real premium market for wine.
Wine comes in at the mouth
And love comes in at the eye;
In the modern era, wine spread from Europe to the New World along
That's all we shall know for truth
with the conquistadores and colonists of the 16th and 17th centuries. In
Before we grow old and die.
the Americas, vineyards were predominantly located around Central
-William Butler Yeats
America and particularly Peru. Although Spanish missionaries brought
vinis vinifera to the southwestern corner of the U.S. in the 18th century, industrialized wine production would
not take off in California for another two centuries afterward. Elsewhere in the world, wine made its way to
South Africa through the Dutch East India trading company in the 1680s and was brought from South Africa
to Australia in 1788. At this time though, the overwhelming majority of wine was still grown in Europe. It
was not until the Phylloxera blight laid waste to European grape harvests in the 1860’s that American, Chilean
and Australian wines began to take precedence. It was at this stage that the rise of California as a new wine
making force seemed absolutely imminent – with the might of American shipping, warm dry climates, and
ample low-cost land, California seemed poised to ascend to dominancy. But the American prohibition
amendment of 1919 quashed this dream outright – vineyards were ordered to be uprooted and cellars
destroyed, and by the time prohibition was repealed, only 140 of the original 800 wineries would still be
operational.
New World wines took a long time to fully develop in during 20th century. For ages, the persistent notion was
that Old World wines were simply superior in terms of quality and taste. Additionally, New World Wines’
simply had lesser demand in their domestic markets – the cultures of America, South Africa and Australia at
the time had not yet adhered to regularly drinking off
the vine. All of this changed in 1976. That year, at
the Paris Wine Tasting, a blind taste test conducted
by French judges put Californian wine ahead of
French ones in both red and white wine categories.
Throughout the world, consumers’ opinions of New
World Wine would begin to change; the U.S. began
to focus more heavily on developing its burgeoning
domestic market; Australia, with its ample land, and
Chile, with its low cost labor, both took advantage
their off-cycle growing seasons in the Southern
Hemisphere to focus on export dominated strategies.
The Old World could only react - their reputation blemished; their domestic markets were waning; their age
old traditional techniques were called into question. These factors set the stage for the nature of the global
wine market today.
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Global Demand for Wine
Per capita consumption can provide a first glimpse into the temperaments of the demand side of the global
wine industry. Per capita wine consumption differs greatly between countries for economic, geographic and
cultural reasons, and as of 2010, the nation with the highest rate of consumption was Luxembourg, at 52.46
liters per person per year. The wine production giants, France and Italy, follow closely behind at 45.7 and 42.1
liters respectively, ranking 2nd and 3rd. The United States ranks in at 52nd, with 9.4 liters per person per year,
and South Africa ranks close behind at 7 liters (62nd). 112 out of 220 countries in the ranking have
Per Capita Wine Consumption
52.46
Overall Consumption of Top Ten
(liters/person)
(metric tons)
Source: The Wine Institute
Source: Wine Institute
45.7 42.15
26.16
24.9324.54
18.78
9.42 7.05
0.69
4,000,000
3,000,000
2,000,000
1,000,000
0
consumption rates below 1 liter per person per year. Using per capita consumption can act as a good proxy
for determining how much a particular culture “enjoys” drinking wine, but using the measure alone can be
shortsighted. For example, even though China’s per capita consumption of wine is only 0.69 liters per capita
(125th), they are ranked 9th in the world for overall consumption and have been steadily rising since the early
1990s.
As for overall consumption figures, the United States is actually ranked first in the world, consuming 2.91
million metric tons of wine in 2010. France and Italy rank immediately after, at 2.89 and 2.45 million metric
tons respectively. Breaking down wine consumption into regions, the entire world consumes approximately
24.9 million metric tons of wine in 2007 – Europe by far has the highest total wine consumption among
continents at 16.6 million metric tons, representing 66% of world consumption. North America follows next
with 13% of the world total, with South and Latin America contributing 9%, Asia 7%, Oceania 2.7% and
Africa 2.3%.
Historically, wine consumption – in line with production – has been steadily decreasing since the 1980’s. The
highest period of consumption fell between 1976 and 1980 at 28.57 million metric tons. From 1980 to 1999,
numbers declined at an average of 1.19% per year, as consumption fell to 22.26 million metric tons by the
end of the period. There are several reasons for this drop – the younger generation’s changing drinking
preferences towards beer and harder alcohols, the older generation’s health concerns, and finally stricter laws
for drunk-driving all played a role in the decline. But importantly, most of the global decline was due to a
drop in consumption in Old World wine countries – countries outside this category mainly increased their
consumption of wine. And, since the turn of the millennia, global wine consumption has actually increased
again, growing approximately 1% per year to 25 million metric tons today. This growth occurred as Old
World wine markets’ consumption continued to decline, showing that an interest in wine from developing
markets like the U.S. and China were enough to offset losses from France and Italy.
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World Consumption Patterns (million MTs)
4
Individual Countries
3.5
3
2.5
2
1.5
1
0.5
0
255
250
245
240
235
230
225
220
215
210
World
Source: OIV, *Wine Institue for 2010
Italy
France
U.S.
China
World
The chart above demonstrates these trends. In the last two decades, wine consumption in France has fallen
from 3.7 million metric tons to just over 2.8. Italy has fallen from 3.5 million metric tons to 2.4. On the other
hand, China’s growth in consumption has brought it from 500,000 metric tons to 1.3 million, and the U.S.
from 1.8 to 2.9 million metric tons. Other Asian nations, such as Thailand, Japan, Taiwan and South Korea
experience double digit growth rates as well.
One last important detail to note is that although consumption has generally been on the wane in Europe –
with demand dropping from 31 liters per person to 18 liters per person from 1985 to 2005 – the
consumption of premium wines have actually increased, from 10 to 15 liters per person in the same time
period. Additionally, the U.K. and Belgium have both bucked the declining trends in wine demand, with per
capita annual consumption rising from 3 to 20 liters in the U.K. and from 10 to 26 liters in Belgium from
1966 to 2005.
Supply Side Factors of Wine
Although oenology has been in existence for over eight millennia, the fundamental process of making wine
has stayed relatively constant. It starts, not with the grape, but with the land itself: the precise location of the
vineyard, the inclination of the ground, the type and quality of the soil, the humidity of the air, quantity of
rain and even the nearby flora and fauna are all considered important factors for the seasoned vintner. These
qualities all lend themselves to an unobservable, almost mythical, property that Old World growers refer to as
terroir. Terroir can only be loosely described as the interaction between these many facets of the vineyard
environs and the eventual taste of the grape; only if the terroir is good, a vintner mighty say, can a vineyard
begin to grow grapes worthwhile for winemaking.
Grape budding typically begins in March or April in the northern hemisphere. The goal of the farmer at this
stage is to minimize the size of the leaf and maximize the amount of sunlight the vine receives, to ensure that
the vine will put most of its energy into the fruit. After the summer growing season, grapes are typically
harvested in late September or October, typically by hand to avoid bruising. The grapes are sent to a winery
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and put through a crusher – a perforated rotating drum that allows only the juice and skin of a grape to pass
through while retaining the stems. The resulting pulverized mixture of grape juice and skin is called the must.
Getting your Feet Wet
In centuries past, squeezing the grapes for juice was done not
with a mechanical crusher, but by putting grapes into a wooden
vat and stomping down with feet. This method, called “pigeage
à pied” is no longer done commercially (except for a few specialty
vintages) today because of health concerns and high costs.
Although it is possible to visit wineries and stomp grapes
yourself, the juice extracted this way is never used for wine.
At this point, the process differs depending on whether red or white wine is to be produced. Red wines can
be sent directly to the fermentation tanks. White wines, which are also typically made from a different variety
of grape than reds, instead have the skins separated from the must before undergoing fermentation. This is
done through a wine press – in the modern day, a large, hollow, metal cylinder with an internal rubber
bladder. The white wine must is put into the space between the inside wall of the cylinder and the outside of
the bladder – which is then filled with air, expelling all liquid elements while trapping the skins between the
metal and rubber.
Red and white wines are now allowed to ferment. Modern day fermentation tanks are completely airtight,
with a typical capacity of 1,500-3,000 gallons. The tanks are cooled with glycol and maintain a temperature of
40 degrees Fahrenheit. Inside the tanks, the vintner will add sugar and yeast, and store for 2-4 weeks. During
this time period, the yeast breaks down sugars found within the grapes called pyruvates, converting them into
carbon dioxide and ethanol. This process is called primary, or alcoholic, fermentation. After the wine has
reached sufficient alcohol content, the vintner then puts the wine through a filter to remove the yeast, then
into oak barrels for storage from three months to three years.1 During this stage, the wine absorbs the flavor
of the oak. Vintners may also choose to have wines undergo an additional step of fermentation by adding a
different type of yeast during this stage. This yeast converts malic acid into lactic acid, giving the wine a
mellower and less acerbic taste. This is called secondary, or malolactic fermentation, which produces a
“buttery” flavor in the wine.
Wine goes through three final stages of processing before it can finally be consumed. Some wines undergo
blending, where vintners blend together wines from different casks or batches to attempt to achieve a perfect
balance of tastes. Modern day wines typically also go through a preserving process, adding sulfur dioxide or
potassium sorbate to slow bacterial or fungal growth which can spoil the flavor of the wine. The final stage is
bottling – wine is filled into glass bottles, typically 750mL in volume, and then corked to be prepared for
shipment or consumption.
1
It is also at this point when red wines will be put into the wine press to have the skins separated out.
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Differences between Old and New World Wines
Even though the above describes the fundamental process of vinification, there are many distinctions
between Old World and New World styles of winemaking that lead to important business side limitations.
For instance, New World wineries sometimes opt to use computer monitored steel tanks during the
malolactic stage of fermentation instead of oak casks. Oak flavoring, then, is obtained by adding wood into
the tank rather than coming from the barrel. This change allows winemakers greater control into monitoring
the wine for a more consistent batch but is strictly verboten in the Old World.
Old World and New World wines also differ in the packaging of wine. Countries like the U.S., Australia and
South Africa are much more likely to use metal screw caps instead of corks. Although untraditional, this
minimizes the chance that the wine inside the bottle will become oxidized, leading to spoilage. Australia also
developed the innovative “wine-in-a-box”, a rectangular shaped container with a plastic spigot near the top
for pouring. This device, seen as gaudy by many wine traditionalists, does offer benefits in terms of reducing
shipping costs and being easier to store in freight or a consumer’s refrigerator.
But the most crucial differences between Old and New
World wine occur even before the grape is sent to the
winery. For one, there is an enormous difference in
average vineyard sizes. In the U.S., the average vineyard
is 213 acres and in Australia, 167 acres. Compare this to
the average in France of just 7.4 acres, or of Italy, with
just over 1.3 acres of land per vineyard. These differences
are the remnants of the old inheritance systems which
inhabited Europe between the 16th and 19th centuries,
breaking up estates into smaller holdings to be divided between children. This constant fracturing of land has
today led to a supply market in the Old World that is extremely fragmented. Wineries and vineyards are both
small, offering only specialized regional products. More importantly, wineries, vineyards and distributors in
the Old World are rarely under the ownership of the same entity. Typically, small vineyard owners sell their
grapes to a nearby vintner, who also receives grapes from other farmers. The vintner then ferments the wine
and sells it in bulk to a négociant, who like before, receives wine from many different vintners within the same
region. It is finally the négociant’s role to blend and bottle the products before distributing them for sale. In
contrast, the large land holdings of U.S. and Australian wine companies allow them to own the entire supply
chain from grape to bottle. This advantage allows New World wineries to sense changes in consumer
preferences downstream and thereby respond to shifts more effectively.
“Tears” of Wine
Some sommeliers may tell you that the
“legs” of wine are caused by the tannins in
the wine, and that longer legs are a sign of
good quality. This is, unfortunately, a myth.
Tears of wine are caused by the Marangoni
effect and the difference in surface tension
between water and ethanol.
Because Old World wines are so important to their respective countries from a cultural standpoint, there is
also greater legal oversight over the production and processing methods in the industries. Germany, for
instance, has a 1971 wine law mandating that a government panel sample each vineyard’s annual harvest and
assign it a quality level. French wines are regulated by the Appellation d’Origin Controllée (AOC), a set of laws
that define regional boundaries and enforce a set of winemaking standards for vineyards and wine makers.
Italy has a similar set of laws called the Denominazione di Origine Controllate (DOC). Across the Old World
countries, these wine laws are both strict and all encompassing. For example, the AOC forbade French
landowners from using drip irrigation, a method employed in Australia to make marginal soils more arable,
thus creating opportunities to expand land holdings. Another example is the restriction on using reverse
osmosis– a technology used to give wine a fuller flavor by concentrating the must during fermentation.
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Apart from legal regulations, factors such as tradition, culture, and local pride have also played a role in
spurning recent wine innovations - for instance, night time harvesting in order to maximize grape sugars, new
trellis systems allowing vines to be grown at twice the density and fertilizer and pruning methods that increase
yield are all employed in the New World, but very rarely throughout Europe.
The bottom line is that fundamental differences in laws, customs, and underlying production factors have all
led Old World production costs to be much higher. In France, the cost to produce one ton of wine is
approximately 238 Euro. In the Australia, economies of scale, cheaper labor, cheaper land, fewer regulations,
openness to innovation and milder climates have all played a role in reducing this amount to only 137 Euro
per ton.
Old World and New World Strategies:
The many differences in Old and New World wines have created two distinct categorical markets for wine.
One market is held by the newcomer, employing unorthodox winemaking methods that cause conservatives
to decry the usurpation efficiency over tradition. At the other market stand the purists – the old guard of
viticulture perhaps clinging to a way of life that may be disappearing.
Both what’s true is that sides are using their unique strengths to position themselves in the global wine trade.
France, Italy and Germany, with higher production costs, make the brunt of their appeal to wine classicists.
They stress the prestige and distinction of purchasing traditional wines from a region like Bordeaux or
Burgundy, and also take great pains to highlight the consistent quality of their government-classification
schemes. For instance, coming from any one of the 327 designated AOC regions supposedly guarantees a
vintage to be great quality wine; anything achieving the distinction of grand cru should be among the best
wines in the world. This quality, Old World producers would argue, is something that simply cannot by
emulated by the newer wines. These tactics, while making headway in growing premium wine markets like the
U.S. and China, have done little to prevent the waning consumption rates of the home countries. Their
success in the future then, relies on whether age-old techniques can continue to be appealing to new markets.
American and Australian wine, on the other hand, have been investing money into differentiating their wines
to appeal to a broader market. Brands such as Ripple or Barossa Pearl, fruity tasting wines have become
wildly successful in target demographics still unaccustomed to the taste of more traditional wines. New World
companies have also been successful in attracting new wine consumers through products like wine spritzers
and ultra-low priced products such as the infamous “two-buck chuck”, Charles Shaw vintage, sold at Trader
Joe’s. American and Australian companies have also been using their supply chain command to more
effectively leverage marketing of their wines. Because the vineyard names are on the final product sold at the
supermarket - and wines are processed, bottled, and distributed by the same company that produces the
grapes - companies can guarantee to customers that quality has been ensured at every step of the journey.
Additionally, because New World companies were operated at scale and lower costs, they were more able to
dominate the lower and middle tiers of the market through lower costs and seasonal promotions.
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Top 10 Wine Production Countries, Historic Values (MT)
Source: FAO
7,000,000
Italy
6,000,000
France
5,000,000
Spain
United States of America
4,000,000
China
3,000,000
Argentina
2,000,000
Australia
South Africa
1,000,000
Chile
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Germany
Investing in Wine
There are numerous ways make an investment in wine, and investors should look into all potential options
before making a decision. The most straight forward method would simply be to buy high quality vintage
wine and resell it at a later point. In fact, it has commonly been stated anecdotally that it is possible to two
bottles of wine, consume one of them, and sell the other when the price doubles allowing one to “drink for
free”. The appeal of this approach is obvious, but there are numerous difficulties in the execution of a purely
physical investment of wine. For one, it relies on the faith that one particular bottle – rather a much broader
company, winery, or even brand – will appreciate in price. Another difficulty is the potential for moral risk
associated when first buying the bottle. Many wine investors settle for receiving advice from their wine
merchants...although this is reasonable given the vast amount of knowledge the merchant possesses, there is
an inherent dilemma in purchasing products from the same entity that give you the recommendation. Lastly is
the fact that keeping truly high quality wine also involves upkeep costs. Wine investors expecting to take the
physical route need to be ready to shell out cash to protect and preserve their investment.
Recently though, wine has been becoming more and more of a viable asset class. In 1999, the London
International Vintners Exchange (better known as Liv-ex) was founded to provide a marketplace for wine
merchants to trade investment grade wine. Though mainly for merchants, Liv-ex publishes two widely used
indexes that allow investors to track the prices of the 50 or 100 most sought after wines. Numerous wine
investment funds have also been taking hold, managed by companies such as Wine Asset Managers, Wine
Investment Fund, Vintage Wine Funds and Bacchus Partners. The last method of entry into the wine world
would be to look into REITs, which actually deal with the vineyard land of wine as an asset class. Global
Wine Partners is just one example of a company that offers REITs for investors interested in vineyard land.
A future paper in the wine series will cover these investment techniques in more depth.
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Future Trends – Developing Markets
Before taking the plunge of investing in wine though, investors should be wary of two new developing trends
that may have drastic effects on the future of wine. The first important trend appearing in the wine world
markets is the emergence two new super economies, namely China and India, and their developing tastes for
wine. In China, the rise in consumption has been particularly sharp in recent years, rising 65% between 2005
and 2008, and essentially quadrupling between 1990 and today. This is astronomical, considering that and 15
years ago, grape wine consumption was virtually nonexistent, the market entirely dominated by non-grape
varieties. These non-grape wines, yellow wine and rice wine, still control the market today by accounting for
2/3 of the share, but grape varieties have been making headway. The reason for this increase in consumption
is because of China’s economic success, and the desire for the new upper class to experiment with new tastes
and more luxury lifestyles. This desire to demonstrate status has exhibited itself in the type of grape wine
imbibed as well - in China, 90% of the wine drunk is red wine, as white wines are not considered to have the
same level of prestige. Despite this red bias, it exists primarily among male consumers – white wine
consumption among Chinese women has been increasing at a rapid rate in recent years. Most exciting for
investors might be the Chinese thirst for particularly elite quality wines – high demand has driven of the price
of Bordeaux, Burgundies and Chiantis to record levels as newly minted millionaires of Shanghai and Beijing
demonstrate their extravagant wealth with little concern for subtlety.
Production wise, China is 5th largest in the world in terms of vineyard acreage, but not yet a big player in the
world export market. China has over 1.16 million acres of vineyard land, right above the United States’
945,000 acres and below Turkey’s 1.23 million (the top 3 counties are Spain, France and Italy, all having
between 2 and 2.5 million acres). China’s low production numbers have not been due to lack of land, but
rather lack of technical expertise; but this is changing as an influx of funds is expected to come into the
industry from global investment. In 2011, Shanghai established first official wine exchange, providing and
online platform for wine traders in China and internationally to do business. This year, the Dinghong Fund
plans to invest $156 million into vintages all across France, and French companies are looking to soon invest
money in vineyards in China as their 400 wineries as of 2008 are expected to increase 10-fold in the next 50
years. Organizationally, China’s wine industry is quite unique with just 3 companies, Dynasty, Changyu and
Great Wall controlling half the market for grape wines. This is a huge departure from a global industry that
tends to be highly segmented.
In India, the growth in consumption of wine is expected to come mainly from the 300 million in the
emerging middle class. Today, Indian preferences still tend towards spirits like whisky or rum, and it is
expected that wine will supplement rather than replace liquors in the coming years. In terms of wine
consumption per capita, India is right now where China was about a decade ago - their per capita
consumption in 2006 was just 1 tablespoon, but it is a fourfold increase since 2000. The 74% growth in
consumption India in 2008 compared to the year before suggests that they are very closely following China’s
rise in consumption in the recent decades. Most wines are grown in Nasik, a region in central and western
India about 100 miles northeast of Mumbai, and South Asia’s version of Napa Valley. In India, the
production market is still a fledgling one – the oldest winery in the country is only 38 years old, and there is
practically no export market as most of the wines made in the country are consumed domestically. But
despite how young the market is, certain factors make the country very appealing for winemakers. For
example, because of the heat in the summer and the monsoon season, vine pruning typically starts in
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September and harvest happens in February. This growing season is completely off-cycle, occurring after the
growing season in the northern hemisphere, but before that of the southern hemisphere. Additionally, Indian
wineries like Chateau d’Ori, Terroir India, Sula Vineyards and Chateau Indage, the biggest winery in the
country, all hope to capitalize on the nations developing tastes and newfound wealth.
Future Trends – Climate Change
The second important trend is the potential for global climate change to affect both the quality and viability
of existing vineyards. Wine vineyards, typically tremendously fastidious when it comes to conditions of
temperature and humidity, only grow in a very narrow range between 30 and 50 degrees of latitude. This band
of arable land, called the wine belt, is within the “goldilocks zone”, providing temperatures that are neither
too hot nor too cold. Even within this zone, cooler areas tend to produce better vintages – cool temperatures
tend to yield grapes with a hint of acidity that makes the eventual wine flavors deeper and more compelling.
Warm regions can sometimes produce flat, uninteresting wine. But even more conditions are required to
make a good wine – even within this narrow range in latitude, top winemakers look for a land that is arid,
mostly sunny and relatively flat. And herein lays the problem: with average global temperatures on the rise,
the few parcels of land with the perfect terroir for wine making - that fall under the correct conditions for
aridness, sunniness, soil and temperature – are gradually becoming sub-optimal or even unfertile at worse.
In March 2006, the first ever conference on Wine and Global Warming was held in Barcelona, Spain.
Sponsored by the Wine Academy of Spain, vintners from across the world met to voice their escalating
concerns about the future of their craft. Spain and Portugal were already suffering from the impact of the
global rise in temperature, with their best grape crops shriveling in the heat. Other winemakers remarked that
their recent vintages failed to come even close to expressing the true varietal characteristics of the land.
Castilla-La Mancha, an area in Spain known historically for its wine, reported its fifth continuous year of
drought, and announced the sobering truth that the region may not be able to sustain life in the future. In
2008, and most recently in 2011, the conference met for its 2nd and 3rd assemblies with echoed concerns.
Napa Valley in California, for example, announced that it too may be susceptible to rising temperatures in the
coming years and that vineyards may have to be relocated northward. And rising temperatures may bring in
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other problems as well – as climate changes, so does fauna; and it is feared that the Asian Lady Beetle
populations may begin to rise in grape growing areas, contaminating the taste of the eventual wines.
But the news is not all negative. As some regions
become too hot to sustain their historically premium
wine vintages, other regions, originally too cold for
top quality wines, will soon fall into the ideal
temperature range. Arnaud Descôtes, environmental
manager for the Comité Interprofessionnel du Vin
de Champagne, has stated that his champagnes have
never been better. The Champagne region, of
course, lies at the 49th parallel, near the northern
limits of where wine can be grown. Forward thinking
investors have already started zeroing in on buying
land that may become premium vintage real estate in
the future. A French wine making company, for
example, has begun buying land in southern England
in anticipation of possible changes. Other regions in
the world are poised to take bigger positions in wine
production in the future as well – Tasmania in
Australia, New Zealand’s South Island, Okanagan
Valley in British Columbia, Canada, and finally Puget
Sound and the Finger Lakes in New York are all
examples.
A future paper in the wine series will focus specifically on climate change and use GIS analysis to provide a
more detailed understanding of which regions are likely to be affected.
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permission of HighQuest Partners, LLC, 300 Rosewood Drive, Danvers, MA 01923
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Disclaimers and Notes of Forward Looking Statements:
The information provided herein is not an offer to sell, or a solicitation of an offer to buy any security,
investment product or service. This material was prepared solely for informational purposes and it is
distributed with the understanding that HighQuest Partners LLC is not rendering legal, accounting or other
professional services. There is no guarantee that forecasts discussed will be realized. A variety of factors,
many of which are beyond the control of HighQuest Partners, LLC, may affect performance and results and
could cause actual performance and results of investments to be materially different from any future
performance or results that may be expressed or implied by any forward looking statements.
Copyright 2012 All Rights Reserved. No reproduction, distribution, or transmission of any portion of this work is permitted without the written
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Additional Reading:

Bartlett, Christopher, A. “Global Wine War 2009: New World vs. Old”. Case Study. Boston: Harvard
Business Publishing, 13 August 2009. Print.

Chaney, Joseph. "China Could Become the Wine Industry's next Chile." The New York Times. The
New York Times, 14 Sept. 2008.

Coplan, Steven. "Great Wine: Global Warming Victim?" Great Wine: Global Warming Victim? Salon
Magazine, 3 June 2010.

Donner, Paige. "Winemakers Rising to Climate Challenge." The New York Times. The New York
Times, 17 Nov. 2011.

Fabricant, Florence. "The New York Times." The New York Times. The New York Times, 04 June
2008.

"FAO Stat Wine Production." FAO Stat. U.N. Food and Agriculture Organization, 23 Feb. 2012.
Web. 28 May 2012. <http://faostat.fao.org/site/636/DesktopDefault.aspx?PageID=636#ancor>.

Freudenrich, Craig. "How Winemaking Works." HowStuffWorks. HowStuffWorks, 28 Mar. 2001.
Web. 28 May 2012.

"India's Wine Industry Booming." The Times Of India. The Times of India, 3 Apr. 2012.

Jones, Gregory V., Ph.D "Climate Change and Wine-Canary in the Coal Mine." Climate Change and
Wine. Carbon Reduction Challenge. Web. 28 May 2012.

Lunzer, Peter. "Investing in Wine: Wine Matures as an Asset Class." Moneyweek. Moneyweek, 29 Aug.
2007. Web. 28 May 2012.

Rabinovich, Simon. "China to Launch First Wine Investment Fund." Financial Times. Financial Times,
23 Aug. 2011.

Statistics of the World Viniculture Sector. Published Statistics. OIV - International Organization of Wine
and Vine, 2010.

Weise, Elizabeth. "Study: Climate Change to Impact Where Wine Grapes Can Grow." USA Today.
Gannett, 07 Oct. 2011.

World Wine Consumption by Volume. Published Statistics. The Wine Institute, 2010.

World Wine Production by Country. Published Statistics. The Wine Institute, 2010.

World Vineyard Acreage by Country. Published Statistics. The Wine Institute, 2010.
Copyright 2012 All Rights Reserved. No reproduction, distribution, or transmission of any portion of this work is permitted without the written
permission of HighQuest Partners, LLC, 300 Rosewood Drive, Danvers, MA 01923
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14