Global Wine Market: How Europe Competes

by Elliott Morss

My latest wine article focused on the marketing strategies of the Southern Hemisphere wine countries: Argentina, Australia, Chile, New Zealand, and South Africa. I pointed out that their global market share is growing. But I also said “rest assured, the European vintners are not sitting on their hands”.

Here, I focus on the leading European producers: France, Germany, Italy, Portugal, and Spain. While these five European countries are losing market share to the Southern Hemisphere countries, they still produce more than 50% of all wine, and their global export share exceeds 60%.

There is a sense that European wines, while good, are expensive. In actual fact, European wines compete price-wise with Southern Hemisphere wines. The following table provides data on wines priced $15 or lower that scored 89 or more by Wine Spectator tasters (my experience is that a Wine Spectator 89 rating denotes a good wine). 64% of the reds and 38% of the whites with scores of 89 or better were from Europe. That means there are plenty of good, reasonably priced European wines available.

It is notable how many South African wines came out of the Wine Spectator search. But remember that the Table 1 listings are totally dependent on what wines Wine Spectator chooses to taste.

Since I am not knowledgeable on European wines, I have asked Patrick Dubsky, the proprietor of Winestone, to help me out. Patrick was born in 1968 in Czechoslovakia, now the Czech Republic. He left for the U.S. at age 19 and settled in the Boston area. He spent the next 17 years working in the fine dining industry, managing operations and overseeing the wine and beverage programs.

Winestone, founded in 2007, is an interesting store. Among its more than 400 offerings, it stocks more than 66 European wines priced at $15 or less, including a significant number of French, Italian and Spanish selections. Patrick uses his European background/connections to find lesser known wines that are competitively priced for value with Southern Hemisphere wines. In what follows, I interview Patrick on what has been happening in Europe.

Elliott: As Table 2 indicates, wine production for leading European countries is down by 5% since 2007. Why?

Patrick: In earlier decades, European governments subsidized more wine production than the market demanded. The governments would buy the surplus and convert to ethanol. Now, things are just the opposite: under the “Grubbing-Up Scheme”, vintners are voluntarily withdrawing areas as government subsidies are reduced for non-competitive wines.  So far, 175,000 hectares (4% of the total vineyard area) has been withdrawn. The effects of the new government program are reflected in your production data.

Elliott: As Table 3 indicates, the leading European wine producers export more than 30% of their wines while the US only exports 21%. It is also interesting that Italy, Portugal, and Spain import very little wine. Wine is clearly the preferred alcoholic beverage in France, while it would appear that the US market is far from saturated.

The export of bulk wines are of considerable importance to European countries. I estimate that 50% of Spain’s exports are in bulk, with much of it going to other European countries. Very little of Italy’s exports are in bulk, but there is much intra-country bulk exchanges.

Patrick: On bulk, Germany is an interesting case. They like sparkling wine in Germany, and most of it comes from imported white grapes.

Elliott: Let’s focus now on specific European countries, starting with France. As I indicated in a recent article, it appears that high-end Bordeaux has really caught on in Asia.

Patrick: True. And with two years of excellent harvests, the prices of the 2009 and 2010 Bordeaux are extremely high. They are so high that some of the vintners are worried about losing their traditional Western markets.

Elliott: Interesting. I have read quotes from numerous US retailers saying the demand for the highest priced Bordeaux is way down and that younger customers show very little interest in high priced wines. I guess that is because there are so many very good, less expensive wines.   I know that wines from the Cote du Rhone region have always provided good value for price. Is this still the case? Am I correct in believing these are mostly blends of different varietals? And are there other good but reasonably priced French reds?

Patrick: Absolutely. Cotes du Rhone and the entire Languedoc region in the south of France have been turning out scores of well-made reds (mostly blends of Grenache, Syrah, Mourvedre and Cincault). The relatively long streak of good vintages has helped as well. As examples of good values here, I carry the 2009 André Brunel Cotes du Rhone at $13, the 2008 Val de l’Ours, a Vin de Pays d’Oc Cabernet Sauvignon/Syrah blend at $12, and the 2008 Domaine Brunet Malbec from Cahors at $11.

Elliott: Let’s talk about high quality, inexpensive French whites. I remember there was a large wine tasting in Boston last year with 6 “amateur” judges. What amazed me was that one wine – the St-Peyre Picpoul from Pinet that was the favorite of all 6 judges. And you sell it for $10. Are there other inexpensive French whites worth trying?

Patrick: The Southern regions of France such as Gascony, which would historically produce unremarkable white wine to be then distilled into brandy are now realizing the potential of grapes such as Colombard and Ugni Blanc are making dry table wine of good quality. For example, along with the St-Peyre Picpoul de Pinet you mention above, here at Winestone I carry the 2010 Haut Marin Cuvée Marine Colombard/Ugni Blanc blend priced at $10 and the Domaine Brunet Chardonnay for $11.

Elliott: Let’s talk now about Spain. I understand that Tempranillo is the dominant grape and that Rioja best known region in Spain. Are there other important regions? And are their inexpensive high quality Spanish wines other than Rioja available?

Patrick: Tempranillo is also used in other regions of Spain such as Toro, La Mancha, and Ribera del Duero. Mourvedre is grown with great success in Jumilla and Garnacha (Grenache) in Navarra. All of the above mentioned regions produce plenty of value priced wine of considerable quality.  From Jumilla, I carry the 2009 Luzon Mourvedre/Syrah blend for $10, and from Navarra I have the 2006 Señoria de Sarria Crianza for $12. I also carry an old vine Grenache from Catalayud, the 2007 Fabla, priced at $12.

Elliott: Italy. I have always loved the Barolos. They are hard to compare with other wines, and they remain expensive. I also like the full-bodied wines from the Valpolicella region. And while some Amarones are quite expensive, I have found some for less than $20 that are exceptional. Why have we not seen some less expensive competitors for Barolos?

Patrick: Nebbiolo, the grape of Barolo, is very unique and does not grow well outside the Piedmont region. As a result the supply is very limited, pushing the price higher. Also, Barolo requires at least 2 years of barrel aging, making it costly to produce. However, excellent Nebbiolo is available at lower price points, such as the 2008 Paitin Nebbiolo from Langhe that I carry for $17. Blends of Nebbiolo with other piedmont grapes like Barbera and Dolcetto are also delicious; for example, I carry the 2009 G.D. Vajra Langhe Rosso blend for $15. Valpolicella, particularly the Ripasso style that mimics the fuller, slightly sweeter style of Amarone can be found and fairly reasonable prices, like the 2008 San Michele Valpolicella Ripasso, priced at $20.

Elliott: Sangiovese is the Chianti grape. I have been surprised at how much variation there is in the wines made from this grape. Some are quite full bodied while other look and taste almost like a Pinot Noir.

Patrick: Very true. The expression of Sangiovese varies quite a bit. It is usually a function of yield levels, soil type and winemaking style.

Elliott: Are there other inexpensive Italian reds that you recommend?

Patrick: In Tuscany, Super Tuscans are wines marketed as varietals from varieties such as Cabernet Sauvignon, Merlot and Syrah. They started our few decades ago as very expensive alternatives to Bordeaux style wines but now there are many lower priced options, such as the 2005 Arceno Primavoce for $15.  Puglia, Abruzzo and Sicily regions tend to over-deliver in quality using their local grape varieties such as Negroamaro, Montepulciano and Nero d’Avola respectively. I carry a delicious 2008 Li Veli Passamante Negroamaro for $13, the 2008 Masciarelli Montepulciano d’Abruzzo for $10, and the 2008 Regaleali Nero d’Avola for $14.

Elliott: Pinot Grigio has emerged with Sauvignon Blancs as the wine of choice among lovers of light whites. Are there other, relatively inexpensive Italian whites worth trying?

Patrick: I would suggest looking at Gavi, Verdicchio, and Falanghina when it comes to light, crisp and unoaked whites. I carry the 2009 Massone Gavi for $13, the 2010 Fontezoppa Verdicchio di Matelica for $12, and the 2009 Aia dei Colombi Falanghina for $15.

Elliott: Patrick, thanks for this. You make a convincing case: Europe produces low-priced and very good wines to compete with those from Southern Hemisphere countries.

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