More Fraud Is Coming In The Global Wine Industry

Introduction

The world is replete with wine conferences, e.g., The American Association of Wine Economists, Wine Vision, and Vinexpo. And typically, these conferences have one or more sessions on the future of the wine industry. But there is one easy-to-predict “future” that is rarely mentioned: more fraud. The reasons for more of this – product segmentation and weather – are discussed below.

Product Segmentation

It used to be that most wine came from “grape farms” where the farmers who grew the grapes also made the wine. This is all changing – we now have “urban vintners” making a significant mark. Perhaps the best known of this group are John Casella of Yellowtail and Fred Franzia of “Two-Buck Chuck” notoriety from the Bronco Wine Company. Both Casella and Franzia buy a lot of bulk wine from others.

Franzia and Casella are admittedly different: Franzia, with 32,000 acres in wine growing is part farmer. But only part farmer. He sells off some of his grapes/grape juice, and some he uses for his own wines. A Franzia quote from Taber’s book:

“People don’t understand that we’re both buyers and sellers…. We buy grapes, and we buy wine. But we also sell grapes, and sell wines.” Franzia uses only use 55-60% of his own grapes in his wines. He adds that his wines will never be 100% from his own grapes.

In contrast, Casella buys nearly all his wine in bulk. These revolutionaries are not alone. According to Wine Business Monthly, Castle Rock, ranked as the 25th largest wine seller in the US, “owns no vineyard and no winery.”

How much “virtual winemaking” – making wine without growing grapes or owning a crushing facility – is there? Current data are hard to come by. But Wine Business Monthly reported that in 2006, there were 5,970 wineries in the U.S., with 1,587 of those buying all their grape juice/wine from others.

The Advantages of Buying Bulk Wine

For all farmers, there are good and bad years. It is the same for grape farmers: all wine regions have good and bad years. And not having to worry about weather and disease makes sense. Why not operate with the option to buy grape juice from farmers who are having good crop years?