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Way Too Much Wine

With the state of the economy today, there are a lot of businesses sitting on excess inventory. Some companies have limited production to avoid adding to the problem. Many have also dropped prices and/or offered sweet financing deals.

The wine business has been about as badly affected as any. It has seen plenty of discounting too, in all tiers of the market. In some places, consumers can buy wine for less than even off-brand bottled water. These price moves have lowered profit margins, or increased losses. As Xavier de Eizaguirre, chairman of Vinexpo, has said about the UK market, “retailers are the only ones making money.” Yet, despite the deep discounting, consumption hasn’t increased dramatically.

Nor has global wine production has declined substantially. Grapes grow every year. You can pull up vines, which costs money and limits future income. Or, growers can let the grapes fall to the ground, but they have little motivation to do so when someone is willing to pay them for the fruit. Frankly, production was at excessive levels in some regions even before the financial crisis. While business boomed for most of California’s grape growers and wineries, cheap wine from places like southern France, Bordeaux and Australia was starting to pile up.

Chris Losh, with the beverage industry analysts just-drinks, recently wrote about a newly released study done for Vinexpo by IWSR. He quotes the study as saying “between 2005 and 2009 the world’s average annual production was 3bn nine-litre cases.” Losh estimates average consumption during that period as 2.4bn cases. This doesn’t sound like a big delta, because the digits are small. What it really indicates, though, is an average excess of 1.45 billion US gallons. Every year. And now wine production in China is increasing rapidly.

Now that sounds like a lot of wine. But how much is it really? Well, the largest oil supertanker in the world holds 172 million gallons. It would take nine of those ships to hold a single year's excess wine. If all you have is a regular (huge) supertanker, you’ll need twenty.

The Knock Nevis, aka Jahre Viking, is the world's largest supertanker.
Photo: Auke Visser's International Super Tankers

Supertankers are hard to relate to though. You don’t see them on the street every day. So let’s use the streets you do see every day as a reference. If you dumped all the excess wine from one of those years on the streets of Manhattan, it would cover the entire island to a depth of 3.5 inches. Splash all five years worth of leftovers out and the Big Apple’s citizens would be wading knee-deep in vin ordinaire.

The problem isn’t just excess inventory though. It’s also a tremendous waste of resources. Making a ton of wine bottles requires 1.2 tons of raw materials and 185 kWh of electricity. Of course much, perhaps most, of the excess wine never gets as far as a bottle. But production of grapes and wine is very energy intensive too; there’s diesel for the farm equipment, air conditioning for the wineries and warehouses, etc. Transporting the wine consumes a lot of fuel, generating carbon emissions in the process. And, in areas such as Australia where irrigation is required, a massive amount of increasingly scarce water is essentially being wasted.

Excess wine can be made into vinegar or used to produce other types of drinking alcohol. It can also be sold to producers of denatured alcohol or absolute ethanol. The latter can used as  industrial solvent, fuel, etc. But conversion from table wine isn’t necessarily the most efficient or cost-effective way to produce those substances. It would be better to decrease the overages by reducing grape and wine production.

That’s easier said than done. Growers won’t pull up their vines unless a governmental organization pays them to do so or it becomes consistently impossible to sell the grapes profitably. Now that governments are suffering from severe financial issues of their own, it seems unlikely that paying farmers not to grow things will be a popular expenditure. In the short run, the biggest decreases in production may come as a result of grower and winery bankruptcies and the elimination of unprofitable wine brands by the multinational drinks companies. Or these companies will act on the notion that they can be more profitable by making less wine but selling it at a higher price. We can hope.

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