California’s Napa Valley vintners Charles
Johnston III ’70 (founder and owner of Helena View
Johnston Vineyards) and Olivier Portet ’02 (CEO of
Portet Wine Selections), share trends associated with
the United States’ increasingly global wine
Two Buck Chuck isn’t a ring toss game at the fair.
It’s the nickname affectionately given to the $1.99
Charles Shaw label sold at Trader Joe’s supermarkets
and, incidentally, one of the most significant
influences on America’s recent widespread fascination
According to Johnston, an oversupply of grapes in
early 2000 led to bulk purchasing by large producers
who, in turn, sold their wine at much lower costs,
bringing in a whole new demographic of wine drinkers.
“What we’re seeing is that someone who would only buy a
$2 bottle of wine as an alternative to beer is now
graduating to the $5 and $7 bottle,” he explains.
This affordability has uncorked some of the mystery
associated with wine, making it a more acceptable and
popular beverage in America. A strong U.S. dollar during
the late ‘90s also allowed wholesale retailers such as
Costco, Sam’s Club and Target to introduce inexpensive
fine wines from around the world, dramatically expanding
the presence of import wines. And as wine interest has
grown, international boutique wines – unique or small
production labels – have become palate-pleasers for
American wine drinkers as well.
The Wine Institute, the public policy advocacy
association of California wineries, reports that only
French and Italians consume more wine than Americans.
Americans annually drink more than $22 billion of wine,
and the Adams Wine Report published in July 2004 stated
an increase in U.S. wine consumption of 5.2 percent over
the previous year.
As wine interest
has expanded in America, the industry itself has also
grown and matured. “As more people consume wine,
marketing becomes more sophisticated – including merger
activity,” says Johnston. During 2004, London-based
Diageo purchased Napa Valley’s Chalone Wine Group; New
York-based Constellation Brands Inc. - the world’s
largest winemaker – purchased Napa Valley’s Robert
Mondavi Corp.; and Wine Group of San Francisco bought
out California-based Golden State Vintners Inc. “As this
consolidation occurs, it becomes a truly global market,”
adds Johnston. “To stay in the game in a global
marketplace, some wineries will have no choice but to
become part of a marketing order much larger than they
In this competitive market for
share-of-mouths, boutique wineries also have their place
among national and global conglomerates. “Boutiques can
be a niche player,” explains Johnston. “They can focus
on a particular geographic region, segment of the market
or a combination of those things.” In fact, boutique
players have a distinct advantage in the area of
“There is a growing lack of service in the wine
industry,” says Portet, whose company imports boutique
wines to the United States from Australia, Chile and
Argentina. “When wine is bought and sold by large
corporations who are maximizing economies of scale,
service often dwindles.”
Both Johnston and Portet believe that educating
consumers, many of whom are new to the world of wine, is
key when competing with the conglomerate wine companies.
Portet’s company endorses shelf talkers,
explanatory cards placed on retail shelves that describe
the wine’s origin and foods that complement it. He
believes that even the global players can benefit by
paying attention to service.
Another key service area is personal interaction with
and education of individuals closest to consumers – the
distributor, supermarket sales staff, restaurateur,
sommelier, and waiter. According to both wine
enthusiasts, the end result is brand loyalty and a more
enjoyable experience for the consumer.
As the U.S. wine industry suffers the growing pains
associated with rapid consolidation, consumers stand to
be the greatest beneficiaries – with resulting
competitive pricing, emphasis on wine education and
worldwide selection. Thoughtfully considering the palate
preferences of various regions of the world and
adjusting the product accordingly, Johnston predicts,
will spell success in the global market. Educating
consumers and keeping prices competitive will yield a
fruitful harvest worldwide.
Charles Johnston (Charles.Johnston.III@morganstanley.com) is
also a vice president with Morgan Stanley. To learn more
about his vineyard, visit http://www.helenaview.com/.
Olivier Portet (firstname.lastname@example.org) is a 10th
generation Portet to be involved in the wine business
RECOMMENDED WEBSITE FROM
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association has more than 700 members from 48 states.
Website contains free industry information on acreage,
grape value, and production.