UK Climate change, Constellation Brands, India

Burst the bubble

A recent report, Impact of recent climate change and weather variability on the viability of UK viticulture – combining weather and climate records with producers’ perspectives, by A Nesbitt, B Kemp, C Steele, A Lovett and S Dorling, from the School of Environmental Sciences, University of East Anglia, Norwich, England, might burst the theory that the UK will one day rival Champagne.

The report starts with warming climate and assesses underlying weather variability and its influence on the development and viability of UK viticulture. Basically, it asks if climate change will be good for English viticulture.

The current assumption is that a warmer England will be beneficial for grape growing. Between 2004 and 2013 UK vineyard area increased 148 per cent, with the number of vineyards rising to 448 by 2013, and the average vineyard size increasing in that period from 2.24 to 4 hectares.

It’s also interesting to note:

“By 2013, total UK vineyard area was greater than that of another emerging cool climate sparkling wine producing region: Tasmania (ca. 1500 ha)”

The period under study was in two parts: 1990-2003 when the dominant grapes were muller thurgau, seyval blanc and reichensteiner, and 2004-2013 when the sparkling wine era became prominent and pinot noir and chardonnay took over.

As wine grapes are generally grown in the latitudinal bands 30-50 degrees north and 30-40 degrees south, southern England, where most vineyards are situated, must be marginal, as it’s 50-52 degrees north. Tasmania is 41-42 degrees south.

The conclusion is that English sparkling wine production has risen, but as a result, the sector is now at greater risk from variability in average growing season conditions. Some quotes from the report:

“At a monthly scale precipitation in south-east and south-central UK during June has been shown to have a statistically significant relationship with yield and has been attributed by growers/producers to low yielding years.

“Opportunities for UK viticulture, when examined at a monthly scale, can be seen through rising median, mean and maximum temperature in most growing season months. In particular, notable temperature increases in the spring months of April and May. Spring air frost risk and wet flowering and fruit set conditions, however, remain a sustained and critical threat. Harvest period conditions in the south-east and south-central UK have now been shown to have become warmer and wetter, bringing the potential for increased disease pressure at this time.

“Here, we have shown that UK yield still faces regular threats from unfavourable weather at key points in the calendar. Viticultural opportunities can be realised in years where these threats do not materialise.

“Viticulture in the UK is vulnerable to weather variability resulting from the UK’s geographical positioning, a vulnerability recognised by UK producers and evidenced in this work. For those investing in UK, viticulture climatic risks may be ameliorated through management strategies, market forces and their ability to cope with lower yielding years. Projections for future climate conditions in the UK will support future risk analysis.”

It appears the increasing number of predictions about the UK taking Champagne’s crown may not be as certain as reported.

Must be in the stars

Constellation Brands has reported a good fiscal 2016 (confusingly, the company’s reporting year runs from March to the end of February).

·         Reported net sales: US$6.548 billion ($8.646 billion), up 9 per cent

·         Earnings before interest and taxes: US$1.892 billion, up 18 per cent

Mexican brands Modelo Especial and Corona Extra led the company’s beer growth, which was in total up 13 per cent. Wine and spirits showed modest growth of 3 per cent. The company is upbeat about the coming year, predicting beer growth of 17 per cent. Most of this will be via the new addition of San Diego craft brewer Ballast Point.

Wine sales should also increase, as the first act of fiscal 2017 was to buy five brands from the Prisoner Wine Company at a reported price of $285 million. The brands are:

  • The Prisoner
  • Saldo
  • Cuttings
  • Blindfold
  • Thorn

The Prisoner retails around US$45, Saldo and Blindfold US$30, Thorn US$40 and Cuttings US$50. The red blend sector above US$20 is up 30 per cent in the US.

Constellation is into brands, not land or buildings. The Prisoner is a red wine. It is made from Napa Valley fruit at the moment but needn’t stay that way, having no specific vineyard. The fruit comes from about 80 growers. More surprising are the varietals. Originally based on zinfandel, it is said to also contain cabernet sauvignon, syrah, petite sirah, and charbono. This means that should Constellation grow the brand dramatically, it can bring in wine from any region and use any mix of grapes it wants to. The brand was established in 1998 and sold for US$40 million in 2010 to Agustin Huneeus (Huneeus Vintners). Huneeus, selling it for US$285 million, has turned a tidy profit in six years.

Constellation is also considering hiving off parts of its Canadian wine business as a separate listing. The speculation is that this may lead to separate wine and beer company listings. No comment was made on its intentions for the 30 per cent of Accolade Wines that Constellation owns.

No cowboys, these Indians

According to a Vinexpo statement, wine consumption in India will rise by 73 per cent in 2017. If this comes about it could tie in neatly with Australia-India free trade agreement negotiations. Though Australia has agreed to reductions of duties on about 9000 items, India has not yet agreed to reduce duty on wine.

Pernod Ricard, via Jacob’s Creek, is well established in India, so should benefit quickly if import duty is reduced. Fingers crossed however its worth reading the article below.

Indian journalist Sourish Bhattacharyya has three theories to explain why young India hasn’t warmed up to wine. (full story here)

Theory 1: Indians, even if they have studied abroad, are not culturally inclined to have wine with food, which is a fundamental part of the wine culture. Our idea of drinking alcohol is to be done with it before sitting down for dinner.

Theory 2: Young India views wine as a fuddy-duddy drink, maybe because it associates it with its parents. Historically, each new generation turns away from the drinks of its parents.

Well, if you check out the age profile of the champions of wine across the world, and the average age of wine club members, you’ll know what I mean.

For a nation as young as India, wine has to be showcased in Bollywood style, not like some Solid State Physics Ph.D. thesis.

Theory 3: Our hotels and restaurants are killing whatever little market that may exist for wine by pricing even supermarket plonks beyond the credit card limits of young India (and I suspect even of the parents). And no argument seems to melt their heart as they laugh their way to the bank.

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