Quo Vadis Regionality?

In my last posts I discussed regionality from the NZ perspective based on adoption of Geographical Indications regulations.

In Australia it is probably fair to say that regionality is being enthusiastically touted as the way back from the mire caused by the success of the long-term rapid expansion and subsequent “dumbing down” of Australia’s wine image (a lesson that, despite certain important differences, New Zealand ignores at its peril).  However, does regional emphasis and the common corollary emphasis of certain quasi-cultural, qualitative aspects of wine production, actually solve the problem?  Does it come with its own set of problems, some of which may serve to quash some of the individual character that advocates of regionally based wine making and marketing hold out as the desirable strengths of this approach?

Let me preface all that I say below by emphasising that I am a firm believer in the diversity of wine production.  In this industry there simply has to be large and small, blends and single vineyard wines, large brands and artisanal “anti-brands”, cheap wines and luxury products.  Problems usually arise when there is an excess emphasis on any one aspect.  If everyone was trying to make and sell multi million litre branded wines most of the industry would go spectacularly bust because there simply isn’t room in the market for two many people trying to do the same thing (and a whole section of the market that prefers small boutique products, for example, would be uncatered for).  However should the market only consist of “small players” there would be higher costs and nor would there be the infrastructure, including sales and marketing, to be able to support the resulting proliferation of labels and “noise” that would result – meaning the same outcome of bankruptcies and consumers not catered for.

Depending on who is expressing the opinion, regionality is both the strength and the weakness of countries such as France and Italy, and of parts of the Old World in general.  To most French, German and Italian vintners the local focus, often to the level of the village, is the source of their pride and identity. This historically derived emphasis, dating from a time when for many the village was the world,  is the bedrock on which each country’s reputation as a great producer has been established – without it there would likely be no Lafite, no Montrachet, no Hermitage, no Bernkastel or Schloss Johannisberg, no Barolo or Brunello. 

However, to other commentators the degree of focus on the local has diminished the capacity of each country to perform competitively.  Local typically means reduced scale and, therefore, higher costs.  In an ideal world where we can all choose between Romanee-Conti or Petrus on a daily basis, the cost of each would be much lower, but not so low that it would remotely compare with the lower price brackets in our supermarketstoday.

Moreover, it is very clear that regions within countries often go through cycles of fashionability, so that regions with big reputations in one decade, or even one century, cannot always maintain them intact.  Someone else rises.  The world is simply not big enough to handle every region of the world acting as if it is as important as Burgundy, Rioja or the Napa Valley. 

The global wine market is very much a pyramid.  It is smallest, and total demand is lowest, at the top.  If every producer in the world tried to price at the level of Cheval Blanc or Le Musigny, demand would slump (although, in a typical paradox, there would likely be significant under-supply or excess demand at lower price points).

Which is where one strongly fears the Australian industry’s newfound (yes, I know in truth that it isn’t remotely new) determination to use regionality as the tool to solve its problems may only create new problems.  It is based on a belief that there is a market for something more valuable than the market that the purveyors of critter wines were managing to sell to.  The problem is that this market is a much smaller market than the market for critter wines, and it is an even more crowded market already.  It is simply not possible for an entire industry (that is, one of material scale already as opposed to a “cottage industry”) to migrate to a different business model targeting different price points. 

Even if the actual message is simply for small and medium producers to step out from competing with the big winemakers and marketers and to differentiate themselves on the basis of their origins, the number of producers for whom this would apply is still too large to be workable without affecting the economics of the shift.  Moreover, if the origins they are pegging themselves on are too diverse or obscure for all but a small number of consuers to follow, if the proliferation of geographical designations has created so much “label noise” that it has become largely meaningless to consumers, the vast majority of producers may find that little has changed: rising stock levels and downeard pressure on prices as the only way to get noticed in the marketplace.

Whether a regionally focused strategy is workable, other than at the margins for a few producers able to garner either attention or reputation, is open to question.  It is not a simple salve for all of the industry woes, but in the right hands it may still be better than the downward spiral that has developed during the global downturn.

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