The commodity reality

Column - Robert Joseph 

Robert Joseph
Robert Joseph

The common enemy [of the wine industry] is commoditisation.” It’s an easy line, ­offered by a Master of Wine in a Twitter thread, and one that I’m sure would get nods of agreement at any industry conference. 

No one wants to be a commodity, in the same category as potatoes and pork bellies: stuff that’s bought by weight and price ­without any recognition being offered to the efforts and skills of the producer. What we all want to be is a bit of a brand. Something that is recognised, sought after and picked out from the crowd.

This is simplistic, however. Wine, like tea, ­coffee and orange juice, is an agricultural product that has always been, at least partly, a commodity. ­People bought and sold anonymously-produced Bordeaux when the ­English­ still owned Aquitaine, just as they buy and sell it by the barrel today. The price those barrels fetch is partly driven by quality, but often its cost is also affected by uncontrollable factors such as the harvest size, exchange rates and financial conditions, and by fashion.

There is a direct parallel here between wine and a couple of other illustrious commodities: gold and diamonds. One of the sadder phenomena of the last few years has been the number of people who have responded to ‘Cash for Gold’ advertisements by selling their jewel­lery. Setting aside their sentimental value, many of the rings and bracelets that were transformed into cash were beautifully-made examples of skilled artisanship. That did not stop the unfashionable examples being treated as scrap to be melted down and reused. 

The appellation system and its New World equivalents actually facilitate commoditisation. Any professional buyer knows the going rate for basic Chablis or Chianti, and the Scandinavian monopolies regularly put out tenders for wines from specific regions. It is very hard for a producer in, say, Minervois to command as high a price for a bottle of their wine as a less fine effort from Margaux, even though the cost of production might be very similar. 

Even when the liquid is effectively branded as it often is in Champagne and Napa, a different level of commoditisation comes into play: the cost per ton or kilo of the grapes from which it is made. Brian Clements, vice president of California’s leading grape and bulk wine brokerage firm Turrentine, was quoted in an article in the North Bay Business Journal saying that: “It has been a challenge to sell 2013 Merlot grapes… even when they have been packaged with more desirable varieties.” California Cabernet Sauvignon is a lot more popular “We have been selling excess tons from both Sonoma County at $2,200–$2,300 a ton; Napa Valley, $3,000–$3,500; Mendocino and Lake counties, $1,600–$1,800.” So, however lovingly you farm your Lake County Cabernet Sauvignon vines, the chances are that they’ll only net you half the price of the same variety grown in Napa. If that isn’t high-level commoditisation, I’d love to know what is. Over the next few months, premium ­Australian and Argentine producers in particular are going to be confronted with some challenges they might not have anticipated even a few months ago. In December 2013, the New York Times ran an article headlined ‘Argentina Tries to Give Malbec More Status’. Less than four weeks later, the Wine Industry Insight online news service offered the contrasting ‘Argentine Peso Crash: Cheap(er) Could Flood US Shelves’.

Between the two publication dates, the Argentine peso had lost 20% of its value in the space of seven days. Status and a weak currency do not always go hand in hand.

Australians who have, until recently, been struggling with a stiflingly strong currency, are seeing a similar phenomenon with their dollar dropping to its lowest value against the US currency since 2010. This, coupled with large stocks of unsold 2013 wine at the lower end of the price scale, more or less ensures that North American and UK consumers will be offered South East Australian Shiraz and Chardonnay at some very cheap prices. Hardly the ‘premium’ image the organisers of last year’s Savour event wanted to paint.

If commoditisation really is an enemy, it’s a foe like the weather and human nature. You can rail against it all you like, but it’s not a battle many are ever really likely to win.



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