Wine Enthusiast |
- Is the Wine Industry Ready for Cryptocurrency? (Maybe)
- Fluke or Fate? How Barley Became Vital to Alcohol
- Sold! What The Ste. Michelle Sale Means for Washington’s Wine Industry
| Is the Wine Industry Ready for Cryptocurrency? (Maybe) Posted: 13 Jul 2021 06:57 AM PDT  In May, fourth-generation winemakers Angelina, Alycia, Riana and Giovanna Mondavi announced they would accept cryptocurrency for their Dark Matter and Aloft brands. "This is an opportunity to expand our network for our wines on a more global scale," says Alycia Mondavi. "It's to be ahead of our time, to dabble in something unique to our industry. We've seen that several fine wine auctions have also started collecting crypto, so I think we are onto something, even if we might be a little early in the game." One of those is Acker Wines, America's oldest wine merchant and the world's largest fine and rare wine auction house. It announced it would start accepting cryptocurrency in April. Cryptocurrency is virtual or digital currency that often uses blockchain technology to record transactions and verify ownership. Early adopters include major corporations like Microsoft, Starbucks, Overstock and Whole Foods. The wine industry, on the other hand, is notoriously resistant to technology. Many estates only take reservations by phone, and some don't use social media. Nonetheless, a handful of wineries and retailers have dipped their toes into cryptocurrency. They acknowledge its volatility and lack of widespread adoption, but they've believe that crypto might just be the future of finance. Cash PoorThe Mondavi sisters and Acker have completed some crypto transactions, but they say that consumer interest has been minimal thus far. Alycia Mondavi believes most cryptocurrency investors, herself included, tend to hold onto their investments and ride the extremely temperamental wave, at least for now. "The wine industry is not cash-rich, it's cash-poor," says Napa Valley winemaker Dan Petroski, a cryptocurrency enthusiast. "If Bitcoin decides to tank, I won't have the cash to do what I need to do to bottle my wine."
Petroski doesn't plan to accept cryptocurrency for his Massican wines until the market becomes much more stable. "As a small business who struggles with cash, with crypto you could either bankrupt your company or do really well for yourself," he says. Adding Value with NFTsIn April, Yao Family Wines, founded by retired NBA star Yao Ming, announced it would auction its smallest-production wine, a 2016 Cabernet Sauvignon called The Chop, alongside a limited-edition, non-fungible token, or NFT. An NFT is a unique digital asset, like a piece of art or a video, that cannot be replicated and can be sold. Four NFTs that feature an image of Yao Ming were divided among the bottles. An additional, one-of-a-kind NFT was created for bottle No. 11, the number that he wore during his basketball career. These NFTs are akin to collectible trading cards, but in digital form. Half of the 200 available bottles, which can only be purchased with Ethereum cryptocurrency, sold upon launch. The rest, says Bill Sanders, the company's chief marketing officer, are "selling at a steady clip."  One month after Yao Family Wines debuted this package, Acker launched its first NFT-accompanied auction and saw huge returns. For the release of 16 single-bottle lots from the 2019 Domaine du Comte Liger-Belair, each bottle was paired with a NFT that consisted of a video of Comte Louis-Michel Liger-Belair. In total, the wines sold for $61,752, a whopping 332% above the low estimate. "It's a unique way for customers and wine drinkers to connect on a more personal level with the greatest producers of the world," says John Kapon, chairman of Acker Wines. "Imagine in 100 years, you want to see the great Comte Liger-Belair, a winemaking legend. He has since passed away, but this lives on forever. To experience the wine through the Comte's eyes, it’s a very tangible thing." The Future of Collecting?The appeal of NFTs for the wine industry goes beyond entertainment and bragging rights. Each time an NFT is sold, the transaction is recorded forever on the blockchain, which offers provenance for collectors. NFTs could one day help combat wine fraud. "Let's say I have a bottle of 1975 Pétrus and so do you, but mine is with an NFT," says Jack Ambriz, marketing director of Yahyn, a wine e-commerce startup that also partners with wineries to offer NFTs with their bottles at auction. "We're both trying to sell to a collector, but mine is a more attractive piece because they know it came from the vineyard. "Your bottle, they don’t know anything about it," he says. "With an NFT, they’re really able to see everything that went on with that bottle. From cellar to cellar, they're able to see who owned it before."  The Sustainability QuestionIn addition to adoption, a big obstacle for cryptocurrency in the wine world is sustainability. Wine is an agricultural product, and winemakers and consumers have prioritized the preservation of natural resources in recent years. Cryptocurrency mining, or the process of maintaining the blockchain ledger and putting more coins into circulation, sometimes requires large, sophisticated processors that use a massive amount of energy. In May, Tesla CEO Elon Musk pulled the plug on the company's acceptance of Bitcoin due to its environmental impact. "At the end of the day, it's probably 10 times the amount of energy used to create a dollar bill, and that’s not good," says Petroski. Still, he believes that cryptocurrency is the future. He's developing his first NFT for Massican, but he plans to tread lightly until crypto mining's carbon footprint is reduced. When he launches it, each NFT will sell for just 0.1 Ethereum, currently worth the equivalent of roughly $210 and requires minimal energy to mine. Several mining operations have begun use solar power and hydroelectricity, which uses flowing water to produce energy. A Bitcoin Mining Council, created soon after Musk's comments, has committed to publish current and planned renewable usage. "The technology behind the blockchain and cryptocurrencies is still very young," says Petroski. "I believe it’s going to be cleaner, more efficient for the environment, and it’s going to be life-changing." |
| Fluke or Fate? How Barley Became Vital to Alcohol Posted: 13 Jul 2021 06:13 AM PDT  Barley might be the mother of all grains. Some argue that it was the pursuit of the perfect brew, not food security, that led mankind toward horticulture. And if our ancestors sought to ferment excess grains into potable beverages, there's no finer accomplice than barley. Today, many barley varieties are grown across the globe. But two-row barley, Hordeum vulgare, is believed to have evolved from the wild grass Hordeum spontaneum, and was likely one of the earliest crops cultivated by humans. While sources differ, barley was reportedly first cultivated in the Fertile Crescent 10,000 years ago. It has several advantages as a crop. It's hearty, resistant to drought and cold weather, its grains are easily stored and transported, and it's a food source for livestock. "Barley and emmer were the main grains of ancient Egypt," says Nigel Tudor, a farmer at Weatherbury Farm near Pittsburgh, which grows ancient grains by historical practices. "And barley was actually the main food source of the Roman legions. When they made polenta, it was with barley, not corn like today."   But barley's greatest and arguably most enduring attribute is its association with alcohol production.  Why is barley so important in beer and whiskey production?Alcohol is created through fermentation, where yeast consumes sugar molecules and excretes alcohol and carbon dioxide as byproducts. Yeasts cling to the skins of grapes and other fruits. So, early humans would have noticed fermentation occurred when they smashed fruits to get the juices. But coaxing yeast to ferment the longer starch molecules found in grains like wheat, rye or einkorn is complex. That's where barley comes in. Each barley grain is a seed that consists of an outer husk, embryo and endosperm. The endosperm takes up most of the mass of the grain, and it serves as the food source for the shoot upon germination. The high levels of enzymes available in the germinating barley seed make the magic happen, and makes it different than other grains. "It is these food reserves which the brewer needs," wrote Michael Jackson, beer author and historian, in his book, The World Guide to Beer. "… It is principally the maltose which is later converted by fermentation into alcohol and carbon dioxide, while the dextrins are important in supplying fullness of flavor to the beer." When the barley soaks in water, the grain begins to sprout. Two enzymes are released: alpha amylase and beta amylase, also called diastase. These are what the brewer or distiller uses to prep and convert grain before pitching yeast. Otherwise, beer would be a nonalcoholic porridge. Through a process known as saccharification, the enzymes convert the long starch molecules into smaller maltose molecules and single-molecule monosaccharide sugars, which the yeast can metabolize. In nature, these enzymes evolved to nurture the budding seedling. There's a short window to stop the process and preserve the enzymes for brewing purposes, before the young plant consumes the reserves. Malting halts germination by drying the seeds. It unlocks the enzymes and makes them available to convert complex starch molecules into sugars that yeast can digest. While other grains can be malted, the number of enzymes released when barley is malted is off the charts. It possesses enough of these enzymes to convert starches from other grains included in the brewing process, like wheat, rye, rice and corn. Today, natural gas or electricity can bake the seeds in large, mechanically turned vats. Traditionally, this was done on malting floors, which were large rooms with a metallic or stone floor that was heated underneath, often by open flame. Despite being a complex biochemical process, our early ancestors mastered it. Once people figured out how to make "wine" from barley, it was all they could seemingly talk about. Depictions of people drinking beer appeared in cave paintings. Early Babylonian texts debated the best varieties of barley for different types of beer. And some of the first hieroglyphs from ancient Egypt depicted detailed brewing recipes.  How did ancient brewers unlock this process?Jim McEwan, who has worked as a master distiller for Scotch whisky brands like Bowmore, Mackmyra, Bruichladdich and Octomore, had a take on its discovery. "The malting process is so old," he said in Still Life with Bottle: Whisky According to Ralph Steadman. "It's probably a fluke, like everything else. A man was probably storing his barley in a cave, and it was so wet it started to shoot, and he said, 'I'd better start drying this out and maybe use it.'" |
| Sold! What The Ste. Michelle Sale Means for Washington’s Wine Industry Posted: 12 Jul 2021 12:17 PM PDT  On Friday, Ste. Michelle Wine Estates (SMWE), the largest winery in the Pacific Northwest and third-largest premium winery in the country, was sold to Sycamore Partners, a New York-based private equity firm. Sycamore, which specializes in retail and consumer investments, will purchase the company in the second half of this year from the current owner, tobacco giant Altria, for a cool $1.3 billion in cash. "The scale of this investment is significant," says Ryan Pennington, senior director of communications and corporate affairs at SMWE. "And we see that not only as a significant vote of confidence for our team, and our estates and brands, but really for the entire Washington wine industry." SMWE includes Chateau Ste. Michelle, the winery's flagship brand, along with 14 Hands and Columbia Crest in Washington; Erath in Oregon; and Patz & Hall in California, among others. Founded in 1967, Ste. Michelle was purchased by U.S. Tobacco (UST) in 1974 and became part of Altria when that company bought UST in 2008. SMWE’s economic and cultural impact on Washington wine is enormous. The company contracts the majority of wine grape acreage and makes approximately 7.3 million cases of wine annually, a majority of the state’s total. "Can you point to another viticultural district anywhere that has such dominance in terms of volume that Ste. Michelle has for the wines of Washington? I don’t think so," says Bob Betz, who spent 28 years at the company before leaving in 2003 to focus on his own brand, Betz Family Winery. Since its founding, there has been one constant at SMWE: growth. The winery increased production and added brands, which former CEO Ted Baseler referred to as a "string of pearls." An entire industry rode the wave of the winery's success, with the state growing from less than 200 wineries in 1999 to more than 1,000 today. However, over the last four years, that success experienced headwinds. Between 2016 and 2020, SMWE's annual volume decreased by 1.2 million cases. Last year, Altria announced a $292 million inventory write-off and $100 million in losses on non-cancellable grape purchases for SMWE in what the company termed a "strategic reset." The company says it misjudged supply and demand forecasting and underinvested in direct-to-consumer sales. "We just weren’t as close to our consumers as we needed to be," says Pennington.
The company also strongly felt the effects of the pandemic, with a larger percentage of on-premise sales relative to its competitors due to the premium nature of its portfolio, according to Pennington. Given the myriad issues, layoffs ensued. SMWE asked growers to crop at lower levels rather than refuse fruit it had contracted, as it had the prior year. "That’s helped," says Yakima Valley grower Dick Boushey. "If they hadn’t had done that, I think we’d still be in a world of hurt." On the winery side, money to promote the state's bottles comes in part from government-mandated assessments on grapes and wine. When Washington's largest player produced less of both, the state-funded agency responsible for marketing Washington wines received fewer dollars. Smaller in-state operations suddenly needed to do more work to get their wines seen, tasted and purchased. "When the mothership has some tough sledding, that impacts everyone," says Chris Sparkman, owner and winemaker at Sparkman Cellars in Woodinville.  During this time, there were changes at key positions throughout the company. In 2018, Baseler, who spent 17-plus years as president and CEO, retired. Jim Mortensen, a previously retired Altria executive, succeeded him and emphasized innovation. However, Mortensen's tenure was always expected to be transitional, and in October of 2020, he hand-picked his successor, David Dearie. The former Treasury Wine Estates CEO's first order of business was putting in place a long-term strategic plan focused on growing and refreshing the company's core brands. "At that point, it became apparent to both us and to our current owners that the best path to executing that plan would be under new ownership," says Pennington. "The foundation of this partnership [with Sycamore] really is our plan for growth, and it takes investment to grow." Some of that work has already started. This year, the winery's Chateau Ste. Michelle and 14 Hands brands changed labels. The company's fortunes have also begun to improve, with net revenues increasing in Q1 and volume sales up. While any corporate sale brings anxiety for those impacted inside and outside the company, many are optimistic about the future. "I think there’s a lot of relief," says Boushey of the sale. "I think Altria was tired of putting money into it. I hope Sycamore takes advantage of the people [Ste. Michelle] has and helps them grow in certain areas."
There’s also some trepidation in the wine community. "What they typically do is try to skinny down and sell off pieces and sell off brands, and I don’t know if that’s good or bad," says Marty Clubb, co-owner and managing winemaker at L'Ecole No. 41 in Lowden, of private equity firms. "The 'string of pearls' might get broken." As SMWE has struggled in recent years and chatter in the industry about a potential sale grew to a fever pitch, many assumed the company would be sold to another wine group, with the palace intrigue who it would be. Had that happened, personnel changes might have occurred. Instead, the leadership team and SMWE's employees are expected to remain in place. "They’ve been very clear that they are buying into our people and our culture, as much as they are buying the company itself," says Pennington of Sycamore. Though it's been a difficult few years for Washington's most recognizable brand, much of Washington's wine industry has continued to flourish. "We’re booking sales faster than ever," says Clubb. "All of a sudden, you’ve got some big California players circling in Washington. I’m pretty optimistic about where the industry is headed." Sparkman agrees. "I’m excited for [SMWE] and for our state really," he says. "Washington continues to be sitting in a very strong position globally, regionally and locally." In many respects, the sale of Ste. Michelle marks a return to its roots. For nearly 40 years, SMWE has been a subsidiary of tobacco corporations. Now, the winery is now back to being the independent entity it was prior to 1974. "At the end of the day, our destiny is still in our hands," says Pennington. "If we’re successful, if we go out and execute our plan, [Sycamore is] going to be happy. And if we don’t, there will be consequences, and that's true of any business." |
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