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April 2016, Volume 22, Number 2

Wine, Food

California had 555,000 bearing acres of wine grapes in 2015, when there were over 3.9 million tons of grapes crushed. Average yields were seven tons an acre, and the average grower price was $670 a ton, down from the peak $745 a ton in 2014. Between 2002 and 2004, grower prices were less than $500 a ton.

Chardonnay was 16 percent of the 2015 crush and Cabernet 12 percent. Fresno-area Chardonnay sold for an average $365 a ton in 2015, while Napa Cabernet sold for an average $6,300 a ton.

Varieties that attract less demand from wineries are being removed, but new plantings of Cabernet, Pinot Grigio and Pinot Noir in 2015 kept vineyard acreage on an upward trajectory. Pinot Grigio is replacing Chardonnay in new plantings. Most projections anticipate 570,000 acres producing 4.2 million tons of wine grapes in 2017 and rising.

About three-fourths of US wine sells for less than $9 a bottle. The quarter that sells for more than $9 a bottle accounts for half of wine industry revenues. The demand for less than $9 wine has been falling, in part because of the boom in craft beer and cider.

Costco's total sales of $114 billion in its fiscal year ending August 30, 2015 included $3.6 billion worth of wine, spirits and beer. Wine sales were $1.7 billion, making Costco the largest US wine retailer. A sixth of Costco's alcohol sales were from its private label Kirkland brand.

Bronco CEO Fred Franzia announced in January 2016 that over a billion bottles of Charles Shaw or Two-Buck Chuck had been sold. Bronco is the world's largest integrated vineyard-winery, with over 40,000 acres of grapes. Bronco buys grapes as well, usually on the basis of oral contracts.

Peter Mondavi died in February 2016 at 101. At the urging of brothers Peter and Robert, Cesare Mondavi bought Charles Krug, a winery started in 1861, for $75,000 in 1943, and began to improve the quality of the wine with cold fermentation and other techniques. Peter handled production and Robert marketing, and they clashed repeatedly, and Robert left in 1965 to found Robert Mondavi, which was bought by Constellation Brands in 2004.

The US red wine market is changing. Cabernet Sauvignon is the leading red wine sold, followed by red blends, many of which include Merlot and Shiraz.

The US imported almost 550 million liters of bottled wine in 2015 worth $3.1 billion, an average of less than $6 a liter. The US imported $1.1 worth of Italian wine; $700 million of French wine; $300 million of Australian wine; and $225 million each from Argentina and New Zealand.

Premier Cru, a major merchant of expensive wine in Berkeley, California, went bankrupt in January 2016, owing money to over 9,000 wine buyers. Founded in 1980, Premier Cru first offered $1,000 bottles of wine at 15 to 20 percent less than competitors and then offered futures, Bordeaux or Burgundy wines that had not yet been bottled but can increase in value when they are bottled. However, prices of Bordeaux futures fell in 2010-11 as Chinese buyers turned to Burgundy; Chinese buyers of futures were among those who lost money with Premier Cru.

France, Italy and Spain are the leading producers and exporters of wine. Chile is the seventh leading producer, and the fourth largest exporter, sending a quarter of its wine exports to the UK. The major wine exported from Chile is Cabernet Sauvignon.

The Pomerol region of Bordeaux bottles mostly Merlot wines, including Petrus. Pomerol has fewer of the imposing chateaux of Medoc, suggesting to some more authenticity.

Argentina began to export Malbec and other wines after the peso crisis of the early 2000s, when devaluation made Argentinean wine cheaper. Catena partnered with Gallo, for example, to make Alamos the market leader.

The US Brewers Association, which represents 3,000 craft breweries, says that two new craft breweries are opening each day. There are over 4,200 craft breweries, up from less than 1,600 in 1999, and they are projected to account for 20 percent of US beer sales in 2020.

Food. Americans eat an average 270 pounds of meat a year. In the US, the production of the major meats, beef, chicken, and pork, is far more concentrated among a few firms than the production of fresh produce.

FDA protects most of the US food supply, and the Food Safety Modernization Act of 2010 led to seven so-called foundational rules to implement FSMA.

About 35 percent of US adults, 80 million people, are considered obese, with a BMI of 30 or more.

Chipotle, whose fresh burritos are sold as "food with integrity," lost sales in Fall 2015 after an E. coli outbreak closed stores in the Northwest, Northeast and Midwest. The CDC in February 2016 closed the Chipotle case without finding the source of the E. coli; both beef and fresh produce were suspects.

Chipotle estimated that its sales may fall 10 percent or more because of food-safety issues, and that its costs would rise in 2016 under an enhanced food-safety system aimed at testing each of the 68 ingredients that it uses. Chipotle, which has over 2,000 US restaurants, saw its stock fall over 30 percent from its August 2015 peak.

Vermont enacted a state law that requires foods with genetically engineered ingredients to be labeled beginning July 1, 2016. A Senate bill to prevent states from requiring labels on GMO foods failed in March 2016, handing a major defeat to the Grocery Manufacturers Association and the major food and biotech companies that fear having to comply with a patchwork of state laws. The House in summer 2015 approved a bill that would pre-empt states from passing laws on GMO labeling and establish a voluntary federal system instead.

Cocoa. The global demand for chocolate is rising as Chinese and Indians, over a third of the world's people, buy more. Some 7.1 million tons of chocolate were consumed in 2015. Some 4.2 million tons of cocoa are the basis of chocolate, along with milk and sugar, although cocoa producers receive only about five percent of the retail price of chocolate.

Ivory Coast is the leading producer of cocoa, followed by Ghana (these countries produce 60 percent of the world's cocoa, with Indonesia third). However, yields Ivory Coast and Ghana are only 500 kilograms an acre, a third of what they could be with better farming. Government sets a fixed price for cocoa, giving the 800,000 cocoa farmers in each country little incentive to respond quickly to price changes. When the governments raised the price they paid for cocoa to induce farmers so that farmers could buy fertilizer, many farmers simply pocketed the cash.

Many West African cocoa trees are older than their typical 10- to 20-year life spans, and but the mostly older farmers have little incentive to replant, especially given complaints of labor shortages. Some farmers hire child workers, which draws concern from cocoa buyers.

Hershey accounts for 43 percent of the $6 billion a year US chocolate market, and uses several third-party certifiers to reduce child labor in its supply chain.

Fair Trade. Launched in 1998, Fair Trade USA has become the major third-party certifier of food-supply chains in the US. The most important commodity certified is coffee; about six percent of US coffee is certified by Fair Trade USA, and fees from coffee labels are about three-fourths of Fair Trade USA's revenues.

Fair Trade USA requires coffee growers to form cooperatives so that they can receive an extra $0.05 a pound for their coffee, a community development premium raised to $0.20 a pound in 2010. Co-op members decide what community projects to fund with the premium pay, often schools and clinics of equipment to improve the quality of coffee.

Fair Trade USA left Bonn-based Fairtrade International in 2011 because of its opposition to certifying coffee from plantations and small farmers who were not organized into co-ops. Keurig Green Mountain, the world's largest fair-trade coffee buyer, supported Fair Trade USA's split from Fairtrade International, which has an $18 million a year budget. Fair Trade USA developed standards for small farmers and hired farm workers, and encouraged long-term relationships between coffee farmers and buyers.

Fair Trade USA also launched a Fair Trade for All program that involved certifying a wide range of fruits and vegetables from large farms abroad as well as fish, Patagonia apparel, and West Elm home goods. Its expansion accentuated competition with New York-based Rainforest Alliance, which has a $50 million annual budget, and Amsterdam-based UTZ Certified, with an $11 million a year budget, organizations that did not focus on community development and charged a third less than Fair Trade USA for certification. Fair Trade USA is a $10 million a year organization with 70 employees based in Oakland.

Fair Trade USA decided to grow in 2012, and obtained a $10 million challenge grant to scale up its efforts to audit large farms and factories that produced Fair Trade Certified commodities and goods for US consumers. Fair Trade USA aimed to distinguish itself from other certifying organizations by tracking the movement of commodities and goods throughout the supply chain.

Fair Trade USA made other changes to expand its foot print, including allowing food producers to use the Fair Trade Certified label even if only some ingredients were fair-trade sourced, as with the cocoa but not the sugar in chocolate. Fair Trade USA also sought to build awareness of Fair Trade Certified products with campaigns in schools and churches, and declared October to be fair-trade month.

Fair Trade USA says that farmers abroad received $40 million in premiums in 2013, and wanted to survey them and their workers effectively to determine what difference the premium prices had in their lives. It used an app called Labor Link to obtain anonymous reports from farmers and workers abroad, and proposed coding Fair Trade Certified products with labels that allowed consumers to contact the farmers who produced them.

Fish. Two-thirds of the earth is covered by water, and many critics decry the lawless ocean. Especially small island nations find it difficult to police their waters, so that up to 20 percent of US-consumed wild fish is believed to have been illegally caught.

The annual global catch of wild fish is about 94 million tons a year. Purse seiners allow a ship to catch a school of fish with netting up to a mile around.

The New York Times on February 17, 2016 profiled Palau's efforts to prevent illegal fishing by Taiwanese and other vessels. Palau has 21,000 residents on a few of its 250 islands with 230,000 square miles of ocean, about the size of France, and one patrol ship. Palau's economy depends on tourism, which could be threatened if illegal fishing for shark fins damages reefs. Shark fin soup can cost $100 a bowl in China.

Olive oil. Italy is grappling with olive oil fraud, which often involves importing cheaper Greek or Spanish oil, blending it with Italian oil, and passing off the finished product as Italian. True "made in Italy" extra-virgin olive oil costs at least ?10 or $11 a liter $11, twice the price of blended oils that are labeled "product of Italy," meaning that Italian know-how was used to blend the oils. Some say that more "product of Italy" labels will reduce the value of "made in Italy" products.

Marta Zaraska, 2016. Meathooked. Basic Books. Siler, Julia Flynn. 2008. The House of Mondavi: The Rise and Fall of an American Wine Dynasty.


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