There’s a very simple answer to this, and it took sitting with Delfim Costa of Enoforum Wines to have it explained to me.
In other places around the world, the cost of labor and goods isn’t anywhere near what it is in the US. As a result, great wines of regionality and careful crafting can be purchased for a fraction of the cost of an American wine.
I was reminded of this as I just heard a story on the news about a car manufacturing plant that may soon shut down in California. A worker talked about how he’s greatly concerned. He’s currently making over $30 an hour and doesn’t know what other job would provide that kind of salary for him, as he’s so specialized. I couldn’t help but wonder, “What are workers being paid in Mexico, for instance, per hour for working on assembly lines?” I dare say a whole lot less. Perhaps the cost of goods is about the same for steel? I really don’t know about that, but I can see where just bringing down labor costs will save a car manufacturer a lot of money, given the US $30/hour, converting to pesos, the cost of land, insurance, and health care – if it exists, etc.
FAST FORWARD to wine imports: With land, labor, and cost of good prices being significantly less, wines coming from other countries are great values, and this is what people are discovering. The Millennial generation, who haven’t become set in their ways and are lot more adventurous that the boomers, the x’s, and the y’s, are out exploring, and import sales are reflecting that in an uptick growth spurt.
According to Delfim, between 2003-2007, global exports of the Portuguese Table wines increased by 38.6 percent, with the US seeing an increase of these wines by a whopping 77 percent. (The UK and Germany are other growth areas of significance for Portuguese wines.) It will be fascinating to learn what 2008-2009 has delivered in Portuguese wine sales, if this is all pre US recession.
What sells for $9.99 from Central Valley fruit is a lot less regional, getting put into bulk wine, losing all aspects of hand crafting and any regionality relationship to California, and yet a $9.99 bottle of wine from Alentejo, Portugal is a wine of great character, flavor, and quality. The same holds true for other imports as well, but Delfim Costa was my point of learning, and this is why he’s given credit in this story…. He’s the one who has educated me to a reality I hadn’t ever considered or understood.
The tide of exploration and discovery is turning toward imports in this economic downturn. Meanwhile, US growers and producers may find a more leveling of the playing field. I can’t image that everything in the world will be homogeneously priced for cost of goods, services, and labor any time soon, but the world is ever-so-slowly moving in that direction… It will take many, many years before the world is primarily segmented into… this country mostly does this (services), this country mostly does that (manufacturing), and that country handles most of that (economy).
I’ve pondered globalization since the 1960’s. I’ve seen a lot of changes and I know there are lots more to come. Meanwhile, I’m enjoying domestic and – now – import wines, as I give in and become part of the globalization process, too.
“There’s a very simple answer to this”
You’re right: it’s because they’re better.
Regards,
jb
Not sure we’ll live to see the day that capitalist economics has run its course that far…..I think France might be a better example in regard to wine. Some of their lower tier producers are starting to go under because the quality frankly isn’t there any more.
Keep up the good work, I enjoy a wine blog with a more economics centered approach!
bluepastures,
Thanks for your comments. It all just made perfect sense to me, once it was explained. I can’t fault anyone in the process. It just is what it is. — jo
Mark,
I don’t think we’ll live to see what I’ve described, either; although my grandchildren might. I didn’t foresee what would happen with globalization as I pondered it in the ’60s, but I could still see it coming, and now it’s here.
Globalizing was encouraged by some executive(s) realizing that the bottom line was quickly slipping way in the 1960s.
1) Labor unions had a big hand in the till. I remember those strikes all too well, as I tried to get through them walking home from school. They were a pretty regular thing every few years back then (Boy, I hate saying back then, but there it is.)
2) Then the strapping on of necessary environmental regulations put manufacturers over the edge. They were told to clean up this smoke stacks (that daily sent big white toxic plumes into the air). They were mandated to stop sending their manufacturing sewerage into the Androscoggin River. And god knows what else… I know it’s somewhere in my head, but it doesn’t matter much now. It happened. That matters.
Those guys got out of Dodge, and left that industrial revolution chapter behind, only to go write another chapter. It’s not over, it’s just moved to somewhere else where labor unions, environmental considerations, and child labor laws don’t exist… yet.
The only reason I have an economic centered approach is because I own a small business. I’m blogging from a business owner’s perspective. I also love writing about wine as a great food and wine experience… but the economy hits me every single day as a reality. I’m fortunate to have some world advisers, too, in the process. They keep me up on things I need to know.
An important consideration you give a brief mention is land cost. In many old world regions, that’s practically a non-existent factor: the vineyard has been in the family for decades, if not generations. In some New World regions — Chile and Argentina come to mind — land sells for a small fraction of what its cost in the Central Valley — never mind Napa.
Joel,
A very good point. I hadn’t even taken it to that place, but you’re so right. Land that’s been held in families for generations has been paid off. This works for all over the world, because I do know some growers in California that are now going into their fifth and sixth generation (Gallo and Foppiano are a couple.) That perhaps won’t last forever in this country, the way major corporations are playing the Monopoly game.
While the land may be paid off, there are still taxes on that land, and I’d be curious to know the tax structure differentials from Chile and/or France, as compared to Napa Valley, as well.
There are so many factors that drive down the cost of imports, especially if the land has been held in the family for generations.
I just wrote a great response to this but your anti-spam software ate it. I got an error message and no way to return to the text I’d written. You might want to fix that.
Tom,
Sorry that happened. I’ll ask my webmaster about that one. — jo