I’ve written about Enologix here before. Their service purports to help you make wine that will score better with influential gatekeepers like Parker and the Wine Spectator. It is veiled in secrecy (very few producers own up to using it, though reports indicate that Enologix has approx. 50-60 clients) and it costs around 20K a year to use their service.
Recently Leo McCloskey was interviewed over at Appellation America by Alan Goldfarb. One of the more humorous moments from the interview, from my perspective at least, is when McCloskey tells Appellation America that appellations, AA’s reason for existing, are pretty much worthless to consumers as indicators of quality. The AVA smackdown follows.
“When you hear AVA, you just think — vanilla. It doesn’t have any color to it and depth. … The AVA won’t tell you where the highest-priced wines come from within the AVA because the producer of the lowest quality product in the AVA wants to cover up (that) fact. The true consumer information is always covered up by the AVA.”
McCloskey is a proponent of the European system: tightly (self) regulated genetic material and winemaking methods crafted specifically for individual wine growing regions. He argues that the wine industry basically sweeps their poor performers under the rug of appellation by refusing to self-regulate, and that this confuses consumers. He also advocates forming a list, ex ante, of the highest quality producers in the market.
Lots of Problems
There are numerous problems with this reasoning. The most glaring of which is the problem of determining quality in the first place.
Under McCloskey’s system, the high performers (those wineries that command high prices in the market) are considered “high quality”. Winners sell wine. This is evidence of quality. We need to celebrate winners and ruthlessly weed out the losers.
But more than any other industry, price and market success in the wine biz is driven by getting a high score from an elite group of perhaps 2 or 3 reviewers. They grade according to intensity. Coincidentally, that’s precisely the metric McClosky advocates using. So, effectively, quality is what Parker and Laube define it to be.
Interestingly, McCloskey acknowledges the problem with relying on experts to determine quality in the interview.
“It would be better to have a producer-based source because of the unreliability of the critics,” he says, surprisingly. “Critics’ ratings, of course, are subjective. About 30 percent of the products are misrated and this creates a risk to capital.
Hmm. And we are supposed to trust this kind of circular definition of quality to crown New World 1st Crus?
Our Industry Doesn’t Scale
But let’s leave that issue for now and talk about risks to capital. McCloskey levels the charge that the wine industry is too conservative. He claims that we subscribe to an incestuous and protectionist type of psudo-competition that focuses on “rising tide lifts all boats” tactics rather than a more transparent and customer-friendly system that rigorously enforces quality standards and weeds out low performing members.
I can’t argue with his analysis. Ours is an industry that tries to limit risk wherever possible. Like all farming endeavors, we have plenty of risk built into the ridiculously capital intense system already. Why add more?
But there is another factor at play as well, and it’s huge: Our industry doesn’t scale.
Example by way of a question: What is the pay off if we were to switch to the system McCloskey proposes?
The pay off is that there will be a newly minted cohort of winners who should always be able to sell their wine at prices many multiples higher than the vast majority of competitors. Consumers, in turn, will be confident that they are getting quality when they purchase these wines. I suppose McCloskey would argue that this would lead to higher sales for these wine winners - but oh, that’s right, wine doesn’t scale. Once a producer sells out, that’s all folks. There’s no good way to monetize unmet demand, otherwise Screaming Eagle wouldn’t be ramping up production (at the possible expense of quality) even as I type this. The only way for the winners to take advantage of their position will be to raise prices, and I’m not sure how that helps consumers.
This is a huge problem. It’s so huge in fact that I predict that we (the wine industry) will never, ever voluntarily enact the changes that McClosky is proposing. The current winners (who would simply be cast in bronze and stamped with “High Quality” under McCloskey’s plan) already sell out. They have nothing to gain by backing such a system, except maybe a nice ego boost.
And the current losers? Do you seriously think anyone who spent 8 million on their Yountville estate vineyard and winery wants to hear that they are no longer welcome in the Valley because their quality levels or chosen varietals don’t measure up? No, the rich owners of under-performing wineries will tell whomever asks that Leo can go pound sand, and to leave them the hell alone thankyouverymuch. This is America, after all.
Leo of course doesn’t have this problem. His business does scale. In fact, if Enologix became the clearinghouse for quality for all of Napa Valley he stands to do very well. That’s no reason not to judge his proposal on its own merits, but it is interesting to note nonetheless.
Unworkable Silliness
Unlike the core service offered at Enologix, which I feel relatively neutral towards, I may be judging this McCloskey idea too harshly. It may be that I took personal offense to his statement (in the YouTube video below) that sales success due to marketing is “undeserved” (Underserved?? Explain white zin, Yellow Tail and Stormhoek’s success to me then. Is it all undeserved? Or are they perhaps providing something of value to the market besides wine quality?). Maybe I’m insecure since a system like he proposes would make the already steep barriers to entry in the wine industry even steeper. Perhaps I’m just overreacting.
But I don’t think so. I think this is just plain ol’ unworkable silliness. I think Leo knows his idea won’t ever work. So is he just trying to be provocative?
If he is, I don’t mind at all. Being provocative is good marketing. I just hope he remembers that any business he gets from this latest PR campaign is “undeserved”.
Cheers to Leo for getting folks talking.
You can read the entire interview over at Appellation America.
Great comments! I agree with you, McCloskey is going where no other winemaker, with as much status as he processes, dares to walk in public. Have you noticed that few industry leaders, I cannot think of anyone, much less a trained scientist, who keeps up with his encyclopedic knowledge of wine quality. He is single handedly defining a new discussion that could lead us through the transformation that needs to occur for small winemakers to remain successful. I love the thoughtfulness.
So, effectively, quality is what Parker and Laube define it to be.
I find that to be the most disturbing observation of the entire article. The fact that everyone spends their time chasing the palates of a few overly influential critics is leading toward a homogenization of wine, the ultimate dumbing down.
Basically, he’s suggesting we do what Bordeaux did to their region, which (IMHO) is the most confusing and elitist appellation and grading system known to mankind. I just can’t see it happening (or at least, I’m hoping I don’t have nightmares about it happening).
Of course, with AA reporting that the TTB is suspending new AVA designations indefinitely due to the Calistoga issue, who knows what might be coming. Gives me chills.
OK then, so glad I came by to read this before going to bed. HA!
–R
I ran into Leo a while ago at Harvest Moon in Sonoma. We had a really interesting talk. It was the first time since college that I felt like I wanted to punch someone in the face for what they felt. It was totally irrational. I think I heard someone, and not necessarily my dad, say “he is ruining all that makes wine, wine.”
i love Leo for exactly that. In the same way that I love Clark Smith. I want to sucker punch them both in the stomach on a personal level. I feel that they endeavor to take every romantic aspect of vineyard and place, and of the ineluctible greatness of wine from a certain piece of soil, that they can. they have the will to actually think they can quantify human emotion.
As Socrates said though. Your strongest friend and enemy is the gadfly. It is that thing that throws your most fervent beliefs back in your face and makes you reconsider. that is what leo and clark are. there is no doubt that their egos would grant them much more.
that said, i personally believe that their necessity to quantify wine in matrix form comes from a combination of freudian impulse and an inability to smell….
There is a related thread on this blog, “problem of determining quality,”
Markets are efficient, using information to make money. Scores attract my attention because the markets use them. Mathematics of scores is real. Before we can talk about why scores are real, lets consider why we sense scores are not accurate. Writers more famous that we are equally confused, See http://www.jancisrobinson.com/articles/jr429
Josh gives the example of Kosta Brown, measured 2-times. Laube and Parker have an Error of 8-points. So, the single wine has an error of ±4-points.
So why do markets use scores? Someone is using scores to make money, but they can only do it if they have some reliability.
Retailers like Zacchy’s are buying and selling 100 wines, not a single Kosta Brown. An accuracy of 3-4 points is better than guessing says our retailer. When you buy 100 wines there is a 70% chance that the score is accurate to within 1 or 2 points, pretty good for business purposes
Mathman,
Nice to have a banana slug as a reader! Thanks for the comment.
I guess my response would be two-fold.
Markets are efficient in that they incorporate information quickly, and this info is reflected in prices quickly. Totally agree. But what if the information is wrong? Garbage in, garbage out. The entire market mis-priced risk on mortgage bonds very badly for the past few years, for instance.
Additionally, if prices and scores always move together, why does DRC command such high prices when it receives pedestrian scores of 90 points and lower? And if prices and scores aren’t linked, then what does this say about either’s correlation with wine quality? Clearly there’s something else going on, and it probably isn’t rational.
Now if I were to open a shop like Zacchy’s, none of this would interest me particularly. All I need to know is what will sell. And what sells is what Parker and Laube say is good. But this has nothing at all to do with (capital Q) Quality, which, I contend, is unquantifiable much less definable.
Thanks again for contributing Mathman!
And Morgan - excellent comments and observations. I’m a little more accepting of the quant movement in general, but I share an equally deep skepticism for people who think that we live in a gaussian world where we can accurately estimate everything with formulas. Still, quants can be very useful. Just need to know when and where to apply their skills.
Josh—yes go slugs. I will repeat myself; your Kosta Brown example shows the critics are off by ±4-points, finding single bottles of wine, even impressive ones like DRC, just goes to show the critics error. In the case of DRC they may be off by ±2-points, whatever. The math still stands—the critics’ accuracy for 100+ wine is 70% with ±4-points for a single wine, which is better than having the retailer guess (50%). The solution is to yank the ratings power from the critics with a better mousetrap to satisfy “demand” for scores—information. New point—there is real consumer demand for scores, that’s the business dilemma you have to solve.
Mathman,
Again though, you’re assuming that the error that McCloskey estimates (30%) is accurate and that Quality itself can be quantified.
You assume that by averaging scores we can get closer to the “truth”. Or am I mis-reading you?
McCloskey seems to be claiming that he already knows the “truth” and can somehow compute the standard error of the critics’ scores based on their deviation from it.
I however believe that the “truth” (at least in terms of wine quality) is subjective and different for different groups of people. I don’t buy the argument that intensity=quality, and neither do a whole slew of wine drinkers. Subjective quality is based on individual physiological differences in people’s palates, their preferences and other completely irrational factors.
Totally agree that consumers want better information about wine though. They are uncertain in their palates and feel like they aren’t qualified to judge quality for themselves. They want to be confident they are buying good wine, even if it’s just someone else’s personal preferences.
I wrote about the problem for winemakers here: http://www.pinotblogger.com/2007/06/15/bashing-the-100-point-scale/
Even made a cool flow chart. This blog (and the spread in influence of other wine blogs) as well as the rest of our marketing is my attempt to hedge against ever receiving a bad score.
I’m confident, but only time will tell if we’re successful.
And thanks again for the conversation!
Josh—I love to slug it out in the math department, so forgive my belaboring 1-point. Let me clarify the math.
First your math is right for 1-bottle of wine tasted by one critic. You say above that the critics are only reliable within ±4-points with the Kosta Brown. That’s about right I suspect, we should ask Princeton’s Orly Ashenfelter.
Second your logic is wrong for 100-bottles, with the same ±4-points. The bivariate regression confidence limits show critics are right within 1-point with 70% confidence if you give them a set of 100-bottles. Critics will get the Kosta-Brown within 1-point most of the time.
The Point—The glass is half-empty for you because you have one-bottle to sell, whereas it is half-full for the retailers who have hundreds of bottles to buy.
As I prepare to bike home I realize this is a cool blog, that a wine blog is considering the math of flavor is wonderful.
Interesting to read Mathman’s comments, FYI other mathematicians are also referencing Enologix. Maybe Enologix is so far ahead of our curve that we cannot understand a fundemental change that is coming. Check this out, …
PAUL B. FARRELL
‘The Singularity’ is already here!
Merging behavioral finance, “rockin’ math,” technology … and profits
By Paul B. Farrell, MarketWatch
Last Update: 12:03 AM ET May 1, 2007
http://www.marketwatch.com/news/story/future-coming-investors-warp-speed/story.aspx?guid=%7B482AC284-6D46-43E1-A675-42DB86290C45%7D