Greg Sherwood MW: Wine is evolving – who will keep up?

The month of July was a busy month for me, travelling both around Europe briefly and twice to the fairest Cape to firstly judge for the International Wine and Spirits Competition, and then towards the end of July, for the Michelangelo Wine Awards. For both trips I stayed in the heart of Stellenbosch and got to experience the vibrant student lifestyle in this very special town that also acts as the unofficial capital of the Cape wine industry.

As we continue to ponder the current state of the global wine industry and the many changes reshaping it, a visit to Stellenbosch and conversations with students of viticulture and oenology offer a striking counterpoint. Here, there is little sign of the existential angst that pervades the wider industry. For these young aspirants, it is very much business as usual.

The positivity and enthusiasm of this next generation of wine industry participants was both comforting and uplifting, helping to banish any thoughts that we are all working in the twilight of a dying industry. On the contrary, their refreshed dynamic thinking looks set to regenerate and strengthen the structures that make the wider wine industry one of the greatest and most fulfilling employment sectors to work in.

Perhaps it is just us older Gen X and Boomer generations that look at all the industry change with trepidation while this younger generation look at the change as a more natural evolution rather than a revolution. With so much positivity around, the wine industry is certainly not facing a ‘Kodak moment’ of decline. Far from it. It is evolving – yes in its usual slow, snail’s pace way – to become an industry more fit for purpose for a new generation of drinkers.

Casting my wine critic–cum–consultant eye over these shifts raises some stark questions, particularly for producers. If the net effect is less wine consumed overall – but what is consumed is enjoyed in more engaged, invested settings – where should the focus lie? Value? Volume? Or the premium-quality segment?

What is certain is that there will be more wine produced globally than there are consumers to purchase and drink it all. Indeed, this is already the case around the world as high production / high consumption markets like Spain, France and Italy continue to experience declining national consumption figures per capita. No amount of marketing or advertising will reverse this trajectory – it is, quite simply, a historical shift that began in the 1950s and 1960s and has continued, unbroken, on its downward course ever since.

We often talk about the early noughties as being the peak of a buoyant global wine trade, but that is also when I started my Master of Wine studies and the reality is I can pull out my old study folders full of doom mongering articles packed with statistics about… the European wine lake, global over production, the various compensation programs around the EU to pay farmers to pull up vines, and the subsidies being paid to wineries to distil their surplus wine into industrial alcohol.

However, looking back to this time, no one in the wine industry predicted that this was the beginning of the end of the wine industry. Rather, these trends were further signs that the consumer was changing, and the industry needed to change along with the wants and desires of the new consumer. Perhaps we find ourselves in the malaise we currently do because the global wine industry did not heed these warning signs sufficiently?

If you crunch all the consumption figures, demographics data and consumer trends, where does that path lead the modern, dynamic Cape producer and what conclusions should they make? Does it point to producing more hard brands that are relatively high quality, scalable, and eminently marketable, or does it suggest that the future should be solely focused on more premium, small production, heavily storied, terroir driven, boutique-styled fine wines that are sold on allocation?

The correct answer to this question is currently difficult to ascertain. When you look at the collapse of the entry-level wine segment that is buckling under rising cost pressures – energy, labour, transport, and tariffs – the signs all point to a failing segment that lacks sufficient profitability to make is sustainable.

Equally, the global fine wine market, as has been quite accurately documented in many related articles in Winemag, has been facing its most severe downturn and slowdown in its recent history, suggesting there is still plenty more consolidation and industry contractions coming down the tracks before a new sustainable equilibrium is established.

Well, you might determine that the real answer lies somewhere in between. But does it really? If you correspondingly look at the restaurant sector during any crisis or downturn, what we clearly see emerging is what we call the ‘doughnut effect’… where the value-based bottom segment prospers and the top end prospers while the middle segment simply disappears.

With a cost-of-living crisis, the squeezed middle tends to migrate downwards, while the rich remain rich, but spend their money in very targeted, top-end, experiential restaurants. Will the wine industry mimic the restaurant trade?

For once, I feel I don’t have an accurate answer to this important question. While I have always personally aspired to operate and work in the top echelons of the fine wine trade over the past 25 years, my expectation is that, like many South African wine producers, I am going to have to keep a very close eye on all segments of the wine market to make sure I don’t miss the potential answers to this evolving conundrum.

• Greg Sherwood was born in Pretoria, South Africa, and as the son of a career diplomat, spent his first 21 years traveling the globe with his parents. With a Business Management and Marketing degree from Webster University, St. Louis, Missouri, USA, Sherwood began his working career as a commodity trader. In 2000, he decided to make more of a long-held interest in wine taking a position at Handford Wines in South Kensington, London, working his way up to the position of Senior Wine Buyer over 22 years. Sherwood currently consults to a number of top fine wine merchants in London while always keeping one eye firmly on the South African wine industry. He qualified as the 303rd Master of Wine in 2007.