This article first appeared in the August, 2019 edition of The Wine and Viticulture Journal. Published by Winetitles Media, Adelaide. https://winetitles.com.au/wvj/

Double, double, toil and trouble – with bubbles

By Mark O’Callaghan

Drawing on the challenges his consulting company hos encountered ot Australian wineries in recent years in the production of sparkling wines-from vineyard to market-Mork speaks with some experts in the game for some advice.


INTRODUCTION

At Wine Network, we have worked on clients’ sparkling wines across many years, regions and issues. From finessing already excellent wines, to investigating and fixing problems, it is always both challenging and interesting.

The sparkling wine problems we have encountered run across the production chain, so this article explores them from a whole-of-business perspective. I also interviewed friends, colleagues and mentors of mine who are top of their fields and from whom I have learned a great deal over my career.

The problems and mistakes that affect sparkling wine are sometimes very style-specific but often apply across the whole spectrum of production, from the vineyard to accounting. They can also be as intriguing as they are expensive.

The primary focus here is on traditional varieties and methods but the issues are often just as relevant to Charmat, prosecco, and even pet nat. Futhermore, covering all topics in detail would require a book rather than an article, so the approach here is more general in nature.

IN THE VINEYARD

With so many vinous articles beginning with the old reliable axiom ‘it all starts in the vineyard’, the sparkling case is probably a slight variation on that theme insofar as it actually starts before the vineyard. Many sparkling wines are made using the wrong varieties or wrong blend of varieties to really deliver the best glass of wine possible.

While it is often a question of style rather than quality per se, two common issues are the overreliance on Chardonnay for wines with relatively short lees ageing and the relative scarcity of Pinot Meunier. Both of these outcomes are usually driven by commercial reality, so we shouldn’t be too critical.

The single-use nature of Pinot Meunier (yes, I know there are some red ones out there) has made it a risky proposition for growers and this was highlighted recently by the extreme difficulty in selling a property which I understand is the only 100% Meunier vineyard in Australia. It is hard to see this situation changing outside of Champagne, so for producers who want more Pinot Meunier in their blends, they are simply going to have to plant it themselves or commit to compelling, long-term, contracts with growers.

When it comes to Pinot Noir price and supply compared with Chardonnay, its growing popularity in red wines all over the world often makes it hard to resist weighting sparkling wine blends towards the latter.

For a more operational take on sparkling wine problems in the vineyard, I spoke to two viticultural colleagues and mentors of mine – Ray Guerin and Peter Hayes.

With many years of experience managing vineyards in cool climates, particularly Victoria and Tasmania, Ray Geurin was named Gourmet Traveller Wine magazine’s inagural Viticulturist of the Year in 2013.

Peter Hayes is a former executive director of the Grape and Wine Research and Development Corporation, was a director of viticulture at Rosemount Estates and was national viticulturist for Southcorp Wines. He is currently self-employed as an independent wine industry strategist and advisor.

When it comes to the obvious question of yields for sparkling wine production, the practical usefulness of benchmarking by tonnes per hectare is understandable, but Ray Guerin is frustrated by its simplicity.

“Maybe l0t/ha is about the limit in premium regions here in Australia. Sure, they go much higher in Champagne but there we’re typically talking about vine densities of 7000 to 10,000 vines per hectare. Generalising is tricky, but [in Australia] I’d still like to see a lot more in the 5000-7000 range. That can still allow relatively conventional machinery so it’s still reasonably affordable,” Geurin said. In terms of problems with recent seasons, Geurin and Hayes both said the main focus was around issues with fruit exposure and adapting to the heat. Given the heat of recent seasons from Australia to the USA and across Europe, growers need to be mindful of fruit protection, such as only removing leaves when necessary and only on eastern sides, row orientation, aspect (planting on south-facing slops in the Southern Hemisphere, for example), irrigation and pruning for wider canopies. Retention of acid is one thing, but that is easier to manage than overripe flavours.

Hayes’ view on canopy cover in particular applies equally across the whole of viticulture.

“That’s more delicate and harder to generalise about. You get a blast of heat, everything gets cooked and we even saw that happen in the UK this last season. You really need to be actively adaptive and not just follow a recipe. I know that’s not terribly imaginative but people too often make the same mistakes by looking for formulaic management routines rather than adapting to each season,” he said.

Looking to the future if current trends continue, it may be as much about vineyard location as management techniques. According to Guerin: “It’s getting more and more difficult to get good fizz results on mainland Australia and it doesn’t look likely to improve either. That said, moving up instead of moving south is still an option. The rough rule of thumb is that you decrease average temperatures by l°C for every 100m in altitude.”

Other common vineyard issues around sparkling wines are the predictable type, such as basic good vine health, but Hayes’ pet hate seems to be fruit crowding.

“The biggest issue is so often uniformity of burst and set across the cordon with crowding at the ends or in the crowns. I still like to see serious thought about shoot spacing and uniformity of shoot length. If possible, aim to achieve sufficient leaf area and consistent, balanced shoot length relative to fruit load across the whole bearing area. Keeping canopies fresh in the face of heat and water stress is also critical,” Hayes said.

STYLE: GOLDILOCKS AND THE SALON HYPOTHESIS

One of my personal frustrations with the world of wine is the clumsy way in which many wine companies chase a style fad -a first world problem, if ever there was one. From overripe, buttery Chardonnay to those masquerading as Sauvignon Blanc or the swing from overripe, chewy reds to bony, hipster wines expressing more stalk than site, balance is often missed and sparkling wine is no different.

A discussion I often have with clients around style is the ‘Goldilocks Zone’, where fruit is not too green and not too ripe while the winemaking inputs, such as oak selection or whole bunches, are in balance but can still influence house style.

It sounds so obvious as to be trite but too many wine companies seem driven more by a set of preconceived ideas than the vineyard or glass in front of them and this links to an idea which I sometimes refer to as ‘The Salon Hypothesis’. When the 1996 vintage Champagnes were available, I was lucky enough to drink the amazing Salon blanc de blancs on a few occasions with other winemakers. I remember how they fawned over it (I still preferred the Comptes), raving about early picked Chardonnay with very low sugar, no oak and no MLF. Over the next few years, I would recall this occasion when encountering Australian sparkling wines which were early picked, low in sugar with no oak and no MLF but also empty, sour, herbal and joyless. The idea that this wine ruined so many others may be drawing a long bow, but the point is that not enough people adapt to their own environment and I see this too often while working around the world -transposing one set of winemaking practices to another location is certainly no guarantee of success.

For his take on style and technical questions, I spoke to Ed Carr, group sparkling winemaker at Accolade -the only non-Champenois winemaker to receive a lifetime achievement award from the Champagne and Sparkling Wine World Championships and a mentor and former boss of mine. He sees a divide based less on things like sugar and MLF and more on method and flavour.

“It’s almost like there are two camps at the moment. You have the ones going Charmat method for costs, making bright, fruity styles, and then there’s the traditional method wines with more complex, toasty approaches. It begs the question, what’s behind the appeal of those Maillard reaction characters, including after dosage, under cork, compared to the fruity, aperitif styles?

All those lovely toast or brioche notes? Is it primal psychology? It’s similar in the shows too. When it comes to the judges, sometimes it’s as though they don’t know what to go for either,” Carr said.

IN THE WINERY

Done properly, sparkling wine uses some of the most technically demanding methods and needs fastidious attention to detail. With the amplification effect of CO2 bubbles in the mix it is easy to see why it is so unforgiving when things go wrong, so problems in the cellar need particular focus.

Over the years we have helped many clients (and lawyers) resolve sparkling wine issues and finesse their winemaking. In addition to Carr, I spoke to Adam Keath (operations winemaker at Demaine Chandon, Yarra Valley) and Adrian Coulter (senior oenologist at the Australian Wine Research Institute) for their views.

Coulter was kind enough to check the AWRI database for the last several years and unsurprisingly, the most common problems were around gushing, caused overwhelmingly by wines not being cold stable and tartrate crystals not being riddled out. In this case the crystals simply form nucleation sites for the CO2 which drives the gushing. Problems with calcium tartrate crystals are much less common but are still worthy of concern, and we certainly recommend clients have calcium levels checked before tirage or Charmat. Cases of gushing from wines being too warm or increasing in temperature can also be problematic but are straightforward to fix and glass imperfections (nucleation sites) also seem to be less common today.

Another problem that emerges occasionally is stuck secondary ferments. This is usually caused by temperature shocks or high SO2. One regrettable case in recent years involved a winemaker not adding the sugar before tirage. Unfortunately, the winemaker was so convinced they had done so, they happily and confidently inoculated the tank and bottled it. The problem was not discovered until later whereupon the truth was uncovered, the wine decanted and the winemaker was shown the door.

An unfortunate story to be sure, but one reassuring feature was that the winery had good quality assurance procedures to check tirage ferment progress and the problem was pickedup quickly. We have seen too many cases of wineries that simply pack tirage crates away after bottling and problems such as stuck ferments or leaking crown seals are not discovered until years later.

Carr, Keath and your correspondent are also in furious agreement on the problems of Brettanomyces in sparkling wine. According to Carr, “Brett is a particularly nasty one. Variation in traditional method is always disconcerting. If people aren’t careful, the envirnment can give them (Brett cells] a happy little home.” Keath was a little more blunt.
“Brett is a big problem and seems to be getting worse. People don’t understand. No filtration, no SO2, just so much potential risk. You combine that with no lab, no skill, no experience and it’s a recipe for disaster. You go down the pet nat road and you can multiply all that by 100!,” Keath said. Hazes are relatively rare but many other technical problems stem from a simple lack of attention to detail -simple things like forgetting to add the adjuvant, not applying crown seals correctly or leaving valves open to vent CO2 during Charmat bottling. Others are more unusual, such as taints from bad adjuvant supplies or rogue yeasts causing very high acetaldehyde levels in Charmat ferments. One sporadic problem that can be hard to pin down is indole – a perfectly normal yeast metabolite that is usually re-metabolised but if it isn’t, it can contribute characters that appear similar to sulfides or plastic, styrene­like characters. Precise causes have been difficult to prove and, according to Coulter, the AWRI has had trouble recreating the effect in laboratory conditions. Anecdotally however, it seems to be related to yeast stress with some producers seeing a link with drought years (late 2000s in Australia) or high sulfur at tirage. Some work has also suggested high yeast assimilable nitrogen (>400ppm) and high solids can lead to elevated levels. Although yet to be conclusively proven, optimal yeast nutrition seems to produce less indole.

MESSAGE IN A BOTTLE: TELLING AND SELLING THE STORY

For a whole-of-business approach to sparkling wine, marketing is criticaland some might argue it is even more important than wine quality. For some perspectives on marketing challenges around sparkling wines, I spoke to Angie Bradbury, managing director of Dig & Fish and chair of the board of Wine Victoria; Dan Sims, founder and chief executive of Revel Global and the driving force behind Pinot Palooza; and Tyson Stelzer, journalist, judge and author of The Champagne Guide and The Australian Sparkling Report 2018).

Bradbury’s irritation is clear.

“Too much of it just falls into stereotypes. At the top end they’re pretending to be Champagne, trying to pass themselves off as that and using all the French jargon rather than owning their own brand, story and provenance. Then at the bottom end it is stereotypical ‘party girl’ imagery. There’s not a lot of nuance around a story like that,” she said.

To Bradbury, this has left the door wide open for prosecco producers who are generally doing much better at creating a unique usage occasion and brand position while traditional sparkling producers are not keeping up.

“With sparkling in 5% decline (and prosecco in double-digit growth), the value is not being taken from Champagne; it is coming from big conservative houses that don’t take their customers seriously.” Bradbury also contrasted two classic family­owned wine companies; one is very consumer-focussed while the other is very traditional and trade-focussed in its approach. “Which one do you think is growing and which is shrinking?”

As a wine show judge and former sommelier, Dan Sims’ view is similar in that he believes the traditional model has been quite elitist.

“Pet nat and prosecco are hot, regardless of what you prefer. But what interests me here is not what the wine nerds like us think, it’s about attention. According to Facebook, the average person scrolls through 90 metres of feed per day. So trying to hold someone’s attention is a real challenge. That’s what we deal with in Palooza -we deal in the currency of attention. An event totally focussed on one single variety and it is packed!”

With social media enabling wine companies to tell customers their story so readily, Sims is also keen on expanding that direct connection to seek their views and reviews. “How many wineries send samples to media who shrug at just another delivery? How many send bottles direct to customers who purchase the wines themselves and share with their friends? Imagine the response -wow! ‘Holy s**t! This winery just sent me a bottle of wine!”‘

When it comes to telling the story, Sims has a catchy summary.

“Wine is either a chat, conversation, lecture or a sermon. And which of those do you think people warm to the most? If you’re making wine for yourself or making it too intellectual, don’t complain when it’s hard to sell. Saying Australian sparkling is as good as Champagne simply doesn’t cut it -even though Arras is better than most NV Champagne. That said, in the right context -and context is huge -you can still dive deeper when you need to. This is the ‘sermon’ setting like our nerdy wine show dinners where we can bang on about the technical stuff of the great wines. Pet nat is a ‘conversation’ – and one many are having.”

With so much time in, and focus on, Champagne, Tyson Stelzer has some interesting observations about the shifts in marketing in a region many consider the gold standard in promotion and positioning. Traditionally, the approach has had generic, regional focus with heavy investment in associations, celebrity endorsements and high profile events like Grand Prix racing. Despite that previous success, there is an increasing shift towards more individual stories of the wine companies, communes and vineyards that make up the region. Unsurprisingly, this has been driven by the smaller wineries but now even a classic house like Krug is much more forthcoming with information and disclosure than it has been in the past.

“The way I’m seeing that unfolding is very different to even five years ago. There is a huge initiative in Champagne towards sustainability, organics, biodynamics (although less so), so there is a compelling story – even amongst the biggest houses. Some are even setting up maps to go find the vineyards.”

Perhaps a cautionary tale can be found in a trend amongst some small grower houses though.

“The bottom seems to be falling out of the grower Champagne market following lots of attention and interest off the back of a good story,” Stelzer said. “They had their moment in the sun and their opportunity a few years ago but lots of them are just not very good. So when fruit prices are around €8/kg, many of them are giving winemaking away and just selling the grapes instead.”

REALITY CHEQUE

Another suite of problems with traditional method sparkling wine comes from the ageing requirements and eye­watering amounts of money tied up in working capital -failing to account for this can be devastating. In addition to some basic financial ratios (gross margin, stock turns, return on invested capital, etc.), to price risk appropriately managers must understand the real nature of opportunity cost-the highest value alternative foregone.

Accountants will be underwhelmed by the simplicity of the following example, but it is only intended as a ‘back of the envelope’ illustration of the implications of large amounts of working capital and financing costs.

Healthy wine businesses are very conscious of their margins and, as a guide, a minimum ex-winery sale price of at least 50% gross margin is a good place to start. Assuming a steady state of sales of 1500 dozen, a production cost of $120 per dozen (not accounting for inflation) and an ex-winery gross margin of 50% ($180 per dozen), this would deliver a gross profit of approximately $90,000, which might seem attractive at first.

However, we often see wine businesses that don’t properly account for financing costs. With a tirage age of three years, the average holding time of the stock could be approximately 3.5 years which would tie up working capital of approximately $630,000. If the business’ cost of capital was, say, 8%, or $50,400, this would reduce the profit after interest to $39,600, or only 6% return on capital. This is much less exciting than the apparent 50% margin and may get even worse if other costs such as storage and insurace are overlooked or not accounted for properly.

Under these assumptions, one would need an ex-winery gross margin of around 80% to deliver a healthier return on capital of about 15%, but even that is probably under-pricing the risk of this type of business when one considers more stable returns from other investment alternatives. The price increase would almost certainly act as a drag on sales volumes too.

Businesses must make their own judgements about pricing risk and acceptable returns but in a competitive environment, one needs a compelling brand in order to set price rather than take it.

SO WHAT?

Sparkling wine in general and traditional method in particular requires a higher level of precision, planning and attention to detail than most other wine styles. It can be quite unforgiving and weaknesses or mistakes at any stage of the business are easily exposed.

While true of wine business in general, long-term success with sparkling needs astute viticulture and winemaking, the finances must be well understood and, perhaps most importantly, the story and branding need to be communicated with impeccable clarity, personality and cut-through.

There is a lot to get right but all of it was probably best summed up by Adam Keath: “Probably the biggest mistake people make is thinking that it’s easy.”


Mark O’Callaghan is senior consultant and director at Wine Network Consulting, www.winenet.com.au

Mark O’Callaghan is Managing Director of Wine Network Consulting. Based in the Yarra Valley, but working on projects around Australia, the UK and China, Mark is a regular contributor to various wine industry bodies and wine show judge. The views expressed here are his own.