In
last Friday's class, we briefly touched on the oak barrel sector of the global
wine industry. I decided to do a bit of research on this highly concentrated
industry as it seems that only a few players control most of the market.
For most people, the concept of wine
production conjures images of lush vineyards and rows of massive wine barrels
hidden in dark cellars containing gallons of wine waiting to reach maturity. I
was shocked to discover that only a small fraction of wine producers opt to
have their wines housed in oak barrels. Oak is used during the fermentation or
aging stages of wine-making to vary the color, flavor, tannins, profile, and
texture of different wines. The porous nature of oak barrels allow
for oxygenation during the wine fermentation process, but typically not at
levels that would cause oxidation and spoilage. Barrels are typically designed
to also minimize evaporation, therefore ensuring that flavor and aroma
compounds are enhanced during the wine-making process.
The wine barrel market is heavily concentrated
in France; there are a few American and Russian companies in the market as
well. There are approximately 400 species of oak trees that grow around
the world, with the majority of these species coming from central and eastern
France. The main type, Quercus Petraea, grows in government-owned and managed
forests in Troncais, Allier, and Nevers, France, and can be purchased at a
periodic auction. Most oak trees that make it to the final stage of production
are at least 100 years old and unblemished at about five feet in circumference.
Most trees are capable of fashioning enough staves to make between two and four
barrels and each barrel can hold about 60 gallons of wine for use up to four
times. While American oak barrels have gained a bit of prominence in recent
years as a cheaper alternative, French barrels are still considered the most
prestigious option. Given these economics, the preference for French oak,
and the scarcity of inputs, it is no surprise that oak barrels cost, on average,
between $850 and $3500 per barrel. The cost
of the barrel can account for up to half of the total production cost, which
results in a higher-priced wine for the consumer. In fact, higher-end wineries sometimes
use their barrels only once, though certain renowned châteaux in France manage to
sell off their old barrels to lesser producers, who still gain from the luster
of using a famous name barrel in their vineyard.
During class, Professors Rapp and Hannan
mentioned that wine companies have now begun using non-barrel alternatives and
have devised several techniques in an attempt to save money while
maintaining the same "oaky" flavor. On hearing this, I remember an
audible sigh in our class, but in thinking about it further, it makes a lot of
sense. Increasingly,
wine is aged in giant stainless-steel tanks and the desired
"oakiness" is not imparted by the container, but by chips, chunks or
even whole planks of wine-barrel wood suspended inside the tank. This allows
for a *similar* taste with substantially lower costs. Other alternatives
include: oak sticks, cubes, barrel staves, and beans. It seems that there has
been an immense amount of innovation in the input alternative space. Cost
is obviously the main driver of this innovation, but combined with a more
controlled aeration process ("micro-oxygenation") this can greatly
accelerate the aging process, leading to a great tasting oaky wine at a
fraction of the price.
 |
| Oak chips used to add flavor and complexity. |
Going back to our
traditionalist vs. modernism conversation, naturally many French
wine connoisseurs, producers, and critics have shunned oak alternatives,
claiming that only barrels allow wines to breathe and develop in ways that
can't be duplicated with wood chips or oak flavoring powder. French wine
connoisseurs, producers, and critics are particularly scathing. Until 2006, the
European Union sympathized, banning the use of wood chips in yet an additional
nod to excessive regulation within the wine industry. In fact, such legislation
was enforced in 1999 when Bordeaux’s Court of Appeals fined several wineries,
including the famous Chateau Giscours, more than $13,000 for the use of oak
chips in their wine. http://www.nytimes.com/1998/06/04/world/bordeaux-winemaker-is-charged-with-fraud-over-contents-of-its-products.html
The EU ban was eventually repealed due to the increased interest
in New World wines, which arguably became preferable to Old World European
wines in markets like the United States given their relatively lower prices. It
seems that the only thing that can beat tradition is capitalism.
Bonus:
For those of you who are considering one
day starting a wine business but are similarly appalled at the sticker price of
oak barrels, I have found a solution for you. Oak Solutions Group – is a
company that clearly lacks creativity in forming a name, but makes up for it by
providing a wide range of specialty oak products that are guaranteed to help
companies achieve great tasting wines at a low cost. Enjoy!
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