Will Global Warming Destroy E&J Gallo Winery?
Can E&J Gallo, one of the world’s leading wine producers, outlast the impact of global of warming?
California makes 85% of all U.S wine. In 2015, 230 million cases of wine worth $32 billion were shipped from California throughout the U.S. . Needless to say, wine is a big deal in California.
E&J Gallo Winery is the leading provider of California wines. First opened in 1933 and located in Modesto, California, this family owned business produces well-known wines and spirits such as Barefoot wines, Andre champagne, and E&J Brandy . However, within the last few years, California has experienced extreme drought and warming temperatures, which threaten the sustainability of E&J’s current operation. How will they adapt to the physical affects of climate change? This is a key question because E&J’s action plan will likely set a precedent for how other vintners respond going forward.
Will innovation save E&J Gallo?
Wine grows best in a tight geographic range that exhibits narrow climate fluctuations. While growers have seen short-term positive effects of global warming—rising temperatures have reduced frost damage to fruit—the climate will soon warm past an acceptable range for cultivating quality grapes. As a result, wineries will be left with overripe grapes that are absent of the acidic undertones and richness of iconic harvests .
To outpace the effects of global warming, E&J has begun innovating new types of grapes that can withstand rising temperatures. However, according to E&J’s VP, Nick Dokoozlian, while they’ve found some promising new varieties, demand for these products doesn’t exist because consumers aren’t aware of them .
Despite E&J’s drive for product innovation, getting customers to actually want new types of wine is a challenge for their marketing team. But Dokoozlian believes that the pressure of increasing temperatures and decreasing water supply will force the market to shift its consumption habits. Eventually .
What else can be done to save the wine industry?
Other vintners, such as Ava Winery, are taking an even more innovative approach to product development. The tech start-up is creating synthetic versions of classic champagnes that attempt to evoke similar aromas and flavors. It is still too early to tell how successful Ava Winery is at mimicking originals .
The wine community in California is also implementing a sustainability program. The Sustainable Winegrowing Program seeks to establish sustainable practices that are environmentally sound, socially equitable, and economically feasible. Started in 2003, the program measures improvements in water, energy, and nitrogen use and greenhouse gas emissions .
There are also some more extreme tactics wineries can employ to adapt to global warming. A 2013 journal article in the Proceedings of the National Academy of Sciences suggested that grape growers move their vineyards to higher elevations to mitigate the risks of climate change .
While solutions to global warming exist for vintners, I’m skeptical about what these solutions really mean in practice. How will E&J and other wineries change their operations and the behavior of consumers to incorporate these ideas? Dokoozlian has similar reservations.
“The wine business is an extremely capital intensive business. The financial risk of planting the wrong variety in the wrong place is pretty significant,” he says .
Wine is good. We should do more.
Although wineries have started to feel the effects of climate change, I’m not confident they have been hit hard enough to fully understand how serious the current environmental situation is and how necessary it’s for them to make immediate changes. For example, while the Sustainable Wine Program has defined goals, participation in the program is voluntary, and I didn’t find any results from participating companies. If preventative sustainability programs are mediocre at best, what signal is being sent to the industry? It’s certainly not that they should devote financial resources to developing new products or move their vineyards to new locations—both sound expensive. As a short-term initiative, existing sustainability programs should ratchet up their efforts to compel all players to get on board and up the rigor of the metrics measured. This will spark wine growers to do even more.
Perhaps Earth increasing by a few degrees doesn’t feel like much. But for wine growers, this incremental change threatens their entire business model. A temperature increase of 2 degrees—which could happen as soon as 2040—could reduce California’s prime vineyard land by 30 to 50 percent, according to a study at Standard University . If wine growers are resisting the fate of global warming, it’s too late. It’s here.
1. Wine Institute of California, “Media & Trade Statistics,” http://www.discovercaliforniawines.com/media-trade/statistics, accessed November 2016.
2. E & J Gallo Winery, “Our Portfolio,” http://www.gallo.com/portfolio, accessed November 2016.
3. Mark Ellwood, “Three Ways to Beat Champagne’s Climate-Change Problem,” The Wall Street Journal, October 18, 2016, http://www.wsj.com/articles/three-ways-to-beat-champagnes-climate-change-problem-1476799848, accessed November 2016.
4. “Climate Change Has California Vintners Rethinking Grapes,” Lauren Sommer, All Things Considered, National Public Radio, November 2, 2011, http://www.npr.org/2011/11/02/141932301/climate-change-has-calif-vintners-rethinking-grapes, accessed November 2016.
5. California Sustainable Winegrowing Alliance, “Sustainable Winegrowing Program,” http://www.sustainablewinegrowing.org/sustainable_winegrowing_program.php, accessed November 2016
6. “An Upside to Climate Change? Better French Wine,” Alastair Bland, All Things Considered, National Public Radio, March 21, 2016, http://www.npr.org/sections/thesalt/2016/03/21/470872883/an-upside-to-climate-change-better-french-wine, accessed November 2016.
Student comments on Will Global Warming Destroy E&J Gallo Winery?
I wrote my blog post on a Australian winemaker that has pursued a number of innovative strategies to mitigate the risks of climate change on winemaking. Perhaps Australia, which has been hit hard by climate change, may serve as a harbinger for what is to come in California. Based on this post, I think California winemakers could stand to learn a bit from Australian winemakers. For example, greater investment into understanding the impact of global warming on their supply chains could help California winemakers (including E&J) quickly adapt to a changing climate. Software that helps companies do that already exists (see link below), so California winemakers don’t need to start from scratch.
Thanks for this post! Agreed – wine is good and we should do more. While I agree that getting consumers to want new types of wine will be a challenge for the marketing team, I don’t think it’s a challenge they should shy away from. The entire demand for the wine and beer industry has been heavily created by marketing (think Super Bowl beer commercials), and I think their past success shows that addressing this new challenge is one they can take on. Rather than being reactive and waiting for the market to eventually shift its consumption habits (as Nick Dokoozlian believes), I think E&J should proactively take on the role of shifting these habits via marketing.
Thanks for the post! Agree that more should be done, but it is difficult to say what the wine industry can do as a whole to reduce climate change drivers. There are much greater tragedies caused by climate change, but it’s a shame that an industry with so much rich history and heritage now has to turn to measures such as creating synthetic champagnes and (further) genetically engineered grapes to circumvent this problem.
In my post, I detail how the hotel industry is noticing that tourism demand is moving away from the equator and closer to the poles as worldwide temperature increases. I wonder if the same will happen in the wine industry (i.e. will Napa and Sonoma soon be a thing of the past, and we’ll all be drinking Alaska reds?).
Thanks again – this is my third comment so far, and it’s really eye-opening and heart-wrenching to see how many industries we love are being or will be severely affected by climate change. Again, there are greater tragedies, but this exercise makes it more tangible.
Great post. What will we do without wine? While I admire E&J’s innovate new types of grapes, it does not address the root causes of climate change. In addition to taking advantage of technology, I believe E&J and other vintners have to come together and advocate for public policy changes that will address issues threatening their industry.