Wine Production: Adapting to a Changing Climate
How can wine producers adjust to climate change, which impacts both temperature and water availability?
Constellation Brands, Fortune 500® company, is a leading international producer and marketer of beer, wine, and spirits with operations in the United States, Mexico, New Zealand, Italy, and Canada.[1] The Company, which has dozens of premium wine brands in its portfolio, is one of the top wine producers in the world. In recent years, climate change has become a major consideration for wine producers such as Constellation Brands, impacting both existing winemaking operations, as well as the acquisition and development of new vineyards. Increasing temperatures primarily affect vine phenology, which includes everything from the onset of ripening and accumulation of sugars to acidity and secondary metabolites.[2] Meanwhile, water deficits can impair photosynthesis, shoot growth, and grape size.
While Constellation Brands provides private data to and works with researchers to understand the impact of climate change on wine making, the Company provides limited public disclosures regarding its business initiatives to adapt to climate change. Its public initiatives are generally through the Company’s robust corporate sustainability practices. It’s California vineyards are all part of the California Sustainable Winegrowing Alliance, which is based on 227 best management practices and 58 prerequisites covering environmental practices and socially equitable business practices. This broad alliance helps ensure the long-term viability of California winemaking by improving the sustainability practices of existing winegrowers, while simultaneously limiting the expansion of both existing and new growers. With regards to climate change specifically, the Company’s initiatives around responsible water usage enable to company’s vineyards to better adapt to a changing climate.[3]
Many additional potential opportunities exist in the short term to reduce the impact of climate change on existing winegrowing operations. A variety of strategies can be used in existing vineyards to reduce the impact of rising temperatures. Changing canopy management practices can provide additional shade to reduce sugars and increase acids, while strategic trellising can improve cooling. Meanwhile, the impact of increasing water deficits can be mitigated by converting high-risk vineyards to more draught-tolerant varietals such as Grenache, or improving erosion control. Changes on the wine production side can also mitigate what changes may have occurred in the growing phase. More alcohol-tolerant yeast strains can reduce higher sugar and alcohol levels during fermentation, while ultrafiltration or reverse osmosis can be used to reduce sugar levels.
Climate change also introduces new long-term opportunities for wine growers. Moderate increases in temperature generally leads to earlier harvest and better wine. However, drought conditions have the opposite effect. In Europe, these effects tend to be decoupled, yielding superior wines from already premium regions such as Bordeaux. Meanwhile, in California, higher temperatures generally occur in tandem with drought, resulting in mediocre vintages.[4] Currently, Constellation Brands is concentrated in California and Italy, with much smaller presences in Washington State, Canada, Mexico, and New Zealand. Constellation Brands could diversify to cooler, wetter regions in the United States and Canada in anticipation of the increasing effects from climate change. Internationally, regions such as Italy may become inhospitable to wine production by 2050, while Southern England could become a premium producer in the same timeframe.[5] The Company should consider acquiring or developing operations in regions that will benefit from climate change, and where climate patterns tend to decouple droughts from rising temperatures.
Many questions regarding the opportunities and risks remain outstanding. As premium winegrowing regions shift, and different varietals become more or less viable, how should Constellation Brands adjust consumer perceptions and demands through marketing? How could Constellation Brands attempt to manage the impact of climate change further up in the supply chain, particularly the production of oak barrels, a vital component of winemaking.
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[1] Constellation Brands, “Sustainability” http://www.constellationcsr.com/sustainability/, accessed November 2017.
[2] Cornelis van Leeuwen and Philippe Darriet, “The Impact of Climate Change on Viticulture and Wine Quality.” Journal of Wine Economics, Volume 11, Number 1 (2016): 150–167, Wine-Economics, accessed November 2017.
[3] Brands, “Sustainability.”
[4] Benjamin I. Cook and Elizabeth M. Wolkovich, “Climate change decouples drought from early wine grape harvests in France.” Nature Climate Change, Volume 6 (July 2016): 715 – 720, accessed November 2017
[5] Michelle Renée Mozell and Liz Thach, “The Impact of Climate Change on the Global Wine Industry: Challenges & Solutions.” Wine Economics and Policy, Volume 3, Issue 2 (2004): 81 – 89, ScienceDirect, accessed November 2017.
Really interesting analysis! I really enjoyed reading it. While I do agree with your point that in order to make wine in the future they need to diversify their land portfolio, I think that won’t help resolve the problem. If we keep running away from the problem, by moving our produce and vineyards to cooler places, then there will be a point in time in which there will be no such place on earth any more. I think that by showing statistics on the vintages, maybe others will pay more attention to it, because people care about their wine and alcohol more than they care about other things, and this might be a way to motivate others to care more about the climate change rather than other channels that people care about, but not as much as their alcohol consumption.
I really enjoyed reading this and learned quite a lot. I think that this is another case when a strong synergetic combination between art and science is required to solve a problem. It is fascinating to realize the global climate change affects almost every industry and market, including “traditional industries” that probably went through many climate fluctuations over the years. Even though the wineries supply chain was probably designed and developed along many years, it seems that we might face a disruption period in the coming years due to the extreme changes in temperatures and water availability.
I guess that another question that should be addressed concerns the financial aspect – we learned the winegrowers are struggling with decreasing consumers’ willingness to pay high prices for their luxury wines. The new technologies will probably increase the manufacturing expenses and might lead to additional prices increase. Under this scenario, it is reasonable to assume, that even more winegrowers will eventually find themselves out of business due to the changing environment.
While I agree that your suggestions would help Constellation combat the effects of climate change on its vines and its wines, I question whether these changes would be accepted by an industry steeped in tradition. Perhaps more so than any other sector in the food and beverage industry, the wine industry is riddled with rules about where grapes can be planted, how they should be planted, what varietals can be used, how the grapes are processed, etc. that stand in contrast with the suggestions you make. As such, I wonder if the wine industry will be able to adapt and, if it is, what the effect of a break from tradition will be on consumer demand.
Interesting analysis, Lee! My thoughts are around Marketing, given that we just discussed the Chateau Margaux case in Marketing class.
I agree with your assessment that their best course of action is to diversify their winemaking locations based on how climate change affects these vineyards differently. However, there are risks. I see a potential lack of consumer believability around the shifting quality of regions for winemaking. As we learned in the Chateau Margaux case, Bordeaux is known for being one of the most premium and prestigious winemaking locations. If, as a result of climate change, Bordeaux is no longer that and there is another region that is superior, that new region would have a lot of work to do to convince consumers. As Oliver said above, winemaking is so rooted in tradition, and little has changed over the years. As a result, consumers will tend to believe what has been, not what is true in reality.
This is very informative and very well structured. I found it interesting to think about how should Constellation Brands adjust consumer perceptions and demands through marketing?
As temperature rises in California, the company is increasingly being forced to relocate the winegrowing operations. The marketing message then should tie the quality of the wine less to the place and more to the state of growing area; for example, ‘Constellation Brands only grows where temperature and land compositions make the best taste of wine’. Presenting to customers that the brand did extensive research and field tests to provide customers with the best wine possible and convince customers of brand quality. It also indirectly educates people about global warming.