{"id":9733,"date":"2016-11-03T22:39:21","date_gmt":"2016-11-04T02:39:21","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/in-vino-veritas\/"},"modified":"2016-11-03T22:39:21","modified_gmt":"2016-11-04T02:39:21","slug":"in-vino-veritas","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/in-vino-veritas\/","title":{"rendered":"In Vino Veritas?"},"content":{"rendered":"

While ancient Romans found philosophical truth in wine, modern society has found in wine truth of a different sort: scientific evidence of climate change. Researchers have tied dramatic shifts in the harvesting season of grapes over the past 30 years with the warmer, dryer summers that have resulted from climate change.[1]<\/a> This sudden divergence from long-standing growing patterns will shake up the wine industry: up to 73% of land in some of the top wine producing regions may be unsuitable for wine production as early as 2050.[2]<\/a> On the other hand, the changing climate is expected to make new regions\u2014such as China\u2014increasingly suitable for wine production.[3]<\/a><\/p>\n

Grace Vineyard<\/strong><\/p>\n

One company poised to take advantage of the shifting wine industry is Grac\"chairmansreserve\"<\/a>e Vineyard. Located in Shanxi province, it\u00a0has been in operation since 1997 and is regarded as one of the top wineries in China.[4]<\/a> As an early mover in Chinese wine production, Grace is\u00a0well-positioned to expand production in a world that demands more Chinese wine.<\/p>\n

While Grace stands to benefit from competitors weakened by climate change, it also will be subject to deleterious effects of its own. Wine grapes are extremely sensitive to temperature, humidity, and soil conditions. As climate change affects these factors, Grace will have to adjust its varietal mix to find grapes that will thrive under new or\u00a0changing conditions. Luckily for Grace, unlike wineries with long traditions of grapes cultivation, Grace already has had the experience of developing its mix of grape varietals through trial and error to find grapes appropriate for the Shanxi terroir<\/em>.<\/p>\n

Building on its varietal sourcing experience, Grace should continue to plant a wide mix of varietals, while also keeping careful track of variations in soil conditions and seeking new land for vineyard expansion with the kind of soil that will produce optimal grapes given changing climate conditions. Grace can also hedge against unpredictable growing seasons by producing blends of multiple types of grapes, since different grapes are affected differently by climate conditions.[5]<\/a><\/p>\n

Human Risks<\/strong><\/p>\n

Climate change may also put Grace\u2019s relationship with local farmers at risk. Grace owns some vineyards, but also has cooperative agreements with local farmers who produce additional grape stock on farmer-owned land.[6]<\/a> Farmers receive a minimum payment from Grace based on quantity produced, as well as bonuses for achieving quality targets.[7]<\/a>
\n\"140922112242-china-vineyard-grapes-story-top\"<\/a>Increasing climate volatility will lead to less consistent grape quality. Scientists have found that changes in temperature and humidity have significant effects on the sugar and acidity levels of Cabernet Sauvignon and Merlot, which accounted for 39% and 29% of Grace\u2019s grape production in 2012 respectively.[8]<\/a> This is problematic for Grace not only because its inputs are at risk, but because its model depends so much on keeping the farmers satisfied with their incentives. Without the cooperation of farmers, Grace\u2019s wine production would be severely limited. As arable land and water decrease, farmers will likely be offered increasingly large incentives to focus on food production. Grace needs to ensure that it offers farmers competitive incentives for grape production, even if the frequency of climate change-induced droughts or heatwaves increase and adversely affect grape quality. Grace might consider incentives tied to continued partnership in order to retain its farmer partners.<\/p>\n

Not Such Bad News After All?<\/strong><\/p>\n

\u00a0<\/strong>While climate change will add variability and uncertainty into the already temperamental wine industry, it will also provide opportunities for relative newcomers like Grace Vineyards to achieve global recognition. Now is the time for Grace to prepare for a world in which China is the new cultural center of the wine world.<\/p>\n

 <\/p>\n

Word Count: 797<\/p>\n

[1]<\/a> Michael Cabbage and Leslie McCarthy, \u201cClimate Change is Shifting Wine Grape Harvests in France and Switzerland,\u201d NASA Global Climate Change <\/em>website, March 21, 2106, http:\/\/climate.nasa.gov\/news\/2418\/climate-change-is-shifting-wine-grape-harvests-in-france-and-switzerland\/<\/a><\/p>\n

[2]<\/a> Marc Lallanilla, \u201cWill Global Warming Crush the Wine Industry?\u201d LiveScience<\/em>, April 9, 2013, http:\/\/www.livescience.com\/28577-wine-global-warming.html<\/a>; Lee Hannah, Patrick R. Roehrdanz, Makihiko Ikegami, Anderson V. Shepard, M. Rebecca Shaw, Gary Tabor, Lu Zhi, Pablo A. Marquet, and Robert J. Hijmans, \u201cClimate Change, Wine, and Conversation,\u201d Proceedings of the National Academy of Sciences of the United States of America<\/em> 110(17), April 23, 2013, http:\/\/www.pnas.org\/content\/110\/17\/6907.full.pdf<\/a>.<\/p>\n

[3]<\/a> Michelle Renee Mozell and Liz Thach, \u201cThe Impact of Climate Change on the Global Wine Industry: Challenges & Solutions,\u201d Wine Economics and Policy <\/em>3(2) December 2014, p. 81-89 http:\/\/www.sciencedirect.com\/science\/article\/pii\/S2212977414000222<\/a><\/p>\n

[4]<\/a> Grace Vineyard Website, http:\/\/en.grace-vineyard.com\/about.html#box_brand_rim<\/a><\/p>\n

[5]<\/a> Gregory V. Jones and Karl-Heinz Storchmann, \u201cWine Market Prices and Investment under Uncertainty: An Econometric Model for Bordeaux Crus Classes,\u201d Agricultural Economics<\/em> 26 (2011) p. 115-133 http:\/\/ageconsearch.umn.edu\/bitstream\/177466\/2\/agec2001v026i002a002.pdf<\/a><\/p>\n

[6]<\/a> William C. Kirby, Michael Shih-Ta Chen, and Keith Chi-Ho Wong, \u201cAppellation Shanxi: Grace Vineyard\u201d HBS No. 309-375 (Boston: Harvard Business School Publishing, 2013).<\/p>\n

[7]<\/a> Kirby et al., p. 5.<\/p>\n

[8]<\/a> Gregory V. Jones and Karl-Heinz Storchmann, \u201cWine Market Prices and Investment under Uncertainty: An Econometric Model for Bordeaux Crus Classes,\u201d Agricultural Economics<\/em> 26 (2011) p. 115-133 http:\/\/ageconsearch.umn.edu\/bitstream\/177466\/2\/agec2001v026i002a002.pdf<\/a><\/p>\n

Photos from:\u00a0http:\/\/www.timeout.com\/travel\/features\/1293\/inside-chinas-biggest-winery and\u00a0http:\/\/www.cnn.com\/2014\/09\/27\/world\/asia\/china-wine-kristie-lu-stout\/<\/p>\n","protected":false},"excerpt":{"rendered":"

Climate change may be bad news for the chateaux of Bordeaux, but Chinese vineyards are ready to lead a new world order in wine.<\/p>\n","protected":false},"author":2437,"featured_media":9761,"comment_status":"open","ping_status":"closed","template":"","categories":[1243,28,154,1218,1311,242,1273],"class_list":["post-9733","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-agribusiness","category-agriculture","category-china","category-climate-change","category-grapes","category-wine","category-wine-industry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nIn Vino Veritas? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/in-vino-veritas\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"In Vino Veritas? 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