Given the environmental impact of rapid climate change, it is becoming imperative for companies to alter and align their business and operating models to remain competitive, particularly in the wine industry. The consensus in the wine industry is that the implications of global warming will have ramifications on its supply. In vineyards however, a great deal of variability exists so it is hard to trace specific aspects of climate change to wine yields, making it difficult to diagnose the problem and devise a working solution [1].<\/p>\n
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In order for grapes to harvest and eventually become wine, a vintner needs the vineyard grounds to dry out which generates the heat that develops the sugars, acids and tannins that truly construct a good wine [2]. The effects of climate change are evident in areas where the land is drying out earlier than in the past either due to droughts or abnormally warm temperatures, especially in the California regions. In most instances, that results in an overpoweringly sweet wine with poor tannins and can jeopardize the aging quality of the wine [3]. No doubt, the land that is available for viticulture is starting to shrink.<\/p>\n
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Founded in 1945, Constellation Brands (CS) is a leading international producer and marketer of beer, wine and spirits, and, as such, stands the most to lose from systemically lower grape yields.\u00a0 The wine division of CS includes more than 100 brands and operates 40 wineries and over 19,000 acres of vineyards worldwide [4]. The majority of CS wine brands are based in North America, where vineyards are typically low in elevation and susceptible to climate change. The overheating of the soil in these areas require excess fresh water usage to maintain cold temperatures which has proven difficult with recent California droughts.<\/p>\n
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Despite that climate change is effectively reducing the amount of wine that can be produced, consumer wine consumption has actually continued to rise in recent years [5], putting pressure on CS to produce premium wines at a fast pace. Given this environment and the regulatory landscape that exists around sustainability, the wine division of CS has an opportunity to differentiate by engaging its supply chain to minimize resource usage and costs. At many of its vineyards and production facilities, CS has implemented next-generation recycling programs, solar power initiatives, and water treatment programs where they engage with the entire supply chain on these measures. In fact, CS owns the largest solar array of any wine producer in California and estimates $8 million per year in savings from the initiative [6]. In 2010, CS became certified as part of the California Sustainable Winegrowing Alliance (CSWA), a certification program based on industry best practices, reporting and transparency around sustainability. Today, all of CS wine brands in CSWA are certified [7].<\/p>\n
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As a front-runner in this industry, CS has successfully made sustainability a pillar of the organization. Unfortunately, the several thousand independent wine brands in the US don\u2019t have the deep pockets to implement sustainability programs. CS should continue to partner and\/or acquire these brands so they to have the ability to fight climate change by leveraging the supply chain of CS. That said, CS should allow its brands to retain control and operate their businesses as they have in the past as to not disrupt the independent character of the industry.<\/p>\n
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While climate change is reducing California grape yield, rising temperatures actually may be increasing yield in other more nascent wine markets such as England and Canada. From both standpoints of capital and market leadership, CS is in a position to take advantage of non-traditional wine geographies.\u00a0 Whether through acquisition of companies, land, or building vineyards \u201con spec,\u201d CS can also view rising temperatures as a Greenfield opportunity.<\/p>\n
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[1] Climate Change From A Global Wine Industry Perspective, From Forbes, http:\/\/www.forbes.com\/sites\/thomaspellechia\/2016\/06\/20\/climate-change-from-a-global-wine-industry-perspective\/#2901848d429f<\/a>, Accessed November 2016<\/p>\n <\/p>\n [2] An Upside To Climate Change? Better French Wine, From NPR, http:\/\/www.npr.org\/sections\/thesalt\/2016\/03\/21\/470872883\/an-upside-to-climate-change-better-french-wine<\/a>, Accessed November 2016<\/p>\n <\/p>\n [3] Climate Change: Field Reports from Leading Winemakers, From Journal of Wine Economics: Volume 11, \u00a0http:\/\/www.wine-economics.org\/aawe\/wp-content\/uploads\/2016\/06\/Vol11-Issue01-Climate-Change-Field-Reports-from-Leading-Winemakers.pdf<\/a>, Accessed November 2016<\/p>\n <\/p>\n [4] From Constellation Brands Website, http:\/\/www.cbrands.com\/about-us<\/a> , Accessed November 2016<\/p>\n <\/p>\n [5] Wave Of Mergers And Acquisitions Sweeps U.S. Wineries, From Forbes, http:\/\/www.forbes.com\/sites\/brianfreedman\/2016\/08\/11\/wave-of-mergers-and-acquisitions-sweeps-u-s-wineries\/#5fcc56ff5053<\/a>, Accessed November 2016<\/p>\n <\/p>\n [6] Constellation Brands Recognized By CDP as S&P 500 Leader for Climate Change Transparency, From Constellation Brands Website, http:\/\/www.cbrands.com\/news-media\/constellation-brands-recognized-cdp-sp-500-leader-climate-change-transparency<\/a>, Accessed November 2016<\/p>\n <\/p>\n