A look at U.S. wine exports

A look at U.S. wine exports – Statistical Data Included

Larry Walker

U.S. wine exports grew by 2% in value to $548 million in 1999 and by 5% in volume to 75.4 million gallons, according to final figures released by Wine Institute. (Some 95% of all U.S. wine shipments are from California.) While this represents a record high for both value and dollar, it was considerably off the whopping 26% jump in value in 1998 over 1997 shipments.

Joseph Rollo, international director of Wine Institute, said part of the reason for the slump was that 1998 figures in effect “borrowed” from 1999. “If you look at the first quarter of this year, we’re back to a 14% increase.

The slower growth in 1999 could also represent the need for some markets to sell through inventory acquired in 1998. That could be especially true in Asia where markets like Japan, Taiwan and Hong Kong showed major drops in 1999 over 1998.

The United Kingdom, still the number one market in both value and volume, was down 7%, which looks alarming. But, as Rollo explained, it could be just a matter of changes in shipping with the European Union. For example, the Netherlands showed a gain of 65% in both value and volume. Much of that wine, according to Rollo, is probably going to the U.K.

“It’s as if someone in Europe were to ask, ‘How much wine does California ship to New Jersey?’ There’s no way to know, since the wine would almost always go to New York first,” Rollo said. He added, “We’ve had a look at some internal reporting on California wine sales within the U.K., which shows sales are up.”

Germany, which also showed a decline in volume and value of wine sales, is probably a similar case.

Rollo said there was also strong price competition, especially at the lower end. “Australia had a lot of wine to sell last year. We saw prices roll back in England to the level of 10 years ago, with wine selling at [pounds]1.99 to [pounds]2.99. California can’t compete at the price point.”

The currency exchange rate is another major problem and one that the wine industry has no control over, Rollo said. And it’s growing more crucial all the time. Since the Euro was introduced, it has fallen about 20% against the dollar, which makes U.S. wine 20% more expensive.

Looking at developing markets, Rollo said that if China gets into the World Trade Organization, they have pledged to reduce the tariff on wine from 65% to 14% over a five-year period, which would make it one of the lowest tariffs in Asia.

“I don’t think we’ll sell a lot of wine in China right away, but in the long term, it is a market that is bound to grow. I see the same thing happening with Taiwan if they get into the WTO.”

Overall, a new round of growth should occur in Asia as the economic situation there continues to improve. (See the special report by Kevin Sinclair on the Asian wine market on page 32.)

“In Europe, there is still much potential growth in the markets where we are currently doing business,” Rollo said.

Paul Molleman, the Wine Institute’s European Marketing Director said that it is California’s positive image that leads to wine sales in Europe. “California’s wine image continues to be young, dynamic, exciting, daring and very high quality.”

He is also expecting some growth in Mexico as that economy continues to stabilize. “We are making a renewed effort there. It isn’t going to be a huge market, but we should be doing better than we are.”

In Canada, Rollo said new efforts were being planned for Quebec, which he sees as Canada’s best potential market for U.S. wines. “We are making gains in the on-sale area and those should spill over into the off-sale liquor board stores.

Overall, Rollo said he believed California wine sales were moving ahead in a consistent manner. “In the past few years we have seen 25-30% increases. I don’t expect to see that anymore but I do think we are in a period of 10% to 15% growth. Much will really depend on external issues such as the currency exchange and trade and tariff issues.”

John Schwartz, who heads up Wente’s massive export program, agreed that Asia is on the rebound. “Tourism is returning, the disposable income level is rising, hotels are starting to place orders again after being our for almost a year.”

Schwartz made his comments from San Francisco International Airport, where Wines & Vines caught up with him on his way to Vietnam, which he sees as a rapidly growing wine market. “It may never be in the top 5 for Asia, but it is becoming a good market. More than 60% of the population is under 30 years-old. They are aggressive and entrepreneurial and enjoy living the good life. The government has done a good job of building the tourism infrastructure,” Schwartz said.

“Where I think we are missing out, as an industry, is Mexico. We should be spending more money on generic programs to develop the market there. Look at the huge super market chains right across the border in Tijuana. There should be California wines in those chains.” Schwartz added that Wente has just had its best year ever in Mexico. Overall, he said Wente export sales for the first quarter were up 20%. The Livermore Valley winery exports to 155 markets, about 60-65% of total production.

There are more than 125 California wineries now exporting to 165 markets, according to Wine Institute figures. The U.S. is the fourth leading wine producer in the world and holds a 4% share of the world export market.

The Pacific Northwest

The most recent figures for the Pacific Northwest are from the 1998-1999 marketing year, which ended last June. There were 113,000 cases of wine exported with a value of about $8.2 million, with Washington accounting for $5.9 million of that and Oregon the balance, according to figures from the Northwest Wine Coalition.

Steve Burns, who heads the group and is also executive director of the Washington Wine Commission, said the coalition was formed ten years ago to promote the export of wine from Washington, Oregon and Idaho.

“The coalition focused its export efforts on the number one and number two markets for the region, Canada and the United Kingdom. We have on-going relationships in each market with marketing firms and have existing retail promotion campaigns, media relations programs and conduct at least one trade tasting per year in each country. This year, we plan to expand our promotional efforts to Japan, our number three market,” Burns said.

He said that the coalition has resisted what appears to be “amazing opportunities in other countries. We have remained true to our export vision. This long-term, methodical approach has paid off for the region with exceptional trade support in the U.K. and Canada.”

Burns added that exports account for 7% to 8% of total production in the three states. The state has a Web site at northwestwine.org, which lists all exporting wineries from the Pacific Northwest with suggested prices and sales volume.

New York State

Susan Spence, director of the export program at Canandaigua wines, estimates that New York exports totaled more than $4 million last year, with $3.6 million in sales to Canada and $450,000 to the United Kingdom, with some additional sales to Germany, Japan and other markets.

COPYRIGHT 2000 Hiaring Company

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