Export/import report
Larry Walker
Exports of U.S.-produced wine continued to surge in the first quarter of 2003. up by 35.6% in value and 41.6% in volume, according to figures from Wine Institute (WI). (See chart for first quarter numbers on page 22.) This fast clip continues the strong growth seen in the last quarter of 2002, which managed to change a down year into slight gains for U.S. exports. About 90% of all U.S. export wine is produced in California.
For last year overall, growth in volume was actually down by 7%, while growth in value inched up 1% to $548 million. Volume was 74.5 million gallons, down from 80.2 million gallons in 2001.
“If you look at last year, the numbers for exports were down in double digits from January through September, then there was a turnaround in November and December that saved the year,” said Joseph P. Rollo, WI international director.
Rollo said the falling dollar against the euro had probably made a positive contribution to the growth rate at the end of 2002 and the first quarter of this year. He said the availability of California wine due to the current oversupply was also a factor. The euro has gained 8% against the dollar this year.
“For the most part, wine is still a price-point game and it’s a lot easier to make your points when the currency is cheaper,” Rollo said. Looking again at first quarter 2003 numbers, Rollo said, “I am encouraged by the solid growth in most markets. However, the poor economy in Asia and the outbreak of SARS will probably continue to weaken many of the Asian markets throughout the year. One exception in Asia is Japan, where the numbers seemed way too high. However, Rollo said that there have been several brand introductions by major California wineries and he expects 2003 shipments to Japan to be up by at least 50%.
Of the top 10 export markets, only four showed gains in value in 2002: the UK, Japan, France and Switzerland. In volume, the UK, France, Switzerland and Denmark showed gains. (See chart for a list of the top 23 export markets on page 20.) Mexico, the No. 11 market, showed strong gains in both value and volume, edging very close to 10th place Denmark.
Looking ahead, Rollo said that the continued wine and grape surplus as well as the gradual weakening of the dollar should lead to continued growth. “You might say that we have been tested by these events–strong currency and limited wine supply–and survived and are stronger for it,” Rollo said.
In the top market, the UK, Rollo said gains have come despite the fact that the UK is a difficult market. “The retail trade there knows there is a wine surplus and that companies here are very anxious to maintain or grow their share.”
Despite a strong showing by Australia, Rollo believes that the chief competition is France. “They are spending a lot of money on advertising and promotions, he added.
John McLaren, WI’s man in London, was also unconcerned by Australian gains in market share. “Australia is gaining market share by losing money, so I’m not concerned about that.” (See the story on Australia’s role in the global market on page 28.)
McLaren cited a number of California brands that were doing well in the market. “Corbett Canyon and Delicato have consolidated nicely. Coming up on the outside: Echo Falls from Constellation, Seventh Moon from BRL Hardy/Constellation, Leaping Horse from Ironstone and Ravenswood Vintner’s Blend, also from Constellation.”
The key to Constellation’s strong growth is its acquisition of Matthew Clark, a leader in the production and distribution of wine, cider and bottled water in the UK. It has a strong presence in the growing branded and wholesale markets, especially the on-sale independent area. Constellation brands include Arbor Mist, Estancia, Paul Masson, Talus, Vendange and Echo Falls.
Simon Russell, a spokesperson for Matthew Clark, is very upbeat about the UK market for California wine in general and the Matthew Clark brands in particular. “Californian wines are doing particularly well because they have the characteristics that match what is driving the growth in UK wine consumption, i.e. they are New World wines; they offer wine styles that have strong varietal character for the classic (and popular) grape varieties; they offer a strong branded proposition (offering reassurance to consumers); they have a range of wines to interest consumers at all price-points and offer genuine points of interest for more discerning consumers, i.e. great interest in developing the viticulture and vinification, exploring regional variation and so on,” Russell said via e-mail.
Echo Falls, cited as one of the hottest of the new California brands, has sold 100,000 cases in the first six months after its introduction last September.
“Echo Falls represents a great example of how different divisions in Constellation collaborate. In the UK, the marketing team identified the opportunity. They were able to give a specific brief to the winemaking team and they worked without compromise to produce wines just for the UK and just for the Echo Falls label,” Russell said. Echo Falls wines are made at Constellation’s Mission Bell Winery in Madera, California.
Paul Masson is another success story for Constellation in the UK. Russell said the independent off-trade was the prime target for Paul Masson, where it has shown strong growth in the past year.
Ironstone, a Sierra foothills winery and a brand leader in the UK, is cautiously bringing its new Leaping Horse brand to market. The introduction was a Viognier sold through virgin.com. It was introduced last September and scored such a success that Leaping Horse Merlot, Cabernet Sauvignon, Chardonnay and White Zinfandel are now being shipped.
Joan Kautz-Meier, vice president of international operations at Ironstone, said it would be difficult to project case sales based on a first shipment of two containers. Viognier will remain a virgin.com exclusive, but based on U.S. results it could take off.
E. & J. Gallo has by far the strongest brand presence in the UK. The Ernest & Julio Gallo brand has been the top wine brand in the UK for eight consecutive years. In 2002, the Gallo portfolio was ahead of the overall California market, finishing with volume growth of 18.9% and value growth of 16.6%, based on AC Nielsen numbers.
Gallo was first launched in the UK in 1988. Within seven years, it was the UK’s most popular wine. It is now the seventh largest drink brand and ranks as the 39th largest retail brand.
The key to Gallo’s success has been maintaining a strong presence for established brands such as Turning Leaf, while building new brands such as River Crest and Garnet Point. Ian Belcher, UK marketing controller for Gallo commented, “Over the last two years we have spent a great deal of time and energy understanding specific consumer needs within the wine market. Very quickly you realize that to continue to grow at the rates we have targeted, you need a portfolio of brands, each satisfying a specific and differentiating consumer need. One brand cannot be all things to all people.”
Along those lines, Gallo has relaunched its Sierra Valley brand, which is supported by a [pounds sterling]7 million sales and marketing campaign ([pounds sterling]1 = $1.64). The advertising campaign emphasizes the wine’s California roots. The theme is “Live Life in Full Colour.” It shows a California mountain landscape in bright purple, red and yellow.
The brand, introduced last summer in the [pounds sterling]9 to [pounds sterling]10 range, is intended by Gallo to compete directly with French wines at that price-point. Gallo has also laid plans to increase its on-trade presence this year, working with Heyman Barwell Jones in England and Wales and William Morton in Scotland. The plan would seem to be wall-to-wall Gallo, off-sale and on-premise.
Weak Dollar
If the weak dollar is helping U.S. exports, it poses a potential problem for import wines, which took about 25% of the market last year. Small wine-only importers are already taking it on the chin. Some are looking at a price increase of 10% to 15% at the wholesale level, just to make up currency losses over the past year. Such price increases are more likely to hit lower-end brands than the top of the market. Consumers may decide to pay an extra dollar or two for wines costing more than $20 a bottle, but at the $6 to $8 range, they might back off and go for a cheaper California wine.
The large global companies that deal in spirits as well as wine are much less affected by the weaker dollar, since they also export. Brown-Forman, for example, noted in its recent earnings report that the weak dollar could boost annual profits because it makes spirits brands like Jack Daniels more profitable.
Not everyone is raising prices. Vince Friend, who imports exclusively Spanish wines through C.I.V. Imports in Sacramento, is holding the line, at least for now. “The strong euro is cutting into our margins, but we are maintaining our prices,” he said. Friend said the wineries are absorbing the losses for now.
C.I.V. is coming off an excellent year and a strong first quarter and he doesn’t want to rock the boat. “We will try to ride it out at least through the year. We feel that it is important to maintain our position. The way California is dropping prices, it is especially important not to budge,” he said. “Once you lose sales through a price increase, it becomes very hard to get them back.”
California’s Top 10 In The UK
WINE OWNER
Gallo (including Turning Leaf) E. & J. Gallo
Blossom Hill Diageo
Stowells of Chelsea (not all Constellation
Californian)
Garnet Point E. & J. Gallo
Paul Masson Constellation
Fetzer (including Banterra) Brown-Forman
Corbett Canyon The Wine Group
Sutter Home Trinchero Family
Echo Falls Constellation
Ironstone Kautz Family
UK industry sources
Total U.S. Wine Exports (All Categories)
By Selected Countries and World Total Value ($000) and Volume
(Callons/Liters 000), 2002 and 2001
COUNTRY RANKING
BY 2002 YEAR % CHANGE GALLONS LITERS
DOLLAR VALUE 2002 2001 ’02 vs. ’01 2002 2002
1. United Kingdom 188,895 169,315 12% 25,215 95,446
2. Canada 92,571 95,817 -3% 13,301 50,348
3. Japan 81,199 57,294 42% 8,544 32,342
4. Netherlands 53,201 69,223 -23% 6,971 26,388
5. Belgium 18,791 27,528 -32% 2,875 10,884
6. France 13,326 7,129 87% 1,570 5,943
7. Germany 11,818 13,580 -13% 2,281 8,634
8. Ireland 10,153 13,545 -25% 1,421 5,380
9. Switzerland 7,199 5,689 27% 1,034 3,914
10. Denmark 5,710 6,242 -9% 1,039 3,933
11. Mexico 5,001 4,359 15% 979 3,705
12. Taiwan 4,868 5,437 -10% 723 2,736
13. Korea, South 3,865 5,620 -31% 644 2,439
14. China 3,370 2,641 28% 670 2,537
15. Singapore 3,002 3,058 -2% 481 1,822
16. Sweden 2,782 6,618 -58% 302 1,145
17. Hong Kong 2,393 4,867 -51% 301 1,140
18. Norway 1,662 2,514 -34% 220 833
19. Finland 1,394 2,100 -34% 285 1,078
20. Malaysia 1,340 1,601 -16% 181 686
21. Thailand 942 590 60% 167 634
22. Italy 713 1,415 -50% 123 464
23. Poland 231 253 -8% 20 77
COUNTRY TOTAL (23) 514,426 506,433 2% 69,349 262,510
OTHER COUNTRIES 33,844 34,685 -2% 5,102 19,312
WORLD TOTAL 548,270 541,118 1% 74,452 281,822
COUNTRY RANKING
BY 2002 GALLONS LITERS % CHANGE
DOLLAR VALUE 2001 2001 ’02 vs. ’01
1. United Kingdom 23,851 90,148 6%
2. Canada 13,867 52,771 -5%
3. Japan 8,888 33,603 -4%
4. Netherlands 9,510 35,998 -27%
5. Belgium 4,396 16,641 -35%
6. France 1,446 5,474 9%
7. Germany 2,473 9,352 -8%
8. Ireland 1,591 6,023 -11%
9. Switzerland 759 2,874 36%
10. Denmark 1,024 3,875 1%
11. Mexico 812 3;074 21%
12. Taiwan 1,018 3,852 -29%
13. Korea, South 905 3,425 -29%
14. China 474 1,796 41%
15. Singapore 577 2,162 -16%
16. Sweden 874 3,309 -65%
17. Hong Kong 643 2,435 -53%
18. Norway 259 982 -15%
19. Finland 423 1,602 -33%
20. Malaysia 214 811 15%
21. Thailand 84 318 99%
22. Italy 310 1,173 -60%
23. Poland 35 131 -41%
COUNTRY TOTAL (23) 74,433 281,830 -7%
OTHER COUNTRIES 5,829 22,064 -12%
WORLD TOTAL 80,271 303,894 -7%
Source: Wine Institute and Ivie International using data from U.S. Dept.
of Commerce, USA Trade Online. History revised. Numbers may not total
exactly due to rounding.
Export Sales 1st Quarter – 2003
VALUE ($000) VOLUME (LITERS 000)
COUNTRY 2002 2003 % CHANGE 2002 2003 % CHANGE
UK 44,376 49,271 11 .0 21,507.0 24,987.8 16.2
Canada 18,845 22,632 20.1 10,169.4 13,375.1 31.5
Japan 10,126 31,626 212.3 5,649.0 19,483.4 244.9
Netherlands 15,469 20,195 30.6 7,909.4 9,021 .1 14.1
Belgium 5,266 3,590 -31.8 3,136.2 2,186.6 -30.3
France 1,370 1,409 2.9 920.1 1,829.6 98.8
Germany 2,784 5,235 88.0 2,058.4 4,376.0 112.6
Ireland 1,948 2,506 28.6 911.7 1,215.8 33.4
Switzerland 725 5,196 616.7 541.8 2,979.0 449.8
Denmark 1,919 2,703 40.9 1,114.5 1,392.4 24.9
Taiwan 1,244 934 -24.9 708.8 365.2 -48.5
Mexico 1,017 266 -73.8 703.6 259.2 -63.2
S. Korea 1,168 1,087 -6.9 644.6 505.7 -21.6
Philippines 1,102 1,364 23.8 644.7 762.1 18.2
China 849 432 -49.1 364.8 221.6 -39.3
Singapore 739 1,029 39.2 452.8 582.5 28.6
Sweden 401 1,286 220.7 140.5 396.6 182.3
Hong Kong 517 959 85.5 215.2 337.6 56.9
Norway 420 658 56.7 216.3 316.8 46.5
Malaysia 341 434 27.3 202.0 215.8 6.8
Finland 685 453 -33.9 461.9 241.2 -47.8
Russia 291 278 -4.5 71.9 120.7 67.8
Thailand 421 223 -47.0 375.7 111.1 -70.3
Italy 105 254 141.9 103.0 146.0 41.8
Poland 35 65 85.7 6.5 32.4 398.5
Vietnam 50 80 60.0 22.5 16.9 -24.9
Austria 5 78 1,460.0 0.3 16.3 5,333.3
Sub-Total 112,218 154,243 37.4 59,252.6 85,494.5 44.3
Other 6,411 6,618 3.2 3,876.2 3,877.3 —
Total 118,629 160,861 35.6 63,128.8 89,371.8 41.56
U.S. Wine Exports 1986-2002
VALUE (IN MILLIONS
VOLUME (IN MILLIONS) OF DOLLARS)
YEAR GALLONS LITERS REVENUES TO WINERIES
2002 74.5 281.8 $548
2001 80.3 303.9 $541
2000 77.7 294.2 $547
1999 76.8 290.6 $560
1998 71.9 272.0 $537
1997 60.0 227.3 $425
1996 47.5 179.7 $326
1995 38.8 147.0 $241
1994 35.2 133.4 $196
1993 34.9 132.2 $182
1992 38.9 147.2 $181
1991 33.1 125.2 $153
1990 29.0 109.8 $137
1989 21.9 82.9 $98
1988 16.9 64.1 $85
1987 11.9 44.9 $61
1986 7.3 27.5 $35
Source: Wine Institute using data from U.S. Dept. of Commerce, USA Trade
Online. Gallons/liters do not convert exactly due to rounding. History
revised. Includes re-exported wine. Excludes cider.
U.S. Wine Exports In Millions of Dollars
1986 $35
1987 $61
1988 $85
1989 $98
1990 $137
1991 $153
1992 $181
1993 $182
1994 $196
1995 $241
1996 $326
1997 $425
1998 $537
1999 $560
2000 $547
2001 $541
2002 $548
Source: Wine Institute using data from U.S. Dept. of Commerce, USA Trade
Online. History Revised. Includes re-exported wine. Excludes cider.
Note: Table made from bar graph
COPYRIGHT 2003 Wines & Vines
COPYRIGHT 2008 Gale, Cengage Learning
