Mixed Bag for U.S. Wine Exports

Wine Institute reports 2014 value slows, while volume grows

by Paul Franson
Italian producers of Primitivo have started promoting their wine under the name Zinfandel in Sweden, using a ‘Wild West’ theme that advertises their use of American oak barrels for aging. Officials from the (California) Wine Institute believe the practice is misleading to customers.
Napa, Calif.—U.S. wine exports hit a record high of $1.56 billion in 2013, up 16% from 2012 (and up from $621 million a decade ago).

Volume grew 2.8% to 413 million liters, but the value of exports was down 3% to $1.386 billion for the 11 months through November 2014, implying a slight weakening in price. This could have been partly due to a rising dollar and the West Coast port slowdown.

These were statistical highlights from the Wine Institute's seminar this week to help guide wineries seeking to start or increase wine exports. The talk included details about its programs, statistics to guide decision-making and advice from on-site country managers.

The seminar highlighted a side of the Wine Institute that’s not as well known as its lobbying and promotional efforts for California wineries. Though Wine Institute pays only a small role in marketing California wines domestically, it administers the marketing-oriented California Wine Export Program funded by the USDA’s Foreign Agriculture Service and industry contributions.

Currently, 170 California wineries participate in the Wine Institute’s International Program. Many others benefit from its programs without being members.

Linsey Gallagher is the Wine Institute’s vice president of international marketing. She noted that the Wine Institute’s promotional campaigns for California wine help develop markets in more than 25 countries by maintaining trade representation in 15 countries to provide critical market information and promotional assistance; and organizing participation in international wine trade shows.

It facilitates California wine promotions in both retail and on-premise accounts, hosts trade, media and consumer tastings in more than 15 countries each year and encourages coverage by top wine, food and lifestyle writers through visits.

Source: Wine Institute
Discover California Wines programs
During 2014, the program hosted more than 25 trade and media groups with 170 guests from more than 15 countries on visits to California wine country.

It now has social media campaigns live in 16 countries, has translated its website into eight languages plus localizations for the United Kingdom and Canadian English speakers. It publishes quarterly newsletters with invitations to events and has made available to members a PowerPoint overview presentation, Discover California Wines, similar to the Napa Valley Vintners’ Napa Valley Rocks.

The wine export program also works with Visit California to encourage visitors, leveraging that group’s upcoming $100 million budget. Lynn Carpenter, vice president of marketing for Visit California, described the importance of wine and wineries to the program to attract overseas visitors: “Wine is a differentiator for the state,” and in fact, along with celebrities in Hollywood and theme parks, wine is the state’s top draw.

She also mentioned that China is now the second-largest source of tourists to California (after Canada) and boasts luxury-oriented travelers.

This year, it will participate in many efforts:
• Colombia Trade Mission (Bogota) – February 17, 2015
• Mexico Annual Tour – February 19, 2015
• European Spring Tour – March 9th– March 18th
• Canadian Wine Fairs – April
• California Wines Summit 2.0 – week of May 3
• Greater China & Hong Kong Tour – June
• Vinexpo Bordeaux – June 14-18
• Media & Trade Visits to California during the year
• China Trade Group – week of Feb. 1
• Zinfandel Media Group (Sweden) – week of April 13
• LCBO Trade Group – week of June 1
• UK Trade Group – week of June 8
• Colombia, Brazil, Mexico Group – week of July 21
• Japan Trade Group – week of Sept. 14

Trade barriers and sustainability
During the seminar, Tom LaFaille, the Wine Institute’s vice president of international trade policy, also outlined current barrier to exports and the attempt to fight them. These include “scientific” barriers such as requiring wine to be tested for salmonella, which can’t live in alcohol, and discriminatory tariffs, subsidies of domestic wineries, counterfeiting, limits on advertising and label requirements.

The current port slowdown, which appears nearing an end, also has hurt many exporters.

On a more positive note, sustainability is an issue that is gaining resonance everywhere, and Allison Jordan, executive director of the California Sustainable Winegrowing Alliance, updated the audience on that program’s progress due to its importance overseas.

Region by region
The wine export program’s regional representatives then gave short summaries of their markets, which were augmented by longer sessions in the afternoon.

Canada has been hit hard by falling oil prices and currency exchange, which has added a few dollars to each bottle of wine at retail. Growth continues, however, and New World wines now account for 66% of the market, including 27% for Canadian wine.

The rising dollar is also impacting sales to Europe, with an unusual situation threatening the booming market for California Zinfandel in Sweden. There, Italian producers are packaging their Primitivo, which is genetically identical, in cowboy-style packaging promoting the use of American oak and promoting with the western-themed ads. As a result, U.S. Zinfandel sales dropped 18% in a year, while Italian “Zin” grew 340%. The Wine Institute is trying to demonstrate that this is misleading customers, which is illegal under Swedish law.

In the United Kingdom, the market has been disrupted by supermarkets seeking market share and driving prices ever-lower just as new duties are added, but the high end of the California market is gaining increased respect partly due to the country’s enchantment with California in general.

The TransPacific Partnership may eliminate wine duties into Japan, which could have a big impact, but rising prices are a handicap to sales. The port slowdown has reduced stocks and it will take some time to recover. Japan has a strong demand for organic/sustainable wines.

While China has been booming, economic growth is slowing, and government anti-corruption measures have created a backlog of higher end wines. However, wine is entering the mainstream instead of being a luxury gift item, partly due to young female consumers.

One promising possibility is the opening of Cuba, while Brazil, Peru, Columbia and Nigeria are creating interest, too. The Wine Institute is focusing on larger markets, however, and has aggressive programs in all.

For more information, visit calwinexport.com.

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