October 2007 Issue of Wines & Vines

Case Studies in Exporting

How small to medium wineries sell internationally

by Laura Ness
Case Studies in Exporting

  • A growing number of small wineries--some producing well under 20,000 cases per year--are exporting their wines.
  • Wine exports from the U.S. have grown from $36 million in 1986, to $876 million in 2006.
  • Small wineries choose to export for many reasons, including opportunities to travel, meet new customers and expand their knowledge of how non-U.S. consumers appreciate their wines.
It's no surprise that large wineries with productions upward of 100,000 cases routinely export to markets outside the United States. What is surprising, perhaps, is that a growing number of small wineries--some producing well under 20,000 cases per year--are putting their toes in the oceans, both Atlantic and Pacific.

In the mid-1980s, the U.S. Congress passed the Wine Equity and Expansion Act, recognizing the significant trade barriers faced by U.S. wine producers in foreign markets. Shortly thereafter, California's Wine Institute (WI) created the California Wine Export Program (for more information visit calwinexport.com) and has helped dozens of wineries get their feet out the domestic door. Washington state has its own International Marketing Program run by the Washington State Department of Agriculture, with in-country representatives in Japan, China and Taiwan. Since the establishment of these initiatives and others, wine exports from the U.S. have grown from $36 million in 1986 to $876 million in 2006.

By far, more U.S. wine goes to the United Kingdom than any other foreign market. The retail sales value of all wine in the U.K. grew by 25% between 2001 and 2005, to reach more than $9 billion (source: Vinexpo). Looking ahead, this research predicts that the retail sales value of the U.K. wine market will be the largest in Europe by 2010. The U.K. is already the world's largest importer of wine. Since 2003, total sales of New World wines have surpassed those of traditional Old World suppliers such as France, Italy, Germany and Spain. Currently, Australia is the No. 1 supplier to the U.K. market, with France second and the U.S. third. The outlook for U.S. wine in the U.K. market looks quite good, as French wine sales continue to decline in volume, and (to a lesser extent) in value, putting the U.S. in a good position to take the No. 2 position in the U.K. market this year.

Besides the U.K., the hottest potential markets, i.e., those judged to have the highest potential for growth, include China, Japan and Mexico.

There are, it seems, as many ways to get started in the export arena as there are places to do it. Many of the wineries interviewed for this story are getting assistance from Wine Institute; others didn't know about the program, and were intrigued. Still others had leveraged family or business/broker contacts, or had stumbled into exporting almost by accident. Some had good experiences, others not so. However, most all wineries that are sending their wines to markets outside the U.S. reported a positive experience, not the least of which was the opportunity to travel--on business--to meet new customers, make new friends and expand their knowledge of how non-U.S. consumers appreciate their wines. Plus it just makes good business sense to diversify and take advantage of an increasingly global marketplace.

Case Studies in Exporting
Matt Ortman exports 3% to 5% of his 3,000-case production to Ireland.
Ortman Family Vineyards
San Luis Obispo, Calif.:

Matt Ortman of Ortman Family Vineyards in Santa Barbara County has deep roots in the wine industry: His father, Chuck, has been in the wine business for nearly 40 years, working at icons like Heitz, Far Niente and Shafer, before moving to the Central Coast and establishing Meridian Vineyards. Matt apprenticed at Castello di Gabbiano in Italy before establishing Ortman Family Cellars. He intends to grow the winery, now at about 3,000 cases, and the idea of export as a business expansion opportunity was intriguing. An industry connection led to the winery's first export to the Republic of Ireland, where between 3% and 5% of the company's inventory goes at present.

The experience has been wholly positive, and the company hopes to increase the overall percentage of wine exported to 10%, as it moves into England as its next target. To Ortman, it is one more component of a sound business strategy, as the competition for California outlets continues to intensify. Plus, he has never visited Ireland, and plans to do so once his children are a bit older. Last year, a recently married wine buyer at one of the restaurants that carries Ortman's wine in Ireland visited Ortman in Santa Barbara on his honeymoon. Turns out the buyer's wife works for the Guinness brewery: definitely a trans-Atlantic bonding opportunity, and a vacation in the making.

Woodward Canyon Winery
Lowden, Wash.:

Rick Small was a pioneer among Washington vintners when he founded Woodward Canyon Winery in 1981. He developed his business based on great quality wines that got rave reviews, and helped put Washington on the map as a high-quality wine region. He spoke about his export experience at the Washington Association of Wine Grape Growers annual meeting in February. He said he sells 25-33% of his production directly to consumers, but long ago realized that he needed other distribution, too. Today exports account for 5% of his sales, but he seems to relish that 5%. "I decided I wanted to be a player," he said. "The best wineries in the world export, and I wanted to be in that world-class category."

Case Studies in Exporting
Washington vintner Rick Small exports about 5% of his Woodward Canyon wines.
Success at exporting requires a firm, long-term commitment to the process and to your importers and agents, "like a marriage does," Small said. Communication is extra important when dealing with business partners so far away, he said, and you must visit the export markets regularly. He advised doing careful research on the overseas companies you consider doing business with. He recommended exporting before you need to: Don't try to sell everything you make in your own backyard, even if you can. He also stressed the personal, emotional benefits of international travel as a welcome reward of exporting, to balance out the generally low financial margins.

Dashe Cellars
Oakland, Calif.:

Dashe Cellars, known for distinctive single-vineyard Zinfandels from Dry Creek and Alexander valleys, is owned by winemaking team Mike and Anne Dashe. Of their 9,000 case production, they are currently exporting a small quantity to England and Japan. Mike has a good friend from UC Davis, who started a distributorship that helped Ravenswood and Ridge enter these markets. This connection provided an introduction to the Dashes.

Anne commented that at their size, they don't need to export, but it's nice to have some diversity, and especially to have a foot in Europe. They export around 100 cases yearly: not for the money, but "more for the pleasure of doing business," she noted. The U.K. seems to be very receptive to their style of Zinfandel, which is still somewhat of a novelty. Anne hails from France, so it's surprising Dashe doesn't export there. Not yet, at least. Anne remarked that when the euro is weak it is pointless, as French wine is cheaper. With a stronger euro, American wine would be less expensive and might make sense. Plus, it would certainly increase personal travel. When they have more wine, they will export more.

Case Studies in Exporting
Andrew, Lee and Doug Nalle sell their Zinfandel in Japan, Europe and Canada.
Nalle Winery
Healdsburg, Calif.:

Doug and Lee Nalle, with their son Andrew, operate a true family winery. With only 2,000 cases, exporting isn't something they do for the money. "Let's face it, the margins are not the greatest, with all the middlemen involved." Doug said. However, they have been exporting for 20 years, and intend to continue. They were initially solicited by an exporter who thought their well-balanced Zin would do well in the Japanese market. It has. Their markets have expanded to include Europe and Canada.

Doug said, "The experience has been generally very good. It has many 'bennies.' My wife and I really like to travel. It's nice to see our wines on a restaurant list in Tokyo or in Edinburgh." They've also shipped wine to England, Germany, Belgium, Italy and Switzerland, and occasionally to Scandinavia. In Sweden and Finland, the name Nalle translates into "teddy bear," and Winnie the Pooh is known as "Nalle Pooh," prompting the occasional Scandinavian lass to call or e-mail the winery wanting to buy some "Nalle Pooh wine" for her sweetheart. The Nalles follow opportunities as they come; they don't necessarily go looking for them. "Importers and exporters come and go, but our reputation is well established," Doug said. "Being in export markets gives you world presence. No matter how small you are, it provides expanded brand exposure. It puts you on the world stage."

Liberty School
Paso Robles, Calif.:

According to Barbara Smith, communications director for Treana Winery (Paso Robles), Liberty School started exporting after research showed a good fit for the company's brands in Canada. To date, the experience has been excellent, particularly in the province of Quebec, where Liberty School Cabernet Sauvignon ranks among the top table wines sold by the SAQ. In Ontario, Liberty School is currently among the fastest growing California brands, and it is also seeing increasing success in Western Canada.

Smith sees the primary benefits of exporting as a "healthy" diversification into stable markets outside the U.S. Canada is a government-controlled market, so sales tend to be more focused. She said the work of local agents in each province is critical to the program's success. And the tasting room in Paso Robles receives more and more Canadian visitors who are Treana and Liberty School fans. A good way to help increase tourism, eh?

Top U.S. Export Markets
Country 2006 Value
in millions
United Kingdom $269
Canada $190
Japan $73
Italy $47
Germany $42
Netherlands $39
Denmark $21
France $20
Sweden $19
Mexico $17
Note: Includes bottled wine, and bulk wine for bottling
Source: Wine Institute
Clos La Chance
San Martin, Calif.:

Santa Cruz Mountain winery Clos La Chance does a very limited amount of exporting to China, Canada (Quebec), Germany and Mexico. It is among the 100-plus California wineries working with WI's export program, and attended France's Vinexpo to find additional exporter and wholesaler opportunities. The winery has made presentations to some of the monopoly countries, including Norway, and has located broker representation in other parts of Canada, including Ontario and Vancouver. In addition, it is working on broker arrangements in the U.K. and other European countries.

Hirsch Vineyards
Sonoma Coast, Calif.:

David Hirsch of Hirsch Vineyards has been growing Pinot Noir for well over 20 years, on the remote Sonoma Coast, literally in the middle of nowhere. Yet wines made from the fruits of his labors grace restaurant lists the world over, mostly under other labels. Superstar wineries like Littorai and Williams-Seylem, which make vineyard designates from purchased grapes, can put a vineyard on the map, even if people routinely get lost trying to find you. When Hirsch began making his own wine in 2002, he knew his vineyard was better known than his brand, so he decided to leverage the attention his plot of land had garnered. What better way to do so than to capitalize on international markets that already had some familiarity with the name?

He leveraged two important connections to make his first placements: mailing list members from Japan, and his daughter, who was living in Europe. Even though he made only 500 cases in the first vintage, some of that made it to Japan, Korea and the U.K. He feels that the real opportunity for an exclusive brand is in the international marketplace, especially if the wines are high quality, limited production and higher in price. "There is no mid-range market internationally," he noted. "The market is for high price/low availability, and low price/high quantity."

For Hirsch, who lives so far off the beaten path, the travel component is also highly attractive. "Doing a wine dinner in London? That's fun. I'd like to do more of that," he said. Moreover, he noted, "We are selling the site, the terroir. Most people, especially here (in the U.S.), are not connected to the land. That is slowly changing. Handmade things are big: things that come from a real place, made by real people." He feels that Europeans in general have more appreciation for where their food and wine come from, and are more receptive to the terroir message. He is currently talking with a San Francisco sommelier, who happens to be Polish, about getting his wines into Central and Eastern Europe. So don't be surprised if you see Hirsch Vineyards Pinot on the finer wines lists of Prague and Warsaw. And certainly don't be surprised if the sommelier proudly points out that the winery is located half way between Guerneville and Gualala: right in the middle of nowhere.

Laura Ness is a long-time resident of the Santa Cruz Mountains. She enjoys writing about the wine industry, frequently serves as a wine judge and teaches a class at DeAnza College called "Meet the Winemakers." Contact her through edit@winesandvines.com.
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