One-Fifth of California Wine Is Exported

Wine Institute tracks bottled and bulk shipments, promotes both worldwide

by Paul Franson
California wine Maria Shriver Arnold Schwarzenegger
Star power sells. California First Lady Maria Shriver and Gov. Arnold Schwarzenegger go to bat for the state's wine and food industries in "Capital of Culinary Travel," a joint effort by the California Wine Institute and the California Travel and Tourism Commission.
San Francisco, Calif. -- In 2008, one of every five bottles of wine produced in California were exported overseas, with total exports amounting to 43.5 million cases. Last year, more than half of California's wine exports went to Europe (including the European Union), and for the first time, California wines surpassed French wines in value in the UK market, taking the No. 2 spot behind Australia. These figures were among the promising data presented by Wine Institute for current and potential wine exporters at a seminar last week.

Also in 2008, more producers began exporting bulk wine for bottling overseas -- primarily to Europe and Japan -- to save on shipping and packaging costs. Once bottled, the wine was then shipped to final destinations in neighboring countries. More than 50% of exported California wine was shipped in bulk -- this was up 14% in 2008. By contrast, wine bottled and then exported accounted for 48%, a decrease of 2%.

Also, China's purchases were up 34% to $22 million, in part because the local import tax on wine was repealed and Hong Kong's sales went up 244% by volume.

In addition to its role advocating California's wineries and wine, since 1985 the Wine Institute has served as the administrator of the California wine Federal Market Access Program, an export promotion program managed by the USDA's Foreign Agriculture Service. (Some other states have similar programs.)

Currently more than 150 California wineries participate in the WI's International Program, and its promotional campaigns for California wine help develop markets in more than 25 countries.

In Canada last year, the Wine Institute partnered with the Liquor Control Board of Ontario in a fully integrated marketing campaign with the theme "California Style." It was likely the largest retail promotion of California wines ever outside the U.S. market, and also highly successful: Sales overall in Canada increased 11%.

The high-visibility tourism program "Capital of Culinary Travel," a joint effort by the California Wine Institute and the California Travel and Tourism Commission also has promoted the state's wine and cuisine offerings to the fast-growing travel segment of culinary connoisseurs -- and those who aspire to be.

A plus for California wines in many markets, particularly in parts of Europe, is the state's emphasis on sustainable and natural grapegrowing and winemaking. The Wine Institute and the California Association of Winegrape Growers are heading a third-party certification program, the Sustainable Winegrowing Program from the California Sustainable Winegrowing Alliance, which will likely expand that reputation when it's formally released early next year.

WI's European marketing director Paul Molleman outlined some trends from Europe: There was a shift toward less expensive wine fueled by the poor exchange rate for the dollar. California cannot easily compete at prices below 3.99 euros ($5.81USD), which represent 95% of the market. Bag-in-box wines are very popular in Scandinavia, and rosé wines are also in great demand. The U.S. now has a more positive image in Europe due to our political transition, but Chile remains the largest New World supplier to most countries.

As in other markets, WI has been conducting aggressive trade and consumer promotions to boost sales in Europe; many of the promotions have been conjunction with specialty retail chains and large retailers. The effort will include participation in many local and regional trade tastings and fairs in 2010. Wineries are advised to sign up for the Euro Spring Tour by Oct. 16.

An interesting effort is a strong program to exploit social networking channels in the UK, extending traditional publicity efforts. Initial results encourage further efforts.

From Japan, Ken-ichi Hori reported that the market is shifting toward less expensive wines, and on-premise business is slow. Japanese importers are not looking for additional wineries to represent, but the Japanese market is showing demand for certified organic wines.

Meanwhile, Spanish wines are enjoying a renaissance, and Chilean wines have recovered in Japan due to the Free Trade Agreement signed with that country. France has 40% of the market for bottled wine, however, with Italy at 18%, ahead of Chile and the U.S., which each boasted more than 10%.

In bulk wine, Chile has 30% of the Japanese market, and the U.S. claims 26%. The biggest opportunity is for wines selling for $16 to $24 per case FOB, and there's high demand of popular-priced Pinot Noir and Viognier. On the other hand, to trendy Japanese, some California brands seem old fashioned. The government also may institute more stringent regulations of wine additives.

Many promotions are geared toward the Oct. 1 release of the movie Sideways, which was recently remade in Japanese with Japanese actors visiting Napa Valley.

The institute's promotional efforts recently have targeted India and Costa Rica for the first time, and WI plans to start in Brazil in April. Among emerging markets, however, China (and Hong Kong) remain the stars. Hong Kong is the fifth largest export market for California wines in value, with the highest growth rate worldwide. The market remains hot, but it might be slowing. The market has a huge interest in new California wineries at present. Some observers question whether this wine boom is sustainable, however.

Overall, the seminar highlighted opportunities overseas, but also challenges, including demand for inexpensive wines, trade and legal barriers, and the overall economic situation.

For more information about the wine export program, go to calwinexport.com.
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