British love for Californian wine drives growth

- Last updated on GMT

Related tags: Wine institute, California wine

Exports of US wine - 90 per cent of which comes from California -
grew by nearly 30 per cent in 2003, helped by its continued
popularity in the UK. While the weakness of the dollar undoubtedly
contributed to the good growth in Britain during the year, most of
the gains were attributed to "the genuine affection and
confidence the consumer has for things Californian".

Total US wine exports reached $643 million in 2003, a 17 per cent increase on the previous year, helped by the 29 per cent volume hike to 96 million gallons, according to the California Wine Institute citing data from the US Department of Commerce and USA Trade Online.

Britain's close relationship with the US also clearly extends to a penchant for its wines, with sales there rising 13 per cent to $212.9 million on the back of a 25 per cent leap in volumes to 31 million gallons. UK value sales are now nearly twice as large as the second-largest export market for US wines, Canada.

"In 2003, California overtook Italy to become the third largest supplier in the UK after Australia and France, with the greatest increase in market share,"​ said UK trade director John McLaren. "The favourable exchange rate, the ripe potential of the many new brands entering the UK and, above all, the genuine affection and confidence the consumer has for things Californian, suggest that significant further progress will continue to be made in 2004."

California's place among the great and the good of the wine world in the rest of Europe is perhaps less assured, but producers will take heart from encouraging gains across many of the continent's leading wine consuming nations.

The Netherlands was the second largest European market for US wines after the UK with sales of $74.8 million, while Germany was third with $19.5 million. France, not traditionally a major buyer of wine from anywhere outside its own borders or indeed a great lover of all things American, was in fact the fourth largest market for Californian wines with a respectable $14.5 million in sales in 2003. Switzerland, Belgium, Ireland and Denmark all registered sales in excess of $10 million during the year.

"Exports of California wine to Europe experienced solid growth, in all markets, due to lower prices largely resulting from a more favourable dollar rate. For instance, in Germany, California has increased its market share by value to 4.2 per cent and now leads the new world wine category,"​ said Paul Molleman, the Wine Institute's European trade director.

Japan, the biggest Asian market for Californian wine and third-largest overall, saw sales reach $76.3 million in 2003, a 6 per cent drop compared to the previous year, although this was not reflected in the volume figures, which showed excellent growth of 46 per cent.

"Japan's wine market in general has been stagnant since 1998 when it had a huge red wine boom. However, last year, the US was the only country among major exporters that increased the export volume to Japan,"​ said Ken-ichi Hori, Wine Institute trade director in Japan. "California wine was very successful, particularly in the popular-price segment, principally because two major importers launched California brands as their strategic product in early 2003. Also,more expensive wines gained entry into restaurant outlets as a result of winery participation in Wine Institute's wine-by-the-glass programme,"

The weak dollar was not the only reason for the strong sales growth, according to the Wine Institute, with a number of new products helping to stimulate and maintain consumer interest, and this will clearly be more important for the long term growth of Californian brands in the increasingly competitive wine market.

"In 2003, we returned to the growth rates of the late 1990s, as wineries had sufficient wines to expand their sales and the exchange rates allowed our California wineries to reach and maintain key price points in very competitive international markets,"​ said Wine Institute international director Joseph A.Rollo.

Maintaining this momentum will not be easy however, as the dip in export sales between 1999 and 2002 clearly shows. After a decade of steady growth, Californian wine exports had reached some $560 million by 1999, but a combination of uncompetitive prices caused by the strong dollar and insufficient supplies meant that by the end of 2002 sales had dropped back to around $549 million.

"While exports in any given year are affected by exchange rates, wine availability and pricing, the long-term growth trend for California has continued for a decade across all price segments. Overseas consumers are embracing California wines,"​ said Wine Institute president and CEO Robert P. Koch "Exports are a growing part of the California wine business and now represent about 15 percent of our state's wine production."

Koch explained that the Wine Institute is working to eliminate international trade barriers to assure long-term access to consumers in top export markets. He highlighted issues such as high import tariffs, production subsidies and distribution restrictions as those most likely to impact export sales in the future.

Related topics: Retail & Shopper Insights

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