U.S. Wine Keeps Flowing--Exports Up 35% in ’96

Reflecting California’s growing prominence as a premium-wine region, U.S. wine exports--90% of them from the Golden State--soared last year, continuing a surge that has seen the value of sales to other nations leap by 437% in the last decade.

The value of exports in 1996 jumped 35%, to $327 million, from the 1995 level, and export volume rose 22%, to 47.5 million gallons, according to the Wine Institute, a San Francisco-based trade group that released the export numbers Wednesday.

California vintners said the figures would have been even more robust if wineries were not hampered by short supplies of the most popular grape varieties, including chardonnay, sauvignon blanc, cabernet sauvignon and merlot.

A shortage of high-quality juice in the last few years has forced many wineries to buy bulk juice and to limit shipments to some U.S. supermarket chains and wine shops, as well as to postpone filling orders from new overseas customers.

Voracious demand and grape shortages have combined to push premium wine prices higher in recent years. Last year, for instance, prices rose a whopping 8%.

The trade figures demonstrate a growing understanding among U.S. vintners that global competition requires a long-term strategy, said Eileen Fredrikson, a partner in Gomberg, Fredrikson & Associates, a San Francisco-based wine industry research and consulting firm.

In the past, she said, California wineries exported at their convenience, whenever they needed another outlet to make up for flagging domestic demand. But in recent years vintners have gotten more serious about nurturing relationships with overseas distributors--even if that means limiting U.S. sales.

As Americans increasingly travel abroad, California wineries consider it important to have their labels featured in fine hotels and restaurants in cities such as Bangkok, Hong Kong and London.

“Now they’re in for the long haul,” Fredrikson said, “and it’s [often] at a sacrifice because domestic demand is so strong.” She noted that, because of shipping costs and tariffs, it is often less profitable to sell wine in, say, England than in Colorado. Yet if U.S. wineries are to compete overseas with wines from South America, Europe, Australia and elsewhere, they usually cannot pass on such costs.

At Ferrari-Carano Vineyards & Winery in Healdsburg, Sonoma County, “demand far exceeds supply,” said Steve Meisner, director of marketing and sales.

“I’m in 17 or 18 countries, and I could be in 35,” he said. “I am turning down five countries a week. It’s unbelievable who I’m turning away--Thailand, Korea, Scandinavia. It’s very frustrating.”

Japan, the winery’s biggest customer, recently ordered five times the number of cases that Meisner could supply. When Meisner held back some cases of the company’s Reserve Red, which retails domestically for about $47 a bottle, “they demanded I put it back on and got mad when I took off one case.”

Like wineries throughout the Napa Valley and Sonoma, Mendocino and Santa Barbara counties, Ferrari-Carano is praying for a bumper grape crop this year and next to make up for several short years. Barring weather catastrophes, which have been plentiful of late, signs are that their prayers will be answered. New acreage is coming on line, and improved trellising techniques have enabled growers to get more yield per acre.

“If there’s a good crush in 1997 and ‘98, we’ll see a major surge,” said Joseph Rollo, director of the Wine Institute’s international department.

A plentiful supply could help bring needed stability to prices, Fredrikson said.

Not every winery is boosting trade at the expense of domestic clients. Grgich Hills Cellar in the Napa Valley community of Rutherford sends about 3% of its production abroad, down from a high of 5%.

“We prefer to focus on domestic markets,” said Bob Hattaway, sales and marketing director. “From a practical standpoint, we find it easier to sell here.”

Hattaway noted that the winery grew discouraged by tariffs, which can be as high as 300%, and by resistance overseas to health warning labels, which are required by U.S. regulators.

Nevertheless, the winery sees Canada as a good growth market and is starting a small operation in Croatia, the homeland of owner Mike Grgich.

U.S. wines are shipped to 164 countries. Last year, the United Kingdom remained the top export market for U.S. wine, followed by Canada and Japan. Exports to Europe showed a 56% boost. With the exception of Japan, Pacific Rim markets experienced big increases. Despite the gains, however, the United States accounts for just a 3% share of the world export market, the Wine Institute said.

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A Very Good Year

U.S. wine exports, 90% from California vintners, are soaring.

EXPORTS

In millions of dollars:

1996: $327

TOP MARKETS IN ’96

In millions of dollars:

Britain: $81.6

Canada: 72.4

Japan: 31.6

Germany: 20.4

Switzerland: 14.1

Netherland: 10.0

Sweden: 9.7

Denmark: 8.4

Ireland: 6.1

Hong Kong: 5.7

Source: Commerce Department