Solid Performance Amid Tariffs and Exchange Rate Challenges
SAN FRANCISCO — U.S. wine exports, over 90% from California, reached $1.47 billion in winery revenues and 375 million liters (41.7 million cases) in 2018. Total exports were down 4.8% in value and 1.2% in volume because of the strong dollar, retaliatory tariffs, competition from foreign wine producers who are heavily subsidized by their governments and benefiting from free trade agreements in key markets.
“California wines performed well under very challenging circumstances as top markets continued to embrace our reputation for premium quality, leadership in sustainable winegrowing and diverse offerings,” said Robert P. Koch, President and CEO of Wine Institute. “Strong marketing programs that invite international consumers to connect with California as a world-class destination and wine producing region continued to generate new fans among media, trade and consumers.”
California wine exports have grown nearly 60% by value in the past decade. Wine Institute’s California Wine Export Program includes more than 170 wineries that export to 142 countries. Thirteen global representative offices conduct marketing and promotional programs in 25 countries across the globe.
A full slate of promotional activities in China and other Asian markets was held in 2018 including a new round of Master Class seminars (above) and California wine tasting events.
The top 10 export markets for California wines are: the European Union’s 28-member countries, $469 million, Canada, $449 million; Hong Kong, $130 million; Japan, $93 million; China, $59 million; Mexico, $27 million; South Korea, $25 million; Nigeria, $15 million; Dominican Republic, $14 million; and Singapore, $14 million.
“We have made critical progress on trade agreements with the UK, Mexico and Canada, and we continue to advocate for wine tariff elimination in key markets including China and Japan,” said Charles Jefferson, Wine Institute Vice President of Federal and International Public Policy. “Wine Institute will continue fighting for a level playing field and the removal of trade barriers in markets around the world.”
Wine Institute’s Regional Trade Directors in key export markets reported on 2018 exports:
“U.S. wines continued to experience modest growth in value in the Canadian market during 2018 despite a decrease in volume. Although a weak Canadian dollar has led to rising retail prices, Canadian consumers continue to buy premium and super-premium priced California wines,” according to Rick Slomka, Wine Institute Trade Director for Canada. “California continues to enjoy a reputation for producing high quality wines at affordable prices. With ongoing liquor board promotions and new product introductions, this momentum is expected to continue. As the retail landscape for wine sales in Canada evolves, we look forward to continued growth in government liquor stores but also anticipate greater access to new grocery distribution channels.”
“Despite strong competition from the “old world” and a strong dollar, Continental Europe continues to be a key market for California wines. In some of the larger export markets, such as Germany and Sweden, retail sales by volume were stable but revenues increased due to higher average pricing. Not only are more and more discerning European consumers discovering the premium wines of California, but more and more California wineries are looking to export to Europe. At Prowein, the world’s largest wine trade show recently held in Germany in March, well over 200 California winemakers presented a diverse selection of outstanding wines to an audience of 60,000 trade and media,” said Paul Molleman, Wine Institute Trade Director for Continental Europe.
UNITED KINGDOM AND IRELAND
U.S. wine exports to the UK showed strong volume growth in 2018 (up 15% vs. 2017) while recording a slight softening in value (down 1.4%). “This is an impressive result considering that the British pound (GBP) closed the year at $1.26 against the U.S. dollar versus its pre-Brexit buying power of $1.55 or higher. These currency headwinds impacted the value/volume mix of many importers. At the same time, volume growth has resulted from growing trade interest and sales of Californian wines under GBP 20. This has been a key focus of our California Wine Institute programs in the U.K. and was the central theme of our recent “Essential California Tasting” in London which was praised by the trade for its focus,” said Damien Jackman, Wine Institute Trade Director, UK and Ireland.
“U.S. wine exports to Japan by value held steady, declining only 1% in 2018 while volume was down 22%. U.S. wines declined mainly in bulk wine exports to Japan which were down by 34% in volume. At the same time, California wine is long established in the Japan market and showed strong performance in the premium category thanks to the ongoing popularity of steakhouses serving aged beef. We are excited with the success of our signature activities such as the annual by-the-glass program,” said Hiro Tejima, Wine Institute’s Joint Trade Director Japan. The U.S. and South Africa are the only two major wine exporters without free trade agreements with Japan and are still subject to the full 15% import duty. A U.S.-Japan free trade agreement will put us on a level playing field with our key competitors and further boost California wines in this market.
CHINA AND PACIFIC RIM
“In 2018, U.S. wine exports to Asia experienced a softening compared to the healthy growth rates of the prior two years. A nearly 25% decline in exports to China by value was the largest contributor to the softness, primarily the result of trade issues between the U.S. and China and the increased tariffs on U.S. wines imported into Mainland China. The long-term prospects for California wine sales in China, however, remain very strong. Exports to Hong Kong are a bright spot, growing 10% to $130 million in 2018. Clearly some of these wines are being re-exported to other countries including Mainland China. Exports to Vietnam increased by 51% from a small base. Vietnam is a promising market for California wines with its huge population, young average age, and aspirational consumer psychographics,” said Christopher Beros, Wine Institute Trade Director for China and Pacific Rim.
About California Wine Export Program: Since 1985, Wine Institute has served as the administrator of the Market Access Program, a cost-share export promotion program managed by the USDA’s Foreign Agricultural Service. Wine Institute’s Export Program supports California Wines worldwide with a consumer website discovercaliforniawines.com in nine languages, social media campaigns in 18 countries, educational tools and videos, and a strong partnership with Visit California to increase tourism to California wine regions. Wine Institute organizes California’s participation in international trade shows and trade missions, offers master classes and seminars as well as tastings for trade, media and consumers worldwide. Last year, the program also hosted 120 international media and wine buyers from 20 countries for California wine country visits, including a special tour for 50 Masters of Wine. For program information, see: Wine Institute’s California Wine Export Program
Source: Wine Institute & Global Trade Information Services, using data from U.S. Dept. of Commerce. Preliminary numbers. Includes hard cider. History revised.
*Statistics exclude re-exported wine due to U.S. DOC changing its reporting to exclude this wine.
**Stats for the 28 EU countries are combined because transshipments to final destinations in neighboring countries make a country-by-country breakdown not reflective of actual consumption in each country.
To convert liters to gallons, multiply liters by .26418. To convert liters to cases, divide liters by 9.
Source: Wine Institute & Global Trade Information Services, using data from U.S. Dept. of Commerce.
Source: Wine Institute & Global Trade Information Services, using data from U.S. Dept. of Commerce. History Revised.