Small is Beautiful? Scratching the Surface of Pennsylvania Wine

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Pennsylvania wine? Do they make wine in Pennsylvania? Is that even a thing?

These were the sort of comments we often heard when Sue and I told friends and family that we were going to try to learn a little bit about Pennsylvania wine while we were in the Valley Forge area for our nephew’s wedding. Even some of the Pennsylvania natives we met were caught by surprise.

A Wagnerian Vision

Most people equate U.S. wine with California, which makes some sense because that state has the most wineries (more than 4500 according to the January 2019 issue of Wine Business Monthly) and makes about 90% of the nation’s wine. But there are actually more than 10,000 wineries in the U.S., so there are more wineries outside of California than in it. There are wineries in every single state and the District of Columbia, too (urban wineries are also a thing).

Wine’s wide domain is a triumph of the vision of Philip Wagner, the founder of Maryland’s Boordy Vineyards, which I wrote about in my book Wine Wars  in a chapter called Martians and Wagnerians.  Wagner imagined  America as a country where wine was made everywhere and consumed everywhere and while his vision hasn’t been fully realized the raw materials are there to see for anyone with a little curiosity.

Pennsylvania, for example, has 285 wineries, which puts it in 6th place in the U.S. wine league table based on number of wineries (not volume of wine) after California (of course), Oregon, Washington, New York, Texas, and Virginia.

1683 And All That

There are at least two ways to look at the history of Pennsylvania wine and both are revealing. Jancis Robinson and Linda Murphy highlight the date 1968 in their excellent survey, American Wine.  That was the year that the Pennsylvania legislature passed the Limited Winery Act, which gave wineries the right to sell directly to consumers and through a limited number of retailers, avoiding the requirement to use wholesalers and the Pennsylvania Liquor Control Board’s monopoly stores.

Pennsylvania wineries would be relatively small and use only Pennsylvania grapes, but they could be economically sustainable because of their favorable market access. Pennsylvania already had grapes — it was the #4 table grape producing state. Now a wine industry could begin to emerge.

Robinson and Murphy only briefly reference Pennsylvania’s much longer wine history, which is discussed in greater depth in Thomas Pinney’s A History of Wine in America (Vol. 1, From the Beginnings to Prohibition). Here 1683 is the critical date. That’s when Andrew Doz planted a vineyard for William Penn. The European vines soon died, alas, but not before creating a natural hybrid with a native variety, which was named Alexander and became the basis of America’s first commercial wine production. Benjamin Franklin was an enthusiastic proponent of the Pennsylvania industry both here and abroad. Wine runs deep in Pennsylvania.

Finding Wine at Penns Woodspennswoods3

We only had time to visit one winery (now that really just scratches the surface), but a well-informed friend helped us choose a target that she thought would tell us something about Pennsylvania wine’s past, present, and future potential. So we pointed our rental Hyundai Santa Fe toward Chadds Ford and Penns Woods Winery.

Italian wine importer Gino Razzi decided he wanted to make wine, not just sell it. He started in 1997 with Symposium, a Montepulciano d’Abruzzo, which received 95 points from Wine Spectator. This success prompted a search for the ideal Pennsylvania location — not too far from his business in Philadelphia — and in 2000 he purchased and re-named the Smithbridge Winery in Chadds Ford. An additional vineyard was developed 20 miles northwest near Coatesville. The first Penns Woods wines appeared in 2004.

Penns Woods produces 4000-4500 cases per year depending upon Mother Nature’s generosity, selling most of it directly at the historic country house tasting room and to wine club members. About 20 percent is allocated to on-premise and retail accounts, where there is strong demand.

We visited on what started out as a sleepy Saturday morning, but things soon heated up. Seated tastings took place on the covered patio, where small groups can learn all they want about the wines and the winery. A bride party suddenly arrived and headed to a long table out in the meadow where concerts and other events take place. These guests purchase wine by the bottle or glass without the guided formal tasting. The bride and her friends seemed to be having a wonderful time and we had a great time, too.

Penns Woods make a large range of wines and wine styles from dry to sweeter and from the European grape varieties that William Penn struck out with to hybrid varieties that were once the only game in town hereabouts. So, for example,  we tasted Pinot Noir (a recent experiment that showed nice spice and good potential) and also Chambourcin, a French-American hybrid that we learned was a favorite of Carley Razzi Mack, Gino’s daughter and business partner.

We were especially fond of a distinctive 2016 Gruner Veltliner from a Bucks County vineyard and a 2015 Cabernet Franc Reserve from 30+ year old vines.

Small is Beautiful

Penns Woods impresses us on many levels. First, the people we met at Penns Woods know who they are and what they want to be. That means a strong focus on quality in all the winery’s products and operations. They are also firmly rooted in their region and they appear to want to nurture relationships with their customers as much as they nurture the vines themselves. Penns Woods represents Pennsylvania very well.77541

What’s the future? Well, I think the adage that “small is beautiful” might apply here and perhaps to Pennsylvania more generally because of the way that the wine laws steer the market.  Success isn’t measured only by scale but also by the quality of the wines, the quality of the relationships the wines help build, and the satisfaction that these things bring.

We have only scratched the surface of Pennsylvania — lots more to taste and learn. American wine is nothing if not diverse and I am sure this is true of Pennsylvania. Impossible to generalize based on just a couple of wines and wineries. But this much I can say:

Penns Woods and other Pennsylvania wineries are helping fulfill Philip Wagner’s dream of a healthy, civilized America covered with vines, filled with wineries, and populated by wine-loving citizens.  Isn’t it about time you made a visit to a Wagnerian winery near you? Cheers!

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Thanks to Rachel Kuehn, sales manager at Penns Woods Winery, for taking time to answer all our questions. Special thanks to Denise Gardner for her good advice.

Congratulations and thanks to Anna and Jeffrey, who exchanged vows on a rainy day in Valley Forge. Your celebration gave us an excuse to scratch the surface of Pennsylvania wine!

Sardinia, Collio, Pennsylvania? Wine Economist World Tour Update

restyling-logo-wine-e-food-01-1-e1522772381248The Wine Economist World Tour is on the road. Here is a quick update.

  • Pennsylvania: Sue and I have just returned from a family wedding near Valley Forge, Pennsylvania and we found just enough time to scratch the surface of this surprising wine region. Watch for an upcoming report.
  • Sardinia: Sue and I are in Porto Cervo, Sardinia this week. I am speaking at the Porto Cervo Wine & Food Festival and we will meet as many winemakers and taste as many wines as we can and report our findings here. This is our first trip to Sardinia and we are excited to learn about the island and its wines.
  • Collio: We’ll be in Northeast Italy at the end of the month participating in the Enjoy Collio Experience program.    I will be part of a roundtable discussion on economic sustainability along with Marco Colognese (The Espresso Guides), Robert Princic (Gradis’ciutta), and Roberto Felluga (Russiz Superiore), moderated by Rosaria Amato (La Repubblica).

What’s further down the road? It looks like British Columbia and Chile this summer. Perhaps our path will cross yours somewhere along the wine road?

The Wine Economist will pause while we are on the road and return very soon. Cheers!

Războaiele Vinului Short-Listed for International Wine Book Award

newwinewarsRăzboaiele Vinului, the Romanian version of my 2011 book Wine Wars, has been short-listed for the 2019 Gourmand International award for best wine book translation. Here are the books up for this prestigious award.

Austria: Georgischer Wein, Anna Saldadze, Claudia Tancsits (Leopold Stocker)
China: Dictionary for wine lovers, Bernard Pivot (East China Normal University) 9787567575172
France: L’anglais commercial du vin, Laetitia Perraut (Cafe Anglais)
Italy: Viaggio in Anfora, Kato Keiko. Masuko Maika, P. Bellomo (Velier)
Macedonia: Xinómavro, Stravroula Kourakou, Translation Alexandra Doumas (Foinikas)
Netherlands: Beer, Tadeáš Hájek, Translation Lander Meeusen (Createspace)
Portugal: Glossário Ilustrado do Vinho, Jorge Böhm (Dinalivro)
Romania: Războaiele vinului, Mike Veseth (Aser – Vinul.ro)
Russia: Madeira o vinho dos czares, Siiri & José Milhazes
Sweden: Cava, Spain’s Premium Sparkling Wine, Anna Wallner (Grenadine)

The bronze, silver, and gold medalist in this category, along with other winners, will be announced on July 4 at the gala Gourmand Awards ceremony in Macao.

Congratulations to the Romanian team who made this volume possible including especially Cătălin Păduraru, Lucian Marcu, and Radu Rizea. Here is a photo of Cătălin, me, and the world’s largest copy of Războaiele vinului taken in Iasi last fall.

And thanks to Gourmand International for this recognition of my Romanian friends’ efforts. I am grateful to Gourmand International for previious awards including Best Wine Blog (for The Wine Economist in 2015) and Best Wine Writing (for Money, Taste, and Wine in 2016).

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The Wine Economist will take a break next week. Sue and I will be in Sardinia where I am speaking at the Porto Cervo Wine & Food Festival.

Who Moved My Wine? The New Wine Buyers Who Play “Beat the Clock”

“Beat the Clock” was a television game show that made its debut on March 23, 1950 and ran in its original form until 1961 (it returned in several variations over the years and is currently available in a format featuring child contestants).

The show’s lasting appeal lies in the fact that even simple things become difficult, sometimes comically so, when the clock is ticking and the pressure mounts. If you remember the chocolate factory scene in “I Love Lucy,” you already know what I mean.

Who knew that buying wine would become a Beat the Clock challenge? But that’s what it has happened.

Supermarket Beat the Clock

Trying to beat the clock is fun and games on television, but it can be serious business in the real world. That’s why wine companies need to understand that supermarket wine shopping has changed in many ways — and the ticking clock is part of the problem.

I learned this by reading “How to Reach the Ever-Changing Beer Shopper” by Peter Frost on MillerCoors’s “Behind the Beer” blog. It is an interview with Jeff Long, MillerCoors’s “chief commercial solutions officer” (I’m guessing that has something to do with sales and marketing). Long notes how supermarket shopping’s clock has shifted in just a few years.

“Seven years ago, more than one-third of grocery store trips were for a stock-up. Shoppers would spend 45 minutes to an hour in a store, pushing a cart up and down the aisles and preparing for the week,” according to the article.

5 aisles, 10 items, 14 minutes … Go!

“Today? The stock-up represents less than a quarter of trips. A full 75 percent of all grocery trips take less than 14 minutes, with shoppers entering fewer than five aisles and buying fewer than 10 items.” And, I need to note, they are doing this while glancing (or more) at their smartphones.

Does this sound right to you? I have never timed myself, but I think my shopping tends  more toward “strategic strike” than casual stock-up. So I guess I’m playing Beat the Clock.

The ticking clock affects beer purchases, according to Long. Instead of pausing at the beer wall and considering the dozens or even hundreds of options, he says, many buyers have already narrowed down their choices by focusing on the intended type of occasion. Then they make a lighting strike and move on.

Selling beer in this environment requires having a clear identity and making it obvious for the fast-moving consumer. “All of this combines to present new challenges for retailers to convert those visits into purchases and for suppliers to reach them before they get there,” according to Frost. “As center-store shopping shrinks and shopping trips become quicker,” Long notes,  “front-of-store and out-of-aisle merchandising that plays off occasions is critical.”

What About Wine?

Since this is The Wine Economist and not The Beer Economist we need to think about what lessons this might have for wine and I think some of them are pretty obvious. Wine buyers and beer buyers are often different people, but they live in the same world and make buying decisions in same environment. Which means that they play beat the clock when they come up again the wine wall.

Two observations come quickly to mind. The first is that buying wine isn’t easy if you are playing beat the clock. Sorting through the hundreds of choices at prices that might range from less than $4 to more than $100 (based on my last visit to our local Safeway) requires focus. Beer is complicated, too, but it is easier to navigate than wine and, apparently, beer people know that the clock is ticking and respond accordingly. (I wrote about other types of problems of buying wine a few weeks ago.)

So maybe rushed consumers go for beer instead of wine. But maybe they don’t purchase either of them. In any case, it is easy to understand why buyers get anxious or confused, as one reader reported (see comments section of this recent column), when wines are moved around or changed. It upsets their well-planned strategy and wastes previous time. Who moved my wine! Arrrgh!

The second observation is that wines with clear, simple identities have an advantage when time and attention are scarce. Maybe this is a reason why branded wines seem to be winning the Land versus Brand battle these days. Safeway had a big stack of Butter Chardonnay right by the entrance near the deli when I stopped in today (that’s an example of the “front-of-store, out-of-aisle” display mentioned above).  I’ll bet a lot of shoppers grab a bottle or two here rather than confronting the complicated wine wall selection.

Fortunately all consumers aren’t playing beat the clock when they go to buy wine and supermarkets do their best to slow them down as they enter the store. But time is an issue and people who sell wine need to take this characteristic into account along with many others if they want to ring up strong sales.

And Beat the Clock may not be the biggest problem wine faces. While some shoppers want to minimize the time they spend in stores, other don’t want to go there at all, preferring home-delivery.  Wine buying is changing and wine selling needs to keep up.

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Special thanks to longtime reader Ken B. for suggesting the I look at the Behind the Beer story.

Thinking Outside the Wine Box about Climate Change & the Future of Wine

ccMiguel Torres recently warned that the wine industry is not doing enough to fight climate change and there is no doubt that he is right. There is a lot happening, as the recent Porto conference on climate change and wine makes clear. Wine is ahead of most other global industries. But it is not enough.

Inconvenient Truth

One reason climate change does not get even more attention in our industry (and I think that this is true of other sectors as well) is that we tend naturally to focus on the direct effects on our businesses, assuming that these are the most important ones to us. So climate change is seen as something to mitigate in the short term using appropriate viticultural techniques and other strategies.

In Australia, for example, there is a shift from French to Spanish and Italian wine grape varieties and investment in cooler regions including especially Tasmania. The fact that firms can adapt in this way lessens the sense of risk and urgency. Climate change is seen, to draw from the title of Al Gore’s film, an inconvenient truth. Inconvenient and sometimes expensive, but not necessarily an existential threat, especially since some elements of climate change actually benefited winegrowers in the not-too-distant past.

Taking the Heat Off

Not everyone thinks this way, of course. Torres has gone all in to combat climate change and he is not alone. But the fact that mitigation techniques exist and more are being developed tends takes the heat off the sense of urgency that might otherwise prevail.

But these direct effects of climate change are not necessarily the most important ones.  In order to properly assess the climate change threat to wine we must look deeper into the future and broader to the impact on the overall economic environment in which wine is embedded.

So what does the future hold, assuming current trends continue in some form? There has been a lot of research on how changing climate will affect the viability of wine grape growing in the traditional regions. Some areas will suffer minor impacts that can be mitigated through changing viticultural practices. Other regions will remain viable, but perhaps need to re-graft vines with different grape varieties more suitable to the new conditions. Old World appellations will have to rethink many of the regulations that current define them.

Other regions will will cease to be viable for quality wine grapes – period – while elsewhere we’ll see areas in the spotlight as emerging wine regions. All this will take place in the context of increasing instability of weather patterns, which most of us have already observed.

Outside the Wine Box

All these factors are important, but I think it is necessary to think further outside the wine box. Climate change will impact all of agriculture in one way or another and a great many other industries, too. The problem of feeding the world (and earning an income in it) will not grow easier overall if trends continue. This will put a squeeze on living standards and wine, because it is far from a necessity, will be squeezed harder than some other products.

At some point, and I hope it is sooner rather than later, coordinated action to slow or potentially reverse climate change is in the cards. Economists like me have long advocated a carbon tax as part of the package. Carbon taxes exist today, but in a patchwork quilt of policies and regulations with widely varying tax rates.

Carbon Tax and Wine

A coordinated carbon tax works by raising the relative price of goods and services that contribute to climate change problems. Consumers are discouraged from purchasing them by the higher price. Producers are given an incentive to innovate products and processes that replace old systems to lessen tax burdens and climate change impacts at the same time. Economists favor a carbon tax because it creates incentives for private actors to reduce emissions whereas direct regulation creates incentives to get around the regulations (see VW diesel emissions fraud).

A well-designed broad-based carbon tax might be the best way to counter climate change. It would harness private self interest to combat climate change in a way that other solutions cannot.

If climate change will affect wine as noted above, how would the carbon tax impact the industry? Well, the modern globally-integrated wine industry has a substantial carbon footprint and a carbon tax would be a big shock. Even firms that are carbon neutral in the vineyard and cellar face the fact that the supply chain is a problem.

Take glass bottles, for example. Glass of course takes a lot of energy to make, which is an important issue, but that’s not the end of the story. The U.S. wine industry is dependent on glass bottle imports from China. The ships that carry containers full of glass bottles are significant sources of pollution. Transportation from bottling plant to warehouse to retailer to consumer adds to the carbon footprint, too.

Beer and spirits might well be less affected by a carbon tax since they can more efficiently be produced close to major markets using ingredients such as grains that can be shipped efficiently by rail. The fact that wine is mainly produced close to the agricultural source and then shipped to far away markets is a disadvantage in a carbon tax system compared with products where weight and bulk (in the form of water) can be added closer to the final consumer.

Need to Do More

I have obviously just scratched the surface here, both in terms of the broader impact of climate change on the wine industry’s economic environment and the potential impacts of policies designed to resist or reverse current trends. But I hope my point clear. The impact of climate change on your wine business goes beyond what you see in your vineyard or cellar and the cost of inaction now in terms of future consequences is likely to be pretty high.

Climate change creates losers and some winners and the policies that are eventually adopted to deal with it will be the same. It is difficult to imagine a scenario where wine will be among the winners and we can already see the negative effects. It’s time to join Miguel Torres and the Porto Protocol team who ask us all to do more.

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An earlier version of this article made referenced to a report in The Drinks Business about Richard Smart’s views about climate change and hybrid grapes. Smart disagreed with the way his views were reported and the interview was removed. Here is the explanation.

Which Wine? Navigating the Retail Wine Wall’s Fluid Map

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What’s the best way to organize supermarket products to facilitate consumer purchases? Over in the canned vegetable aisle, the system is pretty simple. All the canned green beans there. All the canned corn here. Easy to find what you want. Easy to compare.

Over in the breakfast cereal aisle an entirely different geography applies. The corn flakes are found here, there, and elsewhere, not all in one spot. That’s because most of the products are organized by producer. All the Post cereals here, all the Chex products over there.

Thousands of SKUs?

I have been trying to figure out what works best for wine for quite some time, but I am still a bit stumped. The wine wall, the name I have given to the space where wines are put on display, probably has the greatest number of SKUs of any single section of an upscale grocery store. You will find 1000-2000 in many stores today and the big box alcohol superstores like Total Wine and BevMo have about 5000 wine choices at any given time.

So much choice! Consumers need all the help they can get to navigate this crowded retail archipelago.

Canned Veg + United Nations

I used to think that I knew the wine wall map and I wrote about it in my 2011 book Wine WarsThe domestic wines are often arranged like the canned veg aisle — all the Zinfandel here, all the Pinot Noir there. Imports are mapped like the United Nations. France, Italy, Germany, and so on. Sometimes groups of countries get lumped together (Spain + Portugal, Chile + Argentina). I have seen the entire southern hemisphere reduced to a couple of shelves. Ouch!

There is often a sort of Siberia over in the corner for “other” wines, sweet, fortified, alcohol-free, kosher, organic, and so on. Sparkling wines from wherever are all collected together in one place, something that is often true of Rosé wines, too. Alternative packaging rates its own section with box wine and now also canned wines holding forth. You will also find smaller wine displays here and there in the store — near the cheese, meat, fish, and deli counters, for example. Wine, wine, everywhere. Organized chaos!

QWERTY and the Wine Wall

There are lots of variations on this canned veg – United Nations system, so your favorite store is probably a bit different. But does the general outline sound familiar?

This is the hybrid system I know best, but I don’t think it works very well. It is a bit like your computer keyboard. The QWERTY layout is familiar, but inefficient. It was originally designed to slow down users in order to prevent them jamming the mechanism. Now it is the industry standard.

Here’s one problem with the standard system. If you want to browse Pinot Noir wines, for example, you need to visit a number of different locations (Pinot Noir, for domestic wines, plus France, and New Zealand and maybe also Chile, Australia, and others if the store’s selection is strong). You can waste a lot of time and effort tracking down your Pinot choice.

Of course this doesn’t matter much if all you want to do in find the 1.5 liter bottle of Barefoot Moscato you buy every week. Find it once and you are set for life.

The RAM Wine Wall

You can imagine my surprise, then, when Sue and I recently visited a new store, part of a national supermarket chain that takes wine seriously, where all our experience navigating the wine wall was rendered useless. I wonder if this the result of marketing research or just an accident?

We were looking for Chilean wines, not an unreasonable thing to search for, and we never found them if they were there. Apart from a big bunch of Cabernet Sauvignon in one spot, the general organizing principle seemed to be RAM. In computer talk that means Random Access Memory and the wines seemed pretty random to me — no United Nations, not much canned veg. There was a section for Local Wines, but looking there we stumbled upon the Port. There are lots of Ports here in the Puget Sound area, but none of them are the source of Port wine.

Who would find the RAM system helpful? Not someone who knows what she wants. But maybe it was designed for the overwhelmed consumer who is content to browse for something with a clever or colorful label. I know that a lot of wine is purchased this way and that brands, including some private label brands, work hard to attract these customers. I never knew it would come to this!

Alphabet Wine

A recent visit to a local alcohol superstore (again looking for Chilean wine) revealed a system that is the opposite of random, but still pretty difficult to navigate.  The basic canned veg – United Nations approach prevails at the store we visited, but in a different way. Italy and France have their own sections, of course, and are also organized by region, which I find helpful. And other wine producing nations get their UN seats, too, but not all of them. Chile, for example, and South Africa are represented, but not all in one place.  Instead their wines are mixed in with individual grape varieties on the canned veg principle.

Chilean Carmenere was relatively easy to find — we stumbled onto it next to the Malbec section. But Chilean Cabernet, Sauvignon Blanc, and Pinot Noir were found in the long aisles for those varieties along with producers from around the world. The wines were organized alphabetically by brand name! Wow, I didn’t see that coming. If you know the brand and the grape variety you are golden (and, I must say, staff was happy to help us when we asked), but if you don’t know the details and you want to browse the different Chilean Pinots, you are pretty much out of luck.

(The store website can help here, giving you the current stock of your store and the location. It is not seamless, but it works.)

Like a Rolling Stone?

Canned veg, United Nations, RAM, ABCs. What’s next? The Dewey Decimal System? With so many wines to choose from and such complicated ways of organizing them, it is no surprise that many shoppers don’t buy wine or buy it only on special occasions.

And maybe it is no surprise either that some of the stores that sell the most wine are the ones that keep it simple like Trader Joe’s and Costco. Costco, which sells more wine than any other U.S. retailer, intentionally limits the number of wines available at any moment, changes stock frequently, keeps prices low, and uses a very simple system. There are more expensive wines and less expensive wines. There are red, white, pink, and sparkling wines. Go for it.

It’s the Rolling Stones system, really. You can’t always get what you want at Costco, in terms of a particular wine, but you can usually get what you need. The wine flies out the door.

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I keep track of wine walls with unusual geographical patterns. One of my favorites was at a now-defunct discount supermarket in our neighborhood. The wines were displayed according to price. Less than $3, $3 to $5, $5 to $7, and so on. Since price is such an important factor in supermarket wine purchases, and since most buyers have a specific price comfort zone, this system made some sense.

Another local store features a lot of Italian wines and since Italy is so diverse in terms of regions and grape varieties, organizing that single section presents a challenge. The current strategy, which appeals to wine geeks like me, is to mimic the map of Italy itself on the wine wall.  Piemonte is upper left, Friuli and the Veneto upper right. Tuscany has a big section near the middle. Sicily lower left. Puglia lower right. Beautiful!

Please feel free to use the Comments section to talk about your experience with the wine walls in your area.

Anatomy of the Rising Import Threat to U.S. Wine

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The rising threat posed by imports is a frequent topic of discussion when I meet with California winegrowers. With the volume of domestic sales declining in several market segments (especially below $10 retail), it is natural to be suspicious of the impact of international competition.

Home Court Advantage

Imports account for about a quarter to a third of US wine sales, a proportion that been relatively steady for the last few years but is higher now than it was 25 years ago. Recent Nielsen data, for example, indicate that imports of still wine accounted for about 26% of sales in the channels they measure when calculated by value and 24% by volume. Imports take a larger proportion of sales in sparkling wines and in channels that the Nielsen figures do not measure, such as on-trade sales.

Is this a lot (or too much, as my winegrower friends would have it)? It depends on how you look at it. OIV data tell us that the United States accounted for about 8.5% of world wine production volume in 2018, so a two-thirds  domestic market share is a very substantial “home court” advantage that domestic producers naturally want to defend.

The slowly rising import market share has many causes. The US is the world’s most attractive wine market, so foreign producers put a great deal of effort into cracking the market. Technology is also a factor. The advent of efficient bulk wine shipping has facilitated increased competitiveness of foreign wine producers and allowed domestic brands to efficiently add foreign wines to their portfolios. Some brands, such as Cupcake, have had great success by offering wines from around the world under a single brand umbrella.

A Fragmented Market

The intensity of import competition depends on which market segment you are looking at. The U.S. wine market is incredibly fragmented and so it is dangerous to generalize. This is true in many ways including simple geography. Because it is costly to get distribution in all 50 states, many medium and smaller foreign wine companies have learned that it is better for them to focus on a few local markets, say, New York, Florida, Texas, and Illinois, instead of attempting national distribution. These are among the states with the broadest and most intense import competition.

The tables shown above, which tell more of the story, are taken from the latest edition of Wine by Numbers, a publication of the Unione Italiana Vini that tracks international wine trade. They tell part of the story of 2018 imports in the U.S. market. Looking at bottled wine imports, for example, you can see that import penetration is dominated by three countries, but which three is different depending upon whether you look at the volume of imports or their value.

Globally the top three wine producing nations — France, Italy, and Spain — account for more than half of all wine production, so you would expect that to be true in terms of U.S. wine imports. But it is not, in part because Spain punches below its weight here.

Looking at the volume of bottled imports, Italy is far ahead in first place with more than a third of total wine imports. France is number two, powered by the rising Rosè market, while Australia is in third place ahead of Chile, Argentina and then finally Spain. Italy and France account for more than half of all bottled imports measured by volume.

The picture changes when you look at the value of imports. Italy and France are still the top two import sources, accounting for more than half of all import spending by themselves, but New Zealand rises to third place on the basis of its higher average bottle price — second only to France in the table.

A Tale of Two Wine Import Categories

Looking at the most recent Nielsen figures published in Wine Business Monthly, t is fascinating that wine imports, as measured by dollar value, are so influenced by two categories — New Zealand Sauvignon Blanc and French Rosè. Both categories have experienced rising sales at premium prices.  Obviously sales of these wines come at the expense of U.S. products to a certain extent, but the market is not perfectly competitive here. Marlborough Sauvignon Blanc and French Rosè are powerful brands — differentiated products we saw in economics — that are difficult to challenge, which undoubtedly helps account for their premium prices.

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Big in Bulk

Bulk wine imports tell a very different story. Chile, Australia, and New Zealand are the top bulk imports measured by volume in 2018. More Chilean and Australian wine is imported in bulk than in bottle according to these figures.

New Zealand’s higher average price means that it ranks #1 in bulk wine by value despite markedly smaller import value.  About a third of all Kiwi wine imports arrive via bulk shipments.

Are imports a rising threat to U.S. producers? Yes, if I have to generalize, simply because all the important foreign wine producers I have talked with in the last few years are trying harder and harder to move their U.S. export needle. Their efforts have had and will have an impact. U.S. producers are wise to study their efforts and try to learn from them.

But, in practical terms, the actual surge in imports has been more narrow than broad — Marlborough Sauvignon Blanc and French Rosé. And there is something to learn from that, too. The most successful international competition has come at premium prices, with focus on quality, reputation, and product differentiation. Value not volume drives their success.