Trade CycleSeptember 1st, 2017 | Written by Steve Lowery
TIME FOR WINE
Global thirst has vintners crushing it
- American wine exports reached a record $1.62 billion in 2016, with a volume of 412.7 liters or 45.9 million cases.
- Now, when we say “American wine,” we’re really talking about California wine since the Golden State accounts for about 90 percent of all American wine exports. And, by the way, when we talk about California wines, we’re not speaking exclusively but to a significant degree about the good folks at a little outfit named E&J Gallo which—with numerous brands spanning the entire spectrum of price and quality—accounts for a quarter of all U.S. wine sales.
- While the European Union’s 28-member countries make up the biggest market for California wines at $685 million, the single biggest country-customer, by far, is Canada, which purchased $431 million of product. The next three making up the top five: Hong Kong ($99 million); Japan ($87 million) and China ($82 million).
- Like many of the world’s leading wine exporting nations, California wineries are shipping increasing amounts of their product by bulk. Spain and Italy, the world’s two largest exporters by volume, both ship the majority of their product by bulk while 65 percent of all South African wine exports ship by bulk. In fact, the total volume of wine shipped around the world in bulk has increased more than 60 percent since 2005.
- For all that activity, there are actually only two methods that wine can be shipped by bulk. The first is ISO tanks, which are stainless steel vessels that fit directly onto standard trucks and can readily be transferred to rail or sea transport. These kinds of bulk tanks have a capacity of 26,000 liters and are reusable. The other are Flexitank Products’ flexible bags that can be fitted into a standard container with a capacity of 24,000 liters. Though they can be re-used, Flexitanks are usually used only once.
- Now, the fact that wine is shipped in bulk in no way means that it is bulk wine; i.e. low quality. In fact, in most cases, shipping wine by bulk tanks tends to better ensure the quality of the wine. Research has shown that apart from top end wine specifically made with bottle ageing and longevity in mind, the great majority of wine effectively begins to deteriorate from the time it is filled into bottles, and it is at this filling point that the shelf life is deemed to start. Bulk shipping defers the moment of bottling and thus the start of the shelf life.
- It also means more product can get to those shelves quicker. Consider that a standard bottle container holds between 12,000 and 13,000 bottles, while a standard Flexitank holds approximately 32,000 bottles and an ISO tank can hold nearly 35,000.
- Of course, the trend in world wine markets is actually away from volume and toward premiumization, i.e. maxing dollar value per volume shipments. The absolute champs in this realm are the French who, though they rank a lackluster third in overall volume produced (trailing Spain and Italy), get far and away the most money for what they produce. In 2016, French wines fetched $8.2 billion. In second place, waaaaaay behind, was Italy at $5.6 billion.
- California wineries have certainly jumped on the premiumization train, perhaps demonstrated best by the recent success of their product in China. We’ll let Christopher Beros, the California Wine Institute’s trade director for China and Pacific Rim, explain: “The significant growth in U.S. wine exports to China in 2016 is particularly important because it demonstrates a meaningful growth in higher value products. A 47 percent increase in value in one year, coupled with an 11 percent increase in volume, speaks to the inherent strength in consumer acceptance of California wines in China. … Additionally, according to research firm Wine Intelligence, the total number of imported wine consumers in China increased by 26 percent over the last two years. These concurrent developments signal an increasing healthy market in China and Chinese consumers’ burgeoning interest in California wines.”
- In a never-ending search for new markets, California wine producers have focused considerable efforts in Cuba. The island nation, isolated for decades by the U.S., is not what you would call much of a wine drinker; rum is much more popular. To reintroduce both residents and restaurant owners to their products, the California Wine Symposium was organized by the California Wine Institute, associations of Napa and Sonoma valley wine producers and Sonoma-based U.S. Cava Exports, a two-year-old company founded to export California agricultural products to Cuba. The organization has organized tastings, talks on California’s vineyards and one-on-one meetings between U.S. business people and Cuban restaurateurs and state officials.
- One pitch Californians are making to Cuban restaurant owners is that more American tourism, up some 75 percent since President Obama announced a softening of the relationship between the two countries, translates to customers accustomed to drinking California wines with their meals.
- The conferences were attended by not only restaurant owners but sommeliers. Presenting were the likes of representatives from Francis Ford Coppola’s wineries and, you guessed it, E&J Gallo.
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