U.S. wine exports stomp records
Lodi makes a name as vintners press into global markets
LOS ANGELES — U.S. exports of wine — the bulk of it from California — set a record in 2016 despite having to fight a strong dollar, subsidies and barriers in other countries and a tight water and labor supply at home, according to the Wine Institute.
The $1.62 billion in foreign trade revenue for 2016 bested the previous year’s record of $1.49 billion by a slim margin through steadily strong sales in the top market, the European Union, and sharp growth increases in China and Britain.
About 90 percent of the 49.5 million cases of U.S. wine sold came from California, according to a report released this week by the California-based industry advocacy group.
“Lodi wines are a huge part of it,” said David Phillips, co-owner of Michael David Winery. “I’m up in Canada right now.”
He was calling from British Columbia in Canada, where Vancouver is hosting its International Wine Festival.
The big brands like Gallo, Delicato and Constellation use Lodi grapes in many of their wines, he said. Smaller wineries, like LangeTwins, Klinker Brick, Oak Ridge and his own Michael David, also export all over the world.
Ironstone Vineyards, owned by Joe Kautz, exports to more than 50 countries, said Pat Patrick, president and CEO of the Lodi District Chamber of Commerce.
St. Jorge and Watts Winery make regular shipments to China, he added, and Benson Ferry exports a few of their vintages.
It was the price tag of the wines, more than the volume, that drove revenue, continuing a trend of “premiumization” of Golden State labels, said Robert P. Koch, Wine Institute president and chief executive.
“California wines are well positioned for this trend — our vintners are offering quality, value, diverse styles and environmental stewardship in their winemaking,” Koch said.
They had to, Phillips said. California wineries, including those in Lodi, are competing with wineries in South America, South Africa, Eastern Europe and beyond.
Many of those places have much cheaper production costs than California does, he said. In order to compete, Lodi wineries have to bring their best game.
The 28 countries of the European union — Britain and Germany paramount among them — accounted for $685 million in revenue. But Canada was the top single nation buying U.S. wine, shelling out $431 million, largely for table wines. It was followed by China and Hong Kong, with $181 million; Japan, $87 million; Mexico, $24 million; South Korea, $23 million; Switzerland, $19 million; and Singapore, $14 million.
There are a few surprises in the bunch.
For example, Michael David has found dedicated fans in Sweden, where Lodi Zinfandels are pretty popular, Phillips said.
Overall, California wine exports grew about 78 percent as the state and its tourism promoters have cemented the Golden State as a chic label unto itself, particularly among the emerging middle class in China, said Linsey Gallagher, the institute’s vice president of international marketing.
Some of that growth may also be due to the emergence of wine regions throughout California, including in the Central Coast and Sierra Foothills.
“This is not just a Napa and Sonoma story — that’s obviously a huge part of the story — but we make and grow wine in 48 of 58 counties of the state,” Gallagher said.
Phillips offered high praise for the Wine Institute’s international marketing programs.
“I would encourage other wineries to join the Wine Institute and their export program,” he said.
The group helps promote its member businesses all over the world, and brings wine buyers to California to see and taste the wine where it’s made. A group from Finland visited Lodi recently, and the city has also hosted groups from China, Mexico and other major markets, Phillips said.
A crackdown on luxury items purchased by Chinese government officials had caused pain for other exporters over the last couple of years, including California almond growers.
“California wine wasn’t as entrenched in that government channel, so therefore we weren’t as impacted
by it,” Gallagher said. “What I think you’re seeing in the numbers for this year for California wine exports is consumers are connecting with our brand and us becoming a region of choice.”
Canadian sales slowed down from the previous year, though U.S. labels remained the top table wines for our northern neighbor.
“Our biggest market is Canada, after the European Union,” Phillips said.
The U.S. has lodged a complaint on behalf of California vintners with the World Trade Organization over a policy in the Canadian province of British Columbia that limits sales of wine in grocery stores to locally produced labels.
“We anticipate continued growth and are also hopeful that provincial governments will extend to California wineries equal access to retail distribution channels,” said Rick Slomka, Wine Institute trade director for Canada, a partner in the North American Free Trade Agreement.
California vintners began a trade tour with Mexico on Monday, with stops in the capital and Baja California region, where they hope to calm nerves over talk of a trade war, Gallagher said. Last year, U.S. wine sales reached $25 million with our other NAFTA partner, vaulting it into fifth place.
President Donald Trump had vowed to tear up NAFTA, or at least renegotiate it, and in his first week in office, administration officials dangled the possibility of taxing imports as much as 20 percent — setting off anxiety among growers in California, who depend heavily on exports.
Previous trade fights have targeted
U.S. wine for retaliation.
The tariff talk has some winery owners worried.
“I’m concerned about all free trade agreements,” Phillips said. “We need to foster free trade.”
Lower tariffs and increased market shares around the world are vital for the U.S. economy, but especially for California agriculture, he said.
“We’re all prayerful that the economy goes in a good direction, and that we come out of this with good results,” Patrick said. “If (Trump is) the businessman that he’s cracked up to be, hopefully he has a good handle on what it’s going to take to bolster the American economy, not just in the U.S. but around the world.”
The change in administration had caused some uncertainty for local growers — as such changes usually do, Patrick said. He hopes things would settle down.
“We are trying to send a positive message that says we’re still committed to that market,” Gallagher said as she waited to board a plane to Mexico City. “Obviously, the political climate has changed a lot in the last few weeks, to put it mildly.”
The California wine industry is less dependent on exports than other agricultural sectors are, but with Americans still consuming far less wine per capita than their counterparts in many countries, vintners look to foreign markets as a highgrowth potential.
For Lodi wineries, the build-up has been steady over the past several years.
“Lodi has only grown in popularity, not only in this country but around the world,” Patrick said.