US ‘most attractive major market’ for wine

With emerging markets such as Russia and China facing disruption, Rabobank has highlighted a shift in exporters’ focus towards the US.

The latest Rabobank Wine Quarterly report noted “dramatically reduced demand over the past two years” from China as a result of austerity measures introduced in 2012.

Likewise, it pointed to the negative impact of Russian sanctions relating to political tensions over Ukraine, predicting a “material decline” for wine imports to this market in 2015 as a result. In addition, with “the looming risk” that wine may be added to a list of banned imports to Russia, Rabobank noted “profound concerns” from most suppliers about investing in this market.

Against this backdrop, the company observed: “Many wineries are coming to the conclusion that the US is now clearly positioned as the most attractive major market for premium wines, as it offers both growth and acceptable margins.”

To support this assessment, the report noted that US wine consumption has been growing consistently for the last 20 years. What’s more, it continued, “nearly all recent growth is coming from wines priced above USD 9/bottle,” estimating that “more than 60% of US wine market volume growth is coming from wines priced between USD 9 and USD 15.”

Boosting this opportunity still further, Rabobank pointed to the recent strengthening of the US dollar, which “has made growth in the US premium wine market even more compelling for many foreign wineries.”

Its analysis echoes a recent IWSR report published by Vinexpo, which predicted an 11% rise in US wine consumption over the next three years, driven by sparkling wine and rosé. Meanwhile New Zealand Winegrowers expects the US to leapfrog the UK and Australia to become its largest market by the end of this year.

Despite this potential, the report warned of numerous challenges for those seeking success in the US wine market. With Nielsen indicating that 44% of new launches in the last two years have been targeted at the $9-15 price segment, Rabobank described this bracket as “extremely crowded and competitive.”

In addition, with California harvesting its third consecutive large crop in 2014, while Napa and Sonoma are now bringing their high quality 2012 vintage to market, the report described the US’s domestic output as “a formidable competitor” for any foreign producers hoping to make inroads.

Rabobank also pointed to the ongoing distribution challenge presented by the US system, especially in the wake of recent consolidation in the wholesale and retail sectors that has seen many US producers turn to direct to consumer sales. Data from Shipcompliant indicates that direct sales of US wine – an option that is closed to foreign wineries – have grown steadily over recent years to account for “at least” 15% of volumes sold in this market above $20.

One particular growing opportunity within the US retail sector is online sales. According to one e-commerce business Wine.com, imported wines outperform in the on-line marketplace, accounting for around 55% of sales compared to a 35% share when measured across all channels.

Rabobank concluded that while the US premium wine market is “extremely attractive”, wineries targeting this opportunity should be prepared for “an intensification of the competitive environment in the market.”