Value of US wine exports falls for first time in seven years

The value of US wine exports fell by 5.5% in 2017 to $5.53 billion, drawing a line under seven years of consecutive growth, with the biggest decline seen in exports to the European Union, while volumes have soared in both Singapore and Hong Kong.

Overall, US wine exports reached $1.53 billion in value and 380 million litres (42.2 million cases) in 2017, representing a decline of 5.5% and 7.9% respectively. Of those exports, 97% were from California, which saw exports decrease 5.5% in value and 7.9% in volume.

It is the first decline in growth reported by the country following seven years of consecutive growth, having reached a record high of $1.62 billion in 2016. 

Wine institute California attributed the drop in part to challenges posed by a “strong dollar, heavily-subsidized foreign wine producers and competitors forging free trade agreements in key markets”.

Specifically, the European Union saw the biggest drop overall for US exports, which fell by 19% in value and 10% by volume. For the UK’s part – which is in the midst of negotiating its exit from the EU – Justin Knock MW, Wine Institute California’s UK trade director, said that the pound had “strengthened in the past six months” resulting in a positive start to 2018.

It follows a report by Rabobank released last year that also reported on falling sales of US wine to the EU, which it said had dropped 15% by volume and 8% by value, with both bottled wine and bulk shipments down by around 15%, analysts said.

Despite fluctuation, the European Union’s 28-member countries remain the biggest market for US wine exports, accounting for $553 million and 198.7m litres, followed by Canada ($444m), Hong Kong ($119m), Japan ($94m),  China ($79m), South Korea ($25m), Mexico ($23m), Singapore ($17m), Philippines ($14m), and the Dominican Republic ($13m).

Singapore saw the biggest uplift of US wine imports, rising 22% in value and 1.6% in volume, followed by Hong Kong, which saw value rise by 21%, but volumes decline by 25% – the biggest drop of any market by volume – highlighting a readjustment of the market toward more premium offerings.

“California wine exports have grown nearly 70% by value in the past decade,” said Wine Institute vice president of international marketing Linsey Gallagher. “Our global marketing efforts focusing on the quality and diversity of California wine continue to gain traction with our trading partners throughout the world.”

Looking ahead, the California Wine Institute said that securing effective trade agreements would be “essential” to growing US wine exports.

“Free trade agreements that place the US on equal footing with other wine producing countries are absolutely essential to growing U.S. wine exports,” said Charles Jefferson, Wine Institute Vice President of Federal Relations and International Public Policy.

This decline in US wine exports mirrors a tailing off in growth of wine sales more generally in the US market. Earlier this year, Silicon Valley Bank’s (SVB) 2018 State of the Wine Industry Report said that US, specifically, had experienced a boom in wine sales over the past two decades, that growth was now levelling off and reaching the end of a 20-year growth period.

Click through for a closer look at the performance of US wine exports in specific markets around the world… 

Canada

Rick Slomka, Wine Institute trade director for Canada

“Despite a flat wine market in Canada and ongoing exchange rate challenges, Canada remains the top dollar value market for California wines. Canadian consumers have confidence in the quality and value offered by California wineries whose wines are successful in all price segments.

“Although recent price increases may lead to slower growth, new product introductions and line extensions for popular brands have kept the momentum strong for the California wine category. U.S. wines were the number one table wine category by value in Canada in 2017 for the fourth consecutive year with almost Canadian $1.1 billion in retail sales. “We anticipate continued growth in the liquor board stores and are also looking forward to working with the provincial governments to improve and equalize access to new grocery distribution channels.”

Continental Europe

Paul Molleman, Wine Institute trade director for Continental Europe

“As the Euro became stronger in the past 12 months, California wine exports to continental Europe improved. In Germany for instance, our key market on the continent, German customs reported an increase in California wine imports of 7% by volume. The data also shows increases in export value to key markets such as Sweden, the Netherlands and Denmark.”

United Kingdom

Justin Knock, MW, Wine Institute United Kingdom trade director 

“Sales of premium, super-premium and luxury Californian wines continue to be robust despite very challenging currency-led price increases. In 2016, the pound was valued at $1.46. A year later it dropped 17% to $1.21.

“Price increases were largely passed through to consumers as increased shelf prices. The pound has strengthened in the past six months, and we expect this will be positive for California wines in the first half of 2018 as importers look to replenish stocks at more favorable prices.”

Japan

Ken-ichi Hori, Wine Institute’s Japan trade director

“Due to the US withdrawal from the Trans-Pacific Partnership and the Japan-EU Economic Partnership Agreement, all of the U.S.’s wine region competitors will enter Japan duty free by 2019 while the full 15% import duty will continue to be charged on California wines. Japanese importers have been importing U.S. bulk wine to reduce the import duties, but Chilean and Australian bulk wine is already duty free and European bulk will soon have duty free status.

“Bottled US wine exports to Japan decreased 20% by volume in 2017, but value increased 12.1%. Ultra-premium wines are less susceptible to the import duty disadvantage, and Wine Institute’s Japan office has been consistently promoting the premium category with its wine-by-the-glass restaurant promotions. US wine importers in Japan hope the US will establish a Free Trade Agreement with Japan as soon as possible to abolish the heavy import duty disadvantage of US wines, which will help the entire American wine category grow in Japan.”

China and Pacific Rim

Christopher Beros, Wine Institute trade director for China and Pacific Rim

“US wine exports to Greater China (Mainland China, Hong Kong and Taiwan) were strong with 10% growth to over $210 million in 2017. Also experiencing growth were South Korea, Singapore and the Philippines with value increasing more than volume, signaling the premiumization trend.

“For Asia, the main story is the economic growth in China, the largest country in the world in terms of population. China has a rapidly growing middle class that is traveling outside the country and adopting many Western tastes and lifestyle preferences. Consumption of imported wine has increased 2.5 times in the last five years on the Chinese Mainland. We expect this trend to continue for the foreseeable future.”