Americans are trading up and it doesn’t matter whether the bottle is filled with domestic or imported wine, according to analysts at Rabobank.
“In part, we see rising average prices for wine in the wake of last year’s horrendous crop [globally],” Stephen Rannekleiv, Rabobank’s global sector strategist for beverages, told Wine Enthusiast. He was referring to the many vineyards in Europe that saw yields drop up to 80% in 2017.
“But to a large degree, there is a clear trend in the U.S. of shifting to higher-quality imports.”
The Netherlands-based bank found that U.S. wine imports rose 9% in value but declined 4% in volume during the first six months of 2018 compared with the same period a year earlier.
The lower volumes “reflected a significant contraction in bulk-wine imports [-19% in volume and -5% in value] as bottled-wine imports were up 2% in volume and 10% in value during the same period,” according to the report.
“The imported wine market is just like the rest of the U.S. wine market—consumers seeking more premium brands,” said Rannekleiv.
Italy is Number One
Italy, which produces three of every 10 bottles of wine imported into the U.S., is jumping on the premiumization trend. Italian Trade Commissioner/ Executive Director USA Maurizio Forte, in a visit to New York earlier this month, said that Italy was no longer interested in expanding its market share.
“We’re already No. 1,” he said.
Now, Forte wants to extend that success beyond Prosecco, Pinot Grigio and Chianti. Distributors and retailers can soon expect to see bottles of Franciacorta, Arneis and Brunello in their sales representatives’ wine bags.
Direct-to-Consumer Sales are Declining
Meanwhile, U.S. wineries are finding declining direct-to-consumer sales. While wildfires “likely have had an effect on tasting-room traffic for many wineries,” Rabobank’s report notes, “the rising number of wineries is also intensifying competition for visitors.”
Tourists are traveling to fewer wineries but spending more time at those they do visit. There were 3,540 bonded wineries in California in 2011, according to the Wine Institute. By 2016, that number had spiked to 4,653—an increase of more than 1,000 wineries in five years.
It’s not just the smaller players who are feeling pressed by the extra competition. Rabobank cited a recent Sonoma State University (SSU) survey of wineries, company executives and grape growers. The study found among the larger wineries, some 58% cited “brand proliferation as a drag on revenue and profitability.”
Private labels are also providing the traditional retail/wholesale channels with challenges. Aside from the usual producers, retailers are increasingly building up their private-label offerings. In the SSU survey, some 34% of respondents said that “private labels were negatively impacting their brands.”