Exports have become more and more important to the U.S. wine industry in the past few years. Wineries that have never before considered an export program are jumping into the market. According to the Gomberg-Fredrikson Report, the value of all U.S. wine exports grew by $145 million in 2004, up 25%. Total American wine exports, bottled and bulk, reached 41.9 million cases in 2004, up 20% in volume. Total value was $733.7 million, a gain of 25%. In California, the largest exporting region, exports represented 18% of total wine shipments, based on Gomberg, Fredrikson numbers.
Wines & Vines asked Steve Burns, who has had extensive experience in the export market--first with Wine Institute, most recently as executive director of the Washington Wine Commission and now with his own consulting business, O'Donnell Lane, based in Sonoma County--about the export market. Burns responded to our questions by telephone and e-mail.
W & V: Let's assume a mid-sized winery--100,000 cases--came to you and said, "We want to export 10% of our wine." What would you tell them?
Steve Burns: Before a winery thinks about exporting, I would ask them, "Why do you want to export?" If it's to sell lots of volume at lower price-points, then I would suggest that they look at certain markets such as Canada and the United Kingdom, but if their desire is to establish a global brand, hand picking the on-premise and off-premise locations at which to place their wines is the way to go.
Then I would suggest focusing on major cities such as Tokyo and elsewhere. I would also caution them about the extended timeline for the wine exporting business and the impact of currency fluctuations on this business. Today, the dollar is a big help, but down the road, no one knows. Now is the time to begin your export work so that when the currency rates change, your relationships are strong and the customers remain loyal.
W & V: Let's assume a similar situation, only the winery is already beginning to export and wants to know how to do it better. What markets should they look at? How do they determine the right market? What can they do to build that market?
Burns: Again, this is a "Why do you want to export?" scenario. To begin with, for premium wineries I would suggest visiting any prospective markets ahead of time, choosing one or two and learning about that market before deciding what to sell where. In this light, exporting is really no different than domestic business. It's all about choosing the right market, visiting that market as often as possible and then having the patience and persistence to build relationships with trade and media in the market over the long term. As Dan Duckhorn once said to me, "The more often I visit a market the luckier and more successful I get in that market in terms of wine sales and media."
Sales are directly related to market visits domestically and internationally, but with international, they usually want to build up a relationship before doing any business. But once a relationship is built, an export business relationship is very long-lived.
W & V: Can you conceive of a situation where you would tell a winery to forget about exports?
Burns: Only one, and that's if a winery is looking to dump wine overseas. This is not only bad for the individual brand, but overall it's damaging for the region or country, and can have long-term effects on the ability of other wineries from that region to sell in that market. That's the same with domestic business as well.
W & V: What are three (or five or seven) absolute no-noes in exporting?
Burns: Don't use exports as a dumping ground. Don't enter markets that you don't plan to visit regularly. Make sure your wines are priced and packaged correctly in each market. Don't rush into any market--take the long-term approach. Be polite overseas, and respect other cultures and customs. Over-deliver on wine quality in the bottle and your promotional support. When you promise something, don't forget to do it. Drink other wines from other regions so you understand the competition. Do your market research before you enter a market. Don't ship old vintages!
W & V: What, in your opinion, are the best global markets just now for American wines?
Burns: Almost everywhere, due to the current weakness of the U.S. dollar. But major markets are clearly Canada, UK, Japan, Germany, Switzerland, Holland, Denmark, Sweden, Hong Kong, The Netherlands, Singapore, Korea and of course, China. Lots of new opportunity in India, Poland, Russia and Israel, too. Again it's about long-term relationships, good value for the price-point (does that wine over-deliver in the bottle?) and how many markets can you personally visit annually.
W & V: What role do organizations, statewide or regional, have to play in wine exports?
Burns: Overseas customers respond very well, even better than domestic customers, to generic promotions, tastings and events, as they are more accustomed to doing business this way. Trade shows play a bigger role in the export business than they do domestically, and generic stands at these shows are a great way for individual wineries to stretch their export promotion dollars. Generic promotions often attract high profile media that the individual wineries might not get to see. Some associations and the U.S. government offer matching funds for wineries that export, subsidizing their travel to overseas markets and the printing and translation of POS, so I suggest that any new or even an established exporter meet annually with the local regional and statewide trade associations to see what programs they have that could help their export sales and promotions.
W & V: Is Mexico being overlooked as an export market? After all Canada, our neighbor to the north, is our second largest market after the UK.
Burns: American vintners spent a lot of time and money trying to export to Mexico over the last two decades, and with little success. I do think that this is an interesting export market, but there are 15 or 20 other countries with greater opportunity. Mexico also has challenging business issues, such as complicated and substandard infrastructure for shipping and storing premium wines. It's still a great place to visit, but not in my top 10 list for American wine exports. Maybe someday.
W & V: Everyone talks about China. What about it?
Burns: Right now, work for short-term, limited sales with the hope of long-term growth and big numbers ahead. China is also beginning to produce its own wines, so that will have some impact down the road as well. If you are a global brand, I would assume that you must be active, even in some small way, in this market.
W & V: Elsewhere in Asia you mentioned Japan, Hong Kong, Korea and Singapore as top global markets, with India moving up fast. How does selling wine in Asia differ from selling wine in Europe? Or does it?
Burns: Exporting U.S. wines to Asia is very different than exporting to Europe. While it is not good to generalize between these two regions, I must say that Asia is a "top down, prove your quality first market," while Europe is a "bottom up, show value wines before moving up the price-point ladder market."
W & V: Is the fact that a winery principal likes to go to the theatre in London a good enough reason to export to the UK?
Burns: Yes, of course, as long as your wines are still priced right, you are with the right distributor, you will receive international trade visitors when they come the U.S., you will participate in generic tastings organized by your region in that market, that your wines are good quality, that you have the long-term view and won't drop out, that your label, package and vintages are correct, etc.
W & V: Looking at the other side of the coin, suppose a business were formed to import wine to the U.S. Beyond the licensing requirements, how should it proceed?
Burns: First, look at the U.S. as 50 countries, and decide where and why you want to sell your wine in the U.S. If it's media you want, focus your initial efforts on New York and California, then branch out from there. If it's volume you want, then identify large retail buy-ers and meet with them. Again, the same mantra about visiting the market and being ready to do business in each state. Making sure that the label and packaging is interesting to the consumer in that state. Think hard and long about the current reputation of your country's wines in the U.S. so you are prepared to respond to hard questions when you get them from potential customers.
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The book looks at the history of winegrowing in Napa Valley and the appellations and sub-appellations of Napa, as well as the major Napa estates, focusing on terroir and winemaking styles.
Mitchell Beazley publishes many of the world's top wine writers, including Hugh Johnson and Jancis Robinson. Walker's book sells in the U.S. for $29.95 and in the UK for [pounds sterling]20.By Larry Walker