Friday, February 17, 2017

California's Wine Exports Reach Record-Breaking Levels

Of the various foods that California produces for export, many have faced hard times over the past couple of years, mainly due to the scarcity of water throughout the state. Almonds, California's largest export, grow on trees that require gallons of water to grow properly. Those almond trees have suffered over the past couple of years, and, even though rainfall has increased, the trees may not recover, at least not any time soon. Fortunately, even though the almond market has hit rough times, other exports from California have reached record levels. In his L.A. Times article, Geoffrey Moan discusses increased exports of American wines in 2016, led by California's brands.

Even with the increased strength of the dollar, a limited water supply, and high tariffs, which all had limiting effects on the wine exports, foreign trade revenue still increased from $1.49 to $1.62 billion in 2016. Of all of the wine exported from the United States, around 90% came from California. Not only did the volume of wine increase, so too did the prices of those wines. Golden State labels have gained higher prestige in foreign markets, and vintners take advantage of that "premiumization" to mark up the wines. It seems to be a good business strategy that hasn't negatively impacted demand while still increasing revenue.

The single country that imported the largest amount of U.S. wine was Canada, accounting for $431 million in table wines. Behind them came Germany and Britain who, along with the rest of the countries in the European Union, imported a total of $685 million in American wines. Behind them came Mexico, Switzerland, and several Asian countries, who collectively accounted for the remaining portions of U.S. wine export revenue. Wine exporters have faced some difficulties with laws in British Columbia and other areas that prevent retailers from carrying foreign wine brands, but exports have still increased despite such restrictions.

Exporters throughout the U.S. expect that the demand will continue increasing, so limits on foreign retailers could pose future issues. While some exporters are working with foreign governments to try to gain equal access to their markets, other exporters make "trade tours" through the countries that import the most product, to renew their relationships and remind importers of their company's commitment to the wine market. While American wines have plenty of domestic demand, which is why the wine industry depends much less on exports than other industries, vintners are focusing on foreign markets mainly because they represent the best opportunity for fast growth. Their work right now will help to define their growth in the industry in years to come.

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