A booming year for imports

With the numbers in for the first quarter of 2004, imported wines into the United States were down 1% for bottled table wines and 2% overall, a slide that began late in 2003, when the weak U.S. dollar began to take its toll on imports. Nevertheless, for the year as a whole, imports continued a strong run in 2003, gaining 6.2 million cases to a record high of 68.6 million cases, a gain of 10%, claiming 26% of the national market, another record.

The numbers would undoubtedly have been higher except for the slumping dollar. At the end of September, import shipments were up 14%, but for the rest of the year, the gain was only 1%.

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A look at currency values shows what happened to imports. At the end of 2002, the euro was virtually on a par with the dollar at $1.02. By the end of 2003, it was up 21% to $1.23, with most of the gains coming after June. It was shortly after that the import market went into a downward spiral. The Australia dollar gained 32% against the U.S. dollar, from 56 cents to 74 cents. The Chilean peso gained about 20%.

Once again, Australia came through with the strongest performance for the year, showing a gain of 36% overall and a 39% gain in table wines. However, looking at first quarter shipments for this year, Australia shows gains of 12% for table wines and 10% overall, far below its 2003 pace. The 2004 numbers are still respectable enough. In the past three years, Australia has more than doubled its shipments to the U.S. It is conceivable that Australia could replace Italy as the top importer before the end of the decade.

Australia's growth in 2003 was driven by the extraordinary success of [yellow tail], which reached sales of 5 million cases by year's end, up from 2 million cases in 2002, and Black Swan, the E. & J. Gallo entry, which reached about 1.5 million cases by the end of 2003. [Yellow tail] is now the largest-selling imported wine brand in the U.S., and the eighth-largest selling brand overall. Other Australians posting strong gains in 2003 included Lindemans, up 14%; Jacob Creek, up 23%; Penfolds, up 47% and Alice White, up 43%.

The question is, of course, can Australia keep up that kind of success? And where do the Aussies go from here? One assumes that [yellow tail] will not keep leaping up the charts unchecked. One effort to grow the market, following in the cute little footsteps of [yellow tail], is to reach out for consumers who are not regular wine drinkers. Southcorp is introducing the Little Penguin to American consumers this summer. Little Penguin will waddle into the market in four varieties--Chardonnay, Merlot, Shiraz and Cabernet Sauvignon--in 750ml and 1.5 liter bottles, and is priced at about $7 for the 750ml and $13 for the 1.5L.

Doug Rogers, senior vice president marketing for Southcorp the Americas, said Little Penguin was designed to broaden the appeal of the Southcorp portfolio. "We wanted to reach a different consumer. Right now, most consumers look pretty much the same, mid-40s, good income and all that. We want to reach someone in their 30s, probably someone a little less engaged in wine. Little Penguin is more about quaffability."

Among other New World producers, Argentina grew 20% in 2003, and is up 11% for the first quarter. New Zealand grew 28%, and is up an amazing 94% for the first quarter. South Africa was up 19% for 2003 and shows a strong 37% gain for the first quarter. Chile was down 1% for 2003 and is off 9% for the first quarter.

Italy is still the top exporter to the U.S., and posted a solid 6% gain, which might have been higher except shortages of Pinot grigio hurt that hot category. However, for the first quarter, Italy is down 5% overall. France started 2003 strong, up 21% in January, as importers stocked up on the 2000 Bordeaux vintage, but sales declined for the rest of the year and the decline continued into the first quarter of 2004, with overall shipments still down 21%.

Gainers in Europe included Spain, up 19% for the year and 12% for the first quarter, and Germany also up 19% for the year and up 11% for the first quarter.

Chile has been the odd man out in the import surge of the last several years, struggling just to stay even. Arturo Cousino, the president of Cousino-Macul, one of Chile's top premium wineries, blamed this in part on poor decisions on pricing, in both the U.S. and the UK. "Many producers tried to buy market share by lowering prices," Cousino said during a recent visit to California.

He agreed that the weak dollar had been a big problem for Chile. "Cousino gained 25% in value last year, but 20% of that was wiped out by currency losses. It came so fast, we were unable to react," he said.

He said that Chile should be getting back on track and is hopeful about the rest of 2004. "We had a very small harvest this year, down 35% to 45%. That will dry up the source of cheap wines and Chile can get back to competing on quality."

With the wine market following the rush to globalization, an interesting development is the growth of "imports" which are owned by California producers. E. & J. Gallo has taken the lead in this area, with the amazing success of its Black Swan wines from Australia, as well as McWilliam's. Gallo's Bella Sera from Italy is now the largest selling Italian wine in food stores, with growth of 14% in 2003, and its Ecco Domani wines from Italy showed 10% growth. Gallo recently introduced Whitehaven from New Zealand.