Hard times, good wine keep company - Global Wine Competition Slugs It Out - includes related article on Market Access Program and on promotional tactics - Cover Story - Industry Overview

AgExporter,  Feb, 1999  by Yvette Wedderburn Bomershein

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If global consumers have tightened their belts where food purchases are concerned, many are still willing to spring for a glass of wine, particularly in the Japanese market.

U.S. wine production in 1997 was estimated at a record 25 million hectoliters,(1) up 32 percent from 1996. The grape crush for 1997 is estimated at 3.6 million metric tons, also up 32 percent from 1996. California accounted for 3.5 million tons, or 96 percent of the total U.S. grape crush.

U.S. wine producers, with their high-quality, competitive wines, are benefitting from burgeoning sales. So much so that exports from January through September of 1998 were up 32 percent over the same time period the year before, already garnering $401 million in sales, with $520 million forecast for the year. Volume is expected to have reached 2.5 million hectoliters in 1998.

During the first nine months of 1998, the United Kingdom, Japan and Canada were top U.S. customers for wines. Surprisingly, Japan, at $77 million, bought 196 percent more for the nine-month period than it did the previous year. This unexpected surge plus increasing sales to Canada and the European Union (EU), offset the dramatic decline in wine exports to some Asian markets.

Besides long-time customers in Canada and the United Kingdom, U.S. exporters have also been enjoying booming markets in west European countries-Germany, Switzerland, the Netherlands, Sweden and Ireland.

Competitors Enjoy Good Prospects, Too

But other countries also produce competitive wines and stand ready to fill the growing demand for the vintage grapes. Sales to Japan provide a vivid example of a U.S. market that's growing, yet experiencing loss of market share. While U.S. wine exports to Japan totaled $39 million in 1997, the United States is losing its 9 percent market share to new suppliers.

Besides traditional U.S. competitors France, Italy, Spain and Germany, some newcomers to the Japanese market - from Chile, Australia and South Africa - are leveraging Japan's recent economic downturn with reasonably priced wines.

Before Japan's recession, consumers and retailers considered wine to be a premium product - with the high price and high margin to prove it. The pricing strategy of these new competitors, who have duly noted the changing economic times, is to open up wine consumption to a younger clientele, thereby enlarging an already profitable market.

U.S. producers need to be aware of countries that, having delivered good products to receptive markets at competitive prices, are now significantly increasing their vintners and hectares planted to grapes. Having achieved a toehold on the shelves, they are busily upgrading the quality of their vines and aggressively seeking new markets.

Want more information about how other countries are managing? The following three market overviews provide a peek behind the curtain, detailing their production rates, explaining how their industries cope with adversities and outlining their strategies for securing new markets.

MAP Funding

The Foreign Agricultural Service's market promotion efforts under the Market Access Program (MAP), coupled with increased consumer demand, have helped spur the continuing 13-year streak of record-breaking U.S. wine exports. The MAP provides funding to help U.S. producers, exporters and trade organizations finance overseas promotions - three wine MAP participants received funding of $4.8 million for fiscal 1998. Specific covered activities include:

* Trade shows

* Wine fairs

* Tastings

* In-store promotions and displays

* Restaurant menu promotions

* Trade seminars

* Trade and media tours

* Public relations work and media events

* Advertising and production of educational materials

Before inception of the MAP, fewer than 20 U.S. companies were exporting wine. Today, 125 companies from across the country participate. The industry estimates that U.S. wine exports have created an additional 7,500 full-time jobs and about 5,000 part-time jobs.

How To Compete

The language and customs may be different, but marketing strategies and trade servicing are always essential ingredients in a successful overseas market. These promotional tactics can help launch a new wine or expand existing sales:

* Trade Shows. Want to meet distributors and retailers in a potential market? Trade shows provide an ideal format for introducing your product to interested buyers.

* Market Research. Red wines might sell better than whites to a specific demographic group, but you won't know until you've done your homework.

* Education. Wine tastings, wine seminars and written materials in the country's language are probably the most effective methods. All are good promotional activities, well received by traders and consumers.

* Co-promotion. Using food items or other consumer goods associated with wine is likely to attract more consumers.

* Exhibitions. From individual wine promotions to organized food shows, wine exhibitions reach a wide range of consumers at all price levels.