As the 2006 harvest delivers continued positive trends and suggesting California is well-positioned to capitalize on a growing U.S. wine market, we also see an accelerating trend toward global wine sourcing by a few U.S.-based wine companies.
This has challenged wine grape growers to better understand the global market and figure out what they can do to foster consumer loyalty for wines produced from grapes that reflect California's unique natural resources and diverse growing regions.
Coming out of the Unified Wine & Grape Symposium and other industry events earlier this year, everyone glowed with the good news: Wine sales are up; consumers are buying more wine at higher price points; and the United States is in position to become the world's largest wine market as early as 2010.
The 2005 Supreme Court decision on direct shipping holds the promise of giving consumers more access to their favorite wines. Gallup surveys in 2005 and 2006 suggest wine is rapidly closing the gap on beer as the preferred adult beverage of choice and the adult sector of the Millennial Generation (21-28) is poised to be a key demographic driving the popularity of wine.
Despite all these advantages, there is the nagging concern about the increased market share for imports and the pressure it puts on prices — especially the thumping of a certain kangaroo brand driving wine sales for another New World wine producing country!
By May of this year, bulk table wine imports totaled 2.6 million equivalent cases, up 229 percent from a year ago! The concern for growers dedicated to producing high-quality California wine grapes is that this increase follows California's record-breaking 2005 harvest.
Earlier this year, the federal government announced regulatory changes that increase from 5 percent to 15 percent the amount of wine that can be blended from other years to qualify for a vintage date.
One driver of this trend to import foreign wine is the need to fill gaps in supply created by hot consumer demand for varietals like Pinot Noir, Pinot Grigio and Riesling. Another driver is the willingness of consumers to try wines from around the globe to match the flavors of the world in the cuisines popular on today's menus. Well-known, trusted brands are responding by sourcing wines from every continent to complement their portfolio and maintain their relationships with distributors and retailers.
The cost of goods is another driver of this trend. The Golden State has the perfect infrastructure, climate and soils for wine grapes but it comes at a higher cost of doing business!
With their daily shopping habits, American consumers prove price matters more than origin. In wine, price and taste almost always trump origin.
It is this price issue that has led to the most bothersome trend in global wine sourcing — the blending of California wine with imported wine for “American” appellation products.
To protect the image of California wines, a state law was adopted in 1942 to require California appellation wines to be 100 percent from grapes grown in California. However, under federal regulations, an American appellation can be used by blending up to 25 percent of an imported wine into a California (or another state) wine.
Under federal law, this is perfectly legal, but is that what we really want from our wine community? We could seek a change in the federal regulations but no one wants more regulations unless they are necessary.
A more responsible approach would be to provide information on the label disclosing the percentage of wine from America and the percentage from the other source(s) on a voluntary basis.
This is the right thing for the consumer and for the industry. And, this is the right time to do it.
The wine community is celebrating California Wine Month under the leadership of the Wine Institute in collaboration with regional associations. This is part of an ambitious and well-planned U.S. Market Development Program.
Growers and vintners in Mendocino County and growers in Sonoma County have voted with their pocketbooks to match the marketing efforts of the Lodi-Woodbridge Winegrape Commission and the Lake County Winegrape Commission.
Guided by the vision of our Board chairman, Rodney Schatz, CAWG has recently undertaken a project to evaluate communication programs and invest in wine grape grower strategies that can add value to the California brand and Buy California message.
Based on our research, we believe that in addition to price, the place, people and practices behind the product matter to today's consumers. The most important thing we can do for ourselves is to give consumers another reason to choose California wine!
No one has a greater stake in fostering consumer appreciation and loyalty for California wine than the people who own and farm the vineyards of our state. As we reach out to consumers across America, let's be sure the integrity, quality and price of our products justifies the consumers' trust.