Imports of wine to the United States have reached record highs. According to the International Organisation of Vine and Wine (OIV), in 2022, the USA was the leading global importer of wine by both volume and value. Furthermore, it secured the second spot in bulk wine imports by volume, with an average import price of €0.82 ($0.89) per liter. The primary wine-exporting nations to the USA by volume were Spain, Italy, and France.
Seen in Figure 1, in the US, there has been a 220% increase in imports from 2000 to 2022. During the same period, US consumption increased 62% to reach an all-time high. Interestingly, domestic wine production remained relatively constant, reaching its peak in 2018.
This data highlights that the majority of 21st-century wine consumption growth in the US has been fulfilled by imported wines.
This surge in imported wines presents a significant challenge to domestic wine producers, who grapple with competitive pressures stemming from the pricing of imported wines and the substantial marketing budgets supporting them, in addition to navigating domestic economic and legislative obstacles. This raises a question: How can the domestic wine industry maintain its competitiveness amidst rising import competition?
The Domestic Wine Market
The United States has total of 17,371 bonded wine producers spread across all 50 states. 97% of producers fall into the small to limited production category. Despite an 80% increase in the number of producers since 2013, there has been a 14% decrease in the vineyard surface area during the same period. We are currently at the smallest amount of vineyard surface area since 1999.
This juxtaposition of thousands of new small wineries vying for a diminishing supply of raw materials has driven up both the costs of planted acres and the cost of domestic fruit. The ultimate beneficiary of this situation is imported wines and international vineyards, which have stepped in to bridge the growing gap between domestic production and consumption and are doing so for a fraction of the cost.
Figure 2 Source: OIV
Strategic Moves and Sponsorships
It’s important to recognize that the increase in imported wines is not a random occurrence; many of these imports are supported by substantial financial backing and extensive marketing efforts from various foreign and domestic stakeholders seeking to capture the attention of US consumers. These strategic moves often involve key partnerships within the three-tier distribution system, further enhancing their market reach and impact. This is exemplified by a few key players in the beverage alcohol industry and their import SKU distribution:
Wine.com, the largest online wine retailer in the United States, 70% of their wines are from outside the US.
Proof, by Southern Glazers, 60% of their online SKUs are from outside the US.
Total Wine & More, America’s Wine Superstore®, 56.5% of their online SKUs are from outside the US.
It’s apparent that imports are organized, and this becomes even more evident when considering their involvement in areas such as sporting sponsorships.
Think back to the last major US sporting event you watched or attended that was sponsored by a domestic wine producer. Most will be able to name one. The NFL. Gallo penned a deal in 2022 to become the official wine sponsor of the league.
However, when it comes to other US sports, the story is quite different—it’s an international affair:
GH Mumm (France) sponsors the Kentucky Derby.
Kim Crawford (New Zealand) sponsors the US open.
Moet and Chandon (France) sponsors the NBA
Trivento (Argentina) sponsored the MLS
Prosecco DOC Consortium sponsors Prosecco Week in the USA (6 consecutive years)
In this sponsorship arena, international brands strategically position themselves for maximum influence, capturing consumer attention, and boosting sales through their heightened visibility.
In contrast, the US wine market is highly fragmented, with financial resources thinly dispersed. While regional associations advocate for their members and products, there’s a smaller effort to advance the overall domestic wine market. This stems from the fact that the majority of financial influence in the US wine market lies with those vested in international products.
The regional associations dedicated to improving the market require local producers’ support to counteract direct sales restrictions. Simultaneously, national movements, led by organizations such as the Craft Wine Association and the Distilled Spirits Council of the United States, deserve endorsement. Entities like Wine America, focusing on federal legislation and rules, also require backing for their efforts concerning taxes, labelling, and international trade.
There is hope for domestic producers. And it comes from the democratization of direct sales and liberalization of beverage alcohol law.
Liberalized direct sales allow domestic producers to select precisely who they want to sell to, legally, be it customers, grocery stores, wine stores, restaurants, or sporting events. Any entity with an alcohol-selling license should have the opportunity to purchase directly from domestic producers.
Consider a Tennessee producer crafting 2,000 to 3,000 cases of wine, unable to secure nationwide distribution. They could sponsor a sporting event in a neighbouring state, supply the event with their wine, attract a wider customer base, and sell directly to a few retail stores and customers, thus expanding their business. When fulfilling direct orders becomes logistically challenging due to their success, the three-tier system can step in and benefit from the increase of direct sales. There is no guess work for the wholesalers. They receive tried and true brands that have nationwide support, before even hitting major retail shelves.
The success of the US wine industry relies on a collaborated effort to change the laws governing domestic producers and their sales.
Lawmakers must recognize that while these major US import driven companies create jobs and pay taxes domestically, they often serve the interests of large international corporations at the expense of thousands of smaller US tax-paying family businesses. Furthermore, these large US companies wield considerable lobbying power to maintain the status quo. And I repeat, to the benefit of non-American companies.
Boosting direct sales for domestic producers is essential for the success and sustainability of the US wine industry. Buyers crave innovation, passion, and stories—qualities that small US wine producers excel at delivering. Restricting direct sales for these producers ultimately benefits non-US companies.
It all begins with embracing widespread direct sales for domestic producers. America is losing the grip on domestic wine production. Vineyards are getting ripped up. Fruit is being left to hang with no buyer. And imports are fulfilling all the excess demand. The indicators have been there for a while. The US wine industry is struggling and needs the support of domestic producers, consumers, and legislatures to ensure the US can succeed in its own home market.
The time is now to reverse the damage imports are doing to small, family US producers.
Taylor joined the alcohol industry directly out of college as an intern with Constellation Brands. Shortly after, he was awarded the ability to play lacrosse for Team England, so he moved to London, where he began working as a fine wine market analyst for the London International Vintners Exchange. During his summers, he would take time off to do vintage work at a nearby winery in Surrey. Taylor joined Vinoshipper, from London, in 2021 and started up the data analytics program, offering insight into the craft alcohol industry.
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