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U.S. wine shipments up 2 percent in 2012

Published: Wednesday, January 30, 2013 at 1:21 p.m.
Last Modified: Wednesday, January 30, 2013 at 7:30 p.m.

SACRAMENTO -- U.S. wine shipments rose 2 percent last year to 363 million cases, but foreign wineries continue to capture a growing share of the lucrative American wine market.

It all adds up to ample choices and relatively stable prices for U.S. wine consumers, wine analyst Jon Fredrikson said Wednesday in a presentation at the industry's largest trade show.

"This market was brutally competitive," Fredrikson told a crowd of 1,200 wine industry executives gathered at the annual Unified Wine & Grape Symposium in Sacramento.

Federal regulators approved 126,000 new wine labels last year, providing consumers with an array of choices in the wine aisle, Fredrikson said.

Increasingly, they are walking away with wines made overseas. Imports now account for 35 percent of the wine sold in the U.S. by volume, Fredrikson said. Short harvests and high grape prices in California in 2010 and 2011 drove both wineries and consumers to look for for value-priced alternatives overseas.

Argentina was the greatest supplier of bulk wine imports to California, followed by Chile and Australia, said Glenn Proctor, a partner and broker with Ciatti Company. New Zealand could become a larger player in coming years, because the country boosted its planted vineyard acreage by 23 percent from 2007 to 2010, and is appreciated as a producer of sauvignon blanc, he said.

As wine consumption declines in France and Italy, foreign vintners are targeting American consumers. The U.S. is now the largest wine market in the world, consuming 13 percent of the wine produced globally, Fredrikson said. But despite the growth of wine, the beer market is still eight times bigger than the wine market, he said.

"Wine . . . is still small, compared to other categories," he said.

There will be even more California wines for consumers to choose from in the future. While the numbers are not yet final, the 2012 harvest appears to be the largest on record, said Nat DiBuduo, president of Allied Grape Growers. The California crop will likely weigh in at 3.8 million tons, compared to the state estimate of 3.7 million tons, he said.

"If we get our numbers, it should be the largest crop in history," DiBuduo said.

Growers are continuing to plant new vineyards and replant older vineyards, which could lead to even larger harvests in the future. Growers purchased enough vines to plant or replant 27,000 to 36,000 acres of vineyards, based on a survey of nurseries, DiBuduo said.

"I suggest we all exercise caution to avoid oversupply," DiBuduo said.

In the North Coast and other regions, prices of bulk wine are already declining after shortages drove up prices over the past two years, Proctor said.

"It's a balanced market. We think that's a good thing," Proctor said. "Prices are stabilizing. I just don't see the craziness we saw last year."

About 12 percent of wineries raised retail prices last year, passing along higher costs for grapes used primarily to make higher-priced bottles, Fredrikson said. But lower-priced wineries are starting to test pricing, too.

Earlier this month, the Charles Shaw brand -- better known as "Two Buck Chuck" -- went up in price in California by 50 cents, its first increase in 11 years.

Fredrikson commended E&J Gallo Winery and Constellation Brands, based on their growth in both volume and value.

Gallo, which is based in Modesto but has a major presence in Sonoma County, is growing faster than the rest of the industry, increasing shipments 9 percent in 2011 and 5 percent last year, Fredrikson said.

"Gallo has been smoking for years," Fredrikson said. "It has pioneered markets on behalf of everybody. It has broken down countless trade barriers . . . everyone else gets to follow after them."

Constellation also had strong growth, in part because of its acquisition of the Graton-based Mark West brand. The company pleased shareholders when its stock improved by 70 percent in 2012.

"Their California brands had a stellar growth year, going up more than 3 million cases, 10 percent," Fredrikson said.

In Sonoma County, Fredrikson singled out "The Other Guys" as one of the hot California wineries in 2012.

The company makes wine brands with names such as "Hey Mambo," "MooBuzz" and "Plungerhead."

Such names stand out in a market that's increasingly creative about targeting millenials, with beer and spirits companies selling infused drinks like Dogfish Head's "Noble Rot," a craft beer infused with botrytis-infected viogner, and vodkas flavored with everything from wasabi to fresh grass.

"It's a brutally competitive market," Fredrikson said. "You've got shelf space coming from somewhere for all the craft beers and distilled spirits."

You can reach Staff WriterCathy Bussewitz at 521-5276 or cathy.bussewitz@pressdemocrat.com.

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