With the declining value of the U.S. dollar and increasing wine sales overseas, Charles Shaw wine, an American favorite, may seem in some places more like “One-Buck Chuck.”
That’s because the low value of the dollar is starting to turn California wines into bargains abroad. 2007 was a vintage year for wine exports, which grew by almost 9% to a record $951 million, the Wine Institute, the industry’s main trade group, said Thursday. California wineries make 95% of the U.S. wine sold abroad. Two large Central Valley companies, E. & J. Gallo Winery and Charles Shaw maker Bronco Wine Co., were among the biggest exporters.
Gallo, the nation’s largest wine exporter, has bottles on the shelves of supermarkets in China and 91 other countries, and Bronco is a big supplier of bulk wine that is bottled and sold in England, one of the largest foreign markets for California vintages.
The volume of U.S. wine sold abroad is growing by an even faster, 12% rate. California wine is now sold in 125 countries. On Thursday, the euro rose above $1.52 for the first time in its nine-year history. Further interest-rate cuts in the United States are likely to keep exchange rates favorable for wine exporters. At the same time, the low dollar helps California winemakers fend off foreign competition in the U.S. Jon Fredrikson, a Woodside, Calif., wine industry analyst, believes there are early signs that the low dollar is starting to pay off for California makers of premium wines.
“American wines are a bargain right now, and that’s showing up with what’s being shipped to Canada, where the value of our wine shipments is up nearly 25%,” he said. But exporters and industry analysts said the rosy numbers masked a more negative truth about the global wine market: There’s a huge trade imbalance.
Though the U.S. sold nearly $1 billion of wine abroad last year, it imported $4.7 billion worth, according to Fredrikson. The U.S. is a target for virtually every other wine-producing nation because it is the most lucrative market in the world, he said. Americans drink about $30 billion worth of wine each year.
High-end California vintners are having trouble breaking into many foreign wine markets abroad, where French labels still carry more prestige, he said. Much of the wine moving between the U.S. and Europe is less expensive bulk wine that companies are purchasing to bottle and market under their own labels. Fredrikson said the trade had taken on a certain irony with “these big ships of wine passing each other at night.”
Vintners, though, are bullish about exports. “We can compete very well with anywhere in the world,” said Joseph Gallo, chief executive of Modesto-based Gallo, the largest winery in the U.S. Constellation Brands Inc. of Fairport, N.Y., which owns the Ravenswood and Robert Mondavi brands, among others, said its sales of California wine grew by double digits through November.
“A lot of growth is happening with better wine at higher price points,” said Jose Fernandez, CEO of Constellation Wines North America. “It’s just not people looking for an inexpensive California Chardonnay.” Fernandez believes the low dollar has enticed overseas drinkers to sample California wine, and “once that happens, they discover that they like the quality of the wine.”