Historically, we tend to think of countries such as France, Italy and Spain as leading producers and consumers of wine. But in fact, the United States overtook France as the world's leading wine consumer in 2011.
At the same time, the United States ranks 53rd when measured on a per capita wine consumption basis, at slightly less than 13 bottles per person. In other words, Americans as a whole drink a lot of wine, but on our own we could be drinking a lot more. As it is, demand is outpacing domestic production, particularly in light of the shortage of grapes and bulk wine available on the market. It is no surprise that a considerable number of European, South American and Australian wine companies are focused on accessing the United States' wine market, with its tremendous potential for consumption.
If we review sales activity over the past 18 to 24 months, we can see how the role of foreign investment in the U.S. wine industry has evolved. Broadly speaking, there are three general categories of foreign investment in the United States wine market from which to gauge activity: "strategic"; "financial"; and "lifestyle" investments.
Strategic investors are motivated by a desire -- usually on the part of a foreign wine producer -- to access wine distribution channels in the United States. The large wine producers of the world recognize that the U.S. is an important market; however, it is also one of the most difficult markets to penetrate. They often find it easier to own an American brand or winery than to try and import their wines without any local presence. The development or acquisition of a domestic brand can boost a foreign wine producer's relevance in the three-tier system, as well as create a sales and marketing avenue to channel imported wine products into the U.S. market.
A prime example of this is Chilean producer Concha y Toro's acquisition of Fetzer Vineyards in 2011 for $238 million. With the purchase of Fetzer, Concha y Toro obtained a brand with over 3.1 million cases in sales and significant vineyard holdings in Mendocino County and Paso Robles. In doing so, not only did Concha y Toro gain a stake in the rising tide of California wine, but also they were able to leverage an existing sales and marketing platform to strengthen the company's presence in one of their primary export markets.
In 2011, Boisset Family Estates made two key acquisitions of California winery assets. In April, Boisset acquired Buena Vista, expanding upon its growing portfolio of North Coast brands. Six months later, the Burgundy-based company acquired Lockwood Vineyards, a well-known Central Coast brand with annual sales in excess of 75,000 cases. Boisset, which had established a presence in the United States with its prior acquisitions of Lyeth, Deloach Vineyards and Raymond Vineyards, was able to expand its varietal and geographic diversity on an existing business platform. By increasing its clout in the domestic market, the company's imported wines stand to benefit as well.
Similarly, Lion Nathan, a subsidiary of Japanese parent Kirin, acquired MacRostie Winery in 2011, in order to add a California brand to its limited United States portfolio. Lion Nathan already owned Argyle, a small winery based in Oregon's Dundee Hills region. Here again, this purchase was mostly about expanding the geographic diversity of the company's existing presence in the United States market -- a platform from which it sells imported wines from Australia and New Zealand.