The latest stream of economic news out of China has not been positive. Though the consumer portion of China’s economy is reportedly still growing, the engine for the world’s second biggest economy, manufacturing, appears to be contracting. The slower economic growth combined with government reforms on gift giving have hurt the growth of California wine exports to China, with bottled exports showing a 22 percent decline in 2015, according to the Nov. 15 Gomberg Frederickson Report.
Similarly, economic indicators for our neighbor to the north haven’t been stellar. Battered by low oil prices, the Canadian economy has been bumping along, actually contracting somewhat in 2015. The persistent low oil prices and slow growth have combined to drop the value of the Canadian dollar 30 percent against the U.S. dollar in the last two years. While sales of U.S. wine exports to Canada still grew 3 percent in 2015, this market is getting more challenging.
These trends are important, as many California wineries seeking to build export markets for their brands have focused significant attention on China and Canada in recent years. With these potential outlets weakening, shifting focus to the United Kingdom market may offer an alternative export strategy. Growth of U.S. exports to the U.K. increased 15 percent by volume in 2015 and an even more impressive 48 percent by value. While the dollar has appreciated against most currencies in recent years, its value against the British pound is up only 15 percent in the last two years, compared to 20 percent for the euro.
OPEN TO U.S. FINE WINE
The perception of the U.K. wine market has been that it is dominated by large European brands, which has historically been accurate. Even as some California brands have gained market share, the luxury market was still dominated by French houses.
That’s changing. The U.K. market is showing a willingness to try more California wines at the higher end — above £20 (about $28). Wines from Bordeaux, Burgundy and other premium regions in Europe still capture the largest portion of this segment, but U.K. consumers are increasingly open to alternatives. The so-called “cult cabs” of Napa Valley are increasingly well-known and sought after, and this seems to be helping create a pull for other California wines at higher price points.
In considering brands and wines that might work best in the U.K. market, it helps to first look at the market nuances that create obstacles to selling wine in that country.
TOO MUCH SPECIFICITY
Consumers in the U.K. are used to identifying by regions and categories, such as grand cru wines from Bordeaux. The number of very specific American viticultural areas, or AVAs, in California is confusing British consumers. While the wine industry has worked successfully to educate domestic consumers on the difference between a Russian River Valley and Sonoma Coast pinot noir, for consumers in the U.K. the 16 AVAs in Sonoma County is too granular to discern differences.
Also, British consumers have a challenge with the wide swing in varietal labeling. It’s more challenging to understand the difference between a £5 pinot and a £50 pinot when they tend to rely on regional quality markers. For example, nebbiolo varietal wine is labeled as Barolo, after the appellation in the Piedmont of northwest Italy known for that variety.
Vine Notes columns
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