Premium wine sales pour in California has cornered about 85% of the U.S. market - good for Napa/Solano

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Premium wine sales pour in California has cornered about 85% of the U.S. market for $15-and-up bottles, a study finds.
By David Colker

Times Staff Writer

December 8, 2006

Wine shoppers are plunking down more to drink up, and California is reaping the benefit.

California wines dominate the "premium" category of bottles costing $15 and up, according to a study released Thursday on the economic value of the state's wine industry.

That's good news for the industry because the category is on the rise, said MKF Research, which did the study for the Wine Institute, a San Francisco-based public policy advocacy group for state wineries.

"Fifteen dollars is the new $10," said Barbara Insel, managing director of MKF of St. Helena, Calif. "We used to go in a store and say, 'I'll only spend $10 for a wine for dinner.' Now it's $15."

California has cornered about 85% of the U.S. market for these $15-and-up wines, the study found, based on 2005 sales.

"It's considered an affordable luxury," Insel said.

The state's vintners are commanding higher prices because of agricultural advantages, said wine industry consultant Eileen Fredrikson of Gomberg Fredrikson Associates.

"More and more California winemakers are using sophisticated techniques, but what is really invaluable is the grapes we can grow here," she said. "We have fabulous soil, we have a fabulous climate and we do not suffer the vicissitudes of weather that they can in, say, the Bordeaux region" in France.

On the other hand, California wines are losing out to imports in the under-$8 segment of the market that often attracts younger buyers.

Imports account for about 27% of wine consumed in the U.S., up from 18% in 1998, MKF said. That was about 81 million cases in 2005, up from 40 million in 1998.

The last time imports were as popular was the mid-1980s. In 1985, foreign wines had about 26% of the U.S. market, mostly because a strong dollar made imports cheap, Fredrikson said. Also, foreign wines still had a haughty cachet, especially in New York and other East Coast cities.

"Famous restaurants like Windows on the World had a wine list in 1985 that was 75% imports and 25% Californian," Fredrikson said. "By 1990, that was reversed."

The new wave of imports is boosted by clever marketing, she said.

"It used to be that the wines were in very stuffy-looking bottles with pictures of châteaux," Fredrikson said. "Now it's wildly colored labels that appeal to" children of baby boomers.

The leading importer in 2005 was Italy, according to the report, and Australia was second, largely because of the popularity of its Yellow Tail wines that commonly sell for as little as $5 a bottle. About 8 million cases of Yellow Tail were sold in the U.S. last year.

In the last Wine Institute report, France was second in imports based on 2002 data. It slipped to third in the new study.

The countries with the biggest growth in imports were New Zealand and South Africa, but each represents less than 1% of wine sales in the U.S.

Overall, wine produced in the state poured nearly $52 billion last year into the California economy, the report said. That figure is up 14.5% from the $45.4 billion recorded in 2002, the last time the study was conducted, and includes wine sales, industry wages and money from tourist visits to vineyards and wineries.

david.colker@latimes.com

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(INFOBOX BELOW)

A major industry

A Wine Institute study released Thursday contended that the industry boosted the California economy by $52 billion last year. However, wine production was down from the last such report because of the effect of weather on grape production.
1998 2002 2005
Grape growers 4,400 4,805 4,600
Full-time winery jobs 18,446 26,852 24,851
Winery wages $641 million $1.2 billion $1.1 billion
Bottles produced 2.6 billion 3.1 billion 2.7 billion
Retail value $12.3 billion $15.2 billion $16.5 billion
Source: MKF Research


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