Geography and demography:
Capital: Washington
Area: 9,631,000 km2
Population: 295.3 million people
Unemployment: 4.7 % (April 2006)


Politics:
System of government: Federal Republic
Head of state: George Walker Bush


Economy:
Currency: US Dollar $1 = €0.8 (April 2006)
GDP: $12.41 trillion (2005), + 4.8 % in 2006
GDP per capita: $42 000 (2005)
Exports: $0.93 trillion (2005)
Imports: $1.73 trillion (2005)

	Quantity	Share of Market	World Ranking
Area	415 000 ha	5.2%	6th
Production	20 770 000 hl	7.8%	4th
Consumption	20 970 000 hl	8.9%	3rd
Imports	6 018 000 hl	8.7%	3rd
Exports	3 293 000 hl	4.5%	6th

The biggest selling wines on the American market are as follows: Chardonnay, Merlot and Cabernet.

As of February 2006 these three grape varieties constituted 51% of sales or 43% of total production volume in the USA. Chardonnay is always the most popular white wine with 21.5% of sales in volume whilst the highest selling amongst the red grape varieties is Merlot with 11.8% of volume sales.

The ten highest selling grape varieties (in decreasing order) are
– Chardonnay, Merlot, Cabernet Sauvignon, Zinfandel blanc, Syrah/Shiraz, Sauvignon blanc, Pinot Noir, Zinfandel and Riesling
– represent cash sales of 81% in total.

The ten most popular grape varieties based on market share, in volume
52 weeks up until February 2006

Source : AC Nielsen Study, 2006

Evolution of the market share of the ten most popular grape varieties, in volume

Wine : the preferred alcoholic drink of the American people

Consumption of red wine in the United States has increased steadily since 1991 following a number of articles which reported the favourable health effects of drinking wine in moderation. According to estimates by the “Wine Institute”, in 2005 the American public consumed over 23 million hectolitres of wine. During the same year a Gallup survey showed that wine was the preferred alcoholic beverage of the American people.

The US is the third biggest national consumer of wine behind France and Italy, but if the trend of increasing consumption continues, America will become the biggest global wine consumer within two years.

Several factors contribute to this increase in consumption:
- According to Robert Koch, President and Director of the Wine Institute, “[in the United States] the image of wine in the eyes of the consumers, the media and the government is the most positive that it has been for years."
- In May 2005 the Supreme Court ruled that wine producers could sell directly to consumers all over the United States. This decision not only benefited American wineries, but also favourably influenced public-opinion and public-knowledge of wine.
- The big success of the film “Sideways” (the story of two men's passion for Californian reds) contributed to the popularity of wine in the US. The resulting effect: a 70% boom in supermarket sales of Pinot Noir in 2005.
- Demographic evolutions have enlarged the American market for wine. The adult population (aged between 21 and 65) has grown by 15 million since 2005. So-called “echo boomers”, the grown up children of the “baby-boomer” generation, are increasingly adopting wine as part of their lifestyle.

Evolution of wine consumption in the United States

Source : Adams Beverage Group
(*) 2005 estimate by Gomberg, Fredrikson & Associates

Consumption per capita increasing but staying relatively weak

Per capita, the consumption of wine has slightly increased since 1990 reaching 10.48 litres per annum in 2004. Though the total is but a fraction of figures for the other large wine markets: French and Italian wine drinkers consume 48.45 litres and 47.31 litres respectively per person, per annum.

Evolution of wine consumption per adult

Source : Wine Market Council, 2005

In 2005 “regular” consumers of wine, who represent only 14% of the market, consumed 87% of the total volume. In other words, the consumption base is quite small. Between 2000 and 2005 however, the number of “occasional” wine drinkers increased by 26% whilst regular wine drinkers increased by 38%.

The different types of wine consumers

The figure for total American wine imports in 2005 was 7 million hectolitres, representing a value of 3 billion euros. This was a rise of 11% in volume and 10% in value on the previous year. 27% of the wine consumed in 2005 was imported, a steady increase in the three years since 2002 when imported wine took 24% of the market share. Italy is the country which exports the most wine to the US, selling over 2 million hectolitres of wine in 2005, an increase of 9.2% on the 2004 figures. The second biggest exporter is Australia followed by France, Chile and then Spain.

Evolution of wine imports (in volume)

Source : International Trade Administration, US Department of Commerce, 2006

When measuring imports with the US in terms of value it is France who is the leader, having exported wine to the value of €870 million in 2005. This represents a rise of close to 6% on the figures for 2004. For sparkling wines, France is the country which exports the most to the US retaining a 45% share of the market, whilst Italy is ranked second with a market share of close to 30%.

Evolution of wine imports (in value)

Source : International Trade Administration, US Department of Commerce, 2006

Exports of American wine hit 3.84 million hectolitres in 2005, with a value of $658 billion (€518.3 billion), of which 95% originated from California. Provisional figures of exports for the same year reveal a decrease of 17% in value and 16% in volume according to the US Foreign Agricultural Service. These results come after impressive increases in 2004 of 28% and 29% in value and volume respectively.

This decline in exports resulted from an economic situation which did not facilitate export sales:

- Commercial changes in Europe allowing European producers to transport their products en masse, as opposed to in bottles, thereby reducing costs.

- The rise of the American dollar against the euro.

Exports of American wines

Source : Wine Institute, 2005
(*)Totals for 2005 are estimates

Over 60% of exports of Californian wines go to the European Union despite the trade barriers that exist. The strong performance of American exports over the past ten years is in a large part due to the efforts of the wineries who have successfully established their labels in the major markets. In addition, the high quality and precise image of the Californian wines has enabled them to maintain their sales.

The United Kingdom, the premier export market

The United Kingdom is not only the world’s most important wine importer, but it is also the most important market for American wine exports. American exports to the UK have seen a growth of 41% in value and 20% in volume between 2003 and 2004. The Californian wines, in particular, are well established in the UK market; today, one in seven bottles of wine brought in the UK originates from California. This popularity is explained by the promotional presence of commercial publications as well as the quality and diversity of Californian wines available in the UK.

Source : Wine Institute, 2005

International buyers prefer the Californian labels, which represent 78% of sales valued at €460 million. Bulk wines have increased steadily since 2000 and amount to €40.4 million. Sparkling wines amount to €34 million, still wines €34 million, and sweet wines and others at €24 million.

The “Vitis Labrusca” is a wild vine which was widespread on the American continent before the arrival of the first colonists. It was supplanted during the 19th century by more famous grape varieties which belonged to the Vitis Vinifera family. Wine-growing was started by French monks who produced wine to celebrate mass. Father Junipero Serra created the first mission in 1769 in San Diego, the first in a line of twenty-one which stretched along the length of California. These monks were the first to develop sweet wines and brandies (cognac, brandy etc…) on the North American continent. The wine growing pioneers came from such diverse countries as France, Germany and Hungary. Starting in the 1850s they introduced more than one hundred European grape varieties. At the end of this period the Gold Standard allowed the installation of a commercial wine industry in California as “gold fever” brought with it “wine fever”. After a short period the area covered by vine plantations more than doubled, by 1862 the number of vines had reached eight million. The combination of a phylloxera epidemic in the second half of the 19th century, followed by prohibition between 1919 to 1933, destroyed many of the vineyards that had become established. It was not until the end of the sixties that the large “wineries” began to develop. Today, wine growing leads in the Californian fruit market.

California produces 95% of American wines.

Production is concentrated in the following regions:

- The Napa Valley (18,600 ha) is the most important American wine-growing region and is one eighth the size of the Bordeaux region. Situated to the north of San Francisco and bordered on two sides by mountains, it stretches about 48 km. The region enjoys a maritime climate meaning cool nights and hot days. The soil is deep but not excessively fertile, this lends the wines produced here their particular intensity, complexity and balance. What’s more, the soil is volcanic and as a consequence, highly porous. The region consists of appellations or AVAs (American Viticultural Areas) named in order to distinguish between the different localities. There are sixteen AVAs in the Napa Valley: Atlas Peak, Chiles Valley, Diamond Mountain, Howell Mountain, Los Carneros, Mount Veeder, Napa Valley, North Coast, Oak Knoll District, Oakville, Rutherford, St. Helena, Spring Mountain District, Stags Leap District, Wild Horse Valley and Yountville. Although the Napa Valley only comprises 4% of the total volume of wine produced in California, in value, the sales of Napa Valley appellation wines represents more than 25% of Californian wine sales. Moreover, the impact of the Napa Valley wine industry on the local economy is such that it provides 50% of total employment in the county and generates just over $800 million (€630.4 million) in taxes.

- Sonama, (20,000 ha) considered to be the “Provence of California”, is situated to the north of San Francisco parallel with the Napa Valley. Between the rugged Pacific Coast to the west, and the rough hillsides and mountains to the east, Sonama offers a magnificent landscape. The region possesses a wine-growing area which is almost identical to the Napa Valley but consists of fewer wineries. The climate is hot and the soil is rich and deep. Sonama encompasses 14 AVAs: Alexander Valley, Bennett Valley, Chalk Hill, Dry Creek Valley, Knights Valley, Los Carneros, North Coast, Northern Sonoma, Rockpile, Russian River Valley, Sonama Coast, Sonama County Green Valley, Sonama Mountain and finally Sonama Valley. In the county of Sonama, the wineries ensure business figures of $2.1 billion dollars (€1.66 billion). All together, the wine sector and its impact on the local economy represents an annual turnover of $8.2 billion (€6.47 billion). The industry provides 35,000 jobs which represents close to 19% of the total workforce in the county.

- Monterey vineyard (18,300 ha) is the third largest in California. Its climate is hot in the summer yet foggy and fresh in the winter. The region boasts ancient soil, from the slopes of the Carmel Valley to the hills of the Salinas Valley. Monterey constitutes a diverse range of areas spread between nine AVAs : Arroyo Seco, Carmel Valley, Central Coast, Chalone, Hames Valley, Monterey, San Bernabe, San Lucas and the Santa Lucia Highlands.

- Mendocino County (6,300 ha) is the most northern vineyard in California. It is situated on the Pacific coast and subject to an oceanic, Mediterranean climate. The soil is alluvial and very often includes important layers of clay. Mendocino County totals nine AVAs : Anderson Valley, Cole Ranch, Dos Rios, McDowell Valley, Mendocino Ridge, North Coast, Potter Valley, Redwood Valley and Yorkville Highlands.

- Lake County (2,300 ha) to the north of the Napa Valley and to the east of Mendocino County is situated around “Clear Lake” which exercises a moderating influence on the temperatures and the humidity of the vineyard. The humid air heads for the hills in the heat of the day and returns to the lake during the night. This effect stabilises the climate, which is similar to a coastal climate but without the low temperatures and strong humidity which can occur in coastal areas. The soil is of a volcanic nature very similar to the Napa Valley. The region consists of six AVAs : Benmore Valley, Clear Lake, Guenoc Valley, High Valley, North Coast and Red Hills.

- San Francisco Bay (1,600 ha) is a relatively small wine-growing region which benefits from a hot climate and stony soil. There are just four AVAs in the area : Livermore Valley, Santa Cruz Mountains, Santa Clara Valley and Contra Costa Valley.

- The Central Coast region (9,900 ha), with one part located to the north of Santa Barbara County, has a climate which tends to be warmer. Paso Robles is the best-known AVA in this area, but that’s without forgetting the others : Arroyo Grande, Central Valley, Edna Valley, Santa Marie Valley and York Mountain. The other part of the Central Coast region, the county of Santa Barbara, is exposed to cool winds coming in from the sea. The AVAs located here are : Central Valley, Santa Maria Valley and Santa Ynez Valley.

- Southern California (1,400 ha) is located to the south-west of Los Angeles and includes two AVAs : Cucamonga Valley and Temecula.

- The Sierra Foothills (1,400 ha) at the foot of the Sierra Nevada mountains boasts well exposed hillsides, an altitude of around 600 m and a dry climate. The two AVAs are: California Shenandoah Valley and the Sierra Foothills.

 See a map of the wine growing regions in California

Source : www.ca-homes.com

California produces over 90% of total American wine output. The industry plays a very important role in the state economy having an economic impact of €35.5 billion and generating 200,000 jobs. In addition, the grape of Californian wines is classed amongst the five best agricultural products in terms of revenue.

Grape production

The grape harvest for 2005 was 3.39 million tonnes, the biggest harvest in state history, representing an increase of 35% on 2004. Red grapes counted for 59% of the harvest whilst the white grape varieties represented 41% of the total.

Grape production ('000 000 tonnes)

Source : California Department of Food and Agriculture, 2005

The record results of 2005 arrived after two previous years of quite light harvests, this rise in production can be attributed to a number of reasons:

- The rain during the springtime and at the beginning of the summer encouraged vigorous growth.

 - The size of the berries was an important factor; the long and cool season encouraged slower growth, therefore a greater tonnage was generated at the end of the season.

- Equally, several innovative wine-growing techniques contributed to the enormous harvest.

- Unlike previous harvests, the gains in the 2005 harvest were due completely to an increase in productivity rather than to the rapid plantation of vines. According to American wine industry experts, 2005 was unusual in that no one predicted these results. What’s more, they predicted that this enormous harvest could have a lowering effect on the prices of the 2006 vintage of white and red wines once they arrive on the market.

Wine-growing areas

In 2004, Californian wine-growing areas increased to 207,000 hectares of which 16,000 did not produce. During the ten previous years, vine plantation was regular and relatively sizable, which permitted Californian wine-growers to expand in a constant manner between 1995 and 2002. Since then, there has been a constant and steady decrease in the total growing area; however, good management by wine-growers has prevented a decline in crop yield.

Total wine growing area and yields per hectare

Source : California Department of Food and Agriculture, 2005

Grape Varieties

At the present time there are 38 white grape varieties and 65 red grape varieties in California. Chardonnay is the most cultivated variety since it accounts for 19% of the production, next up is Cabernet Sauvignon, then Zinfandel and Merlot. At price level, Chardonnay increased by 4% between 2003 and 2004, to reach €503.50 per ton, whilst the Cabernet Sauvignon saw a fall of 3% (€709,46). The price of Zinfandel reached €343,69 after a growth of 11% the previous year and the price of Merlot was almost unchanged at €580,14 per ton.

Main grape varieties

California has seen its wine industry grow remarkably since the beginning of the Nineties. The income of the vineyards more than doubled between 1991 and 2001 due to a consumer preference for top-of-the-range wines. This tendency was boosted by a strong economy and an increase in incomes. To these factors, we can add the favourable reports on the health effects of moderate consumption (the French-paradox), as well as the succession of great years for the Californian wines. All in all, wine currently has a very positive image within the eyes of the consumers, which has led to a strong performance in the sales of Californian wine.

Sales of Californian producers

Source : Wine Institute, 2006

The total volume of Californian wine sales in 2005 increased to twenty-million hectolitres, an increase of about 2% on the previous year. The “Premium” wines (over €5.6 a bottle) sold 13% more than in 2004, representing 35% of total sales, and 66% of revenues. The strong growth of this segment can be attributed to the interesting labels and the innovative and attractive packing. The sales in food stores has reflected this good performance by top-of-the-range wines, the latest results showing impressive increases. For the second consecutive year, the sales of red wine were slightly higher than those of white wine (41.7% against 41.0%), while the share of market of rosé wine was 17.4%.

Sales of Californian wines by category (price per bottle)

Legislation with regard to the sale of wines in the United States is established in each state, under the name of Direct Wine Shipments. Indeed, each State has the legal right to control the sales and the distribution of alcoholic beverages inside its borders. After the abrogation of prohibition (1920), each state created its own system of regulation for alcoholic drinks. These various systems were influenced by the interests of the local economy and the regional political attitudes. This led to a diversity of stricter and more flexible laws. Since the 1st January 2006, California has put in place a licence system for wineries which sell directly to consumers. Non-Californian wineries must pay a tax and fill a form in order to be able to deliver directly to consumers in the state of California. The Californian wineries do not need to meet these requirements.

Wine-growing and legislation:

The AVAs (American Winegrowing Areas)

Wine-growing regions are similar to appellations however, they are not all solely wine-growing areas. Indeed, an appellation can be the name of a region, a state or a county. The AVAs are hybrid appellations. The size can vary from very small to very large. In terms of quality, there can be no guarantee that the wine label of one AVA will be better than another, even one without label.

In California, there currently exists about 915 commercial wineries and more than 4,400 grape growers. About half of these sell less than 5,000 cases (45.000 litres), and the twenty-five biggest vineyards sell 90% of total Californian wine sales globally. As for the wineries in detail, the US has more than 4,700 in total, including almost 1,400 “virtual” wineries. 52% of these wineries are to be found in California (2,445, including 840 “virtual”), this is an increase of 33% on the previous year.

Wine Institute

This institute is tasked with initiating and recommending to the States, federal or international public policy, in order to improve the environment for the responsible consumption and enjoyment of wine.

Address : 425 Market Place, Suite 1000 San Francisco, CA 94105 Tel : (415) 512-0151 Fax : (415) 442-0742 E-mail : webmaster@wineinstitute.org Website : www.wineinstitute.org

Wine Business

The principle supplier of information and services for all of the wine industry.

Address : 110 W Napa St Sonoma, CA 95476 Tel : 707-939-0822 Fax : 707-939-0833 E-mail : info@winebusiness.com Website : www.winebusiness.com

Wine Market Council

This is an association of individuals and organisations within the field of wine-growing designed to develop, consolidate and stabilise the wine market in the US. Its role is to study consumption habits and support the implementation of marketing initiatives with the goal of promoting moderate wine consumption.

www.winemarketcouncil.com

AVA (American Vintners Association)

The AVA is responsible for the perception of the public and the business environment of American winegrowers. It oversees the development of these environments through marketing and communication. In short, the AVA is the wine-grower’s representative to the national government.

Address : 1200 G Street, NW Suite 360 Washington, DC 20005 Tél : (800) 879-4637 Fax : (202) 347-6341 E-mail :info@americanwineries.org Website :www.americanwineries.org