Avenue Vine

The U.S. wine market is stronger than ever and will surpass France as the largest wine market in the world by the end of the decade, industry analysts forecast Wednesday.

"From the perspective of 3½ decades in the wine industry, I can assure you right now that things have never been better in this market and the future looks outstanding," Woodside wine analyst Jon Fredrikson said in a speech at the Unified Wine & Grape Symposium in Sacramento, the largest wine conference in the United States.

His closely-watched report indicated 2005 was a stellar year for U.S. wine market, reaching record volumes and sales as Baby Boomers and 20-somethings bought more - and more expensive - wine.

Americans purchased an estimated 300 million cases of wine last year, worth more than $25 billion, both of which are records, Fredrikson said.

If Americans continue their love affair with U.S. and imported wines, the United States soon could surpass France and Italy as the world's largest wine market. Wine consumption in France and Italy is still far higher per capita than the United States, but it has been steadily sliding in both nations.

"If we continue to grow at just 3 percent through the end of the decade, we will be the largest wine consumer nation in the world," Fredrikson said.

The news was reassuring to winemakers like Stephen Lindsay, general manager of Adler Fels Winery in Santa Rosa, who is hoping to grow the winery's popular Leaping Lizard and Big Ass Cab labels.

"I was very encouraged," Lindsay said. "They say a rising tide lifts all boats."

The strong market also should be good news for consumers as fierce competition and low grape prices here and abroad have increased the numbers of good, inexpensive wines on the U.S. market, Fredrikson said.

The upbeat report is particularly welcome news because California's 2005 grape harvest was far larger - as much as 25 percent by some estimates - than predicted. The huge harvest raised fears about a return of a grape glut in the state, which triggered price wars that drained profits from 2001 to 2004.

"Let's not panic over the '05 crop," said Nat DiBuduo, head of Allied Grape Growers, the largest grower's trade group in the state. "We're going to get through it."

Indications are that the 2006 crop should be smaller, helping even out the supply, DiBuduo said. Combined with strong demand and no significant new acres of grapes coming into production in the state, DiBuduo said grape prices should continue to rebound.

While California wineries are well positioned to take advantage of this growing market, their success is by no means assured. Competition from other states and imports is stronger than ever, Fredrikson said.

Sales of imports grew nearly three times as fast as California wines sales, accounting for more than half of last year's increase.

Wine drinkers bought an estimated 187 million cases of California wine last year, 6.5 million more than 2004 and a 4 percent increase.

They bought 8.4 million more cases of imported wine than in 2004, soaring to 81.5 million cases, an 11 percent increase.

But while Americans are drinking more Italian, Australian, New Zealand, German and South African wines, those countries aren't drinking more U.S. wines. For the first time in more than 20 years, U.S. wine exports dipped last year.

U.S. exports, which account for 17 percent of total California volume, fell 3 percent to 38 million cases, Fredrikson said. While the dip is troubling, it may be an anomaly, tied partly to Diageo moving production of its Blossom Hill label from California to Italy to be closer to the European market.

A host of factors are behind the increasing strength of the U.S. market.

The popularity of the movie "Sideways" continues to boost pinot noir sales and dog merlot.

"It made wine tasting and going to Wine Country a great adventure," said Barbara Insel, with MKF Research in St. Helena.

Another factor is "the graying of America," Fredrikson said. Baby Boomers have money and they are spending more money on wine as their palates are becoming more refined, he said.

The sheer number of drinking age adults in the United States is growing as well, from 164 million in 2000 to an estimated 184 million in 2010.

Fredrikson also singled out Sonoma's Don Sebastiani & Sons as his winery of the year for 2005, citing its strong sales growth, up 35 percent to 1.4 million cases.

Sales of the winery's Smoking Loon and Pepperwood Grove wines were up 69 and 75 percent, respectively, while its other brands, such as Screw Kappa Napa, showed the kind of creativity and humor the industry needs to become a more approachable beverage, he said.

Source: “U.S. forecast to become world's No. 1 wine market,” Kevin McCallum, The Press Democrat, January 26, 2006