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US 'most attractive' market for premium wine producers, says Rabobank

Published:  09 February, 2015

The United States is the "most attractive major market" for producers targeting premium wine sales, says the latest report from Rabobank.

The United States is the "most attractive major market" for producers targeting premium wine sales, says the latest report from Rabobank.

The bank's Wine Quarterly report for Q1 2015, says wineries are drawing this conclusion as the US "offers both growth and acceptable margins", following declines in the previously identified growth markets of China and Russia.

It says the plummeting demand in China for premium wines in the past two years, prompted by austerity measures, coupled with most suppliers having "profound concerns" over investing in Russia, and a predicted drop-off in that market in 2015, has led suppliers to put the US top of their export priority list.

More than 60% of wine volume growth in the US is at the $9 to $15 range, with the strengthening dollar making the US "even more compelling for many foreign wineries".

But making headway in the US is tricky - 44% of new wine launches in the past two years were targeted at this price range. It is "extremely crowded and competitive", Rabobank states. Also, given California's bumper 2014 crop, in the wake of large 2012 and 2013 harvests, domestic wineries have "ample supply", with an excess in the San Joaquin Valley which is affecting bulk wine imports.

The report also warns that building an effective route to market in the US can be "extremely complicated and stressful".

It says finding the right distributor that "understands the brand, has all the right relationships and has no duplicate brands should be recognised as ideal", but given market "saturation", nigh on impossible to find. Instead the report suggests that producers "be creative in communicating a compelling case for the brand".

Rabobank also warns that in order to manage the risk of brands defecting to larger competitors, importers are seeking some form of long-term commitment from producers. It goes on to say that choosing a smaller distributor to "build a successful track record, then leveraging that success to expand into other markets" can be the way forward.

It also warns that the US market operates a lot on "trust built between two parties". This means spending time building face-to-face relationships, which "can be costly, but is necessary for long-term success".  

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