California looking to increase market share

California throws down the gauntlet

The California Wine Institute is upping its challenge for market share in the UK. It hasn’t been said, but it doesn’t take a great leap of mind to think a prime target would be taking market share from Australia.

In the newly named Golden State Wines UK the institute has announced what it gushingly calls a dream team of Justin Knock MW (a former winemaker who has experience in Australia, California, France and Spain) and Damien Jackman (a lawyer who worked for Treasury Wine Estates in the UK and Europe).

Their brief is to increase UK sales to US$400 million ($521 million) by 2020. We asked the CEO of Wine Australia (WA), Andreas Clarke, how WA sees the efforts of the California Wine Institute in the UK. He said:

“As you know, the UK market is an important defend market for Australia. With 23 per cent of the off-trade, our focus is to defend our market share while building demand at higher price points and in the on-trade.

“CGA Strategy figures for on-trade alcohol sales show that sales hit £24 billion [$38.4 billion] for the first time (wine makes up £4.5 billion) and value sales continue to grow, slightly outpacing the off-trade. While still wine volumes are decreasing, there’s an increase in value sales and price per litre has increased 4 per cent. France and Italy have consolidated their market share in the on-trade, now holding 28 per cent and 25 per cent respectively. Australia is placed third and the US is fourth.

“Our thinking is that the Californians are going to continue to focus on plus-£10 wines and will primarily be competing against the French and Italians for market share.

“In the off-trade, in the year ended 8 October 2016, our figures show that the US share contracted 6 per cent and by value to 13 per cent, while Australia’s share contracted 0.4 per cent to 23 per cent. In wines priced £10-£20, Australia has 5 per cent of the 700,000-case market and we are looking to grow this by building awareness and interest in our premium wine offering.”

Clark agrees the two guys have wide experience of the trade in the UK and says it will be interesting to see how the new arrangement works.

Somehow we can’t see California wine increasing sales by US$120 million in the next three years in the £10-plus sector. Clark says it is French and Italian wines that are being targeted. Again we are not convinced.

We have no doubt there will be fierce fighting in the sector but we also think the Californians will be looking at below £10. The UK team has a scrap on its hands and will require support from this end.

Italian trumpet

The Italians are trumpeting that they are in top spot for wine imported into Canada in 2016, but that is in quantity, not value. The stated value is put with an Italian shrug at over C$300 million ($291 million). Is that C$301 million or C$399 million?

The Ambassador to Canada, Gian Lorenzo Cornado, said, “The market is destined to grow, especially in light of the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada signed on October 30.”

Imports of wine into Canada for the year 2015 were:

3-canada-imports

According to the Californian Wine Institute, Californian wines in 2015 accounted for US$461.19 million. At today’s rate of exchange that is C$616.23 million. The point being: Californian wines are the majority of imports.

Re Australian exports to Canada in 2015, according to the Australian Department of Foreign Affairs and Trade: “Two-way trade in goods was $3.9 billion with Australia exporting $1.6 billion in goods to Canada”.

The latest statistics from Wine Australia to the end of September 2016 show Australian exports to Canada increased by 1 per cent in value to $190 million, but declined by 3 per cent in volume to 63 million litres. The average value increased by 3 per cent to $3.13 per litre, continuing an upward trend that has been evident over the past two years.

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