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Foreign Wine Looking for Greater US Market Penetration

PRESS RELEASE 11 April 2017

Rabobank Wine Quarterly Q2 2017:

Foreign Wine Looking for Greater US Market Penetration

The US wine market continues to represent an attractive opportunity for many foreign wine companies, according to the Rabobank Wine Quarterly Q2 2017. However, increasing competition and ongoing wholesaler consolidation, among other factors, make it increasingly difficult for small wineries to penetrate, with a particular complexity for foreign wineries. An increasing number are seeking alternative structures and strategies to deliver greater penetration in the market. Each strategy has the potential to achieve success, but also carries risks and pitfalls.

While the US market has attributes that make it attractive to many foreign wineries, it is also a crowded, complex, and daunting market. The traditional approach for foreign wineries looking to enter the US market has been to identify an appropriate importer, and to work the market with the importer and/or distributors to sell their product. While this traditional relationship is still the most appropriate go-to-market strategy for many wineries and brands, the growing interest of many foreign wineries to build a stronger presence in the US market is leading some to consider alternative or incremental strategies—and there are a growing number of companies emerging in the US that offer various services to meet these needs. Some of these alternative strategies include: contracting importer services, contracting third-party sales support, entering into distribution agreements with large domestic wineries, acquiring a domestic winery, or establishing a dedicated importer. There is no one right strategy or perfect solution—each option has advantages and drawbacks.

Other highlights from the Rabobank Wine Quarterly Q2 2017 include:

M&A activity reflects supply constraints

E&J Gallo recently announced an agreement to buy Stagecoach Vineyard in Napa. Existing supply contracts with other wineries will be honoured, but this acquisition is part of a broader trend that will have important implications for the structure of the industry over time.

Imports continue to skew premium

US wine imports continue to rise and to shift towards more premium offerings. Imports from New Zealand have now surpassed those from Australia in terms of US import value.

Increasing headwinds in the UK

The UK remains one of the most important wine import markets in the world, but suppliers will face increasing headwinds during 2017. The weak British pound and increases in excise duty on wine will create significant margin pressure for suppliers.

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