Opportunities and challenges of exporting wine to US market

US are a fundamental destination market for premium-price wine, but also a complex and highly competitive market in terms of distribution channels


Food&Beverage United States of America Foreign markets International marketing International marketing

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US imports of bottled wines and sparkling wines have experienced a dynamic growth since the beginning of the century. The 2018 results were placed along this growth path; in particular, in the year just ended, the US import of the sector reached $ 6 billion, with a year-over-year increase of +5% for bottled wines and +8% for sparkling wines.

The undisputed market leadership is held by European exporters, the main partners of the American market, thanks to the winning performance of France and Italy, as documented in the following graph.

Main US trading partners for wine sector (2018, million $)
Horizontal Bar - Main US trading partners for wine sector
Source: ExportPlanning.com

For the segment of sparkling wines France dominates the market, with a share of 46% in the average of 2018, followed by Italy with a 35% stake; in the segment of white and red bottled wines, Italy is the first foreign US partner, thanks to a market share of 28%.
The predominant part of European exports is made up of quality wines marked with designation of origin and protected geographical indication.

Composition of US imports of wine from the EU (2018)
Pie - composition of US imports of wine from the EU
Source: ExportPlanning.com

The available results show the strong preference of the market for high quality products, pointing out several opportunities for wine exporters. However, for an exporter it is essential to combine the analysis of the opportunities offered by the market with the study of the accessibility factors that the market presents.

On the theme of the accessibility of the US market, a small and medium-sized company faces mainly two issues relating to the distribution theme:

  • alcohol distribution rules in the USA;
  • the strong concentration of distribution chains.

American law provides for the tripartite distribution system on three levels, the c.d. Three Tier System: an alcoholic product arrives to the consumer only after passing three different steps. The first level includes the sale of the producer to the importer, who in turn resells the product to the distributor. At the third level, retailers (eg wine bars, grocery stores, restaurants, bars) buy the international or national product from wine distributors. You can think of the US market as a series of doors to cross: the first door is the import solution, the second door is a distribution solution and the third door is the retail sales solution. In this context, the strong concentration of distribution chains (consider that the first seven distribution chains focus on themselves over 50% of the market) and the length of the distribution chain have a significant impact on the price charged to the final consumer.
Given the distribution mechanism and the high level of market competition, it becomes highly strategic to focus on a strong differentiating strategy, able to "tell a story" behind the brand.

Encouraging wine exports to the USA

One of the best practices in entering the US market in a sustainable manner is to aim to be present in 5 or 10 American metropolitan areas that are not yet saturated. A good strategy is therefore to identify metropolitan areas with good sales potential, where, however, wine sales are still underdeveloped and the competition is relatively low: in this way it will be easier to stand out from the competition.
Investing in a limited number of metropolitan areas also allows more complete analysis, studying and evaluating the reception of the product more precisely.

For this purpose, European SMEs can benefit from incentive policies for the wine sector : for example, the WTO funds. These incentives are based on Community rules that aims to encourage the export of European products. The WTO loans concern grants amounting to 40%, assigned to over 80% of wine producers who want to export.
A recent work by the European Commission has pointed out that the WTO measures proved to be fundamental in supporting European producers to respond to the new international demand trends, thanks to the support of quality production and key competitiveness factors, such as production processes, bottling and marketing.

The USA represents a destination market of fundamental importance for European wine exports, but it is necessary to keep in mind that it represents also a complex and highly competitive market; therefore only a strategic approach can guarantee positive long-term results.