Exchange rate's effects trickling over parts of wine industry

Jim Trezise (be aware this link is almost 3 1/2 years old, but I'm using it because it contains a photo and some background on him) is president of the New York Wine & Grape Foundation and his weekly e-letter often hit topics that interest more than just consumers of New York wines.

Including this one, which was the lead in his weekend missive:

EXCHANGE RATES were one of the major factors in shaping the wine market for 2009, according to industry experts at last week’s Unified Wine & Grape Symposium in Sacramento.

Glenn Proctor of the Ciatti Company and Jon Fredrikson of Gomberg-Fredrikson & Associates both cited the effects of fluctuating exchange rates in stimulating global sourcing of wine by large American companies.  For example, because of trends in the exchange rate between U.S. and Australian dollars, bulk Australian wine became extremely inexpensive and attractive to large American producers.  The amount of imported bulk wine rose 87% over 2008 levels to 25 million cases.

So even though U.S. wine consumption increased 2.1% overall last year, California wine sales dropped 1.6%, the first decrease in 16 years.   This trend is likely to continue and maybe even accelerate since many large wine producing countries—Italy, France, Spain, Chile, Argentina, and even China—are looking to export, and the U.S. is the common target because of its unmatched potential as a wine-consuming country.

There are troubling implications for our friends in the California wine grape industry, who are most directly affected and account for about 90% of all U.S. wine grape production.   They can’t just move their vineyard to another country, or plant some other crop next year, because vineyards are literally rooted in the soil.

The effect on New York growers will be less direct and severe, mostly due to our small size and the proliferation of small and medium-sized wineries, but it will still be felt.   It’s our industry’s example of the phenomenon described in Thomas Friedman’s best-selling book, “The World is Flat.”