World Wine Situation

 

Northern Hemisphere

 

European Union

 

The European Union (EU) is the world’s largest producer and consumer of wine, led by France, Italy, and Spain (see table below). The EU has 45 percent of the world’s vineyard area and produces and consumes 60 percent of the world’s wine. European production, wine grape acreage, and per capita wine consumption have been slowly declining over the last decade, although total consumption has increased in certain countries, such as Spain, Italy, and France.

 

The production and acreage declines are due in part to new EU policy reforms. The reforms to the Common Organization of the Wine Market will be implemented on August 1, 2000 to help the EU wine industry adapt to new market conditions. The proposed budget will increase from 661.0 million ECU (roughly the same in U.S. dollars) in EU budget year 1999/2000 to 1.3 billion ECU per year, including roughly 44 million ECU in export subsidies per year. Major changes include replacement of current distillations with a more flexible system that will address such "crises" as overproduction; modification of the EU system of planting and uprooting vines; and EU reimbursements to wine growers for losses resulting from reconversion, uprooting or planting. In addition to these funds, individual member states also provide funds for export assistance (see individual country sections below for more details).

 

In 1998, the EU renewed the U.S.-EU Wine Accords for five years. Under these Accords, the United States obtained temporary derogations from EU restrictions on certain enological practices and from certain cumbersome certification procedures. Meanwhile, U.S.-EU wine negotiations continue but major differences remain. The United States would like to achieve mutual recognition of enological practices approved in either country while the EU prefers to use a positive list of practices. Other negotiation topics include the protection of EU semigeneric/geographic terms, traditional EU expressions (i.e., reserve and amber), labeling, certification, and tariffs.

 

The EU is the largest export market for U.S. wine, and the United States faces steep competition in the EU from new world wine producers, such as Australia, Chile, and South Africa. From 1993-98, the EU’s largest import tariff category was bottled table and fortified wine. Australia was the EU’s top supplier from third countries of this category over this period, followed by the United States, Chile, and South Africa. Australia’s market share by value hovered around 30 percent over this period. In comparison, the United States market share rose steadily to 20 percent over this period, and Chile’s and South Africa’s shares each rose steadily to about 12 percent.

France

France accounts for 12 percent of world vineyard area, 20 percent of world wine production, and 16 percent of world wine consumption. France is forecast to surpass Italy in 1999 as the world’s largest wine producer. French production in 1999 is estimated at 61.7 million hectoliters (hl), an increase of 17 percent over 1998, due to an increase in yield across all regions.

 

French wine exports are forecast to increase 2 percent to 16.7 million hl in 1999. Germany, the United Kingdom, Belgium/Luxembourg, and the United States were France’s top markets in 1998. The financial crisis and large stocks slowed exports to Southeast Asia, however, exports to Japan increased 88 percent to 1.03 million hl. Italy and Spain remain France’s largest suppliers. About three-fourths of France’s wine imports are bulk white table wines.

 

The French government subsidizes the wine sector through the ONIVINS and SOPEXA. ONIVINS administers EU subsidies in France. In 1998, ONIVINS paid approximately $5.1 million in export subsidies. SOPEXA, the French national market promotion agency, markets French food and wine domestically and internationally through a combination of government and industry funds. Its 1998 budget was approximately $10 million.

 

Italy

 

Italian wine production is estimated at 57.4 million hl in 1999, a 2-percent increase over 1998, due to overall favorable weather conditions. Italian vine area has continuously declined in the past two decades due to the vine uprooting program under the EU legislation and was reinforced by the new Common Agricultural Policy which prohibits new planting but allows for limited re-planting aimed at the production of higher quality wines.

 

Italian wine exports increased 9 percent to 15.2 million hl in 1998, and are forecast to remain stable in 1999. Germany, France, the United States, and the United Kingdom are the top export markets. Italian imports increased 34 percent to 863,000 hl in 1998 mainly due to expanded imports of inexpensive French and Spanish wines.

 

Italy provides export promotion assistance funds. The Italian Trade Commission, an agency of Ministry of Foreign Trade, provides the only wine specific program, and allocated approximately $380,000 in 1998. Also, the Ministry of Agriculture funds food and beverage promotions, of which approximately $2.5 million was spent on wine in 1999.

 

Spain

 

Adverse weather conditions have decreased Spain’s 1999 wine production 3 percent to 32.5 million hl. Dryness affected certain key producing areas and frost reduced crops in Rioja and Navarra, while Ribera del Duero and other leading areas had bumper crops.

 

Despite increased prices, exports increased 12 percent to a record 11.2 million hl in 1998. About 75 percent went to other EU countries, 7 percent went to the United States, and 5 percent to Switzerland. Imports rebounded to 922.8 million hl, mostly from the EU, Chile, Argentina, and the United States.

 

The Spanish Foreign Trade Institute is responsible for diversified government-funded foreign market promotion programs. In 1997, Spain spent approximately $29.2 million in EU export subsidies.

 

Germany

 

The 1999 harvest provided a bumper crop of approximately 13 million hl of wine must in 1999, a 22-percent increase, due to perfect growing conditions. This should replenish stocks and market shares that were lost due to low 1995-97 harvests.

 

In 1998, Germany imported 12.2 million hl and exported 2.5 million hl. Also in 1998, imports exceeded production by 1.4 million hl, as a result of the low 1995-97 harvests. The majority of imports came from Italy, France, and Spain. The U.S. has a very small market share in volume but a significant share in value terms. The U.S. exported $35 million in wine to Germany in 1998, most of which was red wine. The trend for U.S. exports is increasing as Germans increasingly prefer high quality wines.

 

The German Wine Institute markets wines internationally through contributions paid by the industry and proceeds from its own business. Its annual budget totals approximately $11.5 million.

 

Portugal

 

Portugal’s 1999/2000 wine production is estimated at 5.5 million hl, a 60-percent increase over the exceptionally poor 1998/99 output. A recent moderate increase in vineyard area will increase output potential.

 

Portugal is traditionally a net exporter. However, due to the low 1998/99 production, 1999 wine exports are estimated at 1.8 million hl, a 50 percent drop over 1998, and imports are estimated at 2.1 million hl. Due to the recent higher production, exports are expected to rise to 2 million hl and imports are expected to decline slightly to 2 million hl in 2000.

 

United States

 

U.S. wine production is estimated at 20.7 million hl for 1999, up 1 percent from the previous year. La Nina helped create an exceptional vintage with its long, cool growing season which concentrated flavors in the grapes. In February 2000, the California Department of Food and Agriculture estimated the 1999 crush at 2.9 million tons, up slightly from a year earlier, but experts think it will fall short.

 

In 1999, exports of U.S. wine and wine products (including cider, fermented beverages, and must) reached a new record at 2.8 million hl, up 4 percent ($540.9 million, up 2 percent) from 1998. Bottled grape wine accounted for 78 percent of the total by value. Robust foreign demand, market promotion efforts, recovering international economies, and reports of favorable health effects associated with moderate wine consumption all fueled U.S. wine exports.

 

The export base for U.S. wine and wine products is expanding. In 1999, the top export markets were the United Kingdom, Canada, and Japan. Japan slipped back into third place, due to large stocks going into 1999. The most impressive gains were South Korea at $2.7 million (up 128 percent), China at $2 million (up 247 percent), and Finland at $3.3 million (up 14 percent). Finland is one market where there is renewed interest in U.S. wines. For the first time, U.S. wine industry representatives plan to use Market Access Program funds to participate in the ViiniExpo Trade Show scheduled in Helsinki in March 2000.

 

(The FAS Attache Report search engine contains reports on the wine industry for more than 13 countries, including France, Italy, and Spain. For information on production and trade, contact Shari Kosco at 202-720-9792. For information on marketing contact Yvette Wedderburn Bomersheim at 202-720-0911.)

Last modified: Wednesday, February 20, 2002