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Richard M. Castaldi, Ph.d.
Professor of Management
(415)338-2829
castaldi@sfsu.edu
Murray Silverman, Ph.d.
Professor of Management
Sanjit Sengupta, Ph.d.
Associate Professor of Marketing
San Francisco State University
College of Business
1600 Holloway Ave
San Francisco, CA 94132
June 2001
Forthcoming in the International Journal of Wine Marketing, 2002
Keywords:
Export Assistance Needs
Wine Industry
Globalization
International Trade
Export Intermediaries (Public and Private)
The authors gratefully acknowledge a Business and International Education (BIE) grant from the U.S. Department of Education and a matching grant from the College of Business at San Francisco State University in support of this research.
In the Spring of 2000, questionnaires regarding the export assistance needs of all 1012 wineries in California, Oregon, Washington and Idaho were mailed. These surveys, one for current exporters and one for non-exporters, were based upon over 25 in-depth interviews with wine industry executives and export service providers. Each questionnaire included a section specifically designed to identify and prioritize the assistance needs of exporters and non-exporters. The robust 24% return rate enhances the validity of the survey results.
Among current exporters, information regarding competitors, consumers and distributors in specific export markets represent five of the six most highly valued assistance needs. Assistance in finding distributors and agents are especially important to inexperienced exporters and those dissatisfied with their current export program.
Non-exporters place priority on training and assistance in understanding the fundamentals of developing a successful winery export program. Finally, both exporters and non-exporters give high priority to learning about the export experiences of other wineries which they feel will help improve their own international trade endeavors.
The US wine industry is in the midst of a radical transformation which will dramatically alter the landscape of the industry. Until a few years ago the US wine market was largely a domestic industry, with some imports from France, Italy and Spain competing with US wineries. Recently however, imports have risen to 20% of the US market share, which is seven percentage points above where it was in 1995 (Love, 2000). This has been fueled by the tremendous inroads made by Australian and Chilean wines, in particular, into the US market.
Moreover, the US has only 4.2% (by volume) of the world export wine market, while producing 8% (by volume) of the wine produced in the world (Wine Institute, 2000). Furthermore, the US wine industry exports only 13% of the wine it produces, while other countries have more intensely developed their export markets. For example, France, Italy and Spain all export more than 25% of the wine they produce, Australia exports over 40% and Chile over 80% of their production (Wines and Vines, 1999). One might argue that these countries export more intensely because of the small size of their domestic market. While this may be true, US wineries run the risk of losing market share at home to those exporters who have been making inroads into the US market. A continued focus on the domestic market may place the US wine industry at a long-term disadvantage in developing the requisite skills for competing in the increasingly competitive global market place.
The forces of globalization have arrived as evidenced by the wine industry consolidation (e.g. Foster’s, an Australian beverage company, recently acquired Beringer, a California winery), a maturing and increasingly competitive domestic market and the move to a more professional (versus family) style of management for many US wineries. The February 2000 naming of Lewis Platt (former Chairman and CEO of Hewlett Packard) as CEO of Kendall-Jackson winery provides an appropriate example. How effectively the US wine industry transforms itself into a strong global player is yet to be determined. To this end, this applied research study will identify and prioritize the export assistance needs of US wineries.
To begin to understand and assess the export assistance needs of US wineries field interviews were conducted with key industry executives, export program managers, winery association personnel, domestic and foreign agents, and distributors along with other experts in the wine community from August to December of 1999. A partnership with WineVision, an industry-wide initiative, which has as one of its goals, “to facilitate broader and easier US wine community distribution to global markets”, was also formed during this time frame.
The insights gained from the 25 industry-related interviews, along with a thorough review of exporting and wine-related literature, provided the foundation for the survey instruments that we developed. Each questionnaire included a section designed to identify and prioritize the exporting needs of wineries that currently export as well as those who do not yet compete in the global marketplace.
A 1999 directory of US wineries compiled annually by “Wines & Vines” (1999) was used to generate the sampling frame. A list of all the wineries in California, Oregon, Washington and Idaho was identified. These 1012 wineries account for well over 95% of the wine produced and exported by US wineries (Wine Institute, 2000). Beginning in January, 2000 the survey instruments were designed, developed, pre-tested and then mailed in March to all 1012 wineries. The number of usable returned surveys totaled 238, representing 103 non-exporters and 135 wineries that reported exporting their product within the last three years. Overall, this is a robust 24% return rate which enhances the validity of the survey’s findings.
This article provides empirical insight to support the future export development programs of WineVision and other public and private international trade service providers to the US wine community. It will also present an analysis of the assistance needs of current exporters and non-exporters along with specific recommendations for wine industry export service providers in their efforts to enhance the exporting endeavors and global competitiveness of US wineries.Table 1 presents the rank order and mean score for each of the 13 export assistance needs as perceived by the 135 wine exporters who responded to our survey. While interest in learning from other exporting wineries rated highest (and will be addressed later in this article), their need for competitor, consumer and distributor information dominated the next five highest rated export assistance needs as presented below:
a) Information about competitors’ products and prices in specific export.
markets.
b) Information about consumer wine preferences in specific export markets.
c) A databank pertaining to wine distributors or agents in specific export.
d) Information about overall wine market size and growth rates in specific.
e) Information regarding competitors promotional activities in specific export
markets.
Fortunately, the WineVision Task Force recognizes the importance of competitor and market information to achieving the goal of making US wineries more competitive in international markets. They are currently attempting to address this issue of providing centralized, comprehensive and timely export-related data.
The results of this study strongly support the efficacy of these efforts and we view the development of such a database as a critical success factor in efforts by industry service providers, both public and private, to assist wineries in their future export endeavors. Moreover, it is recommended that this set of five information needs become part of the framework of any planned database of export-related information. In constructing such a database it is critical to collect and disseminate the most useful data available and these survey results presents specific information needs which current wine exporters believe is most valuable to them in their export endeavors.
The Wine Institute has attempted to centralize quite a bit of this type of export market data on its home web site (www.wineinstitute.org) and on its International Program web site (www.calwinexport.com). The latter database is partially restricted to International Program members.
In addition to these data collection efforts relating to the wine industry, market research firms in the US and international markets collect market and competitor information. While this information is more timely and specific than that collected by governments or public organizations, it is relatively costly, especially for small and mid-size wineries.
In addition to the
analysis of export assistance needs based on whether wineries were exporters or
non-exporters, the data was also analyzed to see if export assistance needs
differed based on other factors such as (a) how long wineries have been
exporting and (b) the success of their current export program.
Table 2 presents the rank order and mean score for each of the 13 export assistance needs as perceived by the 103 wineries that are not currently exporting. Five of their eight most highly rated assistance needs can be considered as components of a “fundamentals of exporting” set of needs. In order of perceived value they are:
a) Training in the basics of exporting (e.g. letters of credit,
documentation).
b) Opportunities to learn about the export experiences of other wineries.
c) Assistance in developing an export strategy plan.
d) Assistance in assessing readiness to export.
e) Workshops on understanding business practices and cultures in specific
country markets.
The study of regional and larger winery associations identified very little in the way of programs geared to ‘export fundamentals or basics’. The Wine Institute offered these types of programs in the past, but does not do so at this point. The Napa Valley Vintners Association offered a half-day program covering export basics in the Spring of 2000, but this is not a regularly scheduled or comprehensive program. There was no evidence of other associations conducting such basic exporting programs.
Fundamentals of exporting programs that are not specific to the wine industry are offered around the country through numerous state and federal export assistance providers. There are also on-line tutorials and publications related to exporting. These export assistance programs are usually limited in scope and since they are not geared to a specific industry, they usually only address generic basics of exporting.
The export assistance findings of this industry-specific study provide a clear message that non-exporting wineries desire assistance in training in understanding the fundamentals of developing a successful exporting program. It is recommended that export service providers direct resources to further support the development of export assistance programs for non-exporting wineries. Such programs should address all or many of the five “fundamentals of exporting” set of needs empirically identified and perceived as valuable by non-exporting wineries.
Furthermore, many of these needs (e.g. assistance in assessing readiness to export, assistance in developing an export strategy plan) could be developed as tutorials for delivery over the Internet. This delivery mode has three major advantages as 1) it can be continuously updated; 2) it is not geographically constrained and 3) it can be accessed when the learner has time and can be absorbed at the learners pace.
Such an Internet mode of delivery is however, viewed as only one part of a more comprehensive export development program that should be designed as this Internet technology should be combined with more traditional one-on-one workshops and seminars that also address fundamentals of exporting issues. The content, insights and structure of the seminars and workshops could be programmed and disseminated geographically through winery associations, along with the Internet component, thus providing a comprehensive export assistance program available to all non-exporting US wineries. The support of such a comprehensive export development program by WineVision is critical to their goal of assisting more wineries successfully enter and compete in the global marketplace.
Another segment of the research
study previously established that effective intermediary relationships was a
critical factor for successful exporting programs.
Results show that non-exporters appear to appreciate the importance of
effective intermediary relationships since they ranked finding appropriate
distributors as their third (of 13) most valued export assistance need.
Because
the process of finding, developing and maintaining relationships with agents and
distributors is so important, the Wine Institute and the Northwest Wine
Coalition have trade representatives in export markets throughout Europe and
Asia. These representatives assist
wineries in meeting and screening potential intermediaries.
The Wine Institute provides this service to International Program members
and the Northwest Wine Coalition service is available to their regional
wineries. Resource support for
further promoting this valuable export assistance service to more US wineries is
highly recommended for all international trade service providers to the wine
industry.
There certainly would be great benefit to hear about the successes and problems experienced by peers in their export endeavors. Exporting wineries represent a wealth of cumulative experience that could help other US wineries go further down the export experience and learning curve at a much faster rate. While some wineries may be reluctant to share any aspects of their export experience in a public forum, evidence suggests they will be in the minority. Furthermore, sharing does not have to be at the level of proprietary information. For example, descriptions and stories regarding labeling issues, documentation, how to go about finding distributors, problems encountered in certain export markets, etc. are all helpful to new and experienced exporters.
US wineries are now realizing they are in intense competition with the wine industries in other producing nations, and thus their US counterparts can be viewed as allies and a resource in the fight for global market share. International trade service providers need to provide support and direction for the creation of forums where exporters and potential exporters can get together. These forums will foster synergistic benefits for participating wineries in the form of learning, skill building and in the development of strategic alliances. It is important to note that exporting wineries, including the ones that said they had successful export programs, were among those most interested in learning from other exporting wineries which suggests that they would also be willing to share their experiences in the appropriate forums.
The purpose of this article is to provide WineVision and other wine-community export service providers with an empirically based analysis of export assistance needs as perceived by US winery managers. The findings and recommendations generated by this empirical research study should be viewed as a starting point in the formulation of export development programs for current and potential US wine exporters. This study empirically defined the types of workshops, conferences, publications, electronic information resources and hands-on export assistance activities that would be most valued by wineries. More importantly, the target audience (exporting vs. non-exporting, successful exporters vs. less successful exporters) for each program was identified.
A major advantage of this study is that it is a single-industry study. Previous studies attempting to help export assistance providers included firms from a wide array of industries, thus results of those studies cannot be applied to the wine industry with the high level of confidence and validity attained by this study. However, there is a question as to whether this study’s findings can be generalized to other industries as well as to export service providers to wineries in other countries.
The US wine industry’s WineVision initiative is intended to increase international market share for the industry and to raise export performance at the winery level. As an industry initiative respected by a large number of wineries and trade associations nationwide, WineVision is in a position to act on the recommendations outlined in this report, taking the lead in orchestrating export assistance activities for export and non-exporting US wineries.
Love, John M. (2000), “US Wine Producers Face Increasing Competition,” Wine Business Montly (June), 30-33.
Wine Institute (2000), “Another Record for US Wine Exports: $548 million,” www.wineinstitute.org/communications/statistics/exports99.htm, Wine Institute, 425 Market Street, Suite 1000, San Francisco, CA 94105.
Wines & Vines 1999 Directory and Buyers Guide, Volume 79 (December), The Hiaring Company, San Rafael, CA.
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