SIC 2084
WINES, BRANDY, AND BRANDY SPIRITS



This category includes establishments primarily engaged in manufacturing wines, brandy, and brandy spirits. This industry also includes bonded wine cellars that are engaged in blending wines. Establishments that primarily bottle purchased wines, brandy, and brandy spirits but do not manufacture wines and brandy are classified in SIC 5182: Wine and Distilled Alcoholic Beverages.

NAICS Code(s)

312130 (Wineries)

Industry Snapshot

Although the first commercial wine venture in the United States was in Pennsylvania in 1793, the majority of modern American wineries have been located in California, with Washington and New York coming in a distant second and third, respectively. California has accounted for more than 90 percent of all U.S. wine production and more than 70 percent of all wine sold in the United States. According to the Wine Institute, "If viewed as a nation, California would rank sixth in worldwide wine production, following Spain but bigger than Germany. The dominant wine producer in California continues to be the Gallo family, controlling nearly 40 percent of the wine market."

After exceptional growth in the wine industry during the 1990s, wine sales in the United States began to sour, with sales generally flat in 2001 and 2002. Retail sales of wine in the United States were $19.8 billion in 2001, a 4 percent increase over 2000's sales of $19 billion. The downturn was primarily due to three factors: a slump in the nation's economy; a glut of grapes from a record number of wineries; and inexpensive, high quality imports. Grape prices sunk, resulting in similar price drops in wine. These price cuts benefited new consumers, however, who were more likely to try wine at rock bottom prices. These discount wines, sometimes starting as low as $1.99, became part of a growing trend in wine sales in 2002 and 2003. White wine continued to enjoy its popularity, owning 40 percent of the wine market in 2001, with red not far behind, growing from 17 percent in 1991 to a strong 37 percent of market share in 2001.

Table wine has been the most popular kind of wine sold in the United States. Varietals, table wines made predominately of one kind of grape, grew in popularity in the past decade following the trend that consumers were drinking fewer but better wines. One reason for the increase of premium wine sales in the 1990s was the growing number of consumers over the age of 55. Reports also touted the benefits of moderate wine consumption, and in 1996, the U.S. government, for the first time, acknowledged moderate wine consumption to be a part of a heart-healthy diet. Growth in the baby-boomer sector, however, reached a plateau during the early 2000s. Younger drinkers were drawn to the martini revival, as well as beer and the proliferation of mixed, bottled spirits.

Imported wine also saw tremendous growth in the United States, and many California wine companies established relationships with producers in Australia, Chile, and Argentina to sell their wine. For example, the Canandaigua Wine Company, the second largest wine seller in the United States, established a relationship with Vino Santa Carolina Chilean wines to become that company's sole agent and exclusive importer for the United States. A growing trend linking American and Australian wine industries resulted in a proposed 2003 merger of BRL Hardy, Australia's second biggest wine company, with leading U.S. drink maker Constellation Brands. The union formed the world's largest wine company, surpassing the California wine institution Gallo. Several other important mergers also took place in the early part of the decade, including the takeover of Beringer Wine Estates in California by Foster's, an Australia beer maker. The export market also grew tremendously during the 1990s, with wine export revenues increasing more than 250 percent, from $153 million in 1991 to $541 million in 2001. With only about 5 percent of the world export market, the United States held the potential for further growth in this area.

Organization and Structure

All winemakers must sell their products through wholesalers and retailers to accommodate various federal, state, and local regulations regarding the sale of alcoholic beverages. The Federal Alcohol Administration Act (FAA) was established after the 13-year Prohibition Era ended in 1933. The Bureau of Alcohol, Tobacco, and Firearms (ATF) is responsible for administering and enforcing the FAA, including qualifying winemakers, collecting producer and wholesaler occupational taxes, and regulating trade practices, advertising, and labeling. Beyond the uniformity of the FAA, regulations vary greatly among the 50 states.

States can sell wine in one of two ways, either in a controlled environment or using an open, licensed method. "Open" states have licensed retailers and wholesalers that handle the distribution and sale of alcoholic beverages. Thirty-two states and the District of Columbia are open states. The other 18 states operate under the control method, in which each state government buys and sells alcoholic beverages at the wholesale and retail levels. In addition to federal regulations, some states have set up their own independent agencies that are responsible for the administration, licensing, and enforcement of state laws and the collection of state revenues. Some state legislatures even have created their own Alcoholic Beverage Control (ABC) agencies with rule-making power, and 32 states allow their citizens to vote for or against the sale of liquor on a city or countywide basis.

Background and Development

California winemaking began in 1769 when Father Junipero Serra planted vines at Mission San Diego. In September 1772, the grapes were harvested and pressed, creating California's first vintage. These early wines were produced for sacramental purposes and personal consumption at the missions.

The commercial era of wine production began in 1830 with the efforts of Frenchman Jean Louis Vignes from Bordeaux, France. His vineyard was located in what is now downtown Los Angeles. The wine industry boomed as an ancillary result of the discovery of gold in California in 1848. A surge of Europeans came to the state seeking their fortune. Immigrants from Italy, France, and Germany who had no luck finding gold turned to a trade they already knew—winemaking.

Between 1860 and 1880, the industry grew rapidly as numerous wineries were established. By 1890, several of the state's famous wine regions already had taken shape and the industry was producing 25 million gallons of wine per year. After suffering losses from a vine pest called phylloxera, the industry virtually disappeared with the passage of Prohibition in 1919. The repeal of Prohibition in 1933, however, prompted the industry to rebuild. Growth was steady between 1949 and 1960, with annual output increasing from 117 million gallons to 129 million gallons. By the 1970s, the demand for California table wines had doubled.

As the industry evolved, so did consumer preferences. From 1933 to 1967, dessert wine was the most popular kind of wine in the United States. During the 1970s, generic table wines, like California Chablis and California Burgundy, dominated sales. By the late 1980s, varietal wines, those labeled with the name of the grape, had taken over; these wines were expected to remain prominent throughout the 1990s.

After posting a 6.5 percent loss in 1993, wine sales in the United States continued to rise, while per capita consumption remained steady at 1.8 gallons. According to the San Francisco-based Wine Institute, consumer demand for premium varietal wines spurred a 5 percent increase in California table wine sales in 1994—the strongest performance in more than a decade.

While most of the largest wine producers reported record sales, and consumer tastes moved upscale to more expensive wines, 1994 was noted as the best year for the wine industry since the late 1980s. "The end of the drought, the waning of phylloxera root louse problems and increased consumer demand all have winemakers singing a new tune," reported Clifford Carlsen of The San Francisco Business Times.

Total U.S. production again rose in 1995, up 10.3 percent at 437 million gallons. According to wine industry analyst Jon Frederickson of Gomberg, Fredrickson and Associates of San Francisco, California, wine sales increased 8 percent in 1995 to a record $4.4 billion. Increased consumer demand and a relatively strong supply of fruit contributed to the industry's continued strong growth.

Following record wine sales and all-time high prices for grapes in 1995, the industry experienced another banner year in 1996. In fact, many North Coast wineries, with sales increases of 30 to 40 percent, did not have enough wine to meet the staggering demand.

The improved economy and continuing news reports about the health benefits of moderate wine consumption fueled the continued growth of the industry. A 1991 broadcast of 60 Minutes reported a link between moderate wine consumption and a reduced risk of heart attack. Called the French Paradox, two scientists found that despite similar fat intake, France's heart attack rate was one-third that of the United States. A key factor they attributed to this was the French custom of drinking wine with meals. Red wine sales increased more than 75 percent after that 1991 report.

Champagne sales continued to drop despite increases of specific brands. From a peak of 18.2 million nine-liter cases of sparkling wine and champagne in the United States in 1986, consumption fell to 12.3 million nine-liter cases in 1995. Causes for the decline were high prices for champagne, high taxes, high cost of shipping, and lack of consistent, high-profile marketing programs.

Wine sales were expected to continue their increase as the federal government took an unprecedented step in advocating moderate consumption. When the U.S. government issued new dietary guidelines in 1996, it acknowledged, for the first time, the benefits of moderate wine consumption. Previously, the government had warned that even small amounts of alcohol had "no net health benefit."

"Writing that language into the dietary guidelines was an extraordinary statement of public policy change in the United States. It's a foundation we can build on into the next century," said John De Luca, president of the Wine Institute, the trade association for the wine industry. He added that the revised guidelines culminated five years of work to redefine the image of wine, "putting it back on the dining room table where it's been for 2,000 years."

Leading the pack in wine sales have been the varietals. Relatively new to the industry, a "fighting" varietal has been defined as a value-priced, cork-finished, 750 ml varietal wine. The leader in fighting varietals has been Glen Ellen, followed by Fetzer's Bel Arbors, Sebastiani's Country Wines and Swan Cellar label, Beringer's Napa Valley, and Robert Mondavi's Woodbridge. Tim Wallace, a Glen Ellen executive, told Beverage Dynamics that "fighting varietals are the foundation for the American wine industry in the future."

In the late 1990s, fruit-flavored varietal wines became popular. Canadaigua introduced Arbor Mist in 1998 in flavors such as peach and tropical fruits char-donnay and exotic fruits and sangria zinfandel. Other producers followed suit, including Sutter Home's Portico, Earnest & Julio Gallo's Wild Vines, and the Wine Group's Lyrica.

The introduction of fruit-flavored varietals caused a minor uproar among wine purists in the industry. Because these wines contain less than 7 percent alcohol, they are regulated for the Federal Drug Administration (FDA), which does not issue designation requirements for varietals.

At the end of the twentieth century, U.S. producers of champagne and sparkling wine commanded a 70 percent share of the domestic market. Growth continued to be slow. In 1997, shipments of champagne rose 1 percent for the first time since the 1980s, but they fell by 3 percent the following year. These losses were attributed to consumers' abandonment of the less expensive charmat producers in favor of the higher-end method champenoise varieties.

The good news was that the quality of champagne, both domestic and imported, was rising. Those producing champagne began to make a product that was more suited to American tastes. Improvements in champagne production were forged mainly in Carneros, Mendocino County, California, as well as on the central coast. In return, these domestic producers saw consumers move to brands that offered high quality at affordable prices.

The sale of wine over the Internet stirred a heated debate between the U.S. Congress and the wine industry. Spurred by a rash of student-led violence in the nation's schools, legislators created a bill on youth crime and gun control. An amendment to the bill gave states the power to use federal courts to enforce local laws governing the interstate alcohol trade. Proponents said that the amendment's purpose was to prevent underage drinking. Many in the wine industry believed that it would restrict their business. A survey of 176 California vintners, conducted by the Wine Institute, found that 9 out of 10 shipped their products to out-of-state customers and 50 percent used Web sites to sell their products.

Production. The making of wine begins with the grape harvest, which generally occurs from August through November, depending on the grape variety and the weather. The grapes are placed in a crusher that separates the stems from the fruit and breaks up the berries. The stems are then discarded, leaving a combination of juice, seeds, pulp, and skins, called "must." Juice from red or white wine grapes is colorless.

To make white wine, the skins and seeds usually are removed from the must after a few hours. The remaining juice is called "free-run." The discarded skins also are pressed to extract the "press juice." Both juices then are filtered, placed in storage, and given yeast to facilitate the fermentation process. White wine fermentation can last anywhere from three days to three weeks. Upon completion, the wine is filtered for solids or remaining yeast. The wine then is aged for a period of one week to a year in stainless steel, oak, or redwood containers. It also can be aged in the bottle. After aging, the wine can be blended with other wines to create a desired style or can be sent to be finished, a process that stabilizes and filters the wine before bottling.

Production of red wine is slightly different than the process of making white wine. Red wine is fermented at warmer temperatures than white wine. For red wine production, the skins are fermented with the crushed juice to give it color and flavor. The skins float to the top and are moistened regularly with juice to extract color and flavor. Red wine usually is fermented for 5 to 10 days and then is filtered, clarified, and preserved with sulfites. Red wine commonly is aged in oak barrels for one to two years.

Champagne is made in one of two ways: by method champenoise or the charmat process. In method champenoise, still wine is blended with a mixture (called triage) of still wine, yeast, and a sugar substance. This blend is resealed in bottles where it is fermented for a second time and aged. Carbon dioxide collects in the bottles, which is released in a rush of bubbles when the bottles are uncorked. In the charmat, or bulk, process, the still wine, yeast, and sugar are fermented in a pressurized tank rather than in bottles.

Types of Wines. Wines sold in the United States generally are divided into the following categories: champagne, aperitif, dessert wine, table wine, and varietal wine. Also included in this discussion are brandy and other fortified wines. Wines can be named one of four ways: by variety, which tells the predominant type of grape; by a generic name describing the color, such as blush; by the region that originally inspired the wine, such as Chablis; or by a proprietary name, which is a label created by the winery.

Champagne and sparkling wines are names used interchangeably in the United States for wines with effervescence. These wines range from very dry (natural), to dry (brut), to slightly sweet (extra dry), to sweet (sec and demi-sec). Aperitifs are appetizer wines usually served prior to a meal and can include champagnes and sherries. Dessert wines are officially classified as those with an alcohol content of 17 percent to 21 percent. They can be sweet or dry and include sherries and ports.

Table wine is a term commonly used to describe all red, white, blush, and rose wines that contain 7 to 14 percent alcohol. These wines are still rather effervescent and are served mainly with meals. Table wines can be made from any grape or combination of grapes and in any style that the winemaker chooses. Varietal wines are table wines that are made from a minimum of 75 percent of a particular grape variety; they carry the name of the grape variety from which they are produced, such as Char-donnay or Merlot.

The red table wine category has been led by Cabernet Sauvignon, a full-bodied, rich, intense wine with noticeable tannins. A leading prestigious varietal, Cabernet Sauvignon has been one of the most widely available wines from California. Other red varietals include Merlot, Petite Sirah, and Zinfandel. Merlot is a medium-to full-bodied wine that originally was made for the sole purpose of blending with Cabernet Sauvignon. Petite Sirah is a wine with deep color, full body, and a fresh-berry taste. Zinfandel, known as the classic California wine, is known too for its versatility, range of style, and raspberry-spicy aroma and flavor.

White table wines have been dominated by Char-donnay, which is the most widely planted variety of grape in California, making up more than 56,000 acres. It is a dry wine that has a balance of fruit, acidity, and texture. Depending on what the winemaker uses for storage, Chardonnay can range from clean and crisp wines to rich, complex, oak-aged wines.

Other white varietals include French Columbard, Sauvignon Blanc, Johannisberg Reisling, Gewurztraminer, and Pinot Blanc. French Columbard is generally fresh and fruity, ranging from light to medium in body. Sauvignon Blanc has been one of the fastest growing varietals in California; sometimes called Fume Blanc, it is best known for its grassy, herbal flavors and is often consumed with fish and shellfish. Johannisberg Riesling, from the German Riesling grape, is aromatic, delicate, and slightly sweet. Late Harvest Rieslings are good accompaniments for dessert. Gewurztraminer offers spicy aromas and flavors and a slight wisp of residual sweetness. Often this wine goes well with Asian food. Pinot Blanc is a unique, dry white wine, with styles ranging from bold, oak-aged to crisp and medium-bodied.

Brandy is "burnt wine" or fruit wine that is boiled and aged in wood. Virtually any type of fruit can be used to make brandy, although grapes have been the most common. Brandy has been produced primarily in Spain, Italy, and France and most recently in the United States. Cognac has been considered to be the best of all brandies. Cognac's discerning characteristic has been its blending, often created from a number of different cognacs coupled carefully to achieve an appropriate mixture.

Fortified wines were the creation of the Spanish and Portuguese and included port, sherry, and Madeira. Sherry is made by blending younger sherries with older sherries in oak casks. It varies in dryness levels and in hues. Harvey's Bristol Cream, imported by Hiram Walker & Sons, has been the top-selling sherry in the United States, with a nearly 41 percent market share. The best-seller is a blend of aged oloroso, a fortified full-bodied sherry, and Pedro Ximines grapes, which sweetens the mixture.

Port is red wine fortified with grape brandy. It was created unintentionally in the seventeenth century when Portugal tried to ship its table wine to England. In order to stabilize the wine during its voyage across the Atlantic, the wine needed the addition of grape brandy. England has remained the most popular market for port.

Madeira comes from a tropical island of the same name and is a raisiny, sweet wine. Madeira has been closely linked with the history of the United States, according to the New York Times Magazine. It was considered to be the wine of choice for American Revolutionary notables such as Thomas Jefferson, George Washington, and Ben Franklin. Unlike other wines that soured during the long, hot voyage across the Atlantic, Madeira was the only wine known to improve dramatically with the introduction of heat.

Current Conditions

After a time of record growth throughout the 1990s, winemakers in the U.S. began seeing wine sales flatten in the early 2000s. With a shaky economy made all the more so by the attacks of September 11, 2001, the wine industry, like many U.S. industries, was affected by the decrease in consumer spending on travel and recreation, which is tied in to wine drinking. Another factor in the state of the wine industry from 2000 to 2003 was the overproduction of grapes and the ensuing drop in grape prices by as much as 75 percent in 2001 and 2002. Wine prices dropped during this time while sales flattened. Retail sales of wine in the United States was $19.8 billion in 2001, a 4 percent increase over 2000's sales of $19 billion. By 2002, sales of California wine dropped in all categories for the first time in more than a decade. Finally, the proliferation of high quality, inexpensive imported wine caused U.S. winemakers further woes. Imports rose 17 percent in 2002, accounting for 25 percent of total wine sales in the U.S.

White wine continued to be popular, owning 40 percent of the wine market in 2001, with red not far behind, growing from 17 percent in 1991 to a strong 37 percent of market share in 2001. The MKF Wine Trends Report noted that the leading California table wine varietals, Chardonnay, Cabernet Sauvignon, Merlot, and White Zinfandel/Blush accounted for about 76 percent of all retail sales by value of California wine in 2001. Chardonnay continued its leading spot with a 29 percent dollar market share, followed by Cabernet with 19 percent, Merlot with 15 percent, and White Zinfandel/Blush holding 13 percent of the market by value. Secondary red varietals, including Syrah, Pinot Noir, and Red Zinfandel, all were up more than 30 percent in revenues for California wineries. There was a surge in popularity of Pinot Grigio, which the Wine Spectator reported had sales increasing faster that any other white wine in supermarkets. Wine coolers, once popular in the late 1990s, were less so as the new millennium dawned.

In a climate of more cautious consumer spending, wines priced at $50 and higher were selling far less than in the robust 1990s, noted Charles Krug Winery co-proprietor Peter Mondavi in an interview with Beverage Industry in July 2002. "The wines that are $35 or so are still going through the rood. So we're having great success in that category," he added. With prices falling to record lows, consumers were indeed enjoying bargains in the early 2000s. Indeed, California chain Trader Joe's seemed to be leading the bargain trend, offering the Charles Shaw line of Merlots, Cabernets, and Char-donneys for $1.99 in late 2002 and early 2003. In those six months, wine industry analysts Jon Fredrikson estimates the company sold about 1 million cases of the generally good quality wine that was dubbed, "Two-Buck Chuck."

The growing trend in mergers between Australian and American companies in the wine industry was prevalent in the early 2000s. Foster's, the Australian beer maker, took over Beringer Wine Estates in California in 2000. Although a pivotal deal, it was overshadowed by the proposed 2003 merger of Australia's BRL Hardy and U.S. drink maker Constellation Brands, which would form the world's largest wine producer, taking the top spot from Gallo. Such unions considerably beef up the resulting company's marketing and distribution muscle and ensure such unions to proliferate in the future. Another advantage to these mergers, especially to U.S. winemakers, is the force Australia enjoys in the wine industry worldwide. Considerably surpassing the United States in the export market, Australia became a prominent exporter, with $2.3 billion in 2002, which outsold the French in the United Kingdom. Conversely, Australian firms were then able to increase their presence in the United States.

Other relevant trends included more vintners moving to plastic corks. Although considered "tacky" by some, more and more winemakers worldwide were seeing the benefits to the move, as costlier, traditional corks were increasingly blamed for ruining bottles with sediment, mustiness, or leakage. This negative cork performance costs vineyards money, as they absorb the cost of returned bottles. Other winemakers made a move to organics, as Fetzer Vineyards announced in 2002 that it intended to grow and use 100 percent organic grapes for all its wine by the 2010 harvest. The company had been growing organic grapes since the mid-1980s. To ensure that California sustained its fertile winegrowing land, the Wine Institute and the California Association of Winegrape Growers launched the "Code of Sustainable Winegrowing Practices" in 2002. The program for vinters and growers was a voluntary tool helpful in conserving natural resources, protecting the environment, and enhancing relationships with neighbors, local communities, and employees. Also, with enhanced airline restrictions after September 11, 2001, the United States approved a provision in 2002 that allowed wine purchased while visiting a winery to be shipped to another state, providing that the purchaser could carry the wine into the state to which the wine was shipped. This limited direct shipment of wine was designed to help consumers during any period when the FAA had restrictions on airline passengers.

Analyst Vic Motto, publisher of the Motto Kryla Fisher (MKF) Wine Trends report, agreed with other industry analysts that solid, long-term growth with continuing revenue growth was forecast for the wine industry in 2003 and beyond. Although California wineries suffered $75 million in losses, about 1 percent of total sales, as a result of the September 11, 2001, attacks, basic trends in wine sales remained the same.

Industry Leaders

As dominant as the state of California is in the wine industry, so too were the wineries of California winemakers Ernest & Julio Gallo (E & J Gallo). Controlling nearly 40 percent of the U.S. wine market, E & J Gallo Wineries led every wine category in which it competed. According to the Wine Spectator, one out of every three bottles of wine made in America is a Gallo product. The world's largest winemaker, E & J Gallo Wineries had annual sales of more than $1 billion.

In 1933, the original Ernest and Julio Gallo brothers winery was founded in Modesto, California. Unable to obtain bank financing, the company bought crushing and fermenting equipment on 90-day terms and rented a warehouse to make its first commercial wine. Using pamphlets on winemaking from the local library and grapes bought on a promise to pay from eventual sales, the two brothers made their first batch of wine. By 1993, Gallo owned five separate vineyards totaling more than 2,000 acres. The company remained a private, family-owned business (two of Julio Gallo's great-grandchildren, Matt and Gina, are actively involved in the company's wine-making operations) and was one of the largest organic farms in the United States.

The company's success was due in part to the partnership of the Gallo brothers; Ernest marketed the wine that Julio made. Another part of Gallo's success was its quest for improving the quality of the wine it produced. To this end, Gallo replanted its vineyard in Livingston in 1946 using grape varieties that had not been previously grown in the area. Various viticultural techniques were experimented with, and in 1947 a formal research program was established to evaluate the results. Specific standards were developed for winemaking and were used thereafter.

In 1965, Julio Gallo established the first Growers Relations Department and shared research findings with area growers. In 1967, Gallo offered long-term contracts to selected growers, giving economic security and incentive to replant vineyards with the better grape varieties recommended by Gallo. During the 1970s, the winery shifted to producing premium varietal wines, and in 1991 it introduced its first ultra-premium wine, 1991 Sonoma Estate Chardonnay. Leading brands for E & J Gallo Wineries have been Gallo, Andre, Bartles & James, and Carlo Rossi.

Recent newcomer Canadaigua Wine Company became the number-two seller in the U.S. wine market in 1995 with the acquisition of the Almaden and Inglenook wine labels (in 1994) from Heublein for $130.5 million. Although the company name may not be well known, its products such as Almaden, Inglenook, Taylor California Wines, and Paul Masson Wines are household names.

The company is a father-and-son operation located in upstate New York, started in 1945 by Marvin Sands, who bought a sauerkraut factory and turned it into a winery for $60,000. For ten years, Canandaigua Industries sold fruit wines in bulk to local bottlers who would then sold them under their own brand names. In 1954, Sands turned away from bulk wines and created a brand for himself—Richards Wild Irish Rose, a blended red dessert wine. During the 1960s, Wild Irish Rose represented nearly all of the company's sales.

Working from that base, Sands slowly expanded, acquiring 11 small wineries through 1984. Then the company entered the wine cooler market with its Country Wine Coolers. Although the company suffered an operating loss of $20 million in 1987 and 1988 due to expensive advertising, Sands realized the power of the company's distribution network and began looking for established brands.

In 1991, Canadaigua made its first major purchase with Cook's Champagne for $60 million. Then came additional purchases in 1993, 1994, 1998, and 1999. By the end of the twentieth century, Canadaigua was posting annual sales of $740 million.

The Seagram Company, Ltd. was one of the world's leading producers and marketers of distilled spirits and wines. Originally, Seagram divided its wine collection into two specialized divisions: The Seagram Classics Wine Company and Seagram Chateau & Estates Wine Company.

Based in San Mateo, California, the Seagram Classics Wine Company produced, marketed, and exported the wines of Sterling Vineyards, the Monterey Vineyard, and Mumm Napa Valley. The division also imported and marketed Mumm Champagnes and Barton & Guestier Wines from France and acted as sales agent for select California and overseas wines.

Based in New York, the Seagram Chateau & Estates Wine Company imported many European wines, including 35 percent of all classified Bordeaux. The company also imported Seagram-owned Perrier-jouet Champagnes (the third best-selling champagne in the United States), Sandeman Ports and Sherries, and Janneau Armagnacs.

In an effort to improve customer service, Seagram merged these two U.S.-based wine companies in 1996. Sam Bronfman II, president of the Seagram Classic Wine Company, was selected to head this new operation, to be called the Seagram Chateau and Estate Wines Company.

Kentucky-based Brown-Forman was well known for its collection of distilled spirits, especially bourbon. During the 1960s and 1970s, the company expanded into the wine industry with the acquisition of Korbel champagne and brandy in 1965 and Bolla and Cella wines in 1968. By the early 1990s, Brown-Forman established a separate division for its wine operations and embarked on an aggressive plan to expand its business through long-term marketing and distribution contracts. Its base of wine products by 1991 included Bolla, Fontana, Candida, Brolio, Korbel, and Noilly Prat.

Aiming to expand in the wine market, Brown-Forman acquired Californian Fetzer in 1995. The Fetzer line sold 2.2 million cases in the United States, and, with the help of Brown-Forman, the brand was expected to make significant progress in export markets.

Workforce

In total, as of the early 2000s, the winemaking industry employed more than 17,000 workers. The majority of wineries were family-owned, were located in California, and had a tremendous impact on that state's economy. Los Angeles-based Recon Research Corporation reported that the California wine industry contributed nearly $1.5 billion annually to the Sonoma County economy, employing more than 3,600 people and creating secondary industrial employment of an additional 2,500 jobs.

America and the World

U.S. wine companies' efforts to establish joint ventures in Europe were not as successful as they had hoped. Controlled by small producers and cooperatives, experiences there led U.S. companies, in the early 2000s, to the more successful, growing trend of teaming with Australian companies, who were more than willing to establish a greater foothold in the States. However, overseas planting of premium varietals elsewhere had been growing at a fast pace and were expected to be a significant new source of wine for U.S. consumers. In fact, California wineries bought unprecedented amounts of overseas wine to meet consumer demand for low-priced everyday wine and to expand their existing line of products in the mid-1990s.

For example, in 1996 Robert Mondavi began importing a Chilean line of wines, the Caletara brand, priced in the $6 to $9 range. A second brand, Edwardo Chadwick, was introduced in the $12 to $15 range, followed by a brand in an even higher price range. In 1995, the winery also launched a line of Italian varietals.

Demand for Australian wine in the United States skyrocketed as American consumers enjoyed the Australian style of wine. Its worldwide trademark of generous flavors, soft tannins, and accessible fruit made this wine easier to like when young, a perfect style of wine for Americans. In 1990, the Australians shipped only 578,000 cases of wine to the United States. By the decade's end, the Australian Wine Bureau reported that more than 4 million cases of Australian wine would be shipped to the United States by 2001, and by 2026, shipments should total more than 10 million cases with an estimated value of $440 million. Chilean wine became popular in the late 1990s and early 2000s as well, with Chilean exports up 15.6 percent, but falling prices earned them only 1.4 percent more money. Exports of Chilean wine to the United States fell 1.8 percent in 2001. South African wines, meanwhile, grew faster than projected, growing by 29 percent and increasing 133 percent in value, based on 1999 sales figures.

In late 2001, the United States, Canada, Australia, Chile, and New Zealand signed the Mutual Acceptance Agreement on Oenological Practices. The wine trade agreement was a significant development in promoting international wine commerce and would loosen trade restrictions for U.S. wines. John De Luca, president and CEO of the Wine Institute in San Francisco exclaimed, "This agreement is a breakthrough for the world wine trade that recognizes the effectiveness of other country's regulatory and enforcement systems for assuring that producers comply with its country's standards." Argentina and South Africa had the option to sign the agreement prior to March 2002.

According to the Department of Commerce, U.S. wine exports totaled $541 million in 2001. The largest market was the United Kingdom, which grew by 32 percent in volume with values of exports rising 20 percent to $170 million in that market. Other leading markets included Canada, with $95 million; the Netherlands, with $69 million; Japan, with $57 million; Belgium, with $28 million; the Federal Republic of Germany, with $14 million; Ireland, with $14 million; France, with $7.1 million; Sweden, with $6.6 million; and Denmark, with $6.2 million. Champagne and sparkling wine exports totaled 25 million gallons valued at $31 million, down from a high of 37 million gallons in 1999 due to consumers stocking up for millennium celebrations. Dessert wine exports were $31 million, and grape must and other fermented beverage exports stood at $22 million in 2001. In total, the United Stats shipped 1 percent less wine in 2001 than the previous year. Mexico was expected to be an important market in the twenty-first century because, according to the North American Free Trade Agreement (NAFTA), the 16 percent tariff on American wine sales to that country would be lifted around the year 2004.

Further Reading

Anderson, Nick. "Battle Brews Over Online Sales of Alcohol." Los Angeles Times, 1999.

"Business: Blended; Wine Industry Mergers." The Economist, 25 January 2003.

——. "The Hottest-Selling Wines in America Are the Latest Fruit-Flavored Varietals." Beverage Dynamics, November 1999.

"California Vintners Getting Stomped After a Decade of Growth." The San Diego Union-Tribune, 7 January 2003.

Carlsen, Clifford. "Full-bodied Sales Make 1994 Vintage Year for Wineries." San Francisco Business Times, 4 August 1995.

——. "Robust Year of Sales Gives Wine Makers a Healthy Glow." San Francisco Business Times, 15 November 1996.

"Crisp Pinot Grigio at Last Gets Chance to Sparkle as Char-donnay Alternative." Nation's Restaurant News, 10 February 2003.

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