By Malinda Geisler, content specialist, AgMRC, Iowa State University, malindag@iastate.edu.

Revised September 2011 by Diane Huntrods, AgMRC, Iowa State University.


Overview
In the colonial and post-colonial period through the middle of the 19th century, the wine industry in the United States and Canada was relatively small, with almost all of the consumption satisfied by imports. Although there was some development in the latter half of the 19th century, wine production in North America only began to develop significantly with the expansion of the California industry early in the 20th century. After the Prohibition era from 1920 to 1933, the industry needed to be recreated. In a sense, the industry was reborn in the early 1970s with an aggressive movement toward higher quality.

Demand
Wine consumption increased steadily in the 1970s and 1980s but decreased in the 1990s. From 1989 to 1995, per capita consumption dropped from 2.3 gallons to 1.7 gallons. It started to increase again in 1996. In 2008 per capita U.S. wine consumption was 2.5 gallons (ERS).

According to the Wine Institute, the United States surpassed France as the world's largest wine-consuming nation in 2010, with total U.S. consumption reaching nearly 330 million cases, a record high. Total French consumption was 320.6 million cases in 2010.

Supply
In 2010 the United States produced more than 4.3 million tons of wine (NASS 2011). Wineries exist in all 50 states. According to statistics compiled by Wine Business Monthly, the number of wineries in 2010 totaled 6,785, a 9 percent rise from 2009. This total is made up of 5,749 bonded wineries and 1,036 virtual wineries. Bonded wineries have been licensed by the Alcohol and Tobacco Tax & Trade Bureau and are responsible for all production activities that take place on their premises. A virtual winery is not bonded and uses the services of a bonded host winery to produce and bottle their wine.

California remains home to 3,306 wineries, or 49 percent of all U.S. wineries, and accounts for nearly 90 percent of wine production. Other states with large numbers of licensed wineries include: Washington (628), Oregon (509), New York (255), Virginia (195) and Texas (185).

The top six U.S. wine companies in 2010 were E&J Gallo Winery, The Wine Group, Constellation Wine, Treasury Wine Estates, Trinchero Family Estates and Bronco Wine Company. Each of these companies sold more than 10 million cases, with the top two companies selling more than 55 million cases.  (Wine Business Monthly) 

The European Union (EU) is the world's dominant producer of wine (as well as largest exporter and importer). However, the rate of growth has been slowing due to policies aimed at social and health concerns and competition from alternative beverages. The United States is the second largest producer. Argentina and Australia are also significant wine producers.  (FAS 2011)

Production
In 2010 California produced 3.4 million tons of wine grapes, which accounted for more than half of the state's grape production. A total of 535,000 acres of grapes were available for wine production. Of that, 497,000 acres were bearing and 38,000 acres were non-bearing. The leading wine grapes continue to be Chardonnay, planted on 91,625 acres, and Cabernet Sauvignon, planted on 74,899 acres. The total value of California's wine grape production in 2010 was nearly $2.0 billion.  (NASS 2011)

Wine grape production in Washington totaled a record 160,000 tons, up 3 percent from the previous year. The grapes were produced on 35,000 acres. White Riesling was the top variety grown in the state, with 33,500 tons of grapes and accounting for 21 percent of the total state production. Cabernet Sauvignon ranked second with 31,900 tons and accounting for 20 percent of the total. The total value of Washington wine grape production in 2010 was $166.4 million.  (NASS 2011)

Prices
The price for wine grapes differs, depending on how the grapes are used before they are sold. In California, about 1 percent of wine grapes are sold as fresh grapes before being processed. In 2010 the average price per ton for California wine grapes was $602. The average price for Washington wine grapes was $1,040 per ton. According to NASS, the average price for U.S. wine grapes was $507 per ton in 2010.

Exports
The United States exported 385 million liters of wine and wine products in 2010, a 10 percent increase from the previous year. The United Kingdom was the top destination for U.S.-produced wine in terms of quantity with 124.8 million liters valued at $212.5 million. Canada was the top destination in terms of value; the country purchased only 53.3 million liters of U.S. wine but it was valued at $280.7 million. Other top export markets for U.S. wine include Japan ($76 million), Italy ($59 million) and Germany ($44.6 million). Bulk exports have been increasing and now account for half of the shipments. Bulk shipments are less expensive to transport and are assessed a lower tariff.  (FAS 2011)

The EU is the leading exporter of wines, accounting for about half of the world's trade. Other leading exporters include Australia, Chile and South Africa. The United States is the fourth largest exporter. Bulk exports of U.S. wine are expanding faster than bottled wine exports, because they are cheaper to transport (FAS 2009).

Imports
The United States imported 932 million liters of wine in 2010 valued at nearly $4.4 billion, a 7 percent increase from the previous year. The majority of imports came from Italy ($1.3 billion), France ($1.0 billion) and Australia ($609.6 million). In a reversal of earlier trends, bottled wine imports grew by value and volume, while bulk wine shipments fell, suggesting that consumers have embraced more expensive brands.  (FAS 2011) 

Tariff Rates and Policy Changes Resulting from North American Free Trade Agreement (NAFTA)
Depending on the type of wine, U.S. tariffs on imported wine from nations with which the United States maintains normal trade relations range from 5.3 cents per liter to 22.4 cents per liter. Countries without normal trade status with the United States face higher tariffs of 33 cents per liter and $1.59 per liter, depending on the type of import.

Under the Canadian-U.S. Free Trade Agreement (CUSTA) signed in 1988, all Canadian tariffs on wine from the United States were phased out over seven years. Tariffs were reduced 25 percent during each of the first two years of the agreement and then 10 percent a year over the next five years.

Under NAFTA, Mexico agreed to eliminate most tariffs over ten years. Some tariffs were eliminated immediately. Beginning in 2003, U.S. wine exports to Mexico no longer faced tariffs. Most Mexican imports consisted of distilled grape wine products, which faced tariffs from 13.2 cents per liter to 33 cents per liter for different container sizes in 1993. NAFTA eliminated the tariffs immediately.

In 1988 U.S. tariffs on fresh wine imports ranged from 9.9 cents per liter for wine with an alcohol content under 14 percent to 26.4 cents per liter for wine with an alcohol content over 14 percent and 30.9 cents per liter for sparkling wine.


Sources
2008 Wine Report, Office of Health and Consumer Goods, International Trade Administration.

California Grape Acreage Reports, California Agricultural Statistics, National Agriculture Statistics Service (NASS), USDA.

Fruit and Tree Nuts Outlook, Economic Research Service (ERS), USDA.

Grape Release, Washington Field Office, NASS, USDA, 2011.

The Impact of Wine, Grapes and Grape Products on the American Economy , MKF Research, LLC, 2007 - This report provides estimates of the impact of wine, winegrape, raisin, grape juice, table grape and grape products on the U.S. economy for calendar year 2005.
 
National Association of American Wineries

New York Wine and Grape Foundation

Northwest Wine Promotion Coalition

State of the Vitiviniculture World Market, International Organisation of Vine and Wine, March 2011.

Top 30 U.S. Wine Companies of 2010, Wine Business Monthly, winebusiness.com.

United States Customs Service: Trade Data on Web site of United States International Trade Commission.

United States International Trade Commission, Tariff Information Center, Official Harmonized Tariff Schedule of the United States, 2006.

The U.S. and World Wine Situation, Foreign Agricultural Service (FAS), USDA, 2008.

Wine, Global Agricultural Trade System, FAS, USDA.

Wine Institute - The voice for California wine.

Wine: World Markets and Trade, FAS, USDA.

The World of Wine: Economic Issues and Outlook, ARE Update, Giannini Foundation of Ag Economics, University of California, 2010 - Four experts review current issues and the outlook for the global wine industry, emphasizing issues for California.