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Weak Dollar Worries American Wine Lovers

by Hannah Punitha on October 2, 2007 at 3:13 PM
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Weak Dollar Worries American Wine Lovers

American wine lovers are worried. With the dollar scraping the bottom of the foreign exchange barrel, they fear their favorite French Bordeaux or Italian Barolo could become unaffordable.

But wine experts here say there is no reason to panic.


"Logically, with the weak dollar, you would think there would be an avalanche of wines going out and the shut-out of European wines especially coming into the United States," Jon Frederikson of the California-based Gomberg-Frederikson wine consultancy told AFP.

"Remarkably, though, imports are continuing to come in because demand here is quite strong and prospects for growth over the next decade are excellent," he said.

"Wine is finally gaining some traction in the US. Consumption is still very low compared with other beverages and other nations, but the likelihood that wine sales will grow are very good.

"So people around the world are swallowing the very heavy foreign exchange losses and making an investment to get into the US market and gain customer loyalty."

Statistics by Sopexa, a French government agency that promotes French food and agricultural products worldwide, showed the euro-dollar exchange rate averaged one euro to 1.206 dollars during the first six months of 2006, and one euro to 1.316 dollars in the same period this year, representing a change of around nine percent.

In the same period, the volume of French still wine exported to the United States rose by 2.8 percent, but the value of exports in euros to the American market shrank by 4.2 percent.

Exports from every major nation were up in the first half of this year, Frederikson said.

"Italy, which is the largest exporter to the US in volume, was up 11 percent. France, which was the biggest exporter in value last year, with 720 million dollars, was up 10 percent in volume."

The volume of wines from Germany, Portugal and Spain was also up, he said.

Editor of the California-based Wine Business Monthly, Cyril Penn, confirmed the volume of imports was rising despite the strong euro, adding the United States was "on the way to becoming the largest wine-drinking market in the world."

While the weak dollar-strong euro equation is not hurting European wine exporters, US wine-producers hope it will open up new domains and bouquets for the European consumer, and win them over.

"There has always been some resistance in Europe to American wines, especially in France, but I believe Europeans appreciate good value and the weak dollar is certainly going to make American wines more irresistible to them," said wine consultant Michael Houlihan, who founded California's Barefoot Cellars.

The weak dollar will allow more American wines to be sold in Europe for between 2.99 and 6.99 euros, the price points where, according to Houlihan, most European wine sales happen.

The pound to dollar exchange rate has also boosted sales to the biggest target market for US wines -- Britain.

"The UK market is up 31 percent in volume. The weak dollar has helped because it makes American wines more competitive," Frederikson said.

While the dollar is floundering, European wine-lovers should seize the occasion and sample US wines, Houlihan advised.

"This is an excellent opportunity for Europeans to discover the quality in American wines that were less competitive until now."

Source: AFP

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