Murray Silverman - Professor of Management
Richard M. Castaldi - Professor of Management
Sally Baack - Asst. Professor of Management
Gregg Sorlien, M.B.A.

San Francisco State University
College of Business
1600 Holloway Avenue
San Francisco, CA 94132
Phone: 415-338-7489
FAX: 415-338-0501
Email: msilver@sfsu.edu

The total volume of the global wine market in 1998 was measured at 6.8 billion gallons (Table 1), with 25% of the total volume accounting for wine that was purchased outside the country from which the wine was produced (California Wine Export Program, 2000). This represents an increase over the 1991-95 period, during which the export segment of the market averaged approximately 17% by volume. The increasing trend for the export market since 1995 is due primarily to a change in the strategic priority that wine producing countries are placing on exporting as a strategy for growth (Table 2). Historically, the market for wine was primarily one of local production and consumption. That paradigm has changed in the last few decades as a few of the more established wine drinking countries have seen their per capita consumption stagnate or decline (Table 3). At the same time, several wine producing countries around the world have begun to make an impact on the export market in an attempt to expand their industries beyond their limited local markets. The result of this shift in market focus for some of the older wine producing countries plus the rise of new wine producing countries around the world has caused an increase in the competitive nature of the global wine market.

Currently the U.S. is the fourth largest producer of wine in the world (Table 1) yet only accounts for approximately 4.2% of the total wine export market based on volume (Table 2). One reason for this disparity can be attributed to the low level of strategic importance placed on exporting by most U.S.
wineries. In the past, a very common export strategy for U.S. companies was to export only the excess capacity that was on hand due to over production (Monterey County Herald, 1998), thus there was little focus on establishing a presence in the global market place. However, the U.S. wine industry is globalizing with driving forces such as increasing foreign imports, maturing domestic markets, industry consolidation and the move to more “professional” versus family management style. The February 2000 naming of Lew Platt (former Chairman and CEO of Hewlett-Packard) as CEO of Kendall-Jackson winery in Napa Valley is an example of the final point. All of these factors indicate that many U.S. wineries need to develop or sharpen their export skills to compete successfully in this new global wine industry.