A number of references were made to the globalization of wine during the 15th annual Wine Industry Financial Symposium last week at the Meritage Resort — indeed, that was the theme of the meeting: “Growth and Profit Strategies in a Maturing Global Industry.” But none were as potentially provocative as one by Donny Sebastiani when he said wine appellations around the world are coming out with wines competitive with Napa’s at lower prices.

It was at the end of a panel discussion on “How Global Supply and Demand is Changing the Wine Industry” that Sebastiani, of Don Sebastiani & Sons, dropped his comment. In a follow-up interview, Sebastiani said, “There are more Napa Valley grapes and wine (available) than prices would indicate. People are willing to pay a snob premium for wine that says ‘Napa Valley’ on the label. But in the long run it doesn’t do a service to Napa Valley growers and landowners.”

Sebastiani said the world is opening up to competition, but “Napa Valley grape prices are not prepared for competition,” he said. “There are wines of commensurate quality coming from Bordeaux, Rioja (Spain), Maipo Valley (Chile) and Barossa (Australia), and they will come in at $25 and compete with the $75 Napa Valley wines. Napa Valley has invited that competition. The perception that Napa will always be Napa is lazy thinking.”

More than 275 wine industry executives and others in fields related to the industry, notably financial institutions, gathered for the day-long symposium, which also covered such topics as a look beyond the Supreme Court decision on direct shipping and positioning a privately-owned business for long-term growth.

New World imports rise

During the panel discussion, David Hayman of Constellation Wines U.S. pointed out that imports into the U.S. from New World countries rose by 21 percent in 2004, while those from the Old World rose by 4 percent. Exports from the U.S. also rose, fueled in part by the surge in bulk wine exports, he said.

Steve Spadarotto of Diageo Chateau & Estates said 5.5 million cases of Blossom Hill, a DC&E brand made from California grapes, were sold in the United Kingdom last year. Bulk wine from California is shipped to a DC&E facility in Italy for bottling, because “the U.K. consumer puts a high value on the fact that the wine is from California.”

Dan Zepponi of Foster’s Wine Estates America simplified the concept of wine industry globalization:

“If a consumer can go into a retail shop in the United States and choose between your wine and one from Chile or Australia or other countries, then you’re in a global marketplace,” Hayman said. “Globalization and consolidation will continue to shape the wine industry worldwide,”

Is globalization here to stay?

Robert Smiley, who heads the Wine Studies Program in the UC Davis Graduate School of Management, revealed the results of a survey he conducted among 30 wine industry CEOs on industry issues including globalization.

The strongest warning about imports came from a respondent talking about Australian wines: “Whether they (Australians) have a concise strategy or not, they have a strategy. They came in cheap and they did that well. And they’re coming up the ranks with $15-$20 bottles of wine. And now they pose a real threat to the premium wineries at $30 and up. South Africa, Chile and Argentina will all have to do the same thing.”

One of Smiley’s questions related to Yellowtail, the wine phenomenon that reportedly sold 8 million cases in the U.S. last year. He said respondents pretty well agreed on this one, with one summarizing it with, “It was a kind of a perfect storm. They came in with a product that was flavorful and had an un-intimidating label and found a price point that had been abandoned by its competitors. It touched an audience that knew they liked wine but didn’t want to be intimidated by wine.”

Privately-held wineries

The keynote address was presented by John Grant, chief of staff of Jackson Family Estates, who works alongside Jess Jackson in determining the company’s business strategy and marketing policy.

“The wine business is best managed by families.” Noting that families can take risks — “commercial courage” he called it — he said, “Jess Jackson can take risks that commercial companies can’t take. Families have more patience and can wait it out. Families bring continuity to leadership and the message of the brand. Families bring passion — and paranoia.”

Panelists providing an update on the aftermath of the Supreme Court’s recent decision on direct shipping of wine told of the various state laws passed or under consideration. Rather than simplifying the concept of direct shipping, the ruling seems to have caused more work and confusion for wineries. In at least one case, the new law is challenged as being discriminatory. Tracy Genesen, who represents the Wine Fair Trade Coalition, said that Family Winemakers of California filed a suit against the Commonwealth of Massachusetts because the law there says if a winery produces more than 30,000 gallons, and if the winery has a contract with a wholesaler, the winery cannot ship directly to consumers. She pointed out that no Massachusetts wineries produce more than 30,000 gallons, and said this appears to go against the Supreme Court ruling.

Beer strategy changes

He pointed to a recent poll showing beer had again taken over as the most popular alcoholic beverage of choice, after a year with wine in the top spot.

“The beer people figured out what they’ve done wrong over the last few years, and they’re changing their strategy,” he said. He played snippets of some new ads which concentrated more on the brand, which accounted for the turnaround.

The California wine industry not only faces competition from abroad, but also from the beer industry which is once again courting the same target audience as the wine industry — those born after about 1977.