San Francisco, Calif. -- Wine sales in the United States reached an all-time high of 449 million gallons (188.9 million 9L cases) in 2006, with a retail value of $17.8 billion, according to the latest Gomberg-Fredrikson Report. On volume growth of 2%, the retail value of California wine sales increased by nearly 8% in a highly competitive U.S. market, driven by the upward trend in the sales of premium wines, priced $7 and up. Total California winery shipments to all markets in both the U.S. and abroad increased 2% to 541 million gallons (227.6 million 9L cases) last year.

Accounting for two-thirds of all wine sold in the U.S., California wines are benefiting from several trends. "Fueling the American consumer's interest in wine is the increased tourism to outstanding wine regions throughout the state of California," said Robert P. (Bobby) Koch, president and CEO of Wine Institute. "The rise of vibrant wine communities all over the U.S., and the availability of a greater selection of wines in retail outlets, restaurants and through direct-to-consumer sales is also adding to greater consumer awareness."

Wine industry analyst Jon Fredrikson added: "Wine's positive image, its extensive media exposure with scores of stories about the potential health benefits of moderate wine consumption, and the widening distribution of a vast range of appealing wines broadened the consumer base. Wine gained share of mind with mainstream media exposure."

Barbara Insel, managing director of MKF Research, pointed out that Americans are drinking higher-priced wines now than in previous years. "Currently, the heart of the U.S. wine market is wine priced between $8 and $15, with rapidly growing sales of wine above $15," she said.

Premium California table wines, priced $7 and over, increased 10% by volume in 2006 for a 38% share of case shipments and 67% of winery revenues, according to the Gomberg-Fredrikson Report. This positive uptrend reflected consumers continuing to use their discretionary income to trade up to more expensive products and affordable luxuries such as wine. The price segment of everyday wines up to $7 was flat in volume sales, accounting for 62% of the shipments and 33% of the revenues.

Thirteen Consecutive Years of Growth, Record-High Exports

For 13 consecutive years, sales in the U.S. of wine from California, other states and foreign producers have increased. In 2006, sales rose 3% compared to the previous year to 716 million gallons (301 million cases) for a total retail value of $27.8 billion. Of the total volume, table wine sales were 624 million gallons; dessert wine 57 million gallons and sparkling wine 35 million gallons. California wine's 449 million gallons to the U.S. accounted for a 63% market share of the volume sold.

U.S. wine exports, 95% from California, totaled $876 million and 404.5 million liters (106.9 million gallons) in 2006, an increase of 30% in value and 4% in volume, compared to 2005. In Europe, where the U.S. ships more than half of its sales abroad, exports surged 48% by value. Wine exports to Canada grew 29% by value. The long-term trend of California wine exports shows steady expansion, with the 2006 number representing a 106% increase in exports by value in the last decade.

Different Picture for Growers

Amid all this optimism, California's grapegrowers are not quite so complacent. Wines & Vines spoke with Lodi grapegrower Bruce Fry, a vice chairman of the California Association of Wine Grape Growers (CAWG), who said members from across the state have observed that this has been a quiet year for them. Fry cited several causes for the inactivity: consolidation, the contentious issue of wines labeled with an "American" appellation that include imported wines and the change in 2005 of vintage dating requirements. "The requirement was 95%; it was changed down to 85%," he said, meaning that if wineries have a surplus of wine from one year, they can incorporate more of it into future blends, thus reducing their need to purchase more grapes from the current vintage.

While some wineries might opt to use 100% of a certain vintage, he said, "Every winery does it different. It's another option for growers to get hurt on."

Fry said he expects this year's crush and market to remain flat, noting that the cool spring/early summer weather has been helpful in a very dry year. "Here in Lodi," he noted, "We've had only 10 inches of rain this year, where normally we'd have 17 inches." His forecast for this year's market? "It depends!"

CALIFORNIA WINERY SHIPMENTS ¹
(In millions of gallons)

Year	California Winery Shipments to All Markets in the U.S. and Abroad	California Winery Shipments to the U.S. Market
2006	541.1	449.2
2005	532.8	441.2
2004	521.7	428.2
2003	493.5	417.0
2002	464.3	401.0
2001	449.1	387.0
2000	445.9	392.0
1999	443.1	397.0
1998	432.5	385.0

Includes table, champagne/sparkling, dessert, vermouth, other special natural, sake and others. Includes foreign bulk shipped by California wineries. Source: Wine Institute and Gomberg-Fredrikson & Associates. History revised.

TABLE WINE VOLUME SHARE BY COLOR
(In U.S. Supermarkets)

COLOR	1991	1995	2004	2005	2006
Red	17%	25%	41%	42%	42%
White	49%	41%	40%	41%	42%
Blush	34%	34%	19%	17%	16%
TOTAL	100%	100%	100%	100%	100%

Source: Based on U.S. supermarket data from The Nielsen Company.

WINE SALES IN THE U.S. 1991 TO 2006
(In millions of gallons)
(Wine shipments from California, other states and foreign producers entering U.S. distribution)
Year Table Wine¹ Dessert Wine²

Year	Table Wine¹	Dessert Wine²	Champagne/ Sparkling Wine	Total Wine	Total Retail Value (Billions)
2006 Estimates	624	57	35	716	$27.8
2005	608	51	32	692	$25.8
2004	589	45	31	665	$24.0
2003	570	40	29	639	$22.3
2002	552	37	28	617	21.8
2001	512	34	27	574	20.3
2000	507	33	28	568	19.2
1999	475	31	37	543	18.1
1998	466	31	29	526	17.0
1997	461	29	29	519	16.1
1996	439	31	29	500	14.3
1995	404	30	30	464	12.2
1994	394	33	31	458	11.5
1993	381	35	33	449	11.0
1992	405	37	33	476	11.4
1991	394	39	33	466	10.9

Sources: Volume--Wine Institute, Department of Commerce, Estimates by Gomberg, Fredrikson & Associates. Preliminary. Totals may not add due to rounding. Excludes exports. History revised because of updated TTB reports.

¹ Includes all still wines not over 14% alcohol; excludes Canadian coolers (made from malt).
² Includes all still wines over 14% alcohol and sake on new TTB releases.

ESTIMATED 2006 CALIFORNIA TABLE WINE SHIPMENTS
(By price segment)

Retail Price	Price Segment	Nine-Liter Cases Sold (Millions)	Percent of Total	Winery Sales Revenues (Millions)	Percent of Total
Over $14	Ultra-premium	22	13%	$2,930	35%
$7 up to $14	Super-premium	42	25%	$2,640	32%
$7 and Over	Subtotal Premium	64	38%	$5,570	67%
$3 up to $7	Popular Premium	56.6	33%	$1,830	22%
$2 to $3	Extreme Value Wines	6.9	4%	$130	2%
Below $3	Economy Wine	43.3	25%	$720	9%
Up to $7	Subtotal Everyday Wine	106.8	62%	$2,680	33%
	TOTAL TABLE WINE	170.8	100%	$8,250	100%

Source: The Gomberg-Fredrikson Report. Traditional table wines include an estimated volume of still wines over 14% alcohol which are sold as table wines. Excludes coolers and cider. CONVERSION: 9-liter cases times 2.37753 equals gallons.