Giving California a Seat at the Global Table w/ Honore Comfort, Wine Institute

Hey listeners, I want to tell you a little bit about Offset, a proudly independent commerce platform and brand studio based in wine country. I've personally used their ecommerce platform, Offset Commerce for over a decade, and I've found it to be one of the most intuitive and functional platforms on the market. Don't just take my word for it, establish luxury brands and leading independent producers and merchants like Brian Estate, Bedrock Wine Company, Arnold Roberts, and Acbee Fine Wines use Offset Commerce and Love it. Go to OffsetCommerce.com to learn more. That's OFF-SET-Commerce.com to learn more. Welcome to Ex-Shadow. The podcast that navigates the business of wine with unique perspectives and insights with your host Robert Vernick and Peter Young. Welcome to this episode of Ex-Shadow. Today we're going to be taking an international context for California wine and our guest is Honor Comfort Vice President of International Marketing for the Wine Institute. Welcome to the show. Great. Well thank you so much. Thanks for having me on. Really looking forward to it. Great. Can you please give me and Peter a brief overview of your background? Sure. I'm based in Healdsburg in Sonoma County. I've been working in wine now for, I hate to say, but more than 25 years. Just about 25 years. I've had the opportunity to work on almost all aspects of wine, which is great. I started out at a very small family-owned winery here in Dry Creek Valley and then worked for international marketing and brand strategy for a large Australian wine company. From there I then also I ran the Sonoma County Vintners organization for almost 10 years and worked very closely with the Sonoma County wine grape growers and also Sonoma County tourism. And then when I left that I also I was president of a mid-sized winery startup based here in Sonoma County and I've also done some consulting. But I've been with Wine Institute now since 2019. And when I was at Sonoma County Vintners I worked very closely with my predecessor Lindsey Gallagher. She was the prior Vice President of International Marketing and she did a great job and we worked really hard to help raise the image and elevate the profile of Sonoma County wines in key international markets. At that time when I was talking with Lindsey I said, "Lindsay if you ever move on to something else like let me know because I would absolutely love to work on California's wines globally." And so I was really fortunate to have this opportunity. I'm a fourth generation Californian. I'm part of a sixth generation, almost seven generation farming family. So supporting California wine and family farmers in particular but really agriculture overall on a global basis really sort of marries a lot of things that I love and care about. And for the people who aren't that familiar what is the Wine Institute? What does it do and who does it serve? Yeah great question. So Wine Institute is the largest nonprofit organization that supports the wine community overall in the US. While we're based here in California and all of our members, Buro and produce California wines, a lot of the work that we do really benefits the total wine sector here in the US and also internationally. So Wine Institute we're based in California where well actually we're co-located. So we have an office based in DC and also an office in Sacramento and we are a public policy organization. So with the exception of what I do, all of my colleagues and counterparts are focused on legislation and policy decisions and making it possible for vendors and growers across California to be able to continue to grow, produce, sell and also for consumers to be able to enjoy the wines made here in the Golden State. So we have over a thousand members, winery members ranging in size from some of the smallest wineries in the state to some of the largest. We have a very diverse area focus with our team in DC really focused on federal policies and international policies. We have our team in Sacramento focused on statewide. We also have a team that focused on wine policy in all of the other states outside of California. So direct to consumer shipping for example is just one of the things Wine Institute has led and continues to lead on opening up all of the states or direct to consumer shipping for people who have been working in wine for not that long. They don't even remember a time when it was hard to ship wine across the US. I do. And I remember when Steve Groes first started making inroads and when direct to consumer, you know, everyone was so concerned about it because of the impact on the wholesalers. Well, you know, we've come a long way since then the wholesalers are really important partners of course to us. But yeah. And then you mentioned that well, quick follow-up direct to consumer shipping for wineries. Do you also work on direct to consumer shipping for retailers? I know that's something that's been coming up and in the legislative process sometimes for legal process. We are actively involved in all aspects of policy and decisions on a state and federal level that impact our ability to produce and sell wine. So yes, we have a team, one of my colleagues Steve Groes, he's in charge of state relations. He has a team underneath him of specialists who are there embedded in different regions of the US and they're very active with state legislators and policymakers tracking not only bills that are directly affecting wine, but also helping to lead and shape some of the decisions and bills that are put forward. Again, not only in California, but across the US. I mean, it's really essential and at a time, like right now, where within the wine sector we're facing sort of a this confluence of significant issues and challenges that are really shaping and having an impact on the wine industry. But wine institute does is very unique among other wine organizations and it's important work that affects every single wine grow or wine producer not only in California, but across the US. So we are actively involved and working hard to protect the rights that we have to work against decisions that make it harder or more expensive. And as we know, growing and making wine in California already is very expensive, but it really is essential work and because of the nature of what we do, there are many producers that aren't really aware of it and don't necessarily understand how much money and time the work of wine institute is saving for them, right? And protecting their employee base and their customer base and so forth. It's really, really important. It's one of the biggest challenges I think we have as wine institute because a lot of this work is work that wineries can't do. So they need us to do it. And they also don't necessarily that fully, you know, they don't always understand it, understand it, impact or the ramifications. And you said you have about a thousand members, was that right? Yes. And there's over 11,000 wineries in the US. So across the US, only 10% or so or less. And again, wine institute is rooted in Californian. So our members are all California based. So but still there are 4,800 wineries plus or minus across the state. We have a thousand. But we represent the vast majority of wine that is produced and sold here in California. And how much does it cost to join in BNM? So it really depends on each wineries sales of the prior year, either based on value or volume. So it's a sliding scale. So and that's one of the other things that's really important to understand. But and right now, as I said, because of the issues that we're facing on many different fronts, our members are critical to wine institute first to ensure that we have active representation from those who are on the front lines and those who are affected and impacted by these decisions and policies. But also because wine institute operates based on consensus. And so it's vital that wineries have a say and have a voice and the decisions and the issues that are being advanced and the policies that are being made. It's also critical for us to be able to demonstrate that we are representing the full majority of the wine sector. And finally, the dues that wineries pay, you know, an important way to see it is right now that's your contribution to ensuring that we protect our ability to continue to grow, produce, sell and market wines. And I don't know if you know this off the top of your head. But so for like a tiny winery for them to join and participate, is it a significant amount of money? Or is it like a hundred dollars a year? Or you know, what how much do they have to give in order to help out in this important effort? Yeah, great question. Well, for tiny wineries, it's not a hundred dollars. It's a little bit more, but we do have a baseline, which is just a few hundred dollars. So it's a small contribution. And then when you look at the impact, it really is critical. And of course, that scale goes up, the larger that you've get. But it's important and continuing to share the work that wine institute does. And you know, we have really sort of key areas of focus. One is to protect, right? And to protect our ability to grow, sell and produce wine. Yeah, there's to promote, to promote the sector, which is really important. So talking about the unique characteristics and qualities of wine, both with legislators and policymakers, but also of course with consumers, the work that I do internationally helping to build build the California category, and then to unify and to unite the sector because the more we come together, the more influence and power we have. So that's really the focus of what Wine Institute does. There's also some great resources and data. We tend to love data over here. The Wine Institute publishes. Could you give our listeners a brief overview of what kind of resources you provide to the whole industry? Oh my gosh. Well, how much time do we have? Because I can really go. Refo. Refo. Okay. So if you go to the Wine Institute website, right, which is wine institute dot or G, there's a lot of information on there that is publicly available, for example, in our press room and so forth and talking about some of the good work that we do. But then there are really valuable resources that are available only to wine institute members. I'll focus on one. Well, two right now. One is of course all the information around direct to consumer and direct shipping regulations which as you too well know, right, selling wine in all 50 states, it's different and how critical it is to be apprised of changes in terms of regulations, requirements, labeling requirements, all of that. So we have full access for our members to up to date and informed direction on all of that. Another upcoming piece that's really critical is I don't know if you've been talking about some of the extended producer regulations, so the EPRs which the wine industry is facing. This will be significant and also impacted in different regards, not only at a state level, but also at a federal level, so within other countries and navigating these extended producer requirements, the additional things that we will need to be communicating, including on our labeling, other requirements will be extensive. What's an example of that? Is that like nutritional information or ingredients or something? Yeah, good example. And also another challenge is as we're seeing changes within the US federal government and how our government is shaped and how different agencies are being impacted. TTP and potential changes to TTP are really critical, so making certain that we can continue to get our labels reviewed, approved and addressing those issues. There's just so much. So we provide a lot of resources that break these items down, provide clear and specific direction, and one of the most important things is that our members know that they are timely and fully informed and reliable. So that's one of the things that's challenging, especially when you work in multiple states or multiple countries, is understanding the source of information. So for this episode, we really want to focus on how California wine is perceived in the international markets. And so, you know, a while back we spoke with Natalie at California Wine Grave Growers and heard some of the challenges of producing wine. How do you see California wines in the global market? I wish I didn't see more of them as the quick answer. So as you know, California is the fourth largest wine producing region in the world, behind France, Italy and Spain. So we are located, of course, in the largest wine consuming market in the world. Within the US market, the largest wine market, the US market is dominated by domestically grown and produced wines, right? It's for various year to year, but by far it's dominant, roughly 75%. The balance is imported wine. And those imported wines come from around the world. So almost every wine producing region in the world sells their wine in the US. In the US, California is fortunate that we are the largest category. So within the domestic wine category here in the US, California is the largest. And so California produces about 80% of the domestic wine that's sold in the US. So the way I always describe it is in the largest market in the world. California is the dominant sector of the domestic market, which is dominant. So because of that, most of our producers are heavily focused on selling the wine here in the US. Many of our producers, moments don't even sell their wine outside of California. The direct to consumer growth that we've seen over the past 10 years has also heavily influenced that. However, there's a whole other world of wine consumers, key accounts, collectors, similiés that are interested in the diverse array of wines from quality and really distinctive regions, including California. And as you know, California has unique natural resources and characteristics that give us the ability to make this really broad selection of wines at a range of price points at exceptional quality. So it's one of the reasons why our wines are so dominant here in the largest wine market. But we've lost many of our producers have lost sight of markets outside of the rest of the world. As a result, we export only about 4% by value of the wine that's grown here in the US. So you take that small amount and you spread it around all those other markets. You tend to not see very much California wine. But getting back to your point and the comment you made about Natalie and the challenges and really the costs of growing and producing wine here in California, it is very expensive. And one of the reasons why is because the alcohol category, the beverage alcohol category in the US and the wine sector specifically is heavily, heavily regulated. Partly because we're here in California with a real focus on environmental protection, as well as protections for our labor force and other requirements regulations. And every layer of regulation, well, they're important. They add cost and complexity to growing and producing wine. So California wines then, you layer on the costs of exporting and truly the structure of taxes, duties and quite frankly tariffs that we're facing in other countries. That just gets layered on top of the higher cost of growing and producing wine here in California. And also, let's not lose sight of the cost of land. And the cost of land in California is significantly higher than in other parts of the world. So it's more expensive to grow and produce wine here and we layer on higher cost structures. So California wine around the world is already within a premium and premium plus category. So that's our reputation for the most part out there. Can you define premium, premium plus for our listeners because I know the penny I know you talked to, those dollar amounts can change dramatically just to give our listeners context. Yeah, that's a great question. So generally when we talk about premium, we're talking $10 retail and above premium plus is more $20 and above. And of course that really varies wildly. But with California, again, such a large amount of the volume of wine that's grown here, you're able to grow and produce beautiful wines at a range of price points. But so much of that is already being sold here in the US that we just don't see as much of it out in the world. So I'm just curious if you look at the 4% that is exported, where on the value proposition are those exports? Is it pretty equally weighted or is it more favor the high end? Great question. So traditionally, the largest category of the volume was at lower price points, right? Because it's less expensive to ship. But there's more value at the higher end sourcing dollar value. Very commonly we have what we call either a, you know, whether you want to call it a dumbbell market so that we've got a lot of lower value wines and then a lot of higher value more expensive wines, but not a lot sort of in that mid price range. That's one of the areas that we're heavily focused on and building and developing. China is a great example of a market like that. The UK is a great example of a market like that. And so one of the reasons for that is because wines that we typically see here in the US at, you know, between $10 retail and $20 retail, those wines out in, depending on where you are out in other markets, can be even double that or triple that or if we're looking at India, 10 times that. So a bottle of wine that retails here, the US for $10 is retailing for $100, the equivalent of $100 US and India. That's an extreme case, but it's one of the challenges that we face. It seems like that's kind of common though. Like I think of like Australian wine in the US people think of like yellow tail or grain, right? Like it seems like that dumbbell, which I think is a great visual for a market is actually a pretty common export issue. It depends by region. I'd say Australia has sort of the biggest parallel for us, but other regions like France and Italy actually have the exact opposite, right? If you look at the production of wine by volume from Italy and France, there's a very broad base of higher volume, lower price wines. Let's just say that, but it then ratchets up to the tip of the pyramid, which are very low volume, very high priced high value wines. And that's really where their reputation is built and rests. And it's that reputation at the high end that helps them sell wines along all the other price points. So that's one of the things that we're really focused on with how we present California wines out in the world and ensuring that we are showcasing and sharing wines at the high end and the small production, small producers, family owned across a range of regions, [BLANK_AUDIO] the story of the diversity, the complexity, the range of wines that we grow here. So that consumers and some aliase and restratours start to gain a better understanding of what the California wine category comprises. Because if you just look at California wines that are in the market, whether you're in France or whether you're in Japan or whether you're in Mexico, what you see is just a sliver of really what's grown and produced here. And that's our biggest challenge. So for an average member of the wine institute, what are the key international markets for their wines or what are they looking for? I mean, obviously the thing that jumps to my mind right away is Canada, but I wasn't sure. Obviously, there's some drama there. Yeah. What's going on right now? But I'm curious on what are the top markets and does it vary based on the size of that winery or the value of that winery? Okay. Two different questions. I asked you your first question, which is the markets for exports for California wine. So Canada has been our number one export market until February of this year when the premieres in Canada chose to take all US wine, during spirits off the shelf. We're still in that situation. It's very painful for us. But Canada traditionally represents around 30% of total US wine exports. So part of it is proximity, right? They're just over the border. Part of it is just the affinity for US and Canadian goods in a similar mindset. Part of it is also because Canada, across many of their provinces, they have liquor control boards or state-run monopolies that sell their wine. So in the largest province on Ontario and with the LCBO, California has been the largest category for imported wines in the LCBO for quite a long time. We have very strong market share there. It's a wide range of products with great relationships. Our wines are also in restaurants, etc. So having all of that basically frozen, Pona Ice has been extremely challenging for us and very frustrating. There's a lot of work that's happening. We're all hopeful that we'll see that situation change shortly. And then we will be working hard to rebuild our relationship with Canadian consumers. After Canada, it's Europe and UK. They're number two and number three and they really sort of go back and forth. It's interesting. The UK, as I like to say, they punch above their weight in terms of significance globally within wine. The UK is one of the oldest wine markets in the world. It continues to be a very highly concentrated market with the number of wine writers, wine critics, institution supporting wine, high end wine traders. I always say, you know, it's like the pebble and the pond. If you do something in the UK, then you see benefit and it reverberates around the world. So it's really important for us. We have one of the broadest selections of California wines available in the UK market of any other export markets kind of fascinating. When you say Europe, what countries does that include? When we talk about exports, we need to talk about continental Europe because the way that our data is tracked, both in value and volume. It's based on where shipments land. It's not based on necessarily where the wine is sold. So if I'm an importer and I'm bringing in five containers of wine from California and the ship that it's on lands in Rotterdam, that's counted as an export to the Netherlands. Even though once I pick up those shipments and I sell one container in Italy and two containers in Sweden and half a container in Poland, right? So that's why we aggregate. When we break it down and we look at sales, the largest market in Europe is Germany because it's the largest market in Europe. Very important but very challenging because Germany has a strong domestic wine market that is also tends to be quite low priced. So we've done a lot of work working with the Simelea community, the wine educator community and importers to help raise awareness and understanding and appreciation for California wines and we're seeing that work really pay off. And do you know where the wine goes if it goes into one EU country or is it just due to lack of transparency in terms of where it goes that you can't track it or is it just it just becomes easier? No, it's two different things. It's a lack of transparency and honestly it's a lack of data because every country tracks it differently. It's also sold very differently. Again, as a category, Californians are high-end around the world and particularly across Europe and that's good for us because it elevates our image and helps build the prestige. But it's a challenge because it means that like in the UK, some California wines are sold at Tesco and St. Petersburgs but most of them are sold in high-end private retail. They're also right, so and they're also sold through collectors and they're sold at restaurants. So you just don't see it as much, you don't see it in the same way. So across Europe, we don't have consistent data. We got great data again from the monopolies in Norway, Sweden and Finland and while they are relatively small markets individually, when you aggregate them, they're quite significant. They're important. And Denmark is a very important market to us and with their strong culinary culture and their focus on wine and food and it aligns nicely with California and California cuisine. Our wines have done very well there. We're feeling some impacts of the geopolitical situation there right now, which is challenging. But one of the things that's really interesting is, again, since you guys are data geeks, I'll lean into this. IWSR, which is International Wine and Spirits Research. There are companies that tracks consumer-related wine data around the world. They're one of the few. They're very good at it. They have an index that they do that ranks. All of the wine markets in the world based in terms of value or attractiveness and it's a combination of both socioeconomic factors and then wine market factors. We haven't seen their new report for 2025 yet. It comes out in the fall. But the 2024 report, the number one market in the world, the US. Number two, Canada. Number three, this blew my mind. Switzerland. Even though it's a small country, they have a very strong wine culture and it's very high value, right? It's really interesting. Then it ranks all of the markets and also tracks movement up and down. As market shift and different policies are put in place, markets varies. I could talk about this for hours. Do they predict where things are going as well as it also projecting trends or no? Is it just purely analytical data that comes in? It's analytical, but then you can use it when you marry it with then looking at other societal factors and trend data, then you can start to use that to build your export strategy. I'm going to come back to your second question, which is, does every winery have the same priorities for export and no, not at all? Every winery business is different. They're all structured differently. They have different areas of emphasis. We only talked about one, two, and three, Canada, UK and Europe. We didn't even get into China, Japan, Korea, Mexico and what's happening with all of those other markets. Those are just our priority markets. California wines. We have programs, active programs in more than 30 countries around the world where we're working to engage with importers, help build relationships, get more California wines into the market and then also educate, help inform the trade about California. California wines, they understand why. California should be on their shelves and on their wine list, but even more importantly, why they need more than one. Why they need different varieties and different regions, how distinctive they are. There's a lot in there. Also, help them understand and appreciate the range in bottle price. They can get great wines for $10 a bottle or under, but also paying $500 a bottle or more for a beautiful Napa Valley Cabernet, why that is and what their customers get and helping to tell that whole story. Sorry, just one random side thought. Given the strong domestic market for producers, how much wine, I'm sure the answer is going to depends, but how much wine does a producer need to make before they start thinking about exporting typically? Is there a threshold once they get over this number of bottles, then they start to think about, hey, maybe I should do it or what's driving to export? Another really good question. I think that what really, and basically, if you have wine to sell, right, and most wineries do particularly these days, adding export and international markets into your sales mix is a really smart strategy for a couple of different reasons. Number one, even as a small producer, and in fact, in many markets and as you're starting out, importers don't want to bring in multiple containers. They want to bring in a small amount. And so it's easier to work as a small producer to get a small amount of wine in. The nice thing about export is that you can do it on your own because unlike here in the US, where we really need to sell every bottle of our own, and well, our wholesalers are really important to us. It's much more transactional. International, your importer, they sell your wine for you. So once you find the right importer and you build a relationship with them, then they sell the wine. Of course, it's always great to go into the market on occasion. It's always important to have a business meeting face to face. And so it does take some investment as you go forward, but that just continues to build your business and elevate it. So as a small producer, it's really about building visibility for your brand, ensuring that your wines are on the right wine lists and on the shelf with those accounts, because your customers, even if they're based here in the US, they travel. And they go to if they're eating at fine dining restaurants here in the US, they're eating, you're sure they're eating at fine dining restaurants from there out in the world on traveling on business, run vacation. And so having your wines side by side with other great wines from regions such as Champagne, Burgundy, Tuscany, other parts of the world is really essential. So California, for us to own our proper space on the world's wine stage, our wines need to be out there in the market. And it benefits our wineries to be selling them to key accounts. One of the wine makers that I've worked with, I've traveled with around the world. And then he's been quite small, but his brand has been very well renowned. And he always said, I guarantee you that in almost every major city of the world, there's at least one account where I want my wines to be. And you know, it's not about moving a lot of boxes. It's about making sure that my wine and my brand is there on the list. And I think that that's really essential, especially for smaller producers and small producers can pick and choose very carefully. You don't have to be everywhere. You can be in one or two markets or a couple of them. Then as you grow and you have more volume to sell, then your strategy starts to shift. And you think a little bit differently about which markets you're in, the priority markets, how you invest and you develop it. But there's a really great small producer over in Napa Valley, started as a grower. Now they produce their own wines under their own label. Beautiful wines, very well regarded. They started doing export a few years ago and they have now grown and their production is under 5,000 cases annually. It's kind of a few thousand cases annually. And he shared with me that because of the work that they've been doing with us and choosing markets carefully, that export is now 15% of their total sales. I mean, that's significant, especially when you're a small producer. And particularly now as we're all facing sales pressure. So we're actively working to help wineries understand and our rule is to really grease the skids, help them get their wine and market. Yeah, thank you. That's helpful to have that context of how it can play into the sales mix and the value export provides. Thank you for going on that to Andrew with me. And we talked a lot about the cost differences of EU or global versus California. And one of the things that we've heard from many people is that the EU does a lot of subsidizing of their wines. Can you expand on what they do and the impact that that has? Yeah, I'm happy to. And you know, it's really interesting because when you speak with EU producers, many of them don't even realize how heavily subsidized their production is. But it's all sorts of things from, oh, I'm sure you guys have traveled and been to little teeny tiny wineries across parts of Europe. Italy is a great example. Every little producer has this gorgeous Ferrari of a bottling line, for example, right? Because it's much easier for them to access to, you know, they can purchase the bottling lines because prices are subsidized. There's access to supplies, materials, marketing support is significant. So by comparison, Italy alone receives over $150 million a year annually just for marketing. California wines, we are very appreciative of the support that we receive from the USDA. This program is built on it. And we receive typically $8 million a year annually. So big difference, right? So there's subsidies in terms of marketing in terms of, as I said, materials supply. We don't have a lot of visibility to it. It's difficult information to get to. But it makes a significant difference. So outside of marketing, though, I'm sorry to jump in. Like what other subsidies kind of go in? So as I said, equipment, supplies, access, they also have support in terms of, I'm sure that you've seen during COVID, there was a whole policy of converting excess wine and bulk wine into hand sanitizer. So some of these programs that help farmers and producers to manage their inventory and availability, that all falls under that subsidy category. And so why doesn't the US or California do anything similar? Well, it's at a federal level. And as you well aware, the US has a tradition of, there's not a lot of support for the beverage, alcohol industry broadly. And certainly within parts of the government. And so it's a challenge. We really need to advocate and fight for it. We do get vital support from the US government and USDA. That's essential. And there's a lot of supports that goes into supporting the wine sector. But it's just not at that same level. So wine is one of the highest, I mean, wine is the highest value, Ag export from the US by volume. However, when you look at all of the products that the US exports, wine is not, you know, up there in terms of the total value and priority. When you look at France, Italy, some of these other countries, wine is one of their most high value exports. It's also culturally. It's a part of their culture and their patrimony. And it's critically important to them. And the US is a very different relationship to wine and beverage alcohol. If we just, you know, look back to prohibition, that fundamentally changed the California wine industry. It almost eliminated the California wine industry, but we were able to survive past that. So there's a very different point of view. We mentioned, you know, sitting now in the summer of 2025, the whole tariff situation, the trade war situation, which is continuing to evolve every day. So tariffs on the US are still a big topic. How do you see the current trade war impacting the wine world today? We're seeing a lot of impact. I mean, I would say the single biggest impact right now, aside from Canada, right, we've already covered that, is the market uncertainty is really having an impact both on the consumer side and then also on the trade side. And that's, we're seeing and we're hearing over and over from importers and other markets that people are just, they're slowing down. They don't want to have shipments on the water. If then trade deal comes through and a tariff is imposed. So everyone is waiting to see what happens. And it also is what's interesting. It isn't just about what happens with the price of wine itself. It is also impacting things such as stainless steel, the cost of inputs and material, oak, barrels, all of this sort of all throughout. And so it's really challenging the level of uncertainty and then also the impact and raising prices. We were talking earlier about the cost of doing business and the cost of production here in the US and in California and this is certainly adding to it. And it's a significant concern for producers large and small. So it's a challenging environment. At the same time, we had just come off of an administrative prior administration that was not interested at all in addressing trade barriers and tariff situations and trade deals. And so we face unfavorable tariff structures and tax structures in most of the countries to which we export. So there is potential benefit, right? We haven't seen yet what the benefit will be, but we're hopeful that we're going to see some improvement with some very challenging trade structures. And that would just help to open up the export market and create a whole other level of engagement because there are consumers out there that are interested in our wines and that want our wines. We have producers that have a lot of wine that we want to sell. And it's just forcing it through the funnel. I mean, just one example alone and talking about trade deals. Right now, we know that the government is actively involved and engaged in discussing trade deals with India, Vietnam, Thailand. Right? We've already seen some deals come through recently as well. We don't know what the impacts are on wine, but with India, we face a 150% tariff. Right? And so if that could be reduced even cut in half, that would be significant. Is that all wine or just for US wine? All wine. Right? And actually, yeah, all I call it beverages. And India is the number one whiskey consuming market in the world and the number five beer consuming market in the world. So it's not a lack of engagement with alcohol. It's the challenge. It's a lack of engagement with wine. And the fact that the domestic Indian wine market is very undeveloped. So if people start though, they try wine that's really domestic Indian wine that may or may not like it. But then there's nothing else to turn to. Right? There are no other options or choices or it's very limited. So that's just one example of how we could really open up and significant, have a significant impact for our producers here. We've seen examples. of that before I believe is in 2008 Hong Kong got rid of any tariff or tax on wine and went to zero and it became a huge trading hub for wine just like London globally. How did that impact the US or California's wines market in that market relative to like the rest of the world's wines? Well, we benefit from proximity to Hong Kong also an extremely tight relationship, particularly Hong Kong to California. Hong Kong really became a hub for wine from California into Asia and we know that a lot of wine was shipped into Hong Kong and then redistributed and sold from there. But from that point we saw dramatic growth and prior to 2019 we were seeing year-on-year growth steadily in China and Hong Kong and it was quickly becoming China was our fourth largest export market and on the rise. But then we had tariff sympos I don't know if you remember back in 2019 where the China imposed a significant 100% tariff on California and our business just plummeted. We were seeing the market recover post-COVID so in 2024 we were having double-digit and triple-digit growth in China and Hong Kong for US, California wine exports. And you know, I just realized one thing that's really important when we're talking about export numbers is that export numbers are only tracked at the US level but we know that California makes up more than 95% of US wine exports. So when we talk about US wines we're really predominantly talking about California. So in 2024 as I was saying we were seeing double and triple-digit growth in China and Hong Kong for US wine exports and then you know the whole trade situation became very unstable and we've just seen that really taper off. So again everyone's sort of holding their breath and waiting right now. And so we talked about how Canada was able to quickly pull out everything from the shells which is a huge impact for American wines. Have any other countries done anything that have kind of hit back against the US? No we haven't seen anything significant yet and the reason why Canada was able to do that was because of their state run or province run liquor boards. And so what was interesting was that the decision was made at the premier levels right and they're the ones that so hold the cards. They're working very closely with Mark Carney. So we believe that once the the conditions on both sides of their trade deal are met that then they'll decide at a federal level but we're still waiting. We're working very closely with the premieres in Canada tracking that is what we can do. But that's one of the concerns is that for example with EU and with Europe is that if the US imposes tariffs that the EU will hit back very heavily with tariffs. So it's that's one of the concerns. Wine Institute has and holds a position and has held this position for very long time of what we call zero for zero tariffs and really that wine and spirits but really wine should not be pulled into trade disputes that have nothing to do with wine. Right because who ends up being hurt by it are of course farmers and the producers but also consumers. That's what we're seeing right now in in Canada and it's really frustrating but we certainly don't want to see that with other countries as well. And have you heard so there's the financial impact of just tariffs and making the price higher or people not wanting to buy it but there's also potentially a reputational impact of the country and people wanting to support US products including California wine. Do you think that's going to have a longer term impact if even if trade deals get done that might hurt us as an exporting country meaning that because of the current situation that consumers in other countries choose not to purchase. Yeah basically people hate Americans even more than they do today. We are seeing I will say it's really interesting. American sentiment and attitudes towards the US really do factor into our business absolutely and we are seeing some pockets of anti-American sentiment Denmark is a good example right because of the threats against Greenland and the very close you know connection there that many consumers and even importers and some liais have decided to just not support goods from the US including California wine. In other parts of the world it really isn't as much of a factor. They really separate their choice of what they purchase from what's happening in the world and China is actually a really interesting example of that and we're not seeing that kind of de facto or rejection of California wines which is good. In other parts of the world the relationship and the American sentiment is a strong positive like Vietnam for example is and Korea as well. So there's both good markets that there's strong support for US goods and so California wine becomes a point of pride. Interesting and so are you giving any advice to California or US wineries about what to do about the trade situation? There's not a lot that we can do. I mean we're sort of all in it with everybody else but we are absolutely guiding our members and helping to support them first and foremost by sharing information right and sharing the inside information and the insights that we're getting on progress and direction. Also we are working to help support and connect both the trade and consumers with California wines and to really lean into the fact that we are California and that we're in the market for the long term that our relationship goes beyond this current situation. We've been working with them for a long time. We'll continue to do so. Separately we're putting in place we have for example we have a really robust strategy that we're ready to put into action as soon as our products are back on the shelf in Canada and we recognize that one of the most important things that we'll need to do is rebuild the trust between Canadian consumers and US products in California wine. We're feeling the same way in Denmark and so how we do that is really important and then we guide our members so giving them talking points, giving them tools. We're engaging with the trade. One of the things that we do in the largest programs that we host is called the Global Buyers Marketplace and we have it here in California so we bring between 85 and 100 buyers for more than 30 countries and these are top selective buyers here to California to meet and do business directly with growers and producers. It'll be happening for three days at the end of October. We were really concerned about whether or not buyers would be willing and eager to come and we're very excited to see the response that we're getting and the engagement and so that's important and that just sort of reinforces the whole notion that that wine really is an important part of our shared culture and this whole notion of wine as diplomacy. It really, it's true, it's important. What are the most important state or federal policy issues that the wine industry is currently working on? Well the US dietary guidelines is and the whole situation around that is absolutely at the top of the list in terms of US focused policies. I was getting wines back on the shelf in Canada is our number one priority internationally and we're also focused on issues such as ingredient nutrition labeling, how we clear that. I'm here in California, the bottle bill and recycling and recycling glass. Also other initiatives around air quality and water quality. So we have a lot of different different initiatives but overall I said a federal level the US dietary guidelines and the decision on what's going to happen around the recommendation is really important. Along that line, wine institute has been working very closely with a coalition of the other organizations that support beer and spirits policy and including wine America which is sort of the equivalent of wine institute but focusing on the on the rest of the states other than California and we work hand in hand to make certain that there was an understanding and an awareness of the lack of transparency and the lack of and potential bias that was being introduced into the process for the US dietary guidelines through this whole secondary output study. I think you may or may not have heard about that but that was really a concern and just that there was this focus on stepping outside of a congressionally over viewed and well established process that had been used for decades and that there was risk there and making certain that that was understood and I think we've made a lot of headway in terms of shining the light on that and ensuring that the process for determining the US dietary guidelines is based on fact incorporate science and it is led by those that are informed. So slight side note in terms of those are things that you're actively working on right now but on the flip side if you were to be able to just like. snap your fingers and make something up in, that isn't kind of in process already. That would be the most beneficial to the California wine market internationally. What would you like to see happen in the US? Well, since my focus is international, I immediately go to a more international angle and I think that actually what would help our producers here the most would be to address some of the trade issues in these other markets and open up significant markets globally for our wines because as I said previously, there are consumers and accounts that definitely would love to sell more California wines and there are producers who want to sell it. And so that would be the single best thing that we could do, which would be to expand the sales mix and to relieve some of the dependence that we have over dependence really on the US market. So with the whole wine world oversupplied including California and Europe and everywhere, people are drinking less everywhere for the most part, what do you think the California wine industry should do in the near term to ensure it thrives? Another initiative that I'm working on that's actually tied in with marketing strategy that we're using all around the world. It's a whole program that's called Share Wine and it's focused on how we within the wine category as a sector can do a better job of first off understanding our future consumers and then communicating and engaging with consumers because our landscape is dramatically shifted. The focus of this work has really been on consumers age 25 to 45 and recognizing that they are really unlike any prior generation but that generations thereafter will be much more like them and it really all centers around their relationship to technology and being digital natives as opposed to digital immigrants. And that has fundamentally shifted the way that they engage with the world, the way they see themselves in the world and the way they engage with each other. So that means as marketers we need to adapt and shift the way that we reach out and engage with them, we better understand where and how they're spending their time and how wine aligns with that. So we have spent the last 18 months really digging into this and better understanding them and come up with some really key insights that are important and can shift the way that we present wine and really build this relationship with wine and pull them into wine culture in a really positive way and it helps satisfy some of what they're looking for in their life which is this opportunity to reconnect with each other and wine is a perfect complement to that. So we've been developing this project. We're just on the verge of launching something that's called the Share Wine Colab and it's a collab because it's collaborative of course with winers but even more importantly because it's a community laboratory and it's focused on sharing all of the work that we've been doing with the research and the insights but then also results from that in directions and tools and insights on how to better build communications campaigns, marketing campaigns, how to work more effectively within the digital media and connect with these consumers to build and expand our audience. I think that's going to be essential for us as we go forward. So we're going to be launching this in the next few weeks. I'll be excited to share it with you. There's a lot that's in there and I think that it has the potential to really have an impact and most importantly to be a really useful toolbox for all of our winery partners to help them be better at what they already want to do. Awesome. Well, Anna, we'd like to wrap up each episode on a personal note and our question for you is what is your most cherished wine in your personal cellar and when do you plan on drinking it? Well, at the risk of sounding to, you know, polyannage, I was thinking about this and I realize that honestly the most cherished wine is the one that I'm just about to open and enjoy. Always. And the reason for that is because the beauty of loving wine is the remarkable range and diversity of wines from around the world. And of course, I love wines from California. I love our own wine that we grow and produce here in Drake Creek Valley. But I also love wine from all the different regions of the world. And this is exactly why we focus on it a more California wines out there too because that's one of the things about discovering a new wine from a different place or a wine that is tied to an experience or a person, you know, that's what you treasure. So I definitely have wines that I do treasure in my wine collection. I'm not certain when. I'm going to drink them, but I know that I will. And what I always prompts it is either, like I said, a special occasion or people that are coming over for dinner tonight and then saying, oh, this is the perfect day, the perfect moment to open up this wine because and then you fill in the story. And that's the part that's so fun. Great. We want to thank you for sharing so much information about the California wine market and how it's perceived internationally and how and all the things that are impacting the international market. Really a lot of context for listeners and we greatly appreciate you spending this time with us. Great. Well, thank you so much. Really interesting talking with you guys. Love to continue the conversation at some point in the future. And hopefully when we have some more insight into all these trade deals and how the landscape is going to change because as the one thing we know, it's going to change. Change is certain. Change is certain. All right. Well, great. Thank you guys so much. Really appreciate the time. Hey, listeners. If you love the show, support it by buying a show notes book. They not only compile two years of episodes, but also organizes them into themes for better learning. They can be an inspiration to listen to or relist into an episode or provide a quick reference of the key learnings from a show. Go to xchatto.com and click on the store page for easy links to buy. Thanks for listening. Thanks for joining us. If you loved this episode of xchatto, we'd love for you to subscribe. Rate and give a review on iTunes or wherever you get your podcast. Until next time, cheers.