The global wine market A macro context A macro context Important - - PowerPoint PPT Presentation

Canadian Vintner’s Association, July 2013

The Canadian Wine Sector:

Driving success in the face of global competition

The global wine market

A macro context

A macro context

Important changes in the market:

• Grape costs rose in many regions, but now in decline
• European domestic market remains soft
• Global wine companies prioritize profitable growth markets

20 40 60 80 100 120 140 160 180 200 220 230 240 250 260 270 280 290 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ending Inventories Production Consumption

Production decline reduces available supplies

Production, consumption and ending inventories of wine, 2000- 2012

Ending inventories Production & Consumption

New World see strong 2012/ 2013 harvest

Wine grape harvest (Mn. HL) in USA, Chile, Argentina & Australia

5,000 10,000 15,000 20,000 25,000 US Chile Arg Aus 2011 2012 2013

New World harvest affecting bulk wine prices

Bulk wine prices remain high, but are declining

Price (USD/ Lt) of bulk wine, Sept 2010- Mayo 2013

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 Cab Sauv- Spain Cab Sauv- Chile Dry Red- Spain Dry Red- Chile

European domestic market under pressure

Wine consumption (Mn lt.) in Western Europe, 2007- 2012

Source: Euromonitor, 2013

11,600 11,800 12,000 12,200 12,400 12,600 12,800 13,000 2007 2008 2009 2010 2011 2012

Premium European wines focus more on exports

Export vs. domestic share of Rioja wine sales, 2004- 2012

Source: Consejo Regulador de la Rioja, 2013

0% 10% 20% 30% 40% 50% 60% 70% 80% Domestic Exports 2004 2012

Wine sales declining in the UK…

Source: National Bureau of Statistics, 2013

UK Wine released for revenue and consumption (Mn. lt.), 2008- 2012

1,120 1,140 1,160 1,180 1,200 1,220 1,240 1,260 2008 2009 2010 2011 2012

China gaining importance for many suppliers…

Spanish exports of bottled wine (with DOP) to China, 2007- 2012

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 2007 2008 2009 2010 2011 2012

Source: OEMV, 2013

5 10 15 20 25 30 35 40 50 100 150 200 250 300 350 400 2005 2006 2007 2008 2009 2010 2011 2012 Vol (Mn 9 lt. cases) Value (USD Bn.)

U.S. wine consumption continues to rise

38% 30%

U.S. wine consumption (Mn cases & USD Bn) 2005- 2012

Source: Wine Institute

USD Billion Million 9 lt. cases

“Frag-solidation” trends in the U.S. wine market

38% 30%

Registered wineries in the U.S.

Source: Wine Business Monthly

1,000 2,000 3,000 4,000 5,000 6,000 7,000 2005 2011 45.3% 48.8% 43% 44% 45% 46% 47% 48% 49% 50% 2005 2012

Market share top 3 US wineries

Source: Gomberg Fredrikson Report, 2013

Wine sales becoming concentrated in chains

38% 30%

Source: The Nielsen Company, 2012

Wine selling locations: Independents vs. Chains, 2004- 2012

Canada emerging as a highly attractive market

38% 30%

Source: Rabobank, 2012

Ranking of global markets for branded wines, 2012 Rank Country 1 U.S. 2 Canada 3 China 4 Hong Kong 5 Japan 6 Switzerland 7 Korea 8 Nordics 9 Germany 10 Denmark

Wine rising and taking share from beer and spirits

Source: Statistics Canada, 2013

Market share of alcoholic beverages in Canada. 1995- 2012

10 20 30 40 50 60 Spirits Beer Wine 1995 2012 2 4 6 8 10 12 14 16 18 1995 2012

Canadian wine consumption per capita, 1995- 2012

… and pricing is compelling for most suppliers

Avg export price (USD/ case) for various suppliers to Canada, 2012

Source: Vinos de Chile, Gomberg Fredrikson, OEMV, New Zealand Wine Growers, 2013

$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 Chile (Btld) USA (Btld.) Espana (Btld DOP) New Zealand Exports to Canada Total Avg exports

Exchange rates to provide support for imports

Source: Rabobank, 2013

Projected exchange rate EUR-CAD, July 2013- June 2015

CAD 1.10 CAD 1.15 CAD 1.20 CAD 1.25 CAD 1.30 CAD 1.35 CAD 1.40 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15

Canada’s position in the global market…

Canadian Wine Market

Driving growth at home

Canadian wines in the Ontario market

Source: LCBO, 2013

Market share of wines in LCBO and Vintages by origin, 2012

New World, 44% Europe, 34% VQA, 6% ICB/ Non- VQA, 16%

Canada faces high production costs

Source: Ciatti Company data and Rabobank analysis, 2013

Cost ($/lt) of wine landed in Canada from various origins, 2013

$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Chile Australia Argentina US South Africa Canada Spain France

• Avg. bulk price

In-country transport Freight to market

ICB and VQA competing for different consumers

Source: LCBO, 2013

Average price ($/ bottle) for wines of various sources in LCBO, 2013

$12.43 $12.33 $8.59 $14.67 $26.64 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 Europe New World ICB VQA Vintages

Driving VQA- Continual focus on quality

$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 Europe Canada

Average price/ bottle Canadian vs European wines (LCBO) 2013 Growth rate Canadian vs European wines (LCBO) 2013

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Europe Canada

Driving VQA- Leveraging your greatest asset

Driving VQA- Millennials vs Boomers

Contact details

Rabobank International

Stephen Rannekleiv Senior Beverage Analyst Food & Agribusiness Research and Advisory

• t. 212-808-6823
• e. Stephen.Rannekleiv@Rabobank.com

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