2006 WINE MARKET OVERVIEW - in the Mix...

2011 Wine Market Overview

Prepared & Presented By:Faith A. Werner

Consumer Confidence Remains Mixed

Mixed Growth Tends in Beverage Alcohol Industry

2010- U.S. Market Economic Indicators

U.S. Economy Shows Signs of Slow Recovery

Source: Wine Handbook , 2011

2010 - U.S. Wine Market Summary• In 2010, wine consumption trended upwards at a greater pace than

the prior year at 2.1%. This is the seventeenth consecutive year of growth.

• Depletion numbers advanced by 2.1% to a total figure of 303.06million 9-liter cases

• Looking ahead to 2015 the future looks bright with a projected increase of 1.2%, otherwise stated as 321.87 million 9-liter cases.

• If the US Wine Market continues this growth it is poised to become the largest Wine Market in the World by the end of the decade.

2010 – Demographic Target Analysis• 2010 – Demographic Target Analysis

– 2010 was a difficult year, consumers traded down as opposed to prior U.S. trends

– Disposable income rose by 2.2%

– GDP rose by 2.8%

– The economy has out placed the on-premise trade channel recovery, as a result there was a consumer shift in purchase dynamics. Consumers are buying less bottles in this trade channel which resulted in a shift to by-the-glass sales which bodes well for the industry , in that it offers consumers a new vehicle for tasting new brands, regions, and varietals.

– 2010 on-premise sales advanced by 2.5% to $ 11.9 billion, otherwise stated 44.3% ACV

– 2010 off-premise sales advanced by 3.0% to $15.0 billion, otherwise stated 55.7% ACV

Source: Arnould et al, (2004). Consumers, (2nd. ed.) New York: McGraw-Hill; Wine Handbook, 2011

2010 – Demographic Target Analysis• 2010 – Demographic Target Analysis

– Dining out is expected to increase due to a need for relaxation, time constraints due to two persons working in the family, as well as increase in flexible working hours/mobile office environments

– Shifting demographics drive the positive forecast with 60 million Millennium generation consumers (21-33 years old) and 20 million entering the channel for the next five years.

– Gallup poll finds Millennial Generation (Y ) prefers Wine as Beverage Alcohol of choice

– This group of individuals is much more ethnically diverse than prior generations

– Targeted Marketing coupled with Market Research will take on a whole new meaning in the Beverage Alcohol Industry

Source: Arnould et al, (2004). Consumers, (2nd. ed.) New York: McGraw-Hill; Wine Handbook, 2011

20010 – Demographic Target Analysis

• 2010 – Demographic Target Analysis

LDA Cohort’s Age

– Baby Boomer Cohort 1: 65 - 54– Baby Boomer Cohort II: 53 - 43– Generation X Cohort: 42 - 34– Generation Y Cohort: 33 - 21

Source: Arnould et al, (2004). Consumers, (2nd. ed.) New York: McGraw-Hill

2010 – Psychographic Target Analysis

• 2010 – Psychographic Target Analysis

– Social Class: Upwardly Mobile & Aspiring Affiliative– Life Style: Maslow’s Needs Hierarchy Assessment Model

• Safety and Security: Protection & Security in Brand Promise

• Social: Affection, Friendship & Acceptance• Ego: Prestige, Success, Accomplishment & Self-Esteem

Brand Affiliation• Self-Actualization: Self-Fulfillment and Enriching

Experiences in Brand Promise– Personality: Social Need, Pleasure Seeking, Relaxation

Source: Arnould et al, (2004). Consumers, (2nd. ed.) New York: McGraw-Hill

2010 - U.S. Share Of Wine Consumption By Category

• Table Wine continues to fuel & dominate the U.S. Wine category, accounting for 91.8% of the total volume

• Total Wine increase of 2.1% - 303.06 million 9 liter cases– Table wine 91.8%– Champagne & sparkling wine 4.8%– Dessert & fortified 2.8%– Vermouth & Aperitif 0.5%


2010 U.S. Wine Market Overview

• Total Domestic Table Wine consumption advanced 3.3% to211.3 Million 9 – Liter cases

• Imported Wines declined 0.9% to 67.0 Million 9 – Liter cases



• US Wine Market poised to become the largest in the world by end of decade

• 70 - 80 Million consumers of the Millennial Generation (ages 21-33) are embracing wine as the beverage alcohol of choice.

• 2006 Harvard University study spurs red wine sales as health conscious consumers discover new varietals

• Packaging Innovations fuel growth in twist off’s, synthetic closures, & boda boxes

• US Wineries continue to both consolidate & fragment

• Fragmentation is driven by increase in small producers

• U.S. Wine consumption climbed on Domestic Wines to 229.4 Million 9 – Liter cases representing an advance of 3.0% in consumption



• Increasing interest in pairing culinary cuisines with a new interest in diverse varietals and countries-of-origin (COO) drive growth

• Chardonnay is still the leading white table wine varietal consumed in the U.S. with 42.7% ACV

• Cabernet Sauvignon & Merlot continue their upward climb in the red table wine category to 21.8% & 15.1% ACV consecutively

• Consumer Interest Continues to Increases in Varietals: Sauvignon Blanc, Pinot Grigio, Pinot Noir, Syrah/Shiraz, Malbec & Red Zinfandel

Source: Wine Handbook, 2011


• Imported Table Wines declined by 0.9% to 76.3 Million9 – Liter cases

• Domestics rose 3.0% to 229.4 Million 9 – Liter cases• Increased retail distribution, plus improved quality in mid-

priced wine labels due to excess premium grape availability, leftward economic pricing, and uneven exchange rates fueled increased table wine consumption

• Total Table Wine consumption advanced 2.3% to 278.25 Million 9 – Liter cases

• The Table Wine category outlook is bright. This category is forecasted to grow over the next five years, reaching 296.9 Million 9 – Liter cases



• Italy reclaims it’s leadership by surpassing Australia as the largest COO of imported table wine 26.3% ACV

• Australia takes second chair to Italy with 21.8% ACV

• Chile ellipses French imports for the first time to take third position with 12.6% ACV

• French imports decline to take fourth position with 9.6% ACV

• Argentina is now the fifth largest importer of wines with 9.1% ACV

• U.S. Wine consumption falls off slightly on imports to 73.65 Million 9 –Liter cases representing a loss of 0.9% due primarily to the affect of a soft economy, global over supply, and uneven exchange rates.



• Imported Wines decline 0.9% to 73.6 Million 9 – Liter Cases

• Imports by country of origin (COO) show mixed annual compound growth rate (ACGR)

• New World continent wines entering the U.S. trade channel are fueling growth in the Imported Category

• Italian Wine gallonage increases by 8.0% reclaiming it’s leadership in exports to the U.S.

• Australia Wine gallonage suffers a set by 12.5% due to over production and price-cutting strategies hurting their brand and COO image.

• Chile Wine gallonage declines 12.0%

• Argentina Wine gallonage advances by 12.9% outpacing the import segment.



• Total Sparkling rose 2.9% to 14.6 Million 9 – Liter Cases

• Domestic Sparkers advance 3.9% to 9.5 Million 9 – Liter Cases outpacing imports

• Imported Sparkling Wines advance by 1.1% to 5.1 Million 9 – Liter Cases

• The economic downturn adversely affected the pricier Methode Champenoise wines

• Imports were outpaced by domestic sparkers for the third consecutive year to 5.1 Million 9-Liter Cases



• Total Desserts & Fortified wines decline 3.9% to 8.6 Million 9 –Liter Cases

• Sake is the bright star of this sub set although it declined due to the soft economic conditions affected the on-premise segment. This sub set is expected to make a strong come back as on-premise trends reverse due to the proliferation of Asian cuisine in the On-Premise trade channel & consumer interest in the Pan Asian Culinary segment

• Domestic dessert wines decline by 4.1% to 7.8 Million 9 – Liter Cases

• Imported dessert wines decline 1.9% to 790 Thousand 9-Liter Cases

• The brighter spots in the Desserts & fortified wine category are the higher end imported ports and sherries, and the sake segment.



• The resurgence of the Martini was not able to overcome the continuing downward trend of the Vermouth category. This was primarily due to the decline in the on-premise segment fueled by the soft economic conditions.

• The Vermouth/ Aperitif segment declines by 4.8% to 1.6 Million 9 – Liter Cases

• Domestics remained flat with a 0.0% increase to 790 Thousand 9 – Liter Cases

• Imports did not fare better than their domestic counterparts with a decline of 9.2% to 790 Thousand 9 – Liter Cases


2015 U.S. Wine Market Projection Overview By Sub Set

• Total Wine consumption projects advance of 1.2% ACGR

• Table Wine Consumption projects advance of 1.3% ACGR

• Champagne & Sparklers projects advance of 1.6% ACGR

• Vermouth/Aperitif projects further decline of 1.3% ACGR

• Dessert & Fortified projects continuing decline of 2.1% ACGR

• Total Wine Consumption projected to advance 1.2% ACGR



2010 U.S. Market Table WinesDomestic Vs. Imports(Thousands of 9-liter Cases)

Domestic and Imports demonstrate mixed performance:

2009 2010 % chg. % share

Domestic 204,525 278,250 3.3% 69.7%

Imports 67,600 67,600 -0.9% 21.1%

Total 272,125 278,250 2.3% 91.8%


2010 Market Share of Table Wineby Supplier Price Class

Class of Price 750 ML ($) Domestic (%) Imported (%) Total(%)

Lowest Under 2.75 26.4 3.5 20.5

Economy 2.76 – 4.25 15.6 9.3 14.2

Popular 4.26 – 5.75 20.7 28.4 23.0

Premium 5.76 – 7.50 12.5 33.4 17.8

Super-Premium 7.51 – 10.00 15.8 18.3 16.1

Ultra-Premium 10.01 + 9.0 7.1 8.4

Demographics

Source: Impact Databank , 2011

2010 Demographics of the U.S. Wine Market

Consumption by Gender:

• Female consumers account for 58.1% ACV

• Male consumers account for 41.9% ACV

• Female consumers account for 58.6% of all Domestic Table Wine volume, while male consumers account for 41.4%

• Female consumers account for 55.9% of Imported Table Wine consumption, while male consumers account for 44.1%



Consumption by Age Group:

Domestic Table Wine consumption has broad appeal with dominant variants 35-65+

Age Group:

21-24 3.6%25-34 14.7%35-44 18.7%45-54 20.6%55-64 21.0%

65+ 21.5%

Total Domestic Table Wine Share 69.7% ACV




Imported Table Wine consumption shows signs of broad appeal with dominant variants 35-65+

Age Group:

21-24 2.8%25-34 14.9%35-44 18.3%45-54 23.0%55-64 21.3%

65+ 19.7%

Total Imported Wine Consumption 22.1% ACV




Malt alternative Coolers have broad appeal base with dominant variants 25-54; however, this sub set has been on a sharp decline due to shifting demographic

preferences

Age Group:21-24 10.1%25-34 18.5%35-44 22.6%45-54 23.5%55-64 14.6%

65+ 10.8%

Total Malt Alternative Cooler Consumption 0.0% ACV



Consumption by Age Group:Champagne & Sparkling consumers continue to be more mature with dominant variants 25-54

Age Group:

21-24 5.5%25-34 18.0%35-44 19.2%45-54 22.7%55-64 19.6%65+ 15.0%

Total Champagne & Sparkling Wine Consumption 4.8% ACV




Dessert & Fortified Wine consumers are mature and more divers with variants 45 - 65+

Age Group:

21-24 2.8%25-34 15.6%35-44 16.4%45-54 22.2%55-64 21.5%65+ 21.5%

Total Dessert & Fortified Wine Consumption 2.8% ACV



Consumption by Gender Group

Category Male (%) Female (%)

Domestic Table Wine 41.4 58.1

Imported Table Wine 44.1 55.9

Coolers 29.3 70.7

Champagne & Sparkling 37.9 62.1

Dessert & Fortified 44.2 55.8

Adult Population (Millions)Adult Population (Share) 48.0 52.0



Consumption (%) by Income (Thousands)

Category 75+ 60-74.9 50-59.9 40-49.9 30-39.9 20-29.9 Under 20

Domestic Table Wine 47.9 11.1 7.3 8.9 8.9 7.3 8.7

Imported Table Wine 54.2 9.6 6.8 9.2 6.7 5.1 8.4

Champagne & Sparkling 48.6 10.0 7.5 8.4 8.4 7.6 9.5

Dessert & Fortified 46.9 9.3 8.4 11.0 7.1 6.4 10.9



Consumption (%) by Education Group

Category Domestic Table Imported Table Champagne & Dessert & Sparkers Fortified

Graduate Degree 51.7 32.5 25.4 12.4

Attended Graduate School 50.4 28.0 29.0 10.6

Graduated College 45.6 25.0 23.6 8.1

Attended College 35.8 16.0 19.3 7.0

Graduated High School 22.3 8.5 10.8 4.0

Attended High School 16.4 5.4 11.6 2.1

Source: Wine Handbook , 2010/2011

Top 10 Markets for Total Wine 2009/2010 (Thousands of 9-Liter Cases)

2009 2010 % Chg.California 53,563 54,589 1.9Florida 24,501 24,990 2.0New York 23,933 24,401 2.0New Jersey 13,290 13,696 3.1Texas 13,549 13,581 0.2Illinois 13,170 13,496 2.5Massachusetts 11,293 11,639 3.1Washington 9,015 9,354 3.8Virginia 8,422 8,773 4.2Ohio 8,145 8.422 3.4


Top 8 U. S. Imported Wine Markets 2009/2010 (Thousands of 9-Liter Cases)

2009 2010 % Chg.

New York 10,077 9,949 -0.1California 8,895 8,658 -0.3Florida 7,474 7,308 -0.2Illinois 4,475 4,507 0.1New Jersey 3,843 3,822 -0.1Texas 3,413 3,482 0.2Massachusetts 3,149 3,129 -0.1Ohio 2,585 2,536 -0.2 U.S. Total 74,285 73,645 -0.1


Top 8 U. S. Domestic Wine Markets 2009/2010 (Thousands of 9-Liter Cases)

2009 2010 % Chg.

California 44,668 49,931 0.12Florida 17,026 17,682 0.04New York 13,856 14,452 0.04Texas 10,136 10,099 -0.01New Jersey 9,447 9,874 0.05Illinois 8,695 8,989 0.03Massachusetts 8,144 8,510 0.05Washington 7,794 8,151 0.05U.S. Total 222,675 229,410 0.03



Consumption by Trade Channel

• 80.3% of all Wine consumption takes place in the retail channel (off-premise)

• 19.7% of Wine consumption takes place in the hospitality channel (on-premise)

• In 2010 there was a 0.3% shift from the on-premise trade channel to off-premise due to contracting economic conditions



Dollar Sales by Trade Channel

• 55.9% of all Wine dollar sales take place in the retail channel (off-premise)

• 44.1% of Wine dollar sales take place in the hospitality channel (on-premise)

• In 2010, percentage dollar sales by on/off premise trade channel remained the same, even though there was a shift of 3.6% in case sales from on-premise to off premise reflecting an increase in cost at the on-premise level.

2010-Leading Brands of Domestic Table Wine

Leading Brands Domestic Table Wine 2009/2010 (Thousands of 9-Liter Cases)

Case Sales Include Off-Premise Trade Channel

DepletionsBrand: 2009 2010 % Chg.

Franzia Winetap 23,000 23,750 3.3

Carlo Rossi 13,400 13,000 -3.0

Sutter Home 9,271 10,263 10.7

Barefoot Cellars 7,500 10,000 33.3

Twin Valley 7,800 8,600 10.03

Beringer 8,367 7,928 -5.1


Leading Brands of Domestic Table Wines2009/2010 (Thousands of 9-liter Cases)

0 5,000 10,000 15,000 20,000 25,000

Twin Valley

Barefoot Cellars

Sutter Home

Carlo Rossi

Franzia Winetap

20102009


2010 -Leading Brands of Imported Table Wine

Leading Brands Imported Table Wine 2009/2010 (Thousands of 9-Liter Cases)



Yellow Tail 8,300 8,300 0.0

Cavit 3,450 3,455 0.1

Concha y Toro 2,965 3,008 1.5

Riunite 2,416 2,445 1.2

Lindeman’s 2,237 1,859 -16.9

Bella Sera 1,300 1,200 -7.7

Jacob’s Creek 943 897 -4.9

Leonard Kreusch 875 870 -0.6


Leading Brands of Imported Table Wines2009/2010 (Thousands of 9-liter Cases)

0 2,000 4,000 6,000 8,000 10,000

Yellow Tail

Cavit

Concha y Toro

Lindeman's

Bella Sera

20102009


Domestic Brand HistoryThe Hospitality Trade Channel

by On-Premise Pricing Tier

Top 5 Domestic Wines Tier–I Hospitality Channel Brands

2009/2010 (Thousands of 9-Liter Cases) Case Sales Include Off-Premise Trade Channel


Sutter Home 9,271 10,263 10.7

Barefoot Cellars 7,500 10,000 33.3

Beringer 8.367 7,928 -5.2

Woodbridge 7,326 7,570 3.3

Inglenook 3,300 3,400 3.0

Kendall Jackson 3,161 3,015 -4.6


Leading Brands of Domestic WinesTier – I Hospitality Channel

2009/2010 (Thousands of 9-liter Cases)

0 2000 4000 6000 8000 10000

Barefoot Cellars

Beringer

Woodbridge

Livingston Cellars

20102009


Top 7 Domestic Wine Tier –II Hospitality Channel Brands

2009/2010 (Thousands of 9-Liter Cases) Case Sales Include Off-Premise Trade Channel


Sutter Home 9,271 10,263 10.7

Kendall-Jackson – Total Brand 3,161 3,015 -4.6

Chateau St. Michelle 2,034 2,338 14.9

Columbia Crest 1,968 2,054 4.3

Robert Mondavi Private Selection 1,794 1,818 1.3

Clos du Bois 1,622 1,700 4.8

Beaulieu Vineyards 1,573 1,400 -11.0


Leading Brands of Domestic WineTier – II Hospitality Channel


0 2,000 4,000 6,000 8,000 10,000 12,000

Sutter Homes

Kendall Jackson

Chateau St. Michele

Columbia Crest

20102009


Imported Brand HistoryThe Hospitality Trade Channel

by On-Premise Pricing Tier

Top Imported Wines Tier –I Hospitality Channel Brands Continued2009/2010 (Thousands of 9-Liter Cases)



Yellow Tail 8,300 8,300 0.0

Cavit 3,450 3,455 0.1

Lindeman 2,237 1,859 -16.9

Bella Sera 1,300 1,200 -7.7


Eco Domani 800 800 0.0


Leading Brands of Imported WinesTier – I Hospitality Channel


0 2,000 4,000 6,000 8,000 10,000

Bella Serra

Lindeman's

Cavit

Yellow Tail

20102009


Top Imported Wines Tier –II Hospitality Channel Brands Continued2009/2010 (Thousands of 9-Liter Cases)



Jacobs Creek 943 897 -4.9

Penfolds 633 517 -18.2

Rosemount Estates 579 434 -25.1

George Duboeuf 475 415 -12.6

Kim Crawford 349 389 11.5

Principato 440 370 -15.9


Leading Brands of Imported WinesTier – II Hospitality Channel


0 1000 2000 3000 4000 5000 6000 7000 8000 9000

Georges Duboeuf

Rosemount

Penfolds

Jacob's Creeek

20102009


Top Imported Brand HistoryBy Country of Origin (COO)

Wine Imports Entering the U.S.County of Origin (COO)

2005-2010 (Thousands of Gallons)

010,00020,00030,00040,00050,00060,00070,00080,000

2004 2005 2006 2007 2008 2009 2010 2011

ItalyAustraliaFranceArgentinaChileSpainGermanyPortugal


Top 5 Australian Import Brands2009/2010 (Thousands of 9-Liter Cases)

DepletionsBrand: 2009 2010 % Chg.Yellow Tail 8,300 8,300 0.0

Lindeman’s 2,237 1,859 -16.9


Little Penguin 947 812 -14.3

Black Swan 850 800 -5.9


Top 4 Italian Import Brands2009/2010 (Thousands of 9-Liter Cases)


Cavit 3,450 3,455 0.1

Riunite 2,416 2,445 1.2

Bella Sera 1,300 1,200 -7.7

Eco Domani 800 800 0.0


Top 5 Chilean Import Wine Brands2009/2010 (Thousands of 9-Liter Cases)


Concha y Toro 2,965 3,008 1.5

Gato Negro 560 655 17.0

Santa Rita 390 433 11.0

Casillero del Diablo 378 371 -1.9

Walnut Crest 426 349 -18.1


Top 7 Argentine Import Brands2009/2010 (Thousands of 9-Liter Cases)


Marcus James 425 431 1.4

Trapiche 350 410 17.1

Don Miguel Gascon 150 175 16.7

Terrazas 120 135 12.5

Dona Paula 141 130 -7.8

Catena 98 113 15.3

Luigi Bosca/ La Linda 60 70 17.0


Top 5 French Import Brands2009/2010 (Thousands of 9-Liter Cases)


Louis Jadot 525 513 -2.3

Octavin Home Wine Bar 370 440 18.9

Georges Duboeuf 475 415 -12.6

La Vieille Ferme 226 252 11.5

Red Bicyclette 170 200 17.6


Top 7 Imported Port Brands2009/2010 (Thousands of 9-Liter Cases)

DepletionsBrand: 2009 2010 % Chg.Sandeman 60 58 -3.3

Cockburn’s 48 50 4.2

Warres 45 45 0.0

Fonseca 45 44 -2.2

Dow’s 42 42 0.0

Graham’s 39 40 2.6

Taylor Fladgate 30 35 16.7


2010 Category Development Indices

2010 - Top 12 StatesCategory Development Index (CDI)

Table Wine

State CDI

District of Columbia 238New Hampshire 210Delaware 176Vermont 172Massachusetts 168New Jersey 156Connecticut 143Rhode Island 141 Florida 141Washington 140 Hawaii 137



Champagne & Sparklers

State CDI

District of Columbia 328Illinois 262Hawaii 220California 169New Hampshire 157Maine 153Vermont 147Michigan 146New York 141Connecticut 136New Jersey 132Massachusetts 121



Dessert & Fortified Wine

State CDI

Nevada 288North Carolina 242Illinois 214New Hampshire 203Louisiana 199California 190District of Columbia 170 Delaware 150Alaska 149Pennsylvania 126Rhode Island 122Michigan 115



Vermouth & Aperitif

State CDI

District of Columbia 511New Hampshire 367Illinois 306Vermont 226Connecticut 212 Nevada 207New York 202Massachusetts 187New Jersey 185Rhode Island 142Florida 138Rhode Island 137


2010 – Advertising Expenditures


2010 - Top 10 Print Advertising

Rank Brand• Kendall-Jackson• E & J Gallo• Cotes Du Rhone• Santa Margherita• Freixenet• Moet & Chandon• Cavit• Sutter Home• Chateau Ste. Michelle• Kim Crawford

2010 - Top 10 Magazine AdvertisingRank Brand• Kendall - Jackson• Santa Margherita• Freixenet• Cotes Du Rhone• Moet & Chandon• Cavit• Sutter Home• Kim Crawford• Chateau Ste. Michelle• Chateau St. Jean


2010 - Top 10 Newspaper AdvertisingRank Brand• E & J Gallo• DIR Wine & Wine Coolers• Cotes Du Rhone• Louis Jadot• Gnarly Head• Turning Leaf• Moet & Chandon• Krug Champagne• Santa Rita• Blackstone


2009 - Top 10 Outdoor Advertising

Rank Brand• Moet Hennessy USA• Constellation Wines• Clos du Bois• DIR Wine & Wine Coolers• Riunite• Rex Goliath• William Grant & Sons, Inc.• Champagne Wine Information Bureau• Korbel• Freixenet


2010 - Top 10 Broadcast AdvertisingRank Brand• Yellow Tail• Martini & Rossi Asti• Korbel• Santa Margherita• Cavit• Domaine Chandon• Freixenet• Beringer• Cupcake• Palm Bay International


2010 - Top 9 Radio AdvertisingRank Brand• Palm Bay International• Santa Rita• E & J Gallo• Constellation Wine• Banfi Wine• Blackstone• Kim Crawford• Cavit• Rex Goliath• Freixenet

Source: Wine Handbook , 2011; Kantar Media Intelligence, 2011

2010 - Top 10 Television AdvertisingRank Brand• Yellow Tail• Martini & Rossi Asti• Korbel• Santa Margherita• Cavit• Domaine Chandon• Freixenet• Beringer• Cupcake• Beringer

Source: Wine Handbook , 2011; Kantar Media Intelligence, 2011

2006 WINE MARKET OVERVIEW - in the Mix...

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