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UNLEASHING MARKET POTENTIAL

T H RO U G H

I N N OVAT I O N A N D D I F F E R E N T I AT I O N

WHAT IS WINE BUSINESS SOLUTIONS?

The only business in Australia, New Zealand and South Africa

whose sole focus is providing management consultancy services to

Wine Business Owners

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FOUR MYTHS ABOUT INNOVATION

MYTH ONE

Only creative geniuses can innovate

The ideas are so often there.

They’re obvious.

They just need someone to act.

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MYTH TWO

You have to be young to be innovative

The greater diversity of people you connect with

The more experiences you have

The more ideas you can meaningfully integrate

MYTH THREE

Our customers will be a critical source of innovation insight

Your customers don’t know what they want

But you almost certainly do

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MYTH FOUR

Innovation requires placing big risky bets

“Great things are done

by a series of small things

brought together”

Vincent Van Gogh

CHOOSING YOUR CUSTOMER

Beverage Wine Consumer

Branded Wine Consumer

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CHOOSING YOUR CUSTOMER

Beverage Wine Consumer

Branded Wine Consumer

The Commodity Business The FMCG Business The Image and Lifestyle Business

The Food, Wine and TravelBusiness

The Luxury BrandsBusiness

1980s

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1990s

By the year 2000, Australia will

export $1Billion worth of wine !

BRIAN - 1991

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AUSTRALIA NAILED THAT ONE

0

5000

10000

15000

20000

25000

30000

35000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Argentinian

Chilean

South Af rican

Australian

New Zealand

US ‘000s of 9 litrecases exportedSource IWSR

2000s

(Bibendum UK)(Terlato US)

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TODAY

(R2.5 Billion Exports)

1980s

1990s

2000s

2010s

The Golden Age of Beverage Wines

The Golden Age of Branded Wines

The Golden Age of Aspirational Wines

The Golden Age of wines of Provenance

2020s

The Golden Age of wines of Heritage?

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GROWTH AT THE RIGHT PRICE POINTS

Source VINEXPO

World Wine Consumption – Millions 9 litre Cases

16%

THE LOC AL MARKET

+20%

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DtC IN THE US

• 75% of Sales above R325 per Bottle

• Ave Price R400 per Bottle

• Worth R18 Billion

• More than US / SA / Australian exports

WHY SURF?

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WHY SURF?

• That is where the best prices, margins and profits are.

• Either making or riding market momentum is so much easier than fighting it.

• You might not be able to make profits in your existing channels anymore.

• You might get left high and dry.

THREE BIG QUESTIONS

• What are the markets?

• What are we going to sell ?

• How are we going to play?

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ADDITIONAL C ASES NEEDED 2016 vs . 2012

• 12 Million cases for US based on 30% imported

• 5 Million cases for Canada based on 72.5%

vs

• 12 Million cases for China based on 17%

• 5 Million cases for Russia based on 33%

• 5 Million Cases for Germany based on 46%

Source – IWSR Estimates 2012-16

THE BEST MARKETS FOR FINE WINE?

• China / SE Asia

• US / Canada

• UK

vs

• Japan

• Switzerland / Austria

• Belgium / Luxemburg

• Africa

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A RED & PINK FUTURE?

Source VINEXPO

World Wine Consumption – Millions 9 litre Cases

BEVERAGE WINE SECTOR

• Still an opportunity in developing countries

• Shrinking low margin category in developed countries

E.g. Australia Under $7 Category

• Shrunk by 3% last year.

• Supermarket own label 70% of category

• Big increases in ‘new’ styles / decreases in old

• SA has 5% share. Grew sales over 30% in 2013

(Source: Nielsen)

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BEVERAGE WINE SECTOR INNOVATION

Our Earth Our Vines Our Land

BRANDED WINE SECTOR EVOLUTION

• No place in UK (or Australian) On-Premise.

• North America a different story but changing.

• Therefore more supermarket power

• Brands aggressively targeted with Own Label

• Low cost manufacture and supply chain critical

• FMCG skills such as customer planning vital

• Smaller suppliers getting squeezed harder

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BRANDED WINE SECTOR REVOLUTION

• Packaging Innovation is one way in.

Merrill Fernando

WHAT IF WE HAD THEIR DEC ANTERS?

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AND THEIR GIFT BOXES?

AND RAW MATERIAL’S PRESENTATION?

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RANDOM GOOGLE IMAGE SEARCH FOR TEA

RANDOM GOOGLE IMAGE SEARCH FOR WINE

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BRANDED WINE SECTOR REVOLUTION

FOR THE ASPIRATIONAL CONSUMER

PACKAGING IS KEY

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CHAMPAGNE UNLEASHED

PROSECCO WINS

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THE BIGGEST OPPORTUNITY

WINE PLUS

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WINE PLUS

Plus Honey

Plus Botanicals

Plus Healthy Ingredients

Plus African Ingredients

Plus Grown Up Flavour

NOW LET’S PUT IN INTO 4 th GEAR…

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PREMIUM WINE CHANGE DRIVERS

Change One - The Arrival of Food

Change Two – People Power and the Globalisation of Tastes

Change Three – Experiences driving Customer Acquisition

Change Four - The split between the “Artisanal” and the “Industrial”

Style Market 2013 2012 Change

UK 20.1% 21.5% -7%

Chardonanay Australia 23.7% 23.4% 1%

Canada 24.8% 26.2% -5%

US 39.4% 39.0% 1%

UK 22.6% 22.4% 1%

Sauvignon Blanc Australia 22.3% 21.8% 2%

Canada 15.6% 16.3% -4%

US 13.5% 14.3% -6%

UK 11.2% 10.3% 10%

Pinot Gris / Grigio Australia 13.0% 12.6% 3%

Canada 14.5% 12.9% 12%

US 17.9% 15.7% 12%

UK 12.6% 11.3% 11%

White Blends Australia 2.0% 1.7% 19%

Canada 16.2% 12.0% 35%

US 4.4% 4.5% -2%

UK 3.0% 3.8% -22%

Riesling Australia 14.4% 13.9% 4%

Canada 8.9% 8.3% 7%

US 11.2% 9.5% 15%

US Canada Aus UK

86% 80% 75% 70%

*Plus Chenin in UK = 76%

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PEOPLE POWER AND TASTE GLOB ALISATION

BIG 5 Share of Listings

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Varietal 2013 2012 Change

Sauvignon Blanc 22.6% 22.4% 1%

Chardonnay 20.1% 21.5% -7%

White Blends 12.6% 11.3% 11%

Pinot Gris/Grigio 11.2% 10.3% 10%

Chenin Blanc 5.7% 5.7% 1%

Viognier 3.1% 3.3% -7%

Riesling 3.0% 3.8% -22%

Picpoul de Pinet 2.3% 2.0% 15%

Gavi 2.1% 1.8% 12%

CHENIN IN THE UK THE EXCEPTION

But at a lower average price than Italian Pinot Grigio i.e. <£20 cf £28 for Marlborough SB and Total White Wine

Source

WBS Wine On-Premise

Research

THE POWER OF PRICE - UK ON-PREMISE

Number of cases needed

to make R1,000,000 17,778 8 2,122

EBITDA 15% R 56.25 R 471.25

Op EX 30% R 112.50 R 112.50

COGS 55% R 206.25 R 206.25

Ex cellar price - $A 375.00R 790.00R

Exchange rate 18.18 £20.63 18.18 £43.45

Freight £1.80 £22.43 £1.80 £45.25

Warehousing £2.40 £24.83 £2.40 £47.65

Freight out £3.00 £27.83 £3.00 £50.65

Duty £24.00 £51.83 £24.00 £74.65

Agent Margin @ 20% 20% £65.00 20% £93.00

Wholesaler Margin @ 20% 20% £80.94 20% £116.00

Price per bottle £6.75 £9.67

Restaurant Margin @ 60% £16.86 £24.17

Value added tax @ 17.5% 0.175 £2.95 0.175 £4.23

List price £19.81 £28.40

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THE REAL LEVER OF C ASHFLOW

PEOPLE POWER AND TASTE GLOB ALISATION

Style Market 2013 2012 Change

UK 7.2% 10.2% -29.4%

Bordeaux Blends Australia 4.1% 4.7% -12.1%

Canada 4.6% 5.6% -18.2%

US 4.4% 5.5% -15.0%

UK 6.8% 5.1% 34.7%

Malbec Australia 1.0% 0.8% 26.9%

Canada 4.7% 3.4% 37.7%

US 2.7% 2.0% 32.0%

UK 10.1% 11.3% -10.0%

Pinot Noir Australia 18.4% 16.9% 9.1%

Canada 10.5% 9.2% 14.5%

US 9.6% 8.3% 15.0%

Source

WBS Wine On-Premise

Research

US Data Wine Metrics 2011 vs 2013

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PEOPLE POWER AND TASTE GLOB ALISATION

Style 2013 2012 CHG Style 2013 2012 Change

Shiraz 24.7% 25.5% -3% Red Blend 22.5% 23.0% -2%

Pinot Noir 18.4% 16.9% 9% Cabernet Sauvignon 12.8% 13.8% -7%

Cab Sauv 15.9% 15.7% 1% Pinot Noir 10.5% 9.2% 15%

Cab Merlot 7.5% 7.6% -1% Shiraz 8.7% 8.3% 5%

Merlot & Blends 7.3% 7.6% -4% Merlot 7.0% 7.5% -7%

Shiraz Blends 3.7% 4.3% -14% Sangiovese 6.4% 6.7% -4%

Grenache & Blends 3.5% 3.8% -7% Malbec 4.7% 3.4% 38%

Sangiovese & Blends 3.4% 3.1% 11% Bordeaux Blend 4.6% 5.6% -18%

Cabernet Blends 3.4% 3.9% -14% Valpolicella 3.3% 3.1% 8%

Tempranillo & Blends 2.0% 1.9% 5% Rhone Blend 3.0% 2.4% 29%

Rhone Blends 1.6% 1.4% 14% Zinfandel 3.0% 2.5% 20%

Red Blend 1.5% 1.7% -8% Tempranillo 2.4% 1.2% 91%

Malbec & Blends 1.0% 0.8% 27% Gamay 1.8% 1.7% 6%

Shiraz Viognier 1.0% 1.1% -11% Nebbiolo 1.4% 2.2% -35%

Bordeaux 0.8% 0.8% -4% Amarone 1.4% 1.9% -29%

Gamay 0.7% 0.5% 36% Cabernet Franc 0.9% 0.8% 13%

Nebbiolo & Blends 0.7% 0.3% 154% Barbera 0.7% 0.6% 11%

Zinfandel 0.5% 0.4% 30% Grenache 0.6% 0.6% -2%

Barbera 0.4% 0.4% 25% Montepulciano D'Abruzzo 0.6% 0.7% -10%

Mourvedre 0.3% 0.2% 42% Carmenere 0.4% 0.6% -34%

Source

WBS Wine On-Premise

Research

Australia Canadavs

*Big Opportunity for SA Reds

WORLD LEADING INNOVATION

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WINE THAT TASTES LIKE WINE

ROSE REVOLUTION

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1. Right Grapes. Right Place.

2. GIs Set Up

3. Yield Limits / Limiting Yields

4. Vine Age Classification

5. Viticulture Standards

6. Production Standards

7. BEE / FAIRTRADE

8. Sustainability Practices

DISIPLINE CRITIC AL

NOW OVERDRIVE

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SA ALREADY PRETTY GOOD AT THE TOP END

1. CREATIVITY

2. COURAGE

3. CAN DO

SOUTH AFRIC A’S WINNING HAND