1. Verbruikers Tendense en Kultivar Voorkeure in die Buiteland Consumer Trends & Varietal Preferences in the International Market

2. International Wine Marketing Dynamics  Grape production has evolved and there is an increased focus on quality.  Structured oversupply of wine in the world wine market.  New World Wine countries compete head on with Old World Wines.  Quality/Price segments are the key to understanding the International Wine Industry.

3. Quality Segments In World Wine Market

4. Consumer Behaviour A study done by Colin A. Hoffman in Australia in 2004; revealed the following; 1) Woman are more likely to drink white wine and sparkling wine than men. 2) In whites; Chardonnay and Sauvignon Blanc are most preferred followed by Riesling. Only Sauvignon Blanc / Semillon blends had any takers whilst other white blends had insignificant support even at low prices. 3) Most preferred reds; Shiraz and Cabernet Sauvignon, their blends then Cabernet / Merlot then Merlot. 4) Advertising had least influence on purchases. Price and recommendation by friend, shopkeeper, newspaper article were most important.

5. 5) The higher the income the more individuals are prepared to spend on wine;  Cabernet Sauvignon  Pinot Noir  Riesling and then  Chardonnay Th ese are varietals most preferred by highest income earners.

6. The 7 criteria measured in choosing a Wine Mean 1) Price3.90 2) Friend/Shop Recommendation3.69 3) Wine Region3.43 4) Brand Name3.30 5) Region newspaper clipping2.87 6) Label design1.99 7) Advertising1.83 On a scale of 1 to 5 (1 being least important and 5 most important).

7. In 2003 Gallo, the largest wine producer in the world, spent more than twice as much on advertising and promotions in Britain as the entire Bordeaux Wine Industry.

8. Study of Behavioural Segmentation in New Zealand by Thomas & Pickering revealed that; 1) Most Purchase from Supermarkets40% Bottle Stores31% Direct Mail13% Winery12% Other 4% 2)No. of Bottles Purchased during Month 1 – 324% 4 – 733% 8 – 1014% 10-2019% 21+ 4%

9. 3) Usually Buy White84% Red81% Sparkling32% Certified13% Rosé10% 4)Price Usually PaidRand Estimate 10 or less NZ$12%<R 40 11-1541%<R 60 16-2033%<R 80 21-2511%<R100 26+ 3%R130 plus

10. Major External Drivers  Shifts in Global Market  Trend to Red Wine  Consumers are trading up  Trend to New World Wine  Changing Consumers  Increasing Competition  Oversupply  Industry Consolidation  Growth of Brands  World Economy

11. 1) Shift in Global Wine consumption. (million litres) Country19932003%DecreaseIncrease Portugal5.934.22-29% Italy34.4628.76-18.5% Spain13.3311.67-17.0% France36.6233.03-9.8% Germany18.3420.12+9.7% UK7.1012.36+74.1% Netherlands2.323.14+35.3%

12. Europe’s share of World Wine Exports have decreased from average 78.5% in 1986-1990 to 64% in 2003. New World has increased from average 3.1% in 1986-1990 to 23.4% in 2003. Source: OIV

13. 2) Trend to Red Wine World2004-20092004-2009 millions x 9 litre cases Still Light Wine 13.2%297.2 Still Red Wine 14.4%173.3 Still White Wine 12.4%108.4 Still Rosé Wine 8.5%15.5 Sparkling Wine 14.3%30.5 Fortified Wine 7.5%9.1 Source: Euromonitor

14. 3 ) Consumers are Trading Up Price Point Volume 2003 Volume 2004 % Share of Market 2003 % Share of Market 2004 Over $20 13.665 15 220 0.60.6 $10-20 96 360 103 035 4.24.4 $5-10 382 720 388 724 16.516.6 <$5 1 824 365 1 834 734 78.778.4 Total 2 317 110 2 341 713 100100 Volume is in ‘000 cases of 9 litres Source: IWSR

15. 4 ) Trend to New World Wines 199720002003 France24.624.221.1 Italy23.826.218.9 Spain15.414.515.6 Australia2.54.57.1 Chile3.24.05.1 USA3.04.14.5 Germany3.63.73.7 South Africa 1.62.03.2 Argentina2.11.52.0 Portugal3.72.72.0 Volume Share of World Wine Exports %

16. Trend to New World Wine (2) New World Products makes wine more accessible and enjoyable. New World Products makes wine more accessible and enjoyable. More consistent and reliable in price and availability. More consistent and reliable in price and availability. Easier to understand and to make a choice. Easier to understand and to make a choice.

17. 5 ) Changing Consumers  Positive coverage on the health benefits of wine continues to drive wine consumption especially amongst older generation. This is good news with the aging population profiles in UK, Europe and USA.  Lifestyle changes in favour of wine, more casual life styles, more free time, more meals been eaten out of home, more interaction amongst cultures.

18. Changing Consumer (2) Increasing affluence –there is a positive relationship between wealth and premium wine consumption. Increasing affluence –there is a positive relationship between wealth and premium wine consumption. A shift to ‘experiencing’ rather than ‘possessions.’ A shift to ‘experiencing’ rather than ‘possessions.’ Globalization of consumer preferences— Westernization of consumption patterns in Asian markets and vice versa. Globalization of consumer preferences— Westernization of consumption patterns in Asian markets and vice versa.

19. Growth of Global Brands Top 10 Brands produce 110 million cases Top 10 Brands produce 110 million cases 11 American brands in Top 20 11 American brands in Top 20 5 Aussie brands in Top 20 5 Aussie brands in Top 20 3 Chilean wines in Top 2O 3 Chilean wines in Top 2O And only one French brand –JP Chenet ! And only one French brand –JP Chenet !

20. The Top 20 Global Wine Brand 1FranziaUSA The Wine Group 21,775.098.0 2GalloUSA E&J Gallo 17,110.060.0 3 Concha y Toro Chile 11,235.07.6 4 Carlo Rossi USA E&J Gallo 11,200.088.8 5AlmadenUSA Constellation Brands 9,560.099.2 6 Robert Mondavi USA Constellation Brands 9,010.093.5 7 Santa Rita Chile Claro Group 7,910.04.0 8 San Pedro ChileCCU7,735.05.9 9 Sutter Home USA Trinchero Family Estates 7,565.092.9 10Hardy’sAustralia Foster’s Group 7,375.06.0 11BeringerUSA 7,270.096.2 12LivingstonUSA E&J Gallo 7,205.099.9 13 JP Chenet France Les Grands Chais de France 6,850.0N/A 14LindemansAustralia Foster’s Group 6,350.030.6 15 Jacobs Creek Australia Pernod Ricard 5,955.013.5 16 Charles Shaw USA Fred Franzia 5,225.0100.0 17YellowtailAustralia Casella Family 4,940.098.2 18RosemountAustralia Foster’s Group 4,670.042.6 19VendangeUSA Constellation Brands 4,540.099.8 20 Peter Vella USA E&J Gallo 4,505.099.9 Sales may be understated as they are derived from the IWSR’s analysis of the wine markets, done on a country by country basis. Source: IWSR

21. The changing market “The only the thing that is sure to remain the same, is change” “The only the thing that is sure to remain the same, is change” The market is dynamic and the grape grower can not be. This leads to frustration and turmoil. The market is dynamic and the grape grower can not be. This leads to frustration and turmoil. “An agricultural product in a fashion environment.” “An agricultural product in a fashion environment.” Market trends are energetic and change can be quick Market trends are energetic and change can be quick

22. Micro Market Trends Pinot Grigio and it’s success in USA. Pinot Grigio and it’s success in USA. Sparkling wine, methode champenois growth. Sparkling wine, methode champenois growth. Dynamic growth of Rose all over the world. Dynamic growth of Rose all over the world. Sauvignon Blanc and aromatic whites successes. Sauvignon Blanc and aromatic whites successes. Pinot Noir and it’s popularity. Pinot Noir and it’s popularity. Spicy reds like Shiraz are sexy. Spicy reds like Shiraz are sexy. Cool climate Riesling, Pinot Noir, even Shiraz Cool climate Riesling, Pinot Noir, even Shiraz

23. Micro trends (2) Regional Blends, Bordeaux, Super Tuscans, Cape Blends? Regional Blends, Bordeaux, Super Tuscans, Cape Blends? ‘Parker Wines’ ---high alcohol reds and whites. ‘Parker Wines’ ---high alcohol reds and whites. Organic wines and bio-dynamic wines. Organic wines and bio-dynamic wines. Fair Trade wines from 3 rd World. Fair Trade wines from 3 rd World. Bush Vine / old vine Zinfandel Bush Vine / old vine Zinfandel

24. Varietal and wine style/colour preferences The Netherlands The Netherlands South Africa South Africa The UK The UK The USA The USA Australia Australia

25. The Netherlands. Consumption: Share Red/Rosé/White (%)

26. The Neterlands: Colour Preference Men 1986 t/m 2004

27. South Africa; Favourite Red Varietals Source: Wine Magazine June 2006

28. South Africa; Favourite White Varietals Source: Wine Magazine June 2006

29. Wine style preferences in UK Total market 120 million cases and growth 2.9%. 95m cases Off and 24m cases On trade. Total market 120 million cases and growth 2.9%. 95m cases Off and 24m cases On trade. Red 44% ms trend + 0.3%, White 48% ms trend +1.7%. Rose 6.5%ms trend +35.3%. Red 44% ms trend + 0.3%, White 48% ms trend +1.7%. Rose 6.5%ms trend +35.3%. Rose 6.0 m cases and growth from USA, 2.9 m cases Blossom Hill all <4 pounds Rose 6.0 m cases and growth from USA, 2.9 m cases Blossom Hill all <4 pounds Value share Aust.=23.3%, France =18.9%, USA= 14.3%, Italy =10.0% and SA=9.8% Value share Aust.=23.3%, France =18.9%, USA= 14.3%, Italy =10.0% and SA=9.8%

30. Wine style preferences in the USA Pinot Grigio enormous, on East Coast esp. More wine is sold in US than what Italy can produce! Pinot Grigio enormous, on East Coast esp. More wine is sold in US than what Italy can produce! Don’t understand blends Don’t understand blends Rose is at the bottom end and called ‘blush’ Rose is at the bottom end and called ‘blush’ Pinot Noir very sexy, also expensive Pinot Noir very sexy, also expensive Merlot lost it’s shine Merlot lost it’s shine Cabernet the king of reds and Chardonnay the king of whites. Cabernet the king of reds and Chardonnay the king of whites. Sauvignon Blanc, not Californian, is very interesting Sauvignon Blanc, not Californian, is very interesting

31. Wine sales in Australia More than 12 000 labels in Table wine market More than 12 000 labels in Table wine market 12 Million cases per annum worth $1.6 Billion 12 Million cases per annum worth $1.6 Billion Market declining, -0.5% in volume, -2% in value Market declining, -0.5% in volume, -2% in value Only growth is in cheapest price category <$7.00 @ +10% Only growth is in cheapest price category <$7.00 @ +10%

32. Wine Sales in Australia (2) White wines dominated by Chardonnay 42%, Sauv. Blanc 10%, Riesling 7% and S.Blanc/Semillon blends 7%. White wines dominated by Chardonnay 42%, Sauv. Blanc 10%, Riesling 7% and S.Blanc/Semillon blends 7%. Biggest growth Pinot Gris +100%, S.Blanc +37% and S.Blanc/Sem. Blends +10%. Biggest growth Pinot Gris +100%, S.Blanc +37% and S.Blanc/Sem. Blends +10%. Pinot Gris only 1% but at high end >$20.00 Pinot Gris only 1% but at high end >$20.00 White wine over 5 000 labels, Chardonnay 1 596 labels, Riesling over 600 and S.Blanc 530 White wine over 5 000 labels, Chardonnay 1 596 labels, Riesling over 600 and S.Blanc 530

33. Wine Sales in Australia ( 3) Total Red Wine sales grew by 0.2% but all varietals declined except Pinot Noir (+14%) and Rose (+49%) of a small base. Total Red Wine sales grew by 0.2% but all varietals declined except Pinot Noir (+14%) and Rose (+49%) of a small base. Market is split evenly between Shiraz 24%, Cab. 19%, Merlot 11%. Market is split evenly between Shiraz 24%, Cab. 19%, Merlot 11%. Blends also popular - Shiraz blends 12% and Cab blends 7% of the market. Blends also popular - Shiraz blends 12% and Cab blends 7% of the market. Pinot Noir and Rose growing at all price points. Pinot Noir and Rose growing at all price points. Over 7 000 red wine labels, but 13 cents cheaper than average white wine. Over 7 000 red wine labels, but 13 cents cheaper than average white wine.

34. Price Point Share – Bottled Table Wine 12m cases 0.5% decline $1.645m 2% decline Avg Price $11.48

35. Source: Nielsen, MAT June 2005 Chardonnay Riesling Sauv Blanc Sem Sauv Blanc Semillon Verdelho Dry White Other White 6.5m cases 1% decline $872m 0.3% decline Varietal Share – White Wine Source: Nielsen, MAT December 2005 Pinot Gris

36. Price Point Share – Bottled Sauvignon Blanc 639k cases 37% growth $114m 38% growth Avg Price $14.80

37. Price Point Share – Bottled Semillon Sauvignon Blanc 463k cases 10% growth $66m 17% growth Avg Price $11.95

38. Price Point Share – Bottled Pinot Gris 25k cases 100% growth $5m 66% growth Avg Price $16.36

39. Total # sku’s = 5,083Avg. vol / sku = 1,269 cases Source: Nielsen, MAT June 2005 Chardonnay Riesling Sem Sauv Blanc Semillon Verdelho Dry White Other White Sauv Blanc Varietal SKU’s – White Wine Source: Nielsen, MAT December 2005 Pinot Gris

40. Shiraz Shiraz Blends Cab Sauvignon Cabernet Blends Merlot Pinot Noir Dry Red Other Red Varietal Share – Red Wine 5.5m cases 0.2% growth $773m 3% decline Source: Nielsen, MAT December 2005 Rose

41. Price Point Share – Bottled Pinot Noir 89k cases 14% growth $20m 17% growth Avg Price $18.97

42. Price Point Share – Bottled Rose 203k cases 49% growth $24m 40% growth Avg Price $9.93

43. Total # sku’s = 7,098Avg. vol / sku = 774 cases Source: Nielsen, MAT June 2005 Shiraz Shiraz Blends Cabernet Blends Pinot Noir Dry Red Cab Sauvignon Merlot Varietal SKU’s - Red Wine Other Red Source: Nielsen, MAT December 2005 Rose

44. What do we plant? From Alicante Boushet to Zinfandel and all the other 42 varieties in between, it’s going to be a tough decision. From Alicante Boushet to Zinfandel and all the other 42 varieties in between, it’s going to be a tough decision. At the cost of R100 000 per hectare and increasing, not an easy decision for FNB. At the cost of R100 000 per hectare and increasing, not an easy decision for FNB. But what about all the other Italian or the Greek varietals that we have not tried! Are we missing out? But what about all the other Italian or the Greek varietals that we have not tried! Are we missing out?

45. Which Varietal and what do we plant? My 5 pointers; My 5 pointers; 1)Must have ‘right’ site and soil to grow quality grapes. 2)Must have ‘quality attitude’—quality wine, label, name, packaging and outlook on the business. 3)Visit the markets with an open mind but know that you will change it about 1 000 times.

46. What to plant 4) Study market and react to these opportunities i.e. Rose—all types of (young) red varietals and some aromatic whites Rose—all types of (young) red varietals and some aromatic whites S.Blanc and Semillon -–perhaps a little Nouvelle to enhance grassy/vegetative character. But the right site! S.Blanc and Semillon -–perhaps a little Nouvelle to enhance grassy/vegetative character. But the right site! Pinot Noir—also for Bubbly Pinot Noir—also for Bubbly Spice Shiraz—not new wood, co ferment with Viognier Spice Shiraz—not new wood, co ferment with Viognier

47. What to plant (cont.) Old Vine Chenin Blanc and Pinotage at the premium end. Old Vine Chenin Blanc and Pinotage at the premium end. Pinotage--- it is our own and is our USP! In quality ways, in Cape Blend. Pinotage--- it is our own and is our USP! In quality ways, in Cape Blend. Chardonnay ---you can’t poopoo chardonnay. What about Champagne, Chablis, White Burgundy ? Chardonnay ---you can’t poopoo chardonnay. What about Champagne, Chablis, White Burgundy ? Pinot Grigio is only commercially viable ‘new’ alternative. Pinot Grigio is only commercially viable ‘new’ alternative.

48. What to plant (cont.) Look at Organic and Bio-dynamic, but only for quality and when it will make a difference. Look at Organic and Bio-dynamic, but only for quality and when it will make a difference. Interesting varieties for own or regional or other blends like Bordeaux, Rhone, etc but don’t let the “interest value” become a “nuisance value”. Interesting varieties for own or regional or other blends like Bordeaux, Rhone, etc but don’t let the “interest value” become a “nuisance value”. 5) Say Thank You that you are in the best business, in the best part of the world, every night! 5) Say Thank You that you are in the best business, in the best part of the world, every night!

49. Thank You