1. American Wine Inc Exporting to France?
Keith Hays
French Economy
Bart Hundt
French & EU Import Laws and Regulation
Trevor Graham
French Wine Industry Analysis
Neal Gee
French Wine Market Overview

2. French Economy
Keith Hays

3. French Economy Demographics France United States Population 60,424,213
293,027,571
Age Structure
0-14
18.5%
20.8%
15-64
65.1%
66.9%
65+
16.4%
12.4%
Median Age
Total
38.6 Years
36.0 Years
Male
37.0 Years
34.7 Years
Female
40.1 Years
37.4 Years
Pop. Growth Rate
0.39%/Yr
0.92%/Yr
Birth Rate/1,000
12.34
14.13
Death Rate/1,000
9.06
8.34

4. French Economy Moving to a market economy Privatizing many sectors
Governmental control of utility sector
Capitalistic Society
Government lowered taxes
Taxes 43.8% of GDP
Employment Issues
35 hour work week
Restriction on Layoffs
Pension Reforms

5. French Economy Economy Sluggish 2003 deficit 4% of GDP
Business investment listless
Low rate of capital utilization
Sluggish Demand
High debt
Steep cost of capital

6. Economic Data
France
United States
GDP
$1.661 trillion
$10.99 trillion
GDP Real Growth
0.50%
3.10%
GDP Per Capita
$27,600
$37,800
GDP Composition By Sector
Agriculture
2.7%
1.4%
Industry
24.4%
26.2%
Services
72.9%
72.4%
Population Below Poverty
6.5%
12.0%
Consumption By % Share
Lowest 10%
2.8%
1.8%
Highest 10%
25.1%
30.5%
Inflation Rate
2.1%
2.3%
Labor Force
$27.39 Million
$ Million
Labor Force By Occupation
4.1%
71.5%
Unemployment Rate
9.7%
6.0%
Public Debt (% Of GDP)
68.8%
62.4%

7. French & EU Import Laws and Regulations
Bart Hundt

8. French & EU Import Laws and Regulations
French labeling and product ingredient regulations are among the most strict n the EU.
Severe limits on food labeling superlatives.
Cannot use “ great tasting…”
Labeling cannot be used to promote product
Products produced in accordance with specific processing procedures.
If they do not conform they may be subject to special taxes

9. Labeling Requirements
Labels must be in French regardless of origin.
Multilingual labels are acceptable.
EU has an approved additive list .
Does not mean that the additive is approved in France.
Foreign names are forbidden in place of existing equivalent French terms.

10. Labeling Requirements
Most items must have in same area of label
Product name
Net quantity (must be in metric units)
Date of minimum shelf life
Date best consumed by (on non perishable products)
To be consumed before (on perishable products)
Wines and spirits that have an alcohol content of 10.5 or greater are exempt from date labeling
Country of origin must be indicated not less than 4mm in height
France has its own packaging or container size requirements for wines and alcohol.

11. French Import Regulations
France is more strict than the EU.
Items must comply with French regulations before they are shipped to France.
French imports of wine from non-EU countries are subject to EU import duties which vary depending on the percentage of alcohol contained in the wine and the type of container.

12. French Import Regulations
Also a VI.1 document is necessary.
EU document certifying that the US wine exporter is approved by the US BATF. Taxes for alcoholic beverages.
Taxes for alcoholic beverages are 19.6%.

13. French Wine Market Overview
Neal Gee

14. Wine Industry in France
Tightly regulated by EU and AOC rules.
Regulations address maximum yield, permitted grape varieties, location of vineyard site, and even pruning practices.
Strict regulations have led to market decline.
Wine growers are unable to adapt to global market changes because of strict guidelines.

15. Wine Industry in France
France is currently world’s second largest producer of wines, but is losing position quickly.
France specializes in premium brands of wine that exceed, on average, $30 a bottle.
Many of France’s wines are created from Hybrid grapes that originated in the US in the 1950’s.

16. Wine Industry in France
In the 1950’s one-third of wine grapes were from American pedigrees.
In 2003 the average French adult drank 58 liters of wine.
37% of French citizens consider themselves regular consumers of wine.

17. Recent Declines
In 1999 French wine producers exported 79 million fewer bottles than previous year.
French wine exports plunged another 10% last year while domestic sales dropped 5%.
French consumption in restaurants has slumped by 15-20%.
The decline in the wine industry is also reflected in the sudden collapse in the value of vineyards in the country.

18. Recent Declines
Overproduction has been a constant problem leading to large supplies that far exceed demand and create downward price pressure.
Due to slumping sales nearly one-third of France’s winescape has disappeared.

19. Problems
Growers complain that strict advertising laws are preventing them from reversing declining trends.
Lack of focus and a shortage of new marketing strategies derived to adapt industry to the demands of a changing global market.
Wine surplus will likely continue.
New entry of abundant amounts of Spanish and Portuguese wines into EC trade.

20. Problems
French have failed to understand the markets they are selling to and have been production led instead of led by market.
French have not been focused on quality across the board.
AOC system has protected poorer wine producers from market forces that create incentives to achieve quality.

21. French Wine Industry
Trevor Graham

22. French Wine Production
World’s #1 wine producer in 2002.
Production statistics.
2002 France’s share of total world wine production was about 20% compared to the US 8%.

23. World Wine Production
Million Hectoliters

24. French Wine Consumption
Has been decreasing in France since 1999.
Study conducted by the French Agricultural Research Center (INRA) and the French Office for Wines and Vines indicated that this trend will continue and result in a 25% decline in wine consumption by 2010 as compared to 1999.

25. French Wine Consumption
Domestic wine consumption has continued to decline.
Trend is expected to continue in coming years.
Sales in supermarkets for 2002 dropped 2.5% compared to
Quantity purchased by food service sector (restaurants, etc) decreased 2% in 2002.
Shrinking use of cheaper “table” wines.

26. French Wine Consumption
Consumers are moving from quantity to quality
Preferences

27. French Wine Consumption
Age Market (Studies by ONIVINS)
Consumers under the age of 35 (23% French households) represent the smallest consumer group.
Consumers between the ages of 35 and 49 (30% French households) make 25% wine purchases.
They purchase white wines in larger quantities than any other age group.

28. French Wine Consumption
Age Market (Studies by ONIVINS)
Consumers between the ages of 50 and 64 constitute the leading buying group in all categories with a preference for red wines.
Also major consumers of Champagne consuming 11% above the average consumption level.
Together with the 65+ this group constitutes 47% total French households.
The age group of 65+ are the leading buyers of still wines, mostly table wines

29. French Wine Exporting
1/3 of production goes to the EU; other major clients include US, Canada, Denmark, and Japan.
Early 2003 results.

30. Wine Export Market Share

31. France-Wine Export Destinations
Million Dollars

32. French Wine Exporting
Continues to lose market share among major clients to the advantage of “new world wines” .

33. French Wine Exporting

34. French Wine Exporting
Trade surplus in wine for 2002 was €5.2B, an increase of 6.6 percent over the previous year.
French wine exports are very concentrated.

35. French Export Promotions
In 2002 France had a total budget of €10.4M for promotions of French wines in different countries, including the US.
Promotional activities funded by ONIVINS focused on:
Advertising campaigns.
Promotional materials.
In-store promotions in specialized outlets, hotels, restaurants, as well as fairs and trade shows.
Four year program launched in 2003.

36. French Export Promotions
Assistance from the French Minister of Agriculture.
Trade shows.
Wine and Spirit Wholesaler Association in Las Vegas, May 2004.
VINEXPO in Chicago in June 2004.

37. French Wine Imports
2002 decreased 11.6% in volume with a worth of 460M Euros ($435M).
US represents only 2% total French wine imports, French imports of US wines has been growing steadily from 15K HL in 1994 to 96K in 2002.
In 2002 French imports of US wines increased 32% in volume and 19% in value.

38. French Wine Imports
Table wines represented 79% of total wine imports in volume, mostly from other EU countries.
Leading Suppliers
EU nations.
Non EU nations.

39. French Wine Imports
Imports of US wines have increased 54% in volume over the period
This can be largely attributed to the presence of Gallo Winery in this market since 1998.

40. French Market Challenges France and the EU
Boosting both domestic and export markets.
France and the EU
French government is urging European growers to adapt to changing consumer demand in order to better compete with emerging third country competitors and in new markets.

41. French Market Production Policy and Governmental Support Subsidies
2002 ONIVINS paid €1.5 Million.
EU agreements to reduce subsidies
Goals
Reduce 21% in volume and 36% in value.

42. French Market Distribution and Infrastructure
Mail order sales are generally made directly by the producer.
Wholesalers and importers make up France’s wine distribution system.
Wholesalers  specialized wine stores, food stores, restaurants and institutions.
Supermarket wine sales make up 78% of household wine purchases, while 22% come from specialized wine sales (wine stores, etc).

43. French Market Advertising Policy Television and radio
Wine industry continues to lobby for modifications to these laws.

44. US Opportunities in France
Most of the American wines sold in France are Cabernet Sauvignon, Chardonnay, Zinfandel, and Pinot Noir from California.
US competition

45. US Opportunities in France
There are opportunities for US wines in France, thanks to the “exoticism” and quality of US wines.
E&J Gallo have been present in France since 1998 and Mondavi wines since 2000.

46. Recommendation Surplus Supply Cost Prohibitive Recommendation: NO
Government subsidies
Declining wine exports
Cost Prohibitive
Labeling requirements
Import taxes
Recommendation: NO