1. “The American Dream - Strategies for U.S. Success” John Grant, President Kendall-Jackson Wine Estates John Grant, President Kendall-Jackson Wine Estates July 2001

2. Agenda Why care about the U.S. market?Why care about the U.S. market? Who has been successful?Who has been successful? Why?Why? Keys for future success.Keys for future success.

3. World Wine Consumption Actual 1996-1998 Average 1991-1995 In Thousands of Gallons (000s ) It’s Big! Ranked No. 3 in terms of aggregate wine consumption and is showing strong growth.Ranked No. 3 in terms of aggregate wine consumption and is showing strong growth.

4. Population(MMs) 8281 78 79 78 Source: U.S. Department of Census 20-39 40-64 65+ 20-39 40-64 65+ Growth in 40-64 Year Olds 1990-2000 20 MM 2000-2010 16 MM It’s Growing! “Baby-Boomers” are entering the peak wine consumption age - a long term category growth driver.“Baby-Boomers” are entering the peak wine consumption age - a long term category growth driver.

5. 2000 U.S. Shipment Growth by Origin California 172 Million Cases Other States 21 Million Cases Imports 42.3 Million Cases +2% +3% +17% Source: Gomberg-Fredrikson & Associates … And they are not parochial! It’s Growing!

6. Australian Wine Exports 1999 Major Markets (M liters and US $) Source: International Wine Associates It’s Profitable! U.S. recorded the highest price per liter paid for Australian wine.U.S. recorded the highest price per liter paid for Australian wine.

7. …and is becoming more profitable with consumer “trade up” Source: Gomberg-Fredrikson Price Segment Surveys -3% 1999 Table Wine Sales 7% 20% 14% 28% 36% -10%0%10%20%30%40% Jug <$3 Popular Prem. 3-$7 Premium $7-$10 Super Prem. $10-$14 Ultra Prem. $14-$25 Luxury $25+ Premium Plus 5-Year CAGR It’s Profitable!

8. Australian Brands, Then and Now 12 weeks ending 5/20/01 vs 12 weeks ending 3/31/96 Who has been successful? Traditionally--first mover exporters. Lately--importers with distribution muscle.Traditionally--first mover exporters. Lately--importers with distribution muscle. Source: IRI Infoscan

9. Why successful? Domestic supply constraint - particularly in reds below $10.Domestic supply constraint - particularly in reds below $10.

10. California has planted its way out of shortage.California has planted its way out of shortage. California Total Tons of High Varietals Crushed 1990-2004F Source: California Dept Food & Agriculture, Motto, Kryla & Fisher CAGR: 90-96 = 10% CAGR: 97-00 = 9% CAGR: 01F-04F = 2%

11. Why successful? Domestic supply constraint - particularly in reds below $10.Domestic supply constraint - particularly in reds below $10. Favorable exchange rates.Favorable exchange rates. “First mover” distribution advantage.“First mover” distribution advantage. Unique product offerings - Shiraz and blended varietals.Unique product offerings - Shiraz and blended varietals. Relatively strong brand support at retail.Relatively strong brand support at retail.

12. Index of Share of Wine Displays by Country of Origin Total U.S. Grocery Current 52 weeks ending 5/20/01 Source: IRI Infoscan Australian category getting strong retail display support, driving distribution and impulse impact.Australian category getting strong retail display support, driving distribution and impulse impact.

13. Success for the Future Incumbents require:Incumbents require: –Continued weak Australian dollar. –Rapid economic recovery in the U.S. –Poor 2001 harvest in U.S.

14. Entrants need to be niche-focused:Entrants need to be niche-focused: –VOLUME opportunities “played out”: Major distributor books fullMajor distributor books full Alliance partners with distribution muscle scarceAlliance partners with distribution muscle scarce Acquisitions prohibitively expensiveAcquisitions prohibitively expensive –VALUE opportunities are opening up: Build appellation awareness - industryBuild appellation awareness - industry Deploy top-end ShirazDeploy top-end Shiraz Target “on-premise” - hand sellTarget “on-premise” - hand sell Seek out “regional” distributorsSeek out “regional” distributors Success for the Future

15. Conclusion: U.S. market is large, profitable, and growing.U.S. market is large, profitable, and growing. Volume players are well defined - they are the few with “distribution muscle.”Volume players are well defined - they are the few with “distribution muscle.” Australian category volume growth will be challenged by emerging domestic over supply and softening economy.Australian category volume growth will be challenged by emerging domestic over supply and softening economy. Niche opportunities are opening upNiche opportunities are opening up –Industry focus on appellations –Suppliers focus on targeted hand-sell On-premiseOn-premise Specialist local distributorsSpecialist local distributors

16. Take Out Strategy for success in the U.S.: “Niche-Market … Up Market!”

17. Thank You