Global Economic Survey March 2012

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Table of Contents

1. POTENTIAL WINE PRODUCTION: WINE-GROWING SURFACE AREA 2

2. WINE PRODUCTION 4

3. WINE CONSUMPTION 6

4. DEGREE OF BALANCE OF THE WINE MARKET 8

APPENDICES 11

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1. Potential wine production: wine-growing surface area

1.1 In the EU (table 1)

• Implementation of the Common Market Organization (CMO) has led to the application of the new final abandonment procedure for the third and last year. This latest campaign of final abandonments has been accompanied by lower premiums than in previous campaigns, which has nonetheless led producers to claim entitlements to this measure in still not inconsiderable proportions; in this respect, applications for permanent abandonment representing approximately 82 mha (against 108 and 160 mha respectively in previous campaigns) have been filed. In view of the budget allocated to this third year of application of the measure, the rebate applied to these applications was 40.4% (against 50.1% and 46.9% respectively in prior campaigns), so much so that only 45 to 50 mha were declared eligible for EU financing. The countries mainly affected are Spain (an expected reduction in areas under vines of close to 28 mha simply due to the European regulation), Italy (9 mha), France (6 mha,), Hungary (a little over 2 mha) and Portugal (less than 1000 ha).

• In fact an examination of the changes in planted surface areas in the main EU countries shows that

the actual reduction is, as in previous years, greater than that induced through implementation of this procedure alone. The main country to be affected is still Spain, where the overall reduction in areas under vines is close to 50 mha, if the changes in wine-producing vineyards are taken into account, making a substantial overall fall of 4.6% / 2010. The overall reduction in Italian vineyard surface area for its part has been evaluated at 12 mha (-1.5%). France's vineyard surface area has again been reduced by 12 mha, down 1.5% on 2010). The vineyards of Bulgaria, Hungary, Greece and Portugal have seen reductions of 2 to 7 mha, which are significant in relative terms, as in Bulgaria (down 8.8% on 2010), while other EU wine-growing areas for their part have remained virtually unchanged, the German and Austrian ones in particular.

The EU area under vines is estimated to total 3530 mha and is therefore down by about 90 mha, or -2.5% between 2010 and 2011. Despite a reduction in the final EU premiums compared with the previous two campaigns, this decline is more marked than the one observed between 2009 and 2010 (65 mha). The 3 EU uprooting campaigns ultimately resulted in a reduction in EU vineyards estimated at 262 mha overall between 2008 and 2011, roughly 175 mha of which were eligible for permanent abandonment premiums.

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1.2 Outside the EU (table 2)

The data sets used for this quantification are specified in the aforementioned table.

They show that overall the non-EU vineyards appear virtually stable for the third year running.

This trend, however, is marked by a revision in the method for counting surface wine-growing area in Argentina, which in 2011 no longer included paths and headlands. As a result, even though national experts consider there was no significant change in the area under vines in Argentina between 2010 and 2011, the country's wine-growing area shrank by 10 mha according to the statistics.

This apparent downward trend has in fact been partially offset, among other things, by the renewed expansion of the Australian wine-growing area (+4mha after a decrease of 6 mha between 2009 and 2010) and by the probable continuing expansion of Chinese vineyards (at a slower rate nevertheless than in the early part of the 2000-2010 decade) and Chilean vineyards, whereas the Turkish and South African vineyards continue to shrink. In aggregate, not counting the EU, areas under vines in 2010 are estimated to have totalled 3965 mha, apparently down by 4 mha on 2010 and now stand at a similar level to that of 2009 (3966 mha).

The world's surface area under vines (which includes areas not yet in production or harvested),

because of these trends, considerable above all in the EU, is expected to decrease by 94 mha (-1.2%) between 2010 and 2011 to roughly 7495 mha.

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2. Wine production These figures concern grapes harvested in the autumn of 2011 in the northern hemisphere and the spring of the same year in the southern hemisphere. 2.1 In the EU (table 3) 2011 production can again be described as low. It is lower than that of the last known five-year average (2006-2010), namely 163.7 mHl. 2011 production, excepting juice and musts, was estimated to amount to 156.9 mHl (against respectively 156.4 mHl in 2010). Compared with 2010 production, the most significant quantitative decrease was recorded in Italy, which saw its 2011 wine production fall by nearly 7 mHl compared with 2010 (-14.3%). Portuguese production (-16.9%), and to a lesser extent Spanish production, also fell respectively by 1.2 and 0.9 mHl. Conversely French production excepting juice and musts grew by 3.9 mHl (+8.6%), while German and Austrian production in 2011 were normal and Romanian production (4.7 mHl) recovered without however attaining its level before the disastrous harvest of 2009 (the 2009 and 2010 harvests respectively totalled 6.7 and 3.3 mHl). 2.2 Outside the EU (table 4) Total 2011 production (excepting juice and musts) in the areas reviewed here, which include the main countries of the southern hemisphere, the United States and Switzerland, amounted to 72.4 mHl, on a par with 2010. This overall trend is again a reflection of highly contrasting changes: • The United States with 18.7 mHl excepting juice and musts, recorded relatively modest wine

production in 2011, down 10.3% on 2010. • In South America, Chile with another record output of 10.6 mHl, Argentina, which maintained a

substantial level of wine production despite the output of juice and musts returning to normality (15.5 mHl against 16.3 last year), and Brazil, which verged on 3.5 mHl (against 2.5 in 2010, low admittedly), production was on the contrary very high.

• In South Africa, wine production grew slightly to 9.7 mHl (9.3 mHl in 2010 and 10.0 mHl in 2009). • Lastly, Australian production continued to decline, struggling to pass the 11 mHl mark, and while

Swiss production was back to its traditional level of 1.1 mHl, New Zealand production for its part posted a record harvest of 2.35 mHl (up 0.45 mHl on 2010).

Therefore (table 5), assuming a variability factor of ±10% in the 2010 wine production figures of

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countries for which no 2011 data is available, world wine production in 2011 (excluding juice and musts) can be estimated at between 262.1 and 269.4 mHl, between 1.1 down and 1.6% up on 2010 (265.7 mHl being the estimated median: up 0.6 mHl on 2010). So it can be stated that once again global wine production was low, or even very low, particularly in the European Union.

220230240250260270280290300310

in m

illio

ns o

f hl

Trend in global wine production(excluding juice and musts)

NB1: this 2011 evaluation factors in changes in wine production between 2010 and 2011 in the countries that in 2010 represented 86% of provisional global production.

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3. Wine consumption The hoped-for recovery marking the end of the financial then economic crisis that started in 2008 is late in coming; 2011 was marked by a difficult start and a slight upturn at the end of the year, albeit impossible to confirm early in 2012, in Europe in particular.

• As a result, in the traditionally producing and/or consuming countries of Europe, despite a rise in French consumption (+1.0 mHl, albeit after a sharp fall of 1.3 mHl between 2009 and 2010), the stability of German consumption and the slight fall in Spanish (-0.2 mHl), British (-0.4) and Portuguese (-0.15) consumption in 2011, Italian consumption dropped sharply by about 1.6 mHl (admittedly following a rise of 0.5 mHl between 2009 and 2010).

On initial examination, a downward trend (-0.5 mHl) can be seen in consumption in the main EU consuming countries (see table 6), falling to 121.9 mHl against 122.5 mHl in 2010, 120.2. For the other countries under review (see table 7), the trends are by and large favourable. Whereas the crisis was severely felt in 2010, causing a slowdown in the domestic demand of some of these countries, in 2011 the upturn seems to have been more marked, more so than in Europe in any case.

• The United States, the second largest market in the world in volume, and whose domestic market is expected to become the largest global market in coming years, grew by 0.9 mHl to an initially estimated 28.5 mHl (excluding special wines and vermouth), whereas between 2009 and 2010 it only grew by 0.35 mHl.

• With regard to China, and subject to the reservations set out in Nota Bene 2, consumption continues to grow, more particularly if its fast-growing level of imports is factored in, without any significant exports from the country. Known consumption in China in 2011 was therefore estimated at 17.0 mHl (up 1.15 mHl on 2010).

NB2: These figures reflect known consumption in China based on Production + Import – export figures (calculated by the OIV using FAO data among other things), which in all likelihood include drinks other than wine that have grapes as an ingredient (including distilled drinks, because no data on wine processing is available). This is the same approach as that used by the FAO. Other unofficial evaluations, which start this quantification with sales of wine-producing companies in the sense of the OIV, (the exhaustiveness of which is unclear however, and inclusion of which would lead to a major shift in statistics since wine as such has only been statistically defined in China since 2003) are more or less half as high, given that wine imported in bulk is generally adapted to Chinese tastes when assembled with wine produced with Chinese grapes in the finished-product sales figures of the corporations concerned.

• In 2011, domestic demand in Argentina, South Africa, Australia, Chile, and New Zealand was

quantitatively more or less unchanged in comparison with 2010.

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Since the same approach is used here as for wine production, these trends lead to an estimated world consumption of wine consumption in 2011 of between 237.4 and 246.4 mHl, or an estimated median of 241.9 mHl: (up 1.7 mHl on 2010: +0.7%, although given the margin of error in tracking global consumption, this figure should be considered with caution). As a result, in 2011 at least, this confirms a turnaround in the sharp fall in global consumption from 2010 after the crisis. Nevertheless the general economic climate, which is somewhat depressed in early 2012 on the largest wine-consuming continent (Europe), calls for continued caution in interpreting this outcome as heralding an immediate return to the pre-crisis trend as regards global consumption, namely moderate yet steady growth.

Q.conj.OIV March 2012 NB3: this 2011 evaluation assesses changes between 2010 and 2011 in wine consumption of countries that in 2010 represented 81% of provisional global consumption, a higher proportion than last year (75%) due to the inclusion of evaluated Chinese consumption (see above)

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4. Degree of balance of the wine market Measured on a rough basis by the difference between global wine production and global consumption, the degree of balance (table 8) in 2011 is estimated to be between 15.7 and 32.0 mHl, or an estimated median of 23.9 mHl (down 4% on 2010), compared with 31.1 mHl in 2009. The reason is that in 2011, with global output continuing to be low in the face of growing albeit slow global demand, by and large this has stretched the global market, because this was the second year running in which, in the middle of the estimated range, volumes available for industrial uses (wine-based alcohol, vinegar and vermouth, for which global demand is estimated at approximately 30 mHl) seem to fall short of demand, on the brandies market in particular. It will therefore be necessary once again to resort to using stocks of wine-based alcohol.

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5. International trade Tables 9 and 10 show changes in international wine trading. The global market, here considered as the total exports of all countries (given that the countries under review make up 93% of global trade), totalled 103.5 mHl in 2011, up 7.9% on 2010, thereby confirming the upturn in world trade observed between 2009 et 2010: 95.9 mHl, the provisional 2010 figure (+9.6%) against 87.5 mHl in 2009. 2009, which as will be recalled, in the midst of the global economic crisis, marked the first downturn in trade growth since 2000 (down 2.8 mHl on 2008).

Q.conj.OIV March 2012 On initial examination, however, this shift in volume is not always reflected in an identical shift in value, as the change in the proportion of bulk exported between 2010 and 2011 would suggest:

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2010 Forecast 2011

change (index 100

in 2010)Argentina 19% 33% 178Australia 44% 48% 107Chile 40% 32% 79France 19% 19% 99Italy 34% 33% 96Spain 52% 57% 110USA 51% 47% 92

Share of exported bulk

Various sources: GTA/experts/OIV Accordingly the crisis has undoubtedly played its part in intensifying the trend, already noted last year, whereby the proportion of trade in bulk wine is growing. The corollary of this is that trade is becoming increasingly complex, with a growing proportion of re-exports, inter alia in transcontinental trade. On initial examination, this upturn in trade has benefited all the main exporting countries to varying degrees except Chile and Australia (both down 10% on 2010), in all likelihood handicapped by a shortage of supply (due to the earthquake affecting stocks in Chile and worsening weather conditions in Australia). The same can be said for South Africa, whose exports also fell slightly: down 0.2 mHl in comparison with 2010. While Italy remains the largest exporter in volume, growing faster than the global market (+2.5 mHl: up 11% on 2010), it is Spain that posted the biggest increase (+4.6 mHl: up 26% on 2010), perhaps benefiting from the gap in the market left in part by the downturn on Chile, more particularly in bulk (respective trend in bulk exports: Chile: -20% Spain: +10%). Portuguese exports also grew more than the global market (+0.4 mHl: up 16% on 2010). Exports from France, Germany and the United States grew but at a slower pace than that of the global market, up between 5 and 6% on 2010. Given these trends, for the second year running the share of world trade exports of the 5 largest EU exporters (IT/ESP/FR/AL/PORT) grew to 65.5% (against 62% in 2010) at the expense of the main countries of the southern hemisphere taken together (AFS/AUST/NZ/CHILE/ARG) and the United States (25.2% against 28.2% in 2010). Trade is thus continuing to grow at a markedly faster rate than the upturn in global consumption, to such an extent that now more than 4 out of 10 litres consumed throughout the world have been imported (see table 10).

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Appendices

Total surface area under vines* in the EU

Austria 48 45 46 46Germany 102 102 102 102Bulgaria 86 81 79 72Spain 1165 1113 1082 1032France 858 837 819 807Greece 115 113 113 111Hungary 72 70 68 65Italy 825 812 798 786Portugal 246 244 243 240Romania 207 206 204 204Other EU wine-producin 66 66 64 63Total 3792 3691 3620 3530*Wine and table vines, or raisin vines, in production or not yet in productionSource: OIV, Experts OIV, trade press

Forecast 2011

Table 1

Thousands of hectares

2008 2009 Prov. 2010

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Table 2

Thousands of hectares

2008 2009 Prov. 2010 Forecast 2011Argentina 226 228 228 218Australia 173 176 170 174Brazil 92 91 92 92Chile 198 199 200 202China 480 485 490 495New Zealand 35 37 37 37Russia 64 67 67 67South Africa 132 132 132 131Switzerland 15 15 15 15Turkey 518 505 503 500United States 402 403 404 405Other African countries 250 246 247 247Other American countries 81 83 86 84Other European countries 664 659 659 660Other Asian countries 615 640 639 638Total 3945 3966 3969 3965*Wine and table vines, or raisin vines, in production or not yet in productionSource: OIV, Experts OIV, trade press

Total surface area under vines outside the EU

2008 2009 Prov. 2010 Forecast 2011Total surface area 7737 7657 7589 7495*Wine and table vines, or raisin vines, in production or not yet in productionSource: OIV, Experts OIV, trade press

Total surface area under vines worldwideThousands of hectares

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Trend in EU wine production (excluding juice and musts)

Prov. 2010 Forecast 2011 2011/2010 changeGermany 6906 9611 2705Austria 1737 2814 1077Bulgaria 1187 1268 81Spain 35235 34300 -935France 45704 49633 3929Greece 2950 2597 -353Hungary 1966 2447 481Italy 48525 41580 -6945Portugal 7133 5925 -1208Romania 3287 4708 1421Other EU wine-producing countries 1746 2001 255Total 156376 156884 508* including production of Baltic statesSource: OIV / CCE DGVI E2 / experts / press and Internet

Table 3

Thousands of hectolitres

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Prov. 2010 Forecast 2011 2011 changeArgentina 16250 15473 -777Australia 11240 11010 -230Brazil 2455 3450 995Chile 9869 10570 701New Zealand 1900 2350 450South Africa 9336 9665 329Switzerland 1030 1121 91United States 20887 18740 -2147Total 72967 72379 -588

Thousands of hectolitres

Source: OIV experts, trade press and Internet

Table 4Wine production in the main non-EU countries (excluding juice and musts)

Table 5

Evaluation of global wine consumption

Millions of hectolitres

2007 2008 2009 Prov. 2010 Forecast 2011 2011/2010 in %

265,8 269,3 271,2 265,1 261,2 to 269,4 1,1% to 1,6%

NB Given that the countries for which 2011 figures were available represented in 2010 (OIV): 228,6 Mhl namely a proportion equivalent to: 86% of global wine consumption in 2010 (Reminder: 265,1 Mhl) namely a proportion equivalent to: 36,5 Mhl, here we estimate the 2011 consumption of countries not listed, with the aid of a variability factor of: 10%, based on the 2010 figure.

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Prov. 2010 Forecast 2011 2011/2010 changeGermany 19 700 19 700 0Austria 2 400 2 600 200Belg.+Lux. 2 878 3 144 266Czech Republic 2 034 2 000 -34Denmark 1 930 1 970 40Finland 606 593 -13France 28 917 29 936 1 019Greece 2 955 2 800 -155Hungary 2016 2400 384Ireland 710 790 80Italy 24 624 23 052 -1 572Netherlands 3 470 3 500 30Portugal 4 690 4 550 -140Spain 10 359 10 150 -209Sweden 2 010 2 000 -10UK 13 200 12 800 -400Total* 122 499 121 985 -514(NB: cyclical tracking of new EU member states does not enable us to reconstruct a forecast for the EU 27 here)Sources: OIV experts, evaluation of consumption per calendar year based on data gathered up to 2009 and/orinformation available from the EU per campaign + panels & national offices of statistics

Table 6

Thousands of hectolitresTrend in EU wine consumption

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Thousands of hectolitres

Prov. 2010 Forecast 2011 2011/2010 changeSouth AfricaArgentinaAustraliaBrazilChileChinaUSA.New ZealandSwitzerlandTotalSource: OIV, Experts OIV, trade press

Table 7Wine consumption in some non-EU countries

3 463 3 530 679 753 9 725 -285 317 5 265 -523 519 3 700 181

1627 600 28 500 900

3 237 3 237 015 846 17 000 1 154

2 940 2 900 -4072 596 74 794 2 198

921 937

2007 2008 2009 2010 prov. 2011 forecast 2011/2010 in %

251,1 248,2 240,1 240,2 237,4 to -1,2% to 2,6%

NB: Given that the countries for which 2011 figures were available represented in 2010 (OIV): 193,2 mHlnamely a proportion equivalent to: 80% of global wine consumption in 2010 (Reminder: 240,2 mHl)or a shortfall of....: 47,0% mHl, here we estimate the 2011 consumption of countries not listed,with the aid of a variability factor of.....: 10% , based on the provisional 2010 figures.

Evaluation of global wine consumption Thousands of hectolitres

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Table n. 9 VOLUMES EXPORTED AND GLOBAL MARKET SHARE per CALENDAR YEAR

Country of origin of exports in

Millions d'hl Fran

ce

Ital

y

Spai

n

Ger

man

y

Port

ugal

PEC

O (1

)

Sout

h A

mer

ica

(2)

USA

Sout

h A

fric

aM

aghr

eb

(3)

Oce

ania

(4

)

Mol

davi

a *

with

out

trac

ked

coun

trie

s

Glo

bal

mar

ket

Av. 1986 -1990 vol. 12,8 12,6 4,6 2,7 1,6 3,9 0,4 0,6 0,0 0,6 0,3 n/a 40,1 43,5 Source OIV % 29% 29% 11% 6% 4% 9% 1% 1% 0% 1% 1% 92% 100%Av. 1991 -1995 vol. 11,5 15,1 7,4 2,7 1,9 2,4 1,5 1,2 0,4 0,2 1,1 1,4 46,7 51,1 Source OIV % 22% 29% 14% 5% 4% 5% 3% 2% 1% 0% 2% 3% 91% 100%Av. 1996 -2000 vol. 15,3 14,8 8,8 2,3 2,1 2,8 3,3 2,3 1,2 0,2 2,2 1,3 56,7 60,9 Source OIV % 25% 24% 14% 4% 4% 5% 5% 4% 2% 0% 4% 2% 93% 100%Av. 2001 -2005 vol. 14,8 15,0 12,1 2,6 2,6 1,9 5,5 3,2 2,4 0,3 5,8 1,9 68,1 72,2 Source OIV % 20% 21% 17% 4% 4% 3% 8% 4% 3% 0% 8% 3% 94% 100%

Av. 2006 -p2010 vol. 13,9 19,3 15,7 3,6 2,8 1,6 9,4 4,1 3,5 0,2 8,5 1,3 83,9 89,7 Source OIV % 16% 21% 18% 4% 3% 2% 10% 5% 4% 0% 10% 1% 94% 100% 2006 vol. 14,7 18,4 14,3 3,2 2,9 1,8 7,4 3,8 2,7 0,2 8,2 1,9 79,6 84,5

see below % 17% 22% 17% 4% 3% 2% 9% 4% 3% 0% 10% 2% 94,2% 100%2007 vol. 15,3 18,5 15,1 3,5 3,4 1,8 9,7 4,2 3,1 0,2 8,6 1,1 84,4 89,8

see below % 17% 21% 17% 4% 4% 2% 11% 5% 3% 0% 10% 1% 94,1% 100%2008 vol. 13,7 18,1 16,9 3,6 2,9 1,7 10,0 4,6 4,1 0,2 7,9 1,2 84,8 90,7

see below % 15% 20% 19% 4% 3% 2% 11% 5% 5% 0% 9% 1% 93,6% 100% 2009 vol. 12,6 19,5 14,6 3,6 2,3 1,4 9,8 4,0 4,0 0,1 8,8 1,0 81,6 87,5

see below % 14% 22% 17% 4% 3% 2% 11% 5% 5% 0% 10% 1% 93,2% 100%Provisional 2010 vol. 13,5 21,8 17,7 3,9 2,6 1,1 10,1 4,0 3,8 0,3 9,2 1,3 89,2 95,9

see below % 14% 23% 18% 4% 3% 1% 10% 4% 4% 0% 10% 1% 93,0% 100%Forecast 2011 vol. 14,1 24,3 22,3 4,1 3,0 1,1 9,7 4,2 3,6 0,2 8,6 1,1 96,2 103,5

see below % 14% 23% 22% 4% 3% 1% 9% 4% 3% 0% 8% 1% 93,0% 100% (1): Bulgaria + Hungary + Romania (2): Argentina + Chile (3): Algeria + Tunisia + Morocco (4): Australia + New-Zealand *:Av. 92-95

NB The global market here is defined as the sum total of all countries' exports.

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Share of world trade av. 06-10 Forecast 20115 largest EU exporters (Ger, Sp, Fr, It, Por) 61,7% 65,5%"Southern hemisphere" (Arg, Chile, AFS, Aus/NZ)+ USA 28,6% 25,2%PECO and Maghreb 1,9% 1,2%Other countries 7,8% 8,1%Unless otherwise stated, figures taken from national customs statistics & Uncomtrade/GTA. If unavailable, we resort to information from OIV experts, the press, and at EU level information on campaign assessments. Magreb & Moldavia in 2011: direct OIV estimate base trendThe 93% factor representing the trend in the share of world trade taken by the countries under review to evaluate the global market.

7,8% 11,4% 9,0% 8,4%

3,1% 8,0% 14,8% 23,4%10,3% 5,1% 4,9% 3,1%

av. 86/90 av. 91/95 av. 96/00 av. 01/05

78,8% 75,5% 71,2% 65,2%

Tableau n° 10Part des échanges mondiaux dans la consommation mondiale de vins

Millions d'hectolitres

2006 2007 2008 2009 Prov. 2010

2011 en milieu de

fourchette11/10 en%

I: Consommation mondiale de vins 244,0 251,1 248,2 240,1 240,2 237,4 à 246,4 241,9 0,7%

II: Marché mondial (cf Tab.n°9) 84,5 89,8 90,7 87,5 95,9 103,5 à 103,5 103,5 7,9%

II / I en % 34,6% 35,7% 36,5% 36,4% 39,9% 42,0% à 43,6% 42,8% 7,2%

Prév. 2011