HOW TO POSITION CARMENERE FOR SUCCESS IN THE U.S.A.
November 25, 2009
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Bruce SchneiderCEO
Schneider Selections
U. S. A.WINE MARKET
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CONSUMPTION GREW RAPIDLY 2001-2007
Still Grew by 0.9% in 2008 Despite Recession
Sources: Impact Databank 2008, 2009 Wine Handbook
Type 2001 2002 2003 2004 2005 2006 2007Table 196.7 210.6 223.3 235.1 243.7 254.4 265Sparkling 11.8 12.2 12.5 12.6 12.8 13.3 13.6Specialty 9.5 9.6 10.2 10 9.9 9.9 10Domestic Fruit-Flavored Wine Beverages
7 6.8 6.7 6.1 6.1 6 6.1
Traditional Dessert 4.6 4.5 4.5 4.5 4.6 4.5 4.5Vermouth 1.8 1.8 1.8 1.9 1.9 1.8 1.8 Total Wine 231.4 245.4 258.9 270 278.9 290 300.9
Millions of nine-liter cases
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2008 IMPORTED WINE
• Total (bulk & bottled) declined 1% to 95 million 9L cases.• New world takes 3% from old world, reaches record 46% share.• Bottled declined by 5% to 69.4 million 9L cases.• Bulk increasing due to U.S. winery purchases to meet consumer
demand for less expensive wines.
Source: Annual Gomberg Frederickson Report December 2008
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(69.4 million none-liter case shipments = 100%)
Source: Gomberg Fredrikson
2008 U.S. IMPORTS BY COUNTRY
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2008 MARKET SHARE
32.56%
11.92%24.58%
5.15%
8.89%
4.39%3.00%
5.57%3.93%Italy
France
Australia
Spain
Chile
Germany
New Zealand
Argentina
Other
2008Italy 22,584 France 8,270 Australia 17,051 Spain 3,572 Chile 6,167 Germany 3,048 New Zealand 2,081 Argentina 3,865 Other 2,726 Total 69,364
Shipments (Thousands 9L Cases)
SUMMARY 2007 VS. 2008 BOTTLED IMPORTED SHIPMENTS
Volume and Average Price Increasing for Chile Argentina Growing Rapidly, Most Others Declining
Source: Annual Gomberg Frederickson Report, December 2008
Country % Change Shipments in Cases
% Change Value in Dollars
France -12 % 6 %
Italy -9 % 0 %
Spain 2 % 4 %
Germany -5 % 2 %
Portugal 2 % 13 %
New Zealand - 4 % -2 %
South Africa - 18 % -10 %
Argentina 31 % 32 %
Australia -7 % -14 %
Chile 2 % 4 %
Total -5 % 0 %
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SIX MONTHS ENDED 2009 vs. 2008 BOTTLED IMPORTED SHIPMENTS
Global Pricing Chile: Volume Average Price
Consumers Trading Down, New World Benefits
Country % Change Case Volume YTD
% Change Imported Value YTD
France -7 % -31 %
Italy -5 % -18 %
Spain -7 % -23 %
Germany -13 % -23 %
Portugal 8 % -8 %
New Zealand 9 % 9 %
South Africa 17 % 1 %
Argentina 37 % 32 %
Australia -7 % -12 %
Chile 26 % 26 %
World Total -1 % -15 %
Source: Annual Gomberg Frederickson Report, June 2009
=
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TOP STATES FOR CHILEAN WINES
1) New York
2) Florida
3) New Jersey
4) Texas
5) California
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FASTEST GROWTH IN $3-7 SEGMENTAfter several years of $10+ growing faster than under $10,
situation has reversed
Source: Gomberg Frederickson Report, March 2009
2009 Consumer Purchases in Food Stores
Volume Cases Volume % Value%Share Change Change Change
Other to $3 (jug) 21% -71 -2% 3%$3 up to $7 49% 156 2% 4%$7 up to $10 15% 2 0% 2%$10 up to $14 9% 24 2% 3%$14 & Over 4% (48) -7% -4%
Source: AC Nielson YTD to 3-28-09
% Change based on difference between 2008 and 2009
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•Millennials (15-32 years) driving market
•77 Million purchase a wider range of products from a wider range of regions
•Much more likely than Boomers or Gen X to purchase imports
CONSUMER TREND – BRIGHT FUTURE
12Source: 2006 Merrill Research for Wine Market Council
Younger Generations, Especially Millennials, Driving New
Growth of U.S. Wine Market
(Net percent “drinking more wine” by generation)
U.S. WINE MARKETMarket Structure
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U.S.THREE-TIER MARKET STRUCTURE
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Non-U.S. Producer
* Importer
On/Off Premise Trade
Consumer
1st Tier
2nd Tier * Distributor
3rd Tier
Source: The Business of Wine* In Some states, companies can act as importer and distributor
U.S. WINE MARKET50 Different Markets
50 Different Sets of Laws
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U.S. WINE MARKETGrape Variety Trends
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MOST POPULAR VARIETALS IN U.S. FOOD STORESChardonnay and Cabernet Continue to Grow From Large Base
Merlot Remains #3 as Sales Stabilize
2009 Consumer Purchases in Food StoresCases Volume Revenue
ACNielsen Volume Change % %Category Share (000) Change Change
Total Domestic 80% 302 2% 5%Total Imported 20% (95) - 3% 0%Total Wine 100% 208 1% 3%Chardonnay 21% 98 3% 2%Cabernet Sauv. 14% 167 8% 7%Merlot 12% 36 2% 0%Wh. Zinfandel 8% (64) - 5% 0%Sauvignon Blanc 3% 17 4% 8%Pinot Grigio 6% 47 5% 6%Riesling 2% 17 6% 7%Shiraz/Syrah 4% (34) - 5% - 5%Red Zinfandel 2% 1 0% 2%Pinot Noir 4% 33 6% 6%
Source: Gomberg/ACNielsen YTD to 03-28-09 *Per eq. 750 ml
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IMPORTED TABLE WINE CONSUMPTION BY VARIETAL 2001 VS. 2007
Source: Impact Databank 2008
Total Share of Top 9 Varietals Increases from 46% to 63%
2001
Chardonnay9%
Merlot9%
Pinot Grigio9%
Chianti4%
Others54%
Sauvingnon Blanc1% Riesling
2%
Cabernet Sauvingon
4%
Shiraz4%
Lambrusco4%
Chardonnay
Merlot
Pinot Grigio
Chianti
Shiraz
Lambrusco
Cabernet Sauvingon
Riesling
Sauvingnon Blanc
Others
2007
Chardonnay12%
Merlot8%
Sauvingnon Blanc3%
Riesling4%
Cabernet Sauvingon
5%
Shiraz9%Lambrusco
3%
Pinot Grigio15%
Chianti4%
Others37%
Chardonnay
Merlot
Pinot Grigio
Chianti
Shiraz
Lambrusco
Cabernet Sauvingon
Riesling
Sauvingnon Blanc
Others
41.9 million nine-liter cases= 100% 265 million nine-liter cases = 100%
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GLOBAL VARIETIES & TOP ORIGINS IN U.S. MARKET
Volume Share
Chardonnay 21% U.S./ California Australia FranceSauvignon Blanc 3% U.S./ California New Zealand FranceRiesling 2% U.S./ Washington & Calif. Germany (~65% Globally) AustraliaPinot Grigio 6% Italy (65% ) U.S. AustraliaPinot Noir 4% U.S./ California & Oregon France/ Burgundy New ZealandCabernet Sauvignon 14% U.S./ California France/ Bordeaux Chile/ Australia/ ArgentinaShiraz/ Syrah 4% Australia U.S./ Calif. & Washington France/ RhoneMerlot 12% U.S./ California Australia France/ BordeauxWhite Zinfandel (Majority of U.S. Rose) 8%Other ( Includes 2% for Zinfandel) 26%
Total 100%
Top Origins
Source: Gomberg/AC Nielsen 3-28-09
REGIONAL VARIETIES WITH DOMINANT ORIGINS
IN U.S. MARKET
(80% + Market Share) Zinfandel U.S./CaliforniaMalbec ArgentinaCarmenere ChileGruner Veltliner AustriaPinotage South Africa
DOMINANT REGION/COUNTRY IDENTIFICATIONS WITH GRAPE VARIETIES
The New World Successes
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ARGENTINA = Malbec
AUSTRALIA = Shiraz
NEW ZEALAND = Sauvignon Blanc
(First Brand: Cloudy Bay)
CALIFORNIA = Chardonnay & Cabernet
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ABC “Anything But Chardonnay”
Consumers seeking more options and new experiences
Riesling was a long time favorite of the influencers but did not reach consumer level into a few years ago when Germany and Washington State increased the visibility. Influencers got pull and were certainly ready to push.
Sauvignon Blanc is longtime white wine of Bordeaux but it took a modern new world style/approach to winemaking and positioning to succeed.
CASE STUDIES
RIESLING & SAUVIGNON BLANC
WHAT IS THE POTENTIAL FOR CHILEAN CARMENERE?
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AND
HOW DO WE POSITION IT FOR THE U.S. & WORLD MARKETS?
Wine Style/Quality: Needed ImprovementMajority were overly herbaceous for U.S. consumers.
Sales: Very lowLess than 50,000 cases
Image & Awareness: NoneUnknown but had a great story to tell.
Identity Within Chile: ControversialIs Carmenere Chile’s signature grape variety?
CARMENERE’S POTENTIAL FOR THE U.S. 2005
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Wine Style/Quality: Significant improvement. More to do.
Majority exported have crossed critical fruit/ripeness frontier.
Sales: Increasing rapdly. +69%
Projected to be approximately 300,000 cases in 2009
Image & Awareness: Still Low
But gaining rapidly with trade and media influencers
Identity within Chile: Clearer and More Confident
Carmenere is Chile’s signature variety and offers Chile the best opportunity to establish a clear identity in the global wine market.
CARMENERE’S POSITION IN THE U.S.
2009
CHILEAN EXPORTS TO U.S. BY VARIETY Cabernet Sauvignon and Sauvignon Blanc Still King & Queen
Carmenere Fastest Growing Varietal: +69%
Chilean Wine Exports to the U.S. by Varietal and Wine Type Eight Months Ending August 2009 and 2008 In Thousands of Nine Liter Cases
Varietal/Wine Type 2008 2009 % Change Value perCases
Cabernet Sauvignon 618.8 752.4 22% $35.86Merlot 273.2 257.0 -6% $30.97Carmenere 117.3 198.6 69% $39.48Pinot Noir 94.3 98.0 4% $39.65Syrah 55.3 40.0 -28% $42.95Red Blends 615.1 724.1 18% $33.90Other Red Wines 34.8 44.1 27% $45.87Chardonnay 298.8 298.6 0% $32.65Sauvignon Blanc 327.5 385.4 18% $32.40White Blends 55.7 185.7 234% $28.73Other White Wines 11.2 21.2 89% $34.82Other Bulk & Packaged 1882.2 5632.0 199% $8.01Total 4384.1 8637.4 97% $17.18
Source: Chile National Customs Service
2008 CONSUMER RESEARCHCarmenere Gets Highest Value Rating
CARMENERE IN THE U.S. MEDIAINCREASED VOLUME OF MENTIONS
2004-2009Source: Dow Jones Factiva Database of Daily Newspapers
CARMENERE # of Hits
13
20
26
33
37
47
2004 2005 2006 2007 2008 2009
CARMENERE # of Hits
CARMENERE IN THE U.S. MEDIASignificant Increase in Positive Feature Stories
CARMENERE IN THE U.S. MEDIASignificant Increase in Positive Feature Stories
“Top Chilean vintners are still producing outstanding Cabernet Sauvignon and Carménère….”
-Wine Spectator, May 15, 2007
“From Chile, History in a Bottle: …perhaps a key to Chile’s future success is Carmenere”
-New York Times, November, 2007
“Wine Spectator’s #1 Wine of the Year, Casa Lapostolle Clos Apalta”
-Wine Spectator, December, 2008
CARMENERE IN THE U.S. MEDIASignificant Increase in Positive Feature Stories
“The Next Grape Superstar?: Carmenere, a neglected grape in France that is thriving in Chile, may be the next big thing in wine.”
-Chicago Tribune, March 25, 2009
“Late Bloomer: In Chile, a long-lost grape is finally getting the attention it deserves”
-Saveur, November 2009
“Carmenere: A Great Value Facing Risks”-Wall Street Journal, November 22, 2009
CARMENERE’S IMAGE WITH SOCIAL MEDIA INFLUENCERS
“I love the idea of this grape, the story of Carmenere – it’s the stuff of which wine legends are made….So what’s the trouble? The tale spun about the lost grape Carmenere is a lot more compelling than the wine it is producing…”
I’ve been critical of Chile’s ability to deliver on the potential of the grape as they’d yet to get pyrazine under control and balanced with the grape’s dark fruit flavors….So, how were the wines? In summary: a mixed bag…”
-1WineDude, Joe Roberts, November 2009
CARMENERE GETS HIGH MARKS FOR QUALITY AND VALUE FROM TRADE
CARMENERE - TOP OF MIND WITH TRADE“Interesting & Different”
CARMENERE’S IMAGE WITH U.S. TRADE INFLUENCERS
“As Piedmont has Nebbiolo, the Russian River Valley in Sonoma has Pinot Noir, and Argentina has Malbec, Carmenere seems to be the best varietal for Chile to identify itself as a serious wine producing country, to differentiate itself from the rest, and also to show its quality potential. Carmenere makes the most sense for several reasons: it can make wine in a wide range of pricing and styles, has ageing potential, is collectable, and is not per se the “specialty” of many other wine regions.”
-Belinda Chang, Master Sommelier & Wine Director The Modern Restaurant, New York
CARMENERE’S IMAGE WITH U.S. TRADE INFLUENCERS
“I went to Chile last year and was really big on Carmenère. I was offering two Carmenères by the glass. I like featuring everything but the usual grapes. It starts conversations.”
-Fernando Beteta, Master Sommelier & Wine Director Hyatt Chicago's NoMi Restaurant
Wine Spectator Interview, June 2009
POSITIONING CARMENERE
Grape with Personality & PedigreeNot Like the Other Grapes, Unique Story to TellDistinctively Chilean, Carmenere = ChileDelicious, Easy to Fall in Love WithDependable, ConsistentGood Value, But Not “Cheap”Cult Following like Pinot Noir & Zinfandel
CARMENEREKEYS TO SUCCESS IN THE U.S.
Continued Commitment to Viti & Vini ResearchKeep Quality High and Wine DeliciousRipe Style, Strong Typicity and “Balanced” PyrazinesTell the Great Story with ConfidenceStay Out of Commodity Price RangeKeep it an affordable yet distinctive wineOfferings Should Start at $8 (Think Pinot Noir)Sweet spot $10 to $18A few exceptional Icons needed
CULTIVATE A “CULT” FOLLOWING FOR CARMENERE
Establish a Formal Carmenere Organization to Elevate Quality/Style and Image
Use Research and Quality Focus as Basis for Education oriented Organization
Educate & Develop network of Trade and Consumer Influencers to be Ambassadors for Carmenere
EXAMPLES OF GRAPE PROMOTIONAL ORGANIZATIONS
http://www.ipnc.org/
http://www.rhonerangers.org/
http://www.drinkriesling.com/
http://www.zinfandel.org/
MUCHAS GRACIAS!
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