BIBENDUM INSIGHTS

THE BEAUTIFUL SOUTH ARGENTINA | CHILE | SOUTH AFRICA

THE BEAUTIFUL SOUTH: Bibendum Market Overview

UK MARKET SUMMARY : Off Trade Sales

GOOD NEWS IN THE OFF TRADE

UK MARKET SUMMARY : OFF TRADE SALES

South Africa and Argentina are 2 of only 3 countries in off trade volume growth Chile is down in off trade volume in line with the market but has outperformed in value. With the 2nd highest increase in bottle price of the top 10 importing nations.

MIXED PICTURE IN THE ON TRADE Argentina is performing excellently: Fastest growing nation in on trade volume and value, 5% rise in £ per 75cl.

South Africa is the biggest volume and value loser in the on trade. Chile is the 3rd biggest volume loser but maintains an above average £ per 75cl.

12 MONTHS TO 29/12/12 (000S OF HECTOLITRES)

% CHANGE

(£M)

% CHANGE

£ PER 75CL

SOUTH AFRICA

755

+9

468

+11

£4.65

+2

CHILE

638

-3

430

+2

£5.05

+6

ARGENTINA

102

+14

74

+14

£5.44

0

% CHANGE

£ PER 75CL

UK MARKET SUMMARY : ON TRADE SALES 12 MONTHS TO 29/12/12 (000S OF HECTOLITRES)

% CHANGE

(£M)

CHILE

165

-5

340

0

£15.46

SOUTH AFRICA

104

-8

198

-5

£14.28

64

+12

113

+18

13.25

ARGENTINA WSTA MARKETING REPORT 2013 - QUARTER 2

% CHANGE

CHILE MARKETING OVERVIEW - MOVING UP FROM £5 Although volume sales in the off-trade have dropped in line with the UK market, Chile’s average bottle price is now experiencing the second highest growth of the top importing nations. With 49% increase in sales over £9 and sales of branded wines over £7 up 24% (by volume, Nielsen) Chile’s wine is on a premium trajectory. With funky blends and small, handcrafted production from producers such as Garage Wine Company, part of the MOVI movement, Chile’s brand positioning is certainly moving away from the £5 price point.

THE UK – FORGET BARGAIN BASEMENT The UK remains Chile’s biggest existing market, although there is shift in its approach. Michael Cox from Wines of Chile says that, Chile “needs to completely forget the bargain basement area... we should sell higher value wines. I see 10 years of growth and progress in selling better quality wine. But [Chile] needs significant commitment [to the cause].”

CHILE VINTAGE REPORT • Cool year with some heat spikes • Bulk producers reporting healthy average yields • Late-harvest to compensate for some uneven ripening but quality generally good • High demand (especially from Spain) for 2012 vintage has left some cellars very empty – 2013 volumes relatively high and there should be enough wine to go around at both ends of the market • Prices should remain relatively stable although increased demand could lead to small increases of up to 5%

TRENDWATCH: CASHING IN ON CEVICHE Martin Morales and his Peruvian restaurant – Ceviche – have managed to create a PR whirlwind success and steal Chile’s thunder when it comes to the national dish. With the two countries fighting it out to the exact origins of the raw fish cuisine, Chile still has an opportunity to ride the back of the wave and tie in its quality wine offer as well.

TRENDWATCH: INDIGENOUS STAR Carmenere remains one of only three indigenous grapes with increased UK penetration in the last four years. Chile must build on this success to achieve true point of difference, offer the consumer a truly authentic experience and move away from the entry level wine it has been known for.

ARGENTINA MARKET OVERVIEW - BOOMING IN THE ON TRADE It’s the fastest growing nation in both volume and value. In the off-trade there is strong volume growth but a value decline when duty is removed. With Malbec now becoming to a ‘must list’ slot for wine buyers and therefore more in the mainstream, Argentina surely has to look elsewhere for growth opportunities for the future rather than diluting Malbec’s success with blended wines. Bonarda provides the perfect example of point of difference for early adopters who love indigenous varieties coupled with the overarching desire for lighter styles that is evident in the UK consumer taste profiles.

THE UK – GENUINE DEMAND FOR PREMIUM WINE Argentine wines have been present in the UK market for over 15 years, becoming a leading product category. According to data provided by Nielsen, in the first quarter of 2013, Argentina was the ontrade category showing the greatest growth, and ranked among the three countries leading the offtrade growth. ‘Malbec represents an excellent opportunity for operators to sell decent volumes of premium new world wine. Customers feel comfortable with Malbec and see it as a high value grape variety, particularly when it is from Argentina.’ John Graves, Head of On Trade Business Development at Bibendum

ARGENTINA VINTAGE REPORT “In relation to last year, we can say that the 2013 crop is excellent, with an incredible balance among acidity, potential alcohol, and pH. We are in front of a great harvest, in terms of both quantity and quality, especially in the traditional regions of Mendoza”. Alejandro Vigil, Catena Zapata Chief Winemaker • 20% increase in volumes compared to hail and frost-ravaged 2012 vintage • Quality expectations high for all major varieties and regions • Pr oducers nervous as bulk exports start to eat into those of bottled wine – reducing prices paid to producers at a time when high inflation and rising costs are also a concern • Malbec still dominated but expect to see more Cabernet and Cabernet blends as demand from China impacts the supply • Expect 5-10% increases in price, mainly driven by the political situation in Argentina

TRENDWATCH: CAPITALISING ON LIFESTYLE DESIRES OF GENERATION Y Despite increased political tensions between the UK and Argentina, there is a lust for Argentinean culture amongst the upwardly mobile Generation Y in the UK. This was no more evident than at Wines of Argentina’s Cambalache “one night in Argentina” event in April. Due to high demand a second night was added to the cultural event, billed as not the typical tweed tasting. Argentinean food, dance, music and language served as a cool backdrop to copious amounts of wine tasting. This was a consumer group who were interested without being knowledgeable. Argentina is well positioned to capitalise on this desire for unique culture, food and wine.

SOUTH AFRICA MARKET OVERVIEW - QUALITY AT ALL PRICE POINTS South Africa’s sales continue to progress strongly with good volume and value performance. Bulk wine offers a lot of potential for further growth with continued supply at this level. The on-trade has seen increases in the average bottle price which suggests that more premium wine is seeing positive upturn in this category too. The main driver of this is Sauvignon Blanc as South Africa steals its share of the Kiwi market. With praiseworthy quality in the 2013 vintage, could South Africa now be producing the world’s best value wine?

THE UK - SOUTH AFRICA COMES OF AGE There is a general feeling of optimism concerning the UK wine market as South African wine becomes more commonly found within the UK consumer’s repertoire. Bevan Newton Johnson, owner of top Hermanus winery Newton Johnson says ‘there has been great reception to our recent vintages. South Africa is finally being put in a category of its own and not been put in the box with Australia or New Zealand but gaining its own shelf or page’. Rollo Gabb, owner of Stellenbosch’s Journey’s End echoes this view, ‘Whilst there remains a lot of competition and a lot of continued pressure on margin, consistency of quality coupled with innovation remain key to progress.’…for the premium South African category.

SOUTH AFRICA VINTAGE REPORT “I’m not alone in believing that South Africa is the most exciting New World wine-producing country at the moment. … South Africa has the wines to surprise and excite consumers, all right. And this could be the year it does so.” Tim Atkin MW • Identical volumes in 2012 – but still 3rd largest harvest in a decade • Large volumes positive as the weak rand has increased demand for entry level wine • Average price of exports is declining as bulk wine shipments increase • Expect bulk exports to increase as costs of bottling wine in South Africa rise • Expectation that the weak rand will mitigate rising costs of fuel, labour and overall prices of bottled wine will remain stable

A SAVVY FORCE TO BE RECKONED WITH The significant 2013 harvest in South Africa coupled with the favourable exchange rate, means that New Zealand has a fight on its hands when it comes to the £5+ sauvignon blanc. Bevan Newton Johnson from Newton Johnson, believes that South Africa has a real opportunity ‘by moving to a style that is less punchy but more riper, softer wines that offer freshness and enjoyment’. It’s not about imitating New Zealand’s success, it’s about tapping into the brand affiliation of Sauvignon Blanc and maintaining South Africa’s style. As wine interested consumers look for something else instead of Sauvignon, Chenin Blanc from South Africa offers an opportunity to try something new without taking too big a risk. Unlike French Chenin Blanc, the flavour profile of South African Chenin Blanc is much more consistent and similar to Sauvignon Blanc. In the USA, the grape variety has recently been in the spotlight and is being held up as a grape to watch. Easy to pronounce, available at all price points and similar to Sauvignon Blanc – it doesn’t seem like it can fail really.

WWW.BIBENDUM-WINE.CO.UK

BIBENDUM WINES LTD. WILL BE EXHIBITING AT THE BEAUTIFUL SOUTH WINE TASTING AT OLYMPIA, LONDON ON 11TH AND 12TH SEPTEMBER 2013 ARGENTINA: Argento Wine Company | Catena Zapata | La Posta | Luca CHILE: Valdivieso | Vina San Pedro SOUTH AFRICA: Graham Beck | Journey’s End | Kloovenburg | Newton Johnson | Perdeberg | Springfield Estate | Stellenrust

WWW.THEBEAUTIFULSOUTHTASTING.COM