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ENTERING THE U.S. WINE MARKET ISRAEL WINE EXPO OVERVIEW OF THE U.S WINE MARKET Trends, Markets, Brand Economics OPPORTUNITIES / APPROACHES 2
U.S. WINE MARKET OVERVIEW Growth Continues For Twelve Consecutive Years Health Reports Perception of Knowledgeable And Responsible Consumers 3
U.S. WINE MARKET OVERVIEW OUTLOOK FOR US WINE MARKET IS VERY STRONG Growth Rates Expected To Continue Both Domestic & Imports Show Great Potential Imports & Emerging Markets Viewed As Strong Opportunities 4
OVERVIEW OF U.S. BEVERAGE MARKET (5 YR ACGR) WINE 635 Million Gallons Growth Continues 3.8% + Annual Compounded Still Underdeveloped DISTILLED SPIRITS BEER OTHER (Soft Drinks etc) 395 Million Gallons 6,390 Million Gallons 41,030 Million Gallons Slight Growth @ 2.7% Annual Comp. Certain Categories Drive Growth Slight Growth @ 1% ACGR Imports Driving Growth Wine 5 yr ACGR Exceeds Everything But Bottled Water 5
WINE CONSUMPTION BY CATEGORY 2005 (In Millions 9 Liter Cases) 250 249 200 150 100 50 9.8 0 12.9 0.4 1.8 Dessert Champ/Sp Coolers Verm/Ap Table Source: Adams Handbook & Impact 6
U.S. TABLE WINE (In Millions 9 Liter Cases) 250 200 195.3 204.6 207.7 220.3 242.8 249 232.4 150 164.1 100 50 0 1995 1999 2000 2001 2002 2003 2004 2005 Table Wine 2005 Prelim. Up 51% vs. 1995 2005 Up 2.5% vs. 04 Source: Adams Handbook & Impact 7
DOMESTIC TABLE WINE (In Millions 9 Liter Cases) 200 180 160 140 120 100 80 60 40 20 0 138.4 161.2 165 165 170.6 177.4 183.1 185.9 1995 1999 2000 2001 2002 2003 2004 2005 Domestic 2005 Up 34% vs. 1995 2005 Preliminary Up 1.5% vs. 2004 Source: Adams Handbook & Impact 8
IMPORTED TABLE WINE (In Millions 9 Liter Cases) 70 60 50 40 30 20 10 0 59.7 63.1 55 49.7 39.6 42.7 34.2 25.7 1995 1999 2000 2001 2002 2003 2004 2005 Imports 2005P Up 145% vs. 1995 2005 Prelim. Up 5.7% vs. 2004 Source: Adams Handbook & Impact 9
Top Table Wine Import Markets (In 000 s Cases) 55 Metro Markets Cover 20% of Imports 3,500 3,000 2,500 2,000 1,500 1,000 500 0 3,290 2174 1947 1647 1305 New York Chicago Wash. DC Boston Los Angeles Source: Adams Handbook & Impact 10
Table Wine Consumption By State (Cases In Millions) 45 40 35 30 25 20 15 10 5 0 CA FL NY TX NJ MA IL WA VI PA Source: Adams Handbook 11
Share Of Table Wine Consumption 7 7 States Make Up 51% Of The US Wine Market Next 10 Largest States Account For Another 25% Balance Is 34 States (including DC) 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% CA FL NY TX NJ MA IL Source: Adams Handbook & Impact 12
Country Gallons %share (in mil) Italy 55.7 31.6 Australia 46.3 26.3 France 24.7 14.1 Chile 13.8 7.9 Spain 9.4 5.4 Argentina 5.7 3.2 Germany 4.9 2.8 Portugal 2.5 1.4 NewZea. 2.2 1.2 Others 12.9 7.3 Source: Adams Handbook & Impact Imports by Country France Vol. Declined 15% vs.2002 Australia 2004 Volume Up 57% vs. 2002 Italy and Chile are up 2 to 3% vs. 2002 13
Imported Table Wine (In thousands of gallons) COUNTRY 2004 1994 Difference Spain 5,908 1,870 4,038 Argentina 5,684 357 5,327 Germany 4,874 2,788 2,086 New Zealand 2,196 41 2,155 South Africa 1,659 145 1,514 Portugal 1,491 1,315 176 Greece 481 384 97 Slovenia 385 740 (355) Israel 324 154 170 Romania 206 109 97 Hungary 159 334 (175) Source = US Department Of Commerce 14
IMPORTED VS. DOMESTIC SHARE- TOTAL WINES 1991 2005 Domesti 87% Imports 13% Domesti c 75% Imports 25% Source: NABI 15
DOMESTIC TABLE WINE MARKET Share by supplier, 2005 Trinchero Family Estates 4.5% Others 19.8% Fosters 6.4% Classic 3.9% Constellation Brands 21.5% The Wine Group 17.3% E & J Gallo winery 26.6% Source: Adams Handbook 16
IMPORTED TABLE WINE MARKET Share by supplier, 2005 Shaw Ross International 3.5% Constellation Brands 4.9% Palm Bay 6.4% Others 43.1% E & J Gallo 7.1% Fosters 10.6% Banfi Vintners 10.7% W J Deutsch 14.10% Source: Adams Handbook 17
ON VS. OFF-PREMISE WINE SALES (CASES) On- Premise 21% Off- Premise 79% 18
ON VS. OFF-PREMISE WINE SALES (Retail $ Sales) Off- Premise 56% On- Premise 44% 19
WINE BRAND ECONOMIC EXAMPLE 750ML / 12 Bottle Case Imported $9.99 Retail Bottle Price Supplier FOB $29.00 OceanFreight 3.7 Fed Tax/Duty 3.3 PPU/BF/INS 0.8 Importers Margin (28% Margin) $14.80 Price to Distributor $51.60 State Tax 0.45 Freight 1.5 Distributor Margin (50% Mark Up/33% Mar) $26.37 Distrib. Price To Retail $79.92 Retailer Margin (50% Mark Up/33% Margin) $39.96 Retail Case Price $119.88 Bottle Price $9.99 20
RETAIL WINE CASE SOLD (9.99 Shelf Price Per Bottle 12 Bottle 750m case $120) ALLOCATION OF TOTAL SALES DOLLARS Importers Margin $14.80 Supplier FOB $29.00 Distributor Margin $26.37 Retailer Margin $39.96 Other $9.75 Ocean freight Fed Tax/ Duty PPU/BF/INS State Tax Freight 21
RETAIL WINE CASE SOLD ($9.99 Shelf Price Per Bottle 12 Bottle 750m case $120) ALLOCATION OF TOTAL SALES DOLLARS Importers Margin 13% Supplier FOB 24% Distributor Margin 22% Retailer Margin 33% Other 8% Ocean freight Fed Tax/ Duty PPU/BF/INS State Tax Freight 22
ENTERING THE U.S. WINE MARKET OVERVIEW OF THE U.S WINE MARKET OPPORTUNITIES / APPROACHES 23
DISTRIBUTION APPROACHES FOR FOREIGN SUPPLIERS Major US Importer And National Distributor Small / Medium Sized Importer National Import & Distribution Service Companies State Wholesalers With Import Licenses US Based Internet & Direct Mail Distribution Systems Establish US Based Import Operation Other 24
FOREIGN SUPPLIER APPROACHES TO U.S. WINE MARKET OPTIONS AND ALTERNATIVES Major US Importer And National Distributor Small / Medium Sized Importer PROS CONS National Import & Distribution Service Companies State Wholesalers With Import Licenses US Based Internet & Direct Mail Distribution Systems Establish US Based Import Operation 25
ENTERING THE US WINE MARKET CHALLENGES Committed Approach To US Market? Finding The Right Importer And Distribution Approach Setting Up A Licensed U.S. Import Operation and /or Working With Licensed Service Companies Monitoring Sales & Brand Activity (Keeping Sales Pressure Up & Understanding Market Conditions) ANSWERS Key Organizations And Memberships With Critical Contacts Key Trade Shows Industry Law Firms For TTB Licensing, Contracts etc. Industry Consulting And / Or Service Companies (Outsourcing Operations for Efficiencies etc.) Independent Sales & Marketing Agents / Brokers Key Industry Reference Material 26
KEY REFERENCES FOR FOREIGN SUPPLIERS REGULATORY & INFORMATION -TTB (Formerly BATF) (online) -State Web Site -Wine Institute -NABCA (Control States) -Adams (Business Research www.atf.treas.gov www.wineinstitute.org www.nabca.org ORGANIZATIONS NABI (National Association Of Beverage Importers) WSWA (Wines & Spirits Wholesalers Association) www.nabi-inc.org www.wswa.org 27
) MHW LTD National US Importer & Distributor for Foreign Suppliers (Wine, Spirits, Beer & Malt Products) Licensed to import and sell in all 50 states Consulting & Market Research including identification and utilization of sales and marketing agents / brokers. Provides all administrative and regulatory compliance / reporting, billing and collection, and accounting 28