An insight into the viticulture sector Business Analysis Pio De Gregorio Head Luca Schianchi Senior analyst Brescia, 12 June 2015
World production of wine Billion of liters 2007 2008 2009 2010 2011 2012 2013 2014 World production 26,8 26,9 27,2 26,4 26,7 25,8 29,1 27,9 Change% 0,37% 1,12% -2,94% 1,14% -3,37% 12,79% -4,12% World production in 2014 = 27,9 billion liters (-4,1% vs 2013) 2 Business Analysis
Wold consumption of wine Billion of liters 2007 2008 2009 2010 2011 2012 2013 2014 World consumption in 2014 = 24 billion liters World consumption 25,2 24,8 24,0 24,0 24,2 24,2 24,2 24,0 Change% 2,86% -1,59% -3,23% 0,00% 0,83% 0,00% 0,00% -0,83% (-0.24% vs 2013) 50% of world consumption is concentrated in just 5 countries: France 12% USA 12% Italy 9% Germany 9% China 7% 3 Business Analysis
Wine consumption per capita and trends Per capita wine consuption Per capita wine consumption is high in Europe, Australia and Argentina. Hence, these markets are mature. In other countries wine consumption is still low and therefore potential growth is high. Litre per capita Consumption trend in the latest 25 years Countries where wine consumption has been traditionally high are showing a costant negative trend in per capita consumption. However, growth in other countries is keeping world consumption stable. More diversified market offers even more opportunities for wine producers. Decrease Growth up +50% Growth from +50% to +100% Growth from +100% to +150% Growth from +150% 4 Business Analysis
World trade flows Volume trade flows have been fairly stable in the last few years. However, trade flows in value have grown costantly since 2009 as a result of the rise in the average price per liter. 5 Business Analysis Source:OIV - ISMEA SERVIZI - FEDERVINI
Italian wine exports Volume (billion of litres) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Production 4,78 4,71 4,09 4,40 4,35 4,46 4,06 3,82 4,51 4,10 Year on Year -1,46% -13,16% 7,58% -1,14% 2,53% -8,97% -5,91% 18,06% -9,09% - North 2,09 1,98 1,49 1,79 1,63 1,75 1,45 1,39 1,70 1,54 Year on Year -5,26% -24,75% 20,13% -8,94% 7,36% -17,14% -4,14% 22,30% -9,41% - Centre 0,73 0,74 0,64 0,63 0,61 0,59 0,53 0,50 0,60 0,53 Year on Year 1,37% -13,51% -1,56% -3,17% -3,28% -10,17% -5,66% 20,00% -11,67% - South 1,96 1,99 1,96 1,98 2,11 2,12 2,08 1,93 2,21 2,03 Year on Year 1,53% -1,51% 1,02% 6,57% 0,47% -1,89% -7,21% 14,51% -8,14% Export 1,57 1,84 1,88 1,81 1,95 2,15 2,32 2,12 2,03 2,04 Year on Year 17,20% 2,17% -3,72% 7,73% 10,26% 7,91% -8,62% -4,25% 0,49% Export leaning (Export/Production) 32,85% 39,07% 45,97% 41,14% 44,83% 48,21% 57,14% 55,50% 45,01% 49,76% Year on Year 18,94% 17,66% -10,51% 8,97% 7,54% 18,54% -2,88% -18,90% 10,54% In the last years around 50% of the Italian wine production has been exported. This trend is set to continue as a result of the opening of new markets, further development of existing markets and for the on-going reduction of domestic consumption. 6 Business Analysis
Italia wine exports: volume and value Over the last ten years, Italian wine exports have grown both in volume and value. 7 Business Analysis
Italian wine exports: main markets hl 2013 2014 Delta Thousand of Euro 2013 2014 Delta USA 2.959.189 2.978.697 0,66% USA 1.077.496 1.124.541 4,37% Germany 5.923.383 5.932.752 0,16% Germany 1.020.270 975.023-4,43% UK 2.918.655 2.968.438 1,71% UK 619.558 657.456 6,12% Switzerland 678.103 712.196 5,03% Switzerland 313.510 319.099 1,78% Canada 689.784 684.865-0,71% Canada 280.241 275.971-1,52% Japan 425.143 430.237 1,20% Japan 154.226 152.721-0,98% Sweden 469.365 481.235 2,53% Sweden 140.883 143.558 1,90% Denmark 394.240 416.447 5,63% Denmark 133.106 140.901 5,86% France 853.149 860.146 0,82% France 139.174 131.742-5,34% Volu ume Netherland 443.991 438.990-1,13% Russia 438.761 410.233-6,50% Belgium 284.455 298.896 5,08% Austria 506.877 508.582 0,34% Norway 231.584 257.427 11,16% Val lue Netherland 116.691 120.712 3,45% Russia 114.499 102.579-10,41% Belgium 91.984 100.749 9,53% Austria 100.926 98.000-2,90% Norway 86.840 96.029 10,58% China 218.973 55.363-74,72% China 74.697 75.630 1,25% Spain 212.950 235.085 10,39% Spain 39.569 40.602 2,61% Latvia 75.948 104.501 37,60% Latvia 24.989 39.433 57,80% Australia 83.859 91.579 9,21% Australia 33.856 37.916 11,99% Poland 139.580 171.314 22,74% Poland 30.509 37.459 22,78% Czech Republic 287.640 297.397 3,39% Czech Republic 34.179 32.554-4,75% Ireland 114.239 120.430 5,42% Ireland 29.071 30.011 3,23% Brazil 101.270 95.713-5,49% Brazil 30.203 29.679-1,73% Others 1.803.298 1.673.823-7,18% Others 354.493 348.861-1,59% Total 20.254.436 20.224.346-0,15% Total 5.040.970 5.111.226 1,39% 8 Business Analysis
Italian wine exports: main product types Volu ume hl 2013 2014 Delta Bulk >2l 5.694.353 5.572.349-2,14% - Common 4.316.714 4.115.722-4,66% - Dop 301.294 377.646 25,34% - Igp 965.859 957.735-0,84% - Specialties 67.725 101.373 49,68% - Other Dop/Igp 42.761 19.872-53,53% Bottle <2l 10.556.409 10.563.356 0,07% - Common 1.015.832 971.900-4,32% - Dop 4.357.539 4.303.645-1,24% - Igp 4.557.987 4.663.204 2,31% - Specialties 146.743 130.303-11,20% - Other Dop/Igp 478.308 494.305 3,34% Fizzy Wine 1.775.689 1.688.104-4,93% Sparkling 2.033.108 2.403.422 18,21% Grape Must 194.872 197.115 1,15% Total 20.254.431 20.424.346 0,84% Va alue Thousand of Euro 2013 2014 Delta Bulk >2l 473.003 389.193-17,72% - Common 290.154 190.607-34,31% - Dop 43.195 62.450 44,58% - Igp 123.193 121.292-1,54% - Specialties 8.999 8.685-3,49% - Other Dop/Igp 7.463 6.159-17,47% Bottle <2l 3.426.979 3.496.928 2,04% - Common 171.637 164.897-3,93% - Dop 1.852.399 1.866.856 0,78% - Igp 1.248.084 1.306.762 4,70% - Specialties 34.663 32.015-7,64% - Other Dop/Igp 120.196 126.399 5,16% Fizzy Wine 371.432 351.713-5,31% Sparkling 735.847 840.390 14,21% Grape Must 33.708 33.000-2,10% Total 5.040.969 5.111.224 1,39% 9 Business Analysis
Main trends for the Italian wine sector Consensus forecasts indicate further growth for exports of DOP, IGT and sparkling wines in both production and value. Production will focus even more on quality, as this is considered the main competitive asset to gain market share abroad. On the other hand, production of basic wine will be further reduced as it is unprofitable. Target markets for exports are United States, Germany and UK, but high potential is seen particularly for China, India and Australia. More investment will be needed to develop brands at international level. In this regard most Italian wine companies find an hurdle in their sizes, tipically very small compared to international players. 10 Business Analysis Source: Business Analysis UBI Banca