Wine Australia providing United States of America Market Insight Report March 2016 insights for Australian Wine
Disclaimer and notes Disclaimer: While Wine Australia makes every effort to ensure the accuracy and currency of information within this report, we accept no responsibility for information, which may later prove to be misrepresented or inaccurate, or reliance placed on that information by readers. Provisions of the Copyright Act 1968 apply to the contents of this publication, all other right reserved. For further copyright authorisation please see the www.wineaustralia.com website. All prices in AUD unless specified All data is the most up to date information available as of March 2016 2
Executive summary This report looks in detail at the USA wine market, including a market overview, channel analysis, sales trends, Australian exports and consumer insights. It aims to provide a resource for exporters of Australian wine to the United States. The USA is the world s largest wine market and also the largest wine importer (by value). Off-trade is by far the largest channel in terms of volume; it is growing more strongly than the On-trade. By value the Off-trade and Ontrade channels are roughly equal. The largest off-trade channels include: supermarkets (Safeway etc.), hypermarkets (Walmart Supercentre etc.) and food/drink/tobacco specialists that account for almost 70% of the off-trade. Chardonnay and Cabernet Sauvignon are the top sellers and are growing. The largest price point is US$4 to US$7.99. All price points US$8+ have increased in the last year. Australia is the third largest source of wine imports into the USA by both volume and value. The USA is Australia s top destination for exports by value. Australia s largest export varietal to the USA is Shiraz, accounting for over $105 million and growing by 2% in 2015. Key export states include California, New York, Illinois, New Jersey, Texas and Florida. A poll of regular wine drinkers scored Australian wine a quality rating of 7.63 out of 10, ranking Australia sixth behind France, Italy, California, Chile, Spain and USA other. This illustrates that Australia has work to do in realigning perceptions of Australian wine. The USA wine market is performing very well, and the tide is turning for Australian wine after experiencing decline in recent years. Australia s premium offering started to pull values upwards at the end of 2015. 3
Wine market overview Channel analysis Sales trends Australian exports Consumer insights
USA sales and consumption In 2014, consumption was 9.4 litres per head, however recent growth in consumption is below the growth in population. Wine sales see continued gradual growth in terms of value and volume. Population (millions) 350 300 250 200 150 100 50 Population and wine consumption in the USA over time CAGR 2009-2014 Population Growth 2013-2014 +1% +1% Consumption Per Capita CAGR 2009-2014 Growth 2013-2014 +2% 0% Per Capita Consumption (litres per head) 10 9 8 7 6 5 4 3 2 1 Million litres 3,500 3,000 2,500 2,000 1,500 1,000 500 Volume and value of wine sales in the USA CAGR 2009-2014 Sales Volume Growth 2013-2014 +3% +1% Sales Value CAGR 2009-2014 Growth 2013-2014 +4% +3% Billion USD 45 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 Source: Euromonitor International 5
Red and white continue to dominate Still red and white wine styles are growing strongly, with sparkling and fortified seeing minimal growth rates. Rose is in decline. Million litres 1400 Sales by wine style over time in the USA Value by wine style - 2014 44% Still Red Wine Still White Wine 36% 1200 Sparkling Wine 8.3% 1000 800 600 Still Red Wine Still Rose Wine Still White Wine Fortified Wine and Vermouth Sparkling Wine Fortified Wine and Vermouth Still Rosé Wine 7.7% 4.2% % = proportion of all value 0 5 10 15 Value (US$ million) 20 Volume by wine style - 2014 Still White Wine 41% 400 Still Red Wine 40% Still Rosé Wine 9% 200 Sparkling Wine 5.4% % = proportion of all volume Fortified Wine and Vermouth 5% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Euromonitor International 0 200 400 600 800 1,000 1,200 1,400 Volume (000 s litres) 6
Record harvests in USA have reduced the need for wine imports Total imports against assumed total USA wine sales Source: Euromonitor International & GTA 7
USA volume of imports by origin Although still ranked second, in the last five years Australian import volume in the USA has decreased annually by 7% 30% Percentage share of imported volume (%) - 2014 Italy Change in volume imports to U.S. 2009-2014 +5% 25% Canada +45% 20% Argentina +6% 15% France +5% 10% 5% 0% Italy Australia Chile France Argentina Spain Canada Other Spain +6% Chile +2% Australia -7% % = CAGR 2009-2014 -100,000-60,000-20,000 20,000 60,000 Volume (000 s litres) Source: GTA 8
USA value of imports by origin Australia s share of imports is in decline. Although currently ranking third, in the last 5 years Australian import value in the USA has decreased 7%. Percentage share of USA imported value (%) - 2014 Change in value of imports to the USA 2009-2014 35% 30% France Italy +9% +8% 25% 20% 15% 10% New Zealand Argentina Spain +7% +10% +17% 5% Chile +2% 0% Australia -7% % = CAGR 2009-2014 Italy France Australia Argentina Spain New Zealand Chile Other -400-200 - 200 400 600 Value (USD million) Source: GTA 9
Wine market overview Channel analysis Sales trends Australian exports Consumer insights
Volume Off- and On-Trade The off-trade has recorded strong and gradual growth over the past 15 years while the on-trade has taken time to recover from the GFC. In 2014, growth in the on-trade exceeded that of the off-trade. Off-trade vs. On-Trade volume - 2015 3,000 2,500 2,000 1,500 Off-trade vs. On-trade volume over time Off-trade On-trade Off-trade On-trade Off-trade On-trade 1,000 CAGR 2010-2015 Growth 2014-2015 +2.2% +1.5% CAGR 2010-2015 Growth 2014-2015 +1.5% +2.3% 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Euromonitor International 11
Volume and value by channel Off-trade vs. On-trade, volume vs. value - 2015 83% Off-trade 52% 48% On-trade Although wine is predominantly consumed outside of licensed premises, higher mark-ups and a tendency to purchase more expensive wines while consuming on premise results in the value share of each channel being roughly equal 17% Value Volume Source: Euromonitor International 12
Off-trade channel distribution 2014 All Off-trade wine sales Non-Store Retailing, 1% Store-based distribution Warehouse Clubs, 5.5% Top 6 channels Convenience Stores, 5% Non-grocery specialists, 21% Mass Merchandisers, 12% Food/drink/ tobacco specialists, 26% Store-Based Retailing, 99% Grocery retailers, 79% Hypermarkets, 19% Supermarkets, 24% Non-store Retailing: direct selling, home shopping, internet retailing, vending. Grocery: Food/drink/tobacco specialists, hypermarkets, small grocery retailers, supermarkets etc. Non-grocery: Drugstores. Department stores, mass merchandisers, variety stores, warehouse clubs etc. Hypermarket: A superstore combining a supermarket and a department store. Source: Euromonitor International Non-store retailing (including internet and direct to consumer sales) are less than 1% of the market Food/drink/tobacco specialists, Supermarkets and Hypermarkets account for almost 60% of off-trade 13 sales
Percentage (%) 45 40 35 30 25 20 15 10 5 0 USA Off-trade channel proportions over time 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Convenience Stores Warehouse Clubs Mass Merchandisers Hypermarkets Supermarkets USA Off-trade proportions 2013-2014 +6% +2% +1% -2% -0.4% 2013 2014 Food/drink/tobacco specialists Supermarkets Hypermarkets Mass Merchandisers Warehouse Clubs The Off-trade over time Food/drink/tobacco specialists and supermarkets have gradually decreased in their off-trade contribution over the past 14 years. Meanwhile, hypermarkets, such as SuperTarget and Walmart Supercenter, have been gradually gaining market share. Convenience stores, warehouse clubs (such as Costco) and mass merchandisers (Target, Kmart etc.) have seen a measured increase in their contributions. In the last four years, however, all channels have remained fairly stable in terms of their contributions. Food/drink/tobacco specialists +0.4% - 5 10 15 20 25 30 Source: Euromonitor International Proportion of Off-Trade Channels (%) 14
Most frequented retailers (n=1,981) The table below shows the proportion of regular wine drinkers who had bought wine from the list of 30 retailers in the past 6 months. Walmart is strong and growing in the short-run. Target has grown steadily over the last few years while Trader Joe s results have decreased recently. Source: Wine Intelligence 15
Wine market overview Channel analysis Sales trends Australian exports Consumer insights
USA Off-trade volume and value by varietal Five out of the six top varietals are growing, with Merlot the only one to decrease in consumption in 2015. Value by varietal in the USA (2015) Volume by varietal in the USA (2015) Chardonnay +4% Chardonnay +1% Cabernet Sauvignon +8% Cabernet Sauvignon +5% Pinot Grigio/Pinot Gris +10% Pinot Grigio/Pinot Gris +7% Pinot Noir +10% % = percentage change 2014-2015 Pinot Noir +7.3% % = percentage change 2014-2015 Merlot -3% Merlot -5% Fume/Sauvignon Blanc +14% Fume/Sauvignon Blanc +12% - 1,000 2,000 3,000 Value (million USD) - 5 10 15 20 25 30 Volume (million cases) Source: IRI 17
USA price point trends The price points above US$8 have all increased, with the largest jump between US$20 and US$25. The largest segment by volume is between US$4 and US$8 which is over 26 million litres ahead of its closest price point. USA table wine volume by price point (2015) SUPER LUXURY US$25.00 PLUS LUXURY US$20.00 - US$24.99 Volume (million cases) 2.0 1.5 1.0 Table wine volume change by price point (2014-2015) +7% +12% % = percentage change in last year ULTRA PREMIUM US$15.00 - US$19.99 SUPER PREMIUM US$11.00 - US$14.99 0.5 0.0 +11% +20% +7% PREMIUM US$8.00 - US$10.99-0.5 POPULAR US$4.00 - US$7.99-1.0-5% -2% VALUE US$0 - US$3.99-1.5 0 20 40 60 Volume (million cases) VALUE US$0 - US$3.99 POPULAR US$4.00 - US$7.99 PREMIUM US$8.00 - US$10.99 SUPER PREMIUM US$11.00 - US$14.99 ULTRA PREMIUM US$15.00 - US$19.99 LUXURY US$20.00 - US$24.99 SUPER LUXURY US$25.00 PLUS Source: IRI 18
Total wine consumption by division/state 2014 Wine consumption by state ( 000 cases) Continued New York, New Jersey, Illinois, Florida, Texas and California represent nearly 50% of all USA wine consumption. These states contain the most densely populated cities in the US. Source: Impact Databank 19
Key markets price points & varietals MAT December 2015 Price Points California New York Southeast* South Central** New Jersey Great Lakes*** Price Point Value (million US$) YOY Change Value (million US$)YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$)YOY Change Value (million US$) YOY Change VALUE US$0 - US$3.99 53-11% 34-2% 79-6% 32 1% 47-4% 65-3% POPULAR US$4.00 - US$7.99 282-7% 300-4% 465 1% 181-1% 278-3% 389-4% PREMIUM US$8.00 - US$10.99 380 5% 231 0% 321 11% 178 8% 213 1% 327 9% SUPER PREMIUM US$11.00 - US$14.99 346 10% 296 5% 192 19% 148 14% 221 5% 164 20% ULTRA PREMIUM US$15.00 - US$19.99 177 11% 126 6% 52 19% 67 13% 103 5% 47 16% LUXURY US$20.00 - US$24.99 74 18% 80 11% 32 43% 33 20% 64 8% 24 24% SUPER LUXURY US$25.00 PLUS 82 10% 95 4% 12 31% 32 11% 93-4% 13 20% Top 10 Varietals California New York Southeast* South Central** New Jersey Great Lakes*** Varietal Value (million US$) YOY Change Value (million US$)YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$)YOY Change Value (million US$) YOY Change Chardonnay 412 3% 165 1% 222 7% 127 5% 148 0% 183 3% Cabernet Sauvignon 282 7% 215 4% 203 13% 157 12% 186 2% 184 10% Pinot Grigio/Pinot Gris 69 8% 131 0% 138 10% 54 7% 120 2% 100 7% Pinot Noir 123 12% 78 6% 100 14% 59 12% 86 5% 73 10% Merlot 84-3% 70-4% 92-1% 49 0% 57-5% 75-4% Fume/Sauvignon Blanc 113 13% 82 7% 72 16% 35 14% 60 11% 60 16% A/O Red Blends 90 16% 54 7% 54 21% 42 20% 52 5% 81 16% A/O Red Non Varietal 20 9% 25-7% 26 10% 25 18% 31-2% 48 12% Brut Sparkling Wine 66 11% 25-1% 27 10% 19 14% 18 10% 19 13% Malbec 16 4% 36-2% 30 10% 20 6% 25-4% 26 2% Noticeably, the price points between US$4 and US$15 are the largest by value in all states The largest declines were recorded in California for wines retailing below US$7.99 per bottle Red blends have reported the highest growth rates in key states, with Sauvignon Blanc following closely behind Source: IRI *Southeast = Florida, Georgia, Mississippi, Alabama, South Carolina ** Great Lakes = Illinois, Indiana, Ohio, Wisconsin, Michigan *** South Central = Oklahoma, Texas, Arkansas, Louisiana 20
Australian off-trade volume and value by varietal Australian Cabernet Sauvignon and Pinot Gris/Grigio are showing signs of growth in the USA market. Australian sales volume in the USA by varietal, 2015 Australian sales value in the USA by varietal, 2015 CABERNET SAUVIGNON/MERLOT -14% % = percentage change from last year CABERNET SAUVIGNON/MERLOT -15% % = percentage change from last year WHITE MOSCATO/MUSCAT -6% WHITE MOSCATO/MUSCAT -7% PINOT NOIR -4% PINOT NOIR -4% A/O RED BLENDS +32% A/O RED BLENDS +36% SHIRAZ/CABERNET SAUVIGNON -8% SHIRAZ/CABERNET SAUVIGNON -6% PINOT GRIGIO/PINOT GRIS +4% PINOT GRIGIO/PINOT GRIS +0.2% MERLOT -7% MERLOT -8% SYRAH/SHIRAZ -9% SYRAH/SHIRAZ -10% CABERNET SAUVIGNON +0.3% CABERNET SAUVIGNON +2% CHARDONNAY -6% CHARDONNAY -7% Source: IRI 0.0 0.5 1.0 1.5 2.0 Million cases 0 50 100 150 Million USD 21
Australian price point trends in the US The US$4 to US$7.99 price point is the majority of Australia s offering in the USA off-trade. However, it is decreasing and positive signs of growth are developing at the higher end of the market. Australian sales volume by price point SUPER LUXURY US$25.00 PLUS LUXURY US$20.00 - US$24.99 ULTRA PREMIUM US$15.00 - US$19.99 SUPER PREMIUM US$11.00 - US$14.99 PREMIUM US$8.00 - US$10.99 Thousand cases 100 50 - -75% -50-100 -150-200 -250 Australian sales volume change by price point +32% +7% -7% +31% +5% % = percentage change in last year POPULAR US$4.00 - US$7.99 VALUE US$0 - US$3.99-2 4 6 8 Million cases -300-350 -400 VALUE US$0 - US$3.99-5% POPULAR US$4.00 - US$7.99 PREMIUM US$8.00 - US$10.99 SUPER PREMIUM US$11.00 - US$14.99 ULTRA PREMIUM US$15.00 - US$19.99 LUXURY US$20.00 - US$24.99 SUPER LUXURY US$25.00 PLUS Source: IRI 22
Key markets Australian price points & varietals MAT December 2015 Price points California New York Southeast* South Central** New Jersey Great Lakes*** Varietal Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change VALUE US$0 - US$3.99 0.00-92% - - 0.0 2954% - - - - 0.0-98% POPULAR US$4.00 - US$7.99 19.61-12% 43.6-5% 70.7 0% 26.7-4% 39.0-5% 47.6-9% PREMIUM US$8.00 - US$10.99 0.77 11% 2.4 7% 2.5 22% 2.4 68% 2.3 29% 4.7 47% SUPER PREMIUM US$11.00 - US$14.99 7.55 10% 4.9-12% 4.0 37% 3.5 18% 4.0-9% 4.6 22% ULTRA PREMIUM US$15.00 - US$19.99 0.13 29% 0.9-28% 0.1 87% 0.2 59% 1.5-15% 0.2-6% LUXURY US$20.00 - US$24.99 0.09 69% 0.7 25% 0.2 160% 0.2 92% 0.6-28% 0.2 111% SUPER LUXURY US$25.00 PLUS 0.21-40% 1.1-10% 0.0-4% 0.6-8% 1.3-19% 0.1 8% Top 10 varietals California New York Southeast* South Central** New Jersey Great Lakes*** Varietal Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Value (million US$) YOY Change Chardonnay 5.22-12% 11.8-4% 16.8-2% 6.2-6% 7.9-3% 9.6-10% Cabernet Sauvignon 5.05-4% 7.2-3% 12.7 8% 6.0 13% 6.9-1% 9.4 5% Syrah/Shiraz 4.80-14% 9.5-12% 9.9-5% 5.3-5% 7.3-15% 7.9-14% Merlot 2.30-10% 7.2-6% 9.8-4% 3.7-6% 4.8-9% 5.5-11% Pinot Grigio/Pinot Gris 0.54-35% 2.6 4% 8.0 17% 2.1-3% 4.2-4% 4.0-5% Shiraz/Cabernet Sauvignon 1.83-7% 3.3-13% 3.9-2% 1.9-7% 2.5-6% 3.3-6% A/O Red Blends 1.89 59% 2.6 15% 2.4 65% 1.3 69% 2.9 6% 4.5 52% Pinot Noir 2.60 4% 2.1-1% 2.1 2% 1.8-2% 2.3-9% 2.7 1% White Moscato/Muscat 0.33-36% 0.8-18% 2.3-4% 1.6 7% 1.4-3% 3.9-5% Cabernet Sauvignon/Merlot 0.26-15% 1.6-7% 1.7-9% 0.4-22% 2.0-9% 1.1-26% The US$4 to US$7.99 segment has the largest value for Australia Red blends and Cabernet Sauvignon are reporting the strongest growth rates in key markets Cabernet Sauvignon/Merlot blends are declining across all key markets Source: IRI *Southeast = Florida, Georgia, Mississippi, Alabama, South Carolina ** Great Lakes = Illinois, Indiana, Ohio, Wisconsin, Michigan *** South Central = Oklahoma, Texas, Arkansas, Louisiana 23
Wine market overview Channel analysis Sales trends Australian exports Consumer insights
The USA is Australia s #1 export market by value Australian export value - Major destinations MAT Dec 2015 UNITED STATES OF AMERICA $443 UNITED KINGDOM $376 CHINA, PR $370 CANADA $193 HONG KONG $132 NEW ZEALAND $75 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 Export Value (million AUD) Source: Wine Export Approval Database 25
Australian exports to USA Volume & value of Australian exports to the USA Value (million AUD) Volume (litres mill.) $1,000 300 $900 Export value peaked in 2005 and then a high AUD, stronger competition, perception issues and the GFC conspired to drive exports down. The 2009 peak in volume was primarily driven by a temporarily low AUD and domestic oversupply, which reinforced the perception issues. 2015 appears to signify a shift with value increasing for the first time since 2009. $800 $700 $600 $500 $400 250 200 150 $300 100 CAGR Years Volume Value 2009-2014 -7% -9% $200 $100 50 2014-2015 +2% +4% $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 Source: Wine Export Approval Database 26
USA price point trends Export Value (million AUD) Export value by price point - December MAT Price points have become less volatile since 2011. The $2.50 to $4.99 and the $10+ price points have started to increase. In 2015 the greatest value share of exports was the $2.50 to $4.99 price point which accounts for 70% of all export value to the USA. Wine shipped at $5.00 and over accounts for only 17% of total exports. $600 $500 $400 $300 $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over $200 $100 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over Source: Wine Export Approval Database 27
USA bottled export overview by varietal Bottled exports to the USA by varietal Shiraz and blends Cabernet Sauvignon and blends Chardonnay and blends Merlot and blends Pinot Grigio and blends Pinot Noir and blends Sauvignon Blanc and blends +3% +1% +5% +10% -6% +8% 2014 2015 +2% Shiraz and blends remains the largest component of export value and has risen by 2% in the last year. Chardonnay, previously in second place, has been overtaken by Cabernet Sauvignon. Pinot Gris and Grenache recorded the strongest rates of growth Riesling and blends 0% Pinot Gris and blends +52% Grenache and blends 39% Source: Wine Export Approval Database $0 $20 $40 $60 $80 $100 $120 Million AUD 28
Export value Shiraz - 2015 $10.00 and over $7.50 to $9.99 $5.00 to $7.49 $2.50 to $4.99 $2.49 and under Million AUD $5 $4 $3 $2 $1 $0 -$1 -$2 -$3 $0 $20 $40 $60 $80 Million AUD Change in export value by price point +6% +12% -16% -10% -20% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over Bottled Shiraz (Singles and blends) exports by price point The $10 and above price point was valued at just over $20 million in 2015. At a growth rate of 12% in the last year, it was the fastest growing price point. Source: Wine Export Approval Database 29
Export value Cabernet Sauvignon - 2015 $10.00 and over $7.50 to $9.99 Bottled Cabernet $5.00 to $7.49 $2.50 to $4.99 $2.49 and under $0 $10 $20 $30 $40 $50 $60 Million AUD Change in export value by price point Million AUD $8 $7 +15% $6 $5 $4 $3 $2 $1 +25% $0 -$1 -$2-67% -31% -19% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over Source: Wine Export Approval Database Sauvignon (singles and blends) exports by price point The $10 and above price point has grown by 25% in the last year, while the $2.50 to $4.99 continues to be the largest price segment and is growing at a steady pace. 30
Export value Chardonnay - 2015 $10.00 and over $7.50 to $9.99 Bottled $5.00 to $7.49 $2.50 to $4.99 $2.49 and under Chardonnay(singles and blends) exports by price $0 $10 $20 $30 $40 $50 $60 Million AUD Change in export value by price point Million AUD 4 3 +123% 2 1 0 +1% -1-27% -11% -2-3 -4-5 -6-7 -10% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over Source: Wine Export Approval Database point The $2.50 to $4.99 is the largest price point, although it has declined by 10% in the past year. Only the lowest priced segment, the $2.49 and under, recorded growth more than doubling in value 31
Export value Pinot Noir - 2015 $10.00 and over $7.50 to $9.99 $5.00 to $7.49 $2.50 to $4.99 $2.49 and under $0 $2 $4 $6 $8 $10 $12 $14 Bottled Pinot Noir (singles and blends) exports by price point Million AUD Million AUD Change in export value by price point $0.35 +3% $0.30 $0.25 $0.20 $0.15 $0.10 +21% $0.05 $0.00 -$0.05-85% -$0.10 -$0.15-16% -18% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over Source: Wine Export Approval Database The biggest relative decline was recorded for the $2.49 and under price point, decreasing by 85% in the past year. At the other end of the spectrum, $10 and over has increased at the fastest rate, up 21%. 32
Export value Riesling - 2015 $10.00 and over $7.50 to $9.99 $5.00 to $7.49 $2.50 to $4.99 $2.49 and under $0 $1 $2 $3 $4 $5 $6 Million AUD Change in export value by price point Million AUD $0.15 +11% $0.10 $0.05 +17% +18% Bottled Riesling (singles and blends) exports by price point All price points over $5.00 have increased in value, while the biggest relative decline was recorded in the $2.49 and under segment. $0.00 -$0.05-76% -$0.10 -$0.15 -$0.20-3% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over Source: Wine Export Approval Database 33
Varietal opportunity (ranked by growth) Bottled wine exports, 2015 Varietal Price Point Value 2015 Change (14/15) Value Rank Growth Rank (14/15) Shiraz blends $2.50 to $4.99 $ 22,737,325 $ 5,748,084 5 1 Pinot Grigio $2.50 to $4.99 $ 17,631,806 $ 1,508,638 6 2 Cabernet Sauvignon $10.00 and over $ 3,167,493 $ 1,317,857 17 3 Cabernet Sauvignon blends $2.50 to $4.99 $ 12,616,527 $ 857,799 8 4 Merlot $2.50 to $4.99 $ 33,729,067 $ 723,467 4 5 Chardonnay $10.00 and over $ 1,657,345 $ 672,485 25 6 Cabernet Sauvignon $7.50 to $9.99 $ 2,988,935 $ 621,270 18 7 Pinot Noir $2.50 to $4.99 $ 11,546,809 $ 614,452 9 8 Sauvignon Blanc $2.50 to $4.99 $ 4,995,033 $ 449,991 13 9 Sauvignon Blanc blends $7.50 to $9.99 $ 891,558 $ 349,342 29 10 Chardonnay $7.50 to $9.99 $ 1,042,300 $ 298,517 27 11 Grenache blends $7.50 to $9.99 $ 440,894 $ 214,054 37 12 Pinot Noir $7.50 to $9.99 $ 422,679 $ 203,648 39 13 Viognier $2.50 to $4.99 $ 406,882 $ 192,783 40 14 Semillon $2.50 to $4.99 $ 159,323 $ 159,323 57 15 Shiraz blends in the $2.50 to $4.99 segment have increased the most in the past year. Cabernet Sauvignon (and blends) price segments appear most frequently in the top 15 varietal price points by growth. Source: Wine Export Approval Database 34
Varietal opportunity (ranked by value) Bottled wine exports, 2015 Varietal Price Point Value 2015 Change (14/15) Value Rank Growth rank (14-15) Chardonnay $2.50 to $4.99 $ 60,430,731 -$ 1,240,027 1 185 Shiraz $2.50 to $4.99 $ 42,091,535 -$ 6,076,805 2 193 Cabernet Sauvignon $2.50 to $4.99 $ 35,932,989 -$ 525,928 3 174 Merlot $2.50 to $4.99 $ 33,729,067 $ 723,467 4 5 Shiraz blends $2.50 to $4.99 $ 22,737,325 $ 5,748,084 5 1 Pinot Grigio $2.50 to $4.99 $ 17,631,806 $ 1,508,638 6 2 Shiraz $10.00 and over $ 13,987,339 -$ 4,133,229 7 190 Cabernet Sauvignon blends $2.50 to $4.99 $ 12,616,527 $ 857,799 8 4 Pinot Noir $2.50 to $4.99 $ 11,546,809 $ 614,452 9 8 Shiraz $5.00 to $7.49 $ 10,007,985 -$ 195,271 10 168 Shiraz $7.50 to $9.99 $ 8,369,311 -$ 85,795 11 162 Riesling $2.50 to $4.99 $ 5,022,355 $ 80,420 12 25 Sauvignon Blanc $2.50 to $4.99 $ 4,995,033 $ 449,991 13 9 Cabernet Sauvignon blends $7.50 to $9.99 $ 3,992,429 -$ 548,959 14 177 Pinot Gris $2.50 to $4.99 $ 3,567,331 -$ 1,221,172 15 184 Illustrating Australia s diversity, eight varietals were recorded in the top 15 varietal by price point categories. The $2.50 to $5.00 per litre segment is the most prominent segment. The table also illustrates Shiraz s position as Australia s flagship premium varietal (above $10 segment) Source: Wine Export Approval Database 35
State Value AUD 2015 Change Litres 2015 Change California $135,907,418 3% 75,733,243 9% New York $53,316,064 29% 15,797,860 16% Florida $44,268,972 36% 13,619,096 27% Texas $28,245,878 23% 8,537,620 18% Massachusetts $17,891,217 13% 5,388,386-3% New Jersey $14,183,728-32% 4,133,225-32% Georgia - Usa $12,801,028 21% 3,866,393 14% Pennsylvania $12,755,221 34% 3,761,115 20% Georgia $12,129,497-11% 3,113,487-17% Virginia $10,497,745-22% 2,959,318-25% Washington $9,674,575 20% 2,747,759 4% Maryland $9,538,671-4% 2,769,459-15% South Carolina $9,282,642 83% 2,797,425 67% Ohio $7,673,996 10% 2,281,517 0% Colorado $6,550,877 11% 1,917,665 2% Michigan $6,422,365-13% 2,033,541-18% North Carolina $4,616,673-39% 1,466,514-42% Missouri $3,756,023-5% 1,122,908-16% Oregon $3,490,683-6% 1,071,104-17% Louisiana $3,343,130-5% 1,034,492-13% Top 20 export states The top 5 states by value have all increased in the last year. South Carolina, though further down the list, has increased in value by 83%. In contrast, North Carolina has declined by 39% in value. These export figures do not necessarily trace where the eventual wine consumption takes place, which is part of the reason why California is well above all other states in value and volume. Source: Wine Export Approval Database *Change = 2014 to 2015 36
Key states Export value (million AUD) 60 +11% Export value to California Year ended Dec 2014 Year ended Dec 2015 Export value (million AUD) 45 Export value to New York Year ended Dec 2014 Year ended Dec 2015 +32% 50 40 35 40 +0% 30 30 +14% 25 20 20 15 10-25% -8% 10 5 +10% +8% +8% +65% 0 $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over 0 $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over In California, the $10 and over price point increased at the fastest rate up 14%. Source: Wine Export Approval Database All price points in New York recorded growth in the past year, with the $10 and over growing most rapidly at 65%. 37
Key states Export value (million AUD) $45 $40 $35 Export value to Florida Year ended Dec 2014 Year ended Dec 2015 +43% Export value (million AUD) 30 25 Export value to Texas Year ended Dec 2014 Year ended Dec 2015 +28% $30 20 $25 $20 15 $15 10 $10 $5 $- -21% +39% -40% -17% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over 5 0 +318% +41% -49% -59% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over The $2.50 to $4.99 segment in Florida grew strongly at 43% while the top price points both declined. Sub $7.49 exports recorded increasing exports, while declining exports were recorded for the segments above that threshold Source: Wine Export Approval Database 38
Key states Export value (million AUD) 18 Export value to New Jersey Year ended Dec 2014 Year ended Dec 2015 Export value (million AUD) 12 Export value to Illinois Year ended Dec 2014 Year ended Dec 2015 16 14 10-12% 12 10 8-36% 8 6 6 4 4 2 0 +59% -5% -4% -70% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over 2 0 +2% +8% +28% -68% $2.49 and under $2.50 to $4.99 $5.00 to $7.49 $7.50 to $9.99 $10.00 and over The $10 and over price point was the only segment to report growth in New Jersey, growing at 59%. Source: Wine Export Approval Database There were mixed results in Illinois. Exports at $2.49 and under increased by 28%, although off a very small base, and exports at $10 and over reported a marginal increase of 2%. 39
Wine market overview Channel analysis Sales trends Australian exports Consumer insights
Overview of USA wine drinkers Year USA Adults (million) USA Regular Wine Drinkers (million) Drinkers of Australian Wine (million) Infrequent Drinkers of Australian Wine (million) Occasional Drinkers of Australian Wine (million) Loyal Drinkers of Australian Wine (million) 2010 223.4 73.7 (33%) 24.3 (33%)* 9.6 (40%)** 12.0 (49%)** 2.7 (11%)** 2013 224.0 90.0 (40%) 24.4 (27%)* 7.3 (30%)** 13.0 (54%)** 4.0 (16%)** 2015 224.0 90.0 (40%) 23.3 (26%)* 10.0 (44%)** 11.0 (46%)** 2.4 (10%)** * % of Regular Wine Drinkers n = 2000 ** % of Drinkers of Australian Wine (in past 6 months) The number of regular drinkers has grown over 16 million (22%) in the past five years. Drinkers of Australian wine have fallen from 33% of regulars to only 26% of regulars in 2015. Infrequent drinkers of Australian wine have increased by almost half a million since 2010. Source: Wine Intelligence 41
Consumption frequency Regular USA Wine Drinkers, n = 2000 38% Frequency of wine consumption 16% 24% 21% Almost 80% of regular wine drinkers consume it at least once per week. The majority consume wine at least 2-5 times per week. Most days/every day 2-5 times a week About once a week 1-3 times a month % = share of regular wine drinkers Source: Wine Intelligence 42
Closure preferences (All Regular USA Wine Drinkers, n=2027) The natural cork is most preferred by drinkers, with the screw-cap and the synthetic cork a long distance behind. The screw cap has the highest proportion of regular wine drinkers who don t like buying wine in this closure Many drinkers stated neutrality, and that they did not like or dislike some closure types. The natural cork is the most preferred, potentially due to its perception of authenticity in the United States and the quality associated with the wine contained in an authentic bottle. Closure Type Preferred Natural 1 3 Screw-cap 2 1 Synthetic 3 2 Disliked Natural Cork Review Screw-Cap Review Synthetic Cork Review 4% 35% 30% 23% 28% 12% I don't like buying wine with this closure Neutral 61% 60% I like buying wine with this closure 47% 43
Drinkers who had heard of the following wine producing countries (n=2000) Origin awareness Italy France California Spain Other States in the U.S.A. Australia Argentina Germany Chile Portugal New Zealand South Africa Hungary Bulgaria Don t know Other 51% 0% 10% 20% 30% 40% 50% 60% 70% 80% Proportion of total drinkers Australia ranks 6 th in awareness as a wine producer, with half of total wine drinkers acknowledging Australia as a wine producing country. Source: Wine Intelligence 44
California Other US States Italy Australia France Chile Germany New Zealand Spain Argentina South Africa Other Bulgaria Portugal Hungary Don t know Consumption given awareness of origin 43% Origin awareness and consumption Less than half of those who had heard that Australia produced wine, had consumed it in the past six months. Australia placed 4 th, behind California, other USA states and Italy. Although more drinkers were aware of Spanish and French wines, Australian wines were consumed more by those who were aware of them. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Proportion of total drinkers Source: Wine Intelligence 45
Usage and consumption of Australian wine 26% of USA wine drinkers have consumed Australian wine in the past 6 months Australia has the 6 th highest proportion of loyal wine drinkers, the same as France. 10% of those who consumed Australian wine in the past six months have done so at least once a week. USA consumer drinking of Australian wine is in long- and short-term decline with 33% consuming it in 2010 versusa the current 26%. Australia has lost loyal drinkers since 2013, like many other the countries. % all USA wine drinkers who have consumed wine from Australia in the past 6 months % who have consumed wine at least once a week for the past 6 months % of those who drink wine from Australia with a certain frequency % who have consumed wine at least once a week for the past 6 months Source: Wine Intelligence 46
Quality perceptions of Australian wine Australia received a score of 7.63 out of 10 from drinkers. This score is in short- and long-term decline having dropped from 7.82 to 7.63 in the past five years. Quality perceptions from non-drinkers have declined in the short-term from 7.02 to 6.56 however have increased in the long-term from 6.54 to 6.56. Score/10 from USA drinkers who have consumed in the past 6 months Source: Wine Intelligence 47
Attitudes towards Australian wine Australian wine stands out from other countries for offering value for money; 82% of USA wine drinkers agree with that statement. Although Australian wine non-drinkers have grown in numbers, their favourable associations with Australian wines have increased in the long-term. Australia lacks many strong associations with its wines when compared with its competitors. % who have consumed in the past 6 months and agree with the statements Source: Wine Intelligence 48
Australian wine region awareness Awareness of Australian regions is in decline. Those who were not aware of any Australian producing regions increased by 9% in the last two years. % Drinkers who were aware of these Australian producing regions Source: Wine Intelligence 49
Choice cues and motivations Grape variety, recommendation by friends/family, brand and shop/staff recommendations are the top four cues for buying Australian wine. Given the opportunity to taste, more drinkers would be willing to buy Australian wine. % who agree or strongly agree that the following are important for them when buying wine % who stated the following would be most likely to encourage them to buy Australian wine Source: Wine Intelligence 50
SWOT Analysis Strengths Australia has the 2 nd largest market share of USA imported volume and largest export market for Australia The USA is a very large and growing market 68% of regular drinkers consume at least once per week on average Large premium segment of the market World s largest economy Weaknesses Australian sales in the USA are in decline Australian wine drinkers declined from 33% to 26% in the past 5 years. Australian wine image is connected to entry-price points / rich wine styles; both areas recently suffering from negative association Opportunities Threats Total market is showing appetite for premium wine with higher price points reporting growth in 2015 Opportunity to reintroduce premium Australian wine, with the $10 and over export price point showing growth of 16% While Shiraz is Australia s flagship variety, others such as Cabernet Sauvignon and Pinot Gris/Grigio are finding success in market Online and DtC Lower per capita consumption than peers Australia could continue to lose market share Active and well-funded competitors (EU and South America) The USA is a fast market and moves quickly to adopt trends The importer and distribution model and regulatory changes Retail consolidation 51
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