The global wine market

South Africa in the Global Wine Market: Tell me about it! VinPro Information Day, January 2014 The global wine market A macro context 1

Global inventories achieving balance Production, consumption and inv. of wine, 2000-2012 Production & Consumption 300 290 280 270 260 250 240 230 300 250 200 150 100 50 0 Ending Inventories Ending Inventories Production Consumption Bulk wine prices easing Index of average bulk wine prices by origin, 2013 1.05 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 Australia Chile France South Africa Spain 2

South Africa still competitive in bulk Avg. price (USD/ Lt.) of Generic White bulk wine, 2013 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 South Africa Australia Italy Spain Source: Rabobank estimates based on data from Ciatti Co., 2013 Global wine consumption slowly rising Grape wine consumption for key regions, 2007-2012 12 000 10 000 8 000 6 000 4 000 2 000 0 2007 2008 2009 2010 2011 2012 Asia Pacific North America Western Europe 3

Growth varies by region Projected growth in wine imports (Mn. Lt.) by country Bottled wine import volumes 2011 Projected 10 yr increase Annual Imports in 10 years China 241.4 16.9 258.3 US 710.9 14.2 725.1 Canada 255.3 7.6 263.0 Russia 236.6 5.9 242.6 Hong Kong 45.5 3.6 49.2 Japan 145.1 3.6 148.8 Czech Rep. 84.8 3.4 88.2 Nordics 159.0 3.2 162.2 Poland 78.9 3.2 82.0 Germany 586.6 2.9 589.5 Attractive markets: growth + pricing Rabobank ranking of markets for branded wine exports Rank Country 1 USA 2 Canada 3 China 4 Hong Kong 5 Japan 6 Switzerland 7 Korea 8 Nordics 9 Germany 10 Denmark 4

Attractive markets: growth + pricing Rabobank ranking of Hidden Gems Rank Country 1 Mexico 2 Brazil 3 Poland 4 Nigeria The global wine market South Africa s position 5

South Africa vs. The World S.A. share of imports and average pricing in key markets $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 7% 6% 5% 4% 3% 2% 1% 0% Avg price btld imp Avg price SA imp SA share of imp South Africa in the U.S. market Bottled wine import vol ( 000 cases) and avg. price, 2012 30 000 25 000 20 000 15 000 10 000 5 000 0 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Volume Avg Price- $/L 6

SWOT: South Africa in Priority Markets Strengths - Low cost supply base - Strong technical capacity - Language - Unique story elements Weaknesses - Brand South Africa unclear - Lack of flagship varietal - Past inconsistencies in quality - Consumer understanding/ focus Opportunities - Establish a viable image - Prioritize market segments - Adjust product to consumer - Unique styles Threats - Exchange rate fluctuations - Return to oversupply - Retailer consolidation - Economic downturn The global wine market Understanding the US market 7

US wine market- proliferation of SKU s Number of active table wine SKU s in the US, 1988-2012 Source: Beverage Information Group, 2013 US Wine market- Distributor consolidation Rank Company Market Share 2007 Market Share 2013 1 Southern Wine & Spirits* 19.1% 22.3% 2 Charmer Sunbelt 10.4% 10.3% 3 Republic National Dist. Co. 10.4% 11.2% 4 Glazer's Wholesale Dist.* 7.0% 6.7% 5 Young's Market Co. 5.2% 5.7% TOTAL REV. & MKT SHARE TOP 5 52.1% 56.2% Market Share Top 10 62.80% 68. 8

US Wine market- 100 markets in one Good brands build their own distribution 9

Project Genome Source: Project Genome, Constellation Brands. 2008 Brands responding to emotional needs His personality is so magnetic, he is unable to carry credit cards. He bowls overhand If opportunity knocks and he s not home, opportunity waits A most unusual gin Its not for everybody Preferred by 1 out of 1,000 gin drinkers 10

The global wine market Defining South Africa s story What differentiates your brand? Without a story, all you have is fermented grape juice 11

What differentiates your brand? If your story is about vineyards and terroir, get in line The story is about the consumer s needs 12

Brands can respond to consumer needs But needs vary by markets and over time 13

But needs vary by markets and over time The global wine market Communicating South Africa s story 14

Communicating the message Proctor and Gamble s The First Moment of Truth Communicating the message Google s Zero Moment of Truth 15

Communicating the message Google searches for Wine trending up in the US Communicating the message Google searches for Malbec in the US see similar trend 16

Communicating the message South Africa losing share of voice? Why should the consumer look for SA? 17

Contact details Rabobank International Stephen Rannekleiv Senior Beverage Analyst Food & Agribusiness Research and Advisory The financial link in the global food chain t. 212-808-6823 e. Stephen.Rannekleiv@Rabobank.com DISCLAIMER Professional advice is recommended for all financial and strategic decisions. However, this information is not professional advice and has not been prepared to be used as the basis for, and should not be used as the basis for, any such decisions. This information is general in nature only and does not take into account an individual s personal circumstances. No representation is made that any forecast or projected information is correct or will eventuate. Although reasonable efforts have been taken to ensure the accuracy of the contents of this publication, no warranty is given in regard to the total accuracy of the printed contents. The persons involved in the preparation and distribution of this information and their related persons disclaim all liability for any loss or damage suffered due to any use of or reliance on the information. 18