Growing wine Globally,

an International

Perspective

Jane Robertson

Category Development

Director

GAME CHANGERS: CHANGING THE WINE &

BRANDY INDUSTRY’S LANDSCAPE

Analysis of market and

consumer trends per key market

and formalising global trade

agenda

The objective of this project was to build a customised model for market

opportunities for South African Wine, explore up to 5 individual markets in more

depth and support the dissemination of insight to stakeholders. The markets that

are being focused thusfar include China, Africa and the USA. This complements

the generic export promotion body Wines of South Africa (Wosa) strategic

framework.

Is South African Wine

Sexy?

Make South African

wine Sexy…

“Premiumisation remains one of the

leading influences on market

trends.”

IWSR Global Trends Report 2015

Influencing the growth of

‘Craft’ Wine knowledge is

improving

Millenials and Females setting

more of the Agenda

Prosecco Flavours

Where does South African wine sell?

Dec 2013 to

Nov 2014

Dec 2014 to

Nov 2015 Share Change Packaged % Change Bulk % Change

UK 12,120,406 11,888,387 28.3% -2% 36% -7% 64% 1%

GERMANY 8,838,152 8,992,122 21.4% 2% 20% 16% 80% -2%

FRANCE 2,691,077 2,945,696 7.0% 9% 100% 0% 9%

SWEDEN 2,792,522 2,786,076 6.6% 0% 74% -7% 26% 18%

NETHERLANDS 2,391,323 2,551,966 6.1% 7% 71% 29% 24%

CANADA 2,093,264 2,143,177 5.1% 2% 43% -3% 57% 6%

DENMARK 2,245,181 2,085,282 5.0% -7% 42% -19% 58% 1%

RUSSIA 2,822,376 1,774,135 4.2% -37% 0% 100% -37%

CHINA 835,160 1,220,143 2.9% 46% 75% 57% 25% 12%

BELGIUM 1,026,749 1,171,844 2.8% 14% 55% -2% 45% 35%

U.S.A. 1,020,313 1,095,367 2.6% 7% 100% 7% 0%

ANGOLA 587,110 590,826 1.4% 1% 100% 1% 0%

JAPAN 659,919 550,621 1.3% -17% 55% -5% 45% -31%

FINLAND 503,180 472,200 1.1% -6% 100% -6% 0%

KENYA 385,587 378,254 0.9% -2% 100% -2% 0%

UAE 397,516 360,125 0.9% -9% 100% -9% 0%

THAILAND 372,898 351,126 0.8% -6% 0% 100% -6%

SWITZERLAND 631,513 322,659 0.8% -49% 0% 100% -49%

CZECH 218,181 287,761 0.7% 32% 0% 100% 32%

A quick tour of the UK – Total Grocery

Price deflation means market growth and

shoppers are buying more and trading up Shoppers are looking

around for Retailers they

trust.

Retailers are looking for Simplicity and are

streamlining their ranges and their supplier base

Volume and Value is

now shrinking in still

wine.

There’s a lot of adults that

drink wine

422.1

439.1

522.5531.8

494.7

£400.0

£420.0

£440.0

£460.0

£480.0

£500.0

£520.0

£540.0

MAT WE 10.12.11 MAT WE 08.12.12 MAT WE 07.12.13 MAT WE 06.12.14 MAT WE 05.12.15

Total Coverage | South Africa Wine | Value sales £Ms

South Africa

South African Wine experienced strong growth until 2013/14.

Performance plateaued and is now in decline for the latest MAT.

£m’s Value Sales

Value -7% vs YA

Volume -7% vs YA

Source: Nielsen ScanTrack Data to WE 05.12.15

South African Wine is the 6th biggest origin in the Off Trade. In the

last 5 months Spain has over taken while Chile and New Zealand

have recently gained ground. South Africa is experiencing the

biggest declines of all the major New World players.

Source: Nielsen ScanTrack Data to WE 05.12.15

Total Coverage | Value Share % | Light Wine by Origin | MAT TY vs YA

3.6%

-5.4%

-5.1%

-6.3%

-0.2%

-7.0%

3.2%

9.6%

29.1%

-13.1%

Value Chg vs. YA (%)

What has caused the

drop in sales?

ScanTrack KPI Tree Trended - Total Coverage - South African Wine - MAT vs. Year Ago

Source: Nielsen ScanTrack Data to: WE 05.12.15

There fewer stores to sell in; and South Africa is selling less per store

Sku count down

13% in the top 4

This year

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Australia Italy France USA Spain SouthAfrica

Chile NewZealand

Argentina Germany

MAT 2YA WE 07.12.13 MAT YA WE 06.12.14 MAT TY WE 05.12.15

Grocery Multiples | Share of Display | Total Light Wine | MAT TY

Source: Nielsen Scantrack Data to WE 05.12.15

South African wine has seen volume on deal drop for the second year in a

row, share of Display has been squeezed as key origins such as Australia

and emerging markets fight for space

The On Trade anis a great area to showcase what can be done,

especially in Restaurants. The trick is converting distribution gains to an increase in sales

• South Africa is the sixth largest country with a 15%

volume share (+0.4% YoY)

• South Africa is currently outperforming the market, being

the only New World country other than New Zealand to

grow value

• Also sees highest distribution growth, and smallest RoS

and volume decline (excluding New Zealand)

Sauce: CGA Strategy Brand Index MAT data to P07 2015

Value Volume Distribution RoS

39% 37%

Volume Sales

1.2m 9L

Value Sales

£0.2bn

• Consumers are able to spend more on

treating

• Going out is a treating occasion and

restaurants are benefitting from this trend

• South Africa is in a good position to take

advantage of this trend with its strength in

Restaurants

48% like seeing brands they

recognise on pub / bar wine lists

47% often choose a recognised

brand when buying wine in a pub / bar

55% would expect to pay more for

a recognised brand in a pub / bar compared to a

supermarket

An area where you can build brands

South African

Brand Equity

Is South Africa Losing it’s Branded Identity?

South African Growth has been

built on these top 4 Brands

MAT vs YA = -£25.8 M

The top 5 brands are in strong decline which isn’t off set by those who are growing

MAT vs YA = +£22.4 M Source: Nielsen Scantrack Data to WE 05.12.15

Total Coverage | Value sales in £ | Top Brands & Winners | MAT TY

The Stealth squeeze however is coming from Own Label

£4.46

£4.58

£4.74

£4.60

£4.66

£4.48

£4.61

£4.71

£4.78

£4.30

£4.40

£4.50

£4.60

£4.70

£4.80

£4.90

Volume2 Yrs Ago

Volume LY Volume

Exclusives Private Label Lead Brand

48.0% 49.3% 45.0%

21.2% 24.5% 30.7%

30.8% 26.2% 24.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Volume2 Yrs Ago

Volume LY Volume

Exclusives Private Label Lead Brand …and its being done on price

Price 2

years

ago

Price

Last

year

Price

This

year

Running Duck

False Bay

Stowell’s Signature

Kumala

YoY Actual volume change (9LCs) 5.4%

(+2.2%)

2.9%

(-1.3%)

3.6%

(+0.7%)

3.1%

(-0.1%)

1.2%

(-0.4%)

Volume share Change

Sauce: CGA Strategy Brand Index MAT data to P05 2015

Kumala outperforms

the market, primarily

due to competitive

pricing and high

consumer

recognition

The view in the on trade is somewhat different – recognisable

brands are helping to spread South African wine and grow sales

What do consumers

think?

1.31 Ltrs

-2.5%

Volume per

Trip

2015

Repeat

Buyers

2015

1.28 Ltrs

-2.9%

Volume per

Trip

2014

Repeat

Buyers

2014

55.1%

+1.7%

Behaviour changes that we are seeing in the South Africa

Category

55.8%

+1.3%

8.8 x

+1%

Frequency

2015

8.7%

+8 % Frequency

2014

Off Set

Penetration

2015

Penetration

2014

32.7%%

30.9%

-5.5%

Off Set

South African Wine is losing to more premium Countries, only gains made

from Germany

£5.07

£5.26

£5.34 £7.16 £5.37

Average Price per 75cl

(Total Coverage)

Nielsen – Homescan & Scantrack – Data to 18.07.15

Trading up – or showing

off South African wines

Pricing hierarchy or ‘the ladder of Trust’

The shape of South Africa’s Wine Category

Total Light Wine & South Africa Price Band | GB Off Trade – Volume | MAT TY

58.5% of wine sells at £5 and under.

Some exciting development over £6

Nielsen – Scantrack – Data to 05.12.15

Low end is beginning to see

change, with volume share

flat and a decline in RoS

RoS in managed outlets

-

5.00

10.00

15.00

20.00

25.00

30.00

<£15 £15 to £20 >£20

MAT YA MAT TY

In the On Trade growth is in the mid tier as well as premium

wines

High end South African

wine seeing solid

volume and RoS growth

Mid is in RoS growth

Differentiating to make a mid tier

Succeeding with

Varietals

South African Sauvignon Blanc has been the back bone of growth

Sauvignon Blanc declined by -

£0.6M vs. MAT YA, accounting

for -1% of South African Decline

However… progress

slowed as New

Zealand Sauvignon

Blanc has recovered.

Value % Chg YA – Sauvignon Blanc

(12 week periods)

Nielsen – Scantrack – Data to 05.12.15

Avg Price - £5.22 Avg Price - £5.19

Shoppers are beginning to Switch to Chilean Sauvignon

Blanc!

Shiraz was another key contributor MAT YA, however £5m has been lost

TY as Australian Shiraz gains another £9M

Source: Nielsen ScanTrack Data to WE 05.12.15

Total Coverage | Value sales in £ | Top 10 Varietal | MAT TY

-9.7% +5.3

%

South Africa’s strength is in its own identity.

Chenin and Pinotage are not yet the heroes of the South

African Category

£0

£20,000,000

£40,000,000

£60,000,000

£80,000,000

£100,000,000

£120,000,000

£140,000,000

£160,000,000

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MAT 2YA MAT YA MAT TY

Chenin Blanc is

the largest white

South African

varietal by volume,

however, it is seeing

a continued volume

decline losing -34% over the past 4

years

Pinotage is the largest red

South African varietal by

volume and has held onto

most of its growth in the

long term, despite

declining -4.9% this year

Nielsen – Scantrack – Data to 05.12.15

The grapes that could help turn the category around are yet to be fully

exploited

-16.4% vs YA (Volume chg.)

Nielsen – Scantrack – Data to 05.12.15

+3.6% vs YA (Volume chg.)

More support for wine’s that command a higher price point

will stop the premium Pinotage market from suffocating.

Chenin Blanc decline is driven by Private Label, here more

premium lines are in strong growth

+14.3% vs YA (Volume chg.)

- 12.6% vs YA (Volume chg.)

Total Coverage | Volume growth chg. vs. YA | Pinotage & Chenin Blanc | MAT TY

Is South African Wine

Sexy?

Not really.

Situation - South African Wine sales have fallen back -7% in value and

Volume over 2015 following strong growth in the years preceding this.

Complication - South African Wine continues to operate in the under

£5 market, a sector which is in market decline.

Success in recent years has been built on International varietals such as

Sauvignon Blanc and Shiraz. Progress on both has slowed down.

Key Brand performance has fallen dramatically as the category turns to lesser

known products for volume.

Make South African

wine Sexy

The Answers

A credible mid tier will help consumers discover

the great wines South Africa has to offer

Lets be proud of the regions and the grapes. Native varietals such

as Chenin Blanc and Pinotage offer differentiation and growth

potential

Strong Brands are vital for the future success of South

African Wine

International varietals such as Sauvignon Blanc and Shiraz have

helped the category grow, they serve a purpose and shouldn’t be

ignored. However there future is largely dependant on other

countries (e.g. NZ, Australia)