8/3/2019 InVina Analysis of the Chilean Wine Market 2011 06
1/21
Analysis of the ChileanAnalysis of the ChileanWine MarketWine Market
July 2011July 2011SneakPr
eview
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Produc
tion
&Dem
an
d
1. Production and Demand and Inventory
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Vineyard Planting Rate, Historical and Projected
0
2
4
6
8
10
12
14
16
18
20
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Change
inHas./Y
ear
0
20
40
60
80
100
120
140
Has.
inPro
duction
Net Increase Tot. Has.
Has. In Production
Hec
tareso
fVineyard
Productive Vineyard Hectares
Chile experienced a big planting boom from 1997 to 2001
Since 2001, Chile has not had any significant net increase in vineyards.
It is likely there has been a meaningful amount of renovation (oldvineyards ripped out and new vineyards planted) that net each other outin the official statistics
Source: SAG (Chilean Agriculture and Livestock Service), Wine of Chile*InVina estimate
Has. in production
defined as vineyards
over 3 years old
Last published data
point for change in
total vineyard area
shows minimal
increase. 2008 and
beyond are estimated
8/3/2019 InVina Analysis of the Chilean Wine Market 2011 06
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Pro
du
ction
Total Chilean Wine Production
Chiles annual wine production has increased nearly 300% in the 15years since 1994
2009 production surpassed the 1 billion liter mark, but is now consideredto be an exceptional year
Subsequent production in 2010 and 2011 returned to more normal levels
when calculated on hl / has. basis
1
0
100
200
300
400
500
600
700
800
900
1,000
MM
Liters
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Total Production, MM Liters
Other
Table Grapes
Viniferous
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Prod
uc
tion
per
He
ctare
Production per Hectare
The 10 year average production per hectare is 68.4 hectoliters (6,840 liters) per hectare inproduction (yellow line). The average for the last 4 years has been 74.5 hl/has, which seems toindicate that overall productivity is trending upward from the 4 years between 2001 and 2005.
The 2009 average production per hectare increased dramatically up to 82.3 hectoliters per hectare
This increase can be partly explained by good rains in 2008 winter, good budding and fruit set inspring 2008, and absence of rains during harvest.
The increase in production per hectare also suggests a strong influx of table grapes into wine
The 2010 and 2011 production per hectare were closer to historical normals
Source: SAG (Chilean Agriculture and Livestock Service), Wine of ChileHL = Hectoliter or 100 liters
Wine Production per hectare of vineyard
0
200
400
600
800
1,000
1,200
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
MM
Liters
0
20
40
60
80
100
120
140
MH
as.
&HectolitersperHas.
Total Wine Production
Has. In Production
Prod. / Has.
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Dem
an
d
Chilean Wine DemandDomestic consumption + Exports
2009 export volumes reached a record level of over 693 million liters Domestic Consumption is assumed to be flat at 260 million liters in 2009 (15.3 liters per capita). However, it is
extremely improtant to note that there is no reliable source for consumption data, and it is usually calculated asproduction exports inventory.
The inferred consumption figures for 2010 show a dramatic reduction.
Exports in 2011 show a 17% decline so far. We are estimating a 12% decline for the year, with imputed consumptionreturning to normal levels.
Source: SAG (Chilean Agriculture and Livestock Service), Wines of Chile
0
100
200
300
400
500
600
700
800
900
MM
Liters
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
2011*
Total Demand, MM Liters
Consumption
Exports
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Inven
tory
Inventory
The 2011 harvest (no official figures avaialble yet) seems to have come in at ho-hum levels
698 MM liters 2010 year-end inventory figure released recently
Bulk exports dropping sharply in 2011
Bottled wine exports continue to grow both in volume and price
Source: SAG (Chilean Agriculture and Livestock Service), Vias de Chile
ProjectionProduction, Demand and Inventory, MM Liters
200
300
400
500
600
700
800
900
1,000
1,100
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
2011*
Year-End InventoryTotal Production
Total Demand 120 millionliters lost due to
earthquake
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Volumen Exportacin, Embotellado y Granel
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
700,000,000
800,000,000
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
MM
Litros
Bottled Wine
Bulk Wine
Other
Total
Bottle
dWin
eDem
an
d
Total Export Volume breakdown
Bulk wine exports off sharply in 2011 (down 55% so far in 2011, forecasting45% drop for the year)
Bottled wine exports continue increasing, (up 17% so far, forecasting a 14%increase for the year)
Source: Vias de Chile
Shortage
Price shocks
Bulk exports
collapse
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Bottle
dWin
eDem
an
d
Bottled Export Price and Volume
The trend line (R2 = 0.94) shows bottled prices have risen steadily at a rate of some$ 0.71 per year over the last 20 years
Although they dropped suddenly in 2009 due to the global financial crisis, in 2011the prices are resuming their upward march (2011 average is $28.65 per case, andApril 2011 average is $ 29.19)
The 10 year Average Growth for bottled wine export volume (2000 to 2010) is 8.7%Source: Vias de Chile
Bottled Export Price and Volume
y = 0.71x + 11.27R2 = 0.94
-
3.00
6.00
9.00
12.00
15.00
18.00
21.00
24.00
27.00
30.00
33.00
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Bottled,
US$/Case9Lit.
0
100
200
300
400
500
600
MM
Litros
Bottled PriceBottled VolumeLineal (Bottled Price)
10yr.C
AGR
2000201
0:8.7%
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Pro
jec
tion
2. Projecting Production and Demandthrough 2012
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Projec
tion
Revisi
ted
Triple-Shock
2010 delivered a triple shock to the Chilean wine industry:
2009 saw record export figures, which began straining supplies
toward the end of 2009 and first few months of 2010
The industry lost at least 120 million liters in the earthquake, or
about 13% of annual production The 2010 vintage was small (off by 10% from 2009 vintage)
The 2011 vintage is also small
Bottled wine exports continue to grow while bulk wines plummet
A significant supply shock will rock the industry in the 2nd half of
2010 and well into 2011. Wine and grape prices will reach levels
not seen since the end of the 1990s.
Quadruple
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Projec
tion
BASE PROJECTION: Supply Increases,
Demand is Moderate
Production Assumptions
2012 2014 production projected at 74.7 hectoliters per
has.
Demand Assumptions
Export volume -12% in 2011 (bulk wines down 45%,
bottled wines up 14%), 0% in 2012 and 5% in 2013.This compares to 10 year average volume growth of
11.5% (1999 to 2009)
Domestic consumption down to 14.0 liters per capita (vs.
estimated average of 15+ liters per capita in last few
years)
8/3/2019 InVina Analysis of the Chilean Wine Market 2011 06
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Pro
jec
tion
Wine Production Projection
Vineyards in production will reach 120,000 has. by 2012 (it wasVineyards in production will reach 120,000 has. by 2012 (it was 104,000 has. in 2003)104,000 has. in 2003)
Wine production surged to 82.3 hl./has. in 2009, then dropped to 71.5 hl./has. in 2010
We project 70 hl./has. for 2011, then 74.7 hl./has. for 2012 & 2013
Source: SAG, InVina projection
Wine Production per hectare of vineyard
0
200
400
600
800
1,000
1,200
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
2012*
2013*
MM
Liters
0
20
40
60
80
100
120
140
MHa
s.
&Hectoliterspe
rHas.
Total Wine Production
Has. In Production
Prod. / Has.
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Dem
an
d
Wine Demand ProjectionDomestic consumption + Exports
Export volume recorded a phenomenal CAGR of 13.1% from 1994 to 2009
This was possible as vineyard area doubled in this period
No significant net increase in vineyards have been registered since 2001, although export growthwas sustainable as these new vineyards entered into production
We forecast that export growth will stagnate in the next few years since there are no newvineyards available to increase production. However, the mix of exports will continue the shift out
of bulk wine exports and increasing bottled wine exports
Also forecasting a moderate drop to 14 liters per capita in consumption
Total Demand, MM Liters
0
200
400
600
800
1,000
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
2011*
2012*
2013*
MM
Liters
Consumption
Exports
Total Demand
ExportsCA
GR
1994
2009:13.1%
Exports CAGR2009-2013: 0.2%
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Pro
jec
tion
Production, Demand and Inventory
Demand Projection:
2010: -2.5%
2011: -2.3%
2012: 0.4%
2013: 4.0%
Projection
Production, Demand and Inventory, MM Liters
200
300
400
500
600
700
800
900
1,000
1,100
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
2011*
2012*
2013*
Year-End InventoryTotal ProductionTotal Demand
Total Wine production:
2010: 906mm liters
2011: 924 mm liters
2012: 974 mm liters 2013: 993 mm liters
Inventory as % Demand:
2010: 75%
2011: 78%
2012: 83% 2013: 83%
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Pro
jec
tion
Analysis
An industry accustomed to double-digit growth based on anample supply of cheap grapes will be challenged as the growthrate in grape production tapers off
Bulk wine volume will remain depressed as demand for bottled
wine exports keeps wine prices high
New vineyard plantings will resume, though it is unlikely we will
see a repeat of the 1997-2001 surge
Wine and grape prices will remain high through at least to 2013
as supply barely manages to slowly recover from the structural
shortages that were emerging before the 2010 earthquake, and
the added shock of losing 15% of production during the
earthquake.
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Supplemental Charts
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Pro
du
ction
Wine Production Projection
2010 saw a significant decline in production
2011 figures not yet released
Source: SAG
Chilean Wine Production, 000s of Liters
Source: SAG (Chilean Agricultural and Cattle Service)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Wines with D.O.
Wines w/o D.O.
Table grape winesTotal
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D
emand
/Hectare
The fundamental issue: The growth inproduction base has not kept up with demand
To sustain even moderate volume growth, the industry needs yields of 80 hl./has.,which is on the high end of historical levels, and above the 5 year average of 73.9 hl. /has.
Add to this the significant losses suffered in the earthquake which suggests that grapeand wine prices will be very high for the next few years.
Source: SAG (Chilean Agriculture and Livestock Service), Vias de Chile
Consumo + Exportaciones
0
20
40
60
80
100
120
140
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
2012*
2013*
Has.,
000s
0
200
400
600
800
1,000
1,200
Liters,
Millions
Has. In Production
Demand / hl per has.Total Demand
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Inven
toryas
%of
Sa
les
Year-end inventory as % of sales & average wine prices arenegatively correlated
Strong negative correlation exists between the Year-End Inventory as% of Demand(consumption + exports) and the Average Price of Cabernet Sauvignon in the localmarket. The coefficient of correlation from 1999 to 2009 is -0.92
Year-end inventory is from the previous year (so 2006 year-end inventory is correlated to 2007 prices).Source: Cabernet pricesCCV web site, where they attribute the source to: ODEPA. Elaborado con informacin de la SNA. A partir
de Junio 94 SIPRE. These figures are checked against our own observations.Inventory and Demand: SAG and Vias de Chile. *2010 prices based on our own observations
*
Inventory as % Dem and and Caberne t Price
0%
20%
40%
60%
80%
100%
120%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
Inven
toryas
%D
eman
d
0
100
200
300
400
500
600
700
800
Ca
berne
tPrice,
$/L
Inventory / Demand
Cabernet Price, $ / Liter
8/3/2019 InVina Analysis of the Chilean Wine Market 2011 06
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Inventory as % Demand and Cabernet Price
0%
20%
40%
60%
80%
100%
120%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
2011*
2013*
Inventoryas%
Deman
0
100
200
300
400
500
600
700
800
CabernetPrice,
$/L
Invento ry / Demand
Cabernet Price, $ / Liter
Wine
Price
Pro
jec
tion
Wine Price Projection
While total inventory grows, it grows only moderately as a % of sales
The relationship between inventory and prices suggest Cabernet wine priceswill hover in the CLP$ 300 to $ 400 per liter range
Source: Cabernet pricesCCV web site, where they attribute the source to: ODEPA.Elaborado con informacin de la SNA. A partir de Junio 94 SIPRE.Inventory and Demand: SAG and Vias de Chile