OIV Revised Proposal for the Harmonized System 2017 Edition

TABLE OF CONTENTS

1. Preamble ...... 3

2. Proposal to amend subheading 2204.29 of the Harmonized System (HS) ...... 4

3. Bag-in-box containers: a growing market share for wine trade ...... 5

3.1 Bag-in-Box trade: an estimate of the trade value ...... 6

4. Conclusion ...... 6

ANNEX ...... 7

The OIV has revised the proposal discussed at the 44rd Session of the Review Sub- Committee according to the comments received at the meeting. The new document, based on the original proposal, has been improved in some of its parts consistently with the questions raised by the delegates.

Contacts: Director General [email protected], Statistics department [email protected]

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1. Preamble

The International Organisation of Vine and Wine (OIV) was established by the Agreement of 3 April 2001. As from 4 July 2012, the OIV comprises 44 Member States.

The OIV is defined as an Intergovernmental Organisation of a scientific and technical nature with recognised expertise in the field of vines, wine and wine-based beverages, table grapes and raisins and other vine-based products.

In its field of expertise, the objectives of the OIV are as follows:

a) to inform its members of measures whereby the concerns of producers, consumers and other parties in the vine and wine products sector may be taken into consideration; b) to assist other international organisations both intergovernmental and non- governmental, especially those which carry out standardisation activities; c) to contribute to the international standardisation of existing practices and standards and, as necessary, to the preparation of new international standards in order to improve the conditions for producing and marketing vine and wine products, and help ensure that consumers’ interests are taken into account.

Within its field of activities, as outlined, among other, by the 2012-2014 Strategic Plan the OIV shall:

1. Compare statistical data with

- the data provided by Member States and/or other sources - the FAO and other official institutions in accordance with OIV methodology.

2. Integrate the concepts of “price” and “value” in the statistics monitoring system.

3. Integrate the data of areas under vines by variety of wine and country in the statistics monitoring system on the basis of a five-year questionnaire or on data on the multiplication material of vine.

4. Integration of data concerning the characteristics of the wine regions of the world – geography, georeference, agro-climate, zonification.

2. Proposal to amend subheading 2204.29 of the Harmonized System (HS)

The subheading 2204.29 identifies the commodity wine in containers of a capacity over 2 liters, that is generally defined as bulk wine.

Bulk wine has displayed a considerable growth in exports in recent years, as illustrated in the enclosed graphic (Annex). In 2011 the volume of world bulk wine market is estimated to have reached almost 38 Million hectoliters, which is close to the 38% of the total volume of exchanges, with an average growth rate in the last years of 4.6%. Bulk wine has further displayed a considerable growth in terms of value, particularly in recent years; in 2011 the value of bulk wine market reached 330 million of USD (figure 5), with an increase of 31% between 2009 and 2011. The total value of the top 5 imports (Germany, USA, United Kingdom, France and Sweden) reached the 184 millions of UDS in 2011.

A growing need therefore arises to identify the wine actually in bulk from the one which is delivered to consumers in containers of a capacity of two liters and more, the so called bag-in- box or similar containers, in order to obtain reliable statistics concerning internal markets and the foreign trade, thus adding transparency and accuracy among other to statistical data.

As of today, wine in containers of more than two liters is considered as bulk wine; nevertheless the recent developments of the bag-in-box market underline the need to distinguish the actual different categories of products.

The presence of the bag-in-box of a capacity of 3 and 5 liters constitutes a significant percentage of wine market and consumption. In France, for instance, 40% of wine is sold in bag-in-box. In Scandinavia the 85% of bulk wine is sold in bag-in-box of a capacity of 3 liters. There is also a growing market in the United Kingdom and North Europe for the 2.25 liters containers.

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In order to align the system with the current trade practices, our proposal to amend subheading 2204.29 of the Harmonized System (HS) is the following:

a. to increase the volume of containers referred to the subheading 2204.29 from 2 liters to 10 liters;

b. to create two subheadings which allow identifying the bag-in-box from 2 liters to 5 liters, and from 5 liters to 10 liters;

In this way the products in containers up to 10 liters can be considered a conditioned product, but it’s not yet bulk wine. We are of the opinion that the above amendments would add further transparency and clarity to our data gathering in view of our statistics information.

1. Bag-in-box containers: a growing market share for wine trade

Wine in Bag-in-box has been growing in popularity in recent years, but it is not easy to obtain reliable statistics on this specific segment of the wine market since the subheading 2204.29 identifies as bulk the wine in containers of a capacity of more than 2 liters.

The need arises, therefore, to identify the wine actually in bulk from the one which is delivered to consumers in containers of a capacity of more than two liters. As altready metioned above in many countries, and especially in the Scandinavian ones, the presence of bag-in-boxes of a capacity of 3, 5 and 10 liters constitutes a significant percentage (often over 50%) of the wine market and consumption. As already mentioned above, the bag-in-box container is the most popular packaging format in countries such as Sweden, where about 65%, or 113 million liters, of the wine sold concerns BIB, and Norway over 50% of wine is sold in bag-in-box. In the USA the bag-in- box already accounts for almost 20% of the total volume.

The values of the 3 liters containers market reached almost 31 million of dollars in October 2012 (Figure 2). Sales are rising in this category with 3 liters packages up 8.7% and 5 liters packages are up 9.3% by value between 2008 and 2009 (Nielsen data).

In France bag-in-box packaging now represents 1.9 million of hl, accounting for 20.9% of wine market. In terms of value it represents the 13.2%, evaluated at 556 millions of dollars (FranceAgriMer).

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According to Reuter’s figures, the British market for bag-in-box wine is valued at around 495 million dollars, with a 2% annual growth (Tesco’s estimations).

In Italy for instance, if the only volume bag-in-box wine Tavernello (a #1 selling wine brand in Italy) accounts for 83 millions of pieces. In 2007 bag-in-box exports in Argentina, accounted for revenue of 6 millions of dollars (Winesur data).

1.1 Bag-in-Box trade: an estimate of the trade value Different assumptions lead us to estimate the value of Bag-in-Box trade for 2011 at almost 170 millions of USD (all 2.5, 3, 5 and 10 liters categories included). The Bag-in-Box exports have increased considerably in the past years, representing a more and more significant percentage of the wine market in many countries (especially Nordic countries).

The above mentioned estimated value is based on different assumptions. Studies, even if not yet official, evaluate the share of the Bag-in-Box in 2011 total bulk wine export at almost 17% i.e. 334 mhl out of 1964 mhl. Assuming that the most shipped categories are the 3 and 5 liters, and assuming an average price of 5 USD/hl, you can obtain an estimated total value for bag-in-box trade of 170 millions USD mentioned above.

If you consider, that in 2011 Argentina exported bag-in-box wines for almost 10 million USD (Windsur data), and that South Africa exports only to Sweden Bag-in-Box wines for almost 18 millions USD, you can also get a clearer picture of the trade value for these categories.

Please also consider that, as of today, the subheading 2204.29 identifies as “bulk” wine in containers of a capacity of more than 2 liters; collection of detailed statistical data on this specific segment is therefore - if not impossible - very difficult. With detailed sub-categories missing, the exact value of each category (all 3, 5 and 10 liters containers) cannot be precisely evaluated.

The creation of subheadings would allow the identification of the three categories, helping to finally obtain reliable statistics of this market segment, thus adding transparency and accuracy to statistical analysis of the sector.

2. Conclusion The creation of the three subheadings, which will allow identifying the bag-in-box of 3 liters, 5 liters and 10 liters, will help to obtain reliable statistics concerning this segment of the market, thus adding transparency and accuracy to statistical analysis of the sector. Will allow to align the Harmonized System (HS) with the current trade practices.

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ANNEX

Figure 1: World wine trade

Trend in the global wine market (sum total of all countries' exports) 80% 140 70% 120 60% 100 50% 80 40% 60 30% Market share in% 20% 40 in millions of hl

10% 20 0% 0

Global market 5 largest EU exporters southern hemisphere +USA

Figure 2: Bulk World Export

Trend 2005-2011 (source: OIV, GTA)

50000

40000 37 953 30000 World Total

ThousandsL of 20000

10000

0 2005 2006 2007 2008 2009 2010 2011

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Figure 3: Bulk wine export

Growth rate 2007-2011 (source:OIV)

USA

South Africa

Chile

France Growth rate

Australia

Italy

Spain

-40% -20% 0% 20% 40% 60% 80% 100%

Figure 4: Bulk wine import

Share of bulk wine in import (source: OIV) 80%

70%

60%

50% 2007 40% 2011

30%

20%

10%

0% Norway Sweden USA China Denmark

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Figure 5: Value of world bulk export

World bulk export value (source: OIV, GTA)

350 330

300 270 252 250

200 World bulk export 150 millions of USD of millions 100

50

0 2009 2010 2011

Figure 6: US sales off prime channel by format

Sales off prime channel ​​by format (mln $) (source: Nielsen)

3 L Premium 3L Box 5 L

50

45

40

35

30

25

20

15

10

5

0 4 week 21/7/12 4 week 18/8/12 4 week 15/9/12 4 week 13/10/12

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Figure 7: Flexi Tank flexi tank for bulk wine from 10 000 to 24 000 liters (Source: http://www.globalmarket.com/)

Figure 8: Bag-in-Box container (Source: http://www.bag-in-a-box.com)

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