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Wines of Germany / German Wine» Brand Stakeholders CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany Germany Sector profile Industry overview Name of national wine brand Wines of Germany (US & UK) / German Wine (international) (Deutsche Weine) Total cultivation area 102,037ha (2005) Number of wineries / vineyards / NA winegrowers Number of distinct wine producing 13 regions regions Latest wine production figure 10,261khl (2007), +15.1% Latest wine sales volume figures DOMESTIC EXPORTS30 12,891khl (2007), 1,919khl (net +3.3% exports 2007), +2.9% 3,130khl (gross exports 2007), +8% Claiming more than 2,000 years of viticultural tradition, Germany is one of the major wine producing countries of the world. Despite being, until recently, associated mostly with sweet wines, Germany today boasts a complete wine product portfolio; the country’s vineyard comprises of 63% white grape varieties and 37% red grape varieties. Moreover, with around 20.2mhl annual wine consumption, Germany today is the fourth largest wine market in the world, preceded only by France, Italy and the US and one of the most attractive markets for imported wine as well. Part of the «old world» of wine, the German wine industry is facing intense competition by new world countries such as Argentina, New Zealand, Australia etc. To deal with this threat, from October 2007 the industry has been going through the process of establishing a successful rebranding strategy and aligning its marketing and promotional activities; this effort will be outlined and detailed further on in this report. 30 Gross exports include wines of foreign origin imported and re-exported by German wineries PRC Group | National Interprofessional Organisation for Vine and Wine Page 200 of 364 See confidentiality restrictions on title page © PRC Group 2008 CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany Wine production & exports Based on 2007 OIV prediction figures, Germany ranks 6th in the world in terms of wine production volume. In terms of export volume31, Germany shares the 7th position with Argentina. Wine production The following chart paints a clear picture of the country’s wine production and gross exports over the past years, both in absolute values and growth rates: Source: Based on data sourced from OIV Following a temporary decline in production volumes over the 2005-06 period, the German wine production volume increased at above average levels in 2007, as forecasted. Latest statistics show that the 2008 harvest will maintain an increased production level. Export levels show constant upward trends which will be thoroughly analysed over the following pages. In terms of quality (see product classification section): • Table wine represents 5.5% of 2007 production (4.1% white, 1.4% red), gone up by 55.8% from 2006. • Q.b.A. wine (quality wine from one of the 13 regions) represents 64.4% of 2007 production (31.9% white, 32.5% red), gone up by 8.6% from 2006. 31 Export volumes here and in the production section refer to gross exports (see footnote on Exports, Industry Overview section) PRC Group | National Interprofessional Organisation for Vine and Wine Page 201 of 364 See confidentiality restrictions on title page © PRC Group 2008 CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany • Q.m.P. wine (quality wine with special attributes) represents the remaining 30% of the 2007 production (24.4% white, 5.6% red), gone up 25.1% from 2006. With regards to the color of wine, the white to red ratio is 60.5 : 39.5 in production volume .Although production volume breakdown by varietal is not available, the breakdown of cultivated land is given. By this measure, Riesling (21.3%), Muller Thurgau (13.5%) and Spatburgunder (11.6%) represent the greatest share of Germany’s total vineyard area. The Dornfelder, Portugueser and Silvaner varieties follow with a share of 4.5% - 8% each. Wine exports German wine exports present a very important particularity which must be taken into account when analysing both volume and value data: the country’s gross wine exports include a significant amount of wines of foreign (non-German) origin. The difference between gross and net exports is substantial, as illustrated in the following table: Gross export volume Net export volume (khl) Difference % (khl) Net export value (! ‘000) Gross export value (! m) 2005 2,549khl 1,721khl 48.1% ! 432m ! 314m 37.6% 2007 3,130khl 1,919khl 63.1% ! 635m ! 383m 65.8% Source: Based on data sourced from Deutches Weininstitut The German Wine Institute decided from the 2008-2009 season to report net exports in its statistics, i.e. German wine exports of own-country origin, not including non- German wine origin exports. The sector analysis in this report is based on net export values and volumes. For purposes of consistency across country analyses, gross export volumes as reported by the OIV are used in the “production and export volume and growth graph” (see Wine production section above) only. PRC Group | National Interprofessional Organisation for Vine and Wine Page 202 of 364 See confidentiality restrictions on title page © PRC Group 2008 CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany The following chart shows net export value and growth evolution: Source: Based on data sourced from Deutches Weininstitut The industry’s main markets by volume as indicated in the chart below are the UK, the USA and Netherlands, with a cumulative 60% on export volumes: Source: Based on data sourced from Deutches Weininstitut Aside from the three main export markets, Germany exports an important share of its volume to countries such as Russia, France and Sweden. PRC Group | National Interprofessional Organisation for Vine and Wine Page 203 of 364 See confidentiality restrictions on title page © PRC Group 2008 CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany The following chart shows export shares by value: Source: Based on data sourced from Deutches Weininstitut The UK represents a third of Germany’s export volume and a quarter of its export value. The Wine Institute reports the UK market’s shift of focus towards the middle price segment with regards to the German wine offer in 2007, leading to a 2.4% decline in volume but also to a much more significant 10% increase in value. The USA is a bigger market by value for German wine exports than the UK, representing an addition 10% share on exports in terms of value than it does in terms of volume. This is fuelled by a growing demand for Riesling wines, which represents almost the sum of German wine exports to the US. Germany now ranks as the 7th largest importer in the US wine market. The secondary markets of Sweden, Norway and Netherlands have shown significant increases in terms of value, reaching 34%, 27% and 12% year on year growth respectively for 2007. PRC Group | National Interprofessional Organisation for Vine and Wine Page 204 of 364 See confidentiality restrictions on title page © PRC Group 2008 CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany Net export pricing and bottled vs. bulk exports The following table presents the latest pricing data for Germany’s net exports. 2007 2006 Change 07/05 Value Volume Value Volume Value Volume (!m) (khl) !/hl (!m) (khl) !/hl % % Total 383.5 1919.5 200 356.7 1849.4 193 7,5 3,8 Quality wine 291.2 1261.3 231 279.2 1299.9 215 4,3 -3,0 Other wine 92.3 658.2 140 77.4 549.5 141 19,2 19,8 Bottled wine 348.1 1637.0 213 321.7 1556.2 207 8,2 5,2 Bulk wine 35.4 282.5 125 35.0 293.2 119 1,2 -3,7 White Wine 323.0 1597.1 202 313.5 1636.4 192 3,0 -2,4 Red wine 60.5 322.4 188 43.2 213.0 203 40,1 51,3 Source: Deutches Weininstitut It is important to note that net export total pricing at !2/lt for 2007 as presented in the table above shows negligible variance from the gross export pricing at !2.03/lt, as reported in a recent news release by the German Wine Institute32. «Wines of Germany / German Wine» brand stakeholders The Deutsches Weininstitut (DWI, or German Wine Institute) is the German wine industry's marketing organization responsible for the development of the quality and sales of German wine domestically and abroad. More specifically, the Wine Institute is responsible for all communications with the press, advertising, market research, marketing strategy development and implementation for domestic and international markets, promotional programs and sponsorships and the wine trade and hospitality industry. Additionally, there are 13 regional wine promotion boards, one for each wine region; according to the new strategy for German Wine marketing as announced in October 2007, DWI is seeking synergies with them, recognizing the potential for strengthening the national brand. 32 Continued growth for German Wine Exports, 12.03.08, the German Wine Institute. (http://www.deutscheweine.de/) PRC Group | National Interprofessional Organisation for Vine and Wine Page 205 of 364 See confidentiality restrictions on title page © PRC Group 2008 CONFIDENTIAL National Interprofessional Organisation for Vine and Wine 5/12/2008 Comparative analysis of countries-markets regarded as competitors or considered cases of excellence Germany The Wine Institute has 15 external “Information Bureaus” located in its important countries-markets, namely Belgium, Canada, Denmark, Finland, Great Britain, Ireland, Japan, Korea, The Netherlands, Norway, Poland, Russia, Sweden, Switzerland, and the USA.
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