WINE TRADE MONITOR 21 January 2020

Press Kit WINE TRADE MONITOR 21 january 2020

In partnership with Sopexa presents the findings of the Wine Trade Monitor, now in its eight year. This international and prospective survey provides an exclusive trade insight into wine trends and forecasts across the globe. Wine Trade Monitor 2019 was conducted in collaboration with Wine Paris, a leading international wine industry event scheduled to take place in Paris, 10 - 12 February 2020.

This year, the survey also includes the UK and Germany, the world’s leading markets for wine imports by volume, bringing the total number of markets surveyed to seven, each a major player in the world wine industry: Belgium, China – Mainland, China – Hong Kong, Germany, Japan, the UK and the USA.

984 importers, wholesalers and retailers took part in the survey and shared their vision on the evolution of the market and future trends set to impact sales over the next two-year period.

TABLE OF CONTENTS

Listings : which wines where ? ...... page 3

Market evolution : confidence levels among industry professionals....page 4

Sales forecasts to 2021, by country ...... page 5

Wine image by country of origin ...... page 7

Wine category dynamics ...... page 9

The great wine regions : Future movers and shakers ...... page 11

Grape variety dynamics ...... page 13

Methodology ...... page 14

2 Listings : which wines where ?

With an average 8 « countries » listed per respondent, competition remains fierce for a place on wine lists in markets surveyed. However, this average score often masks significant regional disparities across the world.

With a notably leaner range in mainland China - only 4.5 countries - the UK, in contrast, offers the most diverse range, with 11.3 countries. Meanwhile, Japan offers the second most extensive range, with 10 countries listed on average.

France, Italy and Spain remain on top

These 3 countries feature most prominently in wine ranges according to respondents across the seven markets surveyed.

Named by 89% of respondents overall, compared to 75% citing Italian wines and 67% Spanish wines, French wines are less popular in wine portfolios in a number of markets. In Belgium for example, French wines lost 17 percentage points compared to 2018. In China, listings of Spanish have declined.

3 Market evolution : industry professionals are relatively optimistic

Three markets stand out for the optimism of wine professionals regarding positive market growth : the majority of respondents in the US, Germany and Japan predict growth over the next 2 years. By way of contrast, respondents in the UK are largely pessimistic with 44% expecting a market decline.

In all other markets, most wine trade professionals forecast the market will stabilise.

4 Sales forecasts to 2021 : French wines under challenge

Most positive outlook for Italian wines

While Italy and France share the top spot in terms of growth potential, according to four in ten respondents, in some markets, the outlook for France is less rosy.

In mainland China, respondents believe Australian wines to have the brightest future (cited by 60% of respondents), followed by Chilean wines (46% of respondents) and Italian wines (42%). French wines are also losing momentum in Belgium, China - Hong Kong and the USA.

I recall over 15 years ago hearing the Australians talking openly about their vision for 2020 and that it was to become one of the prominent wine exporters of the world. So the government as a whole has had a plan to really push wine in terms of marketing and communications. More specifically to China, there are a few additional factors: one is trade agreements between China and Australia resulting in reducing duties for Australian wine to 0 compared to 14% for wines from France. Also, Australia is known as a red wine producer which fits well with the stereotype view of China being a red wine consuming ROB BEVIS, Senior Business Development Director, country. The style of the wines is very fruit forward and Greater China, of export and distribution company approachable, perfect for first time or novice drinkers. East Meets West Fine Wines, Finally, in China, which lacks a strong retail infrastructure, consumers seek reassurance or recognition to guide their choice. Australia, which has some of the world’s largest wine companies, acutely focused on marketing, has prominent, recognisable wine brands that fulfil this role

5 In Japan, for the first time, local wines are set to see the greatest sales growth according to trade professionals surveyed. 40% of respondents place local wines ahead of French wines (36% of respondents) and Italian wines (24%). Loïc Brunot, Managing Director, Sopexa Japan & Australia, explains:

Wine production in Japan began in the 70s, when the country was slowly opening its doors to European wines, and French wines in particular. But it is only recently that the quality of the wines has improved and started to attract the attention of the local wine trade and ultimately consumers. Today it is evident that Japanese wines are increasingly present on wines shelves and in restaurants on the domestic market. Demand is fuelled by consumers wanting to drink local wines, and by the promotional efforts of producers who are focusing on the 2020 Olympics to put their wines in the spotlight. Production however remains relatively low: in 2018, approximately 198,800 hectolitres – by way of LOIC BRUNOT, Managing Director, comparison, you need to multiply this by 276 to match the Italian Sopexa Japan & Australia production and 241 for the French). To satisfy the market, Japan relies heavily on imported wines, compounded by a limited surface area for agriculture.

In the United Kingdom, forecasts indicate that wines from the southern hemisphere will take full advantage of Brexit

According to UK wine trade professionals, Brexit will primarily benefit wine-producing countries outside Europe: 53% of respondents forecast growth for Chilean wines, 45% for Australian wines and 40% for Argentinian wines.

More than one in four UK respondents also expect Brexit to benefit local production.

In the USA, Italian wines are now clearly benefiting from the psychological impact of the announced increase in customs duty on French wines last October. The situation may change however within the context of duties for all European countries under negotiation.

6 Wine image by country of origin

Image & reputation: France, wine-producing country par excellence

In terms of global image, taking all image criteria into account, France continues to command the top spot according to the wine trade, and way ahead of its competitors: 59% of respondents consider French wines have the most positive image. France takes the lead for the majority of criteria, notably for “Wines for special occasions”, “Organically-certified wines”, “Sustainably-produced”, and “Successful national promotional campaigns”.

Italy, in second position, trails significantly behind, named by 11% of respondents overall.

By way of contrast, France’s image is viewed less favourably by the wine trade in Belgium.

7 “Appealing to younger generations” and “innovation” mainly associated with Australian and Italian wines

For the highly sought-after younger market, respondents place Australia and Italy in the lead, according to 16% of those surveyed overall, followed by Spain (13%), Chile and the USA (both with 10%). France does not make the top 5.

Australia (according to 19% of wine professionals) and Italy (18%) were also the top performers for « Innovation ».

Of all the traditional wine-producing countries, Italy has a dynamic approach to marketing and communications. It is worth noting too that Italy is also renowned for its design and design culture. This is reflected in the quality of the packaging and the message this conveys. In addition, the legacy of native Italian grape Paolo LIBRANDI, Director of LIBRANDI, leading varieties is huge: the Italian wine trade could promote a company for wines from Calabria and also President of different variety each day! This can only serve to engage the region’s trade body, agrees that Italian wines have younger drinkers, who appreciate anything new or great potential in these areas original. These are undoubtedly two of the factors which explain why Italian wines perform so well against these two image criteria.

8 Wine category dynamics

Organic and biodynamic wines make their mark

For 42% of professionals surveyed, organic and biodynamic wines are THE buzz category for the next two years, ahead of regional wines (28%).

The wine trade in the UK and the US have particularly high expectations for the category, with 63% and 58% of professionals respectively predicting growth in this area. Only mainland China bucks this major trend.

The interest in organic and natural wines is part of a larger movement involving food, wine, climate change, the environment and globalization. It’s a generational shift, so naturally, the market is trying to jump on it and be a part of it. However, in order to succeed in this category, there are a few important rules to follow. Firstly, the wines have to be organic in their approach, not just a marketing concept. It’s about being honest with the consumer. Organic and natural wines have to be low-sulfur with no additives, especially if the wines are

David BOWLER, US importer and distributer or organic biodynamic. Honesty and Integrity is important in the and naturel wines based in New York explains: production process too which must be part of the marketing. The wine really should be the product of a smaller outfit; If it’s clear the wine comes from a large production facility, it’s not going to work. Another factor is affordability. Lastly, the labels are a strategic element and need to reflect a certain playfulness, with a less traditional look.

9 Low-alcohol wines come out well in the two major European markets

35% of respondents in Germany and 24% in the UK see potential in this category, which is predicted to see the second highest growth over the next two years.

The appeal of rosé wines wanes in the USA

After several years of sustained popularity, only 13% of US respondents expect growth in this category.

10 The great wine regions : Future movers and shakers

Red wines : all-French Top 4

The 4 regions set to see the greatest growth according to the wine trade are all French: Bordeaux, Languedoc, Bourgogne and the Rhône. Their success is driven essentially by their popularity in Asia and continental Europe. In the UK however, Beaujolais is the only French region to make the Top 4, where in contrast, Mendoza in Argentina is considered the region to watch.

While Bordeaux wines are still highly sought-after in mainland China and China - Hong Kong, Languedoc wines are forecast to perform better in Germany, Belgium and Japan.

Wines from Bourgogne are in third place and are expected to perform particularly well in China - Hong Kong by a third of respondents.

White wines : the top 4 have remained unchanged over the last two years, dominated by Marlborough and the Loire

Sharing the top spot with Loire wines according to 24% of all respondents, wines from Marlborough, New Zealand continue to gain ground, and are expected to perform particularly well in the UK, mainland China and China - Hong Kong. In contrast, Marlborough wines rarely feature among top performances according to respondents in Germany and Belgium.

Loire wines maintain their lead as the region with the most positive outlook in the USA, even if their growth potential has fallen slightly compared to previous years.

These two regions are closely followed, if not equalled (according to 23% of respondents) by the Languedoc, which is set to perform well in Belgium and Japan, and also by Bourgogne wines, which lead the way in Asia.

11 A rosy outlook for Provence Rosé

67% of industry professionals place Provence in the top 3 performers within the rosé category. Belgium aside, the region tops the table in all markets. In China - Hong Kong, the wine trade is almost unanimous in the region’s growth potential (90% of respondents).

Languedoc rosé, backed by 57% of respondents, is also expected to see continued growth. It takes the top spot in Belgium, while in the UK, backed by 70% of respondents, Languedoc rosé is considered almost on a par with leader Provence (77%).

Italian rosé continues to challenge its French counterparts: Italian rosé features in the top 3 expected sales performances in every market except the US and the UK.

Sparkling : the top 4 spots are fiercely contented, with the picture varying significantly across the globe

Prosecco remains the outstanding winner and features in the Top 3 performers in every market surveyed. For the rest of the sparkling market, growth forecasts vary significantly.

Hopes are high for Cava in Japan and the US, and to a lesser extent Belgium, while the great majority of respondents in Germany and the UK predict future growth for the Cremant category. Champagne is still set to perform well in mainland China and China-Hong Kong. It is worth noting that English sparkling wines should see healthy growth in the UK over the next two years (no. 1 for 79% of respondents) and echoed in the USA.

12 Grape variety dynamics

A stable picture

Globally, the 4 classic grape varieties - Cabernet Sauvignon, Pinot noir, Chardonnay and Merlot – should continue to see the greatest demand over the next two years.

Outright leader in every market surveyed, Cabernet Sauvignon is predicted to perform particularly well outside Europe where it leads the way for expected growth, particularly in China. Growth forecasts in Europe are less ambitious.

13 Methodology Wine Trade Monitor

Fieldwork

Sopexa has adopted a unique approach canvassing local wine trade professionals, true consumer gatekeepers, harnessing their frontline perception of the wine market in order to understand and anticipate the latest breaking trends.

Decision-makers

The survey was administered on line to a diverse and representative sample of stakeholders who make up the wine market including 984 wholesalers, agents, importers, supermarket retailers and specialist chains and e-commerce specialists (dealing exclusively on-line), of which 92% are major decision makers (CEOs, Sales Managers and Buyers). Almost 41% of respondents sell more than 100,000 bt per annum and 17% in excess of 1 million.

7 key markets

In 2019, the study focuses on seven key markets: Belgium, Canada, Japan, China-Hong Kong, mainland China, the UK and the USA.

Overall results are presented as an average of all seven countries, giving each country equal weighting within the sample.

Future perspectives

In 2019, priority was given to questions focusing on:

- Country of origin of wines listed by wine trade representatives surveyed and 2018 sales results - Confidence levels among professionals regarding future sales outlook - Future sales trends and prospects from the perspective of the wine trade - Perceived image of different countries of origin against selection criteria, including Price attractiveness, Consistent quality, Everyday wines, Wines for special occasions, Approach to sustainable development, Capacity to adapt wine offer to consumer expectations, Innovation (label, packaging), BtoB or BtoC marketing and sales activation and Effective collective or brand communication campaigns - Market dynamics of different categories, including organic and biodynamic wines, flavoured or aromatised wines, regions, grape varieties, low cost, rosé, brands, private label, natural, low-alcohol and premium wines - Grape variety and wine region dynamics segmented by colour

14 SOPEXA is an international communication agency whose teams have embodied the "think global, act local" adage for 60 years.

Today, SOPEXA is a HOPSCOTCH GROUPE agency. Together, they form the HOPSCOTCH + SOPEXA integrated international network, made up of 31 nationalities and present on 5 continents.

On a daily basis, 250 experts passionate about FOOD & DRINKS, design and promote the communication strategies of local authorities, institutions, companies and brands, adapting them to local markets. The international agency develops a unique value proposition covering all communication expertise: planning, editorialization, campaigns and activations, amplification and performance measurement. The agency is the leader in campaigns co-financed by Europe, with more than 400 campaigns to its credit over the past 12 years.

About HOPSCOTCH

HOPSCOTCH is an international communication group created in France, led by its founders and managers, and guided by the vision of entrepreneurs uniting complementary areas of expertise. What is HOPSCOTCH's credo? “Global PR,” articulated through a unique mix of digital, events, public relations and shopper experience. HOPSCOTCH brings together, at its Parisian Hub, in Lyon, Lille and internationally, a team of over 700 experts in all fields of communication: influence, events, activation, digitalisation, internal communication, public affairs, shopper experience, and more. Firmly convinced that the value of a company or organisation lies in the care given to its relationship capital, HOPSCOTCH structures its expertise around its own "Hopscotch" brand (Events / PR / Travel / Corporate / Congress / Luxury / Content&Design), and specialised agencies: heaven, Sagarmatha, Human to Human, Le Public System PR, Le Public System Cinéma, Capdel, Beeshake and Sopexa. Today, HOPSCOTCH operates an integrated international network, with 35 offices on 5 continents, enabling it to operate in more than 60 countries. Listed on Euronext Paris (Code ISIN: HOP FR 00000 6527 8), the Group posts a turnover of €211 million and gross margin of €78 million. Keep up with our news: www.hopscotchgroupe.com and on Twitter/Instagram @HOPSCOTCHgroupe

About VINISUD, VINOVISION PARIS and WINE PARIS

VINISUD is the leading international trade fair for southern wines, established and supported since 1994 by the wine marketing boards and producer organisations in Southern France: CIVL, CIVR, Inter'Oc, Inter-Rhône, IVSO, CIVP and CIV Corse. VINOVISION PARIS, the international trade fair for cool climate wines, was launched in 2017 by the wine marketing boards in the Loire Valley, Centre-Loire, Burgundy, Beaujolais and Alsace and by the Champagne winegrowers’ organisation SGV. VINISUD and VINOVISION PARIS merged to create WINE PARIS, the international event for wine professionals in Paris, at the initiative of all their founding wine marketing boards and partners. The first WINE PARIS was held 11 - 13 February 2019 at Paris Expo Porte de Versailles and was attended by 2,000 exhibitors and 26,700 wine trade members, including 30% from outside France.

VINISUD, VINOVISION PARIS and WINE PARIS are organised by COMEXPOSIUM/ADHESION GROUP and are led by 13 French wine marketing boards. In February 2020, Paris will become the global epicentre of wines and spirits when WINE PARIS and VINEXPO PARIS are held jointly 10 - 12 February 2020 at Paris Expo Porte de Versailles.

15 Press contact : Ghislaine PLUS Phone : +33 (0)1.55.37.51.30 [email protected]