October 22, 2013
Australian Consumer and Beverage
The Global Wine Industry
MORGAN STANLEY RESEARCH
Asia/Pacific
Slowly moving from balance to shortage
Morgan Stanley Australia Limited+
Tom Kierath
Declining in global production deepens supply shortage
Thomas.Kierath@morganstanley.com
+61 2 9770-1578
The global wine industry has seen an excess of 600mn unit cases (almost ¼ of global consumption) in 2004, reduce
to just 1m unit cases in 2012 – largely through an ongoing structural reduction in capacity. After adjusting for non
wine uses, demand for wine exceeded supply by 300mn cases in 2012, the deepest shortfall in over 40 years of
records. Production in 2012 also fell to its lowest levels in more than 40 years.
Crystal Wang
Crystal.Wang@morganstanley.com
+61 2 9770-1195
Impact of shortage lags - demand for exports is likely to accelerate in the medium term
In the short term, inventories will likely be reduced as current consumption continues to be predominantly supplied
by previous vintages. As consumption turns to the 2012 vintage we expect the current production shortfall to
culminate in a significant increase in export demand, and higher prices for exports globally. Further growth in
consumption in the meantime may exacerbate the shortage when it comes through.
Net exporters such as Australia, Chile, Argentina, South Africa and NZ are best placed to benefit
13e
11
12e
10
09
08
07
Demand
06
05
04
Supply
03
Pure play listed wine companies are rare, and vary in terms of their ability to capitalise on global opportunities.
Within the Morgan Stanley coverage universe TWE is the only diversified wine ‘pure play’. For our most recent views
on TWE please see our report published on September 30th, 2013 titled ‘A Hypothetical Cure for the US Hangover”.
02
Treasury Wine Estates (TWE.AX, A$4.73) is our top Australian consumer pick
Global Wine Supply / Demand
3.4
3.3
3.2
3.1
3.0
2.9
2.8
2.7
2.6
2.5
01
With tightening conditions in Europe, the major new world exporters stand to benefit most from increasing demand
on global export markets. Relative cost of production, varietal preference, and relative currency evolution will impact
share, however with overall demand tracking ahead of supply each will likely see increased export demand. Chile,
Argentina and South Africa should see current excess supply absorbed, whilst Australia and New Zealand are
already in balance / shortage domestically, and may see more immediate upward pressure on export prices.
Supply lagged 1 year. Million unit cases.
See pg 11 for references
Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making
their investment decision.
For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.
+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject
company, public appearances and trading securities held by a research analyst account.
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Contents
A Global Summary ……………………………………………………………………………………….3
What has happened in the past 12 months? ………………………………………………………….4
The Global Wine Industry…………………………………………………………………………….….5
Australia ………………………………………………………………………………………………..…17
US ……………………………………………………………………………………………..…………..34
Europe ……………………………………………………………………………………………..……..45
China……………………………………………………………………………………………..………..56
Other New World Markets …………………………………………………………………………...…61
Currency and world trade ……………………………………………………………..…63
Argentina ………………………………………………………………………….…….…64
Chile ……………………………………………………………………………………..…66
South Africa ………………………………………………………………….…….………67
New Zealand …………………………………………………………………….…...……70
2
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Summary
Global View – Production declines maintain outlook for global shortfall
more than 1 million wine producers in the world, producing approximately 2.8 billion cases of wine each year.
Global consumption (including non wine uses) is c3 billion cases.
There are
top ten wine-producing countries control 80%+ of production across 4.4m hectares of vineyards. These countries
represent 60% of global consumption, creating a delineation between net exporters and importers.
The
Global wine production peaked in 2004 and continues to decline. In 2012, production declined to its lowest level in
40+ years. Global consumption inflected in 2010 and continued growing in 2011 and 2012.
global excess supply peaked in 2004, and has been in balance / under supply since 2006 – working down excess inventories following an
extended period of surplus. Following the weak V12, global undersupply is at its deepest level in more than 40 years. Data suggests
Similarly,
there may be insufficient supply to meet demand in coming years, as current vintages are released.
In the past couple of years,
has peaked.
production declines have continued in France, Spain and Italy and new world* production
The French remain the largest consumers of wine, with consumption maintaining a positive trend since 2010, following decades of decline.
The US is now a very close second. The US and China are the main drivers of consumption growth globally.
The global export market is about 1 billion cases. Excluding intra EU trade, we estimate the global ‘seaborne’ export market
is about 600 million cases, 60% of which is to the UK, the US and China.
New world now represents c30% of global exports, compared to less than 3% in the early 1980s.
^ France, Spain, Italy, Germany, Portugal, Greece, Austria, Switzerland, Romania
* USA, Australia, Argentina, Chile, South Africa, New Zealand
3
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
What Has Happened in the Past 12 Months?
Industry capacity continues to decline:
Structural adjustment has continued in Europe. Europe now has ~10% less winemaking capacity than it
did in 2005. France and Spain, with Europe’s largest capacity are 10% and 13% lower respectively than in 2005.
Overall global production fell 5%-6% in 2012 to the lowest level in 40+ years. This was primarily the result of large declines in
European production as a result of poor weather conditions. France in particular saw a sharp fall of c20%. Argentinean production also fell 24% in 2012.
Global consumption has continued its recovery, rising 1% in 2012.
Declining production and rising consumption has resulted in
a large undersupply of almost 300m cases.
Exports now account for 40% of global production, up from 15% 30 years ago, with global consumption growth being
dominated by net importing nations of China and the US.
Australia saw further progression towards a balance between supply and demand, with ongoing reduction in inventories.
This is being driven by continuing vine pull amid a fairly static consumption environment.
Ongoing structural growth trends in the US have seen consumption draw almost level with France. Domestic production
increased substantially in 2012, which may put downward pressure on imports over the coming 12 months as supply re-aligns with demand.
Europe saw plummeting production, driven by ongoing vine pull and poor weather. Consumption rose for the first time since 2001,
driven by France.
Asia continued to see strong consumption growth, driven by China.
Imports have been the primary driver of growth, although
domestic production has also increased.
4
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Area Under Vine: Continuing to decline
1
11,000
Global area under vine
(‘000 hectares)
% of World Total
Spain
France
Italy
China
Turkey
US
10,000
800
9,000
400
-0.6% CAGR
2
Area under vine from 2000 to 2013e (‘000 hectares)
1,200
2001
15.4%
11.6%
11.3%
4.5%
7.2%
5.4%
2012e
13.4%
10.6%
10.2%
7.5%
6.6%
5.4%
-
-78
New Zealand
Germany
South Africa
Australia
Chile
Argentina
Portugal
US
Flat
100
-2.5%
2012e
80
2011
Italy
France
Australia
Turkey
Portugal
Argentina
Iran
South Africa
Germany
New Zealand
Chile
-150
120
2010
-67
US
Italy
-25
-100
China
Old World
140
-21
2009
-9
2008
-5
2007
-4
2006
-2
-50
2005
-
4
+5.3%
China
New World
160
2004
7
China
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
'91-95
'86-90
'81-85
9
2003
10
3yr CAGR
180
(‘000 hectares)
100
50
Indexed area under vine
5yr change in Area under vine
95
2002
150
*
* Includes table grapes (area under vine
purely for winemaking totals approx 70k ha)
2001
3
'76-80
'71-75
7,000
France
Spain
0
Turkey
8,000
Global area under vine has continued its steady decline [1], driven by vine pull in the old world (at c2.5% pa) and minimal new plantings
in the new world [4]. China, is the only country consistently expanding its vineyard footprint with an average growth rate of 5.3% over
the past 3 years [2,4] although data from OIV is total table grapes, grapes for winemaking are estimated to be a much smaller % of the
total.
Source: OIV, ABS, Austrade, Morgan Stanley Research, (e)=OIV estimates in 2012 and MS estimates in 2013
5
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Production: Temporarily stabilised in 2011
1
2
5yr change in wine production (million unit cases)
150
Global wine production
(million unit cases)
3,900
100
3,700
50
3,500
0
-50
3,300
-100
3,100
Italy
Spain
France
Australia
Argentina
Greece
Portugal
Austria
Germany
South Africa
Brazil
Russia
71-75
76-80
81-85
86-90
91-95
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012e
2013e
2,500
US
Chile
China
2,700
New Zealand
-150
2,900
4
Evolution of World Wine Production - from 1995 to 2012
(million unit cases)
3
Production by country
(million unit cases)
700
600
Old World
500
New
World
China
154
35
1996
2001
2006
2012e
300
3,298
2,800
200
New Zealand
Brazil
Greece
Portugal
Russia
Chile
South Africa
Germany
Australia
China
Argentina
US
Spain
France
Italy
0
1995
25
-460
China
Other
111
-186
2,788
Global Production
Decline
Global Production
Build
100
New
World
80
229
400
Old
World
Other
2004
2004
2012e
Production is more volatile than area under vine due to fluctuating agricultural conditions, but has, over the past decade, demonstrated a
substantial declining trend [1]. In 2012, global wine production reached its lowest levels in more than 40 years, driven by ongoing removal of
capacity and poor weather conditions. Global wine production has undergone a significant shift over the past 2 decades with both old and
new world growth driving the first decade, whilst old world declines have dominated the second [4].
Source: OIV, ABS, China Customs, Morgan Stanley Research, (e)=OIV estimates in 2012; MS estimates in 2013
6
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Production: The Old World Still Dominates
1
800
Italy
France
Spain
Germany
Portugal
Old World Wine Production (million unit cases)
600
300
New World (and China) Wine
Production (million unit cases)
Argentina
South Africa
Chile
2
Australia
USA
China
250
200
400
150
zz
100
200
50
3
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
2013e
4
Old and new world wine production (million unit cases)
Share of global wine production
70%
1996
0
1995
2013e
2011
2012e
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
2,500
60%
800
Old w orld (LHS)
New World (RHS)
50%
Old w orld
New World
Other
40%
30%
20%
2,250
725
2,000
650
1,750
575
1,500
500
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0%
81-85
'86-90
'91-95
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012e
2013e
10%
Total old world production in 2012 is estimated to be 1.5bn cases, down 9.5% from 2011 with a sharp fall in particular from France (18%) [1 & 4]. New world production remains flat at c760m cases, with increases in production from South Africa, the US and Chile more
than offset by a 24% decline in Argentina [2 & 4]. These trends, along with the rise of Chinese wine production, are driving production
share declines in the old world, despite signs of maturity in new world markets [3 & 4].
Source: OIV, Morgan Stanley Research, (e)=OIV estimates in 2012; MS estimates in 2013
7
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – The top 10 producers have seen production decline since 2004
Top 10 producer production (million unit cases)
2012e total =2,249
Germany
20
South Africa
139
161
228
-16.8%
469
2011
Spain
(60)
Italy
(80)
-40%
-50%
France
2012e
3
-30%
-23.9%
Chile
445
-20%
US
(40)
South
Africa
China
-10%
-6.3%
-11.2%
China
Chile
US
564
10%
0%
Australia
330
475
7.6% 6.9%
Argentina
Germany
371
20%
(20)
2
20.0% 30%
4.0% 4.2% 5.0%
Italy
116
153
213
Australia
Argentina
-6.0%
Spain
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
-
Top 10 producers – production change
2012e vs 2011 (mucs (LHS))
2012e vs 2011 (% yoy (RHS))
40
2011 total = 2,393
France
1
Top 10 producer production (million unit cases)
3,000
2,500
Germany
South Africa
Australia
Argentina
Chile
China
US
2,000
1,500
Spain
1,000
Italy
500
France
2011
2012e
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-
[1] Total production amongst the top 10 producers fell 6% in 2012, with larger declines from the major regions of France, Spain and Italy,
but also Argentina [2]. China is one of few regions that has seen production increases over the past decade. Despite the decline, France,
Italy and Spain continue to dominate global production [3].
Source: OIV, comtrade, Morgan Stanley Research, (e)=OIV estimates
8
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Consumption: Making a recovery, led by France, the US and China
1
Wine consumption by country (million unit cases)
Global wine consumption (million unit cases)
2,900
2008
400
2009
2010
2011
2012e
2
Falling
2,800
300
2,700
200
2,600
100
2,500
500
450
Australia
Argentina
China
US
Italy
China
Spain
UK
Argentina
Russia
2012e
2011
2010
2009
2008
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Australia
91-95
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
400
50
0
91-95
600
150
100
France
Germany
86-90
800
86-90
US
300
250
200
Old w orld
New w orld
Others
1,000
France
Brazil
Chile
Switzerland
Romania
Portugal
Russia
UK
400
350
1,200
4
Wine consumption by country (million unit cases)
2007
1,400
Germany
2013e
2011
2012e
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Global wine consumption
(million unit cases)
1,600
Spain
Italy
-
2,400
3
Rising
Stable
Global wine consumption has continued to recover [1] with France, the US and China driving incremental growth while other old world
regions continue to show declines [3]. The important markets for growth, the US and China have more than offset declines in old world
markets over the past 10 years [2, 3 & 4].
Source: OIV, Morgan Stanley Research (e)=OIV estimates in 2012; MS estimates in 2013
9
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Consumption Per Capita: Reached inflection point
Global wine consumption per capita per annum (litres)
France
70
60
50
Spain
30
Argentina
Germany
20
Australia
38
UK
US
10
20
10
US
Ireland
Netherlands
Greece
Romania
Australia
Germany
Argentina
Austria
Portugal
France
Spain
New
Zealand
UK
Denmark
Switzerland
Italy
0
2012e
2011
2007
2006
2005
2004
2002
2001
2000
1999
1998
1997
2003
0.5%
0.3%
-0.2%
-0.7%
-1.5%-2.1%-3.0%
-4.5%
-6.4%
Italy
China
30
1.4%1.1% 0.6%
UK
1.0
1.8%1.8%
Germany
1.2
40
Romania
1.4
Netherlands
Rising
Stable
Russia
Falling
50
4
Top 15 wine markets Consumption growth (5 yr CAGR)
7.4%
Argentina
60
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
US
2012e
France
2011
Australia
2010
South
Africa
2009
China
Global per capita wine consumption (litres)
1996
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
3
China
0
2010
33
Spain
Consumption per capita (above 15 years old)
Consumption per capita (total population)
43
2
Italy
40
2009
48
Portugal
53
2008
Global wine consumption per capita per annum (litres)
58
Brazil
1
Global per capita consumption has reached an inflection point, with growth continuing off 2009 lows [1]. Growth from new world markets
and China is more than offsetting declines in some Old World countries [2 & 3]. French consumption has maintained its recovery since
2011, after an extended period of decline [2]. Chinese per capita consumption remains low by international standards, despite strong
ongoing consumption growth [3 & 4].
Source: OIV, Morgan Stanley Research, (e)=OIV estimates in 2012 and MS estimates in 2013
10
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Production & Consumption Over Time
1
Russia
Chile 3%
Italy
17%
Ex-top 10
15%
4%
Global
production
(2013e )
South Africa
4%
Germany
4%
China
7% Argentina
5%
US
8%
Ex-top 10
20%
US
8%
3%
China
1%
Italy
18%
Spain
15%
Argentina
4%
Global
production
(2000)
Italy
9%
Germany
8%
UK
5%
Argentina
China
4%
9%
France
21%
Germany
4% Australia
Russia
5%
2
US
12%
Romania
2%
Spain
12%
3
South Africa
2%
Ex top ten
30%
France
17%
Australia
4%
Russia
2%
Chile
2%
France
12%
Global
consumption
(2013e)
Ex-top 10
28%
Global
consumption
(2000)
France
15%
4
Italy
14%
Romania
2%
Russia
2%
UK
4% Argentina
6% China
5%
Spain
4%
US
9%
Spain
6%
Germany
9%
[1, 2, 3, & 4] following a weak 2012 vintage, Italy, France, and Spain represent 43% of global wine production (down from 54% in
2010), and 25% of global consumption (down from 35% in 2010). New World production has increased from ~20% in 2010 to around
30% today.
Source: OIV, Morgan Stanley Research, (e)=MS estimates
11
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Global Supply and Demand: Expanding Excess Demand
1
400
Global: Production vs. Consumption (million unit cases)
3,400
Net addition (depletion) to global inventories
(million unit cases)
2
300
3,200
200
3,000
100
2,800
0
2,600
Production
Consumption
-100
-200
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
Global production less consumption (including non-wine uses)
million unit cases
3,400
3,300
-300
95
3,300
3,200
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11 12e
Global production less consumption (including non-wine uses)
with production lagged 1 year
million unit cases
3,400
4
3,200
3,100
3,100
3,000
3,000
2,900
2,900
2,800
2,800
2,600
Production
Consumption including non w ine uses
2,500
2013e
2012e
2011
2010
2009
2008
2007
2003
2,400
2002
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2,400
2006
2,500
2,700
Consumption including non w ine uses
2005
2,600
Production
2004
2,700
2001
3
2002
2001
2,400
A continuing rebound in global consumption combined with declining global production saw total global undersupply deepen substantially
in 2012. After adjusting for non-wine uses (OIV estimates ~300 million unit cases are used for non-wine purposes such as vermouth,
brandy, etc.), there appears to be a global undersupply of wine of almost 300mn cases [3]. The impact of the 2012 production shortfall
lags, as current consumption is still dominated by earlier vintages. [4] shows the impact assuming a 1 yr lag. Inventories have been
reduced by almost 700m unit cases since 2006 [2].
Source: OIV, Morgan Stanley Research, (e)=OIV estimates in 2012 and MS estimates in 2013
12
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – Old and New World
1
Global wine production (million unit cases)
2,500
800
Old w orld (LHS)
New World (RHS)
net exporters
200
2,250
725
2,000
650
1,750
575
Production net of consumption –
2012e (million unit cases)
300
2
100
0
-100
net importers
-200
3
2,200
UK
the rest
US
Germany
China
186 mucs
650
Production
Consumption
Russia
Japan
Canada
Brazil
Switzerland
Austria
New
Greece
Portugal
Australia
Consumption
700
1,600
4
Production
750
1,900
Argentina
Chile
New World: Production vs. Consumption (million unit cases)
800
Old World: Production vs. Consumption (million unit cases)
South
Italy
France
500
81-85
'86-90
'91-95
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012e
2013e
1,500
Spain
-300
600
550
379 mucs
1,300
500
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1998
450
1,000
These charts do not include other markets (such as China which is not officially classified as old or new), nor do they account for non wine uses.
The old world still produces significantly more wine (c2x) than the new world [1], although including China reduces this gap. The wine industry
can be categorised into net exporters and net importers [2]. Broadly, old world oversupply has contracted [3], while the new world’s oversupply
continues to diminish [4].
Source: OIV, Morgan Stanley Research, (e)=OIV estimates in 2012 and MS estimates in 2013
Old World: France, Spain, Italy, Germany, Portugal, Greece, Austria, Switzerland, Romania.
New World: USA, Australia, Argentina, Chile, South Africa, New Zealand
13
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – The Global Wine Trade : The Export Market is growing strongly
1
45%
Global exports as a % of global production
Long term growth in value of the export markets (US$m)
35,000
2
40%
30,000
USA
35%
Australia
25,000
30%
15,000
10,000
Italy
5,000
France
Leading wine exporters – 2011e (million unit cases and USD/Case)
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
$15.00
2013
2012
2011
2010
2009
2008
2007
$10.00
2006
New Zealand
Portugal
Argentina
Germany
South Africa
US
Chile
Australia
France
Spain
Italy
0
2005
50
$20.00
2002
100
$25.00
2001
150
2000
200
$30.00
1999
RoW
To Europe
Export Prices (RoW)
Export Prices (Europe)
250
4
Long term pricing on the export markets (US$/case)
1998
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
1997
300
1997
1996
-
1996
2013e
2012e
2011
2010
2009
2008
'01-05
'96-00
'91-95
'86-90
'81-85
10%
2003
15%
2004
20%
3
RoW
Spain
20,000
25%
Chile
The global wine trade has grown dramatically in the past 30 years and now represents 40% of total production [1] and is worth over
US$30bn [2]. At ~US$10bn, French wine exports represent one third of total export value [2], which is largely a function of the higher
prices its wines command [3]. The US$15-$20/case price point is where many countries compete for the large EU demand pool [3].
Pricing overall on export markets has been a growth story for the past 15 years, with 2011 rebounding strongly from 2010 lows [4].
Source: OIV, Comtrade, Morgan Stanley Research, (e)=OIV estimates in 2012 and MS estimates in 2013
14
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – The Global Wine Trade : The Seaborne Market
World Exports inside and outside the EU (million unit cases )
RoW Exports
1,200
30,000
1,000
25,000
800
400
200
10,000
5,000
-
2013e
Of Seaborne trade
20%
0%
81-85 86-90 91-95 96-00 01-05 2008 2009 2010 2011 2012e 2013e
2010
2011
2012e 2013e
The major exporters and pricing by the major importers (US$/case)
France
United Kingdom
Germany
$120
Australia
As at 12 months
$100
USA
to March
China
$80
Canada
VWAP
$60
4
$140
$40
$20
$Spain
Leading 5 EU exporters
Southern Hemisphere
Other
2009
Chile
Share of the global export market
80%
2008
Italy
2012e
Argentina
2011
Australia
2010
USA
2009
Average US/ case paid by importers
2008
40%
Seaborne
export
market is
US$21bn
15,000
0
60%
2
20,000
Seaborne
export
market is
600 mucs
600
3
World Exports inside and outside the EU (US$m)
RoW Exports
Intra-EU Exports
35,000
Intra-EU Exports
New
Zealand
1,400
France
1
Major exporters
By volume, almost half of the global export market is intra-EU trade while by value it is closer to one third [1 & 2]. We remove this intraEU trade to calculate ‘seaborne’ trade, which more accurately defines the addressable export market for New world exporters. After this
adjustment, the share of export markets appears much more equal between the old and new world, and in fact the greater share seems
to go to the new world [3]. Aside from France in the top spot, new world producers round out the top 5 in average export prices [4].
Source: OIV, comtrade, Morgan Stanley Research, (e)=OIV estimates in 2012 and MS estimates in 2013
15
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Global Wine Industry – The Global Wine Trade : US, UK and China drive import demand growth
Largest import markets (million unit cases)
200
2007
2008
2009
2010
2011
2
Largest import markets (US$m)
2012e
2013e
150
$6,000
China
2009
2010
2011
Italy
2008
Australia
2007
France
2006
Canada
$5,000
Germany
1
$4,000
100
$3,000
50
$2,000
$1,000
4
Limited supply and rising consumption underpin US imports
450
Imports required to meet domestic consumption
Imports required to meet domestic consumption
400
Domestic production net of exports
Domestic production net of exports
350
300
250
2015e
2014e
2013e
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
150
1997
2016e
2015e
2014e
2013e
2012e
2011
2010
2009
2008
200
2006
500
450
400
350
300
250
200
150
100
50
-
United
Kingdom
USA
Canada
China
Russia
France
US
$-
Growing Chinese consumption is forecast to more than quadruple import demand
2007
3
UK
Germany
-
Import demand growth is primarily driven by Germany, the US and China [1 & 2]. Import demand growth is set to be driven by China
and the US, two of the largest importers who consume more than they can produce domestically. Euromonitor estimates that Chinese
consumption will reach over 400 million cases by 2016, far ahead of Chinese government targets for production [3]. A similar situation
exists in the US, where IWSR projects consumption growing to almost 400 million cases, whilst domestic capacity is near full [4].
Source: OIV, comtrade, Chinese Customs, Morgan Stanley Research, (e)= OIV estimates (1&2); Euromonitor and International Wine and Spirits estimates (3&4)
16
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australia – Has returned to balance, scope for demand led tightening in medium term
Wine making capacity has reduced
noticeably since 2007. Land under vine is at its lowest levels since 2001, almost
20% below peak
in 2008. Importantly, bearing hectares is almost 100% of total land under vine, reducing risk of an increase in capacity coming
on line in the near term.
Production is 25% below its peak from 2008. With bearing hectares almost equal to land under vine, variations in production are likely to
come from yield. Yields have been broadly flat since 2008, although below previous peaks.
Imports are now 15% of total consumption, compared to 7% 5 years ago. New Zealand represents 2/3 of all imports,
and around 60% of total import growth since 2007. Growth in imports from EU have been more modest.
Total consumption grew 2% in 2012.
Consumption growth was supported by strong import trends, particularly from New Zealand.
Consumption of domestically produced wine was broadly flat.
Export volumes remain broadly in line with 2011, although remain 10% below the 2007 peak.
Export pricing (in local currency) has
been impacted by the strong A$ and 2012 remains near all-time lows.
That said, Exports have been trending
year on year both in value and volume.
positively over the past 12 months, with monthly bottled exports now reporting growth
Overall demand continues to marginally exceed supply, driving a reduction in inventories since 2007. The stocks to sales
ratio has narrowed from peak of 1.8x to 1.3x in 2012, below the industries ‘comfort range’ of 1.5 – 1.6x.
Continuing A$ strength remains a headwind for the industry, particularly for exports at lower price points where Australia is less
competitive in terms of cost of production. Import demand for mid to premium priced wine from The US and China presents the greatest
opportunity for demand growth, and could lead to further tightening of supply.
17
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Capacity
1
180
Area ‘000 hectares
140
Land under vine
Bearing Hectares
25%
Area under vine growth
2
20%
Overbuild
15%
10%
100
5%
0%
60
-5%
-10%
3
100%
FY14e
FY12
FY13e
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
4
6
Proportion of area under vine
bearing fruit
FY01
FY00
FY99
FY98
FY97
FY96
-15%
FY95
FY14e
FY12
FY13e
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
FY97
FY96
FY95
FY94
20
Australian crush per acre
(tonnes)
95%
5
90%
85%
4
80%
FY14e
FY13e
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
FY97
FY96
FY95
FY14e
FY13e
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
FY97
FY96
FY95
FY94
FY94
3
75%
[1 & 2] The substantial increase in land under vine seen through the late 1990s has reversed since 2008. Land under vine is now
15% below its peak, falling 7% in 2012 alone. As most planted land is now bearing [3], capacity is less likely to be a driver of
increased production in the near term. Supply variations can still be large however, based on yields [4], which have been broadly flat
since 2008, although yields have been considerably higher, and lower over the past decade.
Source: Australian Bureau of Statistics (ABS), Wine Australia, Morgan Stanley Research (e)=MS estimates
18
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Production
1
180
- White
- Red
160
Production (million unit cases)
160
Production (m tonnes)
140
40%
Production
% y-y
2
30%
120
20%
120
10%
100
80
0%
80
-10%
60
40
40
-20%
-30%
20
90%
19%
60%
50%
40%
10%
FY14e
FY12
FY13e
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
25%
Other White
19%
18%
22%
23%
Multipurpose
6%
Cabernet
Sauvignon
7%
7%
15%
15%
21%
24%
27%
12%
12%
12%
12%
FY00
FY06
FY10
FY11
14%
15%
30%
20%
FY98
Chardonnay
21%
23%
80%
70%
FY97
-40%
FY95
FY12
FY13e
FY14e
FY10
FY11
100%
FY07
FY08
FY09
FY02
FY03
3
FY04
FY05
FY06
FY99
FY00
FY01
FY97
FY98
FY94
FY95
FY96
FY91
FY92
FY93
FY89
FY90
FY86
FY87
FY88
0
FY96
0
14%
Shiraz
20%
Other Red
0%
[1] Australian production almost quadrupled from 1986 to 2006, although has reduced significantly from its peak. Weather impacts have
seen sharp variation in 2003 and 2007, Premium red wine has been the key area of expansion [1 & 2]. Australia produces ~120 million
unit cases a year, now evenly balanced between red and white wine, with red wine share reducing over the past 5 years.
Source: ABS, Wine Australia, Winemakers Federation of Australia (WFA), Morgan Stanley Research (e)=MS estimates
19
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Domestic Consumption
-10%
3
Sep-12
Mar-11
Jun-13
4
25%
Total
Red & Rose
20%
Bottled
15%
Dec-11
Dec-02
Domestically produced bottled wine consumption trends (volume yoy %)
Domestically produced wine consumption trends (volume yoy %)
20%
Jun-10
-15%
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13e
FY14e
30
bottled
bulk
total
Sep-09
35
-5%
Mar-08
40
0%
Dec-08
45
5%
Jun-07
50
2
10%
Sep-06
55
Mar-05
60
Quarterly total consumption – domestically produced and imports
(MAT, yoy % volumes)
15%
Dec-05
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
Jun-04
Domestic consumption
(million unit cases)
65
Sep-03
1
White
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
Mar-13
Jun-11
Sep-09
Dec-07
Mar-06
Jun-04
Sep-02
Dec-00
Mar-99
Jun-97
Sep-95
Dec-93
Mar-92
Jun-90
Sep-88
-10%
Dec-86
Mar-13
Jun-11
Sep-09
Dec-07
Mar-06
Jun-04
Sep-02
Mar-99
Dec-00
Jun-97
Sep-95
Dec-93
Mar-92
Jun-90
Sep-88
Dec-86
-10%
[1] Strong economic conditions and falling prices have fuelled domestic demand growth to over 50 million unit cases in the past decade,
with recent economic weakness temporarily halting growth. [3] Consumption growth of domestically produced bottled wine was in lower
single digits in 2012. [2] Total consumption growth has been boosted consumption of imported bottled wine, primarily NZ sauvignon blanc.
Mid to high single digit consumption growth in bottled wine shows more structurally positive trends, although is currently being offset by
declines in bulk / cask.
Source: ABS, Wine Australia, Morgan Stanley Research (e)=MS estimates
20
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry - Imports
1
12
700
Australian wine imports
600
10
500
MUCS(million unit cases)
8
2
Wine imports to Australia by country, FY01 to FY12
(million unit cases [bars] and A$/case [lines])
400
Value (A$m) (RHS)
6
300
4
200
100
0
0
FY82
FY83
FY84
FY85
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14e
2
3
4
Australian wine import trends %
Imports as a % of total consumption
Volume
100%
20%
Value
80%
16%
60%
12%
40%
20%
8%
0%
-20%
4%
Dec-12
Jun-11
Mar-12
Sep-10
Dec-09
Mar-09
Jun-08
Sep-07
Dec-06
Mar-06
Jun-05
Sep-04
Mar-03
Dec-03
Jun-02
FY14e
FY12
FY10
FY08
FY06
FY04
FY02
FY00
FY98
FY96
FY94
FY92
Sep-01
-40%
0%
[1] The import market is relatively small, at ~9 million unit cases in 2012, but has shown strong growth trends over the past 3 years and
now accounts for ~16% of total consumption. [2] The vast majority of this volume comes from New Zealand, but France is a key source
of imports when measure by value [3]. Despite strength in the A$ vs the Euro, around 90% of import volume growth over the past 5
years has come from New Zealand (Sauvignon Blanc), with EU import volume increases more modest.
Source: ABS, Morgan Stanley Research (e)=MS estimates
21
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Export Trends
2.0
40
1.5
30
1.0
20
0.5
0
0.0
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13e
FY14e
10
3
18%
Australian exports as a % of global total and Seaborne export market
Glass
Bottle
Bulk
Australia’s top 5 bottled wine export destinations
(12 months to March; million unit cases)
25
16%
14%
20
12%
10%
Mar-13
50
Mar-11
2.5
Mar-09
Value ($m)
Mar-07
60
Mar-05
MUCS
Mar-03
3.0
70
Wine exports by type (million unit cases)
Mar-01
80
2
100
90
80
70
60
50
40
30
20
10
-
Mar-99
3.5
Wine exports (million unit cases)
Mar-97
90
Mar-95
1
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
4
15
8%
6%
% of Total
4%
% of Seaborne
10
5
2%
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0%
USA
UK
China
Canada
NZ
[1] Australian wine export volumes have declined but are relatively unchanged from five years ago. Total value however has deteriorated
significantly with the rise of bulk exports and A$ strength [2]. Australian exports represent over 10% of the global seaborne export
market [3] but have lost some share, particularly at low price points, to lower cost of production regions in recent years. China has been
the only significant source of growth for Australian exports, and is now Australia’s third largest export market [4].
Source: ABS, Wine Australia, Comtrade, Morgan Stanley Research (e)=MS estimates
22
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Exports by price segment
1
Wine exports by price segment (million unit cases)
2
Wine exports by price segment (A$m)
70.0
3,000
60.0
2,500
50.0
2,000
40.0
1,500
$10.00 and over
$7.50 to $9.99
$2.49 and under
$2.50 to $4.99
$2.49 and under
Volume growth by price segment
2.0
$10.00 and
over
$7.50 to $9.99
$2.50 to $4.99
Mar-13
Jul-12
Top ten destinations for luxury wine
exports (above $10/l; million unit cases)
2.5
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Jul-10
Nov-10
Mar-10
Mar-08
-
Mar-13
Jul-12
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Jul-10
Nov-10
Mar-10
Jul-09
3
Nov-09
Mar-09
Jul-08
Nov-08
Mar-08
-
4
The rest
NEW ZEALAND
THAILAND
JAPAN
1.5
UNITED KINGDOM
MALAYSIA
SINGAPORE
1.0
Total
$2.49 and
under
$5.00 to $7.49
CANADA
UNITED STATES OF AMERICA
0.5
CHINA, PR
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Mar-13
Dec-12
Jun-12
Sep-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Jun-10
Sep-10
Mar-10
Dec-09
Sep-09
Jun-09
HONG KONG
Mar-09
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
$5.00 to $7.49
500
Jul-09
$2.50 to $4.99
Nov-09
10.0
$7.50 to $9.99
1,000
Mar-09
$5.00 to $7.49
Jul-08
20.0
$10.00 and over
Nov-08
30.0
[1] Export volumes are heavily skewed to the lower price points (almost 75% is now below $5/l), and just over 50% of value [2]. Export
growth is dominated by the higher price points as demand for premium and luxury wines increases [3]. The source of this demand is
primarily China, Hong Kong and other Asian countries, China is now Australia’s largest export market for wine over A$10/l [4].
Source: Wine Australia.
23
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Exports by source region
1
40%
Export growth since 2010 – The biggest producing regions
2
Australian production is skewed towards
lower quality warm climate grapes
20%
0%
-20%
-40%
Cool
36%
Cool Climate Region
Warm Climate Region
-60%
Warm
64%
M
ar
ga
B a re t
ro R i
v
s
M sa er
cL To
ar
ta
Ad en l
e l Va
ai
le
C de H
l
G are ills
re
at Val
So ley
M
ur Ya ut h
ra rra er
n
y
D Va
ar
li n lley
g
Ed en VIC
O
th
Va
er
So R lley
ut ive
r
h
A ina
C ustr
oo
a
n a l ia
w
ar
O
R
r
th
er Ot iver a
Li he lan
m rV d
es
to icto
S ne ria
O wa C
o
th
er n H as
H ill t
La un - V
O
t
th
er ngh er V IC
W or
a
es ne lley
te
rn Cre
Au ek
M
ur
ra P stra
a
y
D dth lia
ar
lin awa
g
y
W -N
ra
S
tto W
nb
ul
ly
-80%
3
100%
Growth for Margaret River and the
Barossa is being driven by Asia
Export trends from the Barossa Valley to China (unit cases)
North America
250%
250,000
Europe
200%
200,000
Other
150%
Asia
80%
60%
150,000
40%
100%
20%
0%
50%
-20%
0%
-40%
100,000
50,000
Mar-13
Mar-12
2013
Sep-12
2012
Mar-11
2011
Sep-11
2010
Mar-10
2009
Sep-10
2008
Mar-09
2007
Sep-09
2006
Mar-08
2005
Sep-08
2004
Mar-07
-50%
Sep-07
-60%
2003
4
[1] Though overall export growth has been limited over the past few years, two regions have been stand-out performers for the industry
– The Barossa and Margaret River. [2] Overall weak export growth for the wine industry has been driven by falling demand for Australia’s
cheaper wine production – the warm climate areas which dominate overall production. [3] For Margaret River and the Barossa, growth is
being driven by demand from Asia, and from China in particular for the Barossa [4].
Source: Wine Australia
24
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Exports to China
Australian exports to China (A$mn)
Australian exports to China (mn unit cases)
Mar-13
Nov-12
Jul-12
Mar-12
Jul-11
Nov-11
Germany
UK
Denmark
USA
FY12
Belgium
NZ
Netherlands
Norway
Sweden
Ireland
UAE
Canada
Finland
$-
Japan
FY11
China
Mar-13
$48
Nov-12
-12%
Jul-12
$50
Mar-12
-8%
Jul-11
$20
Nov-11
$52
Mar-11
-4%
Nov-10
$40
Jul-10
$54
Mar-10
0%
Jul-09
$60
Nov-09
$56
Mar-09
4%
Nov-08
Mar-11
$80
$58
Jul-08
Jul-10
Mar-08
$100
8%
Mar-08
4
Pricing in the export markets (A$/case)
$60
Hong Kong
12%
-
Malaysia
Bottled exports to China – Average realised price
yoy %
Price (A$/case)
Mar-13
Jul-12
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Jul-10
Nov-10
Mar-10
Jul-09
Nov-09
Mar-09
Jul-08
Nov-08
-
50
Bottled
Nov-10
1
Bottled
150
100
Mar-10
2
Bulk
Jul-09
3
200
Nov-09
Bulk
Mar-08
3
4
Mar-09
5
2
250
Jul-08
6
300
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
Nov-08
7
Singapore
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
Thailand
1
[4 on pg 22] China is Australia’s largest market for luxury wines (above $10/l). [1 & 2] During 2010 / 2011 China switched its sourcing
of bulk wine away from Australia and towards lower cost producing regions, however bottled wine imports from Australia maintained
significant growth, as did total value. Export volume growth has more recently consolidated at ~10% [3] Average price per bottle has
accelerated significantly, not just through the unwinding of bulk, but continuing through to today. Asian countries make up the top 6 of
average price for exports, with China showing a substantial step up in 2012 [4]
Source: ABS, Wine Australia, Morgan Stanley Research
25
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Exports to The US and The UK
2
-50%
900
800
700
600
500
400
300
200
100
-
70%
Nov-12
Bottled
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
-50%
Nov-10
Mar-13
Jul-12
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Nov-10
Jul-10
Mar-10
Jul-09
Nov-09
Mar-09
Nov-08
Jul-08
Mar-08
-50%
-30%
Jul-10
Bottled
Mar-10
-30%
-10%
Nov-09
-10%
Bulk
10%
Jul-09
10%
30%
Mar-09
30%
1,000
900
800
700
600
500
400
300
200
100
-
50%
Nov-08
Bulk
Jul-08
50%
4
Exports to the UK (mat A$m)
Exports to the US (mat A$m)
70%
Mar-13
Jul-12
Nov-11
Mar-12
Jul-11
Nov-10
Mar-11
Jul-10
Nov-09
Mar-10
Jul-09
Nov-08
Mar-09
Jul-08
Mar-08
3
Mar-13
-
5
Bottled
Nov-12
-50%
10
Jul-12
-30%
Mar-12
5
Nov-11
-30%
15
Jul-11
-10%
Bottled
Mar-11
10
-10%
20
Nov-10
10%
Jul-10
15
10%
25
Bulk
Mar-10
30%
Nov-09
20
Bulk
30%
35
30
Jul-09
50%
Mar-09
25
50%
Nov-08
70%
Mar-08
30
70%
Exports to the UK (mat million unit cases)
Jul-08
Exports to the US (mat million unit cases)
Mar-08
1
[1&3] Bottled exports to the US are showing a recovering trend (both volume and value), and are now in positive territory on a monthly
basis (Q1 2013 +13%). Bulk exports to the US continue to show strong volume growth, although slightly less in value indicating A$
pricing pressure. [2&4] Exports to the UK have seen more meaningful value erosion. Bulk exports have significantly outperformed
bottled, and now represent the vast majority of volumes, and half of value. Though the value erosion appears to be stabilising more
recently [3&4].
Source: Wine Australia, Morgan Stanley Research
26
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Exports to Europe
Exports to Europe by destination – FY12
(million unit cases)
The rest
34%
$1,500
40
$1,200
30
$900
20
United
Kingdom
66%
$600
Volume (mucs, LHS)
Value (A$m, RHS)
10
$300
Exports to Europe – Average realised price
$50
NZ
4%
$40
$30
Hong Kong Germany Singapore
3%
3%
3%
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
$FY02
FY00
3
2
Exports to Europe – volume vs. value
50
FY01
1
Australian export
destinations by
value - FY12
4
US
33%
Canada
13%
$20
per case (AUD)
$10
China
11%
per case (EUR)
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
$UK
30%
[1] The UK represents 2/3rds of Australia’s exports to Europe, where brand Australia enjoys about 16% market share. [2] Whilst export
volume declines have been modest in recent years, value declines have been more substantial, as a result of a shift towards bulk exports
and A$ strength [3]. Average export prices from Australia to the EU are the lowest of all export markets [4 on pg 24].
Source: ABS, Wine Australia, comtrade, Morgan Stanley Research (e)=MS estimates
27
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Exports to The US
1
Exports to the US – volume vs. value
30
$1,020
25
$850
20
$680
Volume (mucs, LHS)
15
2
Share of US wine imports from key markets
$510
Value (A$m, RHS)
10
$340
5
$170
100%
80%
Italy
60%
France
40%
Chile
Argentina
20%
3
FY12
Australia
60%
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Monthly exports to US
volume
Exports to the US – Average realised price
$80
2000
1999
1998
1997
0%
1996
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
$FY00
-
4
value
40%
$65
20%
per case (AUD)
per case (USD)
$50
0%
-20%
-40%
$35
-60%
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Nov-10
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
Mar-08
-80%
$20
[1] Australia has moved from exporting 5 million cases to around 20 million cases of wine to the US in the last 10 years (reaching 25mn
cases in 2009). [2] Market share has been eroded over the last few years as Chile and Argentina have grown on the back of lower cost
and a switch of varietal preference amongst US consumers. [1] Export volumes and value have both been in decline as the A$ has
strengthened, although monthly data for bottled exports has been trending positively over the past 12 months, and in fact reported
growth in the first quarter of 2013, accelerating to +28% in March [4].
Source: US Department of Commerce, Gomberg Fredrikson, ABS, Wine Australia, Morgan Stanley Research
28
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Supply led correction has restored overall balance
1
160
120
Production (million unit cases)
Produced
Addition to stocks
2
Excess supply/demand (million unit cases)
50
40
30
80
20
10
40
0
-10
0
-20
FY13e
FY14e
FY09
FY10
FY11
FY12
FY05
FY06
FY07
FY08
FY01
FY02
FY03
FY04
FY97
FY98
FY99
FY00
FY93
FY94
FY95
FY96
FY91
FY92
FY12
FY13e
FY14e
FY06
FY07
FY08
FY09
FY10
FY11
FY00
FY01
FY02
FY03
FY04
FY05
-30
4
Stocks to sales ratio has corrected meaningfully
(million unit cases)
1.9
1.8
200
Comfort stock:sales ratio range
150
1.7
1.6
1.5
Stocks to sale ratio
1.4
100
Total Inventories (mucs) (LHS)
1.3
1.2
50
1.1
1.0
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13e
0
Industry overall is maintaining balance
(million unit cases)
(mucs)
180
160
140
120
100
80
60
40
20
0
Supply
Demand
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13e
FY14e
250
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
3
FY94
FY95
FY96
FY97
FY98
FY99
FY91
FY92
FY93
-40
[1] A ramp up in production led to a steady accumulation of stocks through to 2006. Together with slowing export growth, the industry
was running in excess supply and the stocks to sales ratio peaked at 1.7 to 1.8 in 2006 [3]. A supply led correction has led to a gradual
reduction in inventories since then, with the ratio now back to around 1.3. Following a period of excess supply, we observe the industry
is holding a broadly balanced structure overall, with further scope for inventories to reduce near term [4].
Source: ABS, WFA, Wine Australia, comtrade, Wine Grape Growers of Australia, Morgan Stanley Research (e)=MS estimates
29
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Wine Pricing catching up with CPI in Australia
1
600
500
Domestic wine pricing per case A$
CPI
Food
Beer
Wine
Spirits
400
2
$50
Category inflation since 1981
$45
$40
300
$35
2%
yoy % grow th
Price (A$/case)
$45
$40
30%
0%
-2%
$35
20%
$30
10%
$25
0%
$20
$15
-10%
$10
Jun-12
Jun-11
Jun-10
Jun-09
Jun-08
Jun-06
Jun-05
Jun-04
Jun-03
Jun-02
Jun-01
Jun-00
Jun-99
Jun-98
Jun-97
$Jun-96
$5
-30%
Jun-95
-20%
Jun-94
Mar-13
Mar-11
Mar-09
Mar-07
Mar-05
Mar-03
Mar-01
Mar-99
Mar-97
-4%
Mar-95
FY12
$50
50%
40%
Mar-93
FY11
FY10
FY09
FY08
FY07
FY05
FY04
FY03
FY02
FY06
4
Export pricing
CPI in Australia in excess of wine CPI
4%
Jun-07
3
$30
FY01
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
2012
2013
100
FY00
200
[1] Australian domestic wine pricing has lagged inflation throughout the last decade of excess supply. [2] The most aggressive domestic
discounting appears to have passed, and clearly tracked the wine inventory overhang. [3] The gap between overall CPI and average CPI
has narrowed over the past 12 months, with wine pricing drawing almost equal in the March quarter. [4] Pressure on wine export prices
has abated, though pricing growth still seems to be a struggle for the industry.
Source: ABS, Wine Australia, Morgan Stanley Research
30
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Grape Pricing
1
Grape prices by key regions
$2,500
Riverina
Riverland
Murray Darling - Swan Hill
Orange
A$ / tonne
Hunter
$2,000 - $2,500
Coonawarra
$1,500 - $2,000
Clare Valley
$1,000 - $1,500
Eden Valley
$500 - $1,000
Margaret River
$- - $500
McLaren Vale
Cool climate
$2,000
Warm climate
$1,500
$1,000
3
25%
Barossa Valley
Adelaide Hills
Yarra Valley
Tasmania
ornington Peninsula
Australia’s biggest varieties and
where they’re grown
Pinot Gris
Pinot Noir
Sav Blanc
Chardonnay
Cab Sav
Shiraz
Merlot
Tempranillo
Grenache
Sangiovese
Mataro
V iognier
Riesling
Semillon
Malbec
Cabernet Franc
Petit Verdot
Traminer
Verdelho
Chenin Blanc
ZinfandelM
Riverina
Riverland
Goulburn Valley
Murray Darling - Swan Hill
Padthaway
Hunter
Clare Valley
Adelaide Hills
Barossa Valley
McLaren Vale
Eden Valley
Coonawarra
Yarra Valley
Margaret River
Pyrenees
Tasmania
$-
Mornington Peninsula
$500
2
4
Australian grape pricing
$/tonne
$2,000
$700
20%
$1,500
$525
$1,000
$350
15%
Others
Barossa Valley
Riverina
Murray Darling - Swan Hill
Riverland
10%
5%
Cool climate grapes (LHS)
Warm climate grapes (RHS)
$500
$175
$2012
2011
2010
2009
Sav Semillon
Blanc
2008
Merlot
2007
Cab
Sav
2006
Chard
5%
2005
Shiraz
5%
2004
7%
2003
13%
2002
22%
2001
23%
2000
$-
0%
[1] & [2] Australian grape vary significantly depending on region and variety. [3] The large bulk-producing regions of the Murray and
Darling rivers account for 70% of Australia’s total production. [4] Grape pricing has already begun to revert, rising 10%+ in 2012 and
reversing multi-year declines.
Source: Wine Australia, Australian Wine and Brandy Corporation (AWBC), Morgan Stanley Research
31
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Regional Charts
Source: Quentin Sadler
http://quentinsadler.wordpress.com/2011/10/17/australian-luxury/
32
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Australian Wine Industry – Langton’s Vintage Ratings
'84
'85
'86
'87
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
Vintage
Henschke Hill of Grace
Penfolds Grange
7
7
7
6
10
10
6
7
7
9
6
7
10
10
10
10
6
7
9
6
8
9
8
6
9
10
7
6
10
10
7
9
7
7
9
9
10
10
7
6
7
9
9
8
10
9
8
7
7
8
8
-
10
10
7
Vintage
Canberra District Shiraz-Viognier
Hunter Valley Cabernet
Hunter Valley Chardonnay
Hunter Valley Semillon
Hunter Valley Shiraz
Mudgee Chardonnay
Mudgee Shiraz
Orange Cabernet Sauvignon
Orange Chardonnay
Orange Shiraz
Riverina Botrytis Semillon
Southern NSW Cabernet Sauvignon
Southern NSW Chardonnay
Southern NSW Shiraz
'84
5
5
5
10
-
'85
9
7
6
5
-
'86
8
8
10
8
5
-
'87
8
7
8
7
8
-
'88
4
4
4
4
8
-
'89
6
6
8
6
3
-
'90
7
6
8
7
6
7
8
-
'91
9
8
8
10
6
7
6
-
'92
7
7
7
7
5
5
6
-
'93
6
6
7
6
6
5
9
-
'94
9
9
8
7
8
8
10
-
'95
7
7
7
6
8
9
9
-
'96
9
8
9
9
8
8
9
-
'97
6
7
7
8
6
5
5
7
7
7
8
6
6
6
'98
9
10
10
10
10
9
9
8
8
8
8
9
9
9
'99
7
8
7
8
8
6
8
7
7
7
9
7
7
7
'00
7
9
9
9
9
5
5
6
6
6
9
7
7
7
'01
9
8
7
8
7
4
4
8
8
8
9
9
9
9
'02
10
7
8
9
7
8
9
8
7
8
7
10
10
10
'03
7
10
10
10
10
7
7
7
7
7
7
7
7
7
'04
8
7
8
8
8
7
7
8
8
8
9
8
8
8
'05
10
8
8
8
8
7
7
9
9
9
7
9
8
9
'06
8
10
8
9
10
9
9
9
9
9
8
8
8
8
'07
8
8
8
9
8
6
6
6
7
6
8
7
7
8
'08
10
4
4
6
4
4
4
7
7
7
9
9
8
10
'09
10
7
9
10
7
9
9
8
9
8
7
8
8
8
'10
7
6
10
8
5
7
7
8
8
7
8
8
8
8
'11
5
8
8
9
9
5
3
4
6
3
6
6
5
4
Vintage
Adelaide Hills Chardonnay
Barossa Valley Shiraz
Clare Valley Riesling
Clare Valley Shiraz
Coonawarra Cabernet
Coonawarra Shiraz
Eden Valley Cabernet
Eden Valley Riesling
Eden Valley Shiraz
McLaren Vale Shiraz
Padthaway Chardonnay
Padthaway Shiraz
'84
7
7
8
8
8
6
-
'85
7
7
7
7
7
6
-
'86
10
10
10
10
9
10
8
10
7
-
'87
6
8
7
6
6
6
8
6
6
-
'88
8
7
8
7
7
8
7
8
8
-
'89
5
6
5
5
6
7
8
7
5
-
'90
10
10
10
10
10
10
10
10
10
9
'91
9
10
7
10
10
10
10
9
10
10
9
'92
8
6
7
7
6
7
6
8
6
7
5
'93
7
8
7
8
7
7
9
8
9
7
6
'94
7
8
8
9
8
9
8
8
8
8
7
'95
9
7
9
6
4
5
7
7
7
6
5
'96
9
10
8
9
9
9
9
10
9
10
10
'97
8
7
10
7
7
7
7
10
7
7
9
8
'98
10
10
8
10
10
10
10
8
10
10
10
10
'99
7
9
9
8
8
8
7
7
7
5
8
9
'00
7
7
6
7
9
9
7
7
7
7
8
8
'01
6
8
8
9
7
7
9
9
9
9
9
9
'02
10
9
10
9
9
9
9
9
9
9
9
9
'03
8
6
7
6
8
8
6
7
7
7
7
7
'04
9
8
7
6
9
9
7
8
7
9
7
7
'05
8
8
10
8
9
9
8
9
8
8
8
8
'06
7
9
9
10
9
9
7
9
9
8
8
9
'07
8
6
7
7
7
7
8
7
8
7
7
7
'08
6
6
9
8
8
8
8
10
7
8
7
7
'09
10
8
10
9
8
8
8
8
8
8
7
7
'10
9
10
9
9
9
8
10
10
10
9
8
8
'11
4
6
7
4
6
4
7
8
4
5
4
4
Vintage
Eastern Tasmania
Northern Tasmania
Southern Tasmania
'84
-
'85
-
'86
-
'87
-
'88
-
'89
-
'90
-
'91
-
'92
-
'93
-
'94
-
'95
-
'96
-
'97
8
8
8
'98
9
9
9
'99
7
7
6
'00
9
8
8
'01
7
7
6
'02
8
10
10
'03
6
7
7
'04
6
7
6
'05
10
10
10
'06
9
9
9
'07
7
7
7
'08
9
8
8
'09
8
8
8
'10
10
9
10
'11
6
6
5
Vintage
Beechworth Chardonnay
Beechworth Pinot Noir
Geelong Chardonnay
Geelong Pinot Noir
Gippsland Pinot Noir
Goulburn Valley & Nagambie Lakes
Grampians Shiraz
Heathcote Valley Shiraz
Macedon Ranges Chardonnay
Macedon Ranges Pinot Noir
Mornington Peninsula Chardonnay
Mornington Peninsula Pinot Noir
Pyrenees Cabernet
Pyrenees Shiraz
Sunbury Shiraz
Yarra Valley Cabernet
Yarra Valley Chardonnay
Yarra Valley Pinot Noir
'84
7
7
7
6
5
6
7
8
7
'85
7
7
7
7
7
7
5
8
7
'86
9
9
10
8
10
9
10
8
9
7
8
'87
7
6
6
6
6
5
5
6
5
7
7
'88
8
8
8
9
7
8
8
8
8
8
7
8
'89
8
7
7
6
5
6
6
6
5
4
4
5
'90
9
9
7
9
10
9
10
9
9
10
10
10
10
9
8
'91
10
10
10
9
9
9
9
8
8
8
9
9
9
8
9
'92
8
8
8
8
7
8
7
5
6
6
7
7
8
7
7
'93
8
8
8
6
5
5
5
7
7
4
4
7
8
8
6
'94
7
7
8
8
8
8
8
7
6
8
8
8
8
7
8
'95
7
8
8
9
6
8
6
7
8
6
6
5
7
6
6
'96
8
9
8
8
9
9
8
6
6
9
10
8
7
7
7
'97
7
6
8
9
8
8
8
9
7
8
7
8
8
8
9
10
'98
10
9
7
7
9
10
9
10
8
7
10
10
8
10
9
9
'99
7
9
9
8
8
8
8
7
7
7
7
7
7
7
7
7
7
7
'00
9
9
7
8
10
8
6
8
7
8
9
9
6
7
8
8
8
10
'01
8
8
9
9
7
9
9
10
7
7
8
8
9
10
9
10
9
9
'02
10
10
9
9
8
10
10
10
9
9
6
6
10
10
10
10
10
10
'03
8
8
8
8
8
8
7
8
8
8
8
8
7
7
7
8
8
8
'04
10
9
8
8
10
9
10
9
8
8
9
9
10
10
8
9
9
6
'05
10
9
7
8
8
8
9
10
9
9
8
9
9
9
8
9
9
9
'06
8
9
9
9
7
8
9
8
8
8
9
9
9
9
9
9
9
9
'07
4
4
7
7
9
6
6
6
7
7
8
8
7
7
8
7
8
7
'08
9
8
8
7
8
8
7
7
7
7
8
8
7
7
7
7
7
7
'09
6
4
6
6
6
6
6
7
6
6
6
6
7
7
6
4
4
4
'10
10
9
8
9
8
8
10
9
10
10
9
10
10
9
10
9
10
9
'11
4
3
6
5
5
4
5
5
5
4
6
5
5
5
5
5
7
4
Vintage
Great Southern Cabernet
Great Southern Shiraz
Margaret River Cabernet
Margaret River Chardonnay
Margaret River Shiraz
Pemberton Pinot Noir
'84
7
8
-
'85
6
6
-
'86
9
10
-
'87
8
9
8
-
'88
8
8
9
-
'89
6
7
6
-
'90
10
8
9
-
'91
8
7
9
9
9
-
'92
8
8
9
10
8
-
'93
6
6
7
6
6
-
'94
8
9
10
9
8
-
'95
9
9
10
10
9
-
'96
9
9
9
8
8
-
'97
8
8
8
9
8
6
'98
7
7
7
6
7
6
'99
6
6
8
7
8
8
'00
6
6
7
7
7
6
'01
10
10
10
10
10
8
'02
8
8
9
9
9
9
'03
5
5
7
7
7
6
'04
8
8
10
8
10
8
'05
7
7
8
8
8
8
'06
6
6
6
7
6
6
'07
9
9
10
10
10
9
'08
10
10
10
10
10
10
'09
9
9
10
10
10
10
'10
9
9
10
10
9
9
'11
9
9
9
9
8
9
33
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Summary – The USA
The US now represents 8% of global wine production and 12% of global wine consumption.
By value, it is
marginally second only to France as the world’s largest market.
Capacity has been increasing at <1% per annum since 2005 and bearing hectares are almost 95% of land under vine.
Production increased by ~20% in 2012 with above average yields lapping a low yielding 2011.
Total consumption is up 2% in 2012
by volume, driven by a continued increase in per capita consumption. Value growth was higher due to
ongoing premiumisation trends.
Per capita consumption has almost doubled in the last 15 years, although at ~10l per person remains less than half
that of Australia and the UK, and a third of Europe.
The US is a net importer of wine.
In normal yielding vintages it produces ~300m unit cases pa, exports roughly 40m cases and consumes just
over 350m cases pa. Ongoing growth in consumption therefore places upward pressure on demand from the global export pool, as it is not able to be met by
domestic production. The US market is also
~10% of US consumption is of Italian wine alone.
therefore less loyal to domestic production than many other markets.
As a result, imports have continued to grow share of US consumption, despite USD weakness. New world exporters
have recently overtaken the old world in terms of share of US imports. A strengthening USD could see incremental demand for imports, at the expense of
domestic producers.
Export volume growth accelerated through to 2008, however stalled more recently
with ongoing strong growth
coming from Hong Kong & China, whilst other regions stagnate. Weaker domestic production in 2010 and 2011 could be a factor causing greater retention of
domestically produced wine.
As a net importer,
supply and demand remains largely in balance (its easier to manage imports in short term than production). The
we may see nearer term downward pressure on imports.
higher yielding 2012 has created a temporary excess in supply which
34
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Industry Capacity
1
Area under vine (‘000 Hectares)
250
Area under vine
Bearing area
CAGR = 0.8%
2
Area planted during year (‘000 hectares)
95%
16.0
14.0
90%
200
12.0
Area planted during the year
85%
10.0
Bearing area as % of total area
8.0
80%
150
6.0
4.0
75%
2.0
3
4,500
4,000
Industry wine crush (‘000 tonnes)
Total wine crush (LHS)
Red (RHS)
White (RHS)
2,500
9.0
3,500
1,500
3,000
1,000
2,500
500
2,000
0
2013e
2011
2012e
2010
2009
2007
2006
2005
2004
2003
2002
2008
4
Industry wine crush per acre
(tonnes)
8.5
2,000
2001
0.0
2000
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
100
1999
70%
8.0
7.5
7.0
6.5
6.0
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
5.0
1997
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
5.5
[1] Rapid expansion of wine-growing land in the 1990s retraced after the economic slowdown in the early part of the decade, and US$
strength whilst changing taste profiles led to substantial growth in imports. [2] New plantings have decelerated, negligible in recent
years, and partially offset by removals. Volatility of industry supply has been driven primarily by yield variation [4].
Source: California Department of Food and Ag, Wine Institute, Morgan Stanley Research, e = Morgan Stanley estimates
35
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States - Production
1
10,000
2
7,000
Number of US wineries
US wineries by region
6,000
8,000
California
5,000
6,000
4,000
4,000
Washington
Oregon
New York
3,000
2,000
2,000
Other
1,000
400
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1970
Californian and non-Californian wine production (million unit cases)
Non-California
California
350
300
0
1975
1995
2005
2006
2007
2008
2010
US wine production (million unit cases)
330
20%
290
15%
270
10%
250
250
200
230
150
210
190
-5%
100
170
-10%
150
-15%
2012
2013e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0%
1997
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
5%
1996
50
4
25%
310
1995
3
1955
1940
0
[1] The number of wineries in the US has expanded dramatically in the past 10-15 years, as ‘lifestyle’ operators have entered the
industry. However, this is not driving material growth in industry supply. [2] California still represents just under half of the number of
wineries in the US, despite the proliferation of boutiques in other states, [3] and 90% of production by volume. [4] Production
increased substantially in 2012, as above average yields lapped below average yields from a weak 2011 vintage.
Source: The Wine Institute, California Department of Food and Ag Morgan Stanley Research, e = Morgan Stanley estimates
36
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Consumption
1
400
12
US wine consumption
(million unit cases)
350
2
US wine consumption
per capita (litres)
10
300
8
CAGR 3.9%
250
CAGR 3.5%
200
6
150
4
3
400
Sparkling Wine/
Champagne
Dessert Wine
350
300
2011
2007
2003
1999
1995
1991
1987
1983
1979
1975
1971
1967
1963
1959
1955
1951
1947
1943
15%
US consumption by type
(million unit cases)
4
US wine consumption growth (volume)
10%
Table Wine
250
1939
2011
2007
2003
1999
1995
1991
1987
1983
1979
1975
1971
1967
1963
1959
1955
1951
1947
0
1943
0
1939
2
1935
50
1935
100
5%
200
0%
150
-5%
100
50
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013e
-10%
0
[1&2 ] The US wine market continues to grow, driven by rising per capita consumption and population growth. [4] During the last real
recession (1988-1993) growth turned substantially negative, but this was partly the switch to wine coolers, and the peak publicity of
drink driving programs.
Source: Wine Institute, Gomberg Fredrikson, Datastream, World Drinks Trends, Morgan Stanley Research e = Morgan Stanley estimates
37
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Consumption: Retail
Volume and Value growth in the US wine market
Volume growth
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Nov-10
Jul-10
Mar-10
Mar-13
Jul-12
pricing growth
USRetail
consumption
by type
(million unit cases)
6%
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Nov-10
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Jul-08
Nov-08
Mar-08
Jul-07
Nov-07
Mar-07
-10%
Nov-09
-5%
Jul-09
0%
Mar-09
5%
$7+
$0-$7
Nov-08
Value growth
10%
3
2
Sales growth by price segment
14%
12%
10%
8%
6%
4%
2%
0%
Jul-08
15%
Mar-08
1
4
40
5%
35
4%
30
3%
25
2%
US wine retail sales (US$bn)
20
1%
15
0%
10
-1%
5
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
1991
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
-2%
[1] The US retail wine market has maintained a mid to high single digit growth rate in value over the past 5 years, with volume in the
low to mid single digits. [3] Average retail pricing has maintained a +1 to +4% run rate over that time, driven primarily by mix, with
faster growth coming from higher value segments – suggesting a premiumisation trend. More recently, evidence of list price increases is
less common, due to fragmentation of brands, and a market which is characterised by a high level of promotional activity.
Source: Wine Institute, AC Nielsen, Morgan Stanley Research
38
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Imports (i)
Origins of US wine imports (million unit cases)
80
40%
Old World
160
35%
140
30%
120
25%
100
40
20%
80
30
15%
20
10%
10
5%
0
0%
70
New World
60
re of
ts sha
Impor
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
50
ption
nsum
US c o
Volume- mucs - (LHS)
Value - US$m - (RHS)
$3,000
60
$2,000
40
$1,000
20
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
$-
Limited supply and rising consumption underpin US imports
Imports required to meet domestic consumption
140
Domestic production net of exports
120
350
100
Other
80
Bulk
300
4
US Wine Imports (million unit cases)
160
400
$4,000
0
450
2
$5,000
60
40
250
Bottled
20
200
Jun-13
M ar-13
Dec-12
Sep-12
Jun-12
M ar-12
Sep-11
Dec-11
Jun-11
M ar-11
Dec-10
Sep-10
M ar-10
2015e
2014e
2012
2013e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Dec-09
-
150
Jun-10
3
$6,000
US Wine Imports
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1
[1] As domestic consumption growth exceeds domestic production growth, imports have grown as a share of US consumption. Originally
focused on old world regions, a combination of lower cost of production and varietal preference (specifically moscato) has seen a
structural shift towards new world imports. With domestic production fully absorbed, imports will continue to grow in order to meet
rising consumption.
Source: The Wine Institute, US Department of Commerce, Gomberg Fredrikson, Morgan Stanley Research e = Morgan Stanley estimates
39
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Imports (ii)
US imports by origin and type FY12
(million unit cases)
35
30
25
20
15
10
5
0
2005
30
2006
2007
2008
2009
2010
2011
2012
25
Bulk
Bottled
Still wine
20
15
5
Portugal
US imports by origin (US$m)
2007
2008
2009
2010
2011
2012
$1,400
$120
$1,200
$100
$1,000
South Africa
Portugal
Germany
Spain
Argentina
Chile
New
Zealand
4
US imports value per case (US$)
$140
2005
2006
2007
2008
2009
2010
2011
Australia
2006
Argentina
2005
$1,600
France
Italy
0
Australia
South Africa
Germany
New Zealand
Spain
France
Argentina
Australia
10
Italy
3
2
US imports by origin (million unit cases)
35
Other
Chile
1
2012
$80
$800
$60
$600
$40
$400
$20
$200
Chile
South
Africa
Germany
Spain
Italy
Portugal
New
Zealand
South
Africa
Portugal
New
Zealand
Germany
Spain
Argentina
France
Chile
Australia
Italy
$-
France
$-
[1] Italy dominates US imports, is almost exclusively bottled, and represents ~10% of total US consumption. Australia is second,
however has lost share to Argentina, Chile and Spain due to varietal preferences and cost of production advantage. There has been a
trend towards importing in bulk, due to cost advantages of bottling in market, and domestic wine makers seeking access to varietals not
available in the US, for local brands. This has resulted in overall declines in value per case. Argentina and Chile for example have seen
the highest volume growth to the US, and the majority of their exports to the US are in bulk [1].
Source: The Wine Institute, Gomberg Fredrikson, Morgan Stanley Research
40
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Imports from Australia
1
US imports from Australia
20%
Volume
15%
2
Imports from Australia (mat, million unit cases)
Value
30
70%
10%
50%
5%
30%
0%
10%
-5%
25
Bulk
15
-10%
-10%
20
10
Bottled
-30%
5
-50%
-
3
33
Bottled (LHS)
Mar-13
Jul-12
Nov-12
Mar-12
Jul-11
Nov-11
Mar-11
Jul-10
Nov-10
Mar-10
Jul-09
Nov-09
Imports from Australia, monthly yoy
Australian import pricing (US$m)
$
Mar-09
Jul-08
Mar-08
Jul-13
May-13
Jan-13
Mar-13
Nov -12
Sep-12
Jul-12
Mar-12
May-12
Jan-12
Nov -11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
-20%
Nov-08
-15%
$
Bulk (RHS)
10
32
9
32
8
volume
60%
4
value
40%
20%
31
7
31
6
30
5
0%
-20%
-60%
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Nov-10
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
-80%
Mar-08
Jul-13
Apr-13
Jan-13
O ct-12
Jul-12
Apr-12
Jan-12
O ct-11
Jul-11
Apr-11
Jan-11
O ct-10
Jul-10
Apr-10
Jan-10
-40%
[1&2] Import volumes from Australia increased in 2012 following a period of decline, primarily driven by bulk shipments. Bottled exports
have remained in decline. More recent trends have shown bottled exports trending positively, increasing yoy in Q1 of 2013 [4]. Bottled
prices fell substantially as the A$ appreciated, however have been relatively stable over the past 18 months. Bulk pricing has come
under pressure due to competition from lower cost to produce regions [3].
Source: Wine Australia, US Department of Commerce, Gomberg Fredrikson, Morgan Stanley Research
41
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States - Exports
18
16
14
12
10
8
6
4
2
-
$400
10
$0
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
2012
0
UK
$200
2004
2005
2007
2008
2009
2010
2011
$60
350
300
250
200
2001
2002
2003
2004
2005
2007
2008
2009
2010
2011
2006
2006
2
US export pricing (US$/case)
$70
US exports by destination (US$m)
400
$50
2001
2002
2003
2004
2005
2007
2008
2009
2010
2011
2006
4
$40
$30
150
$20
100
$10
50
Italy
UK
Switzerland
Japan
China
France
Australia
Switzerland
France
Italy
China
Japan
HK
UK
Canada
-
Australia
$HK
3
2003
Australia
$600
20
2002
France
$800
Volume MUCS - (LHS)
Value US$m - (RHS)
30
2001
Switzerland
$1,000
China
CAGR 7.0%
40
US exports by destination (million unit cases)
HK
50
Japan
$1,200
Italy
$1,400
US wine Exports
Canada
60
Canada
1
[1 & 2] US exports saw strong growth through to 2008, driven at different points in time by the UK, Canada and Italy. The UK is by far the
largest volume market for the US, but at lower price points. Canada dominates US exports by value, and has shown substantial growth.
The weak USD has seen a substantial increase in the price per case across virtually all markets, with the exception of the UK, whose pound
has been equally as weak. Poor vintages in 2010 and 2011 may have seen a greater retention of domestically produced wines, causing
export volumes to correct, however a weak currency provided continued step up in value growth.
Source: The Wine Institute, comtrade, Morgan Stanley Research
42
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Supply/Demand
US Supply and Demand
(million unit cases)
520
470
US ending wine stocks (million unit cases)
460
Supply
Demand
1.70
440
420
1.50
400
370
2
1.60
Stocks to sales ratio
420
1.40
380
1.30
360
340
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
1.00
2002
300
2000
1.10
1999
320
1998
2013e
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
220
1.20
Total Inventories (mucs) (LHS)
1997
270
2001
320
1997
1
As a net importer, the US market is predominately in balance – it is easier to manage short term imports than it is short term production.
That said, yield variation has at times caused the market to be in excess, and this is normally corrected in a short time frame by adjusting
imports. Inventories have increased broadly in line with total consumption, and stocks to sales have been fairly consistent, rising in 2012
on the larger vintage and strong import growth prior to harvest.
Source: Gomberg Fredrikson, The Wine Institute, Morgan Stanley Research; e = Morgan Stanley estimates
43
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United States – Wine Pricing
1
1000
45%
US Red & White wine grape prices (US$/tonne)
White
Red
900
40%
800
35%
700
30%
600
25%
500
20%
400
15%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
3
2
US Red wine grape price over White wine grape
prices (US$/tonne)
9
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
4
US import pricing
US$ nominal price per bottle
8
$50
30%
$46
20%
10%
$42
7
0%
$38
-10%
US$/Case
$34
5
Jul-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
-30%
Jan-12
Jul-11
Apr-11
Oct-10
Jul-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
Jan-09
$30
4
-20%
yoy % growth
Jan-11
6
[1] US wine grape prices increased in 2011 on a smaller vintage, and maintained this positive trend in 2012, despite a rebound in supply.
Prices are supported by full demand for domestically produced wine. [2] Red wine prices have increased at a faster rate than white wine,
and have expanded their premium to white back to ~40%. [3] US retail wine prices have continued their upward trend, driven largely by
premiumisation within the category as opposed to actual list price increases. Import pricing trended negatively through 2012, due to an
increase in bulk wine shipments, though is showing a more positive trend as we enter 2013 [4].
Source: The Wine Institute, Gomberg Fredrikson, Morgan Stanley Research
44
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Summary – Europe
Europe accounts for ~57% of global wine production, 57% of global consumption and 62% of the global trade
in wine. Much of this trade is within Europe.
Almost half of the global export market is produced and shipped within Europe.
Capacity has been in structural decline over the past decade.
Area under vine has fallen by 12% over that time frame.
Production declined by ~10% in 2012, due in part to ongoing removal of capacity, as well as poor weather conditions.
Total production has fallen
by 25% since its last peak in 2004. Normal weather conditions could see a partial recovery in 2013.
Consumption was stable in 2012, although down 11% over the past decade.
The worlds largest consumer, France, continued to grow following the
2011 inflection point, as did Germany, although Italy, Spain and to a lesser extent the UK saw continued declines.
Export volumes were flat in 2012, with strong growth to China and Japan offset by a more significant decline to Russia.
Imports remained flat in 2012.
A strong A$ saw imports from Australia (EU’s largest import market) fall by 6%, and -9% from the US. This was
offset by strong growth from Chile and other smaller producers.
Germany and the UK are the largest importers, the UK is the largest by value. German wine consumers are very price
focused, so accessing this market from afar looks problematic.
5 years ago Europe was producing 300mn+ cases of excess supply, representing 15% of worldwide consumption. By 2012
that gap has reversed to ~40mn cases of excess demand, and that is before taking into consideration roughly 300mn unit cases of non
wine use.
Current consumption is being sourced from earlier vintages and inventories are being reduced, however as the 2012 vintage comes into supply,
we see scope
for a reduction in exports from the EU, and / or a step up in import demand by the EU, in order to meet EU consumption,
placing tightening pressure on global export markets.
45
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Europe – Production and Consumption Trends
European production and area under vine
Europe
Production
(million unit cases
and
‘000 ha)(LHS)
2,300
2,200
3,700
Europe Area Under Vine (RHS)
3,500
2,100
3,300
2,000
European consumption (million unit cases)
1,700
1,600
1,500
1,900
3,100
1,800
1,600
1,400
2,900
1,300
2,700
1,200
1,700
1,100
2,500
Demand
450
400
2,100
1,900
Italy
Germany
UK
150
100
Spain
2010
2009
2008
2007
2006
2005
2003
2002
2001
2000
1999
1998
2004
Russia
50
0
1997
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1,500
1996
1,600
91-95
1,700
2013e
France
250
200
1,800
2011
4
European consumption (mn unit cases)
350
300
2,000
2012e
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1996
500
2011
2,200
Supply
2012e
Europe (million unit cases)
pre non wine uses
2,300
1997
1,000
81-85
86-90
91-95
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012e
2013e
1,500
3
2
1,800
86-90
1
Overall European wine capacity and production has continued its decline, with weather also contributing to the fall in 2012 [1].
Consumption remains steady, with ongoing recovery in France offsetting declines in Italy and Spain [2 & 4]. European end demand is
being bolstered by rising exports, particularly to China and the US. Together with declining production, Europe returned to balance in
2012, and this is prior to adjusting for non wine uses (c300mn unit cases) [3].
Source: OIV, Morgan Stanley Research, e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
46
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Europe – Key Producers, Exporters, and Importers
1
500
France
Italy
450
Production (million unit cases) – 2012e
350
400
Spain
350
300
300
2
400
Consumption (million unit cases) – 2012e
France
Italy
Germany
250
250
200
200
150
Greece
50
250
200
Romania
Portugal
Sw itzerland
0
Production (mucs)
300
Spain
50
0
3
Russia
100
Portugal
100
UK
150
Germany
Consumption (mucs)
Exports (million unit cases) – 2012e
Italy
200
180
160
Spain
4
Germany
Imports (million unit cases) – 2012e
UK
140
France
120
100
150
France
80
100
60
Germany
50
40
Portugal
Russia
Netherlands Belgium
Italy
20
-
0
Exports (mucs)
Imports (mucs)
[1] Italy, France, and Spain continue to be the largest producers of wine in the world, and are well ahead of other European producers.
Collectively, they produce 45% of global production, and approximately 81% of European production. [2] France consumes more in
market, whilst Italy and Spain are more significant exporters [3]. [4] Germany consumes well in excess of domestic production and is
the largest importer in Europe, closely followed by the UK.
Source: OIV, Morgan Stanley Research, e = OIV estimates
47
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
France – Production corrected in 2012, bringing supply back towards demand
Supply & Demand (million unit cases)
pre non wine uses
800
750
700
Supply
700
650
650
600
550
550
500
500
450
450
180
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
Exports
2012e
2011
2010
2009
2008
2007
Imports
2006
2012e
2011
2010
0
2009
20
250
2008
40
270
2007
60
290
2006
310
2005
80
2004
330
2003
100
2002
350
2001
120
2000
370
1999
140
1998
160
390
1997
410
4
Imports & Exports (million unit cases)
2005
Consumption (million unit cases)
1996
1997
1995
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
400
2004
430
2003
2002
2001
2000
1999
1998
400
1996
600
3
2
Production (million unit cases)
750
Demand
2003
1
Note – these charts represent supply and demand prior to adjusting for non wine use, which is c300mn unit cases in total for Europe
[2] Production saw a sharp decline in 2012 due to ongoing removal of capacity and poor weather conditions. [3] Consumption has been
in decline for sometime, but reported a second year of growth following an inflection point in 2010. [4] Export demand continues to be
supported by China and the US whilst imports were broadly flat yoy. [1] Supply has corrected, although remains in excess of demand.
Most, if not all of this excess however is removed after accounting for non wine uses.
Source: OIV, Morgan Stanley Research, e = OIV estimates for 2012
48
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Germany – Overshot on imports in 2011 and 2012
1
Supply & Demand (million unit cases)
pre non wine uses
320
300
2
Production (million unit cases)
160
Demand
140
Supply
120
280
100
260
80
240
60
40
220
20
2011
2012e
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
2010
4
Imports & Exports (million unit cases)
200
Consumption (million unit cases)
1998
1997
1996
1995
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
235
0
180
230
160
140
2012e
2011
2010
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
1999
20
200
1998
205
1997
60
40
1996
80
210
2009
Imports
2008
100
215
2007
Exports
2006
120
2005
220
2004
225
2003
3
1999
1998
200
Note – these charts represent supply and demand prior to adjusting for non wine use, which is c300mn unit cases in total for Europe
[2] Production was steady in 2012 and broadly in line with the longer term average. [3] Consumption has been in decline since 2008,
however saw a positive rebound in 2012. [4] a pick up in imports in 2011, combined with a fall in consumption led supply to exceed
demand in that year, and further import growth has maintained that excess in 2012. We would expect exports to normalise in 2013 to
balance supply once more.
Source: OIV, Morgan Stanley Research, e = OIV estimates for 2012
49
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Spain – Production declines matching consumption declines, supply largely in balance
1
Supply & Demand (million unit cases)
pre non wine uses
500
2
Production (million unit cases)
500
Demand
450
450
Supply
400
400
350
350
300
300
250
250
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Exports
2012e
2011
2010
2009
2008
2007
2006
2005
2004
Imports
2003
2012e
2011
2010
2009
2008
0
2007
60
2006
50
2005
80
2004
100
2003
100
2002
120
150
2001
200
2000
140
1999
250
1998
160
4
Imports & Exports (million unit cases)
300
Consumption (million unit cases)
1997
1996
200
1995
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
180
1996
3
1999
1998
200
Note – these charts represent supply and demand prior to adjusting for non wine use, which is c300mn unit cases in total for Europe.
[2 & 3] Production has been in decline since 2004 in response to weakening domestic consumption and significant excess supply.
Exports steadily increased through to 2008, accelerating through to 2011, providing further support for total demand [4]. The supply led
correction has largely restored balance, even before adjusting for non wine uses.
Source: OIV, Morgan Stanley Research, e = OIV estimates for 2012
50
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Italy – Production declines matching consumption declines, supply largely in balance
Supply & Demand (million unit cases)
pre non wine uses
700
650
650
Supply
600
600
550
550
500
500
450
450
380
2011
2012e
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
2010
4
Imports & Exports (million unit cases)
300
Consumption (million unit cases)
400
400
1996
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
400
3
2
Production (million unit cases)
700
Demand
1995
1
250
360
340
200
Exports
320
Imports
150
300
280
100
260
240
50
220
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
2003
0
200
Note – these charts represent supply and demand prior to adjusting for non wine use, which is c300mn unit cases in total
[2 & 3] Production has been in a long term decline response to weakening domestic consumption and an extended period of excess
supply. Exports have steadily increased through to 2011, though have moderated in 2012 [4]. The supply led correction has restored
balance, even before adjusting for non wine uses.
Source: OIV, Morgan Stanley Research, e = OIV estimates for 2012
51
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Europe – The External Picture
2012
0
2007
2008
2009
2010
2011
2012
40
2007
2008
2009
2010
2011
2012
2008
2012
2009
4
Europe wine imports (US$m)
1,400
Europe wine imports (million unit cases)
2006
US
Switzerland
Canada
Australia
500
0
Angola
1,000
10
Japan
1,500
20
Russia
2,000
30
50
2006
2,500
Australia
2011
Norway
2010
Russia
2009
Switzerland
2008
40
US
3
2007
Japan
3,000
2006
50
2
Europe wine exports by destination
(Outside EU, US$m)
Canada
60
3,500
China
Europe wine exports by destination
(outside EU, million unit cases)
70
China
1
2006
2010
1,200
2007
2011
1,000
800
30
600
20
Moldova
New
Zealand
Macedonia
Argentina
US
South
Africa
Chile
Moldova
New
Zealand
Macedonia
Argentina
US
South
Africa
0
Chile
0
Australia
200
Australia
400
10
[1&2] The US is the key focus of European exports and growth has been solid, although Russia has previously taken a large amount of
low-price product. Exports to China have been rapidly growing in volume and value terms to be almost the second largest export
destination for European wine (although growth was more modest in 2012). [3&4] Australia is the largest exporter to Europe by volume,
courtesy of its UK presence. NZ and the US have taken share of EU imports in recent years.
Source: USDA Foreign Agricultural Service, Comtrade, OIV, Morgan Stanley Research
52
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
United Kingdom – The Critical European Importer by Value
3
30
2006
2007
2008
2009
2010
2011
UK imports by origin
(million unit cases)
20
4
UK imports by origin (£m)
1400
2006
2007
2008
2009
2010
2011
1200
1000
800
600
400
10
2011
Total
New Zealand
2010
Portugal
2009
Germany
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
80
2008
Chile
Italy
100
2007
US
120
2006
Spain
UK wine consumption
(million unit cases)
South Africa
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
France
140
2
Average price per bottle by import origin (GBP)
160
Australia
1
200
Portugal
New Zealand
Germany
South Africa
Chile
US
Spain
France
Portugal
New
Zealand
Germany
South
Africa
Chile
US
Spain
France
Australia
Italy
0
Australia
Italy
0
[1] The UK is the second largest importer of wine in the world by volume, although a weakened economy has seen modest declines in
consumption in recent years. [3&4] Primary sources of imports are all the major producers. A strong A$ has seen Australia surrender
the number one position by volume, having been overtaken by Italy. The US, Chile and particularly NZ have all experienced strong
growth in exports to the UK, both in volume and value.
Source: Global Trade Atlas, comtrade, OIV, Morgan Stanley Research, e = OIV estimates for 2012
53
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Germany – A Key Importer, but Value Focused
1
German wine imports by market (million unit cases)
90
80
3.0
70
2007
2008
2009
2010
2011
2
Average value per bottle (US$)
3.5
2007
2008
2009
2010
2011
2.5
60
50
2.0
40
1.5
30
1.0
20
0.5
10
Average value per case (US$)
$140
$120
$100
France
Germany
USA
Canada
Chile
USA
Australia
South
Africa
Denmark
Portugal
Austria
Spain
Italy
Chile
USA
Australia
South
Africa
Denmark
Portugal
Austria
Spain
France
Italy
3
France
0.0
0
UK
Australia
China
VWAP
$80
$60
$40
$20
Spain
Chile
Italy
Argentina
Australia
USA
New
Zealand
France
$-
Italy dominates exports to Germany, more than twice as many volumes as Spain or France. France however realises higher price points
and so leads total export value. The average value of imports is exceptionally low, making Germany a very difficult market for those with
distance to transport product which is the case for most new world countries.
Source: USDA, OIV, Morgan Stanley Research, e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
54
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
France vintage chart
Vintage
12
11
Champagne
10
09
08
07
06
05
04
03
02
01
00
99
98
97
96
95
94
93
92
91
90
89
88
87
86
85
83
82
81
80
79
78
7
7
8
5
7
7
8
6
10
4
6
6
8
7
8
9
5
6
7
4
10
9
8
4
6
9
7
9
7
4
6
5
7
7
Red Bordeaux
8
8
10
10
8
6
8
10
7
8
7
8
10
7
8
5
9
8
5
4
3
5
10
9
8
5
8
8
7
10
6
4
White Bordeaux
7
8
7
7
8
7
8
9
7
9
5
10
7
8
8
9
10
9
6
2
4
4
10
9
10
5
8
7
9
7
6
6
4
Red Burgundy
8
9
9
7
6
7
10
5
8
9
7
7
9
8
7
9
8
4
9
6
8
10
9
8
6
6
9
7
5
6
7
9
White Burgundy
8
9
8
7
7
8
8
7
6
9
7
9
8
7
8
8
8
7
8
8
6
8
8
7
6
8
8
7
7
4
6
7
Chablis
8
10
7
8
8
7
9
6
7
9
7
8
7
7
8
9
9
6
6
8
5
10
8
7
5
7
7
7
6
8
6
Rhone
8
10
9
7
9
7
9
6
7
5
9
9
7
9
6
7
9
6
8
5
7
10
9
8
5
8
9
9
8
5
6
10
Loire
8
9
7
8
8
7
10
8
8
9
7
8
7
7
9
8
9
6
7
5
4
10
9
8
6
8
8
7
7
6
5
6
Alsace
8
9
8
8
9
7
10
7
7
9
5
8
7
8
9
8
9
6
8
7
5
10
10
8
5
7
8
9
5
7
4
5
6
7
Source: Berry Bros. & Rudd
55
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Summary – China emerging as a global wine powerhouse
China is now the fifth largest import market globally, following a substantial growth in the past 5 years.
Consumption has doubled twice in the last 5 years.
Per capita consumption is significantly below global levels but rising, as households
migrate up the income scale into brackets that typically over-index on consumption of wine.
Domestic production has increased 4x over the past decade, and is now the fifth largest producer of wine globally.
The majority of
production occurs in the North East provinces, which are largely in line with Mediterranean Europe and Californian growing regions.
Imports have dominated growth in recent years, and are now 20% of total consumption.
France accounts for half of total imports by
volumes, and 54% by value. Australia is the number two import market with 15% share and Italy #3 with 6%. Imports are skewed to bottled wine – 67% by
volumes and 91% by value. Average import prices in China are amongst the highest globally, with import demand skewed towards premium and luxury wines.
Total consumption is estimated to nearly double by 2016, to over 400m unit cases, which would make China the worlds largest
consumer of wine. Domestic production growth has been strong (currently delivering ~180mn cases) and domestic wine makers are becoming
increasingly responsive to the threat from imports. However targeted levels of domestic production fall short of this forecast level of
production. As a result, further import demand will likely be required to meet the rising consumption gap.
As a net importer of wine,
supply and demand has remained largely in balance.
56
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
China – A structural growth story
1
2
Consumption (million unit cases)
250
200
150
100
50
2012
2011
2010
2009
2008
2007
2006
0
3
4
Per Capita Consumption (litres)
2.0
1.5
1.0
0.5
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
-
Chinese wine consumption has twice doubled over the past 5 years [1], driven by increasing per capita consumption off a very low base
[4], a migration of households up the income scale [2], into income brackets that over-index on consumption of wine [3] and a growing
appetite for imported wine. With per capita consumption a fraction of global levels, and expectations for a near doubling of households in
China with income brackets that favour wine consumption, we see strong structural support for ongoing consumption growth.
Source: Euromonitor, Morgan Stanley Research,. e= Euromonitor estimates for consumption and Chinese government targets for production
57
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
China – Imports have been a meaningful driver of recent growth
1
Value of imports – China vs. USA ($USm)
6,000
2
25%
Import volume as a % of total supply
5,000
20%
4,000
15%
China
US
3,000
10%
2,000
5%
1,000
2006
2007
2008
2009 2010
2011
2012
2013e
2012
2011
2010
2009
2008
2007
2006
2005
Feb-13
2004 2005
5.0
-40%
Feb-12
2003
10.0
-20%
Feb-11
2002
15.0
0%
Feb-10
0
20.0
20%
Feb-09
5
25.0
40%
Feb-08
10
30.0
60%
Feb-07
15
35.0
80%
Feb-06
20
40.0
100%
Feb-05
25
45.0
120%
Feb-04
30
50.0
140%
Feb-02
35
4
Imports MAT (million unit cases)
160%
Import value per case ($US)
Feb-03
40
Feb-01
3
2004
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2003
2002
0%
0
Total value of Chinese imports has accelerated strongly from a near zero base 10 years ago [1], and imports now represent 1 in 5 bottles
of wine consumed in China [2]. The average value per case has also risen substantially reflecting China’s bias towards premium and
luxury wines for imports [3]. Total import growth moderated in 2012 from very high levels in 2011, as the overall base increased, and
due to stronger competition from domestic producers.
Source: China Customs, Comtrade, Morgan Stanley Research
58
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
China – Bottled imports drive value growth
1
2
Imports value per litre ($US)
Imports by type 2012 (by value)
Imports by type 2012 (by volume)
$6.00
Bulk wine
9%
2009
2010
USA
Italy
2011
2012
$5.00
Bulk wine
31%
$4.00
$3.00
$2.00
Bottled wine
69%
Bottled
wine
91%
$1.00
$France
3
Bottled imports by country 2012
(volume)
Chile
8%
USA
5%
Chile
Spain
4
Bottled imports (mn unit cases)
Bottled imports by country 2012
(value)
Chile
6%
Other
9%
Australia
USA
5%
Other
10%
16
14
2009
2010
2011
2012
12
10
8
Spain
10%
Italy
7% Australia
13%
France
48%
Spain
6%
Italy
6%
6
France
53%
Australia
15%
4
2
France Australia
Italy
Spain
USA
Chile
Other
Bottled imports represent over 2/3rds of import volume and more than 90% of imported value [1]. Value per case increases were most
noticeable to Australia and the US, although France has seen a modest reduction in 2012 [2]. The source for bulk imports varies year-toyear depending on supply and cost (currency of producer therefore being relevant), bottled imports on the other hand, are consistently
dominated by France with Australia at number 2 [3].
Source: China Customs, Morgan Stanley Research
59
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
China – Domestic production has accelerated, imports still required to meet future growth
120%
100%
80%
60%
100
40%
80
20%
Shandong
Nov-11
4
Total Supply vs. Total Demand
(million unit cases)
250
Imports required to meet domestic consumption
Nov-10
0%
May-11
Jan13
Nov-09
Jan12
May-10
Jan11
Nov-08
Jan10
May-09
Jan09
Nov-04
Jan08
May-05
Jan07
Nov-03
Jan06
Nov-02
Jan05
May-04
-40%
Jan04
20%
May-03
-20%
20
200
Total Supply
Domestic production net of exports
Total Demand
150
100
2012
2011
2010
2009
2008
2007
0
2006
2015e
2014e
2013e
2012e
2011
2010
2009
2008
2007
50
2006
500
450
400
350
300
250
200
150
100
50
-
Jilin
40%
0%
40
3
Henan
Nov-07
60
Hebei
60%
Nov-05
120
0
Jan03
Tianjin
80%
May-08
140
Nov-06
160
2
Production by region
100%
May-07
180
May-06
Production MAT and monthly
growth (million unit cases)
200
2016e
1
Domestic production has accelerated in response to the accelerating demand [1]. Shandong is the primary production region, however
the majority of incremental production has come from the Jilin and Henan regions in the North East of China [2]. Total consumption is
estimated to exceed 400m unit cases of wine by 2016, however targeted levels of domestic production fall short of this level. As a result,
further import demand will likely be required to meet the rising consumption gap [3]. As a net importer, supply and demand is
predominately in balance [4].
Source: OIV, China Customs, comtrade, Morgan Stanley Research, e= Euromonitor estimates for consumption
60
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Summary – Other New World Markets
Argentina, Chile, South Africa and New Zealand are New World producers with a significant presence on export markets, despite relatively
small (except for Argentina) domestic consumption bases. As net exporters of wine, balancing supply and demand is heavily
reliant on exports. Internal factors such as varietal strength and relative cost of production are drivers of export demand, whilst currency movements
are a major external driver.
Argentinean supply continues to be structurally higher than demand.
provided some relief, but current export demand is not sufficient to absorb normalised levels of supply.
Exports in 2012, however the majority of this is now bulk.
An exceptionally low yielding vintage in 2012 has
The US has driven an increase in
Steady growth in capacity and rising yields has led to a doubling in production from Chile over the past decade. A relatively low cost of
production has boosted export competitiveness. Bulk exports are still the largest proportion of growth, and this needs to continue given existing capacity coming
on-stream.
Demand and supply has been generally well managed
over time,
but is currently in a slight excess.
South Africa continues to be plagued by oversupply due largely to still increasing production (despite some removal of capacity) and
weaker exports, which have been in decline for 5 years. Export prices are amongst the lowest globally as the country is increasingly reliant on value focused
markets such as the UK and Germany.
New Zealand moved into undersupply in 2012, following decades of oversupply. The country has benefited significantly
from it’s ongoing popularity of its Sauvignon Blanc, with export demand re-accelerating in 2012. Exports are extremely concentrated - Australia, the UK
and US make up ~85% of export volumes. Average export prices are high, second only to France.
61
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
The Major Importers: Which exporters have benefited / harmed from currency movements?
1
USA (USD vs exporter currencies)
140
Chilean
Peso
120
Chilean
Peso
120
NZD
AUD
EUR
NZD
AUD
100
EUR
80
2
UK (Pound vs exporter currencies)
140
100
USD
80
SA Rand
60
Argentine
Peso
Europe (EUR vs exporter currencies)
160
Chilean
Peso
NZD
100
AUD
80
120
100
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Oct-13
4
China (Reminbi vs exporter currencies)
120
140
Apr-10
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Argentine
Peso
NZD
Chilean
Peso
AUD
USD
EUR
USD
Oct-13
Apr-13
Oct-12
Apr-12
Argentine
Peso
Oct-11
40
Apr-11
SA Rand
Oct-10
60
Apr-10
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Argentine
Peso
Oct-10
60
Apr-10
SA Rand
Oct-09
80
Oct-09
3
Apr-10
Oct-09
60
Oct-09
SA Rand
Across all four major wine importers (US, UK, Europe and China), Australian and New Zealand exports face the biggest currency
headwinds whilst Chilean exports have also experienced headwinds, although to a lesser degree. The two exporting countries which have
benefited the most from currency movements are Argentina in particular and also South Africa, whose currencies have depreciated vs all
the major importing currencies. In the Chinese import market, US and European exports have also benefited from currency depreciation
vs the Renminbi.
Source: Datastream, Morgan Stanley Research
62
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Argentina – Production variations from yield volatility, exports trending positively
1
Area under vine (‘000 ha)
2
Yields (hectolitres per hectare)
220
80
Statistical
correction
200
75
180
70
160
65
140
60
55
120
2012e
2011
2010
2009
2008
2007
2006
2005
2003
2002
2001
2000
1999
1998
2004
2013e
2011
2012e
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2013e
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1997
1998
Production
Consumption
1999
120
1998
140
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Exports (mucs)
yoy % grow th
1997
160
1996
1996
2013e
2011
2012e
2010
2009
2007
2006
2005
2004
2003
2008
50
45
40
35
30
25
20
15
10
5
0
180
100
4
Exports (million unit cases)
Argentinean wine
(million unit cases)
1996
200
2002
2001
2000
1999
1998
1997
1996
3
1997
50
100
Area under vine was relatively flat in 2012 following a rising trend over the past decade (note a statistical correction to reporting area
was responsible for the step down in 2011) [1]. Yield variations have been quite significant [2], causing large swings in production [3].
Production declined by ~25% in 2012 on a weather impacted fall in yields, whilst domestic consumption stabilised at low levels following
an extended period of decline [3]. Exports maintained a 10% growth rate in 2012, though still remain well below 2008 highs [4].
Source: OIV, comtrade, Instituto nacional de vitivinicultura, Morgan Stanley Research, e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
63
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Argentina – Normalised supply still well above demand
Argentinean wine exports by volume (million unit cases)
Argentinean wine imports (million unit cases)
4.0
Total
Paraguay
Japan
4
Total End Demand vs. End Supply
(million unit cases)
200
4.5
USA
Other
Sweden
Germany
Denmark
Japan
Russia
Netherlands
UK
Paraguay
Canada
USA
3
2011
Denmark
3
-
2010
United
Kingdom
6
Netherlands
9
2009
Sweden
2011
Canada
12
2010
45
40
35
30
25
20
15
10
5
Switzerland
15
2009
2
Argentinean wine exports by price (US$/case)
18
China
1
Demand
Supply
180
3.5
From Chile
3.0
All other imports
160
2.5
2.0
140
1.5
1.0
120
0.5
-
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
100
Exports to the US have been boosted by the rapid increase in demand for the Moscato varietal, with exports to most other regions flat to
slightly down [1]. Although price increases have been impressive for many countries, pricing declined to the US where the majority of
incremental exports have been in bulk [2]. Imports (mostly comprised of bulk trade with Chile) are relatively immaterial for Argentinean
supply, with a large domestic consumption base apparently very loyal to domestic producers [3]. With the exception of abnormally low
yielding vintages in 2009 and 2012, supply appears to be well in excess of current levels of demand in Argentina [4].
Source: OIV, comtrade, Instituto nacional de vitivinicultura, Morgan Stanley Research e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
64
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Chile – Rising yields driving production and creating an excess in the near term
130
120
110
110
100
100
90
90
80
80
70
70
60
60
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1997
1996
50
50
4
Exports (million unit cases)
160
90
80
70
60
50
40
30
20
10
0
2011
2012
2010
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
2008
2009
20
2007
40
2005
2006
Production
Consumption
60
2004
80
2002
2003
100
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
Exports (mucs)
yoy % growth
2001
120
1999
2000
Chilean wine (million unit cases)
140
1998
3
2
Yields (hectolitres per hectare)
Area under vine (‘000 ha)
1996
1997
1
Chile has seen a modest but steady increase in land under vine over the past decade [1]. Yields have increased substantially, particularly
in 2012, driving production growth [2 & 3]. Consumption has remained steady overall however declined slightly in 2012, whilst export
demand have returned to growth in 2012 after 2 year correction from the 2010 peak [3 & 4].
Source: OIV, comtrade, Catastratro Vitivola Nacional, Morgan Stanley Research
65
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Chile – Spike in production has led to an excess in 2012
Chilean wine exports by volume (million unit cases)
30
2009
25
2010
2011
2009
30
25
20
2
Chilean wine exports by price (US$/case)
35
2010
2011
20
15
15
10
10
5
5
160
Chilean wine imports (million unit cases)
140
From Argentina
1.4
USA
Total
Paraguay
Japan
China
Denmark
United
Kingdom
4
Total End Demand vs. End Supply
(million unit cases)
1.8
1.6
Netherlands
Sweden
Other
Ireland
Sweden
Denmark
Canada
Netherlands
China
Japan
Germany
United
Kingdom
USA
3
Switzerland
-
-
Canada
1
All other imports
120
1.2
1.0
Demand
Supply
100
0.8
80
0.6
0.4
60
0.2
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1996
40
-
The US and UK are the largest single export markets for Chile, together accounting for over 30% of total exports, whilst there is a large
tail of export markets [1]. Export pricing is improving to most markets [2]. Imports are immaterial to supply and have historically
focused on bulk trade from Argentina [3]. The rise in production in 2011 and 2012 has not been full absorbed by an improvement in
exports, resulting in oversupply which has been maintained in 2012 [4].
Source: OIV, comtrade, Catastratro Vitivola Nacional, Morgan Stanley Research e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
66
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
South Africa – Production growth still outpacing growth in end demand
1
South African Wine Production (million unit cases)
100
89
90
85
79 77
80
79
97
92
64
60
66
61 60
60 59
45
45
87
44
81
Domestic wine consumption (million unit cases)
2
45
43
43
43
43 43 43
43
42
70
70
46
41
41
63
40
40 40
40
55
39 38 38
50 47
38
39
38 39
38
38 38
38
38
37
3
South African exports – million unit cases
50
40
46
43
45
41
39
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
36
1991
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
40
4
South African imports – million unit cases
6.0
5.5
5.0
35
30
30
24
31 30
4.0
3.5
26
3.0
20
20
14
12 13
10
3
3
5
7
16
1.8
2.0
0.9
9
1.0
0.1 0.10.1 0.1 0.0
2.2
2.2 2.1
1.7
1.6
2.0
1.9 1.9
1.6
1.2
0.9
0.4
0.3
0.3
2012e
2011
2010
2009
2008
2006
2007
2005
2004
2003
2001
2002
2000
1999
1998
1997
1995
1996
1994
1993
1992
1991
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
1990
0.0
[1] South Africa produces approximately 90 million cases of wine (increasing slightly over the past 3 years) of which just under half is
consumed in the domestic market (also showing modest growth) [2]. Exports have been in decline since 2008, down a further 5% in
2012 [3] whilst imports remain largely immaterial at less than 5% of consumption [4].
Source: Department of Agriculture, Directorate Food Safety and Quality assurance. Morgan Stanley Research e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
67
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
South Africa – Remains in excess supply
1
260,000
South African Land Under vine (acres)
South African per capita consumption
(litres per capita)
10
2
250,000
9
240,000
230,000
8
220,000
7
210,000
4,300
4,100
3,953
4,041
2012
2013e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
South African Grape prices
(Rand/ton)
4,133
3,917 3,949
3,930
3,801
3,900
3,640
3,700
70
3,278
Demand
3,173
3,128
2,971
2,900
60
50
2,700
2012e
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1996
40
2,500
1995
3,100
Supply
90
80
3,593
3,500
3,300
4
(million unit cases)
Production and End Demand
100
1994
3
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
e
6
200,000
[1] Capacity has been gradually removed, although not at a rate to match declining demand. [4] Accelerating export demand through to
2008 had the industry on trending towards balance but a reversal of this export trend thereafter has not been able to be offset by
modest improvement in domestic consumption. Improvement in exports and consumption in 2012 has partially narrowed the gap,
however the industry remains in excess supply.
Source: Department of Agriculture, Directorate Food Safety and Quality assurance. Morgan Stanley Research e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
68
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
South Africa – Overall export prices are amongst the lowest globally
1
Supply/Demand surplus (deficit) – (million unit cases)
20
SA Exports by destination - 2012
15
2
UK
22%
Others
28%
10
5
Belgium
2%
0
Finland
1%
Canada
5%
2011
2012e
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Germany
19%
Denmark
4%
US
6%
Leading wine exporters – 2011e (million unit cases and USD/Case)
Industry stocks to forward sales ratio
1.8
Netherlands
5%
300
1.7
1.6
200
1.5
150
1.4
100
1.3
50
1.2
New Zealand
Portugal
Argentina
Germany
US
Chile
France
Australia
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
1.0
Spain
Italy
0
1.1
4
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
RoW
To Europe
Export Prices (RoW)
Export Prices (Europe)
250
South Africa
3
1995
1994
-5
Sw eden
8%
[1] South Africa’s oversupply contributed further to inventories in 2012 and the stocks to sales ratio continues to increase beyond
comfort levels [3]. Overall export prices are amongst the lowest globally [4] as the country has been forced to export a large amount of
low-quality bulk product to markets like the UK and Germany [2].
Source: Department of Agriculture, Directorate Food Safety and Quality assurance, comtrade. Morgan Stanley Research e = OIV estimates for 2012 and Morgan Stanley estimates for 2013
69
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
New Zealand – Small, but Sauvy
1
40
30
Area under vine (‘000 ha)
2
New Zealand wine (million unit cases)
35
25
30
25
20
20
15
Production
Consumption
15
10
10
5
3
25
80%
20
Chardonnay Pinot Noir
60%
40%
70%
Exports (mucs)
yoy % growth
60%
50%
15
40%
10
30%
20%
Sauvignon
Blanc
5
10%
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
0%
FY98
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
0%
FY97
0
FY97
FY12
FY11
FY10
FY09
FY07
FY06
FY05
FY04
FY03
FY08
4
Exports (million unit cases)
Production by Varietal
100%
20%
FY02
FY01
FY00
FY99
0
FY98
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
FY97
0
FY97
5
New Zealand’s area under vine has stopped growing [1] following a deceleration in export demand in 2011 [4] whilst lower yields have seen
production fall in 2012 [2]. Export growth has historically been very strong, rising 10x over the past 15 years [4] as demand for New
Zealand Sauvignon Blanc [3] skyrocketed. Despite its success, the New Zealand market remains very small, with total exports equivalent
to only 25% of Australia’s total. Export growth has re-accelerated in 2012 [4].
Source: New Zealand Winegrowers, comtrade, Morgan Stanley Research
70
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
New Zealand – Small, but Still a Key Competitor to Brand Australia
3
NZ wine imports (million unit cases)
Total
UK
Netherlands
USA
2011
4
35
Total End Demand vs. End Supply
(million unit cases)
8.0
30
7.0
2010
Australia
UK
26%
Ireland
USA
21%
UK
34%
Canada
USA
20%
Japan
Australia
31%
2009
China
Other
22%
Australia
30%
100
90
80
70
60
50
40
30
20
10
HK
Other
16%
2
NZ wine exports by price (US$/case)
Exports by Value (2011)
Exports by Volume (2011)
Singapore
1
All other imports
6.0
25
From Australia
5.0
20
4.0
Demand
Supply
15
3.0
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0
1997
5
1996
1.0
-
FY97
10
2.0
New Zealand relies on three key export markets: Australia, The UK and The US [1]. Export prices for NZ wine are high and rising [2],
almost double Australia’s pricing and second only to France on the global stage. Imports have steadily declined since 2003 from all
regions except Australia [3]. Stable domestic consumption, a rebound in export demand, combined with a fall in production has seen NZ
move into an undersupply situation for the first time in more than 15 years [4].
Source: New Zealand Winegrowers, comtrade, Morgan Stanley Research e = Morgan Stanley estimates
71
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Stock Price, Price Target, and Ratings History
(See Rating Definitions)
72
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
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73
MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Disclosure section (cont.)
STOCK RATINGS
Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below). Morgan Stanley does not assign ratings of
Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold and sell. Investors should carefully read the definitions
of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully
read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice.
An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations.
Global Stock Ratings Distribution
(as of September 30, 2013)
For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equalweight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not
the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most
positive stock rating, with a buy recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively.
Coverage Universe
Investment Banking Clients (IBC)
Count
% of
Total
Count
% of
Total IBC
% of Rating
Category
Overweight/Buy
1002
34%
410
38%
41%
Equal-weight/Hold
1278
44%
493
46%
39%
114
4%
28
3%
25%
526
18%
140
13%
27%
Stock Rating Category
Not-Rated/Hold
Underweight/Sell
Total
2,920
1071
Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing
holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months.
Analyst Stock Ratings
Overweight (O or Over) - The stock's total return is expected to exceed the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months.
Equal-weight (E or Equal) - The stock's total return is expected to be in line with the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months.
Not-Rated (NR) - Currently the analyst does not have adequate conviction about the stock's total return relative to the relevant country MSCI Index on a risk-adjusted basis, over the next
12-18 months.
Underweight (U or Under) - The stock's total return is expected to be below the total return of the relevant country MSCI Index, on a risk-adjusted basis, over the next 12-18 months.
Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.
Analyst Industry Views
Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as
indicated below.
In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated
below.
Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated
below.
Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX;
Asia - relevant MSCI country index.
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MORGAN STANLEY RESEARCH
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October 22, 2013
Disclosure section (cont.)
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MORGAN STANLEY RESEARCH
The Global Wine Industry
October 22, 2013
Disclosure section (cont.)
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MORGAN STANLEY RESEARCH
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October 22, 2013
Disclosure section (cont.)
As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of investment advisory activity.
Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses, portfolio management companies,
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H8806R
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MORGAN STANLEY RESEARCH
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October 22, 2013
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