Notes

Outline

ANZ 2001… Australian Wine Marketing Conference July 16 & 17, 2001 Adelaide THE FRENCH CHALLENGE

The French Challenge How much longer will the French sit back and watch New World producers seize market share?

How much French wine is out there?

Can this market be saved? “France is by no means dead, dying or buried.” Allan Cheesman, wine director J Sainsbury, UK

What went wrong? Complacency Unreliable quality A fragmented industry Erratic pricing An inability to think beyond the next harvest Reliance on tradition rather than innovation A belief that the producer is king

Where are the vineyards? France 1994: 933,000 ha 2005: 908,000 ha Western Europe 1994: 3,228,000 ha 2005: 2,774,000 ha (France, Italy, Spain, Germany) Australia 1994: 67,000 ha 2005: 106,000 ha New World 1994: 817,000 ha 2005: 1,094,000 ha (North & South America, Australasia, South Africa)

Global glut…old news? “There’s more wine chasing fewer people, it’s as simple as that.”Angela Muir, MW

Where does French wine go? French Exports / Percentage of Production 1994: 10.9 million hl     20 percent 2005: 15.5 million hl 25 percent

Exports 2000: 14.6 million hectolitres

France Exports 2000

30 years of French Exports: Value Wine (white), Spirits, (yellow) fédération des exportateurs de vins et spiritueux de france

The French Export Market BY VOLUME Germany 20.4% UK 19.1% Belgium 11.6% US 7.7%

By air, by land, by sea… By 2005, France will export the equivalent of 613 million bottles MORE than it did in 1994 ….

Competition Increased global competition between high and low cost producers has accelerated the need to find competitive responses.  Thus producers will need to find new products, markets, or practices in order to differentiate themselves from other producers. --Kirby Moulton, OIV, 1998

Challenge this There is one basic fact that has kept the French from taking Australia seriously. THEY DON’T LIKE THE TASTE OF YOUR WINE. AND, BEING FRENCH, THEY CAN’T IMAGINE ANYONE ELSE DOES EITHER.

Who is drinking the world’s wine? By the year 2005, an estimated 198.1 million hectolitres of wine will be consumed annually, up 5.1% on 1999. The UK, will see the sharpest increase +36.6%, ahead of Japan (+20.3%), China (13.2%). and Canada (+11.1%). Source: VERTUME International & Associés for Vinexpo. January 2001

Wine as leisure France, Germany and Italy will continue to drink less but better wine, as wine becomes a “leisure” product rather than an agricultural one. Source: VERTUME International & Associés for Vinexpo. January 2001

What Consumers Want CONSUMERS WANT TO DRINK WINE NOW AND…THEY WANT IT AT THE BEST PRICE POSSIBLE. HEALTH IS A KEY ISSUE THEY DON’T WANT ANY JUNK IN THEIR WINES…OR AT LEAST NONE THAT SEEMS UNHEALTHY. Sound familiar? This is what French consumers want according to a 2000 survey.

Cleaning up their act Australia came into the market answering all these “wants” while the French were still caught in the cobwebs of their dirty cellars. But I will tell you…I've been in hundreds of cellars in the last 12  months. In the Rhone, in Burgundy, in Champagne, in the Loire, in Languedoc and in Bordeaux. And there aren’t many dirty cellars anymore.

Bringing it home The French wine consumer is passionate about wine. But during the 1990s, the French courted the export—and particularly the Asian—markets. Last year they started turning this around.

France to slip from No 1? Figures by A.C. Nielsen for 2000 show that 19.5 percent by value of the wine sold in British off-license was from Australia, up almost four per cent on 1999. The French market share, meanwhile, has been in steady decline.

How France is changing Simply being in a prestigious appellation—without marketing the fact--is not enough Marketing is essential What do the customers want? Concentration of the industry Branding is vital Globalisation of the French wine industry

Marketing spend "The Australians seem to have more money to put into marketing. If the French have more money they should be prepared to invest. The French haven’t been used to investing in brands until now." Tim Ranscomby --Safeway (UK)

The Australian threat “Australia has positioned itself as a formidable competitor because of the powerful commercial position of its leading companies and its strong marketing strategies.” ONIVINS Report: Analyse des filieres concurrentes et des strategies des douze principaux pays producteurs de vins dans le monde, 2000

The Ozzie secret “The reason why Southcorp or BRL Hardy do well is they are reliable and disciplined. Relatively new operations don’t have millennia teaching them…wrong. The grapes have a profile and destination from day one.” Angela Muir, MW

Image but boredom “Australia has the brand Australia image - Ayer’s Rock, Sydney Harbour, cricket, Sydney Olympics, etc, strong brand proposition especially for the British. I believe though there is an element of boredom in Australian wine, all up-front fruit, easy to drink, soft and one dimensional.” Allan Cheesman, wine director J Sainsbury, UK

Aiming for quality France and the other European Union members initiated a new program within their markets to focus on traceability for quality, health and regional uniqueness. The first report is due in 2003. A European wine industry group is putting together a voluntary health and sanitation traceability programme now.

Survivors…. France has a number of platforms for success: 1. Quality of 2000 vintage 2. Prices for French wines have fallen 3. The rate of exchange is favourable to French exports 4. France has two huge bread baskets - Languedoc and the Rhone. Languedoc is the 4th biggest wine country in the world 5. An awareness among an increasing number of producers - even coops - that there is a threat.

BORDEAUX Strategy 1. Ensure that regular customers remain faithful 2 Increase the consumer knowledge of Bordeaux appellations 3. Open new markets Budget 2001: $20 million (US)

Bordeaux promotional tools 1. Publicity campaigns 2. Promotions off trade 3. Internet, marketing Bordeaux online.

What some are doing Vins de garage—the French term for small quantity, high price cult wines—are getting press attention and spurring a cottage industry of “garagistes” throughout Bordeaux.

Bordeaux in the UK (1) Press contacts Billboard campaign--sexy images--promoting generic red and white Bordeaux More press visits to Bordeaux Radio campaign Reopened Bordeaux Wine Bureau in the UK (1999) More press tastings Promotions in major supermarkets

Bordeaux in the UK (2) Tasting stall at Victoria Station in London (Kanga Rouge deja vu?) In-store tastings Seminars for sommeliers Scholarships for Bordeaux wine studies for the trade

Slide 34

Burgundy “No one’s going to spend £8 on a bottle of Burgundy when they don’t know what they are going to end up with.” -Chris Brook-Carter, just-drinks.com

Project Burgundy The Burgundy wine bureau launches its “Project Burgundy” this month. 2 million francs (A$514,000) dedicated to downstream monitoring for quality control. This is a fourfold increase over the amount in 2000, a year in which fraud was rampant in Burgundy news headlines.  The emphasis is on Burgundy’s regional appellations “in order to make up ground lost to vigorous international competition.”

Burgundy: project details Compulsory bottling in the region of production. The words “Vin de Bourgogne” or Grand Vin de Bourgogne” on the labels of all 160 million bottles of burgundies sold each year. Down-stream monitoring for quality control Ambitious new communication program for distributors and consumers. Five-year program: by 2003 the BIVB (Burgundy Wine Bureau) budget is projected at 44 million francs (A$11.5 million):

The Rhône THINK RED, THINK CÔTES DU RHÔNE

Think..how to sell all that wine Cotes du Rhone Wines from France has launched its international marketing campaign in the U.S. The Rhone Valley is the second largest wine region in France.

Vallée du Rhône (2) Exports (1999) 992,000 hl PRINCIPAL MARKETS: Benelux 330,000 hl UP 0.8 % UK 190,000 hl    UP 5.5 % Switzerland 136,000 hl UP 2.2 % Germany 111,000 hl UP 8.8 % USA 53,000 hl UP 15.5 %

FIGHTING VARIETALS Languedoc Vins de pays d’Oc Bulk wine

France yesterday… The image of France among new world producers is “old and dirty.” Does it mean this wine is washed up…even though it’s Chateau Haut-Brion?

France today… Global currency in language and wine Micro marketing, by region and appellation

France today (2)…. Not everything is stainless steel and large production. This is one of the world’s most expensive wines, Le Pin. It sells on taste, terroir and marketing.

France today (3)…. New vats, new techniques, attention to detail. This attention is filtering down from the historical best to small wineries intent on making excellent international wines.

Global glut and competition “Consumers will be the beneficiaries as vintners become more competitive, cutting prices and improving quality to keep their wines moving off store shelves.” - Tim Tesconi The (Santa Rosa, CA) Press Democrat, June 10, 2001

French Wine Exports In 2000, France felt the effect of the global stagnation of wine sales. « Competition from New World producers exacerbated the problem, particularly in European wine markets. » --Federation of French Wine and Spirits Exporters

French export markets

How much wine…tomorrow An estimated 282 million hectolitres of wine will be available for drinking around world markets in 2005.

Is Merlot the Pampers of wine? Historically the key to global dominance was distribution. 2000 and 2001 saw a dramatic consolidation of these distribution channels. What is new is global marketing. It’s Proctor & Gamble’s Pampers and soap strategies stuffed into a bottle.

Wine to the people One of the most striking phenomena of the past five years has been the concentration in distribution channels worldwide. US distributor Walmart (owner of German chain Wertkauf and UK’s Asda) is currently the world’s leading chain, followed by Carrefour-Promodes from France and Metro AG from Germany. Walmart last month announced plans for more stores in more European countries.

Survivors “..even if the cost of quality is not all recoverable, it seems certain that with global wine surpluses running at 84 million hectolitres by 2005 (Vinexpo research), it's the producers who commit to quality that will survive and thrive.” Dr. Caroline Gilby Dr. Gilby is a UK-based journalist, broadcaster and lecturer on wine

Voss prediction I believe that Australia’s current role is coming to an end. The fashion for up-front fruity wines, drunk outside meals, is changing. Consumers want to drink wine with food. They want to be able to finish a bottle between two at mealtime and not feel drunk from the excessive alcohol.

Survivors: The Wellington factor The French rely on centuries of lessons learned.  They were beaten by Wellington.They lost to the Germans twice in 100 years…yet they came back to rule the European Market…and once the French mind embraces a concept, they make it theirs.

eurowinenews@aol.com Roger Voss Kathleen Buckley