Transcript French Wine Production

American Wine Inc
Exporting to France?
Keith Hays
French Economy
Bart Hundt
French & EU Import
Laws and
Regulation
Trevor Graham
French Wine Industry
Analysis
Neal Gee
French Wine Market
Overview
French Economy
Keith Hays
French Economy
Demographics
France
Population
60,424,213
293,027,571
0-14
18.5%
20.8%
15-64
65.1%
66.9%
65+
16.4%
12.4%
Total
38.6 Years
36.0 Years
Male
37.0 Years
34.7 Years
Female
40.1 Years
37.4 Years
0.39%/Yr
0.92%/Yr
12.34
14.13
9.06
8.34
Age Structure
Median Age
Pop. Growth Rate
Birth Rate/1,000
Death Rate/1,000
United States
French Economy
Moving to a market economy
Privatizing many sectors
Governmental control of utility sector
Capitalistic Society
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Government lowered taxes
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Employment Issues
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Taxes 43.8% of GDP
35 hour work week
Restriction on Layoffs
Pension Reforms
French Economy
Economy Sluggish
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2003 deficit 4% of GDP
Business investment listless
 Low rate of capital utilization
 Sluggish Demand
 High debt
 Steep cost of capital
Economic Data
France
GDP
United States
$1.661 trillion
$10.99 trillion
0.50%
3.10%
$27,600
$37,800
Agriculture
2.7%
1.4%
Industry
24.4%
26.2%
Services
72.9%
72.4%
Population Below Poverty
6.5%
12.0%
Consumption By %
Share
Lowest 10%
2.8%
1.8%
Highest 10%
25.1%
30.5%
2.1%
2.3%
$27.39 Million
$146.5 Million
GDP Real Growth
GDP Per Capita
GDP Composition By
Sector
Inflation Rate
Labor Force
Labor Force By
Occupation
Unemployment Rate
Public Debt (% Of GDP)
Agriculture
4.1%
Industry
24.4%
Services
71.5%
9.7%
6.0%
68.8%
62.4%
French & EU Import Laws
and Regulations
Bart Hundt
French & EU Import Laws
and Regulations
French labeling and product ingredient
regulations are among the most strict n the EU.
Severe limits on food labeling superlatives.
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Cannot use “ great tasting…”
Labeling cannot be used to promote product
Products produced in accordance with specific
processing procedures.
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If they do not conform they may be subject to special
taxes
Labeling Requirements
Labels must be in French regardless of origin.
Multilingual labels are acceptable.
EU has an approved additive list .
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Does not mean that the additive is approved in France.
Foreign names are forbidden in place of existing
equivalent French terms.
Labeling Requirements
Most items must have in same area of label
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Product name
Net quantity (must be in metric units)
Date of minimum shelf life
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Date best consumed by (on non perishable products)
To be consumed before (on perishable products)
Wines and spirits that have an alcohol content of 10.5
or greater are exempt from date labeling
Country of origin must be indicated not less than 4mm
in height
France has its own packaging or container size
requirements for wines and alcohol.
French Import Regulations
France is more strict than the EU.
Items must comply with French regulations
before they are shipped to France.
French imports of wine from non-EU countries are
subject to EU import duties which vary depending
on the percentage of alcohol contained in the
wine and the type of container.
French Import Regulations
Also a VI.1 document is necessary.
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EU document certifying that the US wine exporter is
approved by the US BATF. Taxes for alcoholic
beverages.
Taxes for alcoholic beverages are 19.6%.
French Wine Market
Overview
Neal Gee
Wine Industry in France
Tightly regulated by EU and AOC rules.
Regulations address maximum yield, permitted
grape varieties, location of vineyard site, and
even pruning practices.
Strict regulations have led to market decline.
Wine growers are unable to adapt to global
market changes because of strict guidelines.
Wine Industry in France
France is currently world’s second largest
producer of wines, but is losing position quickly.
France specializes in premium brands of wine
that exceed, on average, $30 a bottle.
Many of France’s wines are created from Hybrid
grapes that originated in the US in the 1950’s.
Wine Industry in France
In the 1950’s one-third of wine grapes were from
American pedigrees.
In 2003 the average French adult drank 58 liters
of wine.
37% of French citizens consider themselves
regular consumers of wine.
Recent Declines
In 1999 French wine producers exported 79
million fewer bottles than previous year.
French wine exports plunged another 10% last
year while domestic sales dropped 5%.
French consumption in restaurants has slumped
by 15-20%.
The decline in the wine industry is also reflected
in the sudden collapse in the value of vineyards in
the country.
Recent Declines
Overproduction has been a constant problem
leading to large supplies that far exceed demand
and create downward price pressure.
Due to slumping sales nearly one-third of
France’s winescape has disappeared.
Problems
Growers complain that strict advertising laws are
preventing them from reversing declining trends.
Lack of focus and a shortage of new marketing
strategies derived to adapt industry to the
demands of a changing global market.
Wine surplus will likely continue.
New entry of abundant amounts of Spanish and
Portuguese wines into EC trade.
Problems
French have failed to understand the markets
they are selling to and have been production led
instead of led by market.
French have not been focused on quality across
the board.
AOC system has protected poorer wine producers
from market forces that create incentives to
achieve quality.
French Wine Industry
Trevor Graham
French Wine Production
World’s #1 wine producer in 2002.
Production statistics.
2002 France’s share of total world wine
production was about 20% compared to the US
8%.
Million Hectoliters
World Wine Production
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1999/2000
2000/2001
2001/2002
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French Wine Consumption
Has been decreasing in France since 1999.
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Study conducted by the French Agricultural Research
Center (INRA) and the French Office for Wines and
Vines indicated that this trend will continue and result
in a 25% decline in wine consumption by 2010 as
compared to 1999.
French Wine Consumption
Domestic wine consumption has continued to
decline.
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Trend is expected to continue in coming years.
Sales in supermarkets for 2002 dropped 2.5%
compared to 2001 .
Quantity purchased by food service sector
(restaurants, etc) decreased 2% in 2002.
Shrinking use of cheaper “table” wines.
French Wine Consumption
Consumers are moving from quantity to quality
Preferences
French Wine Consumption
Age Market (Studies by ONIVINS)
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Consumers under the age of 35 (23% French
households) represent the smallest consumer group.
Consumers between the ages of 35 and 49 (30%
French households) make 25% wine purchases.
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They purchase white wines in larger quantities than any other
age group.
French Wine Consumption
Age Market (Studies by ONIVINS)
 Consumers between the ages of 50 and 64 constitute
the leading buying group in all categories with a
preference for red wines.
 Also major consumers of Champagne consuming
11% above the average consumption level.
 Together with the 65+ this group constitutes 47%
total French households.
 The age group of 65+ are the leading buyers of still
wines, mostly table wines
French Wine Exporting
1/3 of production goes to the EU; other major
clients include US, Canada, Denmark, and Japan.
Early 2003 results.
Wine Export Market Share
Spain
18%
USA 5%
Australia
6%
Chile 5%
Portugal 3%
Other
12%
Italy
28%
Germany 4%
Argentina
2%
S Africa 3%
France 26%
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2001
Million Dollars
France-Wine Export Destinations
1,400
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French Wine Exporting
Continues to lose market share among major
clients to the advantage of “new world wines” .
French Wine Exporting
French Wine Exporting
Trade surplus in wine for 2002 was €5.2B, an
increase of 6.6 percent over the previous year.
French wine exports are very concentrated.
French Export Promotions
In 2002 France had a total budget of €10.4M for
promotions of French wines in different countries,
including the US.
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Promotional activities funded by ONIVINS focused on:
 Advertising campaigns.
 Promotional materials.
 In-store promotions in specialized outlets, hotels,
restaurants, as well as fairs and trade shows.
Four year program launched in 2003.
French Export Promotions
Assistance from the French Minister of
Agriculture.
Trade shows.
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Wine and Spirit Wholesaler Association in Las Vegas,
May 2004.
VINEXPO in Chicago in June 2004.
French Wine Imports
2002 decreased 11.6% in volume with a worth of
460M Euros ($435M).
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US represents only 2% total French wine imports,
French imports of US wines has been growing steadily
from 15K HL in 1994 to 96K in 2002.
 In 2002 French imports of US wines increased 32%
in volume and 19% in value.
French Wine Imports
Table wines represented 79% of total wine
imports in volume, mostly from other EU
countries.
Leading Suppliers
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EU nations.
Non EU nations.
French Wine Imports
Imports of US wines have increased 54% in
volume over the period 1999-2002.
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This can be largely attributed to the presence of
Gallo Winery in this market since 1998.
French Market
Challenges
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Boosting both domestic and export markets.
France and the EU
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French government is urging European growers to
adapt to changing consumer demand in order to better
compete with emerging third country competitors and
in new markets.
French Market
Production Policy and Governmental Support
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Subsidies
 2002 ONIVINS paid €1.5 Million.
EU agreements to reduce subsidies
 Goals
 Reduce 21% in volume and 36% in value.
French Market
Distribution and Infrastructure
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Mail order sales are generally made directly by the
producer.
Wholesalers and importers make up France’s wine
distribution system.
 Wholesalers  specialized wine stores, food
stores, restaurants and institutions.
Supermarket wine sales make up 78% of household
wine purchases, while 22% come from specialized
wine sales (wine stores, etc).
French Market
Advertising Policy
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Television and radio
 Wine industry continues to lobby for modifications
to these laws.
US Opportunities in France
Most of the American wines sold in France are
Cabernet Sauvignon, Chardonnay, Zinfandel, and
Pinot Noir from California.
US competition
US Opportunities in France
There are opportunities for US wines in France,
thanks to the “exoticism” and quality of US wines.
E&J Gallo have been present in France since 1998
and Mondavi wines since 2000.
Recommendation
Surplus Supply
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Government subsidies
Declining wine exports
Cost Prohibitive
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Labeling requirements
Import taxes
Recommendation: NO