The world’s wine markets by 2030: terroir, climate change, R&D and

globalization

Strategies for wineries over the next two decades

Peter Hayes, Vice-President International Organisation of Vine and Wine (OIV)

7871

7,0007,2007,4007,6007,8008,0008,2008,4008,6008,8009,000

average

Years

Europe

Asia

America

Africa

Oceania

1000

ha

Surface area of vineyards worldwide

9.9%0.7%

69.0%

4.3%

16.1%

11.3%1.4%

64.4%

4.1%

18.8%

2.6%12.8%

57.8%

5.0%

21.7%

270.9

220

240

260

280

300

320

86-9

0

91-9

5

96-0

0

01-0

519

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

05

Pro

v. 2

006

Forec

ast 2

007

average

Years

Europe

Asia

America

Africa

Oceania

1 00

0 00

0 H

l

1.5%

3.0%

78.0%

1.6%

16.0%3.1%

17.0%71.6%

3.4%

5.0%

World production of wine

4.1%

18.5%68.2%

4.2%

5.0%

200

300

400

500

600

700

800

900

1000

1100

1200

1300

2001

2002

2003

2004

2005

prov.

200

6

Foreca

st 2

007

Spain

France

Italy

USA

China

Iran

Turkey

100

150

200

250

300 Portugal

Roumania

Argentina

Chile

South Africa

Australia

Moldavia

Recent developments of the leading vineyards

1000 ha

Australia’s Vineyards = 20% of France’s

Vineyard Area

Surface area of vineyards worldwide

1169

867

800

525 500409

338248 231 205 197174

0

200

400

600

800

1000

1200

Spain

Franc

eIta

ly

Turke

y

China

USAIra

n

Portu

gal

Argen

tina

Roman

iaChi

le

Austra

lia

1000

ha

Areas planted in vines of the 12 leading countries

Forecast 2007

Prev.2007 / 2005

decreasing

stable

increasing

Global Issues: Problems, Opportunities, Drivers

• Global supply-demand balance & system inertia– Defining, analysing and interpretation of statistics– Modelling, scenario analysis and projection?– Emerging (BRIC) and adjusting producer/consumers

• Structure of distribution and retail sector – Recent and ongoing consolidation, limits to SKUs– Alternative access, promotion & servicing pathways?

• Political and social pressures on consumption, pricing, margins, growth– Social licence; health/wellbeing, environment– Sponsorship and tacit promotion– Competition for natural resources and infrastructure

National/Regional Issues : Problems, Opportunities, Drivers

• Industry investor and competitor behaviour– Industry planning, communication and adoption– Numbers, sector focus, current/future viability,

“adjustment”• Policy settings

– Regulation, Taxation etc– Product and industry legitimacy

• Regionality Branding cf/vs Proprietary Brand development– Scale and allocation of investments and by whom?– Legitimacy and credibility of regionality– Risk; climate change and variability

Consequences

• Industry Legitimacy– Direct and indirect implications for industry’s “Licence

to Operate”• Accessibility, reliability and cost of resource

access-land, water, energy, infrastructure----• Accountability

– Development and implementation of BMP+, diverse/confusing/competing certification schemes

– Alignment with regional landscape environmental targets, social objectives-community health and wellbeing

– Role of a “Sustainability Performance Index”– Public audit and reporting; social/community dividend

and environmental impacts etc

Proprietary : Problems, Opportunities, Drivers

• Regionality Branding c.f. Proprietary Brand development– Risk and exposure to weakest colleague– Reliable and valued differentiation-especially with

“Climate Change”?• Consolidation, Innovation and Diversification

– Product; classic vs novel and FMCG approaches– Marketing– Sales and distribution

• Optimising business structures and scale– “Whole of business” modelling, planning and belief– Implementation and monitoring– Adaptation and resilience

For Industry and its Businesses

• Improved sector and business analysis interpretation and communication

• Deeper consideration of– Business positioning and potential– Entrepreneurial opportunity and risk management

• Adoption of more creative approaches in– R&D for contribution to design and delivery– Business planning and execution-action– Communications and Marketing– Adaptability and resilience

Vitivinicultural c.f. Human Factors

• What is the relative plasticity, adaptability and resilience of – The vitivinicultural system– The human operator– Societal institutions– Our markets

• The media• Customers and• Consumers?

Business Performance

• Heightened production and compliance costs

• Greater public accountability measures• Issues of genuine demand/supply balance• Impacts of supply chain consolidation and

balance in market power; novel approaches to marketing and distribution?

• Profitability; individual and regionally– Capacity for reinvestment, innovation and

development

Accountability, information, education and communication

• The public perception and product image of wine has been reinforced by regulatory, industry protocol and promotional assurances of origin, quality, integrity and sustainability communicated to the public, customers and consumers; especially evident with “terroir” based propositions (+organic---?)

• Engagement with the public regarding emerging pressures and industry adaptations must be well planned and managed in order to preserve and enhance these attributes

Optimal adaptation to climate, environment & social pressures needs;

• Development of regionally relevant and realistic potential scenarios

• Preemptive and active balance of management, technical and regulatory innovations to allow effective functioning of the sector, rather than – a belated uncoordinated recuperative action.

• Strategic investment in technical, social and economic R&D, information and communication

• Support and promotion by very well informed leaders and executive management within the public and commercial sector

Implementation of Mitigation/Adaption Strategies

• Clear leadership will be required from industry and government in making a firm commitment to; – Transparent and rigorous analysis of the national and

regional impacts of change (climate, social etc) in its diverse manifestations---technical, environmental, social and economic

– Communication of alternative scenarios and candidate responses is made

– Appropriate adaptation of production and marketing processes

– Well considered legal and regulatory change recognising a need for more adaptable management

And finally-Should the wine industry become more adventurous?

• In its engagement with customers and consumers?

•Different varieties•Different wine styles•Alternative representation of regionality•Different lifestyle and customer/consumer

needs-alternative grape based products

• Adapting industry organisation; variety, viticultural and oenological techniques; packaging and promotion to emerging biophysical and social climates?

Some Stimuli

• Creative thinking; Edward de Bono http://www.youtube.com/watch?v=UjSjZOjNIJg

• Outlook from Bloomberg Business Week; John Mariani http://www.businessweek.com/lifestyle/content/jan2010/bw2010017_325474.htm

• How Globalization is Reshaping the World of Wine; The Wine Economisthttp://wineeconomist.com/category/eu-wine-market-reforms/

• Strategies to reduce the harmful use of alcohol: draft global strategy; WHO

• http://apps.who.int/gb/ebwha/pdf_files/EB126/B126_13-en.pdf