Pinot Grigio – the superstar of wine

A brief moment in the spotlight?

Or a long career?

A brief infatuation? Enduring love?

Wine evolutionThe Past The Present

•People drank wine that was produced close to where they lived

• They drank what their parents drank

•They cared where wines came from.

•Wine was bought by men

•Wine was bought from the producer, or a specialist retailer

•Wine was drunk with food

•They respected official designations (DOC, DOCG etc)

•They bought wines that critics had recommended

•People drink wine from across the world

• They drink what they like (and is in fashion)

•Today they are often more interested in brand, grape and price.

•Wine is bought by women

•Wine is bought from supermarkets, or online

•Wine is drunk without food, as an alternative to beer and vodka

•People no longer respect official designations (DOC, DOCG etc)

•People buy wines that recommended by friends, family – and strangers

U.S. Drinks Conference 2010 5

The B.I.G. 2010 Liquor , Wine And Beer Handbooks

US US Five Year Category Growth Rates

Over the last five years, Spirits and Wine consumption have grown much faster than Beer consumption

U.S. Drinks Conference 2010

U.S. Drinks Conference 2010

US Wine Consumption Trend

Wine consumption has grown steadily posting 0.8% growth in 2009 to reach a record level of 296,960 million 9-liter cases.

The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases)

6

Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis.

US Wine Consumption By Type

U.S. Drinks Conference 2010U.S. Drinks Conference 2010 7 7The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases )

Table Wines represent over 91% of U.S. Wine consumption and they continued to show growth of almost 1% in 2009

This has all been to the advantage of Pinot Grigio

•Fashionable

•Easy to drink with and without food

•Popular with women

•Widely available

•Easy to find (and pronounce – for non Italians) on the shelf

•Uncomplicated

Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis.

US Table Wine Consumption By Varietal

U.S. Drinks Conference 2010U.S. Drinks Conference 2010 9

Chardonnay, Cabernet and Merlot combine for 54% of U.S. Wine consumption by All Other Varietals represent opportunity at 24%

9The B.I.G. 2010 Wine Handbook

Top 25 US Import Wine Brand Trends

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10The B.I.G. 2010 Wine Handbook (Thousands 9-Liter Cases )

Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis.

UK Table Wine Consumption By Varietal

U.S. Drinks Conference 2010U.S. Drinks Conference 2010 1111The B.I.G. 2010 Wine Handbook

Source: Adam’s 2008 Advance. Volume Stated On A Thousands Of 2.25-gallon Cases Basis.

UK Table Wine Consumption By Varietal

U.S. Drinks Conference 2010U.S. Drinks Conference 2010 1212The B.I.G. 2010 Wine Handbook

Can the good times last?

STRENGTHSPopularEasy to understand and likeAffordableCritical massStrong brandsAssociated with Italy

WEAKNESSESUnpopular with opinion formersToo widely available?Price droppingBecoming a commodityLosing links to Italy

OPPORTUNITIESNew styles (sparkling, pink etc)BlendsNew BrandsNew markets (China etc)

THREATSOther styles (Moscato, Albarino, Torrontes, Pinot Bianco, Chardonnay)Boredom

THE SWOT ANALYSIS

Why do people drink Pinot Grigio?

The flavour

Pinot Grigio found a niche in part because it's more versatile and less assertive than oaky chardonnay… Most serious wine drinkers shun Pinot Grigio the way they once shunned Soave. And not entirely without reason… the fact is that 99% of what's called Pinot Grigio from Italy is dilute and flavor-challenged, a refreshing, lemonade-like food lubricant/buzz-delivery system.

Like many of my peers, I turned my back on Pinot Grigio early in the 1990s, and I remained slightly embarrassed about my early enthusiasm, as I did about my earlier reverence for the music of the Monkees…. As its popularity grew, its identity became more nebulous and it was planted all over Italy, far beyond its natural home in the northeast.

Jay McInerney- Wall Street Journal

Chardonnay Sauvignon Blanc

Pinot Grigio

“Rich”, “buttery”, “oaky”

“Fresh”, “grassy”, “crisp”

“Easy” “Soft

Why do people drink Pinot Grigio?

They like the “clean” “fresh”, “smooth” character.

Some of them might get bored with it, if the critics are to be believed

The critics are being replaced by “people power”

Pinot Grigio is “the people’s wine” – like White Zinfandel

Popular – despite the critics

But does it have to be Italian?

2010 was the year that Italy might have gone down to below a 50% share of the Pinot Grigio market, at least for Middle America

Italy: 49% (10% increase in case sales)California: 36% (18% increase in case sales)Australia: 9% (11% decrease in case sales)Texas: 3%, which is mainly California grapes sourced but bottled in Texas (5% increase in case sales)Oregon: 2% (57% increase in case sales)All others: 1%

Italy has lost about 4% since 2008. Australia has lost 1% since 2009. California value brands are soaring (most notably, Barefoot).Italian brands that are still strong, but challenged by the California surge are Bella Sera (doing well in larger size), Mezzacorona and Ecco Domani. Pricier Pinot Grigio’s (over $10 retail) are relatively flat.

So it’s still a hot category, but value wines still reign. Italy’s day of Pinot Grigio dominance look like they are over. America, once again has assimilated something uniquely Italian, just like their people and their foods.

Statistics from Alfonso Cevola, / The Blend

Cabernet Sauvignon

23%

Merlot4%

Pinot Noir7%

Rubired17%Zinfandel

4%

Other Red9%

Chardonnay18%

Muscat Alexander10%

Pinot Grigio4%

Other White4%

Breakdown of Purchased Vines -2010 •Other Whites IncludeOther Whites Include•French ColombardFrench Colombard•Sauvignon BlancSauvignon Blanc•SymphonySymphony

•Other Reds IncludeOther Reds Include•MalbecMalbec•Petite VerdotPetite Verdot•Petite SirahPetite Sirah•Ruby CabernetRuby Cabernet•BarberaBarbera

Pinot GrigioPinot Grigio

0

5,000

10,000

15,000

20,000

25,000

30,000

20,000

5,420

Estimated California Pinot Grigio Acreage, 2010

Bearing Non-Bearing

•The Numbers:The Numbers:•21% non-bearing21% non-bearing•8.32% AGR8.32% AGR

•The Supply Trend:The Supply Trend:•Growth at lower Growth at lower endend•Plantings slowingPlantings slowing

•The Implication:The Implication:•Growth is Growth is manageable based manageable based on current sales on current sales •We donWe don’t know ’t know market capacitymarket capacity•May be May be cannibalizing other cannibalizing other white wineswhite wines

And what if the brand becomes more important than the region or country?

Gallo’s link with fashion supports the “female-friendly” quality of Pinot Grigio.

Cupcake is Italian. Little Black Dress is Californian.

But they could switch. And the blogger writing about Flipflop wasn’t

interested in where it came from.

Wine Intelligence Wine Consumer research. Main reason to buy

Price promotions 70%Grape variety

69%Brand awareness 65%Friend/family Recommendation 60%Country of origin 59%Region of origin 50%

DoILikeIt? research into UK Champagne drinkers

“Very” or “Quite” important

Something you know and previously liked 97.5%Price 97.5%Critical recommendation 64%Brand Name 62.5%

Wilson Report research. Main reason to buy

Ogio – every brand owner’s nightmare. Created in a few hours exclusively for a UK supermarket (Tesco) and now UK no 18 best seller without any marketing.Originally Ogio was created for Italian wine, now the brand covers French and Californian wine. And the Pinot Grigio does not have to be Italian...

Er… and where’s it from?

A “South African” brand, with a Romanian Pinot Grigio

And what should Pinot Grigio cost

ECCO DOMANI

SANTA MARGHERITA

ROBERT MONDAVI PRIVATE SELECTON

CLOS DU BOIS CLASSICS

ESTANCIA

CHATEAU STE MICHELLE MID TIER

RUFFINO

KRIS

VOGA

STERLING VINTNERS COLLECTION

DA VINCI

KING ESTATE

A TO Z

ERATH

GNARLY HEAD

LITTLE BLACK DRESS

MIDDLE SISTER

ECCO DOMANI MASO CANALI

DUCK POND

SAN GIUSEPPE

FRANCIS COPPOLA DIAMOND

EOLA HILLS

CANDONI

DANZANTE

CASTELLO BANFI

Top US selling Pinot Grigio – by volume

SANTA MARGHERITA

ECCO DOMANI

ROBERT MONDAVI PRIVATE SELECTN

CLOS DU BOIS CLASSICS

ESTANCIA

CHATEAU STE MICHELLE MID TIER

RUFFINO

KRIS

DA VINCI

KING ESTATE

VOGA

STERLING VINTNERS COLLECTION

ECCO DOMANI MASO CANALI

ERATH

A TO Z

SAN GIUSEPPE

FRANCIS COPPOLA DIAMOND

LITTLE BLACK DRESS

GNARLY HEAD

DUCK POND

CASTELLO BANFI

CANDONI

DANZANTE

MIDDLE SISTER

EOLA HILLS

by volume by value

SANTA MARGHERITA $20-25

ECCO DOMANI MASO CANALI $15-20

CASTELLO BANFI $15-20

KING ESTATE $10-15

SAN GIUSEPPE $10-15

DA VINCI $10-15

KRIS $10-15

FRANCIS COPPOLA DIAMOND $10-15

A TO Z $10-15

ERATH $10-15

CANDONI $10-15

ESTANCIA $10-15

MIDDLE SISTER $10-15

DANZANTE $10-15

CLOS DU BOIS CLASSICS <$10

DUCK POND <$10

VOGA <$10

CHATEAU STE MICHELLE MID TIER <$10

STERLING VINTNERS COLLECTION <$10

ECCO DOMANI <$10

RUFFINO <$10

LITTLE BLACK DRESS <$10

EOLA HILLS <$10

GNARLY HEAD <$10

ROBERT MONDAVI PRIVATE SELECTN <$10

Pinot Grigio – Average US retail price

Big sellers arestill Italian$15-20, butCalifornia<$10 are growing fast.

Will peopleGrow used to these prices?

In the UK, Ogio, (and Dino and others) are either £9 or half price.

85-95% of these wines are bought at £4.49, just over the UK average retail price of £4.45.

What about the threats?

Beware of Chardonnay in a more neutral style.

ChardonnayChardonnay

0

20,000

40,000

60,000

80,000

100,000

120,000

105,000

11,890

Estimated California Chardonnay Acreage, 2010

Bearing Non-Bearing

•The Numbers:The Numbers:•10% non-bearing10% non-bearing•3.64% AGR3.64% AGR

•The Supply Trend:The Supply Trend:•Growth at lower Growth at lower endend•Minimal pulloutsMinimal pullouts

•The Implication:The Implication:•Growth is Growth is manageable manageable •Large crops could Large crops could be problematicbe problematic•Annual Annual displacement by displacement by imports is imports is possiblepossible

And other “new grape varieties”

Muscat AlexanderMuscat Alexander

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

5,000

1,713

Estimated California Muscat Alex Acreage, 2010

Bearing Non-Bearing

•The Numbers:The Numbers:•25% Non-Bearing25% Non-Bearing

•The Supply Trend:The Supply Trend:•Short thru 2012Short thru 2012•2010 planting 2010 planting explosion begins explosion begins bearing in 2013bearing in 2013

•The Implication:The Implication:•Big shift in supply Big shift in supply comingcoming•Limited use, but Limited use, but hot!hot!•We donWe don’t know ’t know market capacitymarket capacity•If itIf it’s a fad, we’re ’s a fad, we’re in troublein trouble

So does Torrontés have Pinot Grigio-like consumer potential? Importer Des Cross says the Torrontés consumer is "overwhelmingly female, with a slight tendency to younger women."

Other possible contenders:

Pinot Bianco(Possibly attractive because of the Pinot connection)

Albarino(Possibly attractive because of the Pinot connection)

RieslingAlways a possibility, but a long time in coming

•Asia•China – Prefers French red (Bordeaux) at the moment but will hopefully develop thanks to female tastes•Korea – High potential, following Japan•India – Not yet a market as such. But has long term potential and not married to red wine

•Brazil•High potential. 200m population. Young population. Increasingly prosperous. Likes wine. Likes to try new things.

Emerging Markets

•Italian Pinot Grigio IS a style with a future

•Italian Pinot Grigio IS at risk from cheaper versions from other countries

•Italian Brand owners ARE at risk from Supermarket own brands – and others (which can change nationality)

Conclusions

•Italian Pinot Grigio producers (and/or regional producers) should design and protect their own bottle and/or label which cannot be used by Pinot Grigios from anywhere else.

•Wines in this packaging should meet agreed quality and style criteria.

•A budget should be devoted to the promotion of the packaging

•It should be incorporated into sales efforts in emerging markets.

Advice