HOW TO POSITION CARMENERE FOR SUCCESS IN THE U.S.A.

November 25, 2009

1

Bruce SchneiderCEO

Schneider Selections

U. S. A.WINE MARKET

2

CONSUMPTION GREW RAPIDLY 2001-2007

Still Grew by 0.9% in 2008 Despite Recession

Sources: Impact Databank 2008, 2009 Wine Handbook

Type 2001 2002 2003 2004 2005 2006 2007Table 196.7 210.6 223.3 235.1 243.7 254.4 265Sparkling 11.8 12.2 12.5 12.6 12.8 13.3 13.6Specialty 9.5 9.6 10.2 10 9.9 9.9 10Domestic Fruit-Flavored Wine Beverages

7 6.8 6.7 6.1 6.1 6 6.1

Traditional Dessert 4.6 4.5 4.5 4.5 4.6 4.5 4.5Vermouth 1.8 1.8 1.8 1.9 1.9 1.8 1.8 Total Wine 231.4 245.4 258.9 270 278.9 290 300.9

Millions of nine-liter cases

3

2008 IMPORTED WINE

• Total (bulk & bottled) declined 1% to 95 million 9L cases.• New world takes 3% from old world, reaches record 46% share.• Bottled declined by 5% to 69.4 million 9L cases.• Bulk increasing due to U.S. winery purchases to meet consumer

demand for less expensive wines.

Source: Annual Gomberg Frederickson Report December 2008

7

(69.4 million none-liter case shipments = 100%)

Source: Gomberg Fredrikson

2008 U.S. IMPORTS BY COUNTRY

4

2008 MARKET SHARE

32.56%

11.92%24.58%

5.15%

8.89%

4.39%3.00%

5.57%3.93%Italy

France

Australia

Spain

Chile

Germany

New Zealand

Argentina

Other

2008Italy 22,584 France 8,270 Australia 17,051 Spain 3,572 Chile 6,167 Germany 3,048 New Zealand 2,081 Argentina 3,865 Other 2,726 Total 69,364

Shipments (Thousands 9L Cases)

 

SUMMARY 2007 VS. 2008 BOTTLED IMPORTED SHIPMENTS

Volume and Average Price Increasing for Chile Argentina Growing Rapidly, Most Others Declining

Source: Annual Gomberg Frederickson Report, December 2008

Country % Change Shipments in Cases

% Change Value in Dollars

France -12 % 6 %

Italy -9 % 0 %

Spain 2 % 4 %

Germany -5 % 2 %

Portugal 2 % 13 %

New Zealand - 4 % -2 %

South Africa - 18 % -10 %

Argentina 31 % 32 %

Australia -7 % -14 %

Chile 2 % 4 %

Total -5 % 0 %

8

SIX MONTHS ENDED 2009 vs. 2008 BOTTLED IMPORTED SHIPMENTS

Global Pricing Chile: Volume Average Price

Consumers Trading Down, New World Benefits

Country % Change Case Volume YTD

% Change Imported Value YTD

France -7 % -31 %

Italy -5 % -18 %

Spain -7 % -23 %

Germany -13 % -23 %

Portugal 8 % -8 %

New Zealand 9 % 9 %

South Africa 17 % 1 %

Argentina 37 % 32 %

Australia -7 % -12 %

Chile 26 % 26 %

World Total -1 % -15 %

Source: Annual Gomberg Frederickson Report, June 2009

=

10

TOP STATES FOR CHILEAN WINES

1) New York

2) Florida

3) New Jersey

4) Texas

5) California

6

FASTEST GROWTH IN $3-7 SEGMENTAfter several years of $10+ growing faster than under $10,

situation has reversed

Source: Gomberg Frederickson Report, March 2009

2009 Consumer Purchases in Food Stores

Volume Cases Volume % Value%Share Change Change Change

Other to $3 (jug) 21% -71 -2% 3%$3 up to $7 49% 156 2% 4%$7 up to $10 15% 2 0% 2%$10 up to $14 9% 24 2% 3%$14 & Over 4% (48) -7% -4%

Source: AC Nielson YTD to 3-28-09

% Change based on difference between 2008 and 2009

13

•Millennials (15-32 years) driving market

•77 Million purchase a wider range of products from a wider range of regions

•Much more likely than Boomers or Gen X to purchase imports

CONSUMER TREND – BRIGHT FUTURE

12Source: 2006 Merrill Research for Wine Market Council

Younger Generations, Especially Millennials, Driving New

Growth of U.S. Wine Market

(Net percent “drinking more wine” by generation)

U.S. WINE MARKETMarket Structure

17

U.S.THREE-TIER MARKET STRUCTURE

18

Non-U.S. Producer

* Importer

On/Off Premise Trade

Consumer

1st Tier

2nd Tier * Distributor

3rd Tier

Source: The Business of Wine* In Some states, companies can act as importer and distributor

U.S. WINE MARKET50 Different Markets

50 Different Sets of Laws

19

U.S. WINE MARKETGrape Variety Trends

17

MOST POPULAR VARIETALS IN U.S. FOOD STORESChardonnay and Cabernet Continue to Grow From Large Base

Merlot Remains #3 as Sales Stabilize

2009 Consumer Purchases in Food StoresCases Volume Revenue

ACNielsen Volume Change % %Category Share (000) Change Change

Total Domestic 80% 302 2% 5%Total Imported 20% (95) - 3% 0%Total Wine 100% 208 1% 3%Chardonnay 21% 98 3% 2%Cabernet Sauv. 14% 167 8% 7%Merlot 12% 36 2% 0%Wh. Zinfandel 8% (64) - 5% 0%Sauvignon Blanc 3% 17 4% 8%Pinot Grigio 6% 47 5% 6%Riesling 2% 17 6% 7%Shiraz/Syrah 4% (34) - 5% - 5%Red Zinfandel 2% 1 0% 2%Pinot Noir 4% 33 6% 6%

Source: Gomberg/ACNielsen YTD to 03-28-09 *Per eq. 750 ml

15

IMPORTED TABLE WINE CONSUMPTION BY VARIETAL 2001 VS. 2007

Source: Impact Databank 2008

Total Share of Top 9 Varietals Increases from 46% to 63%

2001

Chardonnay9%

Merlot9%

Pinot Grigio9%

Chianti4%

Others54%

Sauvingnon Blanc1% Riesling

2%

Cabernet Sauvingon

4%

Shiraz4%

Lambrusco4%

Chardonnay

Merlot

Pinot Grigio

Chianti

Shiraz

Lambrusco

Cabernet Sauvingon

Riesling

Sauvingnon Blanc

Others

2007

Chardonnay12%

Merlot8%

Sauvingnon Blanc3%

Riesling4%

Cabernet Sauvingon

5%

Shiraz9%Lambrusco

3%

Pinot Grigio15%

Chianti4%

Others37%

Chardonnay

Merlot

Pinot Grigio

Chianti

Shiraz

Lambrusco

Cabernet Sauvingon

Riesling

Sauvingnon Blanc

Others

41.9 million nine-liter cases= 100% 265 million nine-liter cases = 100%

14

GLOBAL VARIETIES & TOP ORIGINS IN U.S. MARKET

Volume Share

Chardonnay 21% U.S./ California Australia FranceSauvignon Blanc 3% U.S./ California New Zealand FranceRiesling 2% U.S./ Washington & Calif. Germany (~65% Globally) AustraliaPinot Grigio 6% Italy (65% ) U.S. AustraliaPinot Noir 4% U.S./ California & Oregon France/ Burgundy New ZealandCabernet Sauvignon 14% U.S./ California France/ Bordeaux Chile/ Australia/ ArgentinaShiraz/ Syrah 4% Australia U.S./ Calif. & Washington France/ RhoneMerlot 12% U.S./ California Australia France/ BordeauxWhite Zinfandel (Majority of U.S. Rose) 8%Other ( Includes 2% for Zinfandel) 26%

Total 100%

Top Origins

Source: Gomberg/AC Nielsen 3-28-09

REGIONAL VARIETIES WITH DOMINANT ORIGINS

IN U.S. MARKET

(80% + Market Share) Zinfandel U.S./CaliforniaMalbec ArgentinaCarmenere ChileGruner Veltliner AustriaPinotage South Africa

DOMINANT REGION/COUNTRY IDENTIFICATIONS WITH GRAPE VARIETIES

The New World Successes

23

ARGENTINA = Malbec

AUSTRALIA = Shiraz

NEW ZEALAND = Sauvignon Blanc

(First Brand: Cloudy Bay)

CALIFORNIA = Chardonnay & Cabernet

25

ABC “Anything But Chardonnay”

Consumers seeking more options and new experiences

Riesling was a long time favorite of the influencers but did not reach consumer level into a few years ago when Germany and Washington State increased the visibility. Influencers got pull and were certainly ready to push.

Sauvignon Blanc is longtime white wine of Bordeaux but it took a modern new world style/approach to winemaking and positioning to succeed.

CASE STUDIES

RIESLING & SAUVIGNON BLANC

WHAT IS THE POTENTIAL FOR CHILEAN CARMENERE?

24

AND

HOW DO WE POSITION IT FOR THE U.S. & WORLD MARKETS?

Wine Style/Quality: Needed ImprovementMajority were overly herbaceous for U.S. consumers.

Sales: Very lowLess than 50,000 cases

Image & Awareness: NoneUnknown but had a great story to tell.

Identity Within Chile: ControversialIs Carmenere Chile’s signature grape variety?

CARMENERE’S POTENTIAL FOR THE U.S. 2005

26

25

Wine Style/Quality: Significant improvement. More to do.

Majority exported have crossed critical fruit/ripeness frontier.

Sales: Increasing rapdly. +69%

Projected to be approximately 300,000 cases in 2009

Image & Awareness: Still Low

But gaining rapidly with trade and media influencers

Identity within Chile: Clearer and More Confident

Carmenere is Chile’s signature variety and offers Chile the best opportunity to establish a clear identity in the global wine market.

CARMENERE’S POSITION IN THE U.S.

2009

CHILEAN EXPORTS TO U.S. BY VARIETY Cabernet Sauvignon and Sauvignon Blanc Still King & Queen

Carmenere Fastest Growing Varietal: +69%

Chilean Wine Exports to the U.S. by Varietal and Wine Type Eight Months Ending August 2009 and 2008 In Thousands of Nine Liter Cases

Varietal/Wine Type 2008 2009 % Change Value perCases

Cabernet Sauvignon 618.8 752.4 22% $35.86Merlot 273.2 257.0 -6% $30.97Carmenere 117.3 198.6 69% $39.48Pinot Noir 94.3 98.0 4% $39.65Syrah 55.3 40.0 -28% $42.95Red Blends 615.1 724.1 18% $33.90Other Red Wines 34.8 44.1 27% $45.87Chardonnay 298.8 298.6 0% $32.65Sauvignon Blanc 327.5 385.4 18% $32.40White Blends 55.7 185.7 234% $28.73Other White Wines 11.2 21.2 89% $34.82Other Bulk & Packaged 1882.2 5632.0 199% $8.01Total 4384.1 8637.4 97% $17.18

Source: Chile National Customs Service

2008 CONSUMER RESEARCHCarmenere Gets Highest Value Rating

CARMENERE IN THE U.S. MEDIAINCREASED VOLUME OF MENTIONS

2004-2009Source: Dow Jones Factiva Database of Daily Newspapers

CARMENERE # of Hits

13

20

26

33

37

47

2004 2005 2006 2007 2008 2009

CARMENERE # of Hits

CARMENERE IN THE U.S. MEDIASignificant Increase in Positive Feature Stories

CARMENERE IN THE U.S. MEDIASignificant Increase in Positive Feature Stories

“Top Chilean vintners are still producing outstanding Cabernet Sauvignon and Carménère….”

-Wine Spectator, May 15, 2007

“From Chile, History in a Bottle: …perhaps a key to Chile’s future success is Carmenere”

-New York Times, November, 2007

“Wine Spectator’s #1 Wine of the Year, Casa Lapostolle Clos Apalta”

-Wine Spectator, December, 2008

CARMENERE IN THE U.S. MEDIASignificant Increase in Positive Feature Stories

“The Next Grape Superstar?: Carmenere, a neglected grape in France that is thriving in Chile, may be the next big thing in wine.”

-Chicago Tribune, March 25, 2009

“Late Bloomer: In Chile, a long-lost grape is finally getting the attention it deserves”

-Saveur, November 2009

“Carmenere: A Great Value Facing Risks”-Wall Street Journal, November 22, 2009

CARMENERE’S IMAGE WITH SOCIAL MEDIA INFLUENCERS

“I love the idea of this grape, the story of Carmenere – it’s the stuff of which wine legends are made….So what’s the trouble?  The tale spun about the lost grape Carmenere is a lot more compelling than the wine it is producing…”

I’ve been critical of Chile’s ability to deliver on the potential of the grape as they’d yet to get pyrazine under control and balanced with the grape’s dark fruit flavors….So, how were the wines? In summary: a mixed bag…”

-1WineDude, Joe Roberts, November 2009

CARMENERE GETS HIGH MARKS FOR QUALITY AND VALUE FROM TRADE

CARMENERE - TOP OF MIND WITH TRADE“Interesting & Different”

CARMENERE’S IMAGE WITH U.S. TRADE INFLUENCERS

“As Piedmont has Nebbiolo, the Russian River Valley in Sonoma has Pinot Noir, and Argentina has Malbec, Carmenere seems to be the best varietal for Chile to identify itself as a serious wine producing country, to differentiate itself from the rest, and also to show its quality potential. Carmenere makes the most sense for several reasons: it can make wine in a wide range of pricing and styles, has ageing potential, is collectable, and is not per se the “specialty” of many other wine regions.”

-Belinda Chang, Master Sommelier & Wine Director The Modern Restaurant, New York

CARMENERE’S IMAGE WITH U.S. TRADE INFLUENCERS

“I went to Chile last year and was really big on Carmenère. I was offering two Carmenères by the glass. I like featuring everything but the usual grapes. It starts conversations.”

-Fernando Beteta, Master Sommelier & Wine Director Hyatt Chicago's NoMi Restaurant

Wine Spectator Interview, June 2009

POSITIONING CARMENERE

Grape with Personality & PedigreeNot Like the Other Grapes, Unique Story to TellDistinctively Chilean, Carmenere = ChileDelicious, Easy to Fall in Love WithDependable, ConsistentGood Value, But Not “Cheap”Cult Following like Pinot Noir & Zinfandel

CARMENEREKEYS TO SUCCESS IN THE U.S.

Continued Commitment to Viti & Vini ResearchKeep Quality High and Wine DeliciousRipe Style, Strong Typicity and “Balanced” PyrazinesTell the Great Story with ConfidenceStay Out of Commodity Price RangeKeep it an affordable yet distinctive wineOfferings Should Start at $8 (Think Pinot Noir)Sweet spot $10 to $18A few exceptional Icons needed

CULTIVATE A “CULT” FOLLOWING FOR CARMENERE

Establish a Formal Carmenere Organization to Elevate Quality/Style and Image

Use Research and Quality Focus as Basis for Education oriented Organization

Educate & Develop network of Trade and Consumer Influencers to be Ambassadors for Carmenere

EXAMPLES OF GRAPE PROMOTIONAL ORGANIZATIONS

http://www.ipnc.org/

http://www.rhonerangers.org/

http://www.drinkriesling.com/

http://www.zinfandel.org/

MUCHAS GRACIAS!

Bruce@SchneiderSelections.com