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“The American Dream - Strategies for U.S. Success”

“The American Dream - Strategies for U.S. Success”. John Grant, President Kendall-Jackson Wine Estates. July 2001. Agenda. Why care about the U.S. market? Who has been successful? Why? Keys for future success. It’s Big!.

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“The American Dream - Strategies for U.S. Success”

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  1. “The American Dream -Strategies for U.S. Success” John Grant, President Kendall-Jackson Wine Estates July 2001

  2. Agenda • Why care about the U.S. market? • Who has been successful? • Why? • Keys for future success.

  3. It’s Big! World Wine Consumption Actual 1996-1998 Average 1991-1995In Thousands of Gallons (000s) • Ranked No. 3 in terms of aggregate wine consumption and is showing strong growth.

  4. It’s Growing! • “Baby-Boomers” are entering the peak wine consumption age - a long term category growth driver. Growth in 40-64 Year Olds 1990-2000 20 MM 2000-2010 16 MM 82 81 Population (MMs) 78 78 79 20-39 40-6465+ Source: U.S. Department of Census

  5. … And they are not parochial! It’s Growing! 2000 U.S. Shipment Growth by Origin California 172 Million Cases +2% Other States 21 Million Cases +3% Imports 42.3 Million Cases +17% Source: Gomberg-Fredrikson & Associates

  6. It’s Profitable! Australian Wine Exports1999 Major Markets(M liters and US $) • U.S. recorded the highest price per liter paid for Australian wine. Source: International Wine Associates

  7. It’s Profitable! …and is becoming more profitable with consumer “trade up” 1999 Table Wine Sales Luxury $25+ 36% Premium Plus 5-Year CAGR Ultra Prem. $14-$25 28% Super Prem. $10-$14 14% Premium $7-$10 20% Popular Prem. 3-$7 7% Jug <$3 -3% -10% 0% 10% 20% 30% 40% Source: Gomberg-Fredrikson Price Segment Surveys

  8. Who has been successful? • Traditionally--first mover exporters. Lately--importers with distribution muscle. Australian Brands, Then and Now12 weeks ending 5/20/01 vs 12 weeks ending 3/31/96 Source: IRI Infoscan

  9. Why successful? • Domestic supply constraint - particularly in reds below $10.

  10. California TotalTons of High Varietals Crushed1990-2004F CAGR: 90-96 = 10% CAGR: 97-00 = 9% CAGR: 01F-04F = 2% Source: California Dept Food & Agriculture, Motto, Kryla & Fisher • California has planted its way out of shortage.

  11. Why successful? • Domestic supply constraint - particularly in reds below $10. • Favorable exchange rates. • “First mover” distribution advantage. • Unique product offerings - Shiraz and blended varietals. • Relatively strong brand support at retail.

  12. Index of Share of Wine Displaysby Country of OriginTotal U.S. Grocery Current 52 weeks ending 5/20/01 Source: IRI Infoscan • Australian category getting strong retail display support, driving distribution and impulse impact.

  13. Success for the Future • Incumbents require: • Continued weak Australian dollar. • Rapid economic recovery in the U.S. • Poor 2001 harvest in U.S.

  14. Success for the Future • Entrants need to be niche-focused: • VOLUME opportunities “played out”: • Major distributor books full • Alliance partners with distribution muscle scarce • Acquisitions prohibitively expensive • VALUE opportunities are opening up: • Build appellation awareness - industry • Deploy top-end Shiraz • Target “on-premise” - hand sell • Seek out “regional” distributors

  15. Conclusion: • U.S. market is large, profitable, and growing. • Volume players are well defined - they are the few with “distribution muscle.” • Australian category volume growth will be challenged by emerging domestic over supply and softening economy. • Niche opportunities are opening up • Industry focus on appellations • Suppliers focus on targeted hand-sell • On-premise • Specialist local distributors

  16. Take Out Strategy for success in the U.S.: “Niche-Market … Up Market!”

  17. Thank You

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