Global Economic Survey March 2012

Table of Contents

1. POTENTIAL WINE PRODUCTION: WINE-GROWING SURFACE AREA 2. WINE PRODUCTION 3. WINE CONSUMPTION 4. DEGREE OF BALANCE OF THE WINE MARKET APPENDICES

2 4 6 8 11

1. Potential wine production: wine-growing surface area

1.1 In the EU (table 1)

Implementation of the Common Market Organization (CMO) has led to the application of the new final abandonment procedure for the third and last year. This latest campaign of final abandonments has been accompanied by lower premiums than in previous campaigns, which has nonetheless led producers to claim entitlements to this measure in still not inconsiderable proportions; in this respect, applications for permanent abandonment representing approximately 82 mha (against 108 and 160 mha respectively in previous campaigns) have been filed. In view of the budget allocated to this third year of application of the measure, the rebate applied to these applications was 40.4% (against 50.1% and 46.9% respectively in prior campaigns), so much so that only 45 to 50 mha were declared eligible for EU financing. The countries mainly affected are Spain (an expected reduction in areas under vines of close to 28 mha simply due to the European regulation), Italy (9 mha), France (6 mha,), Hungary (a little over 2 mha) and Portugal (less than 1000 ha). In fact an examination of the changes in planted surface areas in the main EU countries shows that the actual reduction is, as in previous years, greater than that induced through implementation of this procedure alone. The main country to be affected is still Spain, where the overall reduction in areas under vines is close to 50 mha, if the changes in wine-producing vineyards are taken into account, making a substantial overall fall of 4.6% / 2010. The overall reduction in Italian vineyard surface area for its part has been evaluated at 12 mha (-1.5%). France's vineyard surface area has again been reduced by 12 mha, down 1.5% on 2010). The vineyards of Bulgaria, Hungary, Greece and Portugal have seen reductions of 2 to 7 mha, which are significant in relative terms, as in Bulgaria (down 8.8% on 2010), while other EU winegrowing areas for their part have remained virtually unchanged, the German and Austrian ones in particular.

The EU area under vines is estimated to total 3530 mha and is therefore down by about 90 mha, or 2.5% between 2010 and 2011. Despite a reduction in the final EU premiums compared with the previous two campaigns, this decline is more marked than the one observed between 2009 and 2010 (65 mha). The 3 EU uprooting campaigns ultimately resulted in a reduction in EU vineyards estimated at 262 mha overall between 2008 and 2011, roughly 175 mha of which were eligible for permanent abandonment premiums.

1.2

Outside the EU (table 2)

The data sets used for this quantification are specified in the aforementioned table. They show that overall the non-EU vineyards appear virtually stable for the third year running. This trend, however, is marked by a revision in the method for counting surface wine-growing area in Argentina, which in 2011 no longer included paths and headlands. As a result, even though national experts consider there was no significant change in the area under vines in Argentina between 2010 and 2011, the country's wine-growing area shrank by 10 mha according to the statistics. This apparent downward trend has in fact been partially offset, among other things, by the renewed expansion of the Australian wine-growing area (+4mha after a decrease of 6 mha between 2009 and 2010) and by the probable continuing expansion of Chinese vineyards (at a slower rate nevertheless than in the early part of the 2000-2010 decade) and Chilean vineyards, whereas the Turkish and South African vineyards continue to shrink. In aggregate, not counting the EU, areas under vines in 2010 are estimated to have totalled 3965 mha, apparently down by 4 mha on 2010 and now stand at a similar level to that of 2009 (3966 mha). The world's surface area under vines (which includes areas not yet in production or harvested), because of these trends, considerable above all in the EU, is expected to decrease by 94 mha (-1.2%) between 2010 and 2011 to roughly 7495 mha.

2. Wine production
These figures concern grapes harvested in the autumn of 2011 in the northern hemisphere and the spring of the same year in the southern hemisphere. 2.1 In the EU (table 3) 2011 production can again be described as low. It is lower than that of the last known five-year average (2006-2010), namely 163.7 mHl. 2011 production, excepting juice and musts, was estimated to amount to 156.9 mHl (against respectively 156.4 mHl in 2010). Compared with 2010 production, the most significant quantitative decrease was recorded in Italy, which saw its 2011 wine production fall by nearly 7 mHl compared with 2010 (-14.3%). Portuguese production (-16.9%), and to a lesser extent Spanish production, also fell respectively by 1.2 and 0.9 mHl. Conversely French production excepting juice and musts grew by 3.9 mHl (+8.6%), while German and Austrian production in 2011 were normal and Romanian production (4.7 mHl) recovered without however attaining its level before the disastrous harvest of 2009 (the 2009 and 2010 harvests respectively totalled 6.7 and 3.3 mHl). 2.2 Outside the EU (table 4) Total 2011 production (excepting juice and musts) in the areas reviewed here, which include the main countries of the southern hemisphere, the United States and Switzerland, amounted to 72.4 mHl, on a par with 2010. This overall trend is again a reflection of highly contrasting changes: The United States with 18.7 mHl excepting juice and musts, recorded relatively modest wine production in 2011, down 10.3% on 2010. In South America, Chile with another record output of 10.6 mHl, Argentina, which maintained a substantial level of wine production despite the output of juice and musts returning to normality (15.5 mHl against 16.3 last year), and Brazil, which verged on 3.5 mHl (against 2.5 in 2010, low admittedly), production was on the contrary very high. In South Africa, wine production grew slightly to 9.7 mHl (9.3 mHl in 2010 and 10.0 mHl in 2009). Lastly, Australian production continued to decline, struggling to pass the 11 mHl mark, and while Swiss production was back to its traditional level of 1.1 mHl, New Zealand production for its part posted a record harvest of 2.35 mHl (up 0.45 mHl on 2010).

Therefore (table 5), assuming a variability factor of 10% in the 2010 wine production figures of

countries for which no 2011 data is available, world wine production in 2011 (excluding juice and musts) can be estimated at between 262.1 and 269.4 mHl, between 1.1 down and 1.6% up on 2010 (265.7 mHl being the estimated median: up 0.6 mHl on 2010). So it can be stated that once again global wine production was low, or even very low, particularly in the European Union.

Trend in global wine production (excluding juice and musts) 310 300 290 280 270 260 250 240 230 220

NB1: this 2011 evaluation factors in changes in wine production between 2010 and 2011 in the countries that in 2010 represented 86% of provisional global production.

in millions of hl

3. Wine consumption
The hoped-for recovery marking the end of the financial then economic crisis that started in 2008 is late in coming; 2011 was marked by a difficult start and a slight upturn at the end of the year, albeit impossible to confirm early in 2012, in Europe in particular. As a result, in the traditionally producing and/or consuming countries of Europe, despite a rise in French consumption (+1.0 mHl, albeit after a sharp fall of 1.3 mHl between 2009 and 2010), the stability of German consumption and the slight fall in Spanish (-0.2 mHl), British (-0.4) and Portuguese (-0.15) consumption in 2011, Italian consumption dropped sharply by about 1.6 mHl (admittedly following a rise of 0.5 mHl between 2009 and 2010). On initial examination, a downward trend (-0.5 mHl) can be seen in consumption in the main EU consuming countries (see table 6), falling to 121.9 mHl against 122.5 mHl in 2010, 120.2. For the other countries under review (see table 7), the trends are by and large favourable. Whereas the crisis was severely felt in 2010, causing a slowdown in the domestic demand of some of these countries, in 2011 the upturn seems to have been more marked, more so than in Europe in any case. The United States, the second largest market in the world in volume, and whose domestic market is expected to become the largest global market in coming years, grew by 0.9 mHl to an initially estimated 28.5 mHl (excluding special wines and vermouth), whereas between 2009 and 2010 it only grew by 0.35 mHl. With regard to China, and subject to the reservations set out in Nota Bene 2, consumption continues to grow, more particularly if its fast-growing level of imports is factored in, without any significant exports from the country. Known consumption in China in 2011 was therefore estimated at 17.0 mHl (up 1.15 mHl on 2010).
NB2: These figures reflect known consumption in China based on Production + Import export figures (calculated by the OIV using FAO data among other things), which in all likelihood include drinks other than wine that have grapes as an ingredient (including distilled drinks, because no data on wine processing is available). This is the same approach as that used by the FAO. Other unofficial evaluations, which start this quantification with sales of wine-producing companies in the sense of the OIV, (the exhaustiveness of which is unclear however, and inclusion of which would lead to a major shift in statistics since wine as such has only been statistically defined in China since 2003) are more or less half as high, given that wine imported in bulk is generally adapted to Chinese tastes when assembled with wine produced with Chinese grapes in the finished-product sales figures of the corporations concerned.

In 2011, domestic demand in Argentina, South Africa, Australia, Chile, and New Zealand was quantitatively more or less unchanged in comparison with 2010.

Since the same approach is used here as for wine production, these trends lead to an estimated world consumption of wine consumption in 2011 of between 237.4 and 246.4 mHl, or an estimated median of 241.9 mHl: (up 1.7 mHl on 2010: +0.7%, although given the margin of error in tracking global consumption, this figure should be considered with caution). As a result, in 2011 at least, this confirms a turnaround in the sharp fall in global consumption from 2010 after the crisis. Nevertheless the general economic climate, which is somewhat depressed in early 2012 on the largest wine-consuming continent (Europe), calls for continued caution in interpreting this outcome as heralding an immediate return to the pre-crisis trend as regards global consumption, namely moderate yet steady growth.

Q.conj.OIV March 2012

NB3: this 2011 evaluation assesses changes between 2010 and 2011 in wine consumption of countries that in 2010 represented 81% of provisional global consumption, a higher proportion than last year (75%) due to the inclusion of evaluated Chinese consumption (see above)

4. Degree of balance of the wine market

Measured on a rough basis by the difference between global wine production and global consumption, the degree of balance (table 8) in 2011 is estimated to be between 15.7 and 32.0 mHl, or an estimated median of 23.9 mHl (down 4% on 2010), compared with 31.1 mHl in 2009. The reason is that in 2011, with global output continuing to be low in the face of growing albeit slow global demand, by and large this has stretched the global market, because this was the second year running in which, in the middle of the estimated range, volumes available for industrial uses (winebased alcohol, vinegar and vermouth, for which global demand is estimated at approximately 30 mHl) seem to fall short of demand, on the brandies market in particular. It will therefore be necessary once again to resort to using stocks of wine-based alcohol.

5. International trade
Tables 9 and 10 show changes in international wine trading. The global market, here considered as the total exports of all countries (given that the countries under review make up 93% of global trade), totalled 103.5 mHl in 2011, up 7.9% on 2010, thereby confirming the upturn in world trade observed between 2009 et 2010: 95.9 mHl, the provisional 2010 figure (+9.6%) against 87.5 mHl in 2009. 2009, which as will be recalled, in the midst of the global economic crisis, marked the first downturn in trade growth since 2000 (down 2.8 mHl on 2008).

Q.conj.OIV March 2012

On initial examination, however, this shift in volume is not always reflected in an identical shift in value, as the change in the proportion of bulk exported between 2010 and 2011 would suggest:

Argentina Australia Chile France Italy Spain USA

Share of exported bulk change Forecast 2010 (index 100 2011 in 2010) 19% 33% 178 44% 48% 107 40% 32% 79 19% 19% 99 34% 33% 96 52% 57% 110 51% 47% 92

Various sources: GTA/experts/OIV

Accordingly the crisis has undoubtedly played its part in intensifying the trend, already noted last year, whereby the proportion of trade in bulk wine is growing. The corollary of this is that trade is becoming increasingly complex, with a growing proportion of reexports, inter alia in transcontinental trade.

On initial examination, this upturn in trade has benefited all the main exporting countries to varying degrees except Chile and Australia (both down 10% on 2010), in all likelihood handicapped by a shortage of supply (due to the earthquake affecting stocks in Chile and worsening weather conditions in Australia). The same can be said for South Africa, whose exports also fell slightly: down 0.2 mHl in comparison with 2010. While Italy remains the largest exporter in volume, growing faster than the global market (+2.5 mHl: up 11% on 2010), it is Spain that posted the biggest increase (+4.6 mHl: up 26% on 2010), perhaps benefiting from the gap in the market left in part by the downturn on Chile, more particularly in bulk (respective trend in bulk exports: Chile: -20% Spain: +10%). Portuguese exports also grew more than the global market (+0.4 mHl: up 16% on 2010). Exports from France, Germany and the United States grew but at a slower pace than that of the global market, up between 5 and 6% on 2010. Given these trends, for the second year running the share of world trade exports of the 5 largest EU exporters (IT/ESP/FR/AL/PORT) grew to 65.5% (against 62% in 2010) at the expense of the main countries of the southern hemisphere taken together (AFS/AUST/NZ/CHILE/ARG) and the United States (25.2% against 28.2% in 2010). Trade is thus continuing to grow at a markedly faster rate than the upturn in global consumption, to such an extent that now more than 4 out of 10 litres consumed throughout the world have been imported (see table 10).

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Appendices

Table 1 Total surface area under vines* in the EU Thousands of hectares 2008 Austria Germany Bulgaria Spain France Greece Hungary Italy Portugal Romania Other EU wine-producin Total 48 102 86 1165 858 115 72 825 246 207 66 3792 2009 45 102 81 1113 837 113 70 812 244 206 66 3691 Prov. 2010 46 102 79 1082 819 113 68 798 243 204 64 3620 Forecast 2011 46 102 72 1032 807 111 65 786 240 204 63 3530

*Wine and table vines, or raisin vines, in production or not yet in production Source: OIV, Experts OIV, trade press

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Table 2 Total surface area under vines outside the EU Thousands of hectares 2008 226 173 92 198 480 35 64 132 15 518 402 250 81 664 615 3945 2009 228 176 91 199 485 37 67 132 15 505 403 246 83 659 640 3966 Prov. 2010 Forecast 2011 228 218 170 174 92 92 200 202 490 495 37 37 67 67 132 131 15 15 503 500 404 405 247 247 86 84 659 660 639 638 3969 3965

Argentina Australia Brazil Chile China New Zealand Russia South Africa Switzerland Turkey United States Other African countries Other American countries Other European countries Other Asian countries Total

*Wine and table vines, or raisin vines, in production or not yet in production Source: OIV, Experts OIV, trade press

Total surface area under vines worldwide Thousands of hectares 2008 7737 2009 7657 Prov. 2010 7589 Forecast 2011 7495

Total surface area

*Wine and table vines, or raisin vines, in production or not yet in production Source: OIV, Experts OIV, trade press

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Table 3 Trend in EU wine production (excluding juice and musts) Thousands of hectolitres Prov. 2010 6906 1737 1187 35235 45704 2950 1966 48525 7133 3287 1746 156376 Forecast 2011 9611 2814 1268 34300 49633 2597 2447 41580 5925 4708 2001 156884 2011/2010 change 2705 1077 81 -935 3929 -353 481 -6945 -1208 1421 255 508

Germany Austria Bulgaria Spain France Greece Hungary Italy Portugal Romania Other EU wineproducing countries Total

* including production of Baltic states Source: OIV / CCE DGVI E2 / experts / press and Internet

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Table 4 Wine production in the main non-EU countries (excluding juice and musts) Thousands of hectolitres

Argentina Australia Brazil Chile New Zealand South Africa Switzerland United States Total

Prov. 2010 16250 11240 2455 9869 1900 9336 1030 20887 72967

Forecast 2011 15473 11010 3450 10570 2350 9665 1121 18740 72379

2011 change -777 -230 995 701 450 329 91 -2147 -588

Source: OIV experts, trade press and Internet

Table 5 Evaluation of global wine consumption Millions of hectolitres

2007 265,8

2008 269,3

2009 271,2

Prov. 2010 265,1

Forecast 2011 261,2 to 269,4

2011/2010 in % 1,1% to 1,6%

NB Given that the countries for which 2011 figures were available represented in 2010 (OIV): 228,6 Mhl namely a proportion equivalent to: 86% of global wine consumption in 2010 (Reminder: 265,1 Mhl) namely a proportion equivalent to: 36,5 Mhl, here we estimate the 2011 consumption of countries not listed, with the aid of a variability factor of: 10%, based on the 2010 figure.

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Table 6 Trend in EU wine consumption

Thousands of hectolitres Prov. 2010 19 700 2 400 2 878 2 034 1 930 606 28 917 2 955 2016 710 24 624 3 470 4 690 10 359 2 010 13 200 122 499 Forecast 2011 19 700 2 600 3 144 2 000 1 970 593 29 936 2 800 2400 790 23 052 3 500 4 550 10 150 2 000 12 800 121 985 2011/2010 change 0 200 266 -34 40 -13 1 019 -155 384 80 -1 572 30 -140 -209 -10 -400 -514

Germany Austria Belg.+Lux. Czech Republic Denmark Finland France Greece Hungary Ireland Italy Netherlands Portugal Spain Sweden UK

Total*

(NB: cyclical tracking of new EU member states does not enable us to reconstruct a forecast for the EU 27 here) Sources: OIV experts, evaluation of consumption per calendar year based on data gathered up to 2009 and/or information available from the EU per campaign + panels & national offices of statistics

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Table 7 Wine consumption in some non-EU countries

Thousands of hectolitres

Prov. 2010 South Africa Argentina Australia Brazil Chile China USA. New Zealand Switzerland Total Source: OIV, Experts OIV, trade press 3 463 9 753 5 317 3 519 3 237 15 846 27 600 921 2 940 72 596

Forecast 2011 3 530 9 725 5 265 3 700 3 237 17 000 28 500 937 2 900 74 794

2011/2010 change 67 -28 -52 181 0 1 154 900 16 -40 2 198

Evaluation of global wine consumption Thousands of hectolitres

2007 251,1

2008 248,2

2009 240,1

2010 prov. 240,2

2011 forecast 237,4 to

2011/2010 in % -1,2% to 2,6%

NB: Given that the countries for which 2011 figures were available represented in 2010 (OIV): 193,2 mHl namely a proportion equivalent to: 80% of global wine consumption in 2010 (Reminder: 240,2 mHl) or a shortfall of....: 47,0% mHl, here we estimate the 2011 consumption of countries not listed, 10% , based on the provisional 2010 figures. with the aid of a variability factor of.....:

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Table n. 9 Country of origin of exports in Millions d'hl

Av. 1986 -1990 vol. Source OIV % Av. 1991 -1995 vol. Source OIV % Av. 1996 -2000 vol. Source OIV % Av. 2001 -2005 vol. Source OIV % Av. 2006 -p2010 vol. Source OIV %

VOLUMES EXPORTED AND GLOBAL MARKET SHARE per CALENDAR YEAR

Moldavia * South America (2) PECO (1) Germany without tracked countries South Africa Maghreb (3) Oceania (4) Portugal Global market France Spain USA Italy

NB The global market here is defined as the sum total of all countries' exports.

vol. % 2007 vol. see below % 2008 vol. see below % 2009 vol. see below % Provisional 2010 vol. see below % Forecast 2011 vol. see below %
see below

2006

12,8 29% 11,5 22% 15,3 25% 14,8 20% 13,9 16% 14,7 17% 15,3 17% 13,7 15% 12,6 14% 13,5 14% 14,1 14%

12,6 29% 15,1 29% 14,8 24% 15,0 21% 19,3 21% 18,4 22% 18,5 21% 18,1 20% 19,5 22% 21,8 23% 24,3 23%

4,6 11% 7,4 14% 8,8 14% 12,1 17% 15,7 18% 14,3 17% 15,1 17% 16,9 19% 14,6 17% 17,7 18% 22,3 22%

2,7 6% 2,7 5% 2,3 4% 2,6 4% 3,6 4% 3,2 4% 3,5 4% 3,6 4% 3,6 4% 3,9 4% 4,1 4%

1,6 4% 1,9 4% 2,1 4% 2,6 4% 2,8 3% 2,9 3% 3,4 4% 2,9 3% 2,3 3% 2,6 3% 3,0 3%

3,9 9% 2,4 5% 2,8 5% 1,9 3% 1,6 2% 1,8 2% 1,8 2% 1,7 2% 1,4 2% 1,1 1% 1,1 1%

0,4 1% 1,5 3% 3,3 5% 5,5 8% 9,4 10% 7,4 9% 9,7 11% 10,0 11% 9,8 11% 10,1 10% 9,7 9%

0,6 1% 1,2 2% 2,3 4% 3,2 4% 4,1 5% 3,8 4% 4,2 5% 4,6 5% 4,0 5% 4,0 4% 4,2 4%

0,0 0% 0,4 1% 1,2 2% 2,4 3% 3,5 4% 2,7 3% 3,1 3% 4,1 5% 4,0 5% 3,8 4% 3,6 3%

0,6 1% 0,2 0% 0,2 0% 0,3 0% 0,2 0% 0,2 0% 0,2 0% 0,2 0% 0,1 0% 0,3 0% 0,2 0%

0,3 1% 1,1 2% 2,2 4% 5,8 8% 8,5 10% 8,2 10% 8,6 10% 7,9 9% 8,8 10% 9,2 10% 8,6 8%

n/a 1,4 3% 1,3 2% 1,9 3% 1,3 1% 1,9 2% 1,1 1% 1,2 1% 1,0 1% 1,3 1% 1,1 1%

40,1 92% 46,7 91% 56,7 93% 68,1 94% 83,9 94% 79,6 94,2% 84,4 94,1% 84,8 93,6% 81,6 93,2% 89,2 93,0% 96,2 93,0%

43,5 100% 51,1 100% 60,9 100% 72,2 100% 89,7 100% 84,5 100% 89,8 100% 90,7 100% 87,5 100% 95,9 100% 103,5 100%

(1): Bulgaria + Hungary + Romania (2): Argentina + Chile (3): Algeria + Tunisia + Morocco (4): Australia + New-Zealand *:Av. 92-95

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Share of world trade 5 largest EU exporters (Ger, Sp, Fr, It, Por) "Southern hemisphere" (Arg, Chile, AFS, Aus/NZ)+ USA PECO and Maghreb Other countries

av. 86/90

av. 91/95

av. 96/00

av. 01/05 av. 06-10 Forecast 2011

78,8% 3,1% 10,3% 7,8%

75,5% 8,0% 5,1% 11,4%

71,2% 14,8% 4,9% 9,0%

65,2% 23,4% 3,1% 8,4%

61,7% 28,6% 1,9% 7,8%

65,5% 25,2% 1,2% 8,1%

Unless otherwise stated, figures taken from national customs statistics & Uncomtrade/GTA. If unavailable, we resort to information from OIV experts, the press, and at EU level information on campaign assessments. Magreb & Moldavia in 2011: direct OIV estimate base trend The 93% factor representing the trend in the share of world trade taken by the countries under review to evaluate the global market.

Tableau n 10 Part des changes mondiaux dans la consommation mondiale de vins

Millions d'hectolitres 2006 2007 2008 2009 Prov. 2010 Prv. 2011 2011 en milieu de 11/10 fourchette en%

I: Consommation mondiale de vins II: March mondial (cf Tab.n9) II / I en %

244,0 84,5

251,1 89,8

248,2 90,7

240,1 87,5

240,2 95,9

237,4 246,4 103,5 103,5

241,9 103,5 42,8%

0,7% 7,9% 7,2%

34,6% 35,7% 36,5% 36,4% 39,9% 42,0% 43,6%

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