Wine market in the Netehrlands by Richard Sagala

WINE MARKETS

THE NETHERLANDS

Prepared by: Carlos Marques, Paulo Lopes and Richard Sagala Supervisor: Prof. Florine Livat-Pecheux

Table of contents 1.

Introduction .................................................................................................... 1

Economic environment ................................................................................. 3

2.1

Quick facts ............................................................................................................... 4

2.2 Macroeconomic overview: GDP, Domestic Consumption, International Trade, Inflation, Unemployment ........................................................................................................ 5 2.3

Political and social situation ................................................................................... 12

2.4

Demographics ........................................................................................................ 13

2.5

Wine sector ............................................................................................................ 15

2.5.1

Quick overview ............................................................................................................15

2.5.2

Regulations..................................................................................................................17

Production .................................................................................................... 19

3.1

Historical facts........................................................................................................ 19

3.2

Vineyards, wine, firms and structure...................................................................... 19

Consumption ................................................................................................ 24

4.1

Volume per capita and evolution............................................................................ 24

4.2

Wine and other alcoholic beverages...................................................................... 25

4.3

Profile of wine consumers...................................................................................... 26

4.4

Consumption according to the price ...................................................................... 30

4.5

Consumption according to the type of wine ........................................................... 32

4.6

Image and reputation of different wines................................................................. 34

Imports and exports..................................................................................... 39

5.1

Market landscape................................................................................................... 39

5.1.1

Imports by country of origin .........................................................................................40

5.1.2

Exports by countries ....................................................................................................41

5.2

Competitive environment ....................................................................................... 42

Distribution ................................................................................................... 43

6.1

Market structure ..................................................................................................... 43

6.1.1

Off-trade – Supermarkets’ ...........................................................................................45

6.1.2

Off-trade – Liquor stores..............................................................................................48

6.1.3

On-trade - restaurants, bars, hotels.............................................................................50

6.1.4

Direct mail / e-commerce.............................................................................................52

Market segmentation ................................................................................... 53

7.1

Sales per type of wine............................................................................................ 53

7.2

Sales by country of origin....................................................................................... 55

7.3

Sales per grape variety .......................................................................................... 56

7.4

Packaging .............................................................................................................. 57

7.5

Prices ..................................................................................................................... 58

Conclusion.................................................................................................... 60

List of references ......................................................................................... 64

Appendices............................................................................................................ 65

1. INTRODUCTION [CARLOS] When one thinks about the Netherlands, good things come to mind; some may think of picturesque cities (and canals), a highly educated and open-minded population, beautiful people and a stable socioeconomic environment. The purpose of this economic study though, is to assess the contemporary Dutch wine market.

Although a small country in territorial terms, the Netherlands has played the economic game consistently well for a long time, being today a relevant market for the European wine business. Firstly, because of its geographical location and trade history (way back to its colonial activities and the Dutch East Indian Company in the 17th century), the Netherlands was and still is an important hub for Europe in terms of goodsâ&#x20AC;&#x2122; distribution, making the port of Rotterdam the busiest in Europe. It is in the history, location and nature of the Netherlands to trade, and, not surprisingly, trade is indeed one of the most important economic activities in the Netherlands. In such respect, the figure 1, indicating average prices in consumer products in different countries, shows the Dutch vocation for making trade and purporting competition and low prices. Also welcoming to businesses is the Dutch tax system, with low corporate taxation rates, especially on multinational holdings, making the country nearly a â&#x20AC;&#x153;European tax heavenâ&#x20AC;?. The upsides are obvious, in terms of attracting financial flows, increasing public revenues and

generating direct jobs. The downside, not so often mentioned, is the shift of the tax burden to other sources (such as labor), a reduced competing ability of smaller local companies and the possible attraction of companies with dubious reputation and/or interested in money laundering.

Figure 1. Average price index in consumer products. Source: AC Nielsen (2010)

Wine wise, the Netherlands is typically a non-producing country (see figure 2 and more details in this report), which, however, does not prevent it from intense wine business activities. Indeed, the Dutch people form a mature yet evolving market, with high consumption per head and increasing competition, as well as serve a trading hub for the European market.

Figure 2. Producing and Non-producing Countries in Europe.

Through-out this work we will approach several key aspects of the Netherlands as a wine market. More specifically, Carlos put together this introduction and will continue by building up an overview of the Netherlands as a country and of the Dutch economic environment, and how it interacts with the local wine scenario. This will be followed by Paulo with a close look on the wine production and imports, as well as on its distribution and exports. Amidst that, Richard will approach with depth the situation regarding consumption of wine in the Netherlands Finally, both Richard and Carlos will go over the price structures and segmentation of the Dutch wine market. At last, the three group members contributed to a concluding wrap-up of our study on the Dutch wine market, also indicating which are the main questions and trends posed for the future. The list of references, of course, will also be a result of the efforts of the three group members. Acknowledgements:

The

group

would

thank

Theo

Mellenbergh

(Wijngaardeniersgilde); Annette Badenhorst and Andre Morgenthal (WOSA, Wines from South Africa); Willem Siebelink (Huinck & Co BV / EDC NV) and Tony Battaglene (Winemakersâ&#x20AC;&#x2122; Federation of Australia) for all the information on different aspects of Dutch wine market N.B.: Initially, our group included Barbara Enger and Peter Beaty â&#x20AC;&#x201C; two Wine MBA students from other years. However, we understand that they were not part of our group anymore, reason why we prepared and finished this report between the three of us.

2. ECONOMIC ENVIRONMENT [CARLOS] 2.1

Quick facts

The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with parts in the Caribbean. The Netherlands are an independent monarchy since 1813 and it is currently, since 1848, a parliamentary democratic constitutional monarchy, with a centre-right wing government formed by multi-parties’ coalitions. The capital is Amsterdam and the seat of government is in The Hague. The Dutch Parliament (or Staten Generaal) consists of two chambers – one, with 75 members, indirectly elected and with limited powers, and the other being directly elected. Curiously, the Netherlands in its entirety is often referred to as Holland, even by Dutch people sometimes. Strictly speaking, however, Holland is only the central-western region of the country comprising two of its twelve provinces – North Holland and South Holland (figure 3). Linguistically thus, it is similar to the frequent reference to Russia as the (former) Soviet Union, and to England as the United Kingdom.

Figure 3. The Netherlands territory and representation of the Holland region.

The Netherlands was one of the first parliamentary democracies. Among other affiliations the country is a founding member of the European Union (EU), NATO, OECD and WTO. With

Belgium and Luxembourg it forms the Benelux economic union. The country is host to five international courts â&#x20AC;&#x201C; the Permanent Court of Arbitration, the International Court of Justice, the International Criminal Tribunal for the Former Yugoslavia, the International Criminal Court and the Special Tribunal for Lebanon. Also, it headquarters the EU's criminal intelligence agency Europol and judicial co-operation agency Eurojust. This has led to the city being dubbed "the world's legal capital". A peculiarity of the Netherlands: A quarter of its land mass (where 21% of its population reside) sits below sea level and with 50% of its land lies less than one meter above sea level. Industrial activity in the Netherlands consists predominantly of food processing, chemicals, petroleum refining as well as electrical and electronic machinery. It has a dynamic agricultural sector and is well known for its plants and cut flowers. Also strong is the international trade sector, with the port of Rotterdam being the busiest in Europe and serving a vast European hinterland. The Dutch are somehow trade-dependent, because of their role as a major distribution hub between Europe and third world countries. The falling down of trade barriers and the taking off of global liberalization should prove beneficial for the Netherlands.

2.2

Macroeconomic overview: GDP, Domestic Consumption, International Trade, Inflation, Unemployment

Economic wise, the Netherlands has a long history as a capitalist market-based economy (possibly the first country to introduce joint-stock companies), ranking 15th of 157 countries according to the Index of Economic Freedom. It is currently the 18th largest economy in the world, as well as, surprisingly for some, the 6th largest wine importer on the planet. Also, it ranks at 7th position in terms of GDP (nominal) per capita. The Dutch economy has a range of encouraging factors contributing to its long-term growth potential, including, without limitation, a highly skilled workforce, a stable political environment, a geographical strategic position for trade purposes, low restrictions on making business and an advanced communication infra-structure. Confirming such trend, table 1 provides some overall and very illustrative information on the Netherlands â&#x20AC;&#x201C; namely, GDP, Consumer Prices Index, Current Account Balance and Unemployment Rate â&#x20AC;&#x201C;, as compared with other European countries.

Table 1. Selected European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment (Annual percent change). Source: IMF (2010).

With respect to the GDP, the Netherlands show a more stable performance than its neighbors. While the 2009 year was economically tough on all advanced countries, the Dutch managed to suffer a smaller hit, while quickly recouping for a forecasted positive growth in 2010. For a more stretched view of the real GDP performances, see the figure 4.

Past Annual GDP Growth Rates 6 4 2 2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

-‐2

1990

-‐4 -‐6 Annual GDP Growth Figure 4. Past Annual GDP Growth Rates. Source: Eurostat.

Following on is figure 5 with GDP growth forecasts by Eurostat, Country Watch and IMF for 2010 and next years. You will see that both predictions, though not spectacular, are eventually positive and converging.

Forecasts -‐ GDP Growth 3 2,5 2 1,5 1 0,5 0 -‐0,5 -‐1

2010

2011

IMF

2012

Eurostat

2013

2015

Country Watch

Figure 5. GDP Growth Forecasts. Source: IMF, Eurostat, Country Watch.

It is safe to say that the Dutch economy has been performing consistently well for the last 20 years, with a sole negative growth in 2009, greatly influenced by the global financial meltdown. Even so, some internal government measures facilitating credits and supporting tax

incentives made it easier for the economy to pick up again already in 2010 â&#x20AC;&#x201C; which is not the reality for all European countries nor among the more developed countries. Also relevant is the distribution of such GDP among the population; the Dutch have the second highest GDP per capita in Europe (only behind Luxembourg, Norway and Switzerland, being the latter two out of the EU), 31% above the average of the EU countries for the year 2009 (figure 6).

Figure 6. Volume Index of per capita GDP, 2009.

In terms of domestic consumption, the Netherlands also performs relatively well. Its retail market was worth US$118 billion in 2008 â&#x20AC;&#x201C; the 7th largest in the EU â&#x20AC;&#x201C; and the Dutch are among the richest people in Europe. Many of the Dutch consumer markets are mature, which is also true for food and beverage segments. In fact, food, beverage and tobacco consist in

the largest domestic market in the Netherlands, with a predicted spending of US$55.3 billion by Dutch households by 20141. Even so, the domestic consumption, including public and private spending, either profit purposed or not, is greatly influenced by global flows and, therefore, is not as stable as other indicative figures. Below is an illustration thereof.

Figure 7. Total consumption cycle in the Netherlands from 2001 to 2010. Source: Statistics Netherlands.

The Netherlands went, in terms of private consumption, from 1.8% in 2007 to a worrying 2.5% in 2009. Although figures are not yet available, interim numbers indicate a positive variation again in 2010. Still, no breakthroughs are expected, since the levels of consumer confidence and willingness to buy remain negative. In terms of public consumption, 2009 represented a 3.7% spike, as to help the dynamics of the economy, but present and future numbers should be more moderate2. As previously mentioned, the Dutch has a long tradition in international trade, and proof of that is the fact that the Netherlands derives more than two-thirds of its GDP from merchandise trade. The country is one of the worldâ&#x20AC;&#x2122;s 10 leading exporting countries, comprised mainly of natural gas, food and agricultural products, while it imports mostly machinery and transport

The Economist, Industry Report: Consumer Goods and Retail, October 2009.

IHS Global Insight, Netherlands, September 2010. Â

equipment, chemicals, fuels, foodstuffs and clothing. The EU is by far its largest trading partner, accounting for about 75% of exports and 56% of imports. Even so, the Netherlands was not able to escape from the global disaster caused by the financial crisis. Numbers of both exports and imports had double-digit declines in 2009, but seem to be recovering rapidly, as per the forecasts below.

Figure 8. International Trade Performance Source: IHS Global Insight.

In spite of that, the Netherlands managed to have robust trade surplus in 2009, and has being positive in its trade balance since 1981, for 30 years. Indeed, in 2009 the surplus was a sizeable 6% of the GDP, slightly down from previous years but still better than most of the European trade partners. For the last 5 measured years (between 2005 and 2009), the Dutch have managed to have a surplus between 34 and 42 billion Euros. Current inflation in the Netherlands is between 1.4% and 2.0% per year, according to most economic sources3. As it may happen with inflation measurement, the indexes may vary according to the price baskets and convention parameters being used. Still, Netherlandsâ&#x20AC;&#x2122; inflation has been consistently slightly below the European and US averages.

Â Statistics Netherlands, Eurostat, Dutch Statistics Office. Â

Figure 9. Evolution of the Trade Balance in the Netherlands from 2006 and 2010 (Billion EUR).

From 1997 until 2010, the average inflation rate in Netherlands was 2.08 percent reaching an historical high of 4.50 percent in April of 2001 and a record low of 0.20 percent in July of 2009. Below is a graph representing one of the reputable historical inflation rates.

Figure 10. Evolution of the inflation rates in the Netherlands from 2006 and 2010 (Billion EUR).

Unemployment rates in the Netherlands are roughly above 4% per year, having ranged in the last 10 years from 2.5% to 5%. Using the European reality as a comparison, the Dutch are doing pretty well, having the lowest rate in the EU and also below Japan and the USA (figure 11).

Figure 11. Unemployment Rates in the EU. Source: Eurostat.

2.3

Political and social situation

Owing to the country's multiparty system, the political scene in the Netherlands is often fragile, characterized by coalition governments and decisions taken through consensus. The continuation of Dr. Balkenende as the prime minister of the Netherlands since 2002, has given a sense of stability to the otherwise fragile multiparty system of the country. However, since the government collapse in 2010, the confidence is not that great anymore and there is a sense of political uncertainty. At the same time, the country is also reassuringly ranked in the 94.7 percentile in the rule of law indicator of the World Bankâ&#x20AC;&#x2122;s governance indicators, and is the 13th most free market capitalist economy out of 157 surveyed countries in accordance with the Index of Economic Freedom. The Netherlands are among the most liberal states in the world, and the country possesses an elaborate legal system which ensures the protection of its liberal society. Presently, the chief focus of the government is the economy, followed by environmental policies. The collapse of major banks has forced the government to intervene in the economy and it is expected to continue with this policy for the foreseeable future. The government, though largely continuing with its traditional liberal social policies, has become stricter on illegal immigrants.

The governmentâ&#x20AC;&#x2122;s policies to increase labor force participation also represent an important step in meeting the future needs of a society with an aged population (see more on demographics below). Implementation of these policies has enabled the government to gain more support and encouragement. Importantly, the education system is very strong, with literacy levels at 99% of the population, and UNICEF ranked the Netherlands 1st in child well-being. The Netherlands has also an extensive system of social support through insurance and governmental assistance. The government makes it mandatory to have equal pay for equal work, and prohibits discrimination on grounds of marriage, pregnancy or motherhood. Not surprisingly then, the Human Development Index (HDI) for Netherlands is 0.964, which gives the country a very good ranking of ninth out of 181 countries. This indicates the better than average social conditions of the country. The Netherlands are one of the most generous countries in terms of coverage and benefit levels to the disabled and senior citizens in the entire EU and among the OECD countries. There are currently almost one million people receiving disability benefits in the Netherlands. Other aspects of social welfare includes substantial healthcare initiatives, with expenditures above 10% of the GDP (higher than the OECD average of 9%) and a heath spending per capita around 30% above the OECD average. The government is making efforts to increase support for child development and care. However, the fertility rate in the Netherlands has been declining (see more about demographics below). There is some debate as to how long the country will be able to support such a supportive welfare system in light of a diminishing work force and leaner economic results.

2.4

Demographics

The Dutch overall population is around 16.5 million people, being very concentrated in its major cities of Amsterdam, Rotterdam and The Hague. Also, because of territorial and high density characteristics, the population is very urbanized (above 80%), in the sense that the majority of the Dutch are close to commercial and servicing infra-structures. The population has increased roughly 50% in 50 years, from 11.4 million in 1960 to the current 16.5 million4, and the current growth is around 0.39% (figure 12).

Â Eurostat (2010) Â

Figure 12. Population Growth Rates in the Netherlands.

Similar to other European and developed countries, the Dutch population is aging and is expected to continue aging on average. Indeed, the population of working age is expected to continue to grow modestly in absolute terms up to around 2015, which should be followed by a period of relative stabilization and a slow decline up to 2020, and finally by a steeper fall in 2020-30. Such forecast is exacerbated by the declining mortality rates In all three decades, the proportion of the population of working age relative to the total population will fall. One reason for this trend, other than the aging of the population itself, is that immigration is likely to be less than what it was during the last 20 years. True enough, net migration was negative (that is, emigration has exceeded immigration) between 2003 and 07. This tends to place a greater burden on the working-age population of the country, and is a cause for concern in terms of future productivity and economic activity. The impact of the decline in the working-age population on the labor force should be partly offsetted by an upward trend in the participation rate, encouraged by a number of actual and expected policy changes, which are expected to raise the retirement age from 65 to 67, restrict the early retirement possibilities and increase the participation rate of people in the 5565 age group.

Figure 13. Age composition (i.e. Population Pyramid) in the Netherlands in 2010. Source: Statistics Netherlands (2010).

2.5 2.5.1

Wine sector Quick overview

The Netherlands is the 6th largest wine importer in the world, proving to be an interesting and important wine market. In terms of overall importance, 20% of the countryâ&#x20AC;&#x2122;s GDP is spent on food and beverages. Within the alcoholic beveragesâ&#x20AC;&#x2122; sector, wine is the second most important category, responding for approximately 30.5% of such marketâ&#x20AC;&#x2122;s overall value. The market leaders are beer, cider and FABs (flavored alcoholic beverages) with 56.3%, while spirits respond for the remaining 13.2% (Datamonitor 2010). The Dutch alcoholic drinks market witnessed slow growth rate between 2005 and 2009, as a result of declining sales growth in the beer, cider and flavored alcoholic beverages category. Wine, however, grew and continues to grow (Datamonitor 2010).

In terms of volume and value, the Dutch alcoholic drinks market generated total revenues of $14.1 billion in 2009, representing a CAGR of 0.2% for the period spanning 2005-2009 (figure 14). In comparison, the French rate was of 0.6% and the German recorded flat growth. Market consumption volumes declined with a CARC (compound annual rate of change) of 0.5% for the period 2005-2009, to reach a total of 1,728.4 million liters in 2009, and the forecasts are of similar decreases in the next years (figure 15). The performance of the market is forecast to remain sluggish, with an anticipated CAGR of 0.2% in value for the five-year period 2009-2014, which is expected to lead the market to a value of $14.2 billion by the end of 2014. Anyhow, as we will show during this report, the numbers and estimates are not so negative for wine specifically.

Figure 14. Evolution of the alcoholic drinks market value. Source: Datamonitor 2010.

Figure 15. Evolution of the alcoholic drinks market volume. Source: Datamonitor 2010.

2.5.2

Regulations

The Dutch market is a regulated or semi-regulated market, where the legal age drinking is 16 years old for beverages with less 15% of alcohol and 18 years old for spirits beverages over 15% of alcohol. Furthermore, the sale of alcohol sale is totally forbidden in petrol stations in order to dissuade the drinking before driving. The Dutch law does not allow the sale of alcoholic spirits (> 15% of alcohol) in the supermarkets. These outlets can only sell lowalcohol beverages: wine, sherry, port, vermouth and beer. In terms of regulation, there are the rules and directives mandatorily applied to all EU member states (related to trade and customs, for instance) and there is local complementary regulation issued by the Dutch government. The wine activity regulation in Netherlands is outsourced to different governmental or semi-governmental organizations (Van Deudekom 2005). Part of the regulations follows the European policies and another part comes from the local and the national governments. Through the Productschap Wijn (semi-governmental organization) the regulations are focused more on the wine imports and sales. The Department of Customs is responsible for the excise (indirect tax or duty levied) that the winegrowers have to pay. Customs wise, countries member of the EU are not required to pay customs duties or to present import license (table 2). However, it is mandatory for all countries to pay trade taxes according to the type of imported wines (table 3). Wine imported from “third countries” (nonEU countries) also require a CAP (Common Agricultural Policy) Import License and must be accompanied by a VI1 document until such wine can be freely circulated. The Dutch market has developed specific rules on storage, transport, registration and labeling imported products. Exporting companies should, either directly or through its importer, contact the Netherlands Chamber of Commerce to facilitate the necessary documentation and registration with the relevant association. In addition, wine exporters must notify the Central Bureau of Statistics of Netherlands (CBS) about the wine volume negotiated. Wine importers must also be registered with Productschap Wijn, which charges a total of €1.14 per hectoliter traded in the Netherlands. The Netherlands are highly concerned about the environmental issues, and in November 2007 the Dutch parliament approved a law including a new charge for packaging (€ 0.04 per bottle) – exempt being made to importers that brings less than 15,000 kg of packaging. Wine imported in the Netherlands must also comply with European regulations requiring exporters to provide information on the size and origin on the label of the product. In addition, labels must be translated into Dutch. In the case of table wine, it is not necessary to specify the area of origin of wine. In contrast, quality wines are submitted to strict specifications and should

indicate the region of origin and the D.O. In addition, the importer must make mention of alcohol in moderation. The wine in Dutch market is highly taxed: wine tax is € 0.64 / liter; environmental taxes, as above, are € 0.4 / liter) and VAT is 19%.

Table 2. Excises customs duties for imported from outside the EU.

Source: Productschap Wijn

Table 3. Excises duties for imported wines, which were set on February 2010. Type of beverage (alcohol content, % Vol.)

Excises duty (€ per hectoliter)

Group A (1.2 to 8.5%) Still wines and other fermented beverages Sparkling wines and other sparkling beverages Group B (8.6 to 15%) Still wines and other fermented beverages without added alcohol Sparkling wines and other sparkling beverages with added alcohol up to 13%

35.28 € 45.63 € 70.56 € 240.58 €

Group C (8.6 to 10%) Other beverages with added alcohol Group D (10.1 to 15%) Other beverages with added alcohol Group E (> 15%) Still wines and fortified wines (Port, Jerez, Vermouth) Sparkling wines

70.56 € 87.14 € 122.78 € 240.58 €

Source: ICEX 2010

On that matter, the taxes should be paid only by the winegrowers that produce wine for commercial reasons and if their vineyard is larger than 1,000 m2. However, only if the farmer is growing grapes in a vineyard with at least 4 ha, he/she should register with the Wine Marketing. Since only a small percentage of Dutch vineyards are above 4 ha, this means that most of wine produced in Netherlands is not official declared, making it more difficult getting insights and data about the Dutch wine productive activity.

3. PRODUCTION [PAULO] The impact of domestic wine production is still negligible in the Netherlands. Although the viticulture and wine exist in Netherlands, there is little information about this recent development and the few written documents that exist don’t go deep into the Dutch wine production sector.

3.1

Historical facts

Although Dutch wine production is miniscule, viticulture in Netherlands is not a new phenomenon; it was already taking place since the Roman ages. Viticulture was reported in Maastricht on 12th of February 928 and reports from the Roman period show that drinking wine in this region was normal and vine plots could be found on the hills of Maas, Geul, and Jeterdal (Markantoni 2007). Maastricht, in the Middle Ages was as a centre of wine production and consumption, connected with other wine centers in Europe through the properties of the Saint Servatius and religious communities in Belgium, France, and Germany (Box & Van der Zwet 2003). From 16th to the 20th centuries, it was observed a decline in Dutch viticulture mainly due to the change of the climate, resulting in a period of cold temperatures, but also due to the emerging interest in beer. In 1800 the lifting of heavy taxes on non-French wines by Napoleon led to the disappearance of the last vineyards from the Netherlands. The revival of Dutch viticulture is due to Jean Bellefroid, who went to Moselle (Germany) during World War II to learn the techniques of wine making and of vine growing. Afterwards he returned in Belgium to start his vineyard in 1963. Bellfroid introduced to Frits Bosch in Maastricht (Netherlands) the modern viticulture. Frits Bosch then started his vineyard at Slavante (Limburg) in 1967 (Box & Van der Zwet, 2003). Bosch brought Hugo Hulst in contact with Jean Bellefroid and they were both taking viticulture advices from him. However, the two men had different aspirations and ambitions about their vineyards. Hulst was becoming a commercial winegrower, whereas Bosch remained a hobbyist. This led to the emergence of two different approaches in Dutch viticulture: the hobbyists’ and the commercialprofessional winegrowers’ (Box & Van der Zwet 2003).

3.2

Vineyards, wine, firms and structure

According to the Wijngaardeniersgilde (WNG), the organization of Dutch wine producers, there is currently about 183 commercial winegrowers (over 1000 m2) and 400 hobby

vintners5. In 2006, the numbers of vineyards (both hobby and commercial) were 183. In figure 1 can be observed the growth of the commercial vineyards in Netherlands from seven large vineyards (of a hectare and above) to over fifty in 2005 (Jan Oude Voshaar 2006). Currently, Netherlands count 82 large and 78 small commercial vineyards6.

Figure 16. Number of Vineyards in Netherlands in 1997 and in 2005 with more than 1 ha. Oude Voshaar (2005).

The vineyards are spread all over Netherlands with more concentration in the South, especially in the province of Limburg where are 50 vineyards, in the provinces of Gelderland and Brabant where are 52 and 20 vineyards, respectively. From the South to the North, the vineyards are less and more spread, for example in the provinces of Drenthe and Groningen there are only 3 and 1 vineyards, respectively (figure 16 an 17). The largest Dutch wine growers are located in Wageningen, Maastricht, Vlaardingen, Made and Lelystad (Kolkman 2001).

5 6

Theo Mellenbergh (Wijngaardeniersgilde), personal communication. Wijngaardeniersgilde : http://www.wijngaardeniersgilde.nl/wijngaarden/info

Figure 17. Wine regions and number of vineyards per each region. (The numbers in the regions of right map indicate the number of vineyards per region, Gelderland: 52 vineyards, Limburg: 50, Noord Brabant: 20, Noord Hollad: 13, Overijssel: 12, Zuid Holland: 11, Zeeland: 8, Utrecht: 5, Friesland: 4, Flevoland: 4, Drenthe: 3, Groningen: 1). Markantoni (2007).

In 2001, total area devoted to commercial Dutch wine-growing amounted to 35 hectares. In 2006, 47% of vineyards were less than 0.2 ha planted area, while 13.7 % were relatively big with more than 2 ha and 39.3 % were between 0.2 and 2 ha planted (figure 18). Currently, Wijngaardeniersgilde estimates that overall vineyard area is about 220 hectares, where 85 vineyards have more than 1ha and the other 75 are below 1ha. The vineyards are mostly located in Gelderland and Limburg regions (55% of the total Dutch vineyard surface)7. In 1999, Dutch wine production was approximately 1300 hL. Nowadays, the Dutch wine production is estimated on 9900 hL, which corresponds about 1 million bottles. However, wine production is naturally dependent on the weather and, therefore, changes every year. Dutch wine producers are mainly small artisanal producers who operate more as a hobby than commercially. Essentially, the wine produced is to winegrowers self consumption and their friends. However, commercial vineyards are able to sell their wines locally or regionally into small liquor stores, wine shops, restaurants and even at the vineyard facility. Only a very 7

Theo Mellenbergh (Wijngaardeniersgilde), personal communication

few “larger” winegrowers succeed to sell their wines through national supermarkets. According to Wijngaardeniersgilde, the Dutch wine is sold within the range of 7 to 13 euros per bottle8.

Figure 18. Percentage of vineyards in planted area (ha) in 2006. Extracted Markantoni 2007.

The climate of the Netherlands is not suitable for vine growing because of the cold climate, the lack of sunshine and the soil richness. However, there are some varieties, like Regent, Bianca, Solaris, Johanniter and Merzling, that ripen well in cool climates and made possible the vine cultivation in the country. These varieties are resistant to mildew, mature earlier and therefore can be used in the in north cold areas. In southern of the Netherlands, winegrowers still cultivate the old traditional grape varieties (e.g. Riesling, Auxerrois, Pinot gris, M. Thurgau). However, under the Dutch climatic conditions, the traditional viticulture is much more difficult as traditional varieties mature latter which implies additional and sprayings. Therefore, it is not surprising that white variety wines are more much used than the red varieties (table 4). The most important wine varieties are the Johanniter and Solaris and in less extend Merzling, Riesling, Auxerrois, Pinot Gris and Müller Thurgau. The most important red varieties are the Regent and the Rondo. There isn’t any available information on the on the relative importance of each variety9.

Theo Mellenbergh (Wijngaardeniersgilde), personal communication

Table 4. Grape varieties cultivated on Dutch Vineyards. Type

White (32)

Red (17)

Varieties Auxerrois, Bacchus, Chardonnay, Faber, Gewürztraminer, Hölder, Huxelrebe, Johanniter, Juwel, Kerner, Kernling, Merzling, Morio Muscat, Müller Thurgau, Orion, Ortega, Phoenix, Pinot blanc, Pinot gris, Rayon d'or, Reichensteiner, Riesling, Ruländer, Sauvignon Blanc, Scheurebe, Schönburger, Seyval, Siegerrebe, Silcher, St. Laurent, Sylvaner, Würzer Domina, Dornfelder, Dunkelfelder, Florental, Frühburgunder, Gamay, Landal 244, Léon Millot, Maréchal Foch, Meunier, Pinot noir, Plantet, Portugiezer, Regent, Rondo, Triomphe d' Alsace, Zweigeltrebe

As it was mentioned previously (2.5.2 Regulations), the wine activity in Netherlands is regulated by the Dutch government, which are outsourced to different governmental or semigovernmental organizations (Van Deudekom 2005). The Department of Customs is responsible for the excise (indirect tax or duty levied) that the winegrowers have to pay. The taxes should be paid only by the winegrowers that produce wine for commercial reasons and their vineyard larger than 1,000 m2. However, only if the framer is growing grapes in a vineyard with at least 4 ha should pursuant to Regulation HPA Wine 2002 to register with the Wine Marketing. Winegrowers have also the obligation to annually declare the estimated harvest in both quantity kilograms in hectoliters of wine9. Thus, only a small percentage of Dutch vineyards are above 4 ha, which means that most of wine produced in Netherlands in not officially declared. Many farmers believed that producing wine is an alternative to the other farming practices and they decide to start the vineyard. However, they are realizing that it is not easy to make wine since it requires not only a lot of investments but also to have the experience and the knowledge to produce and sell wine. Moreover, the Dutch wine market is highly competitive, being the imported wines much lower priced than the expensive domestic production. Consequently, it is expected that a stabilization or a decline in the number of commercial vineyards for the next years10.

http://wijn.nl/site/NEDERLANDSEWIJNBOUWWIJNPRODUCENTEN/Auto_Formulier_inschrijving_Nederlandse_wijnproducent.

php 10

Theo Mellenbergh (Wijngaardeniersgilde), personal communication

4. CONSUMPTION [RICHARD] 4.1

Volume per capita and evolution

Wine consumption in Netherlands was insignificant in the early sixties, around 1.6 liter per capita. However, Dutch now drink as much wine as the U.K.; but contrary to that market, which seems to have reached its saturation point, the Dutch affection for wine is still growing, from 14.5 liters per head in 1990 to 22 liters in 2009 (figures 19 and 20).

Figure 19. Evolution of wine consumption per capita in the Dutch market. Source: World Drink Trends/Productschap Wijn/CBS.

Despite an increasing level of maturity, wine continued to enjoy rising popularity in the Netherlands, gaining new consumers, particularly amongst the younger segment. More young Dutch men and women are drinking wine than before, switching from traditionally popular alcoholic drinks such as beer to wine. This trend helped per capita volumes, which continued to marginally rise in the next years.

Figure 20. Evolution of per capita wine consumption by the most important wine countries.

4.2

Wine and other alcoholic beverages

Dutch people choose drinks for health, but also for enjoyment. Demand for alcoholic drinks is being influenced by greater interest in healthy products, as Dutch consumers continue to pursue healthier lifestyles and fitness activities. While demand for higher alcoholic drinks continued to fall, categories such as wine and low alcohol beer continued to generate healthy sales (figure 21). More Dutch consumers are discovering the enjoyment in wine consumption, and they find that it also meets their demand for healthier drinks.

Figure 21. Consumption of alcoholic drinks in the Netherlands between 1992 and 2009. Source: Trendbox (2010).

Figure 22. Evolution of wine consumption as a proportion of alcoholic drinks consumed yesterday. Source: Trendbox (2010).

4.3

Profile of wine consumers

As it was showed previously in demographics section, the Dutch population is ageing. Depending on the perceived target customer group, this is perceived either as an opportunity or a threat. In favor of the ageing population, one of the wine dealers noted: “Older people seem to drink more wine”. Recent research by Trendbox confirms this statement. As presented in figures 23 and 24, the consumer over 50 years of age is responsible for an increasingly large part of the total consumption of both red and white still wines. In the Netherlands there is also quite a significant gender difference in wine consumption. Beer is usually considered a male drink while wine is considered more of a female drink. This is reflected in the fact that 60% of women drink wine, compared to only 30% of men. Two thirds of wine is consumed by people aged between 35 and 64 years. This age group tends to have already developed buying habits which are relatively hard to change, but on the other hand this group generally has the higher disposable income. This consumer segment, and especially over 50 years of age drink wine more frequently than the younger’s, which drink wine more occasionally (figure 25). The pattern of frequency of wine consumption for men and women are quite similar. While wine is generally not so popular with younger target groups in the Netherlands, the easy and pleasant image of rosé wine seems to improve acceptance of wine. Younger

consumers are also more open to New World wines, which offer them a chance to experience a bit of global culture.

Figure 23. Evolution of the age of red wine consumer between 1990 and 2009. Source: Trendbox (2010).

Figure 24. Evolution of the age of red wine consumer between 1990 and 2009. Source: Trendbox (2010).

Figure 25. Frequency of wine consumption of Dutch consumers. Base: all type of wine consumers were considered n =1001. Source: Trendbox (2010).

It is also observed that 75% of Dutch people is buying still wines, while the top 33% buyers takes care of 84% of total volume (figure 26).

Figure 26. Profile of the Dutch consumers. Source: Willem Siebilink (2010) .

Willem Siebilink 2010, personal communication

Figure 27. Place of consumption of the different types of wines by the Dutch consumers. Source: Trendbox (2010).

Figure 28. Moment of consumption of the different types of wines by the Dutch consumers

Source: Trendbox (2010).

The large percentage of wine is consumed at home (figure 27). Only 11 to 18% of wine is consumed on-trade, because “the Dutch don’t take their wives out for dinner”, as a senior member of the international trade used to say (Van Casteren and Heijbroek 2009). Over 50% of wines are consumed after dinner, which contrasts with 14 to 23% of wines, which are consumed before dinner. Consumption of wine with food occurs at dinner, representing around 40% of wine consumption (figure 28).

Only 13% of all day-to-day household spendings on wine occur outside the supermarket, being 18% of all wine purchase is unplanned (impulse buying) and in 67% of all wine purchases the wine brand/item is planned before the shop visit. More than 50% of total wine volume is bought on Friday and Saturday (figure 29).

Figure 29. Type of wine and color preferred by Dutch consumerâ&#x20AC;&#x2122;s preference. Source: GFK (2009).

4.4

Consumption according to the price

Price is the most important wine attribute that Dutch consumers consider when buying a bottle of wine (figure 30). Despite efforts to educate Dutch consumers on wine quality and variants, mid-priced and lower priced bands dominated consumption. The current economic slowdown once again consolidated the preference towards wines priced from 3.4 â&#x201A;Ź up to 5 â&#x201A;Ź, as for most Dutch people buying a good or acceptable quality wine does not mean spending more money (Euromonitor International 2010). The strong promotion around wines from South Africa explained the preference for lower priced bands, a trend which persisted during 2009 as more people looked to spend less money and paid more attention to price (Van Casteren and Heijbroek 2009). The current economic crisis and recession did not have a major impact on wine consumption, as the preference for mid-priced and lower priced bands meant that most consumers could afford them. More intense promotion in key distribution channels such as grocery retailers slightly harmed unit prices, but higher distribution costs allowed a balance to

be maintained after the higher price increases registered during 2008 (Van Casteren and Heijbroek 2009).

Figure 30. Main attributes or aspects that play an important role when Dutch consumers are buying a bottle of wine. Source: Trendbox 2010.

The following tables show that 50 to 60 percent of all wine sold in 2009 via the off-trade is below 3.50 € per bottle. However, the lower price segments for red and rosé (less than 3.5 €), have increase slightly from 2004 to 2009; while the higher segment decline (over 6.5 €) during the same period. Conversely, white wines increase slightly their sales in the higher segment. Regarding the sparkling wine, the preference is towards wines priced from 10 € up to 13 €, 29.4% in 2009; while the lower segment (less than 6.0 €) represent around 33%.

Table 5. Volume sales of still red wine by price segment 2004-2009. % off-trade Under 3 € 3.01 to 3.5 € 3.51 to 4.5 € 4.51 to 6.5 € 6.51 € and above Total

2004

2005

2006

2007

2008

2009

28.5 28.1 25.9 14.8 2.7 100.0

28.6 27.6 27.3 14.0 2.5 100.0

28.9 27.2 27.1 14.4 2.4 100.0

29.1 27.0 27.8 14.0 2.1 100.0

29.3 28.2 26.3 14.2 2.0 100.0

29.5 28.7 26.0 14.0 1.8 100.0

Source: Euromonitor International 2010.

Table 6. Volume sales of still white wine by price segment 2004-2009. % off-trade Under 3 € 3.01 to 3.5 € 3.51 to 4.5 € 4.51 to 6.5 € 6.51 € and above Total

2004

2005

2006

2007

2008

2009

26.7 26.0 25.3 15.1 6.9 100.0

26.9 26.3 25.8 14.9 6.1 100.0

27.1 26.5 25.1 14.6 6.7 100.0

27.2 26.9 24.3 14.2 7.4 100.0

27.5 27.0 24.0 14.0 7.5 100.0

27.9 27.5 23.6 13.9 7.1 100.0

Source: Euromonitor International 2010.

Table 7. Volume sales of still rosé wine by price segment 2004-2009. % off-trade Under 3 € 3.01 to 3.5 € 3.51 to 4.5 € 4.51 to 6.5 € 6.51 € and above Total

2004

2005

2006

2007

2008

2009

28.5 25.0 20.2 22.3 4.0 100.0

28.9 25.2 20.5 22.1 3.4 100.0

29.0 25.7 20.3 21.9 3.1 100.0

29.2 25.9 19.9 21.5 3.5 100.0

29.5 25.5 20.3 21.1 3.6 100.0

29.7 25.6 20.5 21.0 3.2 100.0

Table 8. Volume sales of still sparkling wine by price segment 2004-2009. % off-trade Under 3 € 3.01 to 6 € 6.01 to 10 € 10.01 to 13 € 13.01 to 15 € 15.01 € and above Total

2004

2005

2006

2007

2008

2009

12.5 16.0 20.0 28.5 10.0 13.0 100.0

13.3 17.5 19.2 28.7 9.2 12.1 100.0

13.6 17.9 19.0 28.9 9.1 11.5 100.0

13.9 18.0 18.7 29.0 8.9 11.5 100.0

14.3 18.3 18.1 29.1 8.3 11.9 100.0

14.7 18.6 18.0 29.4 8.1 11.2 100.0

Source: Euromonitor International 2010.

4.5

Consumption according to the type of wine

Within still light grape wine, rosé continued to drive growth, registering the highest growth, with sales increasing by 7% in current value terms and 6% in volume terms (table 9 and figure 31). Rosé is no longer a wine consumed only in the warmer months, but more Dutch people are buying it throughout the year, while the consumer base benefits from being able to attract younger people, including males (figure 32 and 33). Still white and red wine are more mature, but still generated healthy growth in 2009 (table 9). Other sparkling wines emerged as one of the best performing categories in 2009, due to the sudden popularity of variants such as Italian Prosecco; seen as a cheaper but good alternative to champagne, while still rosé wine continued to generating lower but healthy

growth. Good weather during the spring and summer periods further contributed to maintaining demand, as spending time outside is one of the favorite activities for Dutch people during their free time.

Table 9. Volume of consumed wine in the Dutch market between 2000 and 2009.

Dutch adapt their wine drinking with their lifestyle and activities. For instance, while they are on holidays, they will enjoy Italian wines in Italy (acid and tannins) but when they will go back home, they will prefer a different taste profile; since a majority drink their wines after dinner, they tend to like them a bit sweet, without tannins, wines that are considered of an easy drinking style.

Figure 31. Evolution of the proportion of red-rosĂŠ-white wines consumed in the Dutch market. Source: Trendbox 2010.

Figure 32. Type of wine and color preferred by Dutch consumerâ&#x20AC;&#x2122;s preference. Base: consumers that drink at least once every two weeks n =1404. Source: Trendbox 2010.

Figure 33. Evolution of the sales per type of wine during the year in the Dutch market. blue=red wine yellow=white wine green=rosĂŠ wine. Source: Trendbox 2010.

4.6

Image and reputation of different wines

The Dutch preference still goes to wines of Old World such as France; however, nonEuropean wines grew to a 33% market share. Despite the Dutch consumer are openminded

for new wines, the reality is that New World wines, still suffer from the consumer’s belief that they are inferior (Van Casteren and Heijbroek 2009). In comparison to other countries, brands currently possess a small market share in the Netherlands. In the Netherlands, the combined market share of the largest 20 brands is 15%, in the UK 21% and in the USA even 38%. On the other hand, in Germany, large brands only possess 11% of the market. The share of private label is relatively important (29.1%) within still light grape wine, due to the role of grocery retailers, who act as direct importers (Van Casteren and Heijbroek 2009).

Table 10. Brand shares of still light grape wine 2006-2009. % total volume Brand (Global Brand Owner) JP Chenet Berberana (Arco Bodegas Unidas SA) Undurraga Kaapse Pracht Peter Mertes Swartland Beamonte (Bodegas Julian Chivite SA) Lindemans (Foster's Group Ltd) Norton Hardys (Constellation Brands Inc) Casillero del Diablo (Viña Concha y Toro SA) E & J Gallo Torres (Miguel Torres SA) Rosemount (Foster's Group Ltd) Penfolds (Foster's Group Ltd) Nederburg Drostdy-Hof Penfolds (Southcorp Holdings Ltd) Lindemans (Southcorp Holdings Ltd) Private label Others Total

Company

2006

2007

2008

2009

Grands Chais de France SA, Les Bodegas Berberana SA Grupo Berberana SA Viña Undurraga SA Kaapse Vreugd Kelder Mertes KG Weinkellerei, Peter Swartland Cooperative Bodegas Beamonte SA

3.8

3.2

3.1

1.6

1.7

1.9

1.5 1.4 1.0

1.6 1.3 0.9

1.7 1.4 1.0

1.7 1.5 1.0

0.9 0.9

1.0 0.9

0.9 0.9

FGL Wine Estates

0.7

0.8

Bodegas Norton SA Thomas Hardy & Sons Ltd

0.7 0.6

0.7 0.7

Chacali Fine Wines

0.7

0.6

0.7

0.6

E & J Gallo Winery Bodegas Torres SA

0.9 0.4

0.7 0.5

0.6 0.5

FGL Wine Estates

0.1

0.2

FGL Wine Estates

0.1

0.2

Distell Group Ltd Distell Group Ltd FGL Wine Estates

0.0 0.1 -

0.1 0.1 -

0.2 0.1 -

FGL Wine Estates

28.9 55.6 100.0

28.9 56.3

28.7 56.0

29.1 55.2

100.0

Source: Euromonitor International 2010.

The most important brands in volume are: JP Chenet (de-listed from Albert Heijn in 2009), Berbarana (Spain), Undurraga (Chile), Kaapse Pracht (South Africa) and Peter Mertes (Germany) and Hardy’s (Australia), all sold through the most important supermarket chain, Albert Heijn (table 10). In the last three years these five brands have shown a growth in volume to about 5% market share and 7.2% in value. Within still light grape wine, a gradual tend towards concentration continued in 2009, with larger firms such as Constellation Brands Inc working to expand sales and capture share in the face of more intense competition from retailers. Retailers, and in particular grocery retailers, usually import a range of their own still wine products, with their own purchasing teams travelling to the countries of origin to seal agreements and marketing plans. Chilean and Argentinean wines, such as Undurraga and Norton are doing very well in grocery retailers, being supported by increased advertising and more frequent promotions. Dutch consumers appreciate their good quality and fair price, with some brands continuing to build a stronger presence. Undurraga and Norton gained 2% and 1% volume shares respectively in 2009, being the largest Chilean and Argentinean still wine brands in the Netherlands. Spanish wines also enjoy strong popularity in the Netherlands. Torres was one of the top selling brands in 2009, accounting for a 0.5% volume share. Bodegas Torres SA invested in a new promotional campaign during this period, including print advertising combined with trade marketing activities, including draws which allowed consumers to win trips to Catalonia and visit the production site of the brand, leading to more frequent price promotions. Torres as a brand enjoys consumer preference as it is well known by Dutch people travelling to Spain, and fits the balance between quality and fair price sought by consumers. The search for alternatives and new flavours benefited newer still wine brands which entered the market. For example, still wines from New Zealand are gaining a presence in the Dutch market, boosted by advertising and increased distribution. Flaxbourne (Marlborough) is an example of a new brand gaining more distribution in grocery retailers, such as Albert Heijn in 2009, with the supermarket using its house journal to promote the brand and the value of wines coming from New Zealand. LVMH Moët Hennessy Louis Vuitton led champagne sales with a 52% volume share in 2009, with their 3 brand: Moët & Chandon, Veuve Clicquot and Mercier (table 11). The firm encountered increased competition from other sparkling wines; nonetheless it continued to support the brand Moët & Chandon with promotional actions at specialists. For example, the manufacturer usually resorts to special gift packs around key seasonal periods such as the end of the year or Christmas, further contributing to boosting sales of champagne during these periods.

Table 11. Brand Shares of Champagne 2006-2009. % total volume Brand (Global Brand Owner) Moët & Chandon Veuve Clicquot Piper Heidsieck Mumm (Pernod Ricard Groupe) Canard-Duchêne (Champagne Thiénot) Mercier Mumm (Allied Domecq Plc) Others Total

Company

2006

2007

2008

2009

LVMH Moët Hennessy Louis Vuitton LVMH Moët Hennessy Louis Vuitton Rémy Cointreau Group Pernod Ricard Netherland

28.1

27.4

28.1

28.5

17.0

17.9

18.2

19.3

12.3 9.8

11.8 10.4

12.3 11.4

13.0 10.7

9.6

9.8

10.3

10.6

3.9

4.0

4.2

4.5

19.3 100.0

18.7 100.0

15.5 100.0

13.4 100.0

Champagne CanardDuchêne SA LVMH Moët Hennessy Louis Vuitton Allied Domecq Spirits & Wine (Benelux) BV

Source: Euromonitor International 2010.

Prosecco and Cava tried to benefit from the sudden popularity of these products, intensifying promotions and working with retailers to gain improved display to boost impulse sales. Nevertheless, the sales of these types of products have been losing some market since 2006 (table 12).

Table 12. Brand Shares of other Sparkling wines 2006-2009. % total volume Brand (Global Brand Owner) Freixenet (Freixenet SA) Canei Veuve Amiot (Bacardi & Co Ltd) Martini Asti (Bacardi & Co Ltd) Codorníu Martini (Bacardi & Co Ltd) Chiarli Lambrusco Rosso Chiarli Lambrusco Bianco Chardonnay Brut Canei (Pernod Ricard Groupe) Private label Others Total

Company

2006

2007

2008

2009

Maxxium Nederland BV

20.2

20.6

19.8

18.8

Baarsma Wine Group Holding Bacardi-Martini 12.1 Nederland NV Bacardi-Martini 8.7 Nederland NV Codorníu SA 6.1 Bacardi-Martini 3.0 Nederland NV Chiarli 1860 4.0

11.8

11.1

11.5 10.2

8.8

8.5

8.1

6.2 3.4

5.9 3.5

5.7 3.4

3.9

3.6

3.4

2.6

2.8

2.7

2.6 14.1

2.6 13.9

2.5 12.5

2.3 -

18.2 8.3 100.0

17.2 8.9 100.0

15.8 14.2 100.0

15.6 18.3 100.0

Chiarli 1860 Pierre Legendre Pernod Ricard Nederland

Source: Euromonitor International 2010.

Domeq, Conqueror and Offley were the top selling brands within fortified wine and vermouth in 2009 (table 13). The brand shares of fortified wines and vermouth have been relatively stable in the last 4 years. Most of the Port wines brands had increased their market share with the exception of Sandeman. Most fortified wines and vermounth intensified its in-store promotions during 2009, leading to an increase display and placement on supermarket shelves during key seasonal periods such as the beginning of the summer. Such actions led to increased sales of these types of products which enjoys greater consumption during the warmer months in the Netherlands.

Table 13. Brand Shares of fortified wine and vermouth 2006-2009. % total volume Brand (Global Brand Company 2006 2007 Owner) Domecq (Pernod Ricard Groupe) Conqueror (Private Label) Offley (Sogrape Vinhos de Portugal SA) Sandeman Martini (Bacardi & Co Ltd) Kopke Dow's (Symington Family Estates) Cinzano Warre's (Symington Family Estates) Cavelli Madeira Henriquez Honjozo (Okunomatsu Sake Brewery Co Ltd) Domecq (Allied Domecq Plc) Private label Others Total

Pernod Ricard Nederland

2008

2009

13.8

14.2

14.3

Albert Heijn BV

9.9

9.8

10.0

Bacardi-Martini Nederland NV

8.8

9.1

9.4

Sogrape - Vinhos de Portugal SA Bacardi-Martini Nederland NV CN Kopke & CA LDA The Symington Family

9.0

7.6

7.8

7.5

7.3

7.2

7.1

4.0 2.9

4.1 3.1

4.2 3.4

4.2 3.9

Campari Milano SpA, Davide The Symington Family

3.6 1.6

3.4 1.7

3.3 1.8

3.2 1.9

Cavelli SpA Vinhos Justino Henriques, Filhos, LDA Sake Europe BV

1.4 0.4

1.2 0.4

1.1 0.4

0.3

0.4

Allied Domecq Spirits & Wine (Benelux) BV

26.5 10.3 100.0

27.0 10.7 100.0

26.6 10.6 100.0

26.4 9.9 100.0

Source: Euromonitor International 2010.

A detailed list of the most wine brands per country of origin and their respective performance on both off-trade and on-trade from 2000 to 2009 are represented in Appendix 1 to 6.

5. IMPORTS AND EXPORTS [PAULO] 5.1

Market landscape

The impact of domestic wine is still negligible in the Netherlands. The market relies on imports to supply demand. The size of the Dutch wine market is difficult to measure as the country serves as a transit and distribution point for other countries in Europe with a large proportion of imported wines re-exported to other European countries. Although 430 million liters of wine were imported in 2009, a more realistic estimate of the size of the local market is around 350 million liters (table 14). According to the OIV official statistics, the Netherlands is the 6th largest wine importer in world, importing around 330 million liters in 2009 (figure 34). In 2009, Dutch wine market had a value 1.6 billion of Euros (+6% than in 2008), whose import wine represented 940 million of Euros (+4% than in 2008). The Dutch market is a mature market where you can find wines of good quality at low prices. In total there are over 30,000 different wines in Dutch market. The growth in this market is expected to accelerate marginally in the forthcoming five years12.

Figure 34. Evolution of wine imports in the 10 biggest importing countries between 2006 and 2009 (thousands of liters). Source: OIV 2010.

Willen Siebilink 2010, personal communication

Table 14. Wine Production, Imports and Exports: Total Volume 2003-2008 million litres Wine – Imports Wine – Exports Wine – Production Wine – Apparent consumption

2003

2004

2005

2006

2007

2008

351.1 37.3 0.2 313.9

355.8 26.9 0.1 329.1

380.2 46.8 0.2 333.6

347.8 33.3 0.2 314.7

389.5 36.0 -

352.3 24.7 -

Source: Euromonitor international 2010.

5.1.1

Imports by country of origin

In 2008 (no recent data are available), most of the wine imported into the Netherlands came from France (27%), followed by Germany (18%), Spain and Italy (approximately 10%) (table 15). New World wines made up around 25% of imported wine in 2008. Wine imports from France decreased by 27% from 2003 to 2008, while other countries, mainly those from the New World increase significantly the wine exports to Netherlands during the same period. For example, Chile and Argentina imported wines grew by 68% and 315% from 2003 to 2008, respectively. The important increase in imported wine from U.K. (+ 825%) correspond to bulk wine that is imported all over the world to the U.K where is bottled and then re-exported to Netherlands.

Table 15. Wine imports by country of origin: total volume 2003-2008 million litres Wine – TOTAL Wine – France Wine – Germany Wine – Spain Wine – Italy Wine – South Africa Wine – Chile Wine – Australia Wine – Argentina Wine – United Kingdom

2003

2004

2005

2006

2007

2008

351.1 133.0 31.2 33.5 27.8 41.2 12.9 12.6 3.3 1.2

355.8 119.8 38.3 35.1 27.3 47.7 17.8 16.4 2.8 1.8

380.2 110.5 41.9 40.9 29.0 48.6 22.9 19.5 8.5 3.5

347.8 104.1 48.3 34.7 30.5 37.0 21.1 16.8 9.6 4.5

389.5 114.9 61.7 38.6 34.4 31.1 27.1 21.5 11.4 11.0

352.3 96.6 62.6 36.2 34.3 29.5 26.4 17.9 13.7 11.1

Source: Euromonitor international 2010.

In terms of value, France largely dominates the Dutch market (34%), although the value of 2008 is quite similar to those obtain in 2003 (table 16). The popularity of New World wines continued to increase from 2003 to 2008, at the expense of wines from traditional wine countries, like France, Portugal and Spain. New World wine countries such as, Australia, Chile

and Argentina grew between 60 to 300% between 2003 and 2008. It was also observed an important increase of wines imported from Germany; however, a large portion is wine imported to the Germany where is bottled and then re-exported to Netherlands.

Table 16. Wine imports by country of origin: total value 2003-2008 EUR million Wine – TOTAL Wine – France Wine – Germany Wine – Italy Wine – Spain Wine – Chile Wine – South Africa Wine – Australia Wine – Portugal Wine – Argentina

2003

2004

2005

2006

2007

2008

722.6 282.5 44.2 50.9 64.7 28.0 68.7 30.0 46.3 6.9

719.8 262.6 57.3 50.2 65.4 36.8 75.0 37.9 37.9 4.5

739.5 238.5 62.9 56.7 67.7 47.0 70.5 45.2 38.7 15.0

729.6 268.7 71.5 60.0 61.6 44.3 53.4 38.2 37.5 17.9

859.0 319.2 84.1 75.4 72.0 53.9 52.0 53.2 43.0 21.3

831.9 285.0 97.5 82.4 68.9 53.5 52.7 48.1 35.5 27.2

Source: Euromonitor international 2010.

5.1.2

Exports by countries

The size of the Dutch wine market is difficult to determine precisely as the country serves as a transit and distribution point for other countries in Europe with a large proportion of imported wines re-exported to other European countries. The main destination of Netherlands wine exports are Germany, Poland, Belgium, Norway in volume (table 17); while in value Norway and Germany are the main markets (table 18). The Netherlands wine exports has been highly variable these last year’s; however, it seems that there is a slightly decrease in the Netherlands wine exports for most of the countries. The only exceptions are the Latvia and Ireland in terms of volume and Norway and Hong Kong in value. Table 17. Wine exports by country of destination: Total volume 2003-2008 million litres Wine – TOTAL Wine – Germany Wine – Poland Wine – Belgium Wine – Norway Wine – Others Wine – Latvia Wine – Ireland Wine – France Wine – United Kingdom

2003

2004

2005

2006

2007

2008

37.3 19.6 0.1 4.2 0.0 2.9 0.3 0.4 3.6 1.9

26.9 13.6 0.1 4.7 0.0 1.9 0.4 0.0 2.0 1.3

46.8 28.3 2.5 4.9 0.2 1.8 0.7 0.1 1.6 1.6

33.3 17.5 2.4 2.7 0.9 1.7 0.6 0.3 1.9 1.4

36.0 12.3 4.1 2.7 4.3 2.5 0.7 0.5 1.6 1.7

24.7 9.0 2.6 2.6 1.9 1.4 1.0 0.9 0.9 0.7

Source: Euromonitor international 2010

Table 18. Wine exports by country of destination: Total value 2003-2008 EUR million Wine – TOTAL Wine – Norway Wine – Germany Wine – Others Wine – Hong Kong Wine – France Wine – Japan Wine – Poland Wine – Belgium Wine – Australia

2003

2004

2005

2006

2007

2008

120.2 0.0 48.0 11.8 0.2 11.0 9.5 0.3 15.1 0.0

82.7 0.1 27.5 7.6 0.4 7.5 7.6 0.2 15.1 0.1

140.2 0.5 67.1 11.5 0.9 7.8 10.7 6.2 11.6 0.8

132.7 3.2 49.3 14.8 2.5 11.5 16.2 7.3 7.4 1.2

152.7 26.1 30.6 14.6 7.1 14.0 8.0 12.9 7.5 4.6

132.0 27.3 25.0 10.6 10.0 8.8 7.9 7.5 7.0 3.2

Source: Euromonitor international 2010

5.2

Competitive environment

In the Netherlands there are approximately 1200 importers, of which the top 50 account for the bulk of wine imports, the rest being small players. Most Dutch supermarket chains have their own import structures for the larger volumes of the wine imports reducing the position of the traditional wine importers, but also relying on a small group of independent importers for the smaller trade flows in their portfolio The Real Wine Importers Association (KVNW), with 100 members represents over 80% of wine imports in this market13. The most important wine importing companies in the Netherlands are represented below14:

Largest traders/importers: • Baarsma (including Oud Reuchling & Boelen, the quality arm of Baarsma. Consolidator in wine distribution in NW European through a range of acquisitions in the Netherlands, UK, Switzerland. Revenues over EUR 200 million. Is partner of Heineken to supply Heineken on-trade customers, and Lovian with organic wines); • DGS (including Coenecoop), about half the size of Baarsma; • Groupe LFE, part of Castel Frères, the largest French wine company, about half the size of Baarsma; • Delcave, part of the Dirkzwager Group, which also owns or manages a range of bottle shops, including Mitra;

13 14

Wine Importers Association (KVNW), www.kvnw.nl Annette Badenhorst, Manager for WOSA (Wines of South Africa), personal communication

Midsized traders/importers: • L’Exception/Cordier; • Great Grapes; • Jean Arnaud; • Kwast Wijnkopers; • Poot Agenturen; • Verbunt; • Vinites; • W&S Group; • Wijntransport; • Belgium suppliers (like Chaccali); • Spirit companies (like Diageo and Moët/Henessy); • some producers have their own offices (like Constellation, Gallo, Pernod Ricard). About

70%

total imports are made by nine companies: Groupe LFE, Baarsma,

Delcave, DGS, Verbunt, Goessens, Vinita, Wijntransport and Pernod Ricard.

6. DISTRIBUTION [PAULO] 6.1

Market structure

Wine sales in The Netherlands were up in 2009 and Dutch wine importers, wholesalers and retailers had a very good year15. According to the Euromonitor International (2010), the total wine volume was 389.2 million liters, which represented an increase of 18.3% and 3.4% compared to 2004 and 2008, respectively (table 19). The off-trade account for 87% percent of all Dutch wine sales, being the on-trade responsible for the remaining 13%.

Table 19. Sales of wines by on-trade vs off-trade split: Volume 2004-2009. million liters Off-trade On-trade Total

2004

2005

2006

2007

2008

2009

286.6 42.2 328.9

300.6 43.5 344.2

311.0 44.9 355.9

322.0 46.1 368.1

331.8 47.6 379.4

340.4 48.8 389.2

Source: Euromonitor International 2010.

Annette Badenhorst, Manager for WOSA (Wines of South Africa), personal communication

In terms of value, the Dutch wine sales reached the € 2,341.9 millions, which represented an increase of 20.9% and 3.2% compared to 2004 and 2008, respectively (table 20). The offtrade account for 59% of all Dutch wine retail sales (€ 1,371.6 millions), an increase of 3.6% compared to 2008. The share of on-trade was 41% (€ 970.4 millions).

Table 20. Sales of wines by On-trade vs Off-trade split: Value 2004-2009. EUR million Off-trade On-trade Total

2004

2005

2006

2007

2008

2009

1,123.0 814.6 1,937.6

1,157.2 843.0 2,000.2

1,198.7 874.5 2,073.2

1,237.1 900.5 2,137.6

1,323.7 944.9 2,268.6

1,371.6 970.4 2,341.9

Source: Euromonitor International 2010.

In terms of value, the Dutch wine sales reached the € 2,341.9 millions, which represented an increase of 20.9% and 3.2% compared to 2004 and 2008, respectively (table ). The off-trade account for 59% of all Dutch wine retail sales (€ 1,371.6 millions), an increase of 3.6% compared to 2008. The share of on-trade was 41% (€ 970.4 millions). In the Dutch wine market, the smaller players are struggling to uphold their position. Judging from the division of market share, supermarkets are winning steadily at the cost of the smaller players in the market. Figure 35 shows that supermarkets have increased their market share in the Dutch wine market about 14% over the last 14 years, up to almost 80% in 2009. The liquor stores have been suffering from this success. Historically, Dutch liquor stores have a strong competitive position in the Netherlands. In an effort to fight the abuse of strong liquor, the Dutch government installed the “Drankwet” (Liquor Law) in 1882. Due to this law, issuance of liquor selling licenses was limited, thereby allowing established liquor stores to obtain a strong foothold in the market (Jansen 2008). Nowadays, the wine sales are essentially made in supermarkets, which are allowed to sell alcohol up to 15% (with exception of fortified wines such as Port, Jerez, etc). Supermarket chains embarked on new price competition, which led to increased consumer interest in the promotions offered by them. Wine and beer were elements of attraction behind price promotions, while continuing to affect other channels such as liquor stores, which continued to lose share to supermarkets and alternative channels such as online sales, which seem to be slowly gaining territory (Van Casteren and Heijbroek 2009). According to a recent press release of 2008, over 25% of the wine consumers have ordered wine over the internet at least once16. A growing market share for online purchasing is expected.

Press release productschap wijn, 20 of March 2008, source: www.wijn.nl

The on-trade have also been affected as the increase in wine sales was mainly in off-trade once entertaining with friends and family at home become more popular. The smoking ban and slower economic conditions prompted more people to avoid spending money on eating and drinking out.

Figure 35. Evolution of purchase of wine in the Netherlands (% of market share). Source: Trendbox 2010.

6.1.1

Off-trade – Supermarkets’

Netherlands is a “take home” market, as close to 80% of the total wine consumed in the Netherlands is sold in the 7000 supermarkets. For domestic consumption, the market share of supermarkets is 87%. More than 80% of supermarket volume sales are made by 7 chains of supermarkets, being most the important Koninklijke Ahold NV (Albert Heijn) with 750 points of sale and Superunie with 1800 (table 21). Other major supermarkets are: C1000 and Super de Boer (Bijeen group, 700 stores), Lidl and Aldi. Retailer Ahold have been dominating the food retail market with Albert Heijn supermarkets (36.6% of value in 2008) (figure 36). The second most important retailer is Superunie, a group representing 15 smaller retail chains with a total of 1,800 shops (24.3%). Bijeen (C1000 and Super Boer) group represent ~17% (Jumbo entered to the Bijeen group in 2009). Discounters Aldi and Lidl hold market share of 15.2% and 6.6% respectively. This competitive environment and the fact that Dutch supermarkets also import wines give them a major influence over the

supply chain. Generally, Dutch supermarkets insist on wine exclusivity, and through their buying power they make sure they get it17. Brands sold at different retailers face fierce price competition, as is the case, for instance with beer. For example, in 2009, Albert Heijn de-listed the largest French brand, JP Chenet, as Grand Chais de France didnâ&#x20AC;&#x2122;t give Albert Heijn brand exclusivity. This exclusive listing at a single retail chain means that the overall volume of brands always remain limited to the sales of that specific retailer, which results in diversification for the brands.

Table 21. Supermarkets in the Netherlands in 2009.

Annette Badenhorst, Manager for WOSA (Wines of South Africa), personal communication

Figure 36. Marketshares turnover (x 1000) in different retail chains between 2006 and 2008. 18

Source: Nielsen 2010 .

Supermarkets was a key driver in developing wine consumption in the Netherlands, as retailers self-import brands from around the world on their own, and tend to promote their products with information leaflets and articles in supermarket magazines. Retailers also tend to place their own brands in preferential displays, giving them more opportunity to boost impulse purchases. Aldi and Lidl place enormous pressure on market prices through a strategy of trade few largest brands at low prices. Dirck III (Supernie), Jumbo and C1000 (Bijeen group) are perceived by the consumers ‘good price to quality’ and ‘good reflection of the market place’. In contrast supermarkets chains such as Albert Heijn and Plus Supermarkets are praised for its ‘by far broadest range’ including more expensive wines than the competition, and its consistency in quality and service (figure 37). The supermarkets are generally located in the cities center and offer several advantages such as convenience, one-stop-shopping, value for money. In contrast, the self space is limited (average self 6-12 meters) as the shop surface has average 600 m2. The Dutch supermarkets don-t offer either a depth or high end assortment of wines (95% of wines are under 5.5 €) due to the lack of space. Thus, for new wine comers, wine listing is very challenging18.

Willem Siebilink 2010, personal communication

Figure 37. Supermarkets position matrix in the Netherlands (consumer perception), (Hard) 14

Discount, Middle (value for money and quality discount) and Service .

6.1.2

Off-trade – Liquor stores

Not all wine off-trade sales are via the supermarkets. Liquor stores, the so-called “slijters”, have a unique competitive advantage in the Netherlands, as they have a monopoly on the distribution of spirits for which they need a licence. They sell a full range of alcoholic and non-alcoholic beverages, which the supermarkets are not allowed to do it. The Netherlands has still around 3000 slijters; however, the number is shrinking due to the competition of the supermarkets. Nowadays, the sales of wines on liquor store represent around 10% of the total off-trade wine sales (figure 38). The majority of the liquor stores are owned by supermarket chains. Gall & Gall, is a part of the Dutch group Koninklijke Ahold NV (the same group of Albert Heijn supermarkets), has 530 shops, many of them strategically located nearby an Albert Heijn supermarket. Even belonging to the same parent company, Albert Heijn and Gall & Gall operate independently. Mitra and Dirck III with 320 and 70 liquor stores, respectively, are other important players in this channel. These 3 players represent more than 60% of liquor store business. Only about 500 slijters are really independent, of which a significant number are ‘pap & mom’ shops with an annual turnover of less than € 250,000.

Figure 38. Evolution of the off-trade wines sales in both supermarkets and liquor stores.

Table 22. The most important liquor stores in the Netherlands. Points of sale ≥ 50 ≤ 50

Liquor stores Gall & Gall, Dirck III, Mitra, Euro Slijter, Gildeslijter, Gulle Bottelier, Mix-Inn, Vini France, Voordeelslijterij Curio Cave, De Drankenier, Henri Bloem’s

Dutch Liquor stores typically are small (< 200 m2), relatively disorganized places, which are generally located in city centre. In general, the staff is unprofessional and unmotivated, and the working period is rigid16. Therefore, these stores are unappealing to young consumers, having lower penetration, only 10%, among regular (female) shoppers. This situation combined with little investments or innovations, even in high growth areas (Almere, Amersfoort, Utrecht) makes this business hardly profitable. Consequently, the liquor stores have been disappearing, 20% of them have disappeared in last 25 years. Only the fine wine specialist performs very well with the wealthy older generation.

Figure . An example of Dutch liquor store owned by the Mitra group .

6.1.3

On-trade - restaurants, bars, hotels

The Dutch on-trade is only responsible for about 15% of wine sales in volume. Even if habits and lifestyle are gradually changing, in general, it can be said that the Dutch do not have the habit of going to restaurants, mainly because the high prices. Until a few years ago, many restaurants (especially those of higher rank) remained at the expense of businessmen. With the amendment of the legislation, the costs of these meals become no longer attractive from a fiscal perspective which led to a switch/ downgrade of many establishments (Van Casteren and Heijbroek 2009). Meanwhile, volume sales through the on-trade channel declined as more people reduced their spending on eating and drinking out. More entertaining at home with friends and family resulted in a better performance in off-trade channels. Generally, Horeca channel doesnâ&#x20AC;&#x2122;t want to carry wines on wine list which are sold in supermarkets due to the margin issues. The on-trade in the Netherlands represents approximately 30,000 Horeca establishments supplied by a mix of the independent wine importers and supermarkets (trade wholesale outlets also fall under this heading), depending on the type of wine sought (Van Casteren and Heijbroek 2009). New World wines are often purchased through independent wine importers, 19

Willem Siebilink 2010, personal communication

while more established wines from countries such as France are mostly purchased through “cash and carry” type wholesale outlets. The remainder of wine sales is estimated to be split between high end specialist wine stores and restaurants. Below are represented the main suppliers of the Dutch on-trade channel20:

Multiple specialists: • Bart Wijnimport (Purmerend); • Fourcroy-Lensselink; • Goessens (Maastricht) ; • La Gironde (Rotterdam).

Selling both to on- and off-trade: • Vos&Partners (Delcave) ; • Cordier/L’Exception ; • ORB (Baarsma).

General on-trade wholesalers: supplying non-food as well as food and beverages: • Sligro (55 stores, head office Veghel); • Hanos (30 stores, head office Apeldoorn); • Makro (30 stores, headoffice Best, part of Metro Group Germany), • Zegro (few stores, area Rotterdam); • Kweker (few stores, area Amsterdam); • ISPC (one store in Netherlands and two in Belgium, premium end of wholesaling, Breda). Despite the lack of reliable statistics, most on-trade specialists estimate the market share of European wines in the Dutch on-trade at 90%; France is the strongest supplier with 60% or more (Van Casteren and Heijbroek 2009). This dominance of the Old World in the on-trade might be caused by: a preference for an Old World wine style when eating out; a tendency to choose ‘safe’ in the horeca, but also because this channel is dominated by ‘Old World’ restaurants (Italian, French, Greek and Spanish). The on-trade sales of wine are expected to suffer during the next years, as more people restrict their spending on eating and drinking out. Dutch consumers will shift to entertaining at 20

Annette Badenhorst, Manager for WOSA (Wines of South Africa), personal communication

home with friends and family, resulting in a better performance for off-trade sales. As wine consumption within the on-trade channel is also dependent on weather conditions, it is difficult to predict growth for certain products, which are mainly consumed during the warmer months as these are dependent on whether conditions.

6.1.4

Direct mail / e-commerce

Despite the lack of reliable statistics it seems that direct mail, including e-commerce, selling directly to the final consumer, is gaining market share, in particular for the distribution of premium wines. Many are small established specialists, in business for many years with national or multi-regional coverage (Van Casteren and Heijbroek 2009). One of the largest specialists is Okhuysen, in addition to high street direct mailers like Leon Colaris and Wielinga. The leading wine importer Baarsma has its own direct mail division; Bourse du VinWijnbeurs/ Wine Clubs Europe as well as its own e-commerce channel (wijnvoordeel.nl). Moreover, many of the retail chains have their own direct e-commerce business; AH with Wijndomein.nl being likely the largest. Wijndomein.nl is Albert Heijn’s initiative to convert its wine club “Vrienden van de Goede Wijn” into its newly designed e-commerce business. This is a clear attempt to get more market share in the premium wine sector in the Dutch market, directly taking on the multiple specialists. Below are represented some Dutch players that sell directly to the final consumer either by direct mail or e-commerce21:

•

Thiessen (Moermans, Maastricht),

•

Sauter (Kwast Wijnkopers, Maastricht),

•

Berger (Roermond),

•

Colaris (Baarsma, Weert),

•

Robbers & Van den Hoogen (Arnhem),

•

De Bruijn (Nijmegen),

•

Okhuysen (Haarlem),

•

Noordman (Leiden),

•

Cees van Noord (Utrecht),

•

Adventure Wine Trading (Arnemuiden),

•

Aridjis (Utrecht), Brand (Leiden),

•

Cave Cadier (Wijnmakelaarsunie, Cadier en Keer),

•

De Lange (Oosterhout),

•

De Portugese Wijnkopers (Nijmegen),

Annette Badenhorst, Manager for WOSA (Wines of South Africa), personal communication

•

Deils Wijnhuis (Deil),

•

Dielen (Venlo),

•

Toorank (Zevenaar),

•

Hosman Vins (Schiedam),

•

Huinck (Zaandam),

•

Kelders Wijnimport (Udenhout),

•

Neerlands Wijnhuis (Groot Ammeren),

•

Jos Rijnaarts (Alkmaar),

•

Schermer (Hoorn),

•

ThreeWines Benelux (Teteringen),

•

Verlinden (Den Bosch),

•

Victory Wines (Edam),

•

Vinoblesse (Baarn),

•

Vojacek (Maastricht).

7. MARKET SEGMENTATION [CARLOS AND RICHARD] 7.1

Sales per type of wine

The still wine represents 90% of the wine Dutch market by volume. The fortified wines account for 7%, while the sparkling and Champagne represent 2 and 1% of total wine sales by volume, respectively. Red wine is the most important category, representing 44% of total sales volume (table 22). The white and rosé wines account for 32 and 14% of the wine sales, respectively. In terms of growth, the still wine sales increased by 20% between 2004 and 2009, which represents a CAGR of 3.7%. Both red and white sales increased by 12% (CAGR of 2%), while rosé wines knew an increase of 98% (CAGR of 14.7%) during the same period of time. Champagne and sparkling wines sales increased by 25 and 40%, respectively. Conversely, fortified volume sales decreased by 1.6%. All this referring to the period between 2004 and 2009. Still wine sales in 2010 proved the most lucrative for the Dutch wine market, generating 77% of the total revenues. The sales of fortified wine generated 15% of the market's value. Champagne and sparkling wines represent 5 and 3% of the market value in 2010, respectively. Table 22. Sales of wine by subsector: total volume 2004-2009. million litres 2004 2005 2006

2007

2008

2009

Still Light Grape Wine - Still Red Wine - Still White Wine - Still Rosé Wine Sparkling Wine - Champagne - Other Sparkling Wine Fortified Wine and Vermouth - Port/Oporto - Sherry - Vermouth - Other Fortified Wine and Vermouth Non-Grape Wine - Fruit Wine Wine

292.8 155.0 109.8 28.0 6.2 1.9 4.3 27.5

307.4 159.9 111.9 35.6 6.6 2.0 4.6 27.9

318.9 161.6 115.6 41.7 7.0 2.1 5.0 27.7

330.8 165.3 117.9 47.6 7.5 2.2 5.3 27.6

341.7 168.7 120.2 52.7 8.2 2.3 5.9 27.4

351.3 172.5 123.0 55.8 8.7 2.3 6.4 27.1

7.4 15.5 3.9 0.7

7.6 15.6 3.9 0.7

7.9 15.3 3.8 0.8

8.1 15.0 3.7 0.8

8.3 14.6 3.6 0.8

8.5 14.3 3.5 0.8

2.3 2.3 328.9

2.3 2.3 344.2

2.2 2.2 355.9

2.2 2.2 368.1

2.1 2.1 379.4

2.1 2.1 389.2

Source: Euromonitor International 2010.

The Dutch still wine market grew 24.7% since 2004 in value, which represents a CAGR of 4.5%. One reason for the growth of sales has been the increasing consumption of rosé wine, which grew by 96.8% (CAGR 14.5%) to reach a market share of 11% of supermarket sales by volume. Rosé is no longer a wine consumed mainly in the warmer months, but more Dutch people are buying it throughout the year, while the consumer base benefits from being able to attract younger people, including males. Still white and red wine are more mature, but still generated healthy growth in 2009, impacted by sustained demand and less impacted by the current economic slowdown. Sales of white wine gained 16.4% of sales revenues since 2004, reaching 27% of sales volume. Red wine is still the most popular wine, accounting for 38% of sales revenues. Fortified sales revenues went up by 2.1% (CAGR 0.4%). Sparkling wine reached sales worth EUR192 million in 2009, representing an increase of just over 3% in current value terms compared with 2008. Poor value growth was attributed to the economic slowdown. Despite efforts from champagne manufacturers to introduce year-round consumption, and not just for special occasions, sales of sparkling wine remained seasonal. Another deterrent to increasing sales of sparkling wine is that consumers prefer still wines when eating or when entertaining. Other sparkling wine saw slower growth in 2009 than in 2008, but still registered the highest performance, led by the sudden popularity of Prosecco since 2008. Dutch consumers, in light of the economic slowdown, shifted demand from champagne to Prosecco due to its price, and the fact that these products were more intensively promoted. Manufacturers aimed to diversify the offer by presenting more alternatives to consumers. Table 23. Sales of wine by subsector: total value 2004-2009.

EUR million Still Light Grape Wine - Still Red Wine - Still White Wine - Still RosĂŠ Wine Sparkling Wine - Champagne - Other Sparkling Wine Fortified Wine and Vermouth - Port/Oporto - Sherry - Vermouth - Other Fortified Wine and Vermouth Non-Grape Wine - Fruit Wine Wine

2004

2005

2006

2007

2008

2009

1,434.0 767.1 531.7 135.2 147.3 87.1 60.2 332.8

1,487.1 781.5 537.3 168.4 154.7 91.3 63.4 335.2

1,552.9 797.2 557.2 198.5 163.3 96.1 67.2 334.2

1,608.1 815.0 571.1 222.0 173.9 101.5 72.5 333.2

1,722.7 864.5 610.3 247.9 185.4 107.7 77.7 338.3

1,788.6 892.8 629.8 266.1 191.8 110.8 81.0 339.6

94.7 170.7 56.6 10.7

97.4 171.2 55.8 10.8

99.2 169.1 54.9 11.0

101.2 166.9 54.1 11.0

104.5 168.6 54.1 11.2

106.9 167.7 53.7 11.3

23.5 23.5 1,937.6

23.2 23.2 2,000.2

22.8 22.8 2,073.2

22.4 22.4 2,137.6

22.2 22.2 2,268.6

21.9 21.9 2,341.9

Source: Euromonitor International 2010.

The impact of organic products in general is still relatively small in the Dutch alcoholic drinks market. Organic command a very small share and lack special promotions or popularity amongst Dutch consumers. One of the main reasons given to their low impact is price (which is one of the main drivers of Dutch wine consumers), but also the fact that consumers are not able to taste the difference in quality to justify buying them. While promotion of organic wines is uncommon, organic products in general rely on special promotions by large retailers such as Albert Heijn or Plus, which stock a few variants and offer discounted prices to boost demand.

7.2

Sales by country of origin

Although France still dominates the wine sales with a 40% market share, historical links from both the Old to New World have favored the acceptance of South African wines. The languages are similar, aiding pronunciation of names. South Africa thus went from nothing in 1995 to 13% market share in just fourteen years, taking both white wine market share from Germany (now at 10%) and red share from France, Spain and Italy (now at 8%). That is all the more remarkable because Spain and the Netherlands were historical allies and have long been strong trading partners. For years, Spain was Netherlandsâ&#x20AC;&#x2122;s second largest supplier, fuelled by sherry imports. Although European wine producing countries still dominate the Dutch market, all growth today comes from Argentina, Australia, Chile and New Zealand (table 24). The traditional volume products from France, Spain, Italy and Germany will have to adapt if they donâ&#x20AC;&#x2122;t want to see their market continuing to erode.

Table 24. Still wine sales in Dutch market from 2000-2009.

Source: IWSRâ&#x20AC;&#x2122;S Netherlands report 2010.

New World wines made up around 33% of wine sales. The popularity of New World wines continued to increase since 2000, at the expense of wines from traditional wine countries, like France, Germany, Spain and Italy. French wines decreased by 1.3% per year (CAGR) since 2000; while Germany, Italy and Spain had a marginal or low increase during the same period of time. Portugal and U.S also increased their CAGR by 6% during the same period, while U.S. wines increased their sales by 26.6% between 2008 and 2009. New World wine countries such as Argentina, Chile, Australia and New Zealand increased their CAGR by 10 and 20% from 2000 and 2009. The largest market share increase was observed in New Zealand wines. Eastern countries strongly decrease their sales from 2000 to 2009.

7.3

Sales per grape variety

In terms of grape varietal, traditional varietals such as Cabernet Sauvignon for still red wine and Chardonnay for still white wine dominated between 2004 and 2009 (table 25 and 26). Shiraz is becoming popular for red and mainly to rosĂŠ wine, although not yet as popular as Cabernet Sauvignon (table 27). Shiraz profited from intensified promotion in 2009 in such niche, which led to a 25% volume share in 2009.

Table 25. Sales of still red wine by grape/varietal type 2004-2009.

% total volume Cabernet Sauvignon Merlot Shiraz/Syrah Others Total

2004

2005

2006

2007

2008

2009

38.0 21.8 13.0 27.2 100.0

38.1 21.4 13.2 27.3 100.0

38.2 21.1 13.3 27.4 100.0

39.4 20.6 13.5 26.5 100.0

39.8 20.3 13.9 26.0 100.0

40.1 20.0 14.5 25.4 100.0

Source: Euromonitor International 2010.

Table 26. Sales of still white wine by grape/varietal type 2004-2009. % total volume Chardonnay Chenin Blanc Sauvignon Blanc Others Total

2004

2005

2006

2007

2008

2009

38.0 13.6 23.1 25.3 100.0

36.1 13.9 22.9 27.0 100.0

35.9 14.1 22.4 27.6 100.0

35.6 13.3 22.0 29.1 100.0

36.4 13.9 21.5 28.2 100.0

36.9 14.3 21.2 27.6 100.0

Source: Euromonitor International 2010.

Table 27. Sales of still rosĂŠ wine by grape/varietal type 2004-2009. % total volume Cabernet Sauvignon Garnacha/Grenache Shiraz/Syrah Others Total

2004

2005

2006

2007

2008

2009

33.0 14.9 21.8 30.3 100.0

33.2 14.8 22.0 30.0 100.0

33.6 14.4 22.1 29.9 100.0

34.0 13.8 23.2 29.0 100.0

34.4 14.1 23.9 27.6 100.0

34.6 14.8 24.5 26.1 100.0

Source: Euromonitor International 2010.

7.4

Packaging

Wine in the Netherlands remains mostly packaged in 750 ml glass bottles, representing around two-thirds of total volume sales (figure 39). Manufacturers and retailers explored alternative sizes targeting different types of consumers by launching smaller sized bottles. Interestingly, small wine bottles (up to 0.5 liters) are gaining popularity in the Netherlands (Van Casteren 2009). In 2009 in the Dutch market, the popularity of wine bottles 0.375 liters won 11% in volume terms and 31% in value. Small bottles represent today in the Netherlands about 2% of the total wine market. Other packaging formats exist, such as Tetra Pak, but their impact is still marginal, being mostly available through discounters, as the majority of Dutch consumers shows no preference for this type of packaging for alcoholic drinks. Other alternatives such as boxes or cans are less attractive and are used only seasonally. Therefore, Dutch consumers can be considered resistant to significant changes in product packaging of wine. Extreme innovations decrease the value of the product. A good innovation for ready-to-drink wine is the screw cap or synthetic closures. Many New Wine countries prefer using the screw cap or synthetic closures instead of cork, because of better shelf life,

no cork flavor, good locking, and the availability of many colors. In The Netherlands, about 22

70% of wines closures are synthetic or screw caps .

Figure 39. Type of packaging based on the value share within total still wines ex. perl based on GfK life cycle. Source: GKF (2009).

7.5

Prices

In 2009, the average price for a 75 cL bottle of wine in the Dutch supermarket was 2.83 €, and 2.76 € in 2008. These prices already include 19% of VAT and 54 cents of excises, other taxes and respective margins of both distributor and supermarkets. An example of two prices segments in Dutch market is represented in table 28.

Table 28. Price formation for different wines price point in the Dutch market. Landed price 0.89 €

1.74 €

Average margin distributor

0.10 €

0.15 €

Logistics & Warehouse

0.05 €

Wine board fee

0.01 €

Packaging tax

0.04 €

Excises

0.54 €

Average margin supermarket (~35%)

0.88 €

1.47 €

VAT (19%)

0.48 €

0.80 €

Consumer price

2.99 €

5.00 €

Willem Siebelink, personal communication

Over 80% of wine sales with the discount retailers such as Aldi and Lidl is under 2.50 €, (compared with ‘only’ 30% for Albert Hein) with another 15% between 2.51 and 3.50 €. The increasing market share of these discounters forced the other retailers to bring down their (Van Casteren and Heijbroek 2009). New World wine saw an increased share during 2009. Not only for their good quality, but also for their price, Dutch consumers praise New World wines from countries such as South Africa, Australia and Chile, as retailers continue to be the main source of promotion and education behind imports from less traditional wine countries (Van Casteren and Heijbroek 2009). South African wines command the highest share amongst still wines in the Dutch market, with virtually every grocery retailer giving them a preferential position on shelves and promoting them as a good alternative in terms of price and quality. The average price for South African wine in the discounters is 2.25 € (2009), about the same as France; Germany is price taker with 1.80 € per bottle (figure 40). Other New World countries, such as Chile and Australia, have higher perceived values than South Africa, but inferior to Spain and Italy. Detailed price per type of wine, brand and country are represented in Appendix 7 to 11.

Figure 40. Average prices of still wines (0.75 liter bottles) per countries in different outlets 20072009.

Figure 41. Relationship between the price segment and the net income level per month of Dutch consumers.

8. CONCLUSION [CARLOS, PAULO AND RICHARD] To better assess its wine market in context we covered different aspects of the Netherlands delivering an overview of the country economic macro-environment, its political, social and demographic structure. We then proceeded to its wine market â&#x20AC;&#x201C; including, production, consumption, imports and exports, distribution, pricing and segmentation. In terms of its recent economic performance, the Netherlands have performed relatively well, mostly better than its European neighbors. However, there is concern whether the slow pace of its economic recovery growth will be sufficient to support such an extensive and expensive welfare system, a system which will only become costlier with the diminishment of the (ageing) working population who will soon retire and cease contributing their taxes while becoming beneficiaries themselves. Also worth noting is the dependence of the Dutch economy to its international trade and, as such, its sensitivity to external factors. Geographically, The Netherlands are a small and densely populated country with 17 millions of inhabitants (and no domestic viticulture of significance), but it punches above its weight in wine imports. At 430 million liters, it is the 6th largest wine import market in the world. As in many northern European countries, wine consumption in Netherlands was almost non existant in the early sixties, but the Dutch now drink as much wine as the UK; but, contrary to that market which seems to have reached its saturation point, the Dutch affection for wine is still

growing, and went from 14.5 liters per head in 1990's to almost 22 liters in 2009. The most popular still wines in the Netherlands are reds followed by whites and Rosés, the latter being a top performer and showing the highest growing rate. Generally, Dutch consumers are sensitive to price and the country of origin and, to a lesser extent, by the type of grape or other type of wine attributes. The Dutch preference still goes to wines of Old World such as France; however, non-European wines grew to a 33% market share. Despite the fact that Dutch consumers are seen as open-minded for new wines, the reality is that New World wines still suffer from a negative perception image and the consumer’s belief that they are of inferior quality compared to their European counterparts. Therefore, after years of losing market share against the New World in the off-trade, it is expected that France and other Old World exporters will bounce back, both in the supermarkets as well as in the multiple specialists stores and direct mailers, in particular at the higher price points. Netherlands imports and exports numbers tend to be confusing since there is a large proportion of bulk wines exported to the Netherlands that are bottled there and then reexported to other countries. However, the Dutch importations are essentially controlled by three major importers: Baarsma Wine Group, DGS and Coenecoop and supermarket chain Albert Heijn, which is the main chain of supermarkets where the wine is purchased. The offtrade and especially supermarkets are a key driver in developing wine consumption in the Netherlands (which is a “take home” market) since close to 80% of the total wine consumed in the Netherlands is sold in the 7000 supermarkets. Their market share will continue to increase at the expense of the “slijters” liquor stores. On-trade sales of wine, which are responsible for 15% wine sales in volume, are expected to suffer in the next coming years, as more people will continue to restrict their spending on eating and drinking out. Direct mail, including ecommerce, selling directly to the final consumer, is gaining and will continue to gain market share, in particular for the distribution of premium wines. Dutch consumers lifestyle shift to entertaining friends and family at home, resulting in a better performance for off-trade sales. Only 13% of all day-to-day household spending on wine occurs outside of the supermarket, where 18% of all wine purchase is unplanned (impulse buying) and 67% is pre-planned beforehand. More than 50% of the total wine volume is bought on Friday's and Saturday's. The average price of wine (including still wine, sparkling, fortified and vermouth) in 2009 was 2.83 € per bottle of 0.75 liters and 95% of wines sold below the price of 5 € per bottle; while Sparkling wines were around 8 to 10 € per bottle. According to Euromonitor International (2010) the total volume of sales are expected to expand by a CAGR of 3% from 2009 to 2014, despite increased maturity in the level of wine consumption. Wine still has a great deal of potential for growth, not only in volume terms but

also in value terms. The wine drinking culture is still developing amongst Dutch people, with more young Dutch men and women drinking wine than before and switching from traditionally popular alcoholic drinks such as beer to wine. While wine is expected to remain a driver of growth within the alcoholic drinks market, it will reach a new phase of maturity after the steep growth experienced during the last years, which means that pace of growth will be slower, but nonetheless healthy, as the consumer base will continue to expand.

Of Note: Stakeholders will be paying special attention to the female consumer since it is essentially women who are buying (wine and the rest) in supermarkets, this driving factor will be important in the Dutch market for the coming years. Producers and marketers will try to induce buying from the female consumer with specially designed wine and alcoholic products and special ad campaigns. Consumer focus on health and environment. Because of the ageing population, the consumer focus on health and environment issues related to living a better quality life in retirement age will matter more for the Dutch consumer. Prophilaxy: Organic and biodynamic wines will gain better acceptance as people (especially babyboomers) will see them as a healthier way of drinking, i.e. more of a source to remain in good health and live a longer life. The current economic slowdown is expected to maintain demand for mid and lower-priced wines. More intense retail competition will translate into more price offers, resulting in increased pressure on unit prices. However, rising distribution costs will offset this, resulting in stable prices over the forecast period. Due to the fragmented nature of wine distribution, companies wanting to gain share are likely to pursue more aggressive pricing strategies in order to stimulate demand for their brands; another factor which will contribute to a more competitive environment for wine in the Netherlands. Although, still white and red wine are more mature products, i.e. growth in constant value terms during 2009-2014 period is expecting to be lower, their sales will remain positive and healthy, driven by a gradual expansion in the consumer base. However, the hardest challenge still remain; how to rejuvenate the Dutch consumer base? The uplift in the RosĂŠ category will continue to drive growth with nearly 4 % CAGR in total constant value terms expected over the forecast period. Sparkling wine is expected to follow RosĂŠ with a CAGR of 3% in total constant value terms over the forecast period. As with champagne, sparkling producers are committed to grow their market share with the increase in consumption in the Netherlands. Due to intense promotion

around Christmas and New Year, sparkling wines such as Cava are well-known to the Dutch consumers. Intense marketing efforts to promote other sparkling wines are expected to result in positive growth and further expansion of sales (Euromonitor International 2010). Fortified wine will continue to suffer, resulting in lower sales. Sherry, Port and vermouth are expected to register 11% and 14% in total volume declines up to the year 2014 respectively. These products are considered old-fashioned by young consumers, who otherwise are exposed to more modern and trendy drinks, including still light grape wine. In addition, Dutch consumers are more and more consuming wine at home, after dinner, which means that softer wine styles are required. The challenge for producers of fortified wine will be to develop softer wines with a more modern look in order to make them trendy, and be able to attract younger consumers. Branding in the wine industry could have a high impact on the Dutch consumer wine market. In comparison to other countries, brands currently possesses only a small market share in the Netherlands. The combined market share of the largest 10 brands in the Dutch market is 15%, in comparison with 21% in the UK and 38% in the USA. Branding influences the Dutch consumer wine market on many levels. It increases transparency, because it is easier to compare products. Brands can also bring in marketing funds that will increase their exposure. This is a novelty in the Dutch market and Brands that will be able to gain acceptance in the mind of the consumers based on their "reliability" will win. Dutch people will be on the lookout and will travel the distance to buy their favorite Brands the cheapest. Would this work for all market segments? Probably not, for the super premium and icons wine but it should work for those products already widely available in supermarkets In light of the expected positive future for wine, an increasing number of producers which were traditionally linked to the spirits trade are considering investing in and expanding into wine. Falling spirits volume sales are seen as a threat for large companies such as Pernod Ricard Group and Diageo Plc, which are increasingly choosing wine to maintain their strong positions within the overall alcoholic drinks market. Smaller wine importers and distributors will see more competition from spirits firms who will venture into wine, using their knowledge capital, financial muscle and long established presence to influence distribution and capture a share of sales.

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