Required Report - public distribution

**Date:** 3/25/2004

**GAIN Report Number:** UK4006

UK4005

**United Kingdom**

**Wine**

**Annual Marketing Report**

**2003**

**Approved by:**

![](media/image1.wmf)Valerie Brown-Jones

U.S. Embassy

**Prepared by:**

Jennifer Jones

**Report Highlights:**

The UK is arguably the most important wine market in the world. It is
the number one export market for US wine, and this focus has served the
US well. According to AC Nielsen, the US is now the third largest
supplier to the UK retail sector. UK Customs data shows that European
suppliers versus non-European suppliers are currently on an equal
footing. However, forecasters predict that the "New World" will continue
to take market share from traditional EU suppliers.

Includes PSD Changes: No

Includes Trade Matrix: Yes

Annual Report

London \[UK1\]

\[UK\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Production 4](#production)

[Consumption 4](#consumption)

[UK Market Size 4](#uk-market-size)

[UK Per Capita Consumption of Alcoholic Beverages
4](#uk-per-capita-consumption-of-alcoholic-beverages)

[UK Consumer Usage Patterns 5](#uk-consumer-usage-patterns)

[Profile of Wine Drinkers: by Age Group and Social Grade 2002
5](#profile-of-wine-drinkers-by-age-group-and-social-grade-2002)

[Profile of Wine Drinkers: by Wine Color 2002
6](#profile-of-wine-drinkers-by-wine-color-2002)

[Consumer Survey on Price 7](#consumer-survey-on-price)

[Average Price per 75cl Bottle 7](#average-price-per-75cl-bottle)

[UK Top 5 Wine Brands 2002, Still Light Wines
8](#uk-top-5-wine-brands-2002-still-light-wines)

[Top 20 Still Light Wines in Off-Licenses: Ranking By Type
8](#top-20-still-light-wines-in-off-licenses-ranking-by-type)

[Market Dynamics 9](#market-dynamics)

[Still Light Wine 9](#still-light-wine)

[Sparkling Wine 10](#sparkling-wine)

[Vermouth & Other Flavored Aromatized Wines
10](#vermouth-other-flavored-aromatized-wines)

[Marketing 11](#marketing)

[Still Light Wine 11](#still-light-wine-1)

[Examples of Generic Country Marketing Activities
11](#examples-of-generic-country-marketing-activities)

[Sparkling Wine 13](#sparkling-wine-1)

[New Product Development 13](#new-product-development)

[Distribution 14](#distribution)

[Still Wines in Off-Licenses by Outlet, 2002
14](#still-wines-in-off-licenses-by-outlet-2002)

[Still Wines in On-Licenses by Outlet, 2002
15](#still-wines-in-on-licenses-by-outlet-2002)

[Market Access 16](#market-access)

[Tariffs 16](#tariffs)

[Labeling Requirements 17](#labeling-requirements)

[Alcoholic Strength 18](#alcoholic-strength)

[Nominal Volume 18](#nominal-volume)

[Lot Marketing 19](#lot-marketing)

[Origin Labeling 19](#origin-labeling)

[Import/Export Tables 20](#importexport-tables)

[UK Imports of Still Wine by Volume, 2001-2003
20](#uk-imports-of-still-wine-by-volume-2001-2003)

[UK Imports of Still Wine by Value, 2001-2003
21](#uk-imports-of-still-wine-by-value-2001-2003)

[UK Imports of Sparkling Wine by Volume, 2001-2003
22](#uk-imports-of-sparkling-wine-by-volume-2001-2003)

[UK Imports of Sparkling Wine by Value, 2001-2003
22](#uk-imports-of-sparkling-wine-by-value-2001-2003)

[UK Imports of Flavored Wine & Vermouth by Volume, 2001-2003
23](#uk-imports-of-flavored-wine-vermouth-by-volume-2001-2003)

[UK Imports of Flavored Wine & Vermouth by Value, 2001-2003
23](#uk-imports-of-flavored-wine-vermouth-by-value-2001-2003)

[UK Exports of Still Wine by Volume, 2001-2003
24](#uk-exports-of-still-wine-by-volume-2001-2003)

[UK Exports of Still Wine by Value, 2001-2003
24](#uk-exports-of-still-wine-by-value-2001-2003)

[UK Exports of Sparkling Wine by Volume, 2001-2003
25](#uk-exports-of-sparkling-wine-by-volume-2001-2003)

[UK Exports of Sparkling Wine by Value, 2001-2003
25](#uk-exports-of-sparkling-wine-by-value-2001-2003)

[UK Exports of Flavored Wine & Vermouth by Volume, 2001-2003
26](#uk-exports-of-flavored-wine-vermouth-by-volume-2001-2003)

[UK Exports of Flavored Wine & Vermouth by Value, 2001-2003
26](#uk-exports-of-flavored-wine-vermouth-by-value-2001-2003)

# Executive Summary

Wine has become something of an everyday commodity in the UK, enjoyed by
many, regardless of affluence, and without much of the elitism that used
to surround it. This has been facilitated by an increase in affordable,
good quality wines, consumer exposure to wine-drinking while on
vacation, improved signage in retail stores, but, most importantly,
because of the new, accessible, branded wines that have emerged on the
market.

The wine market in the UK is worth (according to Mintel) around ₤8.1
billion (\$14.6 billion), while wholesale figures from Her Majesty's
Customs & Excise show annual imports less exports of around ₤2 billion
(\$3.6 billion).

While French wines are still dominant in the UK on-trade (pubs, bars,
hotels and restaurants), the grip of French wines in the mainstream
retail market \[price range of ₤2.99 - ₤7.99 (\$5.50 - \$15.00)\] is
being strongly challenged by Australia. In fact, according to AC
Nielsen, Australia now tops the UK retail market followed by France,
then USA.

US wines (around 95 percent Californian) have enjoyed year-on-year
growth rates of around 20 percent, and this UK market trend shows no
sign of abating. The US is considered to have a range of wines to
interest consumers at all price points, and offer genuine points of
difference for more discerning consumers, particularly in terms of
viticulture, vinification and regional variation.

The success of "New World" wines is that they offer an easy-to-drink
consistent product with user-friendly identification and packaging.
Wines from South Africa, Chile, Argentina and New Zealand are
continually increasing their market penetration. In particular,
according to Her Majesty's Customs & Excise data, UK imports from
Argentina soared by 49 percent in 2003 over the previous year.

Although import statistics of German wine show an increase in volume in
2003, this was accompanied by a decrease in value. Trade sources report
a notable decline in consumption of German wine. Spanish wine also
battles with price maintenance; however, consumption of Spanish red wine
is thought to be increasing. UK imports from Italy have marginally
decreased in the last three years, again a symptom of the trend towards
"New World" producers. While UK imports from Bulgaria, Hungary and
Romania are currently very low, trade sources report that wines from
Eastern Europe could soon have a significant impact, albeit at the lower
end of the market.

Despite rising sales of wine, the number of UK wine-drinkers is falling
-- existing consumers, particularly women, are simply drinking more.
Some companies have attempted to attract younger consumers (age \<24
years) into the wine market with limited success. Other trade pundits
strategize that there is consistency in those entering into
wine-drinking at this age, so long-term there should be no need for
concern.

Consolidation, in both the UK and global retail and drink industries,
has meant that many retail outlets, afraid of losing share, often
replicate their product ranges, buying from the same suppliers and
relying on selling points such as price, pack size or availability. As
the big brands and companies continue to grow larger, the individuality
of certain wines and vineyards may be eroded.

Currently new product development is going in two directions: one is to
offer better, premium wine to encourage consumers to trade-up; the other
is to offer new, consumer-friendly packaging formats. Screw-cap bottles
replacing cork, organic and fair-trade wines also look set to be growth
areas.

# Production

Wine production in the UK is minimal due to the variable climate.
Historically, it has been a cottage industry for wine enthusiasts and
gentleman farmers. Today, it is slowly becoming a profitable enterprise.
It has limited potential for large-scale production; however, as half of
all vineyards operate in an area of less than 1 hectare. There are
around 335 vineyards in England and Wales, covering about 815 hectares.
This production represents only 0.01 percent of UK wine consumption.
Output is predominately white wine (92 percent), however, increasingly
sparkling, dessert and red wines are now also being produced. The
production total for the 2002 harvest was 9,385 hectoliters, a marked
decrease over the previous year's harvest of 15,800 hectoliters. The
2003 harvest restored production figures on account of favorable summer
weather and was estimated at three million bottles.

The UK also produces a small quantity of "made wine", which is made from
imported concentrated grape must, mainly from Italy.

The lack of any significant production volume in the UK means that it
has negligible affect on market figures. UK production figures are,
therefore, not represented in the following analyses.

## 

# Consumption

## UK Market Size

  ----------------------- ---------- -------- ---------- -------- ---------- -------
  ** **                   **2001**            **2002**            **2003**   

  ** **                   **HL       **BPS    **HL       **BPS    **HL       **BPS
                          (000)**    mil**    (000)**    mil**    (000)**    mil**

  ** **                                                                       

  **Still Wine**          9,508      1,487    10,276     1,600    11,101     1,700

  ** **                                                                       

  **Sparkling Wine**      408        221      512        273      636        307

  ** **                                                                       

  **Flavored/Vermouth**   133        14       134        10       147        15

                                                                             

  *Source of Data: H.M.                                                      
  Customs and Excise                                                         
  (Imports less Exports)*                                                    
  ----------------------- ---------- -------- ---------- -------- ---------- -------

## UK Per Capita Consumption of Alcoholic Beverages

+--------+----------+------------+----------+------------+-----------+
| Year   | Beer     | C          | Made     | Wine of    | Spirits   |
|        |          | ider/Perry | Wine     | Fresh      |           |
|        | \(L\)    |            |          | Grapes (L) | (LPA)     |
|        |          | \(L\)      | \(L\)    |            |           |
+--------+----------+------------+----------+------------+-----------+
| 1995   | 59.13    | 5.58       | 1.42     | 7.22       | 0.79      |
+--------+----------+------------+----------+------------+-----------+
|        |          |            |          |            |           |
+--------+----------+------------+----------+------------+-----------+
| 2000   | 57.02    | 6.01       | 3.29     | 9.70       | 0.93      |
+--------+----------+------------+----------+------------+-----------+
| 2001   | 58.23    | 5.91       | 4.08     | 10.34      | 0.97      |
+--------+----------+------------+----------+------------+-----------+
| 2002   | 59.38    | 5.94       | 1.81     | 11.22      | 1.11      |
+--------+----------+------------+----------+------------+-----------+

L = Liters; LPA = Liters of Pure Alcohol -- Figures based on population
aged 15 years and over. -- Made wine is produced from imported grape
must, blended and bottled in the UK. *Source: The Drink Pocket Book,
2004*

UK wine consumption continues to grow, with beer as its strongest
competition. Factors contributing to growth include the increased
availability of wine and increasing British consumer affluence.

It is widely reported that the total number of British wine drinkers is
falling. Existing consumers, particularly those in the 35-64 age range,
are simply drinking more.

## UK Consumer Usage Patterns

![](media/image2.png){width="3.7493055555555554in"
height="2.0770833333333334in"}

## Profile of Wine Drinkers: by Age Group and Social Grade 2002

+-----------+-----------+-----------+-----------+-----------+-----------+
| P         |           |           | \% by     |           |           |
| ercentage |           |           | Social    |           |           |
| of People |           |           | Grade     |           |           |
| Drinking  |           |           |           |           |           |
| Wine      |           |           |           |           |           |
| Weekly:   |           |           |           |           |           |
|           |           |           |           |           |           |
| \% by Age |           |           |           |           |           |
| Group     |           |           |           |           |           |
+-----------+-----------+-----------+-----------+-----------+-----------+
|           | 2001      | 2002      |           | 2001      | 2002      |
+-----------+-----------+-----------+-----------+-----------+-----------+
| 18-24 yrs | 8         | 7         | AB        | 37        | 38        |
+-----------+-----------+-----------+-----------+-----------+-----------+
| 25-34 yrs | 20        | 20        | C1        | 32        | 32        |
+-----------+-----------+-----------+-----------+-----------+-----------+
| 35-49 yrs | 32        | 32        | C2        | 17        | 17        |
+-----------+-----------+-----------+-----------+-----------+-----------+
| 50+       | 40        | 41        | DE        | 14        | 13        |
+-----------+-----------+-----------+-----------+-----------+-----------+

Source: The Drink Pocket Book, 2004

Social Grade Definitions:

AB Upper Middle/Middle Class ie. Higher/intermediate managerial
professional

C1 Lower Middle Class ie. Junior managerial professional

C2 Skilled Working Class ie. Skilled manual worker

DE Working Class ie. Unskilled manual worker

As might be expected, wine consumption is highest amid ABs and falls
steadily according to socio-economic status. Overall, consumption is
biased towards British consumers living in the more affluent Greater
London area, and the South East of England region generally. The ABC1
socio-economic group is forecast to be the fastest-growing section of
the UK population over the next ten years.

Within the younger age groups of wine consumers, there is increasingly a
more informal approach to wine drinking. This can be attributed to the
way in which some wine, particularly Australian and other \"New World\"
wines have been marketed, using lifestyle messages to which young people
can relate. European wine, particularly French, is said to be too
complicated for many consumers in that the customer has to understand
more about the grape variety and producer to appreciate what they are
buying.

## Profile of Wine Drinkers: by Wine Color 2002

+-----------------+--------------+-----------------+-------------------+
| Wine Color      |              | White %         | Red %             |
+-----------------+--------------+-----------------+-------------------+
| SEX             | Men          | 32              | 48                |
|                 |              |                 |                   |
|                 | Women        | 68              | 52                |
+-----------------+--------------+-----------------+-------------------+
| AGE GROUP       | 18-24        | 8               | 4                 |
|                 |              |                 |                   |
|                 | 25-34        | 21              | 18                |
|                 |              |                 |                   |
|                 | 35-49        | 33              | 33                |
|                 |              |                 |                   |
|                 | 50+          | 38              | 44                |
+-----------------+--------------+-----------------+-------------------+
| SOCIAL GRADE    | AB           | 36              | 43                |
|                 |              |                 |                   |
|                 | C1           | 31              | 32                |
|                 |              |                 |                   |
|                 | C2           | 18              | 14                |
|                 |              |                 |                   |
|                 | DE           | 15              | 11                |
+-----------------+--------------+-----------------+-------------------+

Base = 7 Day Drinkers *Source: The Drink Pocket Book, 2004*

Consumption of white wine is skewed towards women in the 35-54 age
range, from a more affluent background (AB socio-economic group).
Red/rosé wine is biased towards men in the 45-64 age range, again of AB
socio-economic group. Red/rosé continues to be more expensive than white
wine, with average prices per liter around \$15 versus \$12. Nowadays,
there is almost as much red/rosé wine sold at retail in the UK as white.
This is attributed to the more fruity styles of the "New World" against
the full, dry reds from traditional European suppliers. On its own, rosé
is thought to form around 3-4 percent of wine sales. Rosé is seen as a
niche, but a growing area with its current success of white zinfandel
among young female drinkers.

Bag-in-box wine accounts for around 9 percent of the UK's still wine
retail market. It is thought to be on the increase, benefiting from the
trend to increased wine drinking in the home. Wine boxes have been
available in the UK for over 20 years and, initially, the contents were
arguably of indifferent quality. However, standards have improved, as
has packaging technology, so that wine really is kept fresher for
longer. The UK consumer has embraced the sheer practicality of being
able to pour a single glass, while retaining product consistency, at a
price very close to the bottled equivalent. This has resulted in their
usage doubling between 1997 and 2002.

Demographic studies on sparkling wine (including champagne) show that it
is very much a younger person\'s party drink, with 18-34s most likely to
enjoy sparkling wine at a party. There is also a bias towards ABs and
those in London. There is still a certain mind-set of the more
traditional consumer that sparkling wine/champagne is an occasional
treat, or is consumed only on special occasions. Drinking these products
with friends or family is most likely among older ages (45-54s) and ABC1
families, as well as two full-time earner households. Clearly, the most
expensive sparkling wines are the preserve of the most affluent sector
of the British population.

## Consumer Survey on Price

![](media/image3.png){width="4.165972222222222in"
height="2.060416666666667in"}

This chart shows the likelihood of the survey sample to "trade-up\" to
more expensive wines. The number of respondents who "Definitely agree"
fell in 2002; this may be influenced by the price discounting of the
major supermarket chains. Also, the results for 2002 appear to indicate
a certain reluctance in British consumers to spend considerable amounts
on "good quality wine". This may reflect a lack of knowledge as to what
constitutes a "good quality wine" or a belief that wines are generally
of a consistently high quality to satisfy the majority of consumers. The
£4.99 price point is critical for high volume lines in the UK retail
market.

## Average Price per 75cl Bottle

# 

Survey conducted in UK supermarket chains, values shown in British pence

![](media/image4.wmf)

USA = £3.83 (\$6.90), *Source: AC Nielsen*

Price is the most important factor in the UK consumer's purchasing
decision, after the choice between red, white or rosé wine. Wine
consumption patterns in the UK are mainly price-led and the major
dividing line is \$9.00 (£5) per bottle. Consumers are becoming more
adventurous in terms of taste and geography as their wine knowledge
expands. They are choosing wine by grape varieties, region and brand.
Varietal labeling has become well established and better understood in
red as well as white wine production, with Cabernet Sauvignon matching
Chardonnay in popularity over the last few years.

## UK Top 5 Wine Brands 2002, Still Light Wines

**Off-License On-License**

1 Hardy Brand Stowells

2 E&J Gallo Blossom Hill

3 Jacob's Creek Hardy Brand

4 Stowells Jacob's Creek

5 Blossom Hill E&J Gallo

Combined

Market Share 15.5% 13.2%

*Source: The Drinks Pocket Book, 2004*

## Top 20 Still Light Wines in Off-Licenses: Ranking By Type

+-----+----------------+------------+----+---------------+------------+
| **  | **Wine Type**  | **Market   | ** | **Wine Type** | #          |
| Ran |                | Share**    | Ra |               | ####### Ma |
| k** |                |            | nk |               | rket Share |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | French Red     | 12.1%      | ** | South African | 3.8%       |
| 1** |                |            | 11 | Red           |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | Australian Red | 10.5%      | ** | Chilean Red   | 3.6%       |
| 2** |                |            | 12 |               |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | Australian     | 9.2%       | ** | USA White     | 3.6%       |
| 3** | White          |            | 13 |               |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | German White   | 8.8%       | ** | Chilean White | 2.2%       |
| 4** |                |            | 14 |               |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | French White   | 8.3%       | ** | Spanish White | 1.9%       |
| 5** |                |            | 15 |               |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | Italian White  | 7.1%       | ** | Bulgarian     | 1.3%       |
| 6** |                |            | 16 | White         |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | South African  | 5.6%       | ** | USA Rose      | 1.2%       |
| 7** | White          |            | 17 |               |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | Spanish Red    | 5.5%       | ** | Hungarian     | 0.9%       |
| 8** |                |            | 18 | White         |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **  | Italian Red    | 4.6%       | ** | Argentinian   | 0.8%       |
| 9** |                |            | 19 | Red           |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+
| **1 | USA Red        | 3.9%       | ** | New Zealand   | 0.8%       |
| 0** |                |            | 20 | White         |            |
|     |                |            | ** |               |            |
+-----+----------------+------------+----+---------------+------------+

Figures are for year November/December 2002/Ranking by volume

####### Source: AC Nielsen; The Drinks Pocket Book 2004

# Market Dynamics

## Still Light Wine

AC Nielsen (a leading supplier of market research information and
analysis) provides a clear insight into the dynamics of the retail scene
within the UK wine market. AC Nielsen off-trade (retail) market share
figures, which run up to the end of December 2003, report that the US
has eclipsed Italy as the UK off-trade's third largest wine supplier.
This represents a growth of 23 percent by volume, and 20 percent by
value, for the US in the last calendar year.

  --------------- --------------------------- ---------------------------
  **Country**     **% Market Share by         **% Market Share by Value**
                  Volume**                    

  Australia       20.4                        23.7

  France          19.4                        20.0

  United States   11.7                        12.5

  Italy           11.1                        9.8
  --------------- --------------------------- ---------------------------

######### Source: Wine Institute of California, UK Office

The order of suppliers alters somewhat when considering the UK import
market for still light wine as a whole. According to data recorded by
Her Majesty's Customs and Excise (please see tables on pages 20-21 for
further information), the largest supplier to the UK market of still
light wine in 2003 was France. This can be attributed to the dominance
of French wine in the UK's on-trade (foodservice) sector, where it has
43 percent market share.

The table below makes it clear that German wine, while reaching third
place in terms of quantity, was de-valued further in 2003. Australia,
from these figures, at least, appears to have stagnated in 2003,
although they have maintained their average price. Impressively, the US
has grown by 27 percent in volume terms and 14 percent in value.

  ---------- --------------------- ---------- ---------- ---------- ----------- -------------
  **United                                                                      
  Kingdom --                                                                    
  Imports,                                                                      
  HS                                                                            
  220421 +                                                                      
  220429                                                                        
  STILL                                                                         
  WINE**                                                                        

                                                                                

             **Quantity - HL                                                    
             (000)**                                                            

                                                                                

  **Rank**   **Country**           **2001**   **2002**   **2003**   **% Share   **% Change
                                                                    \'03**      \'03/\'02**

  1          France                2,353      2,426      2,484      22          2

  2          Australia             1,748      2,076      2,061      18          -1

  3          Germany               866        979        1,246      11          27

  4          United States         801        917        1,161      10          27

  5          Italy                 1,157      1,105      1,071      9           -3

                                                                                

             **Millions of British                                              
             Pounds**                                                           

                                                                                

  **Rank**   **Country**           **2001**   **2002**   **2003**   **% Share   **% Change
                                                                    \'03**      \'03/\'02**

  1          France                427        433        467        25          8

  2          Australia             333        404        390        21          -3

  3          United States         140        151        172        9           14

  4          Italy                 150        150        164        9           9

  8          Germany               74         85         82         4           -4

                                                                                

  *Source of                                                                    
  Data: H.M.                                                                    
  Customs                                                                       
  and                                                                           
  Excise*                                                                       
  ---------- --------------------- ---------- ---------- ---------- ----------- -------------

Referring to UK Customs data, European suppliers versus non-European
countries show a 50:50 market share split, with forecasts predicting
that the "New World" will continue to take market share from traditional
wine suppliers. This, together with the vast range of product
availability evident in the UK, illustrates that, despite the duty
placed on wine from third countries, it is possible to attain a retail
price that is competitive with wine sourced internally from within the
EU.

UK excise duty rates are much greater than that of its nearest neighbor
across the English Channel -- France. The UK's Wine & Spirit Association
(WSA) research reports that cross-border wine sales have risen steadily
since 1992 to reach 15 percent of the total UK wine market. This
increases to 20 percent in the case of sparkling wine. UK consumer
cross-channel purchases are very often event-driven, as the purchasing
of large quantities offers the largest saving.

## Sparkling Wine

Around ninety percent of the UK's sparkling wine imports originate from
the EU. While France has around 40 percent volume share, this translates
to nearly 80 percent by value on account of Champagne prices.
Conversely, Spain has 26 percent of the volume share, but, just 8
percent of value. Cava has struggled to maintain its price alongside
many other quality sparkling wines as the category has seen extensive
promotional activity. Retailers can find it difficult to sell sparkling
wine in excess of £7-8 (\$13-14) when champagne can be found on
promotion starting at around £10 (\$18).

The market for sparkling wines is forecast by Mintel to show phenomenal
growth over the next three years, to attain market value of just over
£600 million (\$1 billion) by 2006. "New World" suppliers such as
Australia and New Zealand are benefiting from the UK consumers' renewed
interest in sparkling wine. The US does not appear to be keeping up with
the opportunities in this category, since its export figures of
sparkling wine to the UK have steadied (see tables on page 22).

## Vermouth & Other Flavored Aromatized Wines

The UK market for vermouth and other flavored or aromatized wines is in
overall decline, although 2003 saw a resurgence of around 6 percent
growth. The US is not a significant player in the UK market for vermouth
and other flavored or aromatized wines. Please see tables on page 23.

# Marketing

## Still Light Wine

Expenditure on wine advertising during the 1990s was minimal compared
with beer and spirits advertising. However, wine advertising in the UK
has been noticeably increasing since the lates 1990's. Above-the-line
expenditure is very seasonal in pattern, i.e., there is little
advertising in the early months of the year, building to a peak in the
final quarter for Christmas. UK multiple supermarkets control more than
70 percent of wine sales, and consequently, promotional spending by wine
brands remains low as a proportion of total wine sales. Small European
producers selling non-branded wines do not spend heavily on advertising.

It is \"New World\" wines that are driving the increase in wine
advertising in the UK, mainly through the large companies in Australia.
That said, the South African brand Kumala and the Bordeaux Wine Bureau
spent twice as much as Hardy's Australian wine on advertising in the UK
market in 2002. Most wine marketeers are thought to want to keep wine's
'discovery product' status. The four main reasons cited for consumers
choosing a wine, which they have not previously purchased, are:
word-of-mouth recommendation, other special offer in-store, seeing it on
display, and an in-store tasting. Word-of-mouth recommendation remains
the single most important factor in building awareness of wine brands.
\[Source: Mintel Market Research\]

Generic support for wine origins still plays a pivotal role in wine
marketing. For example, a vast array of country and regional pavilions
support the London International Wine & Spirit Fair each year. This show
takes place annually, and the next show is:

May 18‑20 **London International Wine & Spirits Trade Fair**, ExCeL,
London

Contact: Brintex Ltd Tel: 011 44 20 7973 6401 Fax: 011 44 20 7233 5054

Web site: www.londonwinefair.com E-mail: brintex@hemming-group.co.uk

## Examples of Generic Country Marketing Activities

+--------+-------------------------------------------------------------+
| France | -   Wine Department within Sopexa (French marketing body)   |
|        |     London Office                                           |
|        |                                                             |
|        | -   Strategy to improve quality perception in lower         |
|        |     appellations                                            |
|        |                                                             |
|        | -   Advertising campaigns for Côtes du Rhône, Beaujolais    |
+--------+-------------------------------------------------------------+
| Aus    | -   Australian Wine Bureau UK Office                        |
| tralia |                                                             |
|        | -   Australia Day Tasting                                   |
|        |                                                             |
|        | -   Around 66 percent of Australian wine is sold on price   |
|        |     or multi-buy promotion (versus 46 percent of wine as a  |
|        |     whole)                                                  |
+--------+-------------------------------------------------------------+
| USA    | -   Wine Institute of California UK Office                  |
|        |                                                             |
|        | -   London PR Agency for Pacific Northwest Wines            |
|        |                                                             |
|        | -   Generic regional tastings e.g. Napa Valley              |
+--------+-------------------------------------------------------------+
| South  | -   Wines of South Africa UK Office                         |
| Africa |                                                             |
|        | -   Historically low price points, concentrating on         |
|        |     brand-building instead of discounting to build market   |
|        |     share                                                   |
+--------+-------------------------------------------------------------+
| Spain  | -   Wines from Spain UK Office                              |
|        |                                                             |
|        | -   Advertising in trade and consumer press                 |
|        |                                                             |
|        | -   In-store promotions                                     |
+--------+-------------------------------------------------------------+
| Arg    | -   London PR Agency for Wines of Argentina                 |
| entina |                                                             |
|        | -   'Drink Argentina' campaign including promotions, media  |
|        |     campaigns and sampling in UK major cities               |
+--------+-------------------------------------------------------------+

Oversupply in Chile, Australia and the US has given the UK supermarket
chains the opportunity to expand volume at heavily discounted prices.
Trade sources have reported that this might be affecting the mindset of
UK consumers who are becoming accustomed to never paying full price, and
flit promiscuously from promotion to promotion. In the long-term, this
promotional-driven success could come at an unsustainable price.

That said, the US is said to be in a better position than Australia, at
least, since they are considered to offer wine styles that have strong
varietal character for the classic (and popular) grape varieties. The US
is also thought to have a range of wines to interest consumers at all
price points, and offer genuine points of difference for more discerning
consumers, particularly in terms of viticulture, vinification and
regional variation.

Six Australian brands -- Jacob's Creek, Lindemans, Hardy's Stamp,
Banrock Station, Rosemount and Nottage -- feature in the UK's retail
market ten best seller's list. Australian wines are also making in-roads
into the UK's foodservice sector. They are now stocked in more than half
(53 percent) of the UK's licensed premises, third only to France (74
percent) and Germany (63 percent).

South African wines have, historically, been pegged at the lowest price
points among "New World" producers in the UK. Their latest strategy is
to concentrate on brand-building instead of discounting to increase
market share, and to focus more on the premium sector where distinctive
regional style influences buying decisions. Some of the most visible
South African brands in the UK include Kumala, Arniston Bay, Goiya,
Namaqua, KWV and Two Oceans. Namaqua, the top-selling South African
boxed wine in the UK, is now the 15^th^ biggest wine brand in the UK
after a \$160,000 advertising campaign.

Chilean wines continue to increase in both volume and value in the UK
market. However, Chile historically had been marketing products in the
lower price bracket - it was normal, up until recently, to see Chilean
wines on sale at \$5 (£2.99) in retail outlets. Today, Chile is now
averaging \$7 (£4) a bottle and introducing entry-level wine ranges to
increase their brand visibility. A lack of branding is said to be
Chile's current weakness.

2003 was a particularly good year for Argentinian wine imports to the
UK, Customs & Excise data report a 50 percent jump in volume mirrored
with a complimentary increase of 33 percent in value. Trade sources
report that Argentina has organized itself with regard to a new-found
commitment to the UK market, and is endeavoring to improve quality while
keeping prices competitive.

Italian wine, particularly white, has a good history of import into the
UK; however, the last two years has seen its market share eroded. Trade
sources attribute this to competition from "New World" producers at the
lower end of the price scale. Although Italy may find it difficult to
produce true brands, to UK consumers its brands are Chianti,
Valpolicella and Soave.

UK Customs & Excise data reveal that imports of German wine in 2003 grew
27 percent by volume and decreased by 3 percent in value over the
previous year. This is contradictory to AC Nielsen data showing a
continual decline for German wine in the retail trade. It is likely that
the volume has been consumed within the foodservice sector.
Liebfraumilch was one of the most popular wines during the 1970s, but it
has become symbolic of the 'cheap' and unsophisticated image negatively
affecting German white wines recently. Germany has also become a victim
of changing UK consumer tastes (an increase in consumption of
newer-style, drier wines and red wines) and the current trend of trading
up to more expensive wines (mid-priced rather than low-priced). However,
UK consumers are said to be "waking up" to Riesling since it is similar
to the fastest growing white varietals: Sauvignon Blanc and Pinot
Grigio.

According to UK Customs & Excise figures, UK imports of Spanish wine
grew by 10 percent in volume terms in 2003, but decreased by 3 percent
in value. UK consumers continue to favor the Rioja and Tempranillo
varieties, and Cava sparkling wine is doing particularly well.

The UK trade has coined the phrase "New Europe" to imply suppliers such
as Bulgaria, Hungary and Romania to the UK wine market. Although imports
from these countries have dipped in the last two years, their accession
into the European common market later this year is likely to have
long-term benefits.

## Sparkling Wine

Like many categories within the alcoholic beverages market, own-label is
a dominant force within the UK sparkling wine market. It accounts for
over half the market\'s volume and almost one third of value.
Well-advertised brands have prospered, many within the middle ground, as
well as some new introductions without the big budgets, have suffered.

Although own label volumes are still growing, market share has declined
slightly as the share of the leading brands has risen.

Although sparkling wines will never replace champagne, it is
nevertheless a sophisticated category in its own right. Consumers seek
the reassurance of quality provided by either the leading brands or by
outlets\' own-label.

## New Product Development

Capitalizing on the UK\'s obsession with health, wines are now available
in diet/low-calorie versions (one in conjunction with Weight Watchers).
There are also an increasing number of organic wines in the UK market.
However, as it is difficult to determine whether most wines are truly
organic, the premium prices charged have resulted in the retailers
concentrating more on the quality of their range rather than going
organic. In addition, the Co-op has introduced fair trade wines from
Chile, while more sweet wines are now appearing on the shelves. Sweet
wines are appearing from all over the world including France (Sauternes,
Barsac and Beaumes de Venise), Germany (Eiswein), Canada (Ice Wine),
Australia (Muscat) and Hungary (Tokaj) as well as South Africa, Chile
and Spain. Most sweet wines, such as Muscat or Moscatelle, are sold in
the UK as dessert wine and many are now available in half bottles or
half liters. However, many consumers are not familiar either with the
wines or their usage, even though most supermarkets and specialists
stock one or two.

In terms of packaging, many brands are now appearing in single-serve
bottles or with screwtops (as the debate over synthetic and real corks
rumbles on). There are also a large number of gift packs now available
for special occasions. Online sales of wine are in the ascendancy, led
by outlets such as Majestic, Virgin Wines and many of the major
supermarket chains.

# Distribution

In the UK, wine is sold in what is referred to as either through
"on-license" or "off-license" premises. In order for an outlet to sell
alcohol, it is necessary for the retailer to obtain a retailer license,
of which there are two types - retail "ON" and retail "OFF". An
On-License authorizes an outlet to sell alcoholic beverages for
consumption on the premises, whereas an Off-License authorizes an outlet
to sell alcoholic beverages for consumption away from the premises.

Over 70 percent of wine is sold through the off-license trade.
Off-license outlets include specialized wine/alcoholic beverage stores
and general grocery stores, including the major chain stores. As
illustrated in the table below, the distribution of off-license sales
can be divided up roughly into one-quarter specialist wine/alcoholic
beverage shops and three-quarters grocery chains i.e., supermarket
outlets. On the whole, the supermarkets are price-driven - seeking to
reach the all-important price points of £3.99, 4.49 etc. while the
specialist wine chains seek points of difference across a wider price
range.

Large volume orders for UK supermarket chains and off-license chains are
placed with UK agents and distributors, who in turn order from the
required country source on the chain store's behalf. It is not usual for
the UK agent to hold the goods upon entry to the UK; instead they ensure
that they reach the designated distribution depot of the chain customer.
There is around 100 UK importers of various sizes, known to the U.S.
Department of Agriculture office at the American Embassy, London. These
can be accessed on-line at [www.usda.org.uk](http://www.usda.org.uk/)

Larger wineries may have their own UK office, which again does not hold
stock, but rather fills orders for the UK chains. This gives the wine
company increased control so as to ensure a quality and consistent
service to the store group.

## Still Wines in Off-Licenses by Outlet, 2002

  ------------------------- ------------------------- --------------------
  **OUTLET**                **£ million**             **%**

  Grocers                   2,533                     83

  Co-ops                    152                       5

  Multiples                 2,180                     71

  Independents              201                       7

  Specialists               517                       17

  Multiples                 426                       14

  Independents              92                        3

  Total                     3,050                     100
  ------------------------- ------------------------- --------------------

####### Source: AC Nielsen/The Drinks Pocket Book, 2004 

## Still Wines in On-Licenses by Outlet, 2002

  ----------------------- ----------------------- -----------------------
  **OUTLET**              **£ million**           **%**

  Multiples               397                     27

  Managed Pub Chains      223                     15

  Leased/Tenanted Pubs    174                     12

  Independents            1,089                   73

  Pubs                    154                     10

  Clubs                   150                     10

  Hotels                  243                     17

  Other Bars              107                     7

  Restricted              435                     29

  Total                   **1,486**               **100.0**
  ----------------------- ----------------------- -----------------------

####### Source: AC Nielsen/The Drinks Pocket Book, 2004

The supermarket chains deserve much of the credit for the growth of the
UK wine market and supplied 54.2% of the nation\'s retail volume in
2002. Off-trade sales grew more quickly than on-trade sales between 1998
and 2002, and continue to dominate the market. In this retail sector,
multiple specialists are currently losing share to the multiple
supermarkets and are likely to lose more to the new breed of convenience
stores, also run by the supermarkets (e.g. Tesco Metro, Sainsbury\'s
Local). Similarly, it is likely that smaller, independent off-licenses
will continue to find their market share under pressure (while still
growing overall volume) from the convenience store formats of the
multiple supermarkets. New retail initiatives across all outlets include
improved labeling, serving suggestions, and point-of-sale information.

The consolidation evident within the UK and, indeed the global, drinks
business means that many retail outlets, afraid of losing share, often
end up replicating their product ranges and buying from the same
suppliers. They rely on selling points such as price, pack size or
availability. As the big brands and companies continue to grow larger,
the individuality of certain wines and vineyards is slowly disappearing.

In the on-trade the independents are managing to hold on to their market
share better than the retail trade. However, it is steadily being eroded
since the percentage share of the independent on-trade in 1998 was 78,
in 2002 it was 73. There has been a vast improvement in the quality and
range of wines offered in pubs, although some are still guilty of paying
little attention to wine sales. While the availability and range of wine
in the restaurant sector has greatly improved, some restaurants continue
to charge inflated prices.

# Market Access

Wines consigned to the European Union from third countries must be
accompanied by a document known as a VI1 Form which confirms the size
and nature of the wine consignment. The provisions dealing with VI
documentation may be found in Commission Regulation (EC) 3590/85 (OJ
L343) as amended. The VI1 Form requires that US wineries certify that
all wine shipments over 60 liters are made in compliance with the Wine
Accords Agreement and EU regulations. The form also requires that the
exporter report the results of a number of chemical analyses. For
subsequent travel through or within EU countries a Commercial Document
or a Commercial Accompanying Document is also required. In addition to a
transit document, a T-form will be issued when the wine enters the
European Union and this will establish entitlement to EU rates of duty.

Further information on EU import rules can be found on the US Mission to
the EU's website:

<http://www.useu.be/agri/wine.html>

## Tariffs

Third Countries, such as the United States, must pay import duty
(tariffs) on exports to the UK, while European Union Member States are
exempt.

The following table is provided to give examples of tariffs, full
information on commodity codes and tariffs are available on the
following website:

<http://europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?Lang=EN>

and from HM Customs & Excise Commodity Code Helpline Tel: 011 44 1702
366077

plus Duty rate & VAT Helpline Tel: 011 44 845 010 9000

  ----------------------- -------------------- --------------------------
  **Wine Type**           **Commodity Code**   **Tariff/Import Duty**

  Sparkling wine          2204109910           32.0 Euros per hectoliter

  Still white wine 12.5%  2204217980           13.1 Euros per hectoliter
  abv                                          

  Still red wine 14.0%    2204218480           15.4 Euros per hectoliter
  abv                                          

  Vermouth \< 18.0% abv   2205101000           10.9 Euros per hectoliter
  ----------------------- -------------------- --------------------------

abv = alcoholic strength by volume

Tariff quotas, which offer a reduced rate of duty, exist for a range of
specified wine varieties from countries such as Israel, Morocco, Algeria
and Cyprus.

A CAP Import License is required if a consignment of wine exceeds 3,000
liters. A license may be obtained by the UK importer from:

Rural Payments Agency (RPA))

Lancaster House, Hampshire Court

Newcastle upon Tyne, NE4 7YE

Tel: (+44) 191 226 5080/5207

Fax: (+44) 191 226 5212

Web: www.rpa.gov.uk

Market access may be denied by Customs & Excise if documentation forms
are incomplete. If the labeling is incorrect, then the wine will be
allowed into bond but will not be released until the labels have been
corrected. In either case, storage charges are large so it is vital that
the correct documentation/labels are provided.

In addition to tariff (import) duty, U.S. wine is subject to excise duty
and a Value Added Tax (VAT).

  ------------------------------------------ ----------- ----------------
  **Class or Description**                   **Tax type  **Rate of Excise
                                             code**      Duty**

  Sparkling, exceeding 5.5%, but less than   412         £166.70 per HL
  8.5%                                                   

  Sparkling, 8.5% and above, but less than   411         £220.54 per HL
  15%                                                    

  Still, exceeding 5.5%, but less than 15%   413         £163.47 per HL

  Still or Sparkling, exceeding 15%, but     415         £217.95 per HL
  less than 22%                                          

  Still or Sparkling, exceeding 22%          419         £19.56 per liter
                                                         of alcohol in
                                                         the wine
  ------------------------------------------ ----------- ----------------

Source: HM Customs and Excise, Portcullis House

27 Victoria Avenue, Southend on Sea, Essex SS2 6AL

Tel: +(44) 1702 367330/361979 Fax: +4(44) 1702 367253/361975

E-mail: enquiries.lon@hmce.gsi.gov.uk Web: www.hmce.gov.uk

Value Added Tax (VAT) is applied ad valorem on the landed price (CIF) on
arrival at the EU frontier plus all duties. The current rate of VAT is
17.5%.

For example, a 75cl bottle of still light wine sold for £4 in the UK may
have the following price composition:

£1.76 VAT & Duty

£1.35 UK Value Added

[£0.89]{.underline} Overseas costs

£4.00 Total retail sale price

Import duty is payable on samples used at trade fair tastings because of
their promotional nature, public access and loss of control by HM
Customs & Excise.

Import duty is not payable in cases where organoleptic tasting by
professionals takes place within companies for the purpose of quality
control, provided that the wine is not consumed.

## Labeling Requirements

Given below is an overview of mandatory requirements for the labeling of
third country wines imported into the UK.

For third country wines, with no geographical description, the mandatory
requirements are:

> \- the word "wine" } or a combination of these terms using
>
> \- country of origin } "country" (as an adjective) "wine"
>
> \- name and head office address of the responsible packer
>
> \- lot mark
>
> \- nominal volume
>
> \- name and head office address (including member state) of the
> importer
>
> (if the wine is imported already prepackaged)
>
> \- actual alcoholic strength

For third country wines, described by geographical origin, the mandatory
requirements are:

-   country of origin

-   geographical unit

-   name and head office address of the responsible packer

-   lot mark

-   nominal volume

-   name and head office address (including member state) of the
    importer

> (if the wine is imported already prepackaged)

-   actual alcoholic strength

NOTE: The following descriptions must NOT appear anywhere:

1\. "Contains sulphates/sulfates/sulfites"

2\. "Table Wine" - this term is not allowed on any wines coming in from
outside the EU

3\. "Surgeon General's Warning" - this is not a recognized authority in
the EU

In addition, the following terms are prohibited:

-   Table Wine -- this term is restricted European wines as defined

-   Vine Varieties - if more than three are shown, they must appear on a
    label not in same field of vision as mandatory items. The height of
    lettering is restricted to 3mm

-   Any reference in descriptive text to European Quality Wines

Further explanation of some terms given above:

## Alcoholic Strength

Still light wines must not exceed the maximum permitted total (i.e.,
actual + potential alcohol) level of 15% volume. Some US wines, usually
higher alcohol red wines or sweet white wines with high residual sugar
may find this regulation difficult to comply with. This regulation
excludes Liqueur Wines. Inspectors from the UK Wine Standards Board may
inspect import (VI1) documents and will look for labels that state
actual alcohol figures in excess of 15%. If there is insufficient
information, importers/exporters will be asked to supply details (if
necessary by independent analysis at their expense) of residual sugar
levels for late harvest wines labeled as less than 15% vol.

The actual alcoholic strength must be declared on every label either as
"x% vol" or "Alcohol x% vol" to the nearest half percent volume i.e.,
11% or 11.5% vol, NOT 11.2% vol. The minimum character height for this
statement is the same as for the nominal volume given below.

## Nominal Volume

The nominal volume must be stated on the label and the minimum height of
characters used is:

> 2mm - for containers holding 20cl or less
>
> 3mm - for containers holding 21cl - 1 liter
>
> 5mm - for containers holding more than 1 liter

The permitted packaging sizes for wine in the EU are:

+------------------------------+---------------------------------------+
| **Product Type**             | **Sizes Permitted**                   |
+------------------------------+---------------------------------------+
| Still wine not exceeding 15% | 10cl, 25cl, 37.5cl, 50cl, 75cl, 1L,   |
| vol                          |                                       |
|                              | 1.5L, 2L, 3L, 5L, 6L, 9L, 10L         |
+------------------------------+---------------------------------------+
| Still wine over 15% vol      | Any size up to 10cl, 20cl, 37.5cl,    |
|                              | 50cl                                  |
|                              |                                       |
|                              | 75cl, 1L, 3L, 5L                      |
+------------------------------+---------------------------------------+
| Sparkling/Aerated Sparkling  | 12.5cl, 20cl, 37.5cl, 75cl, 1.5L      |
| Wine                         |                                       |
|                              | 3L, 4.5L, 6L, 9L                      |
+------------------------------+---------------------------------------+

## Lot Marketing

The Food (Lot Marking) Regulations 1996, set out the lot marking
requirements to be applied to all foodstuffs sold for human consumption
(unless specifically exempted), including wines and spirits. These
Regulations implement Council Directive 89/396/EEC (OJ No. L186) on
indications and marks identifying the lot to which a foodstuff belongs,
as amended by Council Directives 91/238/EEC (OJ No. L107) and 92/11/EEC
(OJ No. L65).

In summary, this means that the producer and packer must apply to each
unit making up a homogenous group - referred to as a "lot" - a mark
identifying the lots from which that unit came. The lot mark may appear
anywhere upon the package including the seal; however, it CANNOT appear
on the cork. It must be indelible, clearly visible and (although the
characters used may be of any size) intelligible to anyone. The mark can
be of any length and can comprise of alpha and/or numeric characters. To
avoid the forced opening of cases, outer cases should also carry the lot
marks of their contents.

## Origin Labeling

Still wines from the US must show one of the following formats on their
label:

-   "Wine of United States of America"

-   "USA Wine"

-   "Wine Product of USA"

In the case of sparkling wine, US product must be described as "USA
Sparkling Wine". This statement ensures that they are treated as the
equivalent of European quality sparkling wine. Omission of this
expression means that wines are not entitled to show specified items of
information including vine variety, vintage, production term (e.g.,
traditional method), geographical indication.

Further information on regulatory requirements can be obtained through:

Department of Environment, Food & Rural Affairs

Alcoholic Drinks Division

Room 201, Whitehall Place (East Block)

London SW1A 2HH

Tel: (+44) 20 7270 8929 Fax: (+44) 20 7270 8733

Wine Standards Board of the Vintners' Company

Five Kings House

1 Queen Street Place

London EC4R 1QS

Tel: (+44) 20 7236 9512 Fax: (+44) 20 7236 7908

# Import/Export Tables

## UK Imports of Still Wine by Volume, 2001-2003

  ------------------ ---------- -------------- ---------- ------------ -------------
  **United Kingdom -                                                   
  Imports**                                                            

  **HS Codes:                                                          
  220421 + 220429                                                      
  STILL WINE**                                                         

                                **Quantity -                           
                                HL (000)**                             

                                **Calendar                             
                                Years**                                

                                                                       

  **Country**        **2001**   **2002**       **2003**   **% Share    **% Change
                                                          \'03**       \'03/\'02**

                                                                        

  \--World\--        9,683      10,546         11,338     100          8

                                                                        

  -EU-15-            5,350      5,578          5,944      52           7

  France             2,353      2,426          2,484      22           2

  Germany            866        979            1,246      11           27

  Italy              1,157      1,105          1,071      9            -3

  Spain              776        835            916        8            10

  Portugal           150        178            162        1            -9

  Netherlands        21         24             40         \<1          66

                                                                        

  Third Countries    4,333      4,968          5,394      48           9

  Australia          1,748      2,076          2,061      18           -1

  United States      801        917            1,161      10           27

  South Africa       678        891            947        8            6

  Chile              580        604            688        6            14

  Argentina          126        117            173        2            49

  New Zealand        103        117            131        1            12

  Bulgaria           129        101            80         1            -21

  Hungary            85         79             80         1            2

  Switzerland        2          6              5          \<1          -26

                                                                       

  *Source of Data:                                                     
  H.M. Customs and                                                     
  Excise*                                                              
  ------------------ ---------- -------------- ---------- ------------ -------------

## UK Imports of Still Wine by Value, 2001-2003

  ------------------ ------------ ---------- ---------- ------------ -------------
  **United Kingdom -                                                 
  Imports**                                                          

  **HS Codes:                                                        
  220421 + 220429                                                    
  STILL WINE**                                                       

                                                                     

                     **Calendar                                      
                     Years**                                         

                     **Millions                                      
                     of British                                      
                     Pounds**                                        

                                                                     

  **Country**        **2001**     **2002**   **2003**   **% Share    **% Change
                                                        \'03**       \'03/\'02**

                                                                      

  \--World\--        1,593        1,725      1,833      100          6

                                                                      

  -EU-15-            832          867        916        50           6

  France             427          433        467        25           8

  Italy              150          150        164        9            9

  Spain              130          141        137        7            -3

  Germany            74           85         82         4            -4

  Portugal           38           42         48         3            14

  Netherlands        5            5          8          0            49

                                                                      

  Third Countries    761          858        917        50           7

  Australia          333          404        390        21           -3

  United States      140          151        172        9            14

  South Africa       92           117        141        8            20

  Chile              98           94         100        5            6

  New Zealand        33           39         47         3            22

  Argentina          23           17         23         1            33

  Switzerland        10           10         17         1            70

  Hungary            9            8          9          0            4

  Bulgaria           11           8          7          0            -18

                                                                     

  *Source of Data:                                                   
  H.M. Customs and                                                   
  Excise*                                                            
  ------------------ ------------ ---------- ---------- ------------ -------------

## UK Imports of Sparkling Wine by Volume, 2001-2003

  --------------------- -------------- ------------ ------------ ---------------
  **United Kingdom -                                             
  Imports**                                                      

  **HS Code: 220410                                              
  SPARKLING WINE**                                               

                                                                 

                        **Quantity -                             
                        HL (000)**                               

                        **Calendar                               
                        Years**                                  

                                                                 

  **Country**           **2001**       **2002**     **2003**     **% Share
                                                                 2003**

                                                                  

  \--World\--           418            520          652          100

                                                                  

  -EU-15-               363            458          573          88

  France                206            278          276          42

  Spain                 85             102          167          26

  Italy                 64             70           85           13

                                                                  

  Third Countries       55             62           79           12

  Australia             34             39           50           7

  New Zealand           9              10           13           2

  South Africa          3              5            5            1

  United States         7              4            4            1
  --------------------- -------------- ------------ ------------ ---------------

## UK Imports of Sparkling Wine by Value, 2001-2003

  --------------------- ------------ ------------ ------------ ---------------
  **United Kingdom -                                           
  Imports**                                                    

  **HS Code: 220410                                            
  SPARKLING**                                                  

                                                               

                        **Calendar                             
                        Years**                                

                        **Millions                             
                        of British                             
                        Pounds**                               

                                                               

  **Country**           **2001**     **2002**     **2003**     **% Share
                                                               2003**

  ** **                 ** **        ** **        ** **        ** **

  \--World\--           231          283          319          100

  ** **                 ** **        ** **        ** **        ** **

  -EU-15-               213          264          296          93

  France                177          227          247          78

  Spain                 16           19           26           8

  Italy                 13           12           17           5

  ** **                 ** **        ** **        ** **        ** **

  Third Countries       18           19           23           7

  Australia             10           10           13           4

  New Zealand           3            4            5            2

  United States         4            2            1            0

  South Africa          1            1            1            0

                                                               

  *Source of Data: H.M.                                        
  Customs and Excise*                                          
  --------------------- ------------ ------------ ------------ ---------------

## UK Imports of Flavored Wine & Vermouth by Volume, 2001-2003

  ------------------- ---------- -------------- ------------ ----------------
  **United Kingdom -                                         
  Imports**                                                  

  **HS Code: 2205                                            
  FLAVORED WINE,                                             
  VERMOUTH**                                                 

                                                             

                                 **Quantity - L              
                                 (000)**                     

                                 **Calendar                  
                                 Years**                     

                                                             

  **Country**         **2001**   **2002**       **2003**     **% Change
                                                             \'03/\'02**

                                                              

  \--World\--         14,456     13,969         14,872       6

                                                              

  -EU-15-             14,453     13,931         14,796       6

  France              5,776      6,328          6,158        -3

  Italy               6,053      4,725          4,655        -1

  Netherlands         1,421      1,165          2,471        112

  Germany             922        574            1,150        100

  Spain               196        334            341          2

                                                              

  Third Countries     3          38             76           100

  Australia           0          0              51           0

  New Zealand         0          31             23           -27
  ------------------- ---------- -------------- ------------ ----------------

## UK Imports of Flavored Wine & Vermouth by Value, 2001-2003

  -------------------- ---------- ------------ ------------ ----------------
  **United Kingdom -                                        
  Imports**                                                 

  **HS Code: 2205                                           
  FLAVORED WINE,                                            
  VERMOUTH**                                                

                                                            

                                  **Calendar                
                                  Years**                   

                                  **Millions                
                                  of British                
                                  Pounds**                  

                                                            

  **Country**          **2001**   **2002**     **2003**     **% Change
                                                            \'03/\'02**

  ** **                ** **      ** **        ** **        ** **

  \--World\--          17.35      11.92        15.84        33

  ** **                ** **      ** **        ** **        ** **

  -EU-15-              17.34      11.85        15.69        32

  France               4.06       4.19         6.77         62

  Italy                8.21       4.71         5.18         10

  Netherlands          1.04       1.11         1.96         77

  Germany              1.62       0.77         0.89         16

  ** **                ** **      ** **        ** **        ** **

  Third Countries      0.00       0.00         0.14         0

  Australia            0.00       0.00         0.06         0

  New Zealand          0.00       0.05         0.08         61

                                                            

  *Source of Data:                                          
  H.M. Customs and                                          
  Excise*                                                   
  -------------------- ---------- ------------ ------------ ----------------

## UK Exports of Still Wine by Volume, 2001-2003

  -------------------- -------------- ----------- -------------- -----------------
  **United Kingdom -                                             
  Exports**                                                      

  **HS Codes: 220421 +                                           
  220429 STILL WINE**                                            

                                                                 

                       **Quantity -                              
                       HL (000)**                                

                       **Calendar                                
                       Years**                                   

                                                                 

  **Country**          **2001**       **2002**    **2003**       **% Share 2003**

  \--World\--          175            270         237            100

                                                                  

  -EU-15-              132            181         179            76

                                                                  

  Third Countries      43             89          58             24

  United States        8              12          11             5
  -------------------- -------------- ----------- -------------- -----------------

## UK Exports of Still Wine by Value, 2001-2003

  --------------------- ------------ ---------- -------------- -----------------
  **United Kingdom -                                           
  Exports**                                                    

  **HS Codes: 220421 +                                         
  220429 STILL WINE**                                          

                                                               

                        **Calendar                             
                        Years**                                

                        **Millions                             
                        of British                             
                        Pounds**                               

                                                               

                                                               

  **Country**           **2001**     **2002**   **2003**       **% Share 2003**

  \--World\--           106          125        133            100

                                                                

  -EU-15-               42           53         54             41

                                                                

  Third Countries       64           72         79             59

  United States         32           30         40             30

                                                               

  *Source of Data: H.M.                                        
  Customs and Excise*                                          
  --------------------- ------------ ---------- -------------- -----------------

## UK Exports of Sparkling Wine by Volume, 2001-2003

  ------------------- -------------- ---------- -------------- -----------------
  **United Kingdom -                                           
  Exports**                                                    

  **HS Code: 220410                                            
  SPARKLING WINE**                                             

                                                               

                      **Quantity -                             
                      HL**                                     

                      **Calendar                               
                      Years**                                  

                                                               

  **Country**         **2001**       **2002**   **2003**       **% Change
                                                               \'03/\'02**

  \--World\--         10,177         8,456      15,532         84

                                                                

  -EU-15-             4,604          4,291      9,674          125

                                                                

  Third Countries     5,573          4,165      5,858          41

  United States       2,282          1,176      1,111          -5
  ------------------- -------------- ---------- -------------- -----------------

## UK Exports of Sparkling Wine by Value, 2001-2003

  --------------------- ------------ ---------- -------------- -----------------
  **United Kingdom -                                           
  Exports**                                                    

  **HS Code: 220410                                            
  SPARKLING**                                                  

                                                               

                        **Calendar                             
                        Years**                                

                        **Millions                             
                        of British                             
                        Pounds**                               

                                                               

  **Country**           **2001**     **2002**   **2003**       **% Share 2003**

  \--World\--           10           10         12             100

                                                                

  -EU-15-               3            3          4              33

                                                                

  Third Countries       7            7          8              67

  United States         4            2          3              25

                                                               

  *Source of Data: H.M.                                        
  Customs and Excise*                                          
  --------------------- ------------ ---------- -------------- -----------------

## UK Exports of Flavored Wine & Vermouth by Volume, 2001-2003

  --------------------- ---------- -------------- -------------- -----------------
  **United Kingdom -                                             
  Exports**                                                      

  **HS Code: 2205                                                
  FLAVORED WINE,                                                 
  VERMOUTH**                                                     

                                                                 

                                   **Quantity - L                
                                   (000)**                       

                                   **Calendar                    
                                   Years**                       

                                                                 

                                                                 

  **Country**           **2001**   **2002**       **2003**       **% Share 2003**

  \--World\--           1148       605            163            100

                                                                  

  -EU-15-               961        441            91             56

                                                                  

  Third Countries       187        164            72             44

  United States         6          0              0              0
  --------------------- ---------- -------------- -------------- -----------------

## UK Exports of Flavored Wine & Vermouth by Value, 2001-2003

  --------------------- ---------- ------------ -------------- -----------------
  **United Kingdom -                                           
  Exports**                                                    

  **HS Code: 2205                                              
  FLAVORED WINE,                                               
  VERMOUTH**                                                   

                                                               

                                   **Calendar                  
                                   Years**                     

                                   **Millions                  
                                   of British                  
                                   Pounds**                    

                                                               

  **Country**           **2001**   **2002**     **2003**       **% Share 2003**

  \--World\--           3.0        2.3          0.8            100

                                                                

  -EU-15-               2.6        1.9          0.6            75

                                                                

  Third Countries       0.4        0.4          0.2            25

  United States         0.0        0.0          0.0            0

                                                               

  *Source of Data: H.M.                                        
  Customs and Excise*                                          
  --------------------- ---------- ------------ -------------- -----------------

Exchange Rate at March 22, 2004: 1 BPS = 1.88 USD or 0.53 BPS = 1 USD