The IWSR Forecast Report

2012-2017

Date: August 2012

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Forecast 2012-2017 Section: Global Executive Summary

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Background to The IWSR Forecast Report 2012-2017 This report forecasts the development of the global wine and spirits market to 2017. This is based on The

IWSR’s country reports which cover 134 domestic markets and The IWSR’s duty free/travel retail database. The report assesses future developments divided by sub-categories, quality segments and regions.

In addition to the global summary of data, the report also contains individual country reports for 59 markets. These provide in-depth information for the world’s key markets for wine and spirits. Economic, political and social factors are outlined in order to provide a comprehensive image of each market, and help understand the reasons behind the forecasts. For the first time in this year’s reports, these countries have been classed into two separate groups – Grade 1 countries and Grade 2 countries. The process to produce these forecasts was the same, but to slim down the report, Grade 2 countries do not include tables on every category in the report, although all data has been forecast.

Naturally, a report that sets out to forecast the shape and size of the global wine and spirits market for the next five years has certain inevitable weaknesses and limitations. To name a few, political unrests, government changes, new regulations or natural disasters are all factors that can significantly influence the market, but are impossible to predict. In addition, The IWSR is obviously ignorant in most cases on individual company plans for the future and investments behind key brands. The IWSR researchers have attempted to assess the likelihood of some of these factors for each individual market, but generally speaking the forecasts have been compiled based on the assumption that economies will develop more or less uninterruptedly.

These forecasts deal only with the registered, legal parts of each market. Over 35% of world consumption of spirits are from `grey’ sources – illegal, unregistered and paying no taxes in the country of consumption.

Methodology The IWSR forecasts in detail those 59 markets that have been identified as the most significant to the wine

and spirits industry. This includes virtually all the EU countries, as well as key countries across the other continents (see the list below for details). Whether or not a market is analysed in detail depends on various factors, and the size of the market is not the most significant factor. Some countries, such as Kazakhstan or Sri Lanka, have bigger markets than some of the countries which have been forecast in detail, but a large proportion of the market consists of domestic spirits and is thus of little interest on a global level. In order to get a global total of the wine and spirits market, volumes for those countries which are not analysed in detail have been estimated based on straight-line forecasts. These have then been revised by The IWSR researcher responsible for the market.

Knowledge of population and GDP growth in each country underpins the forecasts. Additional market information is gained by The IWSR researchers who visit around 115 markets each year, and meet local producers, distributors and industry experts. This methodology has been used for over 20 years and has resulted in long-established dialogues with key experts across the world. The first-hand knowledge of the local markets allows our analysts to produce nuanced and realistic forecasts for each country.

Notes on some individual markets

In the countries of the CIS, the Balkans and the Baltics, vodka consumption is significantly higher than stated in the report. The level of illegal production and smuggled goods is very difficult to measure, but in some countries could result in total volumes which are twice as high as those indicated in this report. This also affects some categories in Brazil and Colombia. Individual country commentaries provide a more detailed assessment of the illegal commerce for each market and/or category.

Local liquors in India include only Indian Made Foreign Liqueurs (IMFL), but do not make estimates for country or village liquor.

The current political conditions in some countries are so precarious that realistic forecasts are difficult to make. The estimates for Venezuela and Greece would have to be changed, for instance, if the situation in these countries escalates.

Forecast 2012-2017 Section: Global Executive Summary

List of countries used in the Forecast Report, split by regions. Those in bold have been analysed in

detail.

AFRICA & MIDDLE EAST (2)

- Africa (1) South Africa Morocco, Tunisia

- Other Africa Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde Islands, Central African Republic, Ceuta-Melilla, Chad, Comoros, Congo, Democratic Republic of Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Kenya, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, Zimbabwe

- Middle East (1) Israel Abu Dhabi, Afghanistan, Bahrain, Dubai, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Northern Emirates, Oman, Pakistan, Qatar, Saudi Arabia, Syria

AMERICAS (8)

- Caribbean (2) Dominican Republic, Puerto Rico, Antigua and Barbuda, Aruba, Bahamas, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Cuba, Curacao, Grenada, Guadeloupe, Haiti, Jamaica, Martinique, St. Kitts, St. Lucia, St. Martin and St. Maarten, St. Vincent, Trinidad and Tobago, US Virgin Islands

- Central America (1) Mexico Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama

- North America (2) Canada, United States

- South America (6) Argentina, Brazil, Chile, Colombia, Venezuela, Peru Bolivia, Ecuador, French Guiana, Guyana, Paraguay, Suriname, Uruguay

ASIA-PACIFIC (13)

- Asia (11) China, Hong Kong, India, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam Burma, Cambodia, Indonesia, Laos, Sri Lanka

- Australasia (2) Australia, New Zealand

CIS (3) Russia, Ukraine, Kazakhstan Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Uzbekistan

EUROPE (28)

- Central Europe & Balkans (9) Bulgaria, Czech Rep. Hungary, Poland, Romania, Slovakia, Slovenia, Croatia, Serbia

Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro,

- Eastern Europe & Baltics (3) Estonia, Latvia, Lithuania

- Nordic Countries (4) Denmark, Finland, Norway, Sweden Iceland

- North-West Europe (8) Austria, Belgium and Luxembourg, Germany, France, Ireland, Netherlands, Switzerland, United Kingdom

- Southern Europe (7) Canary Islands, Greece, Italy, Portugal, Spain, Turkey, Cyprus Malta

REST OF WORLD American Oceania, American Samoa, Andorra, Anguilla, Bangladesh, Bhutan, British Indian Ocean Territories, Brunei, Christmas Island, Cook Island, DF Rest of World, Dominica, Falkland Islands, Faroes, Fiji, French Polynesia, French Southern Territories, Gibraltar, Greenland, Guam, Kiribati, Lesotho, Liechtenstein, Macao, Maldives, Marshall Islands, Micronesia, Mongolia, Montserrat, Nauru, Nepal, New Caledonia, New Zealand Oceania, Niue, Norfolk Islands, North Korea, North Marianas, Occupied Palestinian Territory, Palau, Papua New Guinea, Pitcairn Islands, Polar Regions, Samoa, San Marino, Solomon Islands, South Georgia, St. Pierre Miquelon, Svalbard, Timor Leste, Tokelau, Tonga, Turks and Caicos, Tuvalu, US Minor Outlying Islands, Vanuatu, Vatican City, Wallis and Fortuna, West Bank and Gaza Strip

This is an extract from The IWSR’s annual forecast on the global trends in the alcoholic drinks market from

2012 to 2017. The forecast report covers the 59 key countries in written detail.

This extract covers part of the 2012-2017 Forecast Report for Cyprus.

If you would like to purchase The IWSR 2012-2017 Forecast Report, have any questions about it or would

like to find out more about The IWSR, please contact:

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The IWSR Forecast Report 2012-2017

Sample: Cyprus

Date August 2012

Country: Cyprus Section: General Summary

Demographic Data

2011 2012 2013 2014 2015 2016 2017 Adult Population (Mn) 0.89 0.91 0.92 0.94 0.96 0.97 0.99

GDP +0.0 +0.0 +0.0 +0.0 +0.0

Source: Demographic data – US Census; Economic data – IMF

Comments on demographic and economic data

The Cypriot economy had experienced years of consistent growth which finally came to an end following the global financial crisis and exposure to the Greek economic collapse. Cyprus has just become the latest eurozone

member to formally request a bailout despite receiving significant economic aid from its long-term economic partner Russia.

Highly unpopular austerity measures have now slowed economic growth to just 0.5%; 2012 is predicted to contract by -1.15%. Unemployment has crept up to 10% in a country which has the second-highest household

debt as a share of GDP in the EU.

However, the prospects for Cyprus are not all doom and gloom as the debt problem should be resolved relatively swiftly. The recent discovery of a natural gas resource will promote investment and confidence in the economy.

Furthermore, a significant part of the economy and the drinks market is sustained by the tourism industry. Tourist visits have been trending positively in recent years and are projected to continue to grow driven in part by the

flood of Russians heading for the sunny island. This should ensure the buoyancy of several tourist-dependent categories. However, it should be noted that while tourist numbers are rising, spend is significantly down. Visitors

are increasingly choosing all-inclusive package holidays which is having a profound effect on several categories as value pouring brands take on a new significance.

General background to the alcohol market

As far as domestic Cypriot consumption is concerned, a key problem is low consumer confidence. This is impacting retailers who are struggling as credit dries up and cash flow is prioritised. This has led to a very

cautious attitude towards retailers from distributors. Furthermore, several companies have merged in a bid to reduce costs – notably the Cosmos and Omilos Laiko groups (July 2012).

Country: Cyprus Section: General Summary

Alcohol by category

Comparison of category trends in the alcohol market

Category 2011 F 2012 F 2013 F 2014 F 2015 F 2016 F 2017 5yr CAGR 06 to 11

6yr CAGR 11 to 17

Total 7,006.7 7,032.9 7,041.0 7,083.5 7,243.4 7,273.9 7,421.0 2.4% 1.0%

Beer 5,260.6 5,277.3 5,277.3 5,305.0 5,443.9 5,443.9 5,555.0 3.3% 0.9%

Wine 1,018.3 1,022.0 1,021.8 1,028.5 1,038.5 1,054.8 1,075.5 -0.6% 0.9%

Spirits 608.1 607.1 610.9 617.4 625.9 637.6 652.1 1.9% 1.2%

Mixed Drinks 72.5 71.0 70.0 68.8 68.5 68.3 69.0 -4.7% -0.8%

Cider 47.2 55.6 61.1 63.9 66.7 69.4 69.4 4.0% 6.6%

Source: IWSR Calculations

Country: Cyprus Section: Wine Summary

Wine Market

By Category

Category 2011 F 2012 F 2013 F 2014 F 2015 F 2016 F 2017 5yr CAGR 06 to 11

6yr CAGR 11 to 17

Wine 1,018.3 1,022.0 1,021.8 1,028.5 1,038.5 1,054.8 1,075.5 -0.6% 0.9%

Still 936.3 937.2 935.8 939.3 947.5 959.8 978.5 -0.6% 0.7%

Sparkling 43.5 45.3 46.0 48.5 50.3 53.5 56.3 0.0% 4.4%

Fortified 26.8 27.8 28.3 28.8 28.8 29.3 29.3 -2.6% 1.5%

Light Aps. 11.0 11.0 11.0 11.3 11.3 11.5 11.5 0.0% 0.7%

O. Wine 0.8 0.8 0.8 0.8 0.8 0.8 Infinity -100.0%

Source: IWSR Calculations

Country: Cyprus Section: Still Light Wine

Still Light Wine Market

Local v Imported

Forecast trends of consumption: ‘000s 9-litre cases

Category 2011 F 2012 F 2013 F 2014 F 2015 F 2016 F 2017 5yr CAGR 06 to 11

6yr CAGR 11 to 17

Still 936.3 937.2 935.8 939.3 947.5 959.8 978.5 -0.6% 0.7%

Local 690.3 675.0 660.0 650.0 645.0 645.0 650.0 -2.4% -1.0%

Imported 246.0 262.2 275.8 289.3 302.5 314.8 328.5 5.7% 4.9%

Source: IWSR Calculations

Forecast trends of consumption – By colour: ‘000s 9-litre cases Category 2011 F 2012 F 2013 F 2014 F 2015 F 2016 F 2017 5yr CAGR

06 to 11 6yr CAGR

11 to 17 Total 936.3 937.3 935.8 939.3 947.5 959.8 978.5 -0.6% 0.7%

Red 420.0 435.0 440.0 444.3 450.0 459.8 475.0 -0.8% 2.1%

Rose 40.0 42.3 47.8 50.0 53.0 55.0 57.0 7.0% 6.1%

White 476.3 460.0 448.0 445.0 444.5 445.0 446.5 -1.0% -1.1%

Source: IWSR Calculation

Local still light wine grew in 2011 following several years of decline as Cypriots started taking more of an interest in local wines (local wine was almost entirely supported by tourist consumption). However, there is considerable

price pressure on local wines due to low wine stocks and competition from imported wines. Price rises are inevitable and have already triggered declines in the first half of 2012.

Local wines are also losing competitivity to cheap Spanish bulk wine for use in the all-important all-inclusives that are demanding lower and lower prices as tourist spend also declines. This will lead to declines over the majority of the forecast period.

Imported still light wine relies on both tourist and local Cypriot consumption. The cheap all-inclusive element will grow, but more expensive bottled products may come under pressure as Cypriots feel the economic pinch and,

importantly, lose confidence in the current economic environment. Overall volumes can be expected to increase as the trend towards wine consumption and the developing wine culture continues.

Country: Cyprus Section: Spirits Summary

Spirits Market

By Category

Forecast trends of consumption: ‘000s 9-litre cases Category 2011 F 2012 F 2013 F 2014 F 2015 F 2016 F 2017 5yr CAGR

06 to 11 6yr CAGR

11 to 17 Spirits 608.1 607.1 610.9 617.4 625.9 637.6 652.1 1.9% 1.2%

Whisky 240.1 236.1 236.6 239.4 243.6 247.9 252.9 5.3% 0.9%

Brandy 127.5 127.3 126.5 125.8 123.8 123.0 122.5 -4.7% -0.7%

Vodka 116.0 112.3 110.5 109.3 110.0 112.8 116.5 3.5% 0.1%

Flav. Spirits 87.5 92.0 95.0 98.3 101.5 104.3 107.8 2.9% 3.5%

Rum 16.3 17.7 19.3 20.8 22.0 23.8 25.3 2.3% 7.6%

Gin/Gen. 14.5 14.8 15.3 15.8 16.3 16.8 17.5 0.0% 3.2%

Tequila 5.8 6.5 7.3 7.8 8.0 8.5 8.8 12.1% 7.2%

Cane 0.5 0.5 0.5 0.5 0.8 0.8 1.0 Infinity 12.2%

Source: IWSR Calculations

Spirits by Growth Spirits by Quality

Local v Imported

Country: Cyprus Section: Whisky

Whisky Market

Whisky market - ‘000s 9-litre cases

Country: Cyprus Section: Whisky

Whisky Market – Cont/d…

Forecast trends of consumption – By quality: ‘000s 9-litre cases

Category 2011 F 2012 F 2013 F 2014 F 2015 F 2016 F 2017 5yr CAGR 06 to 11

6yr CAGR 11 to 17

Whisky 240.1 236.1 236.6 239.4 243.6 247.9 252.9 5.3% 0.9%

Scotch 218.0 213.5 213.5 215.5 219.0 222.0 225.8 4.9% 0.6%

Ultra Pr. 0.2 0.2 0.2 0.2 0.2 0.2 0.3 -9.7% 8.9%

Super Pr. 3.4 3.4 3.6 3.6 3.8 3.8 4.0 6.9% 3.0%

Premium 42.8 45.0 47.3 48.8 50.5 51.5 52.5 21.2% 3.5%

Standard 156.3 150.0 148.0 150.0 152.5 155.0 158.0 4.3% 0.2%

Value 15.5 15.0 14.5 13.0 12.0 11.5 11.0 -9.8% -5.6%

Blended Scotch 213.8 209.3 208.9 210.9 214.1 217.1 220.7 4.9% 0.5%

Ultra Pr. 0.2 0.2 0.2 0.2 0.2 0.2 0.3 -9.7% 8.9%

Super Pr. 1.1 1.1 1.3 1.3 1.4 1.4 1.5 8.0% 4.7%

Premium 40.8 43.0 45.0 46.5 48.0 49.0 50.0 23.0% 3.5%

Standard 156.3 150.0 148.0 150.0 152.5 155.0 158.0 4.3% 0.2%

Value 15.5 15.0 14.5 13.0 12.0 11.5 11.0 -9.8% -5.6%

Malt Scotch 4.3 4.3 4.6 4.6 5.0 5.0 5.1 4.0% 2.9%

Super Pr. 2.3 2.3 2.4 2.4 2.5 2.5 2.6 6.4% 2.1%

Premium 2.0 2.0 2.3 2.3 2.5 2.5 2.5 1.6% 3.8%

US 18.8 19.0 19.3 19.8 20.0 20.8 21.5 15.2% 2.3%

Super Pr. 0.8 0.8 0.8 1.0 1.0 1.2 1.2 30.3% 7.4%

Premium 16.8 17.0 17.3 17.5 17.8 18.4 19.1 15.1% 2.2%

Standard 1.3 1.3 1.3 1.3 1.3 1.3 1.3 10.8% 0.0%

Canadian 0.1 0.1 0.1 0.1 0.1 0.1 0.1 -16.7% 0.0%

Standard 0.1 0.1 0.1 0.1 0.1 0.1 0.1 -16.7% 0.0%

Irish 3.3 3.5 3.8 4.0 4.5 5.0 5.5 -5.2% 9.2%

Premium 0.3 0.3 0.3 0.3 0.4 0.4 0.4 -5.6% 4.9%

Standard 3.0 3.2 3.5 3.7 4.2 4.7 5.1 -5.2% 9.6%

O. Whisky 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -98.6% -6.5%

Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -98.6% -6.5%

Source: IWSR Calculations

Scotch is primarily a Cypriot category. It has been growing in popularity in recent years, with consumption primarily done by the bottle. Cypriots are highly brand aware and resist downtrading, which explains why

consumption is likely to decline in the next few years as consumers are likely to downsize rather than

downtrade.

Premium growth has been driven by incredibly low prices and has affected standard Scotch as a result. Such promotions are not sustainable in the long term and growth in the segment will likely slow down; this

will aid a return to growth in standard Scotch. Growth for the category as a whole is expected to return as

the economy improves as it is fundamentally popular and on trend. As in other categories in the market, parallels will play an important part in maintaining low prices relative to other European markets.

US and Irish whiskey have also been experiencing growth driven by both tourist and local consumption. This is likely to continue, although at more modest rates in light of the recent economic developments.