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BIN LIGHTWEIGHT GLASS INITIATIVE

May 2010

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• From October 2010 production, Wyndham Estate BIN range will change from 540g to 360g glass bottles (subject to markets confirming agreement to the change and the proposed timing)

• This move:

1) Responds to customer and consumer environmental expectations

2) Drives cost savings through lower COGS and reduced freight costs

3) Will enable increased A&P investment to build the brand

Executive summary

• The decision to move is strongly recommended and will be made collaboratively with markets

• Some markets will be automatically effected as a result of the change in other markets

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• Demand for lighter weight packaging is growing across a number of categories including wine from both environmental and cost saving perspectives

• Demand mainly driven by trade but “green packaging” also becoming increasingly expected by consumers

• Environmental benefits include less glass plus substantial reductions in energy use, water use and carbon dioxide outputs

• Cost benefits include reduced dry goods cost to supplier and reduced freight costs for both supplier and customer

Background

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• Competitors are moving to lightweight at an increasing pace

• AU competitors moving to lightweight include d’Arenberg Stump Jump, Taylors Eighty Acres, Houghton Stripe, Hardy’s Stamp, Tyrell’s Moore’s Creek and Old Vine, Peter Lehmann Weighbridge, Banrock Station, etc.

• A number of other brands are expected to convert this year

Competitor landscape

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• Consumer research undertaken in Australia, focused on Jacob’s Creek Classic, indicated that there were no significant risks to brand appeal and image in JC adopting the lightweight bottle

• The research methodology involved 3 steps:

1) Consumers interacted with lightweight or current packs in a store like set up

2) Then took home 3 bottles (same type as used in store like test) to use as normal for a one week trial – completed on line questionnaire

3) A final telephone interview was conducted to probe for differences in perception when the respondents were told about the lightweight bottle

JC consumer research

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• In the store like set up test, the JC lightweight bottle showed no difference in appeal, purchase likelihood or premium quality compared to the current bottle

• In the home use test there was also no difference in appeal, purchase likelihood or premium quality

• During the telephone follow up, after being told the bottles were 30% lighter, 61% did not change their opinion

• The other 39% had a more positive perception – generally seen as more environmentally friendly

• We believe these findings for Jacob’s Creek Classic are highly applicable to Wyndham Estate BIN range

JC consumer research

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• When the BIN range current bottle and lightweight bottle are lined up against each other, the two bottles look quite similar

• Especially considering the bottle on the right uses 1/3 less glass

• The difference is easier to pick when the 2 bottles are alongside each other at eye level

Rationale for moving BIN

Current bottle Lightweight bottle

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• When the two BIN bottles are lined up against other Australian brands at similar price points, some competitor packs look more substantial (e.g. Wolf Blass Yellow) while others do not (e.g. Penfolds Koonunga Hill)

Rationale for moving BIN

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• Our #1 export market is Canada where the trade is pressuring suppliers to move towards lightweight and we expect more competitors will move to lightweight in the future

• Moving BIN to lightweight will position the George Wyndham range as fine wine and more clearly differentiated from BIN

• The Jacob’s Creek AU research indicated higher acceptance for red wine in lightweight bottles v white wines – and, as BIN range volume is >75% red, the risk of alienating consumers is lower

Rationale for moving BIN

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• The financial impact of moving to lightweight glass for Wyndham Estate BIN will be:– Indicative standard cost reduction for dry goods of $0.54 per 9L

case equivalent commencing from B12, and

– Freight savings driven by reduced weight and increased no. of cases per pallet/container. These freight savings will vary from market to market.

Financial implications

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• The communication of this change will be primarily to the trade and we will discuss any further communication on a market by market basis

• An information kit will be developed and it will include:

- PowerPoint presentation

- Product specifications and images

- Question & answer sheets

- Product samples

• In the future, the Lean and Green logo may be embossed into the punt of lightweight bottles as an industry standard (this is under consideration but no decision has been made)

Support tools

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• Secure agreement from all markets (for the change and the timing)

• Develop information kit and distribute samples

• Market present samples and story to customers and gatekeepers

• Minimise current in market stock holding to speed lightweight bottle progression to shelf

• In market launch

Next steps

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CLARET CURRENT LIGHTWEIGHT

Weight 540 grams 360 grams

Height 304.00mm 297.00mm

Diameter 76.60mm 73.90mm

Punt Height 28.50mm 13.00mm

BURGUNDY CURRENT LIGHTWEIGHT

Weight 540 grams 360 grams

Height 304.00mm 297.00mm

Diameter 80.30mm 77.50mm

Punt Height 28.50mm 13.00mm

Appendix A: bottle specifications

Current

Claret

Lightweight

Claret

Current

Burgundy

Lightweight

Burgundy

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4.5l case Specifications

         

4.5lt case Burgundy Bottle Claret Bottle

         

  Old 540g New 360g Old 540g New 360g

Length 242mm 236mm 233mm 228mm

Width 164mm 159mm 156mm 152mm

Height 309mm 308mm 309mm 308mm

Weight 7.90kg 7.0kg 7.90kg 7.0kg

Appendix B: case specs

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Pallet Configuration Pallet Configuration Pallet Configuration

4 Layer High Pallet 104 cases 4 Layer High Pallet 112 cases 5 Layer High Pallet 140 cases3 Layer High Pallet 78 cases 3 Layer High Pallet 84 cases 3 Layer High Pallet 84 cases

2 Layer High Pallet 56 casesFull container configuration Full container configuration Full container configuration

10 x Pallets of 104 cases 1040 cases 12 x Pallets of 112 cases 1344 cases 24 x Pallets of 140 Cases10 x Pallets of 78 cases 780 cases 12 x Pallets of 84 cases 1008 cases 4 x Pallets of 84 Cases2 x Pallets of 76 cases 152 cases 2 x Pallets of 56 Cases2 x Pallets of 57 cases 114 cases

Total 2086 cases Total 2352 cases Total 3808 Cases

Pallet Configuration Pallet Configuration Pallet Configuration

4 Layer High Pallet 112 cases 4 Layer High Pallet 120 cases 5 Layer High Pallet 150 cases3 Layer High Pallet 84 cases 3 Layer High Pallet 90 cases 2 Layer High Pallet 60 cases

Full container configuration Full container configuration Full container configuration

12 x Pallets of 112 cases 1344 cases 12 x Pallets of 120 cases 1440 cases 25 x Pallets of 150 cases 3750 cases12 x Pallets of 84 cases 1008 cases 12 x Pallets of 90 cases 1080 cases 1 x pallet of 60 cases 60 cases

Total 2352 cases Total 2520 cases Total 3810 cases

20 ft Container 20 ft Container 40 ft Container

Current Bottle540 grams

Lightweight Bottle360 grams

Appendix C: containers / pallets