for reasons of health. Here, white wine growth of just 4% will be significantly slower, but nonetheless offers organic growth potential. India, Russia and China are all significant immature markets, expected to enjoy dynamic wine growth in the 2004-2009 period, as all three countries see an increasingly westernised lifestyle. Although Diageo’s New World-focused portfolio may be slower to enjoy the benefits of growth, with these markets particularly enjoying wines from the Old World producing countries such as France, there is certainly medium-term potential, particularly with the benefit of the work being done to widen distribution channels. In Russia, the development of a market for domestic wine may also dampen Diageo’s growth rate. Only in China is red wine growth expected to outpace that of white. In Russia, both white and red wine are expected to grow at very similar rates of between 28% and 29%, whilst in India white wine is likely to grow more rapidly, at around 81% compared to 74% for red, due to its lower base. (Global Market Information Database, Mar 2005)

Industry Environment

The wine industry environment, as a whole, is particularly susceptible to fluctuations in supply arising from weather-related factors that influence the volume and quality of the annual grape crush harvest. In 2004, a shortage of wine in Western Europe resulted in increased prices, leading to slower volume growth and consumers switching to cheaper alcoholic alternatives such as beer. In the previous year, however, oversupply had caused the opposite effect, with a glut of wine volume driving down prices and value in the industry. As a result, the wine industry needs more effective coordination between producers in order to ensure a steadier level of global sup