1. Allied Grape Growers, 2011. All rights reserved.

2. Part 1: Industry Issues Part 1: Industry Issues Part 2: Inventory Analysis Part 2: Inventory Analysis 2010 Estimated Production 2010 Estimated Production Production vs. Shipments Production vs. Shipments Special Report on Concentrate Special Report on Concentrate Part 3: Development/Growth Trends Part 3: Development/Growth Trends AGG Nursery Survey AGG Nursery Survey Supply Trends 2011 Supply Trends 2011 Cost of Production: California Winegrapes Cost of Production: California Winegrapes Part 4: Closing Part 4: Closing Take-Home Messages Take-Home Messages

3. Allied Grape Growers, 2011. All rights reserved. Market Factors Recession (global & domestic) Consumer behavior Global supply (imports/exports) Industry Planning Crush report and acreage report Planting/supply needs for future Availability of reliable information (both domestically and globally) Investment in facilities (capacity) Grower/Winery Relationships Cultural practices – needs vs. costs Vineyard/Farming plans Price determination (when & how) Changing quality standards Harvest determination (objective vs. subjective)

4. Allied Grape Growers, 2011. All rights reserved. Process Issues (Vitculture/Winemaking/Marketing) Sustainability - Self assessment vs. certification program Invasive Pests – EGVM, LBAM, GWSS, Mealybug Promotion of domestic wine – “California” appellation (sustainability is only step one) Research & investment in viticulture & winemaking to compete globally Assessments, Regulation & Taxation Mandatory assessments Ag issues within the legislature – Immigration, 40 hour week, card check, etc. Label issues before TTB Drawbacks The ongoing pursuit of new & higher excise tax

5. Allied Grape Growers, 2011. All rights reserved.

6. A regional look at production

7. Allied Grape Growers, 2011. All rights reserved..370 Other

8. Allied Grape Growers, 2011. All rights reserved.

9. White concentrate: White concentrate: Very short market Very short market Spot prices above $10.00/gallon Spot prices above $10.00/gallon Apple concentrate is also in short supply and at prices above grape Apple concentrate is also in short supply and at prices above grape Stable foreign grape concentrate supplies are questionable Stable foreign grape concentrate supplies are questionable Red concentrate : Red concentrate : High demand High demand Pricing at +/-$12.00/gallon Pricing at +/-$12.00/gallon Foreign product is on short side Foreign product is on short side California recognized as the go-to source for quality red concentrate California recognized as the go-to source for quality red concentrate Concentrate

10. Allied Grape Growers, 2011. All rights reserved. Higher end supply filling lower end demand

11. Allied Grape Growers, 2011. All rights reserved.

12. Allied Grape Growers conducted a confidential & voluntary survey of California nurseries to determine up-to-date planting trends: Allied Grape Growers conducted a confidential & voluntary survey of California nurseries to determine up-to-date planting trends: Data represents approximately 3/4 of the major varietal vine sales in the state, by variety, and region. Data represents approximately 3/4 of the major varietal vine sales in the state, by variety, and region. Data is not directly comparable to last year’s based on participation and the voluntary nature of the survey. Data is not directly comparable to last year’s based on participation and the voluntary nature of the survey. Dependent upon vine spacing, total potential planted acreage identified via the survey represents between 14,000 and 17,000 acres. Dependent upon vine spacing, total potential planted acreage identified via the survey represents between 14,000 and 17,000 acres. Survey participation was skewed toward the larger state nurseries. Smaller, coastal nurseries were not as likely to participate, therefore the resulting data is likely missing some level of coastal influence. Survey participation was skewed toward the larger state nurseries. Smaller, coastal nurseries were not as likely to participate, therefore the resulting data is likely missing some level of coastal influence.

13. Allied Grape Growers, 2011. All rights reserved.

14. Other Whites Include French Colombard Sauvignon Blanc Symphony Other Reds Include Malbec Petite Verdot Petite Sirah Ruby Cabernet Barbera

15. Chardonnay The Numbers: The Numbers: 10% non-bearing 10% non-bearing 3.64% AGR 3.64% AGR The Supply Trend: The Supply Trend: Growth at lower end Growth at lower end Minimal pullouts Minimal pullouts The Implication: The Implication: Growth is manageable Growth is manageable Large crops could be problematic Large crops could be problematic Annual displacement by imports is possible Annual displacement by imports is possible

16. Allied Grape Growers, 2011. All rights reserved. Pinot Grigio The Numbers: The Numbers: 21% non-bearing 21% non-bearing 8.32% AGR 8.32% AGR The Supply Trend: The Supply Trend: Growth at lower end Growth at lower end Plantings slowing Plantings slowing The Implication: The Implication: Growth is manageable based on current sales Growth is manageable based on current sales We don’t know market capacity We don’t know market capacity May be cannibalizing other white wines May be cannibalizing other white wines

17. Allied Grape Growers, 2011. All rights reserved. Muscat Alexander The Numbers: The Numbers: 25% Non-Bearing 25% Non-Bearing The Supply Trend: The Supply Trend: Short thru 2012 Short thru 2012 2010 planting explosion begins bearing in 2013 2010 planting explosion begins bearing in 2013 The Implication: The Implication: Big shift in supply coming Big shift in supply coming Limited use, but hot! Limited use, but hot! We don’t know market capacity We don’t know market capacity If it’s a fad, we’re in trouble If it’s a fad, we’re in trouble

18. Allied Grape Growers, 2011. All rights reserved. Cabernet Sauvignon The Numbers: The Numbers: 12% Non-Bearing 12% Non-Bearing 4.34% AGR 4.34% AGR The Supply Trend: The Supply Trend: Short, but becoming in balance with demand Short, but becoming in balance with demand Growing supply at low end Growing supply at low end The Implication: The Implication: Plant cautiously Plant cautiously Manageable supply given shipment growth Manageable supply given shipment growth Plant where feasible for the long term Plant where feasible for the long term

19. Allied Grape Growers, 2011. All rights reserved. Merlot The Numbers: The Numbers: 3% Non-Bearing 3% Non-Bearing 1.15% AGR 1.15% AGR The Supply Trend: The Supply Trend: Pullouts/Grafting still? Pullouts/Grafting still? Flat supply thru 2014 Flat supply thru 2014 The Implication: The Implication: No “new” production No “new” production Likely to see stronger market in future Likely to see stronger market in future Only plant where feasible for the long term Only plant where feasible for the long term

20. Allied Grape Growers, 2011. All rights reserved. Pinot Noir The Numbers: The Numbers: 18% Non-Bearing 18% Non-Bearing 6.79% AGR 6.79% AGR The Supply Trend: The Supply Trend: New production mostly thru 2012 New production mostly thru 2012 Planting slowing Planting slowing Newest production mostly at the low end Newest production mostly at the low end The Implication: The Implication: New supply coming in to match price demands New supply coming in to match price demands High end mostly in balance High end mostly in balance

21. Allied Grape Growers, 2011. All rights reserved. Rubired The Numbers: The Numbers: 26% Non-Bearing 26% Non-Bearing 10.65% AGR 10.65% AGR The Supply Trend: The Supply Trend: New production mostly after 2011 New production mostly after 2011 Planting explosion in 2009 & 2010 Planting explosion in 2009 & 2010 Mostly planted under contract Mostly planted under contract The Implication: The Implication: Limited use in wine Limited use in wine Dependent upon concentrate market Dependent upon concentrate market

22. Allied Grape Growers, 2011. All rights reserved. Zinfandel The Numbers: The Numbers: 3% Non-Bearing 3% Non-Bearing The Supply Trend: The Supply Trend: Pullouts/Grafting a factor into the future Pullouts/Grafting a factor into the future New acres mostly at low end (White Zin) New acres mostly at low end (White Zin) The Implication: The Implication: Markets balancing with continued shift from White to Red in Lodi Markets balancing with continued shift from White to Red in Lodi No significant opportunities for growth, except maybe in Napa No significant opportunities for growth, except maybe in Napa

23. Allied Grape Growers, 2011. All rights reserved. Allied Grape Growers conducted a survey of California growers to determine up-to-date planting & production costs: Allied Grape Growers conducted a survey of California growers to determine up-to-date planting & production costs: The purpose of this exercise is to share current-day costs of production, vineyard acquisition and development costs. The purpose of this exercise is to share current-day costs of production, vineyard acquisition and development costs. We pose the questions: We pose the questions: What is a reasonable ROI for vineyard investment, and should a grower have profit as well as a return on investment for the land? What is a reasonable ROI for vineyard investment, and should a grower have profit as well as a return on investment for the land? Where is the balance of yield and price for breakeven? Where is the balance of yield and price for breakeven? Can the winery/consumer pay what it takes in these current times to cover these costs? Can the winery/consumer pay what it takes in these current times to cover these costs?

24. Allied Grape Growers, 2011. All rights reserved. Napa/Sonoma Per Acre Costs

25. Allied Grape Growers, 2011. All rights reserved. Mendocino/Lake/Solano Per Acre Costs

26. Allied Grape Growers, 2011. All rights reserved. Central Coast Per Acre Costs

27. Allied Grape Growers, 2011. All rights reserved. California Interior Per Acre Costs

28. Allied Grape Growers, 2011. All rights reserved.

30. As always, the wine industry faces many challenges from market issues, to planning and relationship issues to taxation/regulation and process issues. The 2010 winegrape crop was likely below average overall. This downward swing in production, coupled with increasing wine shipments could go a long way toward re-establishing overall market balance. Planting has slowed significantly at the high end. Most new vineyards in the state have been planted in the interior regions for value-priced wines. Growers are planting mostly red grapes, but popular varieties for planting include: Cabernet Sauvignon, Chardonnay, Rubired & Muscat Alexander. Costs of acquisition/development/production continue to increase. Today’s market prices are mostly economically unsustainable.

31. Allied Grape Growers, 2011. All rights reserved.

33. History in Farming Commitment to Sustainability Industry & Community Involvement Awards & Acclamations

34. Allied Grape Growers, 2011. All rights reserved.