Nielsen Trends Review: Lodi on the move! Brian Tognotti June 2017

Agenda Nielsen Overview Beer-Wine-Spirits Trends Wine Category Trends Lodi Deep Dive Wrap Up

Nielsen measures what people watch and buy

What Nielsen measures in Beverage Alcohol WINE 221 MM 9L cases $33 billion dollars (@ retail) OFF PREMISE ON PREMISE Food / Drug Mass Merchandisers Dollar Convenience Military Exchanges Select Club Stores Liquor* Eating (Restaurants) Drinking (Bars) E-commerce (in development 2017) *7 liquor market geographies (NY City, NJ, FL, MA, MD, CO, MN); PLUS 15 liquor chain retailers across the country

Beer-Wine-Spirits Trends

Bev Al trends slowing, but still ahead of total CPG Spirits Wine Beer Total Store CPG* 6 *Total Store Definition – Includes Departments Bakery, Baby Care, Dairy, Deli, Frozen, General Merchandise, Grocery, Health & Beauty Care, Household Care, Meat, Pet Care, Produce…. Does NOT Include Alcohol and Tobacco Products CPG = xAOC + Convenience; BEV AL = xAOC + Convenience + Liquor Plus 6

In a flat to negative CPG environment, wine is a star Nielsen Off Premise Channels % Dollar Change Source: Nielsen Off Premise All Outlets (xAOC + Liquor Plus + Conv + Military); 52 w/e 5/20/17

Every drinking occasion is a battle, especially for females % that drink 3+ Bev Al segments within one off premise drinking occasion 36% Millennial Females 10% Boomer Females Source: Nielsen Bev Al Generations study, conducted via Nielsen Harris Survey; 11/29/16 – 12/14/16

Wine and Spirits winning “battle of the pour” at Beer’s expense $234 BILLION Beer 50% 18% 32% Spirits Wine Source:

On Premise: Spirits & Wine steal share from Beer Spirits sales in bars and restaurants growing steadily at the expense of beer; wine slowly recovering Total Beer Wine Spirits 9L Eq % chg vs YA -1.6% -2.0% +0.9% +1.4% $ % chg vs YA +1.2% -0.8% +1.6% +3.2% Source: Nielsen CGA on premise data – megacategory, volume, value, 9L EQ, rolling 52 w/e 01/28/2017 vs YA

Wine Category Trends

US world’s largest wine market but more potential #1 Growing, Consistently Volume & Value #42 per capita** 74%<France 72%<Italy 120MM Consumers At least several x per year 85MM at least monthly 46MM at least weekly Average responses consumer surveys conducted in 2015

Wine growth slowing across all price tiers Pickup in April primarily due to Easter 2017 timing vs 2016 Source: Nielsen Scantrack, Total US xAOC+Liquor+Convenience+Military

Trade up continuing despite the slowdown Total Wine $ Share by Price Tier -0.7 pts -0.6 pts +0.9 pts +0.9 pts +1.1 pts +1.5 pts -1.2 pts -1.4 pts Source: Nielsen Homescan, Total US xAOC+Liq+Conv+Military

Access to wine continues to expand # of Locations (On and Off Premise) that Sell Wine ~ 120,000 more than 10 years ago Source: Nielsen TDLinx – December of each year

Wine channels up nearly across the board Walmart, Target Annual $ Billions $0.08 $2.3 $0.5 $0.8 $8.1 $0.4 $4.3 $17.1 $0.1 Price/ 750 ml $30.72 $38.69 $6.81 $6.99 $7.34 $7.26 $5.26 $8.67 $40.05 $5.53 Source: : **Nielsen/Nielsen CGA - ; 52 weeks thru 12-31-2016 Wines and Vines/Ship Compliant –Annual 2016; Wine.com – Annual 2016; NABCA – Annual 2016

Average price of a 750ML bottle has crossed $10 Source: Nielsen Total U.S. xAOC + Liquor Plus + Conv + Military

Taste, quality top reasons for choosing premium wines Millennial Source: Nielsen Bev Al Generations Study (2016)

High end not just a red phenomenon 750ML Glass PRICE TIER <$8 $8-$11 $11-$20 $20+ $11+ $ Share Chardonnay 51% Cab Sauv 62 Red Blends 37 P Grigio/Gris 32 P Noir 65 Sauv Blanc 54 Merlot small 35 Moscato 13 Malbec 42 Riesling 15 Zinfandel Wht Blends Rose 58 <0% 0-+4.9% +5-+9.9% +10%+ 19 Source: Nielsen Total US xAOC + Liquor Plus + Conv + Military, 52 w/e 4-22-2017

Fragmentation reducing dominance of top brands 19 17 14 # of top 25 in 2010 smaller today 20 Source:

Innovation contributing less to fragmentation; assortment contributing more # ITEMS ON SHELF # of new Wine items launched in Off Premise in 2016 Average # of Wine items on shelf (Grocery Channel - 2016) 2,167 390 Down from 2,851 in 2015 Up from 383 in 2015 Source: Nielsen Off Premise All Outlets (xAOC + Liquor Plus + Conv + Military); New items 52 w/e 12/31/16; average # items 52 w/e 1/28/17

Rose, Sauv Blanc, Red Blends Lead growth +26%

Rose is on fire !!! About 2.2% of Table Wine now (up from 1.5% 5 months ago) Growing at close to +26% (and over +71% at price tiers above $11) Almost 38% of dollars sold above $11 US now leads with 56% share, with France at 38%; others each <5% Significant number of new entries Summer skewed – opportunity to extend the season? Female (younger) skewed – opportunity to extend to more Males? 23 Source: Nielsen Total U.S. xAOC + Liquor Plus + Conv + Military; 52 w/e 5-20-2017

Sparkling wine is bubbling over Up +9% off a 1.5 Billion base Growth led by Prosecco (18% of category $; +24% annual growth), but others too (Cava, Champagne) – a rising tide lifting all boats Sparking Rose’ up +19% Growth at multiple price points; $13-$20 especially vibrant and large Opportunities around extending… beyond just celebratory drink occasions to more Males to more Table wine buyers 24 Source: Nielsen Total US xAOC + Liquor Plus + Conv + Military; 52 w/e 5-20-2017

Alternate packaging vehicles on the rise Single Serve Wine on Tap 3L Boxes: +16% Tetra: +22% Cans: +143% 25 Source: Nielsen Total US xAOC + Liquor Plus + Conv + Military; 52 w/e 5-20-2017

Wine increasingly concentrated at upper income levels Total Wine $ Share by HH Income Level +0.7 pts +1.5 pts $100K+ % of US Population: 22.8% $100K+ % of US Population: 24.2% Source: Nielsen Homescan, Total US xAOC+Liq+Conv+Military

While battle for younger generation rages, are needs of seniors being considered? 65+ WINE BEER SPIRITS INDEX 117 57 77 CAGR +.28 % +.74 % +.38 % +3.4 % Source: U.S. Census Bureau (2014)

LODI DEEP DIVE

First, a word about Nielsen Coding Coding is based on appellation on label – no visibility to in-bottle mix 29

Lodi-appellated wine up nearly 9% +8.6% +6.7% Source: Nielsen Total U.S. xAOC + Liquor Plus + Conv + Military

Distribution continuing to build, with nearly 5 items on the shelf on average; promo down slightly Source: Nielsen Total U.S. All Outlets (xAOC + Liquor Plus + Conv + Military), Current 52 Wks

Zinfandel and Cabernet make up nearly ¾ of Lodi wine Source: Nielsen Total U.S. All Outlets (xAOC + Liquor Plus + Conv + Military), Current 52 Wks - W/E 05/21/16

Lodi growth cooled since last year, but still outpacing category, Napa and Sonoma 33 Source: Nielsen Total U.S. All Outlets (xAOC + Liquor Plus + Conv + Military), Latest 52 Wks - W/E 05/20/17

Lodi wines priced higher than Columbia Valley, Central Coast and Monterey County 34 Source: Nielsen Total U.S. All Outlets (xAOC + Liquor Plus + Conv + Military),Five Years Current Periods 52 Wks - W/E 05/20/17

Lodi showing healthy price appreciation 35 Source: Nielsen Total U.S. All Outlets (xAOC + Liquor Plus + Conv + Military),Five Years Current Periods 52 Wks - W/E 05/20/17

Lodi-appellated wine consumers tend to be wealthy, educated and older; live in suburbs or cities Household Income $100K+ (194 index) Affluent Suburban Spreads (164 index) College Graduate (159 index) Cosmopolitan Centers (157 index) Empty Next Couples (133 index) Senior Couples (133 index) Professional/Managerial (123 index) Source: Nielsen Homescan Total U.S. All Outlets 52 Wks - W/E 12/24/16

Lodi wines more evenly distributed across major markets 116 119 112 106 110 102 124 92 116 123 105 101 114 108 103 113 107 118 107 117 129 109 105 103 116 120 + 81-119 37 Source: Nielsen Scantrack, xAOC Markets, Current 52 Wks - W/E 05/20/17 80 & Below

Kroger and Alb/Sfy top sellers of Lodi Wine with around 8 items on shelf; Raley’s flat with nearly 14 items Source: Nielsen Scantrack, xAOC Markets, Current 52 Wks - W/E 05/20/17

Wrapping Up: Lodi on the move! Wine trends slowing off premise, but far better than CPG Trade up to premium continuing despite slowing category growth More and more places to drink Wine Wine becoming more fragmented, so find ways to stand out Rose and sparkling growth slowing but still hot Growth still strong for Lodi-appellated wines, with broadening distribution and solid price positioning Zinfandel and Cabernet Sauvignon nearly ¾ of Lodi sales Lodi wine has an upscale, older consumer Kroger, Albertsons/Safeway and Publix doing well with Lodi wine 39

Thank you! Brian Tognotti Brian.Tognotti@Nielsen.com