Quality, Integrity, Stability

Association Report Changing with the Times Investments in staffing/regional development Changes in AGG member profile Work with members regarding sustainability Expansion of customer base Negotiate planting contracts

Association Report Continued involvement in, and contribution to, numerous boards, committees and task forces

Consider a Donation: Allied Grape Growers – Bob McInturf Endowment Contact Ag One today! (559) 278-4266

Bringing winegrape supply data to the industry… Association Report Bringing winegrape supply data to the industry…

Winegrape Market Review Central Interior Northern Interior Central Coast North Coast

A few points to make about winegrape production: World winegrape production is mostly flat

Worldwide Wine Production Chart Source: OIV

A few points to make about winegrape production: World winegrape production is mostly flat California production is forecasted to be flat in the near future

Our Production Potential

The ongoing challenge is to understand The wine world is a large, diverse place with competition from many different countries, regions and appellations, none of which really have a specifically dominant position. The ongoing challenge is to understand your position in this big picture, and more importantly, position yourself for success.

Fungibility “Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. That is, it is the property of essences or goods which are capable of being substituted in place of one another.” -Source: Wikipedia-

Our forecast for 2017 is +/-15,000 new acres. Planting Trends Our forecast for 2017 is +/-15,000 new acres.

Planting Trends, 2014-2016 2016 – 15 million vines Cabernet Sauvignon - 35% Chardonnay – 16% Pinot Noir – 16% Pinot Grigio – 7% 2015 – 19 million vines Cabernet Sauvignon - 31% Pinot Grigio – 17% Pinot Noir – 15% Chardonnay – 13% 2014 – 27 million vines Cabernet Sauvignon - 29% Chardonnay – 17% Pinot Noir – 12% Pinot Grigio – 12%

Tying Regions to Categories <$7/Bottle Interior - south of Lodi $7-10/Bottle Interior – Lodi/Delta and north $10-20/Bottle Coastal (standard) >$20/Bottle Coastal Premium (primarily Napa & Sonoma)

Tying Regions to Categories

Production Breakdown

Macro Supply Trends Going Forward

Evolving California Acreage Base Compare these net gains/losses in acreage to wine shipment growth rates by category

Behavior Catalyst ...so what is driving the wine business today? Premiumization empowered by the economy Behavior Catalyst

Keeping California’s Wine Industry Great Quality is a prerequisite of fungibility. Without it, you are stuck in a rut! Labor and water issues are critical going forward and play a direct role in the success of the wine industry. The collaboration of growers & wineries through regional and statewide organizations provides synergies for advancement and opportunity. Research, Research, Research Sustainability and related certifications are a must-do as we continue to differentiate California wine in the market.

Sustainable Winegrowing SWP Overview What is Sustainability? The Sweet Spot Sustainable Winegrowing Just a quick overview of the way we think about sustainability – it is about balancing the 3 Es of sustainability (which you have probably heard of before) or the environmental, economics and social equity (or the people aspect including neighbors and community and employees). The goal is to consider all of these things when you are making decisions in the vineyard or winery.

Industry Commitment International Programs Sustainability Drivers Industry Commitment International Programs Australia New Zealand South Africa Chile Italy California & Regional Programs Oregon Washington New York

Industry Update CAWG recently secured $5,000,000 for the PD/GWSS program. SGMA is nothing to be ignored – be aware of what’s coming. Food Safety Act: What are requirements? For who & when? CAWG working with FDA for exemption for winegrapes. We need to be aware of SB 623 (Monning) - “Safe & Affordable Drinking Water Fund”. Opposition to SB 252 (Dodd) - Proposed limit on any new ground water pumping Cap & Trade Reauthorization Bill AB 1420 (Aguiar-Curry) - North Coast Irrigation Ponds AB 1513 litigation update – Nisei Farmer’s League Appeal Numerous labor bills related ICE raids, access, I-9 forms, audits and notifications to the Labor Commissioner It’s important to contribute to PAC’s to help defend ourselves

Industry Update There are threats to our continued success Available & skilled labor supply Bulk & bottled imported wines Regulations via bureaucratic decisions Unfriendly state business legislation But the overall wine industry remains strong & successful in California and domestically. California wine shipments continue to expand. The US remains the #1 wine consuming nation. Consumers continue to spend more on wine.

Thank you from all of us…. Questions? Thank you from all of us…. The AGG Team, 2017