1. 33rd Annual Grape Day State of the Industry Nat DiBuduo
Allied Grape Growers
April 21, 2016

2. -AGG’s Industry Update Newsletter, January 2016-
“It’s more interesting to talk about huge crops during excess or short crops during shortage, but a short crop in a time of ample supply just makes for a boring production story of “moving toward balance.””
-AGG’s Industry Update Newsletter, January 2016-

3. Wine Shipments U.S. Wine Market Volume
Graph Source: The Gomberg Fredrikson Report Annual Wine Industry Review

4. California Wine Shipment Volume
Graph Source: The Gomberg Fredrikson Report Annual Wine Industry Review

5. Wine Shipments
Data Source: The Gomberg Fredrikson Report Annual Wine Industry Review

6. The Changing Five-Year Landscape
2010 vs. Now…..
Supply/Production:
Bearing acreage up 11% (now 555,000)
Yield up 5% on average (7.22 TPA average)
Competition:
Wine imports up 15% (114m case average)
Craft beer/Cider
Demographics/Consumers:
Less boomers, more millennials
Premiumization
Economics:
Recession vs. Recovery
Strength of US Dollar up 25%

7. This changing landscape
has/will affect different regions in different ways…
Some positive
Some negative

8. Trends, Issues, Threats & Opportunities
Categorical Review
Trends, Issues, Threats & Opportunities

9. Breaking it Down…. Value - (<$7/bottle)
Interior (excluding Lodi/Delta)
Mid - ($7-10/bottle)
Lodi/Delta
High - ($10-20/bottle)
Coastal (standard)
Luxury - (>$20/bottle)
Coastal (Napa, Sonoma, etc.)

10. Trends, Issues, Threats & Opportunities
Value Category
Trends, Issues, Threats & Opportunities

11. Wine Shipments

12. (All interior, including Lodi)
Vineyard Removal….
(All interior, including Lodi)
+/-35,000 grape acres removed between the 2014 and 2015 harvests (est. 21,000 winegrape).
27,000 acres pulled (+/- 13,000 winegrapes) from 2015 harvest to end of March.

13. Trends, Issues, Threats, Opportunities
Value Segment
Trends, Issues, Threats, Opportunities
Trends
Declining demand/Acreage base revamp
Issues
Economic sustainability/Competing crops
Threats
Imports/Water policy
Opportunities
Differentiate & Premiumize (Quality)

14. Varietal Trends, by Segment…..
California
+6%
+25%
+62%
-15%
-8%
+26%
+75%
+1%
Note:
Change stated cumulatively
Annual attrition rates estimated

15. Trends, Issues, Threats & Opportunities
Mid Category
Trends, Issues, Threats & Opportunities

16. Trends, Issues, Threats, Opportunities
Mid Segment
Trends, Issues, Threats, Opportunities
Trends
Improving visibility/recognition
Issues
Labor, return/cost imbalance
Threats
Surplus of inexpensive winegrapes in SJV
Opportunities
Provide value priced grapes for the high category

17. Varietal Trends, by Segment…..
California
+3%
+15%
+1%
-6%
+32%
+39%
+49%
+2%
Note:
Change stated cumulatively
Annual attrition rates estimated

18. Trends, Issues, Threats & Opportunities
High Category
Trends, Issues, Threats & Opportunities

19. Trends, Issues, Threats, Opportunities
High Segment
Trends, Issues, Threats, Opportunities
Trends
Premiumization lands right in their back yard
Issues
Pricing pressure – related ability to provide value
Threats
Competing beverages/producers (both domestic and foreign) vying for same consumer
Opportunities
Mechanization

20. Varietal Trends, by Segment….
+32%
California
+11%
+23%
-2%
+6%
+23%
+2%
+16%
Note:
Change stated cumulatively
Annual attrition rates estimated

21. Trends, Issues, Threats & Opportunities
Luxury Category
Trends, Issues, Threats & Opportunities

22. Trends, Issues, Threats, Opportunities
Luxury Segment
Trends, Issues, Threats, Opportunities
Trends
Differentiation
Issues
Limited opportunity for growth, scarce resources
Threats
Dependence on economy
Opportunities
Branding - AVA and associated brands

23. Varietal Trends, by Segment….
+8%
California
+2%
+8%
-4% 0%
+1%
+9%
+4%
Note:
Change stated cumulatively
Annual attrition rates estimated

24. Summing it up….
The macro-trends

25. Over the Hump…..
Our prediction for 2016 is 16,000 new acres.

26. Our Production Potential……

27. Evolving Acreage Base…
Represents only 1.3% total growth annually

28. Pierce’s Disease Assessment

29. Sustainability Issues

30. Final Thoughts/Highlights on Winegrape Industry
Premiumization is driving acreage base changes.
As an industry, we need to be realistic about what needs to come out of the ground and why.
The momentum of the business appears to be such that we may revert back to a time of adding an appropriate amount of new acres annually.
There has been, and always will be, opportunity for differentiation; marketing is key.
We need to be diligent in controlling invasive pests statewide

31. Thank you.