1. American Vineyard Magazine’s Sonoma Grape Expo
State of the North Coast
Grape Industry
Jeff Bitter
Allied Grape Growers
November 10, 2017

2. How is the coast positioned from the supply side and what are the implications for the future?
First: Look at the coast’s position in wine market
Next: Coastal varietals history & supply outlook
Next: Challenges in relation to “neighboring”
California wine regions
Last: Factors driving success for the North Coast
and issues that are threats.

3. Allocations – Grapes & Wine

4. The market for “coastal” wines
(i.e. the market above $10/bottle) is really the only segment of the wine business that has shown sustained growth since 2011.

5. Coastal Wine Shipment Trends
About 8.5% annual growth in recent years

6. …..If wine sales above $10/bottle have been that strong, why was it not until this year that we really experienced a decent jump in prices and demand?

7. Production Breakdown

8. ....so what are the grape supply projections for coastal areas in the future?….

9. Note:
Change stated cumulatively
Annual attrition rates estimated

10. Coastal regions don’t function in a supply bubble.
Other areas of the state do have influence on coastal markets.
Note:
Change stated cumulatively
Annual attrition rates estimated

11. ....so if grape supply from other areas of the state can impact coastal grape markets, what’s the supply situation in those areas?

12. Planting Trends

13. ....considering planting trends in the interior, look what was happening to wine sales below $7/bottle and from
$7-10/bottle….

14. $7-10/Bottle
<$7/Bottle

15. ....the combination of increased interior production and flat or slipping shipments below $10/bottle has caused a fairly major acreage correction….

16. Interior Vineyard Removals

17. this is what the California winegrape acreage base transforms to….
.....so as the world turns,
this is what the California winegrape acreage base transforms to….

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

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

20. Economic Performance Key Measures GDP – Gross Domestic Product
Inflation
Unemployment rate
Other Important Indicators
Stock market indexes (S&P, Dow Jones, etc.)
Rate of national debt reduction
Labor productivity
Housing affordability
Surveys
Consumer Confidence/Consumer Sentiment

21. Gross Domestic Product, 2015-2017
Chart source:

22. Inflation & Unemployment
U.S. Inflation Rate, Previous Year
Chart source: tradingeconomics.com
U.S. Unemployment Rate,
Graph source: Bureau of Labor Statistics

24. Major U.S. Market Indexes:
Chart Source: 11/08/2017

25. Consumer/Economic Confidence
11/08/2017

26. Consumer/Economic Confidence

27. California Winegrape Market Points
Although there is no shortage of total winegrape acreage in California, coastal regions or more likely to experience tight supply, particularly on certain varieties and/or in specific regions.
The supply pressure created by excess interior grapes/wine over the last few years is now mostly diminished with increased vineyard removals.
“Reliable” and “stable” market trends since 2012 have allowed us to plan on increasing supply in proportion to projected increases in demand, by region and by variety.
Remember…..it’s the economy, economy, economy.

28. So, what about the fires?

30. The “Real” Impact of the North Coast Fires
Specific AGG Stats
-As of October 8th
(The day the fires broke out)
78% of our total North Coast grapes were already harvested
100% of our WHITE North Coast winegrapes were harvested
100% of our PINOT NOIR was harvested
55% of our RED North Coast winegrapes were harvested

32. Thank you
AGG Staff, 2017