1. Building the Winegrape Supply Puzzle
Jeff Bitter
Allied Grape Growers
Building the Winegrape Supply Puzzle
Livermore
Valley Winegrowers’
Annual Grower
Meeting
March 1, 2018

2. Themes Equilibrium Fungibility Stability Premiumization 2015 2016 2017
2018
Fungibility
Stability
Themes

3. Supply Stability
Planting at Attrition Rate
(Forecast)

4. Production for 2018-2020 based on average yield of 7.2 tons/acre
Supply Stability
Production for based on average yield of 7.2 tons/acre

5. What/where are growers planting and what are consumers buying?
Trends –
What/where are growers planting
and what are consumers buying?

6. Huge preference toward reds:
28% white

7. Varietal Growth, by Price
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report

8. Segmenting Supply Central Valley North Valley California Coastal AVA
(Value Wines)
North
Valley
(Daily Drinkers)
California
Coastal
(Premiums)
AVA
Based
(Luxury Wines)
<$6/bottle
$6-10/bottle
>$20/bottle
$10-20/bottle

9. Central
Valley
(Value Wines)
<$6/bottle

10. Central Valley Land Use: Competing Crops & Water Reginal Market/Supply
Hot Topics

11. Reginal Market/Supply
Central Valley
Declining Shipments
Reginal Market/Supply
Hot Topics

12. Rolling 52-Week Sales Comparison of Wine, by Price
Central Valley
Rolling 52-Week Sales Comparison of Wine, by Price
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report

13. Central Valley

14. Central Valley
“The bottom line is that, following the 2015 crop, we will still need to remove about 36,000 acres…”

15. Central Valley
(Forecast)

16. Central Valley

17. Central Valley

18. Bright Spots/Opportunities
Central Valley
Production
Ability
Bright Spots/Opportunities
Regional
Floral,
Off-Dry
& Color
Rosés?
Blends?
Categorical
Strengths

19. North
Valley
(Daily Drinkers)
$6-10/bottle

20. Reginal Market/Supply
North Valley
Zinfandel
Reginal Market/Supply
Hot Topics

21. Reginal Market/Supply
North Valley
Margin Compression
Reginal Market/Supply
Hot Topics
Costs
Data from Table 10, GCR Estimated
Costs arrow shown for
illustration purposes only
Estimate

22. North Valley

23. North Valley

24. Bright Spots/Opportunities
North Valley
Regional
Bright Spots/Opportunities
Premiumization
Potential
“Middle” of
the Market
Varietal
Diversity

25. California
Coastal
(Premium Wines)
$10-20/bottle

26. Reginal Market/Supply
California Coastal
Labor
Reginal Market/Supply
Hot Topics

27. Reginal Market/Supply
California Coastal
Slowing Premium Wine
Growth Rates
Reginal Market/Supply
Hot Topics

28. Rolling 52-Week Sales Comparison of Wine, by Price
California Coastal
Rolling 52-Week Sales Comparison of Wine, by Price
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report

29. Premium Winery Sales Growth
California Coastal
Premium Winery Sales Growth
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report

30. California Coastal

31. California Coastal

32. Bright Spots/Opportunities
California Coastal
Regional
Bright Spots/Opportunities
Epicenter of
Growth
“Managed” Growth
AVA Extenders
and
Alternatives

33. AVA
Based
(Luxury Wines)
>$20/bottle

34. Reginal Market/Supply
AVA Based
Reginal Market/Supply
Hot Topics
Relationship with
“The Economy”

35. Sales Growth Rates of U.S. Luxury Goods
AVA Based
Sales Growth Rates of U.S. Luxury Goods
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report

36. Reginal Market/Supply
AVA Based
Wildfires and
Consumer Perception
Reginal Market/Supply
Hot Topics

37. AVA Based (The day the fires broke out)
AGG Stats as of October 8th
(The day the fires broke out)
- 78% of 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

38. AVA Based

39. AVA Based

40. Bright Spots/Opportunities
AVA Based
Regional
Bright Spots/Opportunities
Strong Consumer
Identification
AVA Promotion
Domestic
Advantage

41. Summing it up…

42. Supply Stability
9,000 Net Acre
Reduction (-5%)

43. Supply Stability 9,500 Net Acre North Valley Addition (+7%)
Overall Interior
Acres Flat
From 2016

44. Most of the new acres came in 2017!
Supply Stability
16,500 Net Acre
Addition (+7%)

45. Warehouse Wine Shipment Trends
Consumer Pull-Thru
Warehouse Wine Shipment Trends
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report

46. Summary
With all of the supply pieces now in place, it appears we will have virtually no material growth in bearing acreage through Supply growth will only come through increased productivity and likely “larger” annual crops.