1. Winegrapes & Concentrate
State of the Industry
Winegrapes & Concentrate
Jeff Bitter
Allied Grape Growers
November 13, 2018

2. Evaluating the Market and Forecasting the Future
First: Set the stage for wine market discussion
Next: Trends in the wine business
Next: Central Valley supply/demand
Finish: Discuss concentrate market and interaction with raisin industry

3. Setting the Stage However
Grape & Wine Markets Are Under Constant Evaluation
Short and Long Term Supply Evaluation
Crop Size, Bulk Wine Market & Acreage Analysis
Short and Long Term Demand Evaluation
Consumer Behavior and Demographics
Producers/Winemakers Generally Slow to React
Varietally vs. Categorically
However
Growers Seek Stability
Challenges to Stability Exist
Mother Nature
Global Supply
Ever-Rising Costs
Understanding Grape/Wine Spot Market
Gives Directional Information
Never Truly Reflects Industry Stability

4. Wine Industry Stability
Stability can come in times of growth, times of regression, or amidst no change at all.
Market stability is a function of supply/demand equilibrium, regardless of specific market volume/size or direction.

5. Potential Threats To Market Stability
Unavoidable Supply Changes (short-term)
Large crops and/or imports pressure
Economic Regression (mid-term)
Consumer Age Demographics (long-term)

6. Trends in the Wine Business…..

7. Premiumization vs. Commoditization
The
$10/Bottle
Divide
Premiumization: The action or process of attempting to make a brand or product appeal to consumers or buyers by emphasizing its superior quality and exclusivity.
Commoditization: The process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers.

8. Wine Shipment Growth Rates are Slowing
Wine Shipments
Wine Shipment Growth Rates are Slowing

9. Wine Shipments Slowing
Percentage changes reported from the Gomberg-Fredrikson Report

10. Wine Shipments
What are some of the characteristics associated with slowing wine shipments?
Incredible competition and product offerings
Growth brands are essentially cannibals
Wine producers practice “just-in-time” supply management
Start/stop buying behavior (Now shifting to bulk market)
Bottling/warehousing just before shipment
Speculative or opportunistic grape buying is limited
Enhanced efforts surface to maintain margin
Wine producers focus on value
More attention on the intersection of price/quality

11. Domestic Wine Consumption Growth

12. Supply Stability
Planting at Attrition Rate
(Forecast)

13. Statewide Supply
Record crop, but not
record yield

14. Central Valley
Winegrapes

15. Central Valley

18. Relative Bright Spots in the 2018 Winegrape Market
Generic Whites (including Thompsons)
Grapes for Rosé
Florals
Rubired (Color)

19. Winegrape Market Summary
Trump’s
“very unofficial” reaction
Winegrape Market Summary
Demand and supply trends of wine & winegrapes are limiting opportunities for Central Valley market expansion.
The recent over-supply of Central Valley winegrapes is now mostly diminished with increased vineyard removals.
Opportunities in the interior come specifically from strong production and/or above average quality allowing inclusion in price points above $6/bottle.
Imports are making in-roads at our expense in a U.S. market that is still growing.
Given market dynamics are “stable” over the next year, it is likely we will see no real change in the value of, or demand for, most Central Valley grapes for crush.

20. Red and White Grape Juice Concentrate
Shifting Gears…..
Red and White Grape Juice Concentrate

21. Red and White Concentrate

22. Red and White Concentrate
Red concentrate:
Stable demand/relatively balanced market.
California (Red 1,000): +/-$12.00/gallon.
Producers selective about re-signs; based on color history
White Concentrate:
Finally transitioned from long to balanced last year.
Argentinian crop was “average” in 2018.
California white concentrate traded at or near $10.00/gallon this year.
Demand is impacted by permeate (Red 200) – the by-product of crystal-color (75% of volume) and table grape strippings and other “leftover” grapes.

23. Defined Need

24. Go Green or Make Raisins?

25. Winegrapes & Concentrate
Thank You!
State of the Industry
Winegrapes & Concentrate
Jeff Bitter
Allied Grape Growers
November 13, 2018