1. Updates on the Grape and Bulk Wine Market
Son Cty Dollars & Sense Jan 2009
20TH ANNUAL VINEYARD ECONOMICS SEMINAR
MAY 8, 2019
Updates on the Grape and Bulk Wine Market
Change is here – a new market Reality?
----- Meeting Notes (1/24/13 17:48) ----- 1 1

2. PROFESSIONAL BROKERS IN 9 COUNTRIES
Son Cty Dollars & Sense Jan 2009
PROFESSIONAL BROKERS IN 9 COUNTRIES
----- Meeting Notes (1/24/13 17:48) -----
Globally based Wine Brokerage Company
Brokering Wine and Grapes
Ciatti Office and employees located in all the major winegrowing regions of the world
We feel strongly you need to have this type of investment to get a true global picture and understand the market
Assist in transactions between buyers and sellers - use that information to understand the market.
Here is what we are seeing
LOCALLY BASED TO HELP BUILD YOUR BUSINESS WORLDWIDE 2

3. POINTS TO DISCUSS SALES DEMAND BULK MARKET 2018 CRUSH GRAPE MARKET
THOUGHTS
----- Meeting Notes (1/24/13 17:48) -----
Rapid changes over the last three years
Moving from Long 2-3 years ago to Short last year to what we see as a currently balanced market
2012 Price increases across the board – Record highs in many areas.
Seller controlled market – Buyers were caught unprepared and were forced to take pricing
Provide you some examples of the changes
CIATTI

4. CALIFORNIA MARKET OVERVIEW
SLUGGISH SALES GROWTH
HISTORIC 2018 CROP
BULK MARKET ACTIVITY SLOW
BULK INVENTORIES INCREASING
MARKET IS ADJUSTING TO NEW REALITY
----- Meeting Notes (1/24/13 17:48) -----
Rapid changes over the last three years
Moving from Long 2-3 years ago to Short last year to what we see as a currently balanced market
2012 Price increases across the board – Record highs in many areas.
Seller controlled market – Buyers were caught unprepared and were forced to take pricing
Provide you some examples of the changes
CIATTI

5. SUPPLY DEMAND DYNAMICS

6. Son Cty Dollars & Sense Jan 2009
WAREHOUSE SHIPMENT TRENDS
CIATTI
Source: Gomberg-Fredikson through Aug 2018, Silicon Valley Bank

7. NON-GROWING US WINE CONSUMPTION?
MILLIONS OF GALLONS
CIATTI
Source: CA Wine Institute, Gomberg Fredrickson, BW 166, SVB

11. 2018 CALIFORNIA SHIPMENTS JAN. 2019 16% 18% (-10%) TOTAL CA WINE 2%5%
(-19%)
11%
TOTAL CA WINE %
DOMESTIC %
EXPORTS (-14% Bottled; +2% Bulk) (-5%)
IMPORTS
CASEGOODS %
BULK (-15%)
TOTAL US Market
IMPORT & DOMESTIC 1%
CIATTI
Source: Gomberg-Frederickson

12. CALIFORNIA BULK MARKET

13. CALIFORNIA BULK WINE INVENTORY
CIATTI

14. CENTRAL COAST CIATTI BULK CHARDONNAY BULK CABERNET SAUVIGNON
BULK PINOT NOIR
PRICE PER GALLON CH
PRICE PER GALLON CS
PRICE PER GALLON PN
CIATTI

15. LAKE / MENDOCINO CIATTI BULK CHARDONNAY BULK CABERNET SAUVIGNON
BULK MERLOT
PRICE PER GALLON CH
PRICE PER GALLON CS
PRICE PER GALLON ME
CIATTI

16. NAPA CIATTI BULK CHARDONNAY BULK CABERNET SAUVIGNON BULK MERLOT
PRICE PER GALLON CH
PRICE PER GALLON CS
PRICE PER GALLON ME
CIATTI

17. SONOMA CIATTI BULK CHARDONNAY BULK CABERNET SAUVIGNON BULK PINOT NOIR
PRICE PER GALLON CH
PRICE PER GALLON CS
PRICE PER GALLON PN
CIATTI

18. Son Cty Dollars & Sense Jan 2015
BULK MARKET
ACTIVITY HAS BEEN SLOW AND PRICING HARD TO PIN DOWN
BUYERS ARE LOOKING FOR DEALS WITH LOWER PRICING
RENEWED ACTIVITY BY NEGOTIANTS IN THE LAST FEW MONTHS
BULK SELLERS HAVE STARTED TO REALIZE NEW MARKET REALITY
WINERIES ALSO LOOKING TO MOVE EXCESS INVENTORY
Larger Wineries Growers Planting Limited to contracts and Capital
CIATTI

19. 2018 CRUSH

20. CALIFORNIA STATEWIDE GRAPE CRUSH
CIATTI

21. STATE REGIONAL TOTAL TONS
CIATTI

22. STATE TONNAGE TOTAL BY VARIETY
CIATTI

23. STATEWIDE AVERAGE PRICES
CIATTI

24. Son Cty Dollars & Sense Jan 2009
THE “BIGGESTS” 
Son Cty Dollars & Sense Jan 2009
NAPA
TOTAL HARVEST CS
SONOMA
CHARD, SB, CS, PN
MENDOCINO
CS, PN
LAKE COUNTY
CLARKSBURG
CHARD, PN, PG, SB, PS
TOTAL STATE
TOTAL HARVEST
PG, CS, PN, PS
LODI
CS, PN, PG, SB, PS
MONTEREY PN
SAN LUIS OBISPO/SANTA BARBARA
CS, PN
CIATTI

25. Son Cty Dollars & Sense Jan 2009
2018 HARVEST – CROP SIZE
AVERAGE CHANGE IN WINE GRAPE YIELDS ( )
REGION
CHANGE
NAPA
29.5%
SONOMA
33.3%
MONTEREY
5.9%
LODI
14.4%
FRESNO
-1.2%
CALIFORNIA STATE
6.6%
CIATTI

26. Son Cty Dollars & Sense Jan 2009
SONOMA COUNTY PRICING DYNAMICS
∆ 23%
∆ 26%
∆ 19%
CIATTI
∆ Average Growth % 2013 to 2018

27. Son Cty Dollars & Sense Jan 2009
NAPA COUNTY PRICING TRENDS
CIATTI
Source: The Correia Company

28. 2019 GRAPE MARKET

29. Son Cty Dollars & Sense Jan 2015
SUPPLY/DEMAND DYNAMICS 2016 – EARLY 2017
Tight Supply Market
Sellers
Buyers
Sellers
(On sideline)
Buying
Selling
CIATTI

30. SUPPLY/DEMAND DYNAMICS TODAY
Expanding
Sourcing
Options
OVERSUPPLY
Buyers
Buyers
Sellers
Buyers
(ON SIDELINE)
SELLING
BUYING
CIATTI

31. NEW REALITY!
MARKET HAS CHANGEDD

32. MARKET SURVEY 2019
CIATTI

33. Son Cty Dollars & Sense Jan 2015
2019 GRAPE MARKET
EARLY MARKET HAS BEEN EXTREMELY SLOW
WINERIES GRAPPLING WITH INVENTORY FROM LARGE 2018 HARVEST, AND IN MANY CASES ARE SELLERS THEMSELVES
MORE SPOT MARKET AVAILABILITY AS WINERIES HAVE GIVEN CONTRACT NOTICES
BUYERS RELUCTANT TO BUY UNTIL THEY KNOW THEY HAVE A REAL NEED, OR THE 2019 CROP DICTATES IT
DELAYED CRUSH REPORT AND THE GALLO/CONSTELLATION TRANSACTION HAVE ALSO CAUSED MARKET HESITATION
Larger Wineries Growers Planting Limited to contracts and Capital
CIATTI

34. GLOBAL MARKET

35. GLOBAL MARKET LARGE 2018 HARVEST CHANGED MARKET BACK QUICKLY! 2017
VERY SMALL 2017 HARVEST CAUSED MARKET TO TIGHTEN
DEMAND/PRICES INCREASED
2018
YIELDS UP 13%
PRICES AND DEMAND FOR BULK WINE HAVE DECLINED IN ALMOST ALL REGIONS
BACK TO NORMAL?
----- Meeting Notes (1/24/13 17:48) -----
Rapid changes over the last three years
Moving from Long 2-3 years ago to Short last year to what we see as a currently balanced market
2012 Price increases across the board – Record highs in many areas.
Seller controlled market – Buyers were caught unprepared and were forced to take pricing
Provide you some examples of the changes
CIATTI

36. GLOBAL SUPPLY / DEMAND MILLION hL VINTAGE CIATTI
Source: OIV 2018, Ciatti Estimates

37. GLOBAL GRAPE ACREAGE 7.5 MILLION HA (18.5 million acres) CIATTI
Source: OIV 2018

38. CHILE QUALITY CONTINUES TO IMPROVE, ESPECIALLY ON THE HIGH END
‘14
‘15
‘16
‘17
’18
’19 Est.
1.5 M
2.0 M
1.4 M
1.7
$ / GAL. DLVD
TREND
CABERNET SAUVIGNON
$3.00 – 4.10 →
MERLOT
$3.10 – 4.20
CHARDONNAY
$3.60 – 4.20 ↑
PINOT NOIR
$4.10 – 5.10
QUALITY CONTINUES TO IMPROVE,
ESPECIALLY ON THE HIGH END
STRONG PLAYER IN CS, ME, PN, AND SB FOR US MARKET
ACTIVE SALES SEASON
FREE TRADE WITH MOST COUNTRIES
Review some countries that are affecting international supply
Explain graph – Tons over 5 years, $ gal dlvred and pricing trends
Chile – production is trending up on tons matching the wine production figures and new planting figures already discussed.
Recent activity by by Spain into the chilean market for white and red generics – has reduced inventories
Varietals are still available. Cost of CS looks good relative to last years 8-11 per gallon pricing.
Cabernet Sauvignon Focused 33 % of Acreage
Have been very successful at exporting bulk to the US, Germany, and China
Comments/Trends
Strong International demand for bulk wine, especially Spanish buyers
Inventory levels are relatively low
Availability of premium varietals before 2013 crush
Percent of production
CS – 33
ME – 12
CH - 9
CIATTI

39. THOUGHTS? Vineyard Economics 2015
Buyers cautious, rising costs are slimming margins

40. ACTIONS TO TAKE
ADJUST YOUR EXPECTATIONS - BE OPEN TO THE REALITIES OF THE NEW MARKET PLACE
SOMETIMES THE FIRST OFFER IS THE BEST OFFER
STRENGTHEN RELATIONSHIPS WITH CURRENT BUYERS – RECOGNIZE THEIR NEEDS
MANAGE INPUTS AND ASSETS TO MAINTAIN PROFITABILITY
DEVELOP A STRATEGY : SHORT TERM – ADAPT AND ADJUST
LONG TERM – PROSPERITY AND PROFITABILITY

41. SUMMARY/CONCLUSION
WE HAVE BEEN THROUGH THIS BEFORE
CONSUMERS WILL CONTINUE TO DRINK CALIFORNIA WINE
PREMIUM SALES GROWING – BUT AT SLOWER RATES
NEW BRAND OPPORTUNITIES EXIST TO UTILIZE THIS AVAILABLE SUPPLY
CAPITALIZE AND INVEST IN THOSE OPPORTUNITIES
MANAGE INVENTORY!!!!! HIGH COST INVENTORY IS NOT A POSITIVE IN OUR INDUSTRY – ESPECIALLY NOW!

42. TODAY’S CHALLENGES ARE TOMORROW’S OPPORTUNITIES
FINAL THOUGHT
DON’T BE FEARFUL
TODAY’S CHALLENGES ARE TOMORROW’S OPPORTUNITIES
CIATTI

43. 201 ALAMEDA DEL PRADO SUITE # 101 NOVATO, CA 94949
THANK YOU
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