May 10 2018 Jeff Bitter Allied Grape Growers Lodi District Grape Growers Association Presentation Pieces California Supply Trends California Wine Shipments Lodi CropMarket Update Wine Shipments ID: 760081
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Slide1
State of the
IndustryPiecing Together the Wine Industry Supply/Demand Puzzle
May 10, 2018
Jeff BitterAllied Grape Growers
Lodi DistrictGrape GrowersAssociation
Slide2Presentation Pieces
California
Supply
Trends
California
Wine
Shipments
Lodi
Crop/Market
Update
Slide3Wine Shipments:
What are consumers buying?
Slide42017 Wine Shipments
Quote from the Annual
Gomberg
Fredrikson
Report (GFR):
“The U.S. market saw good growth with an increase of 9.7 million cases or just over 2% in 2017.”
Slide5Wine Shipment HighlightsGomberg Fredrikson Report, 2017
Overall:
U.S. market grew to 407.2 million cases of wine
California wines to the U.S. market were up by 1%
Imported wines to the U.S. market were up by 7%
California wines were down overall by 1%
Imports/Exports:
Bottled imports were up 3%
Top importers (in order) were Italy, France, Australia, Chile, Argentina, New Zealand and Spain
Bulk imports were up by 19%
Top importers (in order) were Chile, Australia, New Zealand, Argentina, Italy and Spain
Bottled exports down 16%
Bulk exports were flat
Slide6Wine Shipments
Are Premium Wine Growth Rates Slowing?
Slide7Rolling 52-Week Sales Comparison of Wine, by Price
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report
Wine Shipments
Is Premium Wine Growth Slowing?
Slide8Premium Winery Sales GrowthSource: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report
Wine Shipments
Are Premium Wine Growth Rates Slowing?
Slide9Wine Shipment HighlightsFor 2017, as compared to 2016
As reported by
Neilsen
<$4/bottle - down 4%
$4-8/bottle - down 4%
$8-11/bottle - up 1%
$11-15/bottle - up 7%
$15-20/bottle - up 10%
>$20/bottle - up 8%
As reported by the GFR
<$3/bottle - down 7%
$3-7/bottle - up 1%
$7-10/bottle - flat
$10-14/bottle - up 12%
$14-20/bottle - up 9%
>$20/bottle - up 8%
Slide10Wine Shipment HighlightsGomberg Fredrikson Report, 2017
Varietal Volume Performance
(scan data in food stores only)
Chardonnay flat (value up 2%)
Pinot
Grigio
up 4%
Moscato up 2%
Sauvignon Blanc up 8% (value up 10%)
Other whites down 6%
White Zinfandel down 5%
Cab
Sauv
up 3% (value up 6%)
Red Blends up 2%
Merlot down 6%
Pinot Noir up 7% (value up 10%)
Red Zin down 6% (value down 1%)
Other reds up 3%
Slide11Value Change, by Variety, for >$8/Bottle
2017 as compared to 2016
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report
Slide12Volume Growth by Variety and Price Range
Source: With Permission - Danny
Brager
, Nielsen Company
Slide13What about
“trade wars?”
Slide14Supply Trends:
What is our
winegrape
supply future?
Slide15Supply Stability
Planting at Attrition Rate
(Forecast)
Slide16Supply Stability
Production for 2018-2020 based on average yield of 7.2 tons/acre
Slide17Huge preference toward reds:
72% red
28% white
Slide18Segmenting Supply
North
Valley
(Daily Drinkers)
Central
Valley
(Value Wines)
California
Coastal
(Premiums)
<$6/bottle
$6-10/bottle
$10-20/bottle
>$20/bottle
AVA
Based
(Luxury Wines)
Slide19Central
Valley
(Value Wines)
<$6/bottle
Slide20Central Valley
Slide21Central Valley
“The bottom line is that, following the 2015 crop, we will still need to remove about 36,000 acres…”
Slide22Central Valley
(Forecast)
Doesn’t equal 36,000 acres
Slide23North
Valley
(Daily Drinkers)
$6-10/bottle
Slide24North Valley
(Forecast)
Slide25North Valley
Regional Bright Spots/Opportunities
Premiumization
Potential
“Middle” of
the Market
Varietal
Diversity
Slide26North Valley
Slide27North Valley
Slide28California
Coastal
(Premium Wines)
$10-20/bottle
Slide29California Coastal
Slide30California Coastal
Slide31California Coastal
Regional Bright Spots/Opportunities
Epicenter of
Growth
AVA Extenders
andAlternatives
“Managed” Growth
Slide32AVA
Based
(Luxury Wines)
>$20/bottle
Slide33AVA Based
Reginal Market/Supply
Hot Topics
Relationship with
“The Economy”
Slide34Premium Winery Sales GrowthSource: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report
AVA Based
Slide35AVA Based
Sales Growth Rates of U.S. Luxury Goods
Source: With Permission - Silicon Valley Bank’s 2018 State of the Wine Industry Report
Slide36AVA Based
Slide37AVA Based
Slide38Summing up Supply…
Slide39Supply Stability
9,000 Net Acre
Reduction (-5%)
Slide40Supply Stability
9,500 Net Acre
North ValleyAddition (+7%)
Overall Interior
Acres Flat
From 2016
Slide41Supply Stability
16,500 Net Acre
Addition (+7%)
Most of the new acres came in 2017!
Slide42The Lodi
Winegrape
Market
Hot or Not?
Slide43Winegrape Crop Potential
Slide44Whites:High level of interest in Sauvignon BlancBuyer interest/activity in Generic WhitesAverage interest/activity on ChardonnayVirtually no interest in Pinot GrigioStrong interest in florals with some offers/activity (mostly south)Blush/RoséPotential interest in reds for Rosé programs (Demand moves south)White Zin stable (mediocre) due to pullouts, early year activityReds:Strong interest in Pinot Noir (virtually none on the market)Relatively strong interest in Cabernet SauvignonPockets of interest for Petite Sirah/Teraldego and other blendersExtremely mild activity on ZinfandelNo “current” interest/activity for Merlot
Winegrape
Market Activity
Slide45DomesticallyContinuing decline of wine shipments <$10/bottle“Ample” supply of Central Valley grapesSlowing growth rates of premium wines?“Skittish” purchasing behavior by buyers(Result is an inconsistent or non-fluid marketplace)GloballyGenerally negative consumption patternsCompetitor cost advantageTrade wars?
What Are Our Challenges?
Slide46Wine consumers continue to be very fickle; they are not particularly loyal to California, readily looking to foreign alternatives.
Premiumization will continue as the dominate wine industry trend, as consumers trade up in quality, all while being value conscious.California will experience no material growth in bearing acreage through 2020, but higher yields and larger crops are likely.Producers will continue to adjust regional supply, in response to continually changing consumer preference.
Summary