Allied Grape Growers, 2015. All rights reserved. Clarksburg District Grape Day State of the Industry...

Allied Grape Growers, 2015. All rights reserved.

Clarksburg District Grape Day

State of the Industry

Jeff BitterAllied Grape Growers

March 3, 2015


Sections

• Current Acreage/Grape Supply Position• Macro-trends (A look at the future)• Segmenting the Industry (By price)• Supply Potential by Variety and

Segment


Current PositionAcreage and Grape Supply


Current PositionAcreage & Grape Supply

Regional Tons

Region 2014% Change from 2013

Three-Year Average

% Off 3-year Average

North Coast 551,887 -6% 573,404 -4%Central Coast 553,315 -7% 565,205 -2%Lodi/Clarksburg 813,956 -14% 893,228 -9%Central Interior 1,911,175 -6% 1,940,560 -2%Other 79,845 -9% 85,692 -7%Total 3,910,178 -8% 4,058,089 -4%



0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

2006 2007 2008 2009 2010 2011 2012 2013 2014

3.14 3.253.06

3.70 3.583.34

4.024.25

3.91

3.673.49 3.673.67

Tons(in Millions)

Statewide Grape Crush, 2006-2014

Winegrape Crush Other Crush

4.09 3.98

4.704.39

4.16



Bearing Non-Bearing Total2014 555,000 100,000 655,000 2015 562,000 90,000 652,000

AGG Winegrape Acreage Estimates



Presentation Assumption:Non-bearing for three years


We have observed new plantings statewide, but now we are beginning

to see significant removals

in the interior.


Why are growers pulling vines out?



Lodi – 12/14

Madera – 01/15

Is over-production

limited to the interior regions?

What Happened?• Imports• Large Crops/Ample

Supply• Shipment/Supply

Imbalance


0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2006 2007 2008 2009 2010 2011 2012 2013 2014Est.

106.8 107.2113.2

117.0 118.1123.9 122.8

118.0 115.6

Cases(in Millions)

Est. California Table Wine Volume <$7/Bottle, 2006-2014

Data Source: Gomberg Fredrikson Report, 2014 Est. by AGG

Segmenting the Business


• Vineyard Removals• It is primarily a SJV phenomenon.• It may be a very tough decision based on vineyard

age.• The ground is not being replanted to grapes.

• Removal Data – From Observation and Public Records• 30,000+ grape acres (20,000+ winegrapes) are

estimated to be pulled out this winter in the SJV.• During the 2014 calendar year the amount of

vineyard removals tripled over that recorded in each of the five previous years.

• It is likely removals will continue at the current pace thru Spring, and even into next year, as growers plan to plant alternative crops.



Macro-trends(A look at the Future)


34.5% White

65.5%

Red

Other Reds Include:GrenacheCab FrancBarberaTeroldegoPetite Verdot

Cabernet Sauvingon

29.2%

Pinot Noir12.2%

Zin/Primitivo3.8%

Petite Sirah4.2%

Merlot3.1%

Rubired3.3%

Syrah1.8%

Malbec1.1%

Other Red7.0%

Other White/Florals

2.7%

Sauvignon Blanc1.1%

French Colombard

1.2%

Pinot Grigio12.5%

Chardonnay17.0%

2014 Winegrape Vines Sold by California NurseriesMacro-trends

Vine Sales - 2015 Nursery Survey Results


-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014

Range of Potential California Winegrape Acres Planted Based on Annual Vine Sales

Macro-trendsWill new acres produce a multi-year surplus?

Are we repeating the early 2000s?-Larger acreage base today-Quicker grower reaction to excess-Less speculative planting


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2009 2010 2011 2012 2013 2014Est.

2015Est.

2016Est.

2017Est.

California Wine Shipments and Grape Production (for wine only)2009-2014 with estimates and projections thru 2017

Wine Shipments Grapes Crushed for Wine

Millionsof Tons

California Wine Shipment Data Source:The Gomberg Fredrikson Report

Macro-trends

Assuming attrition rates of 2% coastal and 6% interior,We are forecast to produce along the demand trendline.


0

10

20

30

40

50

60

70

80

90

100

2006 2007 2008 2009 2010 2011 2012 2013 2014Est.

64

68.4 69.6 71 74.9

81.187.2

92.197

Cases(in Millions)

Est. California Table Wine Volume >$7/Bottle, 2006-2014

Data Source: Gomberg Fredrikson Report, 2014 Est. by AGG

Macro-trends


Segmentingthe Industry



• <$10 – Everyday Wines – (The “Value” Category)• The backbone of the industry• Highly competitive (not only within the wine business,

but among competing beverage industries)• The bottom end of this segment has been declining in

volume for decades• Generally characterized by higher volume/lower

margin• Limited differentiation• Lower portions of this segment may exist due to

oversupplies of wine worldwide• Competing interest – production agriculture• Geographically – the interior regions

• (Grapes <$1,000/ton)

Bottle Prices:Less than $10 / $10-20 / and above $20



• $10-20 - Premium Segment (The “Mid” Category)• Seemingly more mainstream to the U.S. consumer• Consumer confidence and value are keys to success• Grape buyers looking to average down their cost• Growers challenging the paradigm of low-yield = high

quality• Geographically – coastal regions

• (Grapes $1,000-2,000/ton)




• >$20 - Luxury Segment (The “High” Category)• Based on discretionary income• Highly differentiated; provides unique experience• Limited land & unique sites (grape

growing/marketing)• Ultimate place in the business for differentiation• Grants the most ability to invest in quality & pass

along cost• Geographically – Very specific coastal areas

• (Grapes >$2,000/ton)




Essentially, the California Coast

Range is the geographic line that

represents the+/- $10/bottle pivot point in the market.

<$10

>$10= <$10= $10-20= >$20



-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2012 2013 2014

Segment Allocation of Winegrape Vines Sold, 2012-2014

HighMidValue

24 Million

30 Million

27 Million

Higheremphasis

in NorthernInterior

Majorconcentrationin Northern

Interior


Supply PotentialBy Variety and Segment


Supply Potential - Chardonnay

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

High Mid Value

Est. California Chardonnay Bearing Acres, 2013-2017

2013 2014 2015 2016 2017

Includes 2% Attrition Rate

0% 1% 2%

3% 3% 4%

-1% 4% 4%


Supply Potential – Sauvignon Blanc

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

High Mid Value

Est. California Sauvignon Blanc Bearing Acres, 2013-2017

2013 2014 2015 2016 2017

Includes 2% Attrition Rate for High and Mid

0% -1% 1% 0% 0% -1%0% 1% 2%


Supply Potential – Pinot Grigio

-

5,000

10,000

15,000

20,000

25,000

High Mid Value

Est. California Pinot Grigio Bearing Acres, 2013-2017

2013 2014 2015 2016 2017

3% 3% 1%

2% 4% 9%

7% 12% 23%


Supply Potential - Merlot

-

5,000

10,000

15,000

20,000

25,000

30,000

High Mid Value

Est. California Merlot Bearing Acres, 2013-2017

2013 2014 2015 2016 2017

Includes 2% Attrition Rate

-2% -1% -1%1% 0% 0%

1% 2% 1%


Supply Potential - Pinot Noir

-

5,000

10,000

15,000

20,000

25,000

30,000

High Mid Value

Est. California Pinot Noir Bearing Acres, 2013-2017

2013 2014 2015 2016 2017


2% 5% 4%

9% 10% 6%

3% 8% 13%


Supply Potential – Petite Sirah

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

High Mid Value

Est. California Petite Sirah Bearing Acres, 2013-2017

2013 2014 2015 2016 2017


1% 6% 1%

6% 5% 6%

16% 23% 15%


-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

High Mid Value

Est. California Winegrape Bearing Acres, 2013-2017

2013 2014 2015 2016 2017

Includes 2% Coastal Attrition Rateand 6%Interior Attrition Rate

1% 2% 2%

6% 6% 5%

-1% 1% 0%

Supply Potential - All Wine


Summing up for Success• Market growth is currently at higher price points.

This is a prime opportunity to differentiate.• Focus on promoting California (A grower driven marketing

order?)• Embrace sustainability (on our terms)

• Industry growth requires continued investment in our future.

• Clean vine stock protocols• Pest/disease prevention and control programs

• Continue to monitor production increases and inventories.• A healthy industry strives for growth but requires balance• Planting for need is critical; pulling for lack of market is

essential• Opportunities exist, even in segments of the

business that appear disadvantaged at the moment.


For more information,visit us at:

alliedgrapegrowers.org

Allied Grape Growers, 2015. All rights reserved. Clarksburg District Grape Day State of the Industry...

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Transcript of Allied Grape Growers, 2015. All rights reserved. Clarksburg District Grape Day State of the Industry...