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Allied Grape Growers, 2014. All rights reserved.
The 2014 Crush –
What Happened to the Market?
SJVWA Annual Meeting
And Industry Forum
Jeff Bitter, Allied Grape Growers
Matt Towers, O’Neill Vintners and Distillers
Greg Magill, Ciatti Company
November 21, 2014
Allied Grape Growers, 2014. All rights reserved.
Panel Discussion Outline -
•The goal will be to answer this -
• What happened to the market in 2014 and why was
this year so different from recent crop years?
•Three sections developed to address this
• Supply – SJV and worldwide
• Imports and availability/competition
• Shipments at the lower end of the market
•Closing Discussion:
• What is the future of the SJV winegrape business, and
do any competitive advantages exist that help secure
our future?
Allied Grape Growers, 2014. All rights reserved.
Section 1:
Supply
Allied Grape Growers, 2014. All rights reserved.
Supply
0.00
0.50
1.00
1.50
2.00
2.50
2006 2007 2008 2009 2010 2011 2012 2013 2014Est.
1.471.58 1.59
1.741.83 1.80
1.88
2.03 2.00
Tons(in Millions)
SJV Winegrape Crush 2006-2014 Estimate
SJV Winegrapes
CAGR = 4.03%Record statewide harvests
Allied Grape Growers, 2014. All rights reserved.
•Winegrape Planting:
• 2012 plantings for <$7 per bottle is estimated by AGG
at 15,000 acres. Those will begin producing material
crops by next harvest.
• 2013 planting for <$7 per bottle is estimated by AGG at
20,000 acres. Those will begin producing material crops
by 2016.
• 2014 planting for <$7 per bottle will decline significantly
and is expected to be <5,000 acres. AGG annual
nursery survey data will be released in January of 2015
to confirm.
•Winegrape Pullouts
•Estimated by AGG at 15,000-25,000 acres over this
winter, preceding the 2015 harvest
Supply
Allied Grape Growers, 2014. All rights reserved.
Supply
•What’s the impact of current supply on the CA Wine Market?
Year
TOTAL CA WINE GRAPES
Harvested (000,000'S)
EQUIVALENT CASES
(000,000'S)
CALIFORNIA CASES
SHIPPED (000,000's) LONG/(SHORT)
2010 3.58 243 243 0
2011 3.35 228 256 -28
2012 4.02 273 250 23
2013 4.25 289 260 29
2014E 3.9 est. 272 270 2
25.6
• Based on shipments of CA wines over last 5 yrs, CA is
in a structurally long position ~ 25.6 million cases
• Equivalent of about 365,000 tons.
• Equivalent of about 36,000 acres (using 10 tons/acre)
Allied Grape Growers, 2014. All rights reserved.
International
• Decreased production in most countries (AUS,
ARG, CH*)
• Everyone wants into US market; Casegoods are
the priority
• Vine removals in Europe
• New plantings everywhere
Supply
Allied Grape Growers, 2014. All rights reserved.
Supply
0
1
2
3
4
5
6
7
8
9
Ton
s in
Millio
ns
2012
2013
2014
Allied Grape Growers, 2014. All rights reserved.
Section 2:
Imports
Allied Grape Growers, 2014. All rights reserved.
Imports
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2008 2009 2010 2011 2012 2013 Tracking2014
Imported Wine - Bottled and Bulk(In Millions of Cases)
Bulk Imports
Bottled Imports
Data obtained via the Gomberg Fredr ikson Repor t
Total-1%
Total+12%
Total+0%
Total+7%
Total+16%
Total-7%
-5%
+27% +92%
-2% +7% +3% -2% +3%
-20%+26%
+71% -25%
-1%
-1%
Total-1%
Allied Grape Growers, 2014. All rights reserved.
Imports
Allied Grape Growers, 2014. All rights reserved.
Imports
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15
Exchange Rates (Value to $1 U.S.), January 2011 - December 2014
Chilean Peso Argentine Peso Australian Dollar Eur o Br itish Pound
ChileanPeso
Aust $Arg Peso
Euro & Pound
Thru June, bulk
Argentine imports were
up 51% from previous
year
Allied Grape Growers, 2014. All rights reserved.
Imports
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Est. 2014
Thompson Seedless & Rubired Crush2004 - 2014 Estimate
Thompson Seedless Rubired
Tons
Relative strengths and weaknesses in California concentrate production
Allied Grape Growers, 2014. All rights reserved.
0
5
10
15
20
25
30
Argentina Chile Australia Spain South
Africa
New
Zealand
Italy France
Gallo
ns
in M
illio
ns
2011 2012 2013
Source: US Department of Commerce & Gomberg, Fredrikson & Associates
Imports
Allied Grape Growers, 2014. All rights reserved.
CABERNET SAUVIGNON - Global
Market $/Gallon Availability
California $6.50 – 9.00 Balanced
$/Gal Delivered/Duty
Paid
Availability
Chile $2.75 – 3.25 High
Australia $3.50 – 4.75 Moderate
Spain $3.50 – 4.50 Moderate
Imports
Allied Grape Growers, 2014. All rights reserved.
CHARDONNAY - Global Market$/Gallon Availability
California $3.00 – 5.00 Long
$/Gal Delivered/Duty
Paid
Availability
Chile $4.75 – 5.50 Low
Australia $2.50 – 3.00 High
Spain $2.75 - 3.25 Moderate/Hig
h
Imports
Allied Grape Growers, 2014. All rights reserved.
Imports
•Impact of Bulk Wine Imports on CA grape market
Year
BULK STILL WINE IMPORTS
EQUIVALENT CASES (000's)
EQUIVALENT
TONS
EQUIVALENT
ACRES
2011 25,494 367,349 45,919
2012 43,553 627,571 78,446
2013 32,872 473,662 59,208
2014E 31,886 459,452 57,431
•Typically used for the <$7 category.
•Typically used as a cheaper alternative to Interior CA grapes.
•Consumer does not care.
Allied Grape Growers, 2014. All rights reserved.
Factors That Influence the
Import Market
•Supply / Demand
•Exchange Rates
•Interchangeability of product from any country around the
world.
•Tax Incentive – “Drawback”
Allied Grape Growers, 2014. All rights reserved.
Equivalent Import Grape
Pricing
Agrentina Australia Chile France S. Africa Spain
Generic Red 243$ 249$ 287$ 568$ 293$ 231$
Generic Wht. 200$ 324$ 374$ 674$ 225$ 218$
Chardonnay 431$ 324$ 665$ 936$ 324$ NA
Chenin Blanc 259$ NA NA NA 237$ NA
Cabernet 431$ 431$ 431$ 662$ 374$ 331$
Merlot 431$ 399$ 381$ 662$ 374$ 331$
Muscat Alex 293$ 356$ NA 805$ 262$ 449$
Syrah 431$ 437$ 368$ 671$ 381$ 318$
EQUIVALENT GRAPE PRICE PER TON BY COUNTRY
Agrentina Australia Chile France S. Africa Spain
Generic Red 67$ 73$ 110$ 391$ 117$ 54$
Generic Wht. 23$ 148$ 198$ 498$ 48$ 42$
Chardonnay 254$ 148$ 488$ 760$ 148$ NA
Chenin Blanc 82$ NA NA NA 60$ NA
Cabernet 254$ 254$ 254$ 485$ 198$ 154$
Merlot 254$ 223$ 204$ 485$ 198$ 154$
Muscat Alex 117$ 179$ NA 629$ 85$ 273$
Syrah 254$ 260$ 192$ 494$ 204$ 142$
EQUIVALENT GRAPE PRICE PER TON BY COUNTRY w/ EXCISE TAX DRAWBACK
Allied Grape Growers, 2014. All rights reserved.
Section 3:
Wine Shipments
Allied Grape Growers, 2014. All rights reserved.
Wine Shipments
Allied Grape Growers, 2014. All rights reserved.
Wine Shipments
Allied Grape Growers, 2014. All rights reserved.
Wine Shipments
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)
Shipment Volume Below $7/ Bottle, 2006-2014 Estimate
Wine Shipment Volume <$7/ Bottle
CAGR = 1.37%
Allied Grape Growers, 2014. All rights reserved.
Wine Shipments
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)
Shipment Volume Below $7/ Bottle, 2006-2014 Estimate
Wine Shipment Volume <$7/ Bottle
2006-2011 CAGR = 3.15%
Allied Grape Growers, 2014. All rights reserved.
Gomberg Fredrikson Report
August 2014Quote:
“The continuing low growth rates for
California winery shipments reflect a
bifurcated market where weaker sales
of everyday brands, priced below $9 at
retail, mask gains of higher-priced
premium wines.”
Wine Shipments
Allied Grape Growers, 2014. All rights reserved.
Allied Grape Growers, 2014. All rights reserved.
Closing Question/Discussion
What is the future of the SJV
winegrape business, and do any
competitive advantages exist that
help secure our future?