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Transcript of Allied Grape Growers, 2015. All rights reserved. San Joaquin Valley Winegrowers Association Harvest...
Allied Grape Growers, 2015. All rights reserved.
San Joaquin Valley Winegrowers Association
Harvest 2015 & Future Opportunities
Nat DiBuduoAllied Grape GrowersNovember 20, 2015
Allied Grape Growers, 2015. All rights reserved.
Four Part Presentation• Part 1: A look at California Supply• Production trends• Acreage forecasts
• Part 2: What Happened with the 2015 Harvest?•What’s a grower to do?
• Part 3: Pros & Cons of the Industry
• Part 4: Understanding and Managing Market Risk
Allied Grape Growers, 2015. All rights reserved.
Part 1:A look at supply
Allied Grape Growers, 2015. All rights reserved.
A look at supply
Allied Grape Growers, 2015. All rights reserved.
Factors affecting crop size as compared to last year:• Mother Nature – Shorter Crop• Off 20-25% in the coast• Off less than 10% in the interior
• New Plantings• Added 30-35K bearing acres from
2012 plantings (3 years non-bearing assumed)
• Newer plantings producing more each year
• Vineyards Removals (Predominantly Interior)• Removed 25,000 winegrape acres in
2015
A look at supply -Lots of moving parts
Allied Grape Growers, 2015. All rights reserved.
Thompson Seedless 7.3 10.0 37% 9.2 8%"Old" Generic Whites (French & Chenin) 10.2 10.2 0% 10.8 -6%New French Colombard (2010 or newer) N/A 13.7 N/A N/A N/AChardonnay 8.1 8.6 6% 8.1 6%Old Florals (Muscat, Symphony, etc) 12.7 12.7 0% 13.2 -4%New Muscat Alexander (2010 or newer) N/A 17.5 N/A N/A N/APinot Grigio 9.1 9.2 1% 8.8 4%Grenache 10.0 8.6 -14% 10.0 -14%Rubired 11.4 13.0 14% 12.7 2%Barbera/Carignane 7.5 9.4 25% 9.0 4%Cabernet Sauvignon 6.5 6.9 6% 8.0 -14%Merlot 7.6 8.2 8% 8.7 -5%Ruby Cabernet 10.0 9.2 -8% 10.5 -13%White Zinfandel 10.8 10.2 -6% 11.5 -12%Syrah 8.8 8.0 -9% 9.4 -15%
2015 to Avg % Difference
Comparison of Allied Grape Growers' Central Valley Yields (Districts 12-14)
Variety/Category 2014 20152014-2015 % Change
Six-Year Avg Yield
A look at supply
Allied Grape Growers, 2015. All rights reserved.
• Six-year average = 2,690,281 tons• In 2014 we were right at our six-year average, but that was
with record-breaking bearing acreage. In reality, yields were light.
• For 2015, we see yields similar to 2014 (below average)
Region 2009 2010 2011 2012 2013 2014Lodi/Clarksburg 906,949 705,066 682,617 916,138 949,591 814,894 Central Interior 1,738,182 1,831,629 1,803,818 1,884,293 2,026,212 1,882,299 Total all Interior 2,645,131 2,536,695 2,486,435 2,800,431 2,975,803 2,697,193
Winegrape tons crushed, 2009-2014
A look at supply
Allied Grape Growers, 2015. All rights reserved.
Bearing Non-Bearing Total2014 555,000 100,000 655,000 2015 562,000 90,000 652,000
AGG Winegrape Acreage Estimates
*
*2015 non-bearing acreage includes an assumption that approximately 20,000 acres were planted this
year.
A look at supply
Allied Grape Growers, 2015. All rights reserved.
A look at supply
Allied Grape Growers, 2015. All rights reserved.
- 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
A look at supply
Allied Grape Growers, 2015. All rights reserved.
Segmenting the Business
-
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 Million27 Million
Higheremphasis
in NorthernInterior
Majorconcentrationin Northern
Interior
Allied Grape Growers, 2015. All rights reserved.
-
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
Allied Grape Growers, 2015. All rights reserved.
Segmenting the Business
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
Allied Grape Growers, 2015. All rights reserved.
Part 2:What happened with the 2015
harvest?
Allied Grape Growers, 2015. All rights reserved.
The 2015 Harvest
• Buyers (or lack thereof)• Pricing• Crop size• Late season buying• Sustainability• What’s a grower to do?
Allied Grape Growers, 2015. All rights reserved.
Let’s not be afraid ofour own shadow….or
making tough decisions!
What’s a Grower to Do?
Allied Grape Growers, 2015. All rights reserved.
• Vineyard Evaluation• Know what your average production level is! Be honest
with yourself.• Know what your true costs of production - not only per
acre, but per tons produced.• Know what your average price per ton has been then
factor in the new paradigm of SJV winegrape pricing.• Evaluate the alternatives you have
• What alternative crops can you grow on your land taking into account development costs & timing, water, gross & net per acre.
• Check with a reliable appraiser or real estate agent on the true value and marketability of your vineyard. The current real estate market is high and of questionable sustainability.
What’s a Grower to do?
Allied Grape Growers, 2015. All rights reserved.
What’s a Grower to Do?
We have observed many new plantings statewide, BUT………..
Allied Grape Growers, 2015. All rights reserved.
What’s a Grower to Do?
……now we see significant removals in the interior.
Allied Grape Growers, 2015. All rights reserved.
What’s a Grower to Do?
Allied Grape Growers, 2015. All rights reserved.
Part 3:Pros and consIn the business
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the business
• The economy• Foreign competition• Consumption trends
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the Business
The Economy
Allied Grape Growers, 2015. All rights reserved.Graph Source: The Gomberg Fredrikson Report - 2014 Annual Wine Industry
Review
30.8
66.6
69.745.9
California Wine Shipment VolumeShown in millions of cases shipped, 1980-2014 Recession directly affects
the wine business categorically.
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the Business
Foreign Competition
Allied Grape Growers, 2015. All rights reserved.
+20%
+30%
+23%
Pros and Cons in the Business
Foreign Competition
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the Business
Consumption and Categorical Competition
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the Business
Consumption Trends
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the Business
Consumption Trends
Allied Grape Growers, 2015. All rights reserved.
“Millennials generally drink more premium wine than the typical US wine
consumer, but they are not yet the core consumers of ultra-premium
wines. The sweet spot of millennial consumption appears to be the $10-
25/bottle range.”
- Stephen Rannekleiv -Rabobank Beverage Industry Analyst
Pros and Cons in the Business
Consumption Trends
Allied Grape Growers, 2015. All rights reserved.
Pros and Cons in the Business
Consumption Trends
Allied Grape Growers, 2015. All rights reserved.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2006 2007 2008 2009 2010 2011 2012 2013 2014
106.8 107.2 113.2 117.0 118.1 123.9 122.8 118.0 115.6
Cases(in Millions)
Est. California Table Wine Volume <$7/Bottle, 2006-2014
Data Source: Gomberg Fredrikson Report
Pros and Cons in the Business
Consumption Trends
Allied Grape Growers, 2015. All rights reserved.
Part 4:Understanding and Managing Market
Risk
Allied Grape Growers, 2015. All rights reserved.
What creates market risk?
OVERSUPPLY
-Either from a supply/demand imbalancecaused by a multi-year, longer term issue
Or from a large crop or series of large crops
(generally a shorter term issue)
Understanding/Managing Risk
Allied Grape Growers, 2015. All rights reserved.
Understanding/Managing Risk Some Closing Comments
• Different Varieties & Relationships• Planting contracts dictate what to plant, but consider your
current mix of varieties as well as who you sell to.• Little to no Central SJV planting contracts are currently
being offered.• Ask your buyer if they would like the SJV grower to be
available for them in the future and how to develop a partnership with them to remain viable.
• Different Crops• Evaluate your property for suitability of alternative crops.
• Different Options• Do you want to continue farming? Do you want to consider
leasing your vineyard or maybe even selling it & retiring?• Different Landscape of the SJV in the future?
Allied Grape Growers, 2015. All rights reserved.
What’s a Grower to Do?Allied Grape Growers
• Is a grape marketing cooperative• We are in the business of representing grape
growers• We are in the business of selling grapes to
wineries, concentrate producers, dehydrators and other grape buyers
• We are not in the nut business• We are NOT telling anyone to remove or sell
their economically sustainable vineyards.• We are telling growers to be smart
businessmen and assure your future and the future of your families!
Allied Grape Growers, 2015. All rights reserved.
In SummaryConsidering where market growth
is, this is prime opportunity to differentiate for the above $5 “California” bottle. In order to
successfully grow grapes for price points below $5, it will require non-traditional production levels and the
ability to out-produce those worldwide, which have much lower
costs of production.
Allied Grape Growers, 2015. All rights reserved.
Please visit us at:alliedgrapegrowers.org