1. American Vineyard Magazine’s Grape, Nut and Tree Fruit Expo
State of the Wine &
Concentrate Grape Industry
Jeff Bitter
Allied Grape Growers
November 14, 2017

2. First: Look at the SJV position in wine market
How are we positioned from the supply side and what are the implications for the future?
First: Look at the SJV position in wine market
Next: Supply history and outlook
Next: Challenges in relation to “neighboring”
California wine regions
Last: Factors driving success & issues that are threats

3. Allocations – Grapes & Wine

4. Planting Trends

5. Central Valley Wine Shipment Trends
About 2% annual loss in recent years

6. “The bottom line is that, following the 2015 crop, we will still need to remove about 36,000 acres…”

7. Estimated Interior Winegrape Removals

8. …..But, it’s not all bad!

9. $7-10/Bottle
>$10/Bottle

10. Allocations – Grapes & Wine

11. …..so how do we get into the other segments of the market?

12. Planting Trends
The north valley has represented a clear majority of interior plantings in recent years

13. Production Breakdown

14. Note:
Change stated cumulatively
Annual attrition rates estimated

15. .....so what are we expanding in here in the valley?

16. Note:
Change stated cumulatively
Annual attrition rates estimated

17. What Needs to Come Out?
Any red grape that struggles to achieve uniform color and/or high sugar
“Unpopular” consumer varieties like Zinfandel, Merlot and Syrah
Generics? – Not necessarily
Low production vineyards

18. AGG Central Valley Yields

19. Behavior Catalyst ...so what is driving the wine business today?
Premiumization empowered by the economy
Behavior
Catalyst

20. Economic Performance Key Measures GDP – Gross Domestic Product
Inflation
Unemployment rate
Other Important Indicators
Stock market indexes (S&P, Dow Jones, etc.)
Rate of national debt reduction
Labor productivity
Housing affordability
Surveys
Consumer Confidence/Consumer Sentiment

21. Gross Domestic Product, 2015-2017
Chart source:

22. Inflation & Unemployment
U.S. Inflation Rate, Previous Year
Chart source: tradingeconomics.com
U.S. Unemployment Rate,
Graph source: Bureau of Labor Statistics

24. Major U.S. Market Indexes:
Chart Source: 11/08/2017

25. Consumer/Economic Confidence
11/08/2017

26. Consumer/Economic Confidence

27. California Winegrape Market Points
Although there is no shortage of total winegrape acreage in California, coastal regions or more likely to experience tight supply, particularly on certain varieties and/or in specific regions.
The supply pressure created by excess interior grapes/wine over the last few years is now mostly diminished with increased vineyard removals.
“Reliable” and “stable” market trends since 2012 have allowed us to plan on increasing supply in proportion to projected increases in demand, by region and by variety.
Opportunities in the interior come specifically from strong production and/or above average quality allowing inclusion in price points above $7/bottle.

28. Concentrate Industry Review

29. Concentrate Market White Concentrate:
Market remains economically unsustainable for California.
Finally transitioned from long to balanced in 2017.
Argentinian crop was short for the second year in row.
California concentrate is selling at $9.00+/gallon.
If 100% juice drinks were still popular, we would be experiencing major shortage of product.
Permeate (Red 200) – the by-product of crystal-color (75% of volume) – is providing cheap sugar product.
Red concentrate:
Stable demand/relatively balanced market.
The diglucoside anthocyanin is still one of the most stable.
California (Red 1,000): $12.00+/gallon.
Producers selectively re-signing expired contracts.

30. Concentrate Market

31. Go Green or Make Raisins?

32. Raisin Varieties in Crush

33. Thank you
AGG Staff, 2017