1. 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

2. Allied Grape Growers, 2014. All rights reserved. Panel Discussion Outline - The goal will be to answer this - 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? What happened to the market in 2014 and why was this year so different from recent crop years? Three sections developed to address this Three sections developed to address this Supply – SJV and worldwide Supply – SJV and worldwide Imports and availability/competition Imports and availability/competition Shipments at the lower end of the market Shipments at the lower end of the market Closing Discussion: Closing Discussion: What is the future of the SJV winegrape business, and do any competitive advantages exist that help secure our future? What is the future of the SJV winegrape business, and do any competitive advantages exist that help secure our future?

3. Allied Grape Growers, 2014. All rights reserved. Section 1: Supply

4. Allied Grape Growers, 2014. All rights reserved. Supply CAGR = 4.03% Record statewide harvests

5. Allied Grape Growers, 2014. All rights reserved. Winegrape Planting: 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. 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. 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. 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 Winegrape Pullouts Estimated by AGG at 15,000-25,000 acres over this winter, preceding the 2015 harvest Estimated by AGG at 15,000-25,000 acres over this winter, preceding the 2015 harvest Supply

6. Allied Grape Growers, 2014. All rights reserved. Supply What’s the impact of current supply on the CA Wine Market? What’s the impact of current supply on the CA Wine Market? 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)

7. 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

8. Allied Grape Growers, 2014. All rights reserved. Supply

9. Allied Grape Growers, 2014. All rights reserved. Section 2: Imports

10. Allied Grape Growers, 2014. All rights reserved. Imports

11. Allied Grape Growers, 2014. All rights reserved. Imports

12. Allied Grape Growers, 2014. All rights reserved. Imports Thru June, bulk Argentine imports were up 51% from previous year

13. Allied Grape Growers, 2014. All rights reserved. Imports Relative strengths and weaknesses in California concentrate production

14. Allied Grape Growers, 2014. All rights reserved. Source: US Department of Commerce & Gomberg, Fredrikson & Associates Imports

15. Allied Grape Growers, 2014. All rights reserved. CABERNET SAUVIGNON - Global Market $/GallonAvailability California$6.50 – 9.00Balanced $/Gal Delivered/Duty PaidAvailability Chile$2.75 – 3.25High Australia$3.50 – 4.75Moderate Spain$3.50 – 4.50Moderate Imports

16. Allied Grape Growers, 2014. All rights reserved. CHARDONNAY - Global Market $/GallonAvailability California$3.00 – 5.00Long $/Gal Delivered/Duty PaidAvailability Chile$4.75 – 5.50Low Australia$2.50 – 3.00High Spain$2.75 - 3.25Moderate/High Imports

17. Allied Grape Growers, 2014. All rights reserved. Imports Impact of Bulk Wine Imports on CA grape market Impact of Bulk Wine Imports on CA grape market Typically used for the <$7 category. Typically used for the <$7 category. Typically used as a cheaper alternative to Interior CA grapes. Typically used as a cheaper alternative to Interior CA grapes. Consumer does not care. Consumer does not care.

18. Allied Grape Growers, 2014. All rights reserved. Factors That Influence the Import Market Supply / Demand Supply / Demand Exchange Rates Exchange Rates Interchangeability of product from any country around the world. Interchangeability of product from any country around the world. Tax Incentive – “Drawback” Tax Incentive – “Drawback”

19. Allied Grape Growers, 2014. All rights reserved. Equivalent Import Grape Pricing

20. Allied Grape Growers, 2014. All rights reserved. Section 3: Wine Shipments

21. Allied Grape Growers, 2014. All rights reserved. Wine Shipments

22. Allied Grape Growers, 2014. All rights reserved. Wine Shipments

23. Allied Grape Growers, 2014. All rights reserved. Wine Shipments CAGR = 1.37%

24. Allied Grape Growers, 2014. All rights reserved. Wine Shipments 2006-2011 CAGR = 3.15%

25. Allied Grape Growers, 2014. All rights reserved. Gomberg Fredrikson Report August 2014 Quote: “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

26. 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?