allied grape growers, 2014. all rights reserved. the 2014 crush – what happened to the market?...

Allied Grape Growers, 2014. All rights reserved.

The 2014 Crush – What Happened to the

Market?

SJVWA Annual MeetingAnd Industry Forum

Jeff Bitter, Allied Grape GrowersMatt Towers, O’Neill Vintners and Distillers

Greg Magill, Ciatti CompanyNovember 21, 2014


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?


Section 1:

Supply


Supply

0.00

0.50

1.00

1.50

2.00

2.50

2006 2007 2008 2009 2010 2011 2012 2013 2014Est.

1.47 1.58 1.591.74

1.83 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


• 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


Supply

• What’s the impact of current supply on the CA Wine Market?

YearTOTAL 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 02011 3.35 228 256 -282012 4.02 273 250 232013 4.25 289 260 29

2014E 3.9 est. 272 270 225.6

• 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)


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


Supply

Fran

ceIta

ly

Spain

U.S.

Arge

ntina

Austra

liaChi

le

Sout

h Af

rica

Germ

any

New Z

ealand

0

1

2

3

4

5

6

7

8

9

2012

2013

2014

Ton

s in

Million

s


Section 2:

Imports


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 Fredrikson Report

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%


Imports


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 Euro British Pound

ChileanPeso

Aust $Arg Peso

Euro & Pound

Thru June, bulk Argentine imports were up 51% from previous year


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


Arge

ntina

Chile

Austra

lia

Spain

Sout

h Af

rica

New Z

ealand

Italy

Fran

ce0

5

10

15

20

25

30

2011 2012 2013

Gallon

s in

Million

s

Source: US Department of Commerce & Gomberg, Fredrikson & Associates

Imports


CABERNET SAUVIGNON - Global Market $/Gallon Availability

California $6.50 – 9.00 Balanced

$/Gal Delivered/Duty Paid

Availability

Chile $2.75 – 3.25 HighAustralia $3.50 – 4.75 ModerateSpain $3.50 – 4.50 Moderate

Imports


CHARDONNAY - Global Market $/Gallon Availability

California $3.00 – 5.00 Long

$/Gal Delivered/Duty Paid

Availability

Chile $4.75 – 5.50 LowAustralia $2.50 – 3.00 HighSpain $2.75 - 3.25 Moderate/

High

Imports


Imports

• Impact of Bulk Wine Imports on CA grape market

YearBULK STILL WINE IMPORTS EQUIVALENT CASES (000's)

EQUIVALENT TONS

EQUIVALENT ACRES

2011 25,494 367,349 45,9192012 43,553 627,571 78,4462013 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.


Factors That Influence the Import Market

• Supply / Demand

• Exchange Rates

• Interchangeability of product from any country around the world.

• Tax Incentive – “Drawback”


Equivalent Import Grape Pricing

Agrentina Australia Chile France S. Africa SpainGeneric Red 243$ 249$ 287$ 568$ 293$ 231$ Generic Wht. 200$ 324$ 374$ 674$ 225$ 218$ Chardonnay 431$ 324$ 665$ 936$ 324$ NAChenin Blanc 259$ NA NA NA 237$ NACabernet 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 SpainGeneric Red 67$ 73$ 110$ 391$ 117$ 54$ Generic Wht. 23$ 148$ 198$ 498$ 48$ 42$ Chardonnay 254$ 148$ 488$ 760$ 148$ NAChenin Blanc 82$ NA NA NA 60$ NACabernet 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


Section 3:

Wine Shipments


Wine Shipments


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%


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%


Gomberg Fredrikson ReportAugust 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


Closing Question/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. the 2014 crush – what happened to the market?...

Documents

supply slide

market shipments

worldwide supply sjv

sjv winegrape business

market closing discussion

winegrape planting

supply cagr

worldwide imports