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


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


Part 1:A look at supply


A look at supply


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


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

Nat Dibuduo

Add SJV and Souther Ca. numbers for 3.7 total


• 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

Nat Dibuduo

Add SJV and Souther Ca. numbers for 3.7 total


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


A look at supply

Nat Dibuduo

Do we need a slide showing raisin grape reported acreage vs. Agrian's acreage based on permits.


- 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


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


-

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


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


Part 2:What happened with the 2015

harvest?


The 2015 Harvest

• Buyers (or lack thereof)• Pricing• Crop size• Late season buying• Sustainability• What’s a grower to do?


Let’s not be afraid ofour own shadow….or

making tough decisions!

What’s a Grower to Do?


• 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?



We have observed many new plantings statewide, BUT………..



……now we see significant removals in the interior.


Part 3:Pros and consIn the business


Pros and Cons in the business

• The economy• Foreign competition• Consumption trends


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.



Foreign Competition


+20%

+30%

+23%


Foreign Competition



Consumption and Categorical Competition



Consumption Trends


“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


Consumption Trends



Consumption Trends


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


Consumption Trends


Part 4:Understanding and Managing Market

Risk


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


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?


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!


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.


Please visit us at:alliedgrapegrowers.org

allied grape growers, 2015. all rights reserved. san joaquin valley winegrowers association harvest...

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