svb 2014 state of the wine industry presentation
TRANSCRIPT
State of the Wine Industry Report 2014 #SVBWINE
SVB's Annual State of the Wine Industry Report addresses current trends, conditions and future views on wine industry growth, consumer demand trends and winery financial performance.
Sales growth is expected to be the highest since the recession (6-10%), despite a tough economy.
Wine supply is in balance heading into 2014.
Stable pricing means good news for consumers.
For wineries, increased grape costs and flat pricing means lower profitability.
Read the full report: www.svb.com/wine-report
Silicon Valley Bank Wine Report
State of the Wine Industry Report 2014 #SVBWINE
Global: Production vs. Consumption (million unit cases)
State of the Wine Industry Report 2014 #SVBWINE
Household Employment as a % of the Labor Force and Population
State of the Wine Industry Report 2014 #SVBWINE
Buyers
SUPPLY / DEMAND DYNAMICS Supply / Demand Dynamics
Short Term – “Hang Over”
Source: Ciatti Company
State of the Wine Industry Report 2014 #SVBWINE
Chardonnay - Global Market
California $/ Gal Availability California $3.25 – 5.00 Long N. Coast $8.00 – 12.00 Balanced/Long Napa/Son $10.00 – 16.00 Balanced/Long
Global $/ Gal Dlvd Availability Chile $3.40 – 4.00 High Australia $2.50 – 3.00 High South Africa $3.00 – 3.50 Moderate
Source: Ciatti Company
State of the Wine Industry Report 2014 #SVBWINE
Cabernet Sauvignon - Global Market
California $/ Gal Availability California $5.50 – 8.00 Long/Balanced N. Coast $13.00 – 17.00 Short Napa/Son $18.00 – 33.00 Balanced
Global $/ Gal Dlvd Availability Chile $2.90 – 3.90 High Australia $4.00 – 5.25 Moderate Spain $4.50 – 4.85 Moderate
Source: Ciatti Company
State of the Wine Industry Report 2014 #SVBWINE
Winegrape Demand - Steady
Buyers securing long-term grape supply
Contract activity strongest in Coastal Areas
Pricing should remain stable with a few exceptions
+/- 30,000 acres planted in last two years 2014 Crop size and Water concerns
Source: Ciatti Company
State of the Wine Industry Report 2014 #SVBWINE
Buyers Sellers
Buying Selling
SUPPLY/DEMAND DYNAMICS Supply / Demand Dynamics
Source: Ciatti Company
Longer Term - Balanced Market
State of the Wine Industry Report 2014 #SVBWINE
2013 Market Review 2013 Acquisitions of Notable U.S. Based Wineries and Brands
Target Acquirer Region Comments
Alderbrook Winery Bernie Orsi Sonoma Production capacity
Geyser Peak Wine Facility Francis Ford Coppola Sonoma Production capacity
Sonoma Crush Facility Carneros Vintners (The Vintners Group) Sonoma Production capacity
Rack & Riddle Facility Duckhorn Wine Company Mendocino Production capacity
Yverdon Vineyard and Winery Jackson Family Wines Spring Mtn. (Napa) Portfolio building
Viansa Winery Vintage Wine Estates Sonoma Portfolio building
Clos Pegase Winery Vintage Wine Estates Napa Portfolio building
Panther Creek Cellars Bacchus Capital Management, LLC Oregon Portfolio building
Moraga Vineyards Rupert Murdoch Los Angeles Lifestyle
Mayacamas Vineyards Charles Banks and Jay Schottenstein Napa Lifestyle
Araujo Estate Artemis Group (Owner of Chateau Latour) Napa Foreign buyer
Cleavage Creek FCC North American Investment, LLC Napa (Pope Valley) Foreign buyer
Solena Winery Jackson Family Wines Oregon Geographic expansion
Goosecross Cellars Golden Equity Investments Napa Industry entrant
Silverado Hill Winery Laird Family Estate Napa Opportunistic
Source: Zepponi & Company
State of the Wine Industry Report 2014 #SVBWINE
2012-2013 Winery Purchases of Vineyards
Vineyard Planted Acreage Location
Gallo 3 Vineyards 1,277± acres Monterey Paso Robles Lake County
Jackson Family Wines 9+ vineyards 1,629± acres
3 in Sonoma 2 in Mendocino 3 in Oregon 1 in South Australia
Foley 2 vineyards 450± acres 1 in Sonoma 1 in Lake County
Others
6 vineyards, bought by: Duckhorn Paul Hobbs Bill Price TGIC Ledson Frank Family
483± acres 4 in Sonoma 2 in Napa
Source: Zepponi & Company
State of the Wine Industry Report 2014 #SVBWINE
Sonoma
Napa
Mendocino
Oregon
Central Coast
Lake County
Other
Most Desired Areas (by planted acreage)
2012-2013 Winery Purchases of Vineyards
Gallo
Jackson Family Wines
Foley
Other
Largest Acquisitions (by planted acreage)
Source: Zepponi & Company
State of the Wine Industry Report 2014 #SVBWINE
And It’s SUPER HARD aka Welcome To The Most Competitive Wine Market in Human History
Source: VinTank
State of the Wine Industry Report 2014 #SVBWINE
And It’s Super Confusing and Demands Incredible Amounts of Time (Learning & Usage)
Source: VinTank
State of the Wine Industry Report 2014 #SVBWINE
Customer Relationships (past) New Types of Customer Relationships
Even The Way We Define Relationships is Changing
Source: VinTank
State of the Wine Industry Report 2014 #SVBWINE
Some hard hittin’ social media stats
An average of 1.5 million organic conversations about wine EVERY DAY across ALL primary social media channels
450K new people talking about wine on social media EVERY month
Over 80% of those go unanswered by wine brands.
Over 60M “quality” conversations about wine on SM in the last 5 years from 600 million analyzed conversations
Over 16 million people profiled that mentioned wine at least 1x on SM
Source: VinTank
State of the Wine Industry Report 2014 #SVBWINE
Mobile traffic (Phone only, not tablet) is increasing to a meaningful percentage - 2013 was the first year it topped 25% of traffic.
E-com sales year over year were up 44% percent. Top 10% Vin65 customers had increases of at least 140%
One large driver of sales was "shipping included". Shipping Included outperformed 20% off in A/B tests
Yes, Everything Digital is Growing
Source: VinTank
State of the Wine Industry Report 2014 #SVBWINE
Year of the mobile everything.
Digital will become a viable alternative to traditional distribution for certain brands.
The DTC divide for wineries is maturing already.
2014 will be the year of digital divide for wineries.
Expect an increase in consolidation/attrition at the wine/tech vendor level.
Location tools will be key assets for acquiring new business for wineries with tasting rooms.
Looking into 2014 for Digital & DTC + Wine
State of the Wine Industry Report 2014 #SVBWINE
Mary Meeker’s Tech Predictions for 2013 - http://www.slideshare.net/kleinerperkins/kpcb-internet-trends-2013
The Age of Context by Shel Israel and Robert Scoble - http://amzn.com/1492348430
Your Brand, The Next Media Company by Michael Brito - http://amzn.com/0789751615
Recommended Reading
Source: VinTank
State of the Wine Industry Report 2014 #SVBWINE
About the Report: The report is based on SVB's in-house expertise as one of the largest bankers to the West Coast wine industry, a proprietary database of more than a decade of winery financials, ongoing research, and an annual survey of 650 wineries.
About Silicon Valley Bank’s Wine Division: Silicon Valley Bank’s Wine Division specializes in commercial banking for premium wineries and vineyards and the industries that support them. SVB has the largest team of commercial bankers dedicated to the wine industry of any bank nationwide. Founded in 1994, SVB’s Wine Division has offices in Napa and Sonoma counties and serves clients focused in the fine wine producing regions of California, Oregon and Washington. By virtue of its dedication to the wine industry, Silicon Valley Bank is able to support its clients consistently through economic and growth cycles, and offer guidance on many aspects of their business, beyond traditional banking services. Silicon Valley Bank is a member of global financial services firm SVB Financial Group (Nasdaq: SIVB), with SVB Analytics, SVB Capital and SVB Private Bank. More information on the company can be found at www.svb.com/winedivision. Contact Us: For more information about this report or Silicon Valley Bank’s Wine Division, please contact us:
Rob McMillanEVP & Founder Phone 707.967.1367, [email protected]
Bill Stevens Division Manager Phone 707.967.1373, [email protected]
State of the Wine Industry Report 2014 #SVBWINE
This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information from third-party sources that we believe to be reliable, but which have not been independently verified by us and for this reason we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction.
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©2013 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademarks. B_WD-13-13170. Rev. 01-14-2014