Wine Industry Macro-Trends (presentation by Jeff Bitter)

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Trends in the
California Wine Business
Jeff Bitter
Allied Grape Growers
November 5, 2014
Quality, Integrity, Stability
California Wine Shipment Trends
Industry Update
• The California wine industry remains
strong, but there are threats to our
success:
Industry Update
• The California wine industry remains
strong, but there are threats to our
success:
• Dependence on Economy
Industry Update
California Wine Shipment Trends
Industry Update
Source: zillow.com
Industry Update
Headline: The Conference Board Consumer Confidence Index® Continues
to Improve
24 Jun. 2014
According to Lynn Franco, Director of Economic Indicators at The Conference
Board: “Consumer confidence continues to advance and the index is now at its
highest level since January 2008 (87.3). June’s increase was driven primarily by
improving current conditions, particularly consumers’ assessment of business
conditions. Expectations regarding the short-term outlook for the economy and
jobs were moderately more favorable, while income expectations were a bit
mixed. Still, the momentum going forward remains quite positive.”
Source:
June 2014 Consumer Confidence Survey®
The Conference Board
Industry Update
• The California wine industry remains
strong, but there are threats to our
success:
• Dependence on Economy
• Foreign competition
Industry Update
Imported Wine - Bottled and Bulk
(In Millions of Cases)
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Total
-1%
-5%
Total
+12%
-2%
Total
+0%
+7%
Total
+7%
+3%
Total
+16%
Total
-7%
+3%
-2%
+71%
-25%
+92%
-20%
+26%
+27%
2008
2009
Data obtained via the Gomberg Fredrikson Report
2010
2011
Bottled Imports
2012
Bulk Imports
2013
Industry Update
• The California wine industry remains
strong, but there are threats to our
success:
• Dependence on Economy
• Foreign competition
• Categorical competition
Industry Update
Industry Update
Craft Beer
Beer Trends from CNBC.com
Craft beer production was up 9.6 percent in 2013, while overall beer
production fell 1.4 percent, according to Technomic's "2014 Special
Trends in Adult Beverage Report: State of the Industry" report. And that
continued popularity of specialty beers is paving the way for a new crop
of beer makers.
"Over the last couple of years, the number of new brewery openings has
been at near unprecedented levels," said Bart Watson, Ph.D., staff
economist at Brewers Association, a craft beer industry group. "We're
seeing breweries open at about a rate of 1.2 per day.“
Craft breweries have a few things working in their favor, perhaps the
most important of which is a customer base that's financially well off.
Nielsen reports that 58.9 percent of craft beer drinkers have annual
incomes of $75,000 or more.
Gomberg Fredrikson Report
2013 Annual Wine Industry Review
• Cider shipments increased by 67%
last year!
• Moscato (the hottest trend in the
wine business) was only up by 5%.
Gomberg Fredrikson Report
2013 Annual Wine Industry Review
Quote:
“New cider brands, new flavors, and the
lower alcohol content of hard cider are
attracting new consumers, and
especially young women…..it seems
likely that the upsurge in cider sales
has cannibalized sales of entry level
wines….”
Industry Update
• The California wine industry remains
strong, but there are threats to our
success:
• Dependence on Economy
• Foreign competition
• Categorical competition
• Costs of business and the
scarcity/price of resources
Industry Update
Industry Update
• The California wine industry remains
strong, but there are threats to our
success:
• Dependence on Economy
• Foreign competition
• Categorical competition
• Costs of business and the
scarcity/price of resources
• Overproduction
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
500,000
400,000
Growing
Demand Good,
Acreage stalls;Demand;
but Acreage
Oversupply Moderate
Growing
Peaks; Chronic Expansion
Demand, but
Oversupply
Rapid
Growing
Expansion
Demand;
No Growth
Moderate
from the
Expansion
1980s
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
Growing
Demand;
Moderate
Expansion
700,000
600,000
500,000
400,000
Growing
Demand;
Moderate
Expansion
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
Growing
Demand; Rapid
Expansion
500,000
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
CAUSED
500,000
THIS
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
THIS
CAUSED
500,000
THIS
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
Growing
Demand; Rapid
Expansion
Are we Entering
a Period of
Rapid
Expansion?
500,000
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
Growing
Demand; Rapid
Expansion
We know this is coming
for 2015 & 2016, but is it
rapid expansion?
500,000
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
700,000
600,000
Only if we continue
the recent planting
trend and/or neglect
to remove vines
500,000
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
California Acreage Trends
Estimated California Bearing Winegrape Acres
From 1990 with projections
Moderate
700,000
600,000
Moderate Planting Defined:
+/-15,000 NET new acres per year
Planting
Matches the
Trend
500,000
400,000
300,000
200,000
100,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Industry Update
• The California wine industry remains
strong, and we do have opportunities
before us:
• There’s more consumption of wine
today than ever in the U.S.
Industry Update
Industry Update
• The California wine industry remains
strong, and we do have opportunities
before us:
• There’s more consumption of wine
today than ever in the U.S.
• Millennial generation is significant.
Industry Update
Industry Update
Industry Update
• The California wine industry remains
strong, and we do have opportunities
before us:
• There’s more consumption of wine
today than ever in the U.S.
• Millennial generation is significant.
• Plenty of supply in the short term.
Industry Update
Millions
of Tons
California Wine Shipments and Grape Production (for wine only)
2009-2013 with estimates and projections thru 2017
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2009
2010
2013 Wine Shipments estimated by AGG
based on data obtained via the
The Gomberg Fredrikson Report, 01/2014
2011
2012
2013
Wine Shipments
2014
Est.
2015
Est.
2016
Est.
2017
Est.
Grapes Crushed for Wine
Industry Update
• The California wine industry remains
strong, and we do have opportunities
before us:
• There’s more consumption of wine
today than ever in the U.S.
• Millennial generation is significant.
• Plenty of supply in the short term.
• Mid/high price segments are on fire,
experiencing very strong growth.
California Wine Shipment Trends
Industry Update
What about 2014?
• Was this the third large crop in a row?
Industry Update
Statewide Grape Crush 2005-2014 Estimate
Tons
(in Millions)
5.00
4.70
4.33
4.39
4.09
4.50
3.67
3.00
3.67
4.02
3.76
3.70
3.14
3.25
3.58
4.10
3.67
3.49
4.00
3.50
3.98
4.25
3.90
3.34
3.06
2.50
2.00
1.50
1.00
0.50
0.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Other Crush
Winegrape Crush
Industry Update
What about 2014?
• Was this the third large crop in a row?
• How did the market develop?
Industry Update
Industry Update
www.alliedgrapegrowers.org
Questions?
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