UNIF NIFIE IED D WINE INE AND ND GR GRAPE SYMP MPOSIU IUM JA JANUARY 30, 2019 CHANGE IS HERE – A NEW MARKET PARADIGM “Intelligence is the ability to adapt to change” - Stephen Hawking
PROFESSIONAL BROKERS IN 9 COUNTRIES LOCALLY BASED TO HELP BUILD YOUR BUSINESS WORLDWIDE
CALIFORNIA BULK MARKET
CALIFORNIA MARKET v SLUGGISH SALES GROWTH v HISTORIC 2018 CROP v BULK MARKET ACTIVITY SLOW v BULK INVENTORIES INCREASING v MA MARKET IS ADJUSTING TO NEW PARADIGM CIATTI
CALIFORNIA BULK WINE INVENTORY 7,000,000 6,000,000 5,000,000 BULK GALLONS AVAILABLE 4,000,000 3,000,000 2,000,000 1,000,000 0 JAN. 2015 JAN. 2016 JAN. 2017 JAN. 2018 JAN. 2019 CABERNET SAUVIGNON CHARDONNAY MERLOT PINOT NOIR ZINFANDEL CIATTI
CENTRAL VALLEY 2,500,000 $10.00 2,000,000 $8.00 BULK GALLONS AVAILABLE PRICE PER GALLON 1,500,000 $6.00 1,000,000 $4.00 500,000 $2.00 0 $0.00 JAN. 2017 JAN. 2018 JAN. 2019 Bulk Chardonnay Bulk Cabernet Sauvignon BULK CABERNET SAUVIGNON Bulk Merlot BULK MERLOT BULK CHARDONNAY Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME PRICE PER GALLON CH PRICE PER GALLON ME PRICE PER GALLON CS CIATTI
CENTRAL COAST 1,600,000 $24 $22 1,400,000 $20 1,200,000 BULK GALLONS AVAILABLE $18 PRICE PER GALLON $16 1,000,000 $14 800,000 $12 $10 600,000 $8 400,000 $6 $4 200,000 $2 0 $0 JAN. 2017 JAN. 2018 JAN. 2019 Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Pinot Noir BULK PINOT NOIR BULK CHARDONNAY BULK CABERNET SAUVIGNON Price Per Gallon CH PRICE PER GALLON CH Price Per Gallon CS Price Per Gallon PN PRICE PER GALLON CS PRICE PER GALLON PN CIATTI
LAKE / MENDOCINO 2,000,000 $22 $20 1,800,000 $18 1,600,000 BULK GALLONS AVAILABLE $16 1,400,000 PRICE PER GALLON $14 1,200,000 $12 1,000,000 $10 800,000 $8 600,000 $6 400,000 $4 200,000 $2 0 $0 JAN. 2017 JAN. 2018 JAN. 2019 Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot BULK CHARDONNAY BULK CABERNET SAUVIGNON BULK MERLOT Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME PRICE PER GALLON CS PRICE PER GALLON ME PRICE PER GALLON CH CIATTI
NAPA 600,000 $56 $52 $48 500,000 $44 BULK GALLONS AVAILABLE $40 400,000 PRICE PER GALLON $36 $32 300,000 $28 $24 $20 200,000 $16 $12 100,000 $8 $4 0 $0 JAN. 2017 JAN. 2018 JAN. 2019 Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot BULK CHARDONNAY BULK CABERNET SAUVIGNON BULK MERLOT Price Per Gallon CH PRICE PER GALLON CH Price Per Gallon CS Price Per Gallon ME PRICE PER GALLON CS PRICE PER GALLON ME CIATTI
SONOMA 600,000 $32 $30 $28 500,000 $26 $24 BULK GALLONS AVAILABLE $22 400,000 PRICE PER GALLON $20 $18 300,000 $16 $14 $12 200,000 $10 $8 $6 100,000 $4 $2 0 $0 JAN. 2017 JAN. 2018 JAN. 2019 Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot BULK CHARDONNAY BULK CABERNET SAUVIGNON BULK PINOT NOIR Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME PRICE PER GALLON CH PRICE PER GALLON CS PRICE PER GALLON PN CIATTI
CALIFORNIA BULK MARKET v SLOW ACTIVITY WITH WEAKENING PRICING v BUYERS LOOKING FOR DEALS, SELLERS STARTING TO REALIZE NEW MARKET v COASTAL MARKET MORE AFFECTED THAN CENTRAL VALLEY v RENEWED NEGOTIANT ACTIVITY v WINERIES ALSO LOOKING TO MOVE EXCESS INVENTORY CIATTI
GLOBAL MARKET
GLOBAL MARKET v LARGE 2018 HARVEST CHANGED MARKET BACK QUICKLY! v 2017 – VERY SMALL 2017 HARVEST CAUSED MARKET TO TIGHTEN – DEMAND/PRICES INCREASED v 2018 – YIELDS UP 13% – PRICES AND DEMAND FOR BULK WINE HAVE DECLINED IN ALMOST ALL REGIONS v BACK BACK TO TO NORMAL AL? CIATTI
GLOBAL SUPPLY / DEMAND 300 290 280 270 MILLION hL WINE PRODUCTION 260 250 WINE CONSUMPTION 240 230 220 210 2011 2012 2013 2014 2015 2016 2017 2018 VINTAGE CIATTI Source: OIV 2018, Ciatti Estimates
GLOBAL WINE PRODUCTION BY COUNTRY 1,600 1,400 1,200 MILLION GALLONS 1,000 800 600 400 200 0 France Italy Spain Argentina Australia Chile China South Africa USA 2011 2012 2013 2014 2015 2011 – 2016 2016 2017 2018 CIATTI Source: OIV 2018, Ciatti Estimates
GLOBAL GRAPE ACREAGE 7. 7.5 5 MILLION HA HA (1 (18.5 millio illion acres) CIATTI Source: OIV 2018
GLOBAL ACREAGE TRENDS COUNTRY 2013-17 % ∆ COMMENTS SPAIN -1% HIGHER PRODUCTIVITY FRANCE -1% REMOVED YIELD RESTRICTIONS – VDF APPELLATION ITALY -1% WINE GRAPE PLANTING SLOWING CHINA +15% 11% GRAPE VARIETIES USA -3% ARGENTINA -1% MORE REMOVALS EXPECTED CHILE +4% CABERNET SAUVIGNON, SAUVIGNON BLANC, MERLOT, PINOT NOIR AUSTRALIA -8% TREND COULD REVERSE GIVEN DEMAND? SOUTH AFRICA -6% DROUGHT ISSUES NEW ZEALAND +4% SAUVIGNON BLANC, PINOT NOIR CIATTI Source: OIV 2018
GLOBAL WINE CONSUMPTION TRENDS Chart Title 35 30 25 MILLION hL 20 15 10 5 0 USA France Italy Germany China UK Spain Argentina Russia Australia 2010 2011 2012 2013 2014 2015 2010 – 2016 2016 2017 CIATTI Source: OIV 2018
CHILE � 14 � 15 � 16 � 17 ’18 $ / GAL. DLVD TREND 1.5 M 2.0 M 1.5 M 1.4 M 2.0 M CABERNET SAUVIGNON $3.00 – 4.10 ↓ MERLOT $3.10 – 4.20 ↓ v QUALITY CONTINUES TO IMPROVE, CHARDONNAY $3.60 – 4.20 ↓ PINOT NOIR $4.10 – 5.10 ↓ ESPECIALLY ON THE HIGH END v STRONG PLAYER IN CS, ME, PN, AND SB FOR US MARKET v FREE TRADE WITH MOST COUNTRIES CIATTI
AUSTRALIA � 14 � 15 � 16 � 17 ’18 $ / GAL. DLVD TREND 1.9 M 1.8 M 2.0 M 2.1 M 2.0 M CHARDONNAY $3.20 – 3.60 ↓ SHIRAZ $4.60 – 5.10 ↔ v EXPORTS TO CHINA AND THE UK ARE KEY PINOT GRIGIO $3.75 – 4.25 ↓ DRIVERS OF GROWTH v CHARDONNAY AND PINOT GRIGIO IMPACT US MARKET v BULK PRICES HAVE REMAINED STRONG v 2019 HARVEST LOOKS GOOD – WATER BECOMING AN ISSUE AGAIN CIATTI
FRANCE � 14 � 15 � 16 � 17 � 18 Est. $ / GAL. DLVD TREND 7.2 M 7.3 M 6.9 M 5.6 M 7.1 M CHARDONNAY $5.10 – 6.00 ↓ CABERNET SAUVIGNON $4.85 – 5.90 ↔ v BULK BUYER ACTIVITY LIMITED AS MERLOT $4.70 – 5.55 ↔ ROSÉ $4.70 – 6.00 ↔ EUROPEAN BUYERS MOVE TO SPAIN v PRICES HAVE WEAKENED, BUT PREMIUM AREAS ARE STABLE v PROVENCE ROSÉ REMAINS IN DEMAND BUYERS MOVED TO OTHER AREAS v STRONG EXPORTER TO CHINA CIATTI
ITALY � 14 � 15 � 16 � 17 � 18 Est. $ / GAL. DLVD TREND 6.8 M 7.7 M 7.8 M 6.0 M 7.4 M CHARDONNAY $3.85 – 5.10 ↓ CABERNET SAUVIGNON $4.05 – 5.25 ↓ MERLOT $3.85 – 5.10 ↓ v BULK MARKET SLOW TO DEVELOP PINOT GRIGIO $5.10 – 6.00 ↓ v LOW ALC/ENTRY LEVEL WINES UNDER PRICING PRESSURE FROM SPAIN, WITH SOME QUALITY CONCERNS v HIGH QUALITY DOC AREAS – DEMAND AND PRICING RELATIVELY STABLE v PROSECCO CONTINUES TO GROW ESPECIALLY INTO THE US v BULK ORGANIC WINE EXPERIENCING STRONG DEMAND CIATTI
SPAIN � 14 � 15 � 16 � 17 � 18 Est. $ / GAL. DLVD TREND 6.7 M 6.4 M 6.4 M 5.4 M 6.3 M CHARDONNAY $4.25 – 5.05 ↓ CABERNET SAUVIGNON $3.75 – 4.40 ↓ GENERIC RED/WHITE $2.75 – 3.50 ↓ v FOCUSED ON GENERIC MARKET v MAJOR BULK SUPPLIER TO THE EU AND CHINA v LEADING ACTIVITY OVER OTHER EUROPEAN BULK SUPPLIERS GIVEN PRICING v DEMAND DEVELOPING FOR VALUE ROSÉ’S AND ORGANICS INTO EUROPE CIATTI
FUTURE CONSUMPTION GROWTH? v ITALY/SPAIN GROWING – COULD THIS CONTINUE? v USA REMAINS THE MOST DESIRABLE AND PROFITABLE MARKET v CHINA’S ECONOMIC CHANGES COULD AFFECT WINE CONSUMPTION GROWTH v UK – BREXIT UNKNOWN EFFECT FOR U.S. SUPPLIERS v AL ALL MAR ARKETS WILL GET MORE COMPETITIVE CIATTI
NON-GROWING US WINE CONSUMPTION? MILLIONS OF GALLONS CIATTI Source: CA Wine Institute, Gomberg Fredrickson, BW 166, SVB
THE GREATEST CONSUMING NATION WE ARE STILL THE TARGET CIATTI
IMPORTS STILL GAINING PERCENT MARKET SHARE CIATTI
THE MARKET HAS CHANGED! v GLOBAL AND U.S. GROWTH SLOWING? v WINE IS READILY AVAILABLE AROUND THE WORLD v BUYERS ARE CAUTIOUS v SEL SELLING GRA RAPES ES & BULK WINE E WILL BE E MORE RE CH CHAL ALLENGING CIATTI
ADAPT TO THE CHANGE v ADJUST YOUR EXPECTATIONS v MANAGE INPUTS AND ASSETS TO MAINTAIN PROFITABILITY v DEVELOP A STRATEGY : - SHORT TERM – ADAPT and ADJUST - LONG TERM – PROSPERITY and PROFITABILITY CIATTI
GLOBALLY THINKING WINE TRADED INTERNATIONALLY / GLOBAL WINE CONSUMPTION CIATTI Source: OIV 2018
QUESTIONS WE NEED TO ANSWER! v ARE WE A VALUE TO THE CONSUMER v MILLENNIALS - HOW DOES THE WINE INDUSTRY CAPTURE THEIR ATTENTION v CAN WE DEVELOP NEW AND INNOVATIVE PRODUCTS TO UTILIZE THIS AVAILABLE SUPPLY v CAN WE GROW BY TAKING MARKET SHARE FROM OTHER ALC BEVERAGES (CRAFT BEER AND SPIRITS), IMPORTS, AND EXPAND EXPORTS v HO HOW W DO WE WE BECOME MORE INNOVATIVE AND COMPETITIVE CIATTI
FINAL THOUGHT DON’T BE FEARFUL TODAY’S CHALLENGES ARE TOMORROW’S OPPORTUNITIES PUT PUT ON ON YOUR YOUR B BOOT OOTS A S AND G D GET T TO WOR O WORK CIATTI
THANK YOU Subscribe v CALIFORNIA MARKET REPORT v GLOBAL MARKET REPORT GLENN PROCTOR GLENN@CIATTI.COM 415/458-5150 201 ALAMEDA DEL PRADO SUITE # 101 NOVATO, CA 94949
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