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SVB 2014 State of the Wine Industry Presentation

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The Silicon Valley Bank 2014 State of the Wine Industry Report identifies trends and addresses current issues facing the U.S. wine industry, offering data and observations that help that wineries can …

The Silicon Valley Bank 2014 State of the Wine Industry Report identifies trends and addresses current issues facing the U.S. wine industry, offering data and observations that help that wineries can use to develop their business strategies.

Silicon Valley Bank's wine report is based on its in-house expertise as one of the largest bankers to the West Coast wine industry for nearly 20 years, a proprietary database of more than a decade of winery financials, ongoing research, and an annual survey of 450 West Coast wineries.

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  • 1. Silicon Valley Bank Wine Report 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 State of the Wine Industry Report 2014 #SVBWINE
  • 2. Global: Production vs. Consumption (million unit cases) State of the Wine Industry Report 2014 #SVBWINE
  • 3. Net Inventory Balance State of the Wine Industry Report 2014 #SVBWINE
  • 4. Net Inventory Balance by Retail Price Point State of the Wine Industry Report 2014 #SVBWINE
  • 5. Net Inventory Balance by Production Level State of the Wine Industry Report 2014 #SVBWINE
  • 6. California Bulk Wine Inventory State of the Wine Industry Report 2014 #SVBWINE
  • 7. 2013 Spot Market Grape Prices State of the Wine Industry Report 2014 #SVBWINE
  • 8. United States GDP Growth Rate State of the Wine Industry Report 2014 #SVBWINE
  • 9. United States Government Spending State of the Wine Industry Report 2014 #SVBWINE
  • 10. Household Employment as a % of the Labor Force and Population State of the Wine Industry Report 2014 #SVBWINE
  • 11. Consumer Credit Outstanding: Revolving State of the Wine Industry Report 2014 #SVBWINE
  • 12. Net Worth of Cohorts State of the Wine Industry Report 2014 #SVBWINE
  • 13. Income by Cohort State of the Wine Industry Report 2014 #SVBWINE
  • 14. Fine Wine Buyers State of the Wine Industry Report 2014 #SVBWINE
  • 15. Income Correlates with Fine Wine Purchases State of the Wine Industry Report 2014 #SVBWINE
  • 16. Total U.S. Wine Consumption State of the Wine Industry Report 2014 #SVBWINE
  • 17. Population Distribution by Age–1990 State of the Wine Industry Report 2014 #SVBWINE
  • 18. NASDAQ State of the Wine Industry Report 2014 #SVBWINE
  • 19. Population Distribution by Age–2020 State of the Wine Industry Report 2014 #SVBWINE
  • 20. Premium Planted Acreage on West Coast State of the Wine Industry Report 2014 #SVBWINE
  • 21. Wine Industry Financial Performance State of the Wine Industry Report 2014 #SVBWINE
  • 22. Direct to Consumer Shipments Value State of the Wine Industry Report 2014 #SVBWINE
  • 23. Supply / SUPPLYDemand Dynamics / DEMAND DYNAMICS Short Term – “Hang Over” Buyers Source: Ciatti Company State of the Wine Industry Report 2014 #SVBWINE
  • 24. Chardonnay - Global Market California $/ Gal Availability California N. Coast Napa/Son $3.25 – 5.00 $8.00 – 12.00 $10.00 – 16.00 Long Balanced/Long Balanced/Long Global $/ Gal Dlvd Availability Chile Australia South Africa $3.40 – 4.00 $2.50 – 3.00 $3.00 – 3.50 High High Moderate Source: Ciatti Company State of the Wine Industry Report 2014 #SVBWINE
  • 25. Cabernet Sauvignon - Global Market California $/ Gal Availability California N. Coast Napa/Son $5.50 – 8.00 $13.00 – 17.00 $18.00 – 33.00 Long/Balanced Short Balanced Global $/ Gal Dlvd Availability Chile Australia Spain $2.90 – 3.90 $4.00 – 5.25 $4.50 – 4.85 High Moderate Moderate Source: Ciatti Company State of the Wine Industry Report 2014 #SVBWINE
  • 26. 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
  • 27. Supply / Demand Dynamics SUPPLY/DEMAND DYNAMICS Longer Term - Balanced Market Buyers Buying Sellers Selling Source: Ciatti Company State of the Wine Industry Report 2014 #SVBWINE
  • 28. 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
  • 29. 2012-2013 Winery Purchases of Vineyards Vineyard Gallo 3 Vineyards Planted Acreage Location 1,277± acres    Monterey Paso Robles Lake County 3 in Sonoma 2 in Mendocino 3 in Oregon 1 in South Australia Jackson Family Wines 9+ vineyards 1,629± acres     Foley 2 vineyards 450± acres   1 in Sonoma 1 in Lake County 483± acres   4 in Sonoma 2 in Napa 6 vineyards, bought by: Others       Duckhorn Paul Hobbs Bill Price TGIC Ledson Frank Family Source: Zepponi & Company State of the Wine Industry Report 2014 #SVBWINE
  • 30. 2012-2013 Winery Purchases of Vineyards Largest Acquisitions (by planted acreage) Most Desired Areas (by planted acreage) Other Other Sonoma Foley Gallo Lake County Napa Jackson Family Wines Central Coast Mendocino Oregon Source: Zepponi & Company State of the Wine Industry Report 2014 #SVBWINE
  • 31. The Future is NOW Source: VinTank State of the Wine Industry Report 2014 #SVBWINE
  • 32. 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
  • 33. And It’s Super Confusing and Demands Incredible Amounts of Time (Learning & Usage) Source: VinTank State of the Wine Industry Report 2014 #SVBWINE
  • 34. Even The Way We Define Relationships is Changing Customer Relationships (past) New Types of Customer Relationships Source: VinTank State of the Wine Industry Report 2014 #SVBWINE
  • 35. 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
  • 36. Yes, Everything Digital is Growing  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 Source: VinTank State of the Wine Industry Report 2014 #SVBWINE
  • 37. Looking into 2014 for Digital & DTC + Wine  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. State of the Wine Industry Report 2014 #SVBWINE
  • 38. Recommended Reading  Mary Meeker’s Tech Predictions for 2013 - http://www.slideshare.net/kleinerperkins/kpcbinternet-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 Source: VinTank State of the Wine Industry Report 2014 #SVBWINE
  • 39. 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, rmcmillan@svb.com Bill Stevens Division Manager Phone 707.967.1373, wstevens@svb.com State of the Wine Industry Report 2014 #SVBWINE
  • 40. 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. Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement of exchange rates. Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from your own tax, financial, legal and other advisors, and only make investment decisions on the basis of your own objectives, experience and resources. Opinions expressed are our opinions as of the date of this content only. ©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 State of the Wine Industry Report 2014 #SVBWINE

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