- Grape prices drive vineyard land prices, and wine prices tend to correlate with grape prices based on a "rule of 100" whereby grape price equals retail bottle price times 100. - Recent winners have been grapes for wines under $20 per bottle from regions like Lodi, Central Coast, Lake and Mendocino. Losers have been grapes for wines over $20 from Napa and Sonoma. - Vineyard land prices continue rising in prime regions like Napa despite a lifestyle buyer slowdown, as wineries, investors and growers purchase land. The annual appreciation rate in the Central Valley has risen from 2.8% in 2002 to over 17% in 2012.

1. San Joaquin Valley Wine &
Grape Industry Forum
November 29, 2012
Fresno, CA
Ben Slaughter, ARA
Correia-Xavier, Inc.

2. In the Wake of the Great
Recession
• Who were the winners?
• Who were the losers?
• Who may catch the next wave?
• Who may get left behind?

3. The New Normal?
• Cheap US Dollar
– Exports attractive
– Imports expensive
• Ag is Cool!!!!
– Everybody’s doing it
• Investors
• Farmers
• Wineries

4. Vineyard Real Estate
• Data:
– Correia-Xavier, Inc. database
– 900+ transactions from 1992-2012
– Raw numbers, only buildings are extracted
• There are outliers
– All numbers on a “per acre” basis

6. Sale Data
• Sort by Region/Price
– Napa, District 4
– Sonoma, District 3
– “Coast” or Secondary Coastal
• Districts 7 & 8, Central Coast
• Districts 1 & 2, Mendocino and Lake
• District 10, Sierra Foothills
– Valley, Districts 11-14 & 17

7. Napa
Sonoma
Coast
Valley

8. $350,000
$10,000
Per acre? Really?
Why?

9. Why?
• Because Grapes prices drive vineyard
prices.
– Duh!!!!!!!

10. $3,400
$375
That explains it,
I think...

11. Grape Prices
• So, if grape prices are so important why do
we just look at the average?
• Doesn’t everyone just get an “average”
price?
– Well, no Ben, you see the average is simply a
mathematical representation of the typical
situation.
– Oh, okay, thanks for clearing that up.

12. Grape Prices
• Percentiles
– Break pricing into brackets
– Uses tonnage to establish brackets
– For Example, if “10th Percentile” = $100
• 10% of the tons sold for $100 or less
• All data from Grape Crush Report
– Table 8
• Look for signals
– Is high end behaving differently than low?

14. 90th
50th
10th

15. Napa
• Overall average up (4.7%)
– Price points below $4,000 up
– Price points above $4,000 down
• For the First time since 1995:
– The spread between high and low went down
• 2012 Season
– Grape demand solid with early buyers
– Great yields
– Wineries didn’t take overages (anecdotal)

18. Sonoma
• Overall average up (3.5%)
– Distribution mixed
– Mostly just flat
• 2012 Season
– Grape demand good
– Great Yields
– Wineries didn’t take overages (anecdotal)
– Big price change would be a surprise

21. Secondary Coastal
• Overall average up (>10%)
– Strength at all price points
• 2012 Season
– Grape demand good
– Solid (not great) yield
– Price increases expected
– Depressed markets (Lake Co.) healed
– Stronger vineyard prices

22. Short crop in Lodi

23. e
V al u
L and

24. Correlation between wine price and
Grape Price?
The “Rule of 100”?
-whereby grape price = retail bottle price x 100
Cabernet Sauvignon Napa Sonoma Paso Robles Lodi Fresno
Super Popular Jug or Super
Category Luxury Ultra-Premium
Premium Premium Value
Bottle Price using "rule of 100" $47 $21 $11 $6 $4.9
2011 Avg. Grape Price $4,660 $2,111 $1,119 $620 $486
Highest Vineyard Value (LVS) $300,000 $140,000 $50,000 $20,000 $12,000

25. The Winners? (so far)
• Producing grapes for wines in demand
– Wines at less than $20 per bottle:
– Lodi, Central Coast, Lake, Mendocino

26. The Losers? (so far)
• Producing grapes for wines not in demand
– Wines at greater than $20 per bottle:
– Napa, Sonoma

27. Grape Prices & Real Estate
• Lifestyle buyers still on sideline
• Buyers are:
– Wineries securing product
– Investors looking for returns
– Growers looking to expand
• High cost of vacant land in valley

28. 17%
2012: $12,800
annual
2002: $2,800
appreciation

29. Less land to buy?
Can’t stomach the price?

30. Take Home Messages
• Wine prices drive Grape Prices
• Grape prices drive Vineyard Prices
• What could change that?
– Change in interest rates
• Inflation?
– Change in costs
• $4.00 gas in a recession?
• What happens when the economy recovers?

31. Take Home Messages
• Winter 2010-11 was bottom of the barrel for
some on the Coast
– 2012 was much more optimistic
• Strong grape prices driving planting
– Valley
– Secondary Coastal
• No significant new developments on North
Coast

32. Take Home Messages
• When (if?) economy recovers:
– Will consumers go back to “buying up”?
– Will they realize there is quality at lower prices?
– Will improving economy strengthen US Dollar
and encourage imports?
– Will input costs run away?
• These factors will influence grape prices,
eventually…

33. Take Home Messages
• Nut Crops create strong competition for land
• Cost of land a barrier to entry
• Development cost a barrier to entry
• Continuing escalation of land price could
change the dynamic in the valley
• Can you buy $12,000 dirt and grow $300
grapes?

34. Thank You!
Ben Slaughter, ARA
Correia-Xavier, Inc.
www.c-x.com