State of the Grapes
Nat DiBuduo
President CEO
Allied Grape Growers
Sections
Winegrape Supply History & Forecasts
Winegrape Acreage Updates & Analysis
Varietal/Regional Expansion
Coastal Wines Trending
Future Varietal Supply, by Price Point
The Sustainability Movement
Winegrape Supply History & Forecasts
Economy/Winegrape Supply Interaction
Three short
crops set stage
for balance
Three “below
Light crop in a Record crop &
much stronger huge coastal crop average” crops
market
2017 & Beyond:
Huge premium
opportunity; low
end balancing
occurring
Recession
Strengthening economy,
but relatively weak dollar
Strengthening Dollar,
Economic Optimism
California’s Production History and Potential
“Average” Yield
Acreage Updates & Analysis
Planting Trends
Our forecast for
2017 is +/-15,000
new acres.
Pullout Trends
Statewide Vineyard Removal
• +/-40,000 grape acres removed between the 2015
and 2016 harvests (estimate 18,000 winegrape)
• +/-20,000 grape acres removed since 2016 harvest,
with about 1/3 being winegrapes
• Estimate up to 10,000 winegrape acres will be
removed by the 2017 harvest.
Evolving California Acreage Base
Growing
Stable
Declining
Varietal/Regional Expansion
What’s Hot, What’s Not….
71% Red
29% White
Planting Trends, 2014-2016
•2016 – 15 million vines
•Cabernet Sauvignon - 35%
•Chardonnay – 16%
•Pinot Noir – 16%
•Pinot Grigio – 7%
•2015 – 19 million vines
•Cabernet Sauvignon - 31%
•Pinot Grigio – 17%
•Pinot Noir – 15%
•Chardonnay – 13%
•2014 – 27 million vines
•Cabernet Sauvignon - 29%
•Chardonnay – 17%
•Pinot Noir – 12%
•Pinot Grigio – 12%
Central Coast or North Coast?
Popular Coastal Planting Regions
San Luis Obispo County
(Paso Robles)
Santa Barbara
County
Sonoma County
Napa County
Sonoma County
Sonoma County
Coastal Wines Trending
Tying Regions to Categories
“Coastal” Wine Shipments
Six-Year Average Price/Ton
North Coast AVA
2011
$4,000
$3,500
2012
$3,000
2013
$2,500
2014
$2,000
2015
$1,500
2016
$1,000
$500
$-
2015
2013
2011
Solano County – Six-Year Weighted District Avg Pricing
$2,000
$1,800
$1,600
+13.04%
$1,400
2011
2012
2013
2014
2015
2016
$1,200
CH: Chardonnay
SB: Sauvignon
blanc
PG: Pinot Grigio
CS: Cabernet
Sauvignon
PS: Petite Sirah
CF: Cabernet Franc
SY: Syrah
MER: Merlot
ZN: Zinfandel
PN: Pinot Noir
$1,000
$800
$600
$400
$200
$-
2015
2013
2011
Lake County – Six-Year Weighted District Avg Pricing
$2,500
+7.17%
$2,000
2011
2012
2013
2014
2015
2016
$1,500
$1,000
$500
$CH: Chardonnay
SB: Sauvignon blanc
CS: Cabernet
Sauvignon
PV: Petite Verdot
PS: Petite Sirah
ZN: Zinfandel
SY: Syrah
MER: Merlot
2015
2013
2011
Mendocino County – Six-Year Weighted District Avg Pricing
$3,000
$2,500
$2,000
+3.49%
2011
2012
2013
2014
2015
2016
$1,500
$1,000
CB: Chenin blanc
SB: Sauvignon
blanc
CH: Chardonnay
PN: Pinot Noir
CS: Cabernet
Sauvignon
GN: Grenache Noir
PS: Petite Sirah
ZN: Zinfandel
SY: Syrah
CAR: Carignane
MER: Merlot
$500
$-
2015
2013
2011
Sonoma County – Six-Year Weighted District Avg Pricing
$4,000
$3,500
+8.01%
$3,000
$2,500
2011
2012
2013
2014
2015
2016
$2,000
$1,500
$1,000
$500
CH: Chardonnay
PG: Pinot Grigio
SB: Sauvignon blanc
PN: Pinot Noir
PS: Petite Sirah
CS: Cabernet
Sauvignon
ZN: Zinfandel
SY: Syrah
MER: Merlot
$-
2015
2013
2011
Napa Valley – Six-Year Weighted District Avg Pricing
$8,000
$7,000
$6,000
$5,000
+6.03%
$4,000
$3,000
$2,000
$1,000
SE: Semillon
CH: Chardonnay
SB: Sauvignon blanc
PG: Pinot Grigio
CF: Cabernet Franc
CS: Cabernet
Sauvignon
PS: Petite Sirah
SY: Syrah
ZN: Zinfandel
MER: Merlot
PN: Pinot Noir
$-
2015
2013
2011
2011
2012
2013
2014
2015
2016
Future Varietal Supply, by Price Point
Note:
Change stated cumulatively
Annual attrition rates estimated
Talking Points <$7/Bottle
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<$7/bottle represents over half of all California wine
shipments, by volume.
There is significant investment in both vineyards and
wineries in the Central SJV to produce “California” wine.
Worldwide wine competition is fierce as the majority of
the world’s wines (by volume) fall within this price
range.
Vineyard removal and lack of new development will
continue as the norm unless and until wine shipments
<$7/bottle stabilize OR until production of SJV
winegrapes regularly makes it way into >$7/bottle wines.
Note:
Change stated cumulatively
Annual attrition rates estimated
Talking Points $7-10/Bottle
•
•
•
•
•
This is a mostly stable retail price range, but on a very
strong base (i.e. lots of volume in this tight price
range).
The quality in this price range has been well
established and strengthening for both grapes & wine.
There is currently interest from wineries to contract
2017 grapes and discuss possible planting contracts.
More and more, “coastal” wineries are looking to
northern interior grape and wine supply when
considering alternatives to control costs and expand
program volumes.
A great place to be in the future, as the demand for
high quality wine expands.
Note:
Change stated cumulatively
Annual attrition rates estimated
Talking Points $10-20/Bottle
•
•
•
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•
This is the hottest, sizeable price segment presented
today.
Quality within this price segment is known &
established for both grapes & wine.
Winery interest is strong for grapes to satisfy
consumer demand. Growers have been responding by
planting more.
Extending wines by blending with lower-cost grapes is
maximizing profit opportunity.
Conversely, the need for the upper end to extend
creates opportunity for this category of grapes
Note:
Change stated cumulatively
Annual attrition rates estimated
Talking Points >$20/Bottle
•
•
•
•
•
Market behavior that drives industry pricing up starts
here – at the top.
Price elasticity - How high is too high on pricing? Is there
a bubble? Did I really say that?
Are some AVA’s in jeopardy of becoming mono-varietal?
Many vines are being planted in AVA’s contributing to this
price category, but a high percentage are replants.
How much does “extending” to control costs degrade the
overall quality of an AVA?
The Sustainability Movement
SWP Overview
What is Sustainability?
The Sweet Spot
SUSTAINABLE
WINEGROWING
34
Sustainability Drivers
Industry Commitment
| California &
Regional
Programs
| Oregon
| Washington
| New York
| International Programs
| Australia
| New Zealand
| South Africa
| Chile
| Italy
CERTIFIED SUSTAINABLE
Background
| Launched January 2010
| Updated in 2017 to allow Logo on Bottle
| Ensures:
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•
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Environmental Stewardship
Conservation of Natural Resources
Socially Responsible Business Practices
CERTIFICATION
As of November 2016:
666
VINEYARDS WERE CCSW-CERTIFIED
113,220
WINEGRAPE ACRES WERE CCSW-CERTIFIED
(18% of California’s total acres)
IN 2015, 25% OF THE STATEWIDE ACREAGE AND 64% OF THE STATEWIDE CASE
PRODUCTION WERE CERTIFIED TO CCSW-CERTIFIED, LODI RULES, NAPA GREEN,
AND/OR SIP CERTIFIED.
CERTIFIED SUSTAINABLE
sustainablewinegrowing.org
LODI RULES
lodiwine.com
NAPA GREEN
napagreen.org
108
WINERIES WERE CCSW-CERTIFIED
175M
CASES WERE PRODUCED
by CCSW-Certified wineries
(65% of cases produced in California)
For a list of CERTIFIED SUSTAINABLE Participants, visit
http://www.sustainablewinegrowing.org/certifiedparticipants.php
SIP CERTIFIED
sipcertified.org
Summary & Highlights
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There is no shortage of winegrape acreage in California, although
specific regions may experience tighter supply, particularly with
certain varieties. Four-million-ton harvests are standard now.
Cab Sauv, Pinot Noir, Pinot Grigio and Chardonnay will continue
to dominate California varietal offerings, but the future of product
development may move more toward blends utilizing regionally
appropriate varieties.
The stability of current market trends (since 2012) has produced
a situation where supply is increasing in proportion to current
increases in demand, by region and by variety.
Sustainability is something the industry already is – it’s a matter
of documenting it. This documentation should bring additional
marketability/return to both wineries and growers.