SONOMA COUNTY WINEGRAPE COMMISSION DOLLARS & $ENSE SEMINAR JANUARY 17, 2019 SONOMA COUNTY GRAPE AND WINE MARKET UPDATE
Information provided by: Glenn Proctor DEDICATED BROKERS IN 8 COUNTRIES
GLOBALLY BASED TO BUILD YOUR BUSINESS WORLDWIDE CALIFORNIA MARKET OVERVIEW
- SLUGGISH CASEGOOD SALES THE LAST 12 – 18 MONTHS
- HISTORIC 2018 CROP
- SPOT MARKET GRAPE ACTIVITY EXTREMELY QUIET
- BULK WINE MARKET CONTINUES TO SOFTEN; INCREASED INVENTORIES (PRICES EXPECTED TO DECREASE) SUPPLY DEMAND DYNAMICS 2018 USA SHIPMENTS – 9 months ending September
TOTAL CA WINE 0% DOMESTIC 0% EXPORTS (-16% Bottled; +9% Bulk) (-3%)
IMPORTS CASEGOODS +1% BULK (-14%)
COASTAL WAREHOUSE SHIPMENTS (-15%)
TOTAL US Market (YTD) IMPORT & DOMESTIC (-1%)
Source: Gomberg-Frederickson TABLE WINE SALES
Retail Price/ Price Segment Volume Change Volume Share Value Share 750ml Eqv. Under $4 Value - 3.5% 23.7% 9.0% $4 - $7 Premium Box 10.8% 8.0% 5.4%
$4 - $8 Popular - 5.6% 30.5% 22.8%
$8 - $11 Premium - 0.4% 18.7% 24.1%
$11 - $15 Super Premium 7.1% 10.9% 18.7%
$15 - $20 Ultra Premium 9.2% 3.9% 9.1%
$20 - $24 Luxury 6.8% 1.4% 4.1%
$25 + Super Luxury 4.1% 0.9% 5.0%
TTL Table Wine All - 0.5%
Source: Nielson - Latest 52 Weeks – Ending 12/1/2018 WAREHOUSE SHIPMENT TRENDS
Source: Gomberg-Fredikson through Aug 2018, Silicon Valley Bank 2018 CRUSH CALIFORNIA STATEWIDE GRAPE CRUSH
4.5
4.3+ 4
3.5
3 Tons in Millions in Tons
2.5
2 2012 2013 2014 2015 2016 2017 2018 Est. Winegrape Other Crush SONOMA TOTAL TONS 2014 – 2018 Est.
280,000
260,000
240,000
220,000
200,000
180,000 TOTAL TONS TOTAL 160,000
140,000
120,000
100,000 SONOMA 2014 2015 2016 2017 2018 SONOMA COUNTY WHITE GRAPE TONNAGES 2014 – 2018 Est.
100,000
90,000
80,000
70,000
60,000
50,000
TONS 40,000
30,000
20,000
10,000
2014 2015 2016 2017 2018 Est. SONOMA COUNTY RED GRAPE TONNAGES 2014 – 2018 Est.
60,000
50,000
40,000
30,000 TONS
20,000
10,000
0 Cab Sauv Merlot Zinfandel Pinot Noir
2014 2015 2016 2017 2018 Est. SONOMA COUNTY PRICING DYNAMICS
102,000 $4,500
92,000 $4,000 82,000 ∆ 25%
72,000 $3,500 62,000
52,000 ∆ 28% $3,000
TONS (US) TONS 42,000 $2,500 32,000
∆ 28% PRICE/TON AVERAGE 22,000 $2,000 12,000
2,000 $1,500 2013 2014 2015 2016 2017 2018 Est.
Chardonnay Tons Cabernet Sauvignon Pinot Noir Chardonnay Prices Cabernet Sauvignon Prices Pinot Noir Prices
∆ Average Growth % 2013 to 2018 Est. 2018 GRAPE MARKET 2018 GRAPE MARKET
– BUYER ACTIVITY WAS EXTREMELY SLOW – WEAKEST ACTIVITY SINCE 2010
– MOST GRAPES UNDER CONTRACT – FEW UNCOMMITTED GRAPES
– INITIAL EARLY RRV CHARDONNAY, AND PREMIUM CS DEMAND
– BUYERS SHUT DOWN MID-SEASON ONCE CROP WAS REALIZED
– END OF SEASON NO REAL OFFERS
– QUALITY STANDARDS MORE RELATIVE SUPPLY/DEMAND DYNAMICS 2016 – EARLY 2017
Tight Supply Market
Sellers (On sideline)
Buying Selling SUPPLY/DEMAND DYNAMICS - TODAY
Expanding Sourcing Options MOVING TO OVERSUPPLY
Buyers (ON SIDELINE)
SELLING BUYING NEW REALITY! MARKET HAS CHANGEDD SONOMA COUNTY GRAPE MARKET SURVEY 2019 SONOMA MARKET SURVEY 2019
Current Overall Sonoma County Grape Supply/Demand Situation: 80.00%
60.00%
40.00%
20.00%
0.00% Short Slightly Short Balanced Slightly Long Long SONOMA MARKET SURVEY 2019
Do you plan to purchase LESS, SAME, or MORE of the following varietals in 2019 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Chardonnay Sauvignon Blanc Cabernet Sauvignon Pinot Noir Merlot Zinfandel Less Same More SONOMA MARKET SURVEY 2019
In 2019, do you expect grape prices to be DOWN, STABLE, or UP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Chardonnay Sauvignon Blanc Cabernet Sauvignon Pinot Noir Merlot Zinfandel Down Stable Up SONOMA MARKET SURVEY 2019
Case good sales projections for 2019 compared 2018 45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00% Down Moderately Down Slightly Down Flat Slightly Up Moderately Up Significantly Up SONOMA MARKET SURVEY 2019
How have your grape purchasing strategies changed 80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00% Adjust app. Sourcing Cancel supply contracts Long term contracts Renegotiate price Remove old vyds 2019 GRAPE MARKET 2019 EXPECTED GRAPE MARKET
– EARLY MARKET EXPECTED TO BE VERY SLOW
– WINERIES GRAPPLING WITH INVENTORY FROM LARGE 2018 HARVEST, AND WILL POTENTIALLY BE SELLERS THEMSELVES
– MORE SPOT MARKET AVAILABILITY AS WINERIES GIVE CONTRACT NOTICES
– BUYERS WILL BE RELUCTANT TO BUY UNTIL THEY KNOW THEY HAVE A REAL NEED
– POTENTIAL MARKET ACTIVITY IF 2019 CROP LOOKS SIGNIFICANTLY LIGHTER SOME THINGS WINE/GRAPE MARKET – WILL NEVER CHANGE?
WI
Lower! Higher!
Winery Grower BULK MARKET BULK MARKET
– ACTIVITY HAS BEEN SLOW AND PRICING HARD TO PIN DOWN
– BUYERS ARE LOOKING FOR DEALS WITH LOWER PRICING
– RENEWED ACTIVITY BY NEGOTIANTS IN THE LAST FEW MONTHS
– BULK SELLERS HAVE STARTED TO REALIZE NEW MARKET REALITY
– WINERIES ALSO LOOKING TO MOVE EXCESS INVENTORY CALIFORNIA BULK WINE INVENTORY
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000 Bulk Gallons Available Gallons Bulk
1,000,000
0 Jan. 2017 Jan. 2018 Jan. 2019 Cabernet Sauvignon Chardonnay Merlot Pinot Noir Zinfandel SONOMA COUNTY BULK WINE INVENTORY 2017 – 2019
500,000
400,000
300,000
200,000 Bulk Gallons Available Gallons Bulk
100,000
0 Jan. 2017 Jan. 2018 Jan. 2019 Cabernet Sauvignon Chardonnay Pinot Noir Zinfandel THE MARKET HAS CHANGED!
- SALES ARE SLUGGISH
- BUYERS ARE CAUTIOUS – SUPPLY IS A BAD WORD ONCE AGAIN
- BUYERS HAVE CHANGED SOURCING PLANS TO MANAGE MARGINS
- SELLING GRAPES & BULK WINE WILL BE MORE CHALLENGING
- GLOBAL DYNAMICS OF WINE BUSINESS ACTIONS TO TAKE
- STRENGTHEN RELATIONSHIP WITH CURRENT BUYERS – RECOGNIZE THEIR NEEDS (INVEST SONOMA COUNTY BRANDS)
- BE OPEN TO THE REALITIES OF THE NEW MARKET PLACE
- SOMETIMES THE FIRST OFFER IS THE BEST OFFER
- MANAGE INPUTS AND ASSETS TO MAINTAIN PROFITABILITY
- DEVELOP A STRATEGY : SHORT TERM – SURVIVAL LONG TERM – PROSPERITY SUMMARY/CONCLUSION
- WE HAVE BEEN THROUGH THIS BEFORE
- CONSUMERS WILL CONTINUE TO DRINK CALIFORNIA AND SONOMA COUNTY WINE
- PREMIUM SALES GROWING – BUT AT SLOWER RATES
- NEW BRAND OPPORTUNITIES EXIST TO UTILIZE THIS AVAILABLE SUPPLY - CAPITALIZE AND INVEST IN THOSE OPPORTUNITIES
- DON’T BE FEARFUL BECAUSE TODAYS CHALLENGES ARE TOMORROWS OPPORTUNITIES CIATTI REPORTS / PUBLICATIONS
- CALIFORNIA MARKET REPORT NEW OFFICE ADDRESS: - GLOBAL MARKET REPORT – 201 ALAMEDA DEL PRADO SUITE # 101 NOVATO, CA 94949 - WWW.CIATTI.COM
THANK YOU
GLENN PROCTOR [email protected] 415/458-5150 POINTS TO DISCUSS
- 2018 WINEGRAPE HARVEST
- GRAPE AND BULK MARKET
- WHAT TO EXPECT IN 2019
- COMMENTS/QUESTIONS GROWTH RATES IN LUXURY SALES AVERAGE PRICE INCREASES STATE REGIONAL TOTAL TONS
2,500,000
2,000,000
1,500,000
TOTAL TONS TOTAL 1,000,000
500,000
0 North Coast Central Coast & So. Cal North Interior C & S SJV
2014 2015 2016 2017 2018 Est. 2018 SPOT MARKET GRAPE PRICING
Sonoma Napa
Chard $500 – 2,800 $1,000 – 3,000
Sauv Blanc $1,000 – 1,850 $1,400 – 2,500
Cab Sauv $1,000 – 3,400 $2,000 – 10,000+
Pinot Noir $1,000 – 4,500 $800 – 3,600
Merlot $1,000 – 2,200 $1,800 – 3,800
Zinfandel $1000 – 3,000 $2,500 – 4,500
How low should we show pricing -$500 per ton ??????????? SONOMA MARKET SURVEY 2019
– MOST NEEDED VARIETY – CHARDONNAY, CABERNET SAUVIGNON
– LEAST NEEDED VARIETY – ZINFANDEL, CABERNET SAUVIGNON, PINOT NOIR
– BIGGEST THREATS TO SONOMA COUNTY – LABOR, PRICING, GOVERNMENT REGULATIONS, COMPETITION, LACK OF GROWING SONOMA COUNTY BRANDS
– VARIETY YOU WOULD PLANT/REPLANT – CHARDONNAY, PINOT NOIR, SAUVIGNON BLANC
– VARIETY YOU WOULD REMOVE CABERNET SAUVIGNON/ZINFANDEL – CABERNET SAUVIGNON, ZINFANDEL SONOMA WINEGRAPE ACREAGE 2017
Reported Reported Non Total Reported N-B % Bearing Bearing We should look at Updating this based on Chardonnay 15,078 559 15,637 4% Latest crop report – Cab Sauv 11,952 383 12,335 3% show that there is Merlot 4,668 106 4,774 2% really no new acres? Zinfandel 4,927 70 4,996 1% Sauv Blanc 2,595 15 2,611 1%
Pinot Noir 12,233 349 12,582 3% Potentially bigger Syrah 1,517 11 1,528 1% issues with CS where more planting has Pinot Gris 452 2 454 .4% gone in Others 303 29 332 9% Total 57,603 1,613 59,216 3% Remember when We said we could Not have too much Because we have Limited acres – When demand changes And brand sourcing Changes you Can be oversupplied NAPA COUNTY BULK WINE INVENTORY 2017 – 2019
400,000
350,000
300,000
250,000
200,000
Bulk Gallons Available Gallons Bulk 150,000
100,000
50,000
0 Jan. 2017 Jan. 2018 Jan. 2019 Cabernet Sauvignon Chardonnay Merlot Pinot Noir BULK MARKET PRICING
INTERIOR COASTAL SONOMA NAPA
$7 - 10 $15 - 22 $24 - 30 $40 – 55 CAB SAUV $5 - 7 $9 - 15 $15 - 22 $20 - 30
$5 - 7 $9 - 11 $14 - 17 $20 - 27 MERLOT $4 - 6 $7 - 9 $12 - 15 $18 - 23
$6 - 8 $10 - 15 $16 - 20 $20 - 25 ZINFANDEL $5 - 7 $8 - 11 $10 - 15 $20 - 25
PINOT $6 - 9 $13 - 17 $25 - 30 $20 - 28 NOIR $5 - 8 $9 - 13 $12 - 20 $14 - 18
$PRE HARVEST 2017 PRICES $POST HARVEST 2018 EST. PRICES? *PRICES DIFFICULT – MINIMAL ACTIVITY RECENT HEADLINES
- CALIFORNIA NORTH COAST WINE GRAPE HARVEST IN 2018 TOO MUCH OF A GOOD THING? (NORTHBAY BUSINESS JOURNAL)
- STOCK MARKET WOES RAISE A NAGGING FEAR: IS A RECESSION NEAR? (ASSOCIATED PRESS)
- TOUGH BUSINESS CLIMATE WILL TEST NORTH COAST WINERIES IN 2019 (PRESS DEMOCRAT)
- THE FUTURE OF LOCAL TOURISM? WINE, CRAFT BEER, MAYBE EVEN CANNABIS (PRESS DEMOCRAT)
- CONSTELLATION DUMPS CHEAP WINE FOR WEED (WINE SEARCHER) SONOMA MARKET SURVEY 2019
What changes will the industry need to make over the next 5 years to remain competitive 100.00%
80.00%
60.00%
40.00%
20.00%
0.00% Greater Yields Per More Mechanization Higher Grape/Wine More Reasonable Return to Brix Sustainable Grape Growers Making Acre Quality Brix Parameters Bonuses Pricing More Bulk Wine BULK MARKET PRICING
INTERIOR COASTAL SONOMA NAPA $5 - 8 $11 - 14 $16 - 22 $17 - 20 CHARDONNAY $4 - 7 $8 - 11 $10 - 14 $14 - 17 $6 - 8 $8 - 11 $12 - 15 $18 - 22 SAUV. BLANC $6 - 8 $7 - 10 $10 - 13 $14 - 18
$PRE HARVEST 2017 PRICES $POST HARVEST 2018 EST. PRICES? *PRICES DIFFICULT – MINIMAL ACTIVITY 2018 GRAPE MARKET
– BUYER ACTIVITY WAS EXTREMELY SLOW – WEAKEST MARKET SINCE 2010
– MOST GRAPES UNDER CONTRACT – FEW UNCOMMITTED GRAPES
– EARLY RRV CHARDONNAY, AND PREMIUM CS DEMAND, BUT MARKET CAME TO HALT BY MID SEASON
– BUYERS SHUT DOWN ONCE CROP WAS REALIZED
– END OF SEASON NO REAL OFFERS
– SOME BUYERS GIVING NOTICE ON LONG TERM CONTRACTS TO PROVIDE GREATER SUPPLY FLEXIBILITY
– BUYERS ADJUSTING SOURCING OPTIONS BECAUSE OF AVAILABILITY & PRICING CONTRAINTS SUPPLY/DEMAND DYNAMICS - TODAY
MOVING TO OVERSUPPLY
Buyers (ON SIDELINE)
Buying Selling