Suisun Valley Grape Growers Assn

2007 to 2011 Strategic Plan & Budget

In keeping with defined initial goals, the Suisun Valley Grape Growers Association has developed forward strategic planning and budgets to cover 2007 and out to 2011. Based upon the changes in market during initial three years of Association presence, the plan sets direction for sustainable market performance into the future.

Market Situation – Year End 2006

1. Winery consolidation has been highly focused to the commodity side of the wine business and has consolidated globally. Global commodity status has allowed major old line buyers to source freely at the bulk juice level globally on lowest price available, creating competitive disadvantage in California production costs 2. $10 and under commodity wines likely not competitively feasible in California vineyards on sustainable basis 3. Consolidated commodity wineries have significantly reduced numbers of grape buyers thus controlling commodity grape pricing. 4. Coastal appellations no longer regard commodity programs as sustainable 5. Wine quality levels continue to improve requiring more quality improvements in vineyards. 6. An explosion of small boutique up scale wineries with very different quality and quantity needs has surfaced 7. A major expansion of Midwest and East Coast wineries has occurred in US market, often focused to available hybrid local grapes but seeking more European varietals for their customer demands 8. Coastal premium growers have opted to custom crush over sell at distressed commodity levels, bringing high levels of new premium to luxury bulk wines into market for program acquisition by many previous winery grape buyers 9. Suisun Valley awareness levels and quality perceptions are being significantly elevated from non existent levels as results of multiple year effort by SVGGA. 10. Internal grape demand within Suisun Valley remains relatively flat and significantly out of balance to supply. 11. Political issues have clouded unified approach within Suisun Valley 12. Suisun Valley Fund is aging and moving into second half of its defined life. 13. Industry alliances have helped elevate the status and awareness of Suisun Valley AVA 14. Potential of expansion of “in-valley” wineries becomes more favorable with new players entering Suisun Valley.

15. Editorial by WineBusiness Monthly describes the status and imperative of ‘Regional Marketing” imperative as follows:

Regional Marketing Will Drive Wine Sales

2006 was the year of regional marketing. This was the year when regional associations started trying to get control of their marketing processes. The proliferation of AVAs has made it more difficult for any region to become well known to consumers. There are now roughly 200 American Viticulture Areas (AVAs) in North America. Most consumers still barely know what an AVA is. Though consumers may have heard of Napa, or even of California, a surprising number of them (as a study from a couple of years ago demonstrated) assume "Robert Mondavi" is an AVA.

Global competition has made it imperative that vintners and growers find a way to make their regions stand out. Associations will take the lead in explaining to consumers how the products from their region are different than the grapes and wines available from other regions. Associations are coordinating the marketing efforts of vintners and growers in each region to deliver a unified message.

Regions trying to get control of these processes include Sonoma, Paso Robles and Mendocino. Growers in Sonoma County voted by an overwhelming margin this year for an assessment through which they will fund a new growers commission to boost the profile of Sonoma grapes.

Regional marketing associations in several wine-producing states have reinvented themselves. From New York to Washington to California, many have new enthusiasm, momentum and leadership. We count nearly a dozen new executive directors of grower and vintner marketing organizations. Mendocino winegrape growers and vintners approved the implementation of the Mendocino County Winegrape and Wine Commission. Unlike the two other regional winegrape commissions currently operating in California, this commission has its own separate statute and will be funded by both growers and vintners instead of just growers alone.

SWOT Analysis

Strengths AVA Status North Coast Status Multiple micro climate zones Core group of progressive growers Emerging willingness of key press to type Suisun Valley with Napa Emergence of proven quality ratings by key influential types Short term available funding

Weaknesses Very poor awareness of AVA Misperceptions on climate and soils by premium wineries Inability to continue in commodity arena due to costs Significant lack of internal AVA grape demand Limited appellated wines to create market presence for growers Lack of alternative processing facilities Lack of current long term sustainable funding to market Limited base of leadership

Opportunities Emergence of notable recognition of Suisun Valley wines to build upon Effective utilization of available Public funding over next 4 years Potential changes in General Plan to open more market driven activities that support grape and wine sales Expanded strategic alliances within industry influential types Expansion of internal winery entities creating expanded internal grape demand Ability to define quality perceptions with positive efforts

Threats SVF sunset is clearly on the horizon, loss of resource. Industry consolidation reducing sales opportunities Globalization at commodity pricing levels Changes in development pressures on Suisun Valley Poor vineyard management practices of some effect all Competitive development by other AVA groups further stratify barriers to cross AVA grape purchasing.

Situation Conclusions

The Association has demonstrated cohesiveness and viability that requires long term self sufficiency. Internal funding mechanisms of greater consequence must evolve.

Growing of commodity oriented wine grapes is not long term economically viable within Suisun Valley; globalization of wine market at commodity level, direct operating expense issues of the region.

A need for agricultural zoning and policy reform is critical to economic viability for many growers, allowing diversified marketing approaches to enhanced farm revenues.

Expansion of appellated wines from Suisun Valley will be critical to gaining credibility for specialized grape demand on Suisun Valley. Evolution of such demand can be attained under significant quality requirement that will pay superior pricing.

Market awareness is critical to grower success, agricultural branding of regions is a real competitive factor that must be pursued.

Current AVA Position

One of oldest awarded status areas since inception of AVA system in United States with current limited awareness of AVA status, founding entity status lost on market, capable of producing excellent luxury class wine grapes and appellated wines. Very current awakenings of market position being stimulated by increased observations of wine quality by market defining media sources in positive direction.

A position yet encumbered with supply industry stereotyping to commodity side of market.

SVGGA Desired AVA Position

A Coastal appellation of it’s own character and value relationships in both contract wine grape supply and appellated ultra premium to luxury class wines capable of being considered within the top tiers of appellations in California.

SVGGA Desired Position

ƒ To be member self sufficient on long term basis ƒ Projecting efforts solely within Ultra Premium and Luxury Class wine segments ƒ Advocate of reformed Ag zoning and policy that supports conceptual Agricultural Enterprise Zone development and adoption upon agreeable plan ƒ Project defining leadership for agriculture in Suisun Valley

SVGGA Goals and Objectives 2007-2011

1. To sustain wine grape production at commercially profitable levels for all growers with the Suisun Valley AVA. 2. To improve price per ton averages on annualized basis to maintain grower revenue in line with increased operating costs 3. To increase annual tonnage shipments from Suisun Valley to ultra-premium and luxury class North Coast wineries or wine programs. 4. To develop meaningful awareness within commercial markets of brand (AVA) orientation of Suisun Valley and position such awareness as high quality/high value. 5. To foster further winery development within the Suisun Valley AVA producing Suisun Valley appellated wines, growing internal demand of Suisun Valley grape growers.

Strategies to Achieve Goals

Financial Strategic Element

Develop an internal grower annual assessment structure upon which sustainable future financing of SVGGA administration and programs can be accomplished. Initial roll out 2008, ramped up fashion to fully self sufficient assessments beginning 2011. Build budget based upon SVF grants during 2007 followed by integrated funding 2008 to 2010.

Grower self assessment structure to be augmented by ancillary SVGGA wine auction. First wine auction to be staged in 2008.

Industry Alliance Strategic Element

Utilize the market presence of a highly regarded brokerage to provide market intelligence, periodic sales support and 'halo effect' market validation to AVA. Support primary industry alliance with tangent broad based organizational alliances with overview organizations such as Wine Institute, Family Winemakers of CA, Allied Grape Growers, California Association of Wine Growers. Assign Board members to manage relationships with each organizational alliance to grow impact.

Seek a primary intermediary company in supply / demand channels to enhance image and product credibility, develop long term contractual relationship.

Community Strategic Element

Creation of specialized commercial wine sales and communications programs within the local to regional supermarket brands that captures the spectrum of Suisun Valley wines, creating more demand for and awareness of Suisun Valley wine grapes. Utilize initial contacts to further penetrate chains distribution opportunities.

Provide a unique ‘member’ signage program for individual vineyard sites that signifies unity of regional brand and integration with market position, provide signage as benefit.

Seek establishment of new agricultural zoning and policy vehicles that improve farm revenue potential of existing assets.

Quality Assessment Element

Development of impartial quality assessment tools and review by third party entities to be utilized in grower and vintner quality enhancement. Increased understanding of target wine position. Utilize outcomes to isolated defining characteristics upon which Suisun Valley grapes can be differentiated upon.

Communications Strategic Element

Continued use of Public Relations efforts with industry and general market provided under agency services directed towards wine press and industry influential types. Continue to build upon relationships established to date. Embellish efforts with limited but targeted industry advertising driving AVA awareness and quality standards.

Sale Promotion StrategicElement

To expand existing, and develop new, markets through brand sales promotion involving primary industry contact at local, regional and national levels. Create significant presence of brand within industry forums that target our primary market segments. Utilize a combination of grower members to implement sales presence along with industry alliances.

Tactical Action Steps (specific schedules to be established)

Attend and take booth space at Wineries Unlimited, Unified Symposium and other important industry trade shows as available and fundable. Sales representation to be member based.

Produce sales sheets and fliers for distribution via trades show participation, direct mail campaigns and direct sales efforts.

Place individual or individuals into buyer marketplace to encourage positive consideration of Suisun Valley grapes above commodity levels.

Continue separate PR contractual relationship with Diaz Communications to drive AVA news to target audiences, influence coverage by influential types

Expand agency efforts to develop point of sales promotional displays for AVA wine, develop unified advertising concept and implement continued placement in industry trade media. Further develop brand identity via industry promotions at local, regional and national forums. Participate in broader branding messages; CAWG California campaign, Wine Institute and others.

Continue to present varied grant funding requests to SVF, gain needed resources to fullest extent of their capacities, while implementing a new scaled grower assessment to insured sustained financial health of Assn. Full transition to occur by 2011.

Engage in Solano County General Plan update process to insure barriers to winery entry to Suisun Valley are lower and ancillary market opportunities are secured via a conceptual enterprise zone to enhance revenues.

Pursue retail corporate and chain store integration of Suisun Valley wines under local banner in Solano County, building out as feasible. Develop common Point of Sale branded display unit to feature appellation.

Revisit wine and grape brokerage entities to develop alliance relationship under more significant contractual terms focused to building our image and awareness among ultra premium and luxury class demand. Primary consideration to Turrentine based upon positive history.

Initiate planning to commence an annual Suisun Valley wine auction by summer 2008 as sustainable revenue generator to Assn. Assn to seek contributory from appellated producers returning integration to Assn.

Request resident winemakers to develop an independent peer panel to review our annual products and provide constructive feedback to be utilized for quality improvement and industry promotion.

Create standardized member signage program to be displayed at respective vineyards throughout the AVA.

Revenue and Expense Budgets

(Multi year revenue and program expense budget that defines sources of income and specific areas of expense required to implement tactical programs pursuing strategic direction. 2007 to 2011 range of budget.)

EXCEL FILE attachment

Appendix

Additional elements for further consideration Strategies & Tactics to Achieve Goals

! Formulate grower assessments (funding mechanism) and start phasing in over next four years at 25% per year. ! Establish an annual public event to build awareness of our Assn., AVA,and the wines of Suisun Valley. ! Have a third party tasting panel evaluate our wines, we may need a reality check. ! Sponsor a tasting seminar for all Assn. Members. ! Encourage all members to evaluate their vineyards and remove ones that will not meet the quality standards outside of commodity pricing. ! Put together an informational packet for new comers to Suisun Valley ! Have a presence at as many of industry forums as possible.(symposiums, trade shows, etc.) ! SVGGA signs in as many member vineyards as possible to show unity. ! Continue a presence with county to steer the future direction for Siusun Valley. ! Local exposure campaign. Example: Suisun Valley section in local supermarkets. We must make our local community believers before we move to a broader base (bay area ). ! Continue our relationship with Turrentine Grape Brokerage simply because the leaders in our industry. ! Start a Vintners Assn. to compete for funds from SVF and to ensure proper focus on the wine interest in Suisun Valley

!Put together promotional materials to promote Suisun Valley (Example; ads that have the appearance of a written article and strategically placed in magazines and show Suisun Valley as the place to visit, grocery store display materials top promote Suisun Valley wines) !Vineyards should upgrade to produce better quality fruit. A consultant viticulturist may have to be put on to assist some growers. !Svgga must become self sufficient and an agreeable assessment must be implemented in the coming years. !The county must assist business with infrastructure costs that cannot be afforded to meet permitted requirements

State Crush Data 2006

Suisun & Green Valley Preliminary Prices - 2006 2006 Preliminary Crush Report comparative

Dist 5 Dist 5

County County NCGGA NCGGA 2004 2006 Preliminary Avg. 2005 Avg. 2005 Prelim. 2005 Final Recommendations Cabernet Sauvignon $701.00 $763.00 700-1000 800-1000 800-1100 adjusted for firesale

Merlot $778.00 $863.00 900-1200 900-1200 900-1200 adjusted for firesale

Pinot Noir $891.00 1000-1200 1500 special lots

Syrah $665.00 $662.00 650-1000 1000-1300 800-1200 1500 special lot adjusted for firesale

Zinfandel (red) $572.00 $677.00 900-1400 900-1500 900-1400 includes white

Chardonnay $784.00 $822.00 800-1000 900-1200 900-1200

Sauvignon Blanc $458.00 $480.00 600-800 800-1000 700-1000 adjusted for firesale

Notes Crush District 5 does not isolate Suisun Valley or North Coast AVA's Wild Horse Valley which stradles Dist 4 & % are in numbers, removed from firesale adjustments Firesale adjustment attempted to drop out end of year salvage sales of $110 to $125 per ton levels Some vineyard data is clearly not present.

Suisun Valley Grape Growers Assn Crush District 5 - Preliminary Value vs Volume Comparative

Dollar Value Varietal

1000- 1500- Whites $500&less 500-1000 1500 2000 2000-5000

Chard 21.30% 40.44% 38.23% Pinot Gris 82.82% 17.18% Sauv Blanc 70.72% 28.77% 0.50% Viognier 100.00% Reisling 40.85% 59.15%

Reds

Cab Sauv 10.75% 20.55% 58.84% 1.41% Merlot 2.64% 20.05% 52.69% 19.63% Petite Sir 0.70% 83.60% 13.31% 3.01% Pinot Noir 8.70% 83.53% 3.73% Syrah 4.27% 1.32% 31.28% 63.13% Zinfandel 50.28% 43.60% 6.12%

Tonnage Delivered

1000- 1500- Whites $500&less 500-1000 1500 2000 2000-5000

Chard 30.90% 38.06% 22.04% Pinot Gris 88.55% 11.45% Sauv Blanc 82.71% 17.18% 0.11% Viognier 100.00% Reisling 52.99% 47.01%

Reds

Cab Sauv 52.87% 17.36% 28.37% 1.41% Merlot 21.21% 32.14% 40.01% 6.64% Petite Sir 0.13% 90.33% 8.41% 1.13% Pinot Noir 15.91% 80.36% 3.73% Syrah 36.69% 1.48% 28.20% 33.64% Zinfandel 69.27% 28.25% 2.47%

State of Washington 2006 Crush varietal average. Washington is producing 120 million tons of fruit and Washington wine shipments are now 2.5% share of US Market

WASHINGTON WINERIES' 2006

CRUSH

TOP 10 VARIETIES Tons Crushed Avg. Price Per Ton

Chardonnay 28,600 $783

Riesling 23,800 $716

Cabernet Sauvignon 20,000 $1,261

Merlot 19,100 $1,098

Syrah 8,200 $1,152

Sauvignon Blanc 4,300 $764

Gewurztraminer 4,000 $715

Cabernet Franc 2,400 $1,243

Pinot Gris 2,100 $861

Chenin Blanc & Viognier, TIE 1,100 $622; $985