Winegrape Issues A California & International Perspective Nat DiBuduo Allied Grape Growers Valent: Grape & Fru

1. Winegrape Issues A California & International Perspective Nat DiBuduo Allied Grape Growers Valent: Grape & Fruit Symposium November 5, 2013

2. Allied Grape Growers was formed on 1951 by 230 growers representing 50,000 tons Sold off all wineries in 1987 and switched to todays business plan 2001 AGG Represented 500 growers and 150,000 tons with a grape value in $34 m Today AGG represents 600 growers from Kern County to Lake County of 285,000 tons with a value in 2012 over $100 millon. Allied Grape Growers is a grape marketing cooperative that believes there is strength, efficiency and benefit in numbers. What is Allied Grape Growers?

3. How does California Winegrape Acreage, Production & Value Compare?

4. Winegrape Acreage

5. 2012 Winegrape Volume

6. 2012 Winegrape Value

7. Wine Shipments Opening Excerpt from the Gomberg Fredrikson 2012 Annual Wine Industry Review “Following and explosive industry growth year in 2011, the pace of wine shipments slowed in 2012, partially as a result of wine supply shortages……In an extraordinary development, 2012 wine demand exceeded the available California wine supply…”

8. Thompson Seedless and Rubired Usage & Concentrate Markets

9. Raisin Industry: Sales for the 2012-2013 marketing year were off by a total of 3% Domestic shipments were flat Export shipments were down by 9% from the previous year Field Price negotiations for the 2013 crop are underway. Thompson Seedless has alternative Brandy and other alcohol based products Dry white wine or wine stock for sparkling wines Rubired grapes are used for red wine but predominantly used for quality red concentrate: Coloring for wine and other products Demand for both white and red concentrate have been at higher than expected prices White Concentrate has been $10-$12 Red Concentrate has been trading at $12-$15 Thompson Seedless and Rubired Usage & Concentrate Markets

10. Part 1: Today’s Planting Trends

11. 2013 Nursery Survey 39% White 61% Red Other Reds Include: Grenache Petite Verdot Cab Franc Rubired Syrah Barbera Ruby Cab Tempranillo Other Whites Include: Gewurztraminer Riesling Viognier Sauvignon Blanc

12. 2013 Nursery Survey Vine sales began trending toward the coast in 2012

13. 2013 Nursery Survey Are we over-planting…..again?

14. California Acreage Trends Only if we Continue the Recent Planting Trend

15. California Acreage Trends Moderate Planting Matches the Trend Moderate Planting Defined: +/-15,000 NET new acres per year

16. Part 2: Production& Supply

17. California Production

18. Are we in balance now, and in the immediate future?

19. California Shipments 3.93 3.87 3.80 3.74 Projected Need:

20. California Production

21. California Shipments For 2014-2016, take the forecasted winegrape crush and deduct 220,000 tons for other uses Balanced

22. Part 3: The Market

23. The Winegrape Market Are today’s grape prices here to stay?

24. The Winegrape Market What were the driving factors behind the healthier grape prices of the last few years? We have identified major factors driving price now, and likely in the future

25. The Winegrape Market What were the driving factors behind the increased grape prices of the last two years? • #4: Competition from alternative crops • Almonds primarily, but all ag crops in general • Outlook: • Can you say $3/pound? For how long? • Many market forecasts from the almond industry point toward unfilled market capacity in the short term.

26. The Winegrape Market What were the driving factors behind the increased grape prices of the last two years? • #3: Forethought by buyers • Buyers have needed to secure mid-term supply as inventories balanced • Translates into competition for existing grapes • Outlook: • Price is now stabilizing based on supply/demand factors.

27. The Winegrape Market What were the driving factors behind the increased grape prices of the last two years? • #2: The re-establishment of the “mid-market” following the recession • Wineries depleted inventories in response to the recession. • Consumers moved down the price chain, but that trend seems to be slowly reversing. • Outlook: • Sufficient Lodi and Coastal inventories will help supply the > $7 programs in the immediate future. Demand for interior fruit will come in the interest of averaging down price, not in the interest of filling supply shortage.

28. The Winegrape Market What were the driving factors behind the increased grape prices of the last two years? • #1: Overall supply “shortage” • Not only domestically, but globally. • California has only added acreage at a moderate pace in recent years • Outlook: • Planting will continue. Speculative planting will be at a minimum, while contracted planting should be “controlled.” • With the exception of a few “smaller” world producers, most winegrowing regions are not expanding their acreage.

29. The Winegrape Market Will rising grape prices slow wine sales?

30. The Winegrape Market Every $100 in grape value = $.12 in the bottle

31. California and International Wine Market Source: Morgan Stanley Research

32. California and International Wine Market Source: Morgan Stanley Research

33. International Wine Market Share of Production, by Country Source: Wine Institute/Trade Data and Analysis

34. International Wine Market Percent of World Export Volume, by Country Source: Wine Institute/Trade Data and Analysis

35. International Wine Market Percent of World Export Value, by Country Source: Wine Institute/Trade Data and Analysis

36. Cabernet Sauvignon- Global Market California Global Source: Ciatti Company

37. Chardonnay - Global Market California Global Source: Ciatti Company

38. Pinot Noir - Global Market California Global Source: Ciatti Company

39. Take Home Message The underlying factors that create a stable market look to exist, at least for the foreseeable future, but we must maintain quality grapes/wine and offer value in order to remain successful.