U.S Consumer Demand For Wine Can New Zealand Grow in the US?

Transcription

1 U.S Consumer Demand For Wine Can New Zealand Grow in the US? FRIDAY AUGUST 26 TH 2016 MASTER ROB MCMILLAN, EVP & FOUNDER SILICON VALLEY BANK WINE DIVISION

2 Comparative Country Performance Into the US Market Table Wine Case Shr Chg Country Category Performance 52 Weeks Ending 16-July-2016 $ Vol $ Vol % Chg vs YA Case Vol TTL DM TABLE WINE 9,950,473, ,819, TTL IMP TABLE WINE 3,692,319, ,273,892 (0.4) TTL ITALIAN TBL 1,214,756, ,055, TTL AUSTRALIAN TBL 728,400,330 (3.4) 12,479,751 (0.4) (3.83) TTL ARGENTINE TBL 411,523,366 (3.9) 4,852,889 (0.2) (4.15) TTL NEW ZEALAND TBL 371,986, ,745, TTL FRENCH TBL 330,381, ,209, TTL CHILEAN TBL 285,198,041 (3.1) 4,082,511 (0.1) (3.18) TTL SPANISH TBL 165,716, ,102,230 (0.0) 1.98 Source: Nielsen Beverage Group 2

3 U.S. Total Wine Consumption by Volume Neo-Prohibition Source: California Wine Institute 3

4 The Future of Wine Sales in the US Depends on your view of Long Term Economic Growth Requires a shared view of the U.S. Consumer Demand And if Trump or Hillary wins, we are all DOOMED!!! 4

5 Understanding Where We Are Started with WWII Napier Harbour NZ Rugby

6 US Stock Market 1941 to the Present Evolving Investment & Productivity Productivity Boomers Post War 6

7 How Does The US Economy Get Stronger & Buy More NZ Wine? Productivity = Employed Labor Force times Hours Worked Potential GDP Growth = Potential Labor Force & Productivity Growth Capital Investment leads to Long Term Labor Force Growth Labor Force Size needs positive Birth Rate + Immigration to grow Better Labor Metrics = Higher US GDP = More $$ to Spend on Wine 7

8 US Birthrate in Decline Accelerated with Recession 8

9 Participation in Labor Force Has Trended Lower 9

10 Contributions to Growth in Productivity Zero Interest Rates NORMALLY should lead to more Investment Source: Economic Cycle Research Institute, 13-Jun

11 Where are Companies Directing Their Cash Growth in the uses of Cash in Non-Financial Stocks Source: Wall Street Journal 11

12 U.S GDP Growth Making Modest Improvement US Worker Productivity Still Leads the World? 12

13 World Markets»Consumption»Supply to USA 13

14 Worldwide Production vs Consumption (in Mhls) Source: OIV 14

15 Consumption of Wine from by Country Source: OIV 15

16 Major Exporters into US Volume Trends (in Mhls) Brand Australia? Source: OIV 16

17 Import Share of US Wine Market Dropping? Source: Gomberg Fredrickson, SVB Estimates 17

18 Large Wine Companies: Leaving Large Scale Growers & Buying Premium Assets Representative Winery Transactions Wine Company Asset Type Reported Purchase Price Crimson Wine Grp Seven Hills Winery Winery & Vineyards Ste. Michelle Patz & Hall Brand Constellation The Prisoner Brand $285M Constellation Meomi Brand $315M Constellation Robert Mondavi Winery & Vineyards $1,030M Gallo J Wine Company Winery & Vineyards $90M Gallo Talbot Winery Winery & Vineyards Gallo Asti Winery & Souverain Winery & Vineyards Gallo Cypress Ranch & Palisades Vineyard Vineyards $18M Gallo The Ranch Wine Production Gallo Covey Run Winery Winery & Vineyards Gallo Columbia Winery Winery & Vineyards Kendall Jackson Yverdon Vineyard & Winery Winery & Vineyards Kendall Jackson Gran Moraine Vineyards Kendall Jackson Zena Crown Vineyards Kendall Jackson Siduri Winery Winery Pernod Ricard Kenwood Vineyards Winery & Vineyards $100M Treasury Estates Diagio Wine Assets Numerous $600M Wine Group Benzinger Family Winery Winery & Vineyards $70M 18

19 US Consumers Enter the Millennial Consumer Premiumization 19

20 Segment Performance in U.S. Table Wine Wine Selling Below $US9.00 Slumping Table Wine Case Shr Chg Price Category Performance 52 Weeks Ending 16-July-2016 $ Vol $ Vol % Chg vs YA Case Vol TOTAL TABLE WINE 13,642,792, ,093,304 - TTL GLOBAL TBL BE ,075,514 (2.7) 27,302,281 (1.1) (3.82) TTL GLOBAL TBL BE ,129,146, ,341,694 (0.4) 0.69 TTL GLOBAL TBL BE ,635,069,868 (1.4) 17,996,472 (0.4) (1.80) TTL GLOBAL TBL BE ,166,487, ,275, TTL GLOBAL TBL BE ,846,704, ,832, TTL GLOBAL TBL BE ,125,012, ,491, TTL GLOBAL TBL BE >20 938,797, ,774, Source: Nielsen Beverage Group 20

21 Present Demographic Demand by Price Point (Fine Wine) Source: 2015 Annual Wine Conditions Survey November 30,

22 Growth in Premium Categories Millennial Fingerprints - 22

23 Restaurant Sales of Wine Showing Long Term Decline Millennial Fingerprints Source: Beverage Information Group, Nielsen Beverage 23

24 Boomers Retiring Millennials Arriving Source: Calculated Risk Blog

25 Boomers Retiring Millennials Arriving 25 Source: Calculated Risk Blog

26 Median American Net Worth by Age Boomer Mature Gen X Millennials Source: U.S. Federal Reserve 26

27 Annual Change in Cohort Consumption Source: 2015 Annual Wine Conditions Survey November 30,

28 What is Driving Premiumization Then? Growth in Upper Middle Class 28

29 Projected Size of the Workforce in 2025 Millennials in Charge 29

30 Projection of U.S. Net Household Wealth to 2030 Kids Will Never Move Out! Source: Deloitte Center for Financial Services, Nov. 9 th,

31 Generational Differences in Beer vs Wine Consumption Millennials Will Be Good Premium Wine Consumers! Index Base = Gen Y (21-29) Gen X (30-49) Boomers (50-69) Silent (70+) Beer in Past 7 Days Wine Past 7 Days Source: Scarborough Research, 2015

32 Observations and Predictions on the Business Low priced generic/jug wine failing as a category World wine supply is balanced? Growth segment is 100% in premium wine Drop in US per capita wine consumption, but it s temporary World economic growth will be slow for the foreseeable future Need improved productivity and capital investment Gen X take over for boomers as top cohort by 2021 have wealth Millennials take over in 2026, but are financially disadvantaged Foreign imports will gain market share over US Wine in next decade Increasingly difficult environment to take price increases. NZ s wine is very well-positioned for US Consumers. Brand Strength, Premiumization, Lower Alc%, Good Value 32

33 Type Sections or Title of Entire Presentation Insert-Header and Footer Georgia 10pt 33

34 About SVB About Silicon Valley Bank s Wine Division: Silicon Valley Bank s Wine Division specializes in commercial banking for premium wineries and vineyards and the industries that support them. SVB has the largest team of commercial bankers dedicated to the wine industry of any bank nationwide. Founded in 1994, SVB s Wine Division has offices in Napa and Sonoma counties and serves clients focused in the fine wine producing regions of California, Oregon and Washington. By virtue of its dedication to the wine industry, Silicon Valley Bank is able to support its clients consistently through economic and growth cycles, and offer guidance on many aspects of their business, beyond traditional banking services. Silicon Valley Bank is a member of global financial services firm SVB Financial Group (Nasdaq: SIVB), with SVB Analytics, SVB Capital and SVB Private Bank. More information on the company can be found at Contact Us: For more information on Silicon Valley Bank s Wine Division Rob McMillan EVP & Founder rmcmillan@svb.com Blog: SVB on Wine 34