Lake County in the Marketplace Christian Miller Lake County Winegrape Commission Momentum Seminar January 23, 2014
About Full Glass Research Provider of economic & industry research to food & drink companies and organizations, governments Economic Impact studies Category outlook and trend analysis Supply vs. demand analysis using acreage/crush stats vs. sales data Marketing strategy consulting Clients have included a food service company, blueberry farmer, vineyard REIT, CPA firm, industrial suppliers, regional wine organizations, individual wineries, and grape brokers 2 2
About Wine Opinions Leading provider of quantitative and qualitative consumer and trade research on the U.S. wine market Online trade or consumer surveys Major market focus groups Proprietary Vintrospectives online trade or consumer discussion groups Trade one-on-one interviews Mobile ipad survey capabilities tasting room or wine shop consumer intercept surveys and one-on-one interviews Custom market research and reporting 3 3
Wine Opinions Data Sources Consumer panel (8,400+) skews to high frequency wine drinkers and wine purchasers across all price segments Trade panel (2,400+) focused on importers, distributors, on-premise, and off-premise sectors Commercially-sourced respondents for over samples or other client needs Client databases (wine club members, social media followers, trade contacts) Custom recruiting of trade senior executives and gatekeepers Partnership with Wine.com to provide consumer customer respondent pools based on purchases 4 4
Wine Opinions Clients (sampling) Full Glass Research Clients (sampling) 5 5
A Brief Review of the Wine Market
% Change in Table Wine Consumption 1993-2013 (Percentage gain/loss in volume) 7.2 5.6 4.5 4.1 2.5 3.4 4.7 1.3 5.7 5.4 3.8 2.5 3.7 3.5 0.9 1.1 1.8 4.7 2.9 3 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13-2.9 Source: Beverage Information Group, Full Glass Research
Growth in California Table Wine by Price Segment 2000-2012 16 15 % Growth 14 12 10 8 6 4 2 0-2 -4-1 12 10 10 8 8 8 6 6 6 4 5 5 3 3 1 2 0 0 1 0 Under $8 $8-15 $15+ -2 5 2000 2002 2004 2006 2008 2010 2012 2013 Source: Full Glass Research 2014
SCANNED TABLE WINE SALES, SELECT VARIETIES % Share of $ Sales Varietal Value % Change 100% Total Table Wine +4.6% 19.5 Chardonnay +2.0 15.3 Cab Sauv +6.5 9.5 Red Blends +15.0 8.8 Pinot Grigio/Gris +9.3 7.6 Merlot -3.0 6.5 Pinot Noir +9.0 5.1 Moscato +15.0 4.9 Sauv Blanc +8.8 2.2 Riesling -4.0 1.6 Syrah/Shiraz -12.0 Source: Nielsen Total U.S. All Outlets (Food/Drug/Mass/Conv/Liquor/Club) 52 wks end 11/9/13
SCANNED TABLE WINE SALES by PRICE % Share of $ Sales Price Segment % Change in $ Sales 100% Total Table Wine +4.6% 6.7 $0-2.99 +0.2 33.1 $3-5.99 +2.1 14.7 $6-8.99-3.3 24.0 $9-11.99 +10.3 9.5 $12-14.99 +12.2 5.9 $15-19.99 +4.4 5.8 $20+ +12.0 Source: Nielsen Total U.S. All Outlets (Food/Drug/Mass/Conv/Liquor/Club) 52 wks end 11/9/13
High Frequency Wine Consumer: Purchases by Price Point 2009 vs. 2014 Percentage retail purchase by frequency and price segment (750ml) Purchase Monthly+ Never Purchase Price Segment 2009 2014* 2009 2014* Under $10 62% 48% 6% 15% $10 - $20 74% 70% 1% 2% $20 - $30 36% 45% 6% 5% Over $30 14% 18% 20% 16% 2014 Wine Opinions. All Rights Reserved. *prelim Jan 2014
Wine over $20: Frequency of Purchase 2009-2013 2009 2010 2011 2012 2013* 45% 40% 35% 30% 25% 20% 35% 25% 23% 22% 20% 36% 33% 40% 37% 35% 31% 22% 15% 10% 5% 5% 9% 6% 10% 0% Weekly Monthly Sevrl x Yr Less often/never *2014 preliminary 2014 Wine Opinions. All Rights Reserved. 12
STATEMENTS on PRICE & VALUE 2013 Strongly Agree Somewhat Agree Neutral or Undecided Somewhat Disagree Strongly Disagree The era of great deals brought on by the recession is coming to an end AGREE..DISAGREE 5% 25% 42% 23% 5% If you shop carefully, it s easy to find wines under $10 that are as good as wines costing $10-$20 24% 35% 19% 17% 6% If you shop carefully, it s easy to find wines between $10-$20 that are as good as many wines over $20 41% 45% 8% 5% 1% When it comes to wine quality, you get what you pay for 7% 40% 19% 29% 5% 2013 Wine Opinions. All Rights Reserved. 13
STATEMENTS on PRICE & VALUE 2013 Strongly Agree Somewhat Agree Neutral or Undecided Somewhat Disagree Strongly Disagree Over the past few years, I have found better and better quality in wines $10-20 AGREE..DISAGREE 29% 50% 15% 4% 1% Over the past few years, I have found better and better quality in wines under $10 19% 32% 24% 18% 8% The best way to find high quality at a low price is to shop at many different stores or websites 13% 37% 31% 16% 4% The best way to find high quality at a low price is to try wines from new regions or varieties 22% 52% 20% 6% 1% 2013 Wine Opinions. All Rights Reserved. 14
A Brief Review of the Supply Side
Three Sources of Demand for Lake County Grapes As blender for high end wines with high grape costs (e.g. Napa Cab) As blender or base for California or coastal appellated $10-20 wines Sales of Lake County AVA wines 1 6 16
Key Demand Indicators High End Blender: sales of $20+ California and/or Napa Valley wines in scan data (skew towards liquor stores); DtC sales of Napa Valley wine; surveys of trade and high end wine consumers; Napa grape supply/demand balance. Blender or base for California or coastal appellated $10-20 wines: sales of $10-20 wine in scan data; grape supply and price trends in competitive regions (Lodi, Mendo, Central Coast, etc.) Lake County AVA wines: sales of Lake County wine in scan data (under-represented?); surveys of awareness-trial-purchase among high frequency wine consumers; surveys of wineries with widely distributed Lake County SKUs; DtC sales at Lake County wineries; Lake County share of SKUs in stores. 1 7 17
Price Comparison for Leading Varieties Price per Ton 2012 Lake Cty "Premium" Variety Lake Cty California Lodi vs CA vs Lodi Chardonnay 1210 849 559 43% 116% Sauv Blanc 1005 862 511 17% 97% Cab Sauv 1616 1385 727 17% 122% Merlot 1201 802 588 50% 104% Petite Sirah 1551 854 807 82% 92% Syrah 1317 761 565 73% 133% Zinfandel 1518 715 817 112% 86% Source: CASS, Full Glass Research 2014 18
Cabernet Grape Trends 2005-2012 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% 50% 40% 30% 20% 10% 0% -10% -20% % Change in Tonnage, Cabernet Sauvignon 2005 2006 2007 2008 2009 2010 2011 2012 % Change in Price per Ton, Cabernet Sauvignon 2005 2006 2007 2008 2009 2010 2011 2012 Lake Napa Lodi/Delta Lake Napa Lodi/Delta Source: CASS, Frank Rimerman 19
Sauv Blanc Grape Trends 2005-2012 % Change in Tonnage of Sauv Blanc 100% 80% 60% 40% 20% 0% -20% -40% -60% 20% 15% 10% 5% 0% -5% -10% -15% 2005 2006 2007 2008 2009 2010 2011 2012 % Change in Price per Ton of Sauv Blanc 2005 2006 2007 2008 2009 2010 2011 2012 Lake Napa Cntrl Cst Lake Napa Cntrl Cst Source: CASS, Frank Rimerman 20
2012 Napa Crush Implications of Napa Blending for Lake County Grapes Proportion of Lake Cty 2012 Crush if Lake supplies X% Tons blender needed at 15% 100% 50% 25% 10% 39,256 (CabSauv) 8,135 (SauvBlanc) 6,928 65% 33% 16% 7% 1,436 22% 11% 5% 2% Note: Lake County 2012 supply = 10,653 tons Lake Cty CabSauv; 6,541 tons Lake Cty SauvBlanc Source: Full Glass Research, CASS 21
Wine Opinions National Consumer Panel Survey Lake County Data
Panel Sample Online survey of Wine Opinions consumer panel January 2014 Panel targets high frequency & high involvement wine consumers, a segment representing roughly 20 million wine consumers across the U.S., who are responsible for over half the wine purchases $10-20 and over 90% of the purchases over $20. N = 772; 2.1-3.5% margin of error at 95CI 55% male/45% female gender split; 20% aged 21-37, 27% aged 38-49, 49% aged 50-68, 4% older From 47 different states, 25% California 87% drink wine more often than once a week; 45% purchase $20+ wine monthly or more often 2014 Wine Opinions. All Rights Reserved. 23
Varietal Drinking Frequency 2013 (WO Consumer Panel) Variety Frequently Occasionally Seldom Rarely or Never Cabernet Sauvignon 57% 30% 11% 3% Merlot 25% 36% 32% 7% Sauvignon Blanc 34% 36% 23% 8% Red Blends 62% 29% 8% 1% Zinfandel 41% 32% 20% 7% Syrah/Shiraz 36% 39% 20% 6% Petite Sirah 5% 35% 39% 21% 2013 Wine Opinions. All Rights Reserved. 24
Frequency of Retail Wine Purchase by Price Point (750ml pricing) SEVERAL LESS PRICE SEGMENT WEEKLY MONTHLY TIMES/YEAR OFTEN NEVER Under $10 25% 23% 15% 22% 15% $10 - $20 30% 40% 20% 8% 2% $20 - $30 10% 35% 34% 17% 5% $30 - $50 3% 15% 36% 30% 16% Over $50 1% 5% 22% 38% 35% 2013 Wine Opinions. All Rights Reserved. 25
Consumer Awareness by AVA/Region Sonoma County Napa Valley Santa Barbara Monterey Mendocino Paso Robles Lodi 99% 99% 94% 93% 93% 92% 89% LAKE COUNTY Amador Livermore Valley 74% 71% 66% 2014 Wine Opinions. All Rights Reserved. 26
Regional Awareness & Trial Percent by awareness and trial (past 3 months) Have NOT heard of Heard of, NOT tried HAVE Tried LODI 11% 42% 47% LIVERMORE 34% 50% 16% LAKE COUNTY 26% 51% 23% SANTA BARBARA 6% 47% 47% AMADOR 29% 45% 26% PASO ROBLES 8% 31% 61% SONOMA 1% 16% 83% MONTEREY 7% 48% 45% NAPA VALLEY 1% 13% 86% MENDOCINO 7% 49% 44% Source: Wine Opinions Jan 2014
Regional Awareness & Trial, 2008 vs. 2014 Percent by awareness and trial (past 3 months) Have NOT heard of Heard of NOT tried HAVE Tried 2008 2014 2008 2014 2008 2014 Source: Wine Opinions Jan 2014 LODI 27% 11% 44% 42% 29% 47% LIVERMORE 52% 34% 40% 50% 8% 16% LAKE COUNTY 39% 26% 47% 51% 14% 23% SANTA BARBARA 7% 6% 53% 47% 39% 47% AMADOR 49% 30% 32% 44% 19% 26% PASO ROBLES 19% 8% 31% 31% 51% 61% SONOMA 2% 1% 19% 16% 79% 83% MONTEREY 7% 7% 55% 48% 50% 45% NAPA VALLEY 1% 1% 17% 13% 83% 86% MENDOCINO 12% 7% 47% 49% 41% 44%
Regional Associations with White Varieties 2014 Percent associating Leading Varietals Many different Don t know Lodi OTHER 18%, CHARD 13%, 16% 38% Livermore Valley CH ARD 13%, SB 4% 12% 59% LAKE CTY CHARD 12%, SB 12%, OTHER 6% 11% 51% Santa Barbara County CHARD 30%, PG & SB 7% 18% 25% Amador County OTHER 12%, CHARD 5% 13% 58% Paso Robles CHARD 12%, OTHER 16%, VIO 10% 24% 25% Sonoma County CH 43%, SB 5% 33% 9% Monterey County CH 33%, SB 7%, OTHER 6% 21% 25% Napa Valley CH 40%, SB 7%, OTHER 6% 40% 5% Mendocino CH 14%, OTHER 8%, SB/PG 7% 22% 37%
% Associating Sauvignon Blanc with each Region/AVA Lodi Livermore Valley 5% 4% LAKE COUNTY 12% Santa Barbara County 7% Paso Robles 6% Amador County 4% Sonoma County 5% Monterey County Napa Valley Mendocino County 7% 7% 7% 2013 Wine Opinions. All Rights Reserved. 30
Association of Regions with Sauvignon Blanc, 2008-2014 Percent associating varietals with regions Region 2008 2014 Lake County 9% 12% Napa Valley 4% 7% Mendocino 6% 7% Paso Robles 4% 6% Lodi 2% 5% 2014 Wine Opinions. All Rights Reserved.
Regional Associations with Red Varietals, 2008 Percent associating Leading Varietals Many different Don t know Lodi ZIN 49%, CAB 6%, MER 6% 9% 23% Livermore Valley CAB 10%, PS 6% 10% 58% LAKE COUNTY CAB 14%, PN 6%, MER 5%, ZIN/PS 4% 13% 48% Santa Barbara County PN 39%, CAB 8%, MER/SYR 5% 15% 22% Amador County ZIN 28% 9% 45% Paso Robles CAB 15%, ZIN 14%, SYR 13%, PN 9% 23% 13% Sonoma County CAB 24%, PN 17%, MER/ZIN 5% 38% 7% Monterey County PN 28%, CAB 8%, MER 8% 21% 26% Napa Valley CAB 56% 33% 4% Mendocino County PN 18%, CAB 8%, ZIN 5% 24% 32%
Association of Regions with Cabernet Sauvignon, 2008 vs. 2014 Percent associating varietals with regions 2008 2014 Lake County 8% 14% Napa Valley 50% 56% Paso Robles 12% 15% Mendocino 7% 8% Lodi 6% 6% 2014 Wine Opinions. All Rights Reserved.
Quality Ratings: Lake County vs. Key Competitors % Rating on a 5 point scale 5 23 15 31 16 5 (excellent) 38 30 73 4 (very good) 56 44 3 (good) 41 44 14 23 6 2 8 Lake Mendo Paso Lodi Napa 20 7 0 2 (poor) 1 (very poor) 2014 Wine Opinions. All Rights Reserved.
Value Ratings: Lake County vs. Key Competitors % Rating on a 5 point scale 8 12 25 35 56 48 20 21 19 19 40 34 30 36 37 21 5 (excellent) 4 (very good) 3 (good) 2 (poor) 9 5 3 6 Lake Mendo Paso Lodi Napa 1 (very poor) 2014 Wine Opinions. All Rights Reserved.
Quality & Value Ratings: Lake County 2008 vs 2014 Percentage rating Lake County 4 or 5 on 5-point scale (1=very poor 5=Excellent) Value 24 33 2014 2008 Quality 23 28 2014 Wine Opinions. All Rights Reserved.
Mean Quality & Value Ratings by Region 2008 vs. 2014 QUALITY VALUE 2008 2014 2008 2014 Lodi 3.2 3.5 3.3 3.7 Livermore Valley 2.8 3.1 2.9 3.2 LAKE COUNTY 3.0 3.1 3.0 3.3 Santa Barbara County 3.7 3.8 3.2 3.4 Paso Robles 3.9 4.0 3.5 3.8 Amador County 3.2 3.3 3.2 3.4 Sonoma County 4.2 4.5 3.4 3.7 Monterey County 3.6 3.7 3.3 3.5 Napa Valley 4.4 4.6 3.1 3.2 Mendocino County 3.6 3.6 3.3 3.5 2014 Wine Opinions. All Rights Reserved.
Change in Quality/Value Positioning for Select Regions 2008 vs. 2014 VALUE 4.5 4.3 4.1 3.9 3.7 Paso Lodi Snma 3.5 Mntry Paso 3.3 Lake Lodi Mntry Snma 3.1 Napa Napa Lake 2.9 2.7 2.5 2.5 3 3.5 4 4.5 5 QUALITY 38 2014 Wine Opinions. All Rights Reserved.
Lake County in the Marketplace info@wineopinions.com www.wineopinions.com cmm@fullglassresearch.com www.fullglassresearch.com