GLOBAL SUPPLY UPDATE GLENN PROCTOR FEBRUARY 7, 2018
21 DEDICATED BROKERS IN 8 COUNTRIES GLOBALLY BASED TO BUILD YOUR BUSINESS WORLDWIDE
INTRODUCTION - CIATTI CO 8 REGIONAL OFFICES WORLDWIDE - WINE, GRAPES, & CONCENTRATE, ETC - JOHN FEARLESS HOPS - GLOBAL PERSPECTIVE - WORLD APPROACH LOCAL KNOWLEDGE
OUTLINE - WORLD PRODUCTION - WINE TOTAL & ACREAGE - EUROPE - SOUTHERN HEMISPHERE - CALIFORNIA USA - SALES DOMESTIC / EXPORT - SUPPLY/DEMAND - CHANGING DYMANICS - THOUGHTS
GLOBAL WINE PRODUCTION Argentina 5% Spain 15% USA 12% Germany 3% Italy 21% France 19% Rest of World 6% Australia 6% New Zealand 1% So. Africa 5% Chile 4% Portugal 3% VINTAGE WORLD PRODUCTION 2017 247 MHL 2016 267 MHL 2015 274 MHL Source : OIV, Rabobank
GLOBAL ACREAGE TRENDS COUNTRY 2010-2015 % CHANGE PLANTING SPAIN 6 SOME REPLANTING FRANCE 2 REMOVED YIELD RESTRICTIONS ITALY CHINA USA 8 42 4 ARGENTINA 3 MALBEC SOME VARIETALS GENERIC & TABLE REMOVAL OF GENERICS / PLANTINGS OF VARIETALS CHILE 3 CABERNET SAUVIGNON, SAUVIGNON BLANC, MERLOT, PINOT NOIR AUSTRALIA 13 REMOVAL OF GENERICS SOUTH AFRICA 2 GERMANY 0 NEW ZEALAND 12 SAUVIGNON BLANC, PINOT NOIR Source: OIV
TREND OF WORLD WINE CONSUMPTION Source : OIV Statistical Report on World Vitiviniculture
GLOBAL WINE PRODUCTION, CONSUMPTION, AND ENDING INVENTORIES 300 250 200 150 100 50 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ending inventories Industrial use Production Consumption Source: OIV, Rabobank 2017
WORLD GRAPE PRODUCTION KEY WINE COUNTRIES US TONS EST. EST. 2018 2017 2016 2015 ARGENTINA 2.64 1.98 1.92 2.64 CHILE 1.87 1.375 1.55 1.97 AUSTRALIA 2.09 2.12 1.99 1.84 NEW ZEALAND 0.48 0.44 0.48 0.36 SOUTH AFRICA 1.54 1.65 1.51 1.62 SUB TOTAL 8.62 7.565 7.45 8.43 CALIFORNIA 4.05 3.95 4.03 3.70 WASHINGTON 0.25 0.24 0.27 0.23 GERMANY 1.43 1.43 1.43 1.43 FRANCE 6.79 5.64 6.88 7.32 ITALY 7.18 6.05 7.77 7.64 SPAIN 5.94 5.78 6.41 6.42 SUB TOTAL 25.64 23.09 26.79 26.74 TOTAL 34.26 30.655 34.24 35.17 PREVIOUS YEAR VARIANCE 3.605-3.585-0.93 % 12% -10% -3%
NORTHERN HEMISPHERE ITALY FRANCE SPAIN
ITALY HISTORY: CRUSH TONNAGES (MILLION US TONS) 12 13 14 15 16 17 Est. 6.9 8.2 6.8 7.5 7.2 6.0 - KEY VARIETALS - PINOT GRIGIO, PROSECCO $ / Gal. Delivered Trend Chardonnay $6.00 7.00 Cabernet Sauvignon $6.00 7.00 Merlot $6.00 7.00 Pinot Grigio $5.75 7.00 - TIGHT INVENTORY EFFECTS EVERYONE BUYER? - VINE ACREAGE: 2000 2012 2016 850,000 HECTARES 769,000 HECTARES 680,000 HECTARES 2.10(MILLION ACRES) 1.90(MILLION ACRES) 1.68(MILLION ACRES)
FRANCE HISTORY: CRUSH TONNAGES (MILLION US TONS) 12 13 14 15 16 17 Est. 6.3 6.4 7.2 7.3 6.6 5.6 - KEY VARIETALS - ROSÉ, SPARKLING $ / Gal. Delivered Trend Chardonnay $6.00 7.00 Cabernet Sauvignon $5.25 6.25 Merlot $5.25 6.25 - DECLINING DEMAND LOCALLY EXPORT GROWTH TO U.S. & CHINA - VINE ACREAGE: 2000 2012 2016 900,000 HECTARES 800,000 HECTARES 780,000 HECTARES 2.23(MILLION ACRES) 1.98(MILLION ACRES) 1.93(MILLION ACRES)
SPAIN HISTORY: CRUSH TONNAGES (MILLION US TONS) 12 13 14 15 16 17 Est. 4.7 6.9 6.7 6.4 6.4 5.1 - KEY VARIETALS $ / Gal. Delivered Trend Chardonnay $5.00 6.50 Cabernet Sauvignon $5.00 6.00 Merlot $5.25 6.00 - GENERICS, CONCENTRATE & GRAPE SPIRITS - EXPORT TO EUROPE & CHINA - VINE ACREAGE: 2000 2012 2016 1,200,000 HECTARES 1,000,000 HECTARES 1,000,000 HECTARES 2.96(MILLION ACRES) 2.47(MILLION ACRES) 2.47(MILLION ACRES)
EUROPEAN OUTLOOK - EXPORTS TO THE WORLD - ITALY & FRANCE CASEGOODS SPAIN BULK SUPPLY - HUGE CONSUMER BUT DECLING CONSUMPTION - SUPPORT & SUBSIDIZE MARKETING
SOUTHERN HEMISPHERE HILE ARGENTINA AUSTRALIA SOUTH AFRICA
SOUTHERN HEMISPHERE - VARIETAL LEADER - MARKET DRIVER PRODUCTIVE NEWER VINES - EXPORTS REQUIRED - POPULATION LACKING - GLOBAL PLAYERS - PERSONALITY
ARGENTINA HISTORY: CRUSH TONNAGES (MILLION US TONS) $ / Gal. Delivered Trend 12 13 14 15 16 17 2.5 3.0 2.9 2.6 1.9 1.8 - KEY VARIETALS - MALBEC Malbec $7.00 8.00 Red Generic White Generic $4.70 5.00 $3.25 4.00 - GENERICS / CONCENTRATE WHITE - LARGE DOMESTIC MARKET TIGHT SUPPLY TODAY - GOVERNMENT & INFLATION - VINE ACREAGE: 2000 2012 2016 240,000 HECTARES 221,000 HECTARES 225,000 HECTARES 593,000 ACRES 546,000 ACRES 556,000 ACRES
CHILE HISTORY: CRUSH TONNAGES (MILLION US TONS) 12 13 14 15 16 17 1.9 2.0 1.5 2.0 1.6 1.5 - KEY VARIETALS - CABERNET SAUVIGNON, MERLOT Cabernet Sauvignon $ / Gal. Delivered Trend $4.60 5.00 Merlot $5.00 5.50 Chardonnay $5.00 5.50 Pinot Noir $5.50 7.00 - PINOT NOIR, SAUVIGNON BLANC - FREE TRADE AGREEMENTS VINEYARD MODERNIZATION QUALITY - VINE ACREAGE: 2000 2012 2016 170,000 HECTARES 205,000 HECTARES 210,000 HECTARES 420,000 ACRES 494,000 ACRES 510,000 ACRES
SOUTH AFRICA HISTORY: CRUSH TONNAGES (MILLION US TONS) 12 13 14 15 16 17 1.4 1.6 1.7 1.5 1.5 1.6 $ / Gal. Delivered Trend Chardonnay $3.25 4.50 Chenin Blanc $3.00 3.50 - KEY VARIETALS Sauvignon Blanc $3.85 4.50 - CHARDONNAY, CHENIN BLANC, BRANDY - DEMAND FROM EUROPE CURRENCY FLUCTUATES - VINE ACREAGE: 2000 2012 2016 100,000 HECTARES 131,000 HECTARES 130,000 HECTARES 240,000 ACRES 323,000 ACRES 321,000 ACRES
AUSTRALIA HISTORY: CRUSH TONNAGES (MILLION US TONS) 12 13 14 15 16 17 1.8 2.0 1.9 1.8 2.0 2.1 - KEY VARIETALS $ / Gal. Delivered Trend Chardonnay $3.50 4.25 Shiraz $5.25 6.50 Pinot Grigio $4.00 4.50 - CHARDONNAY, PINOT GRIGIO - NET EXPORTER CHINA BIG MARKET US & UK - BALANCED MARKET TODAY - VINE ACREAGE: 2000 2012 2016 180,000 HECTARES 169,000 HECTARES 150,000 HECTARES 445,000 ACRES 418,000 ACRES 370,000 ACRES
AUSTRALIA S EXPORTS TO CHINA IMPACT OF TRADE AGREEMENTS ON AUSTRALIA S WINE EXPORTS TO CHINA Source: Wine By Numbers, Uiv, 2017, Rabobank
CALIFORNIA
CA. & USA SALES Thru Oct 2017 California - OVERALL -1% - DOMESTIC +1% - EXPORTS -16% IMPORTS - CASEGOODS +4% - BULK +23% TOTAL US Market - IMPORT & DOMESTIC +3% Source: Gomberg-Frederickson
BULK WINE INVENTORY 6,000,000 5,000,000 35.0 Total Bulk Wine (In Millions) Bulk Gallons Available 4,000,000 3,000,000 2,000,000 30.0 25.0 Millions 20.0 15.0 10.0 JAN 2015 JAN 2016 JAN 2018 1,000,000 5.0 JAN 2017 0 Jan. 2015 Jan. 2016 Jan. 2017 Jan. 2018 0.0 Total Cabernet Sauvignon Chardonnay Merlot Pinot Noir Zinfandel Total Gallons (2015-2017)
SUPPLY / DEMAND DYNAMICS Expanding Sourcing Options Buyers PREMIUM SALES GROWTH? COSTS/AVAILABILITY? CROP SIZE CURRENT/FUTURE? ECONOMY? BUYING SELLING
GROWTH RATES IN LUXURY SALES
CONSOLIDATION - DISTRIBUTION TOTAL MARKET $55B NOW TOP 3 DISTRIBUTORS CONTROL 61% OF THE MARKET + + 44 STATES + WASH, DC $17.5B (32%) 30 States + DC $13B (23.5%) A/O $21.5B (39%) Small Distributor Consolidation: Winebow: NY, FL, GA, WA, WI, ID (18 Markets) McLane (Warren Buffett): TN, CO, MO 10 STATES $3.0B (5.5%)
CONSOLIDATION - RETAIL RETAIL GROCERY INDUSTRY $594.4 BILLION
PRIVATE LABEL COMPETITION - PRIVATE LABEL WINE IS BUILDING MOMENTUM IN THE US, THANKS TO NATIONAL SUPERMARKET CHAINS SUCH AS ALDI, TRADER JOE S, COSTCO, AND WHOLE FOODS TAKING ON THE IDENTITY AS TRUSTED WINE VENDORS BRIAN SHAROFF, PRESIDENT OF PRIVATE LABEL MANUFACTURERS ASSOCIATION (PLMA)
THOUGHTS - THE WINERIES WILL CONTINUE TO GET BIGGER - IMPORTS WILL CONTINUE TO GROW - BULK AND PREMIUM BOTTLED - PREMIUM MARKET GROWING AT SLOWER PACE - MARGIN SQUEZZE AT ALL LEVELS WINERIES AND GROWERS - GLOBAL MARKET TIGHTER NOT FEELING THAT IN CALIFORNIA - GLOBALLY ON SELLERS SIDE NOW, BUT 2018 CROP MAY SEE THINGS SOFTEN
CIATTI REPORTS / PUBLICATIONS - CALIFORNIA MARKET REPORT - GLOBAL MARKET REPORT - WWW.CIATTI.COM THANK YOU FOR YOUR TIME AND ATTENTION GLENN PROCTOR GLENN@CIATTI.COM 415.458.5150