change is here –a new market paradigm · $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 0 200,000...
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CHANGE IS HERE – A NEW MARKET PARADIGM“Intelligence is the ability to adapt to change”- Stephen Hawking
UNIFIED WINE AND GRAPE SYMPOSIUMJANUARY 30, 2019
PROFESSIONAL BROKERS IN 9 COUNTRIES
LOCALLY BASED TO HELP BUILD YOUR BUSINESS WORLDWIDE
CALIFORNIA BULK MARKET
CALIFORNIA MARKET
v SLUGGISH SALES GROWTH
v HISTORIC 2018 CROP
v BULK MARKET ACTIVITY SLOW
v BULK INVENTORIES INCREASING
vMARKET IS ADJUSTING TO NEW PARADIGM
CIATTI
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
JAN. 2015 JAN. 2016 JAN. 2017 JAN. 2018 JAN. 2019
BULK
GAL
LONS
AVA
ILAB
LE
CABERNET SAUVIGNON CHARDONNAY MERLOT PINOT NOIR ZINFANDEL
CALIFORNIA BULK WINE INVENTORY
CIATTI
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
JAN. 2017 JAN. 2018 JAN. 2019
PR
ICE
PE
R G
ALL
ON
BU
LK G
ALL
ON
S A
VAIL
AB
LE
Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot
Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME
CENTRAL VALLEY
CIATTI
BULK CHARDONNAY
PRICE PER GALLON CH PRICE PER GALLON CS PRICE PER GALLON ME
BULK MERLOTBULK CABERNET SAUVIGNON
$0
$2
$4
$6
$8
$10
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$18
$20
$22
$24
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
JAN. 2017 JAN. 2018 JAN. 2019
PR
ICE
PE
R G
ALL
ON
BU
LK G
ALL
ON
S A
VAIL
AB
LE
Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Pinot Noir
Price Per Gallon CH Price Per Gallon CS Price Per Gallon PN
CENTRAL COAST
CIATTI
BULK CHARDONNAY
PRICE PER GALLON CH
BULK CABERNET SAUVIGNON
PRICE PER GALLON CS
BULK PINOT NOIR
PRICE PER GALLON PN
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
$22
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
JAN. 2017 JAN. 2018 JAN. 2019
PR
ICE
PE
R G
ALL
ON
BU
LK G
ALL
ON
S A
VAIL
AB
LE
Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot
Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME
LAKE / MENDOCINO
CIATTI
BULK CHARDONNAY
PRICE PER GALLON CH
BULK CABERNET SAUVIGNON
PRICE PER GALLON CS
BULK MERLOT
PRICE PER GALLON ME
$0
$4
$8
$12
$16
$20
$24
$28
$32
$36
$40
$44
$48
$52
$56
0
100,000
200,000
300,000
400,000
500,000
600,000
JAN. 2017 JAN. 2018 JAN. 2019
PR
ICE
PE
R G
ALL
ON
BU
LK G
ALL
ON
S A
VAIL
AB
LE
Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot
Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME
NAPA
CIATTI
BULK CHARDONNAY BULK CABERNET SAUVIGNON
PRICE PER GALLON CS
BULK MERLOT
PRICE PER GALLON MEPRICE PER GALLON CH
$0$2$4$6$8$10$12$14$16$18$20$22$24$26$28$30$32
0
100,000
200,000
300,000
400,000
500,000
600,000
JAN. 2017 JAN. 2018 JAN. 2019
PR
ICE
PE
R G
ALL
ON
BU
LK G
ALL
ON
S A
VAIL
AB
LE
Bulk Chardonnay Bulk Cabernet Sauvignon Bulk Merlot
Price Per Gallon CH Price Per Gallon CS Price Per Gallon ME
SONOMA
CIATTI
PRICE PER GALLON PN
BULK PINOT NOIRBULK CHARDONNAY
PRICE PER GALLON CH
BULK CABERNET SAUVIGNON
PRICE PER GALLON CS
v SLOW ACTIVITY WITH WEAKENING PRICING
v BUYERS LOOKING FOR DEALS, SELLERS STARTING TO REALIZE NEW MARKET
v COASTAL MARKET MORE AFFECTED THAN CENTRAL VALLEY
v RENEWED NEGOTIANT ACTIVITY
v WINERIES ALSO LOOKING TO MOVE EXCESS INVENTORY
CALIFORNIA BULK MARKET
CIATTI
GLOBAL MARKET
v LARGE 2018 HARVEST CHANGED MARKET BACK QUICKLY!
v 2017– VERY SMALL 2017 HARVEST CAUSED MARKET TO TIGHTEN– DEMAND/PRICES INCREASED
v 2018– YIELDS UP 13%– PRICES AND DEMAND FOR BULK WINE HAVE DECLINED IN ALMOST ALL
REGIONS
v BACK TO NORMAL?
GLOBAL MARKET
CIATTI
210
220
230
240
250
260
270
280
290
300
2011 2012 2013 2014 2015 2016 2017 2018
WINE PRODUCTION
WINE CONSUMPTION
MIL
LIO
N h
L
VINTAGE
Source: OIV 2018, Ciatti Estimates
GLOBAL SUPPLY / DEMAND
CIATTI
Source: OIV 2018, Ciatti Estimates
GLOBAL WINE PRODUCTION BY COUNTRY
0
200
400
600
800
1,000
1,200
1,400
1,600
France Italy Spain Argentina Australia Chile China South Africa USA
2011 2012 2013 2014 2015 2016 2017 20182011 – 2016
CIATTI
MIL
LIO
N G
ALLO
NS
Source: OIV 2018
GLOBAL GRAPE ACREAGE
7.5 MILLION HA
CIATTI
(18.5 million acres)
Source: OIV 2018
GLOBAL ACREAGE TRENDSCOUNTRY 2013-17 % ∆ COMMENTS
SPAIN -1% HIGHER PRODUCTIVITY
FRANCE -1% REMOVED YIELD RESTRICTIONS – VDF APPELLATION
ITALY -1%
CHINA +15% WINE GRAPE PLANTING SLOWING 11% GRAPE VARIETIES
USA -3%
ARGENTINA -1% MORE REMOVALS EXPECTED
CHILE +4% CABERNET SAUVIGNON, SAUVIGNON BLANC, MERLOT, PINOT NOIR
AUSTRALIA -8% TREND COULD REVERSE GIVEN DEMAND?
SOUTH AFRICA -6% DROUGHT ISSUES
NEW ZEALAND +4% SAUVIGNON BLANC, PINOT NOIR
CIATTI
Source: OIV 2018
GLOBAL WINE CONSUMPTION TRENDS
CIATTI
0
5
10
15
20
25
30
35
USA France Italy Germany China UK Spain Argentina Russia Australia
Chart Title
2010 2011 2012 2013 2014 2015 2016 20172010 – 2016
MILL
ION
hL
vQUALITY CONTINUES TO IMPROVE, ESPECIALLY ON THE HIGH END
v STRONG PLAYER IN CS, ME, PN, AND SB FOR US MARKET
v FREE TRADE WITH MOST COUNTRIES
CHILE�14 �15 �16 �17 ’18
1.5 M 2.0 M 1.5 M 1.4 M 2.0 M$ / GAL. DLVD TREND
CABERNET SAUVIGNON $3.00 – 4.10 ↓MERLOT $3.10 – 4.20 ↓CHARDONNAY $3.60 – 4.20 ↓PINOT NOIR $4.10 – 5.10 ↓
CIATTI
AUSTRALIA
v EXPORTS TO CHINA AND THE UK ARE KEY DRIVERS OF GROWTH
v CHARDONNAY AND PINOT GRIGIO IMPACT US MARKET
v BULK PRICES HAVE REMAINED STRONG
v 2019 HARVEST LOOKS GOOD – WATER BECOMING AN ISSUE AGAIN
�14 �15 �16 �17 ’181.9 M 1.8 M 2.0 M 2.1 M 2.0 M
$ / GAL. DLVD TRENDCHARDONNAY $3.20 – 3.60 ↓SHIRAZ $4.60 – 5.10 ↔PINOT GRIGIO $3.75 – 4.25 ↓
CIATTI
FRANCE
v BULK BUYER ACTIVITY LIMITED AS EUROPEAN BUYERS MOVE TO SPAIN
v PRICES HAVE WEAKENED, BUT PREMIUM AREAS ARE STABLE
v PROVENCE ROSÉ REMAINS IN DEMAND BUYERS MOVED TO OTHER AREAS
v STRONG EXPORTER TO CHINA
�14 �15 �16 �17 �18 Est.
7.2 M 7.3 M 6.9 M 5.6 M 7.1 M$ / GAL. DLVD TREND
CHARDONNAY $5.10 – 6.00 ↓CABERNET SAUVIGNON $4.85 – 5.90 ↔MERLOT $4.70 – 5.55 ↔ROSÉ $4.70 – 6.00 ↔
CIATTI
ITALY
v BULK MARKET SLOW TO DEVELOP
v LOW ALC/ENTRY LEVEL WINES UNDER PRICING PRESSURE FROM SPAIN, WITH SOME QUALITY CONCERNS
v HIGH QUALITY DOC AREAS – DEMAND AND PRICING RELATIVELY STABLE
v PROSECCO CONTINUES TO GROW ESPECIALLY INTO THE US
v BULK ORGANIC WINE EXPERIENCING STRONG DEMAND
�14 �15 �16 �17 �18 Est.
6.8 M 7.7 M 7.8 M 6.0 M 7.4 M$ / GAL. DLVD TREND
CHARDONNAY $3.85 – 5.10 ↓CABERNET SAUVIGNON $4.05 – 5.25 ↓MERLOT $3.85 – 5.10 ↓PINOT GRIGIO $5.10 – 6.00 ↓
CIATTI
SPAIN
v FOCUSED ON GENERIC MARKET
v MAJOR BULK SUPPLIER TO THE EU AND CHINA
v LEADING ACTIVITY OVER OTHER EUROPEAN BULK SUPPLIERS GIVEN PRICING
v DEMAND DEVELOPING FOR VALUE ROSÉ’S AND ORGANICS INTO EUROPE
�14 �15 �16 �17 �18 Est.
6.7 M 6.4 M 6.4 M 5.4 M 6.3 M$ / GAL. DLVD TREND
CHARDONNAY $4.25 – 5.05 ↓
CABERNET SAUVIGNON $3.75 – 4.40 ↓
GENERIC RED/WHITE $2.75 – 3.50 ↓
CIATTI
v ITALY/SPAIN GROWING – COULD THIS CONTINUE?
v USA REMAINS THE MOST DESIRABLE AND PROFITABLE MARKET
v CHINA’S ECONOMIC CHANGES COULD AFFECT WINE CONSUMPTION GROWTH
v UK – BREXIT UNKNOWN EFFECT FOR U.S. SUPPLIERS
v ALL MARKETS WILL GET MORE COMPETITIVE
CIATTI
FUTURE CONSUMPTION GROWTH?
Source: CA Wine Institute, Gomberg Fredrickson, BW 166, SVB CIATTI
NON-GROWING US WINE CONSUMPTION?M
ILLIO
NS O
F GA
LLON
S
CIATTI
THE GREATEST CONSUMING NATION WE ARE STILL THE TARGET
CIATTI
IMPORTS STILL GAINING
PERC
ENT
MAR
KET
SHAR
E
CIATTI
THE MARKET HAS CHANGED!vGLOBAL AND U.S. GROWTH SLOWING?
vWINE IS READILY AVAILABLE AROUND THE WORLD
vBUYERS ARE CAUTIOUS
vSELLING GRAPES & BULK WINE WILL BE MORE CHALLENGING
CIATTI
ADAPT TO THE CHANGEvADJUST YOUR EXPECTATIONS
vMANAGE INPUTS AND ASSETS TO MAINTAIN PROFITABILITY
vDEVELOP A STRATEGY :
- SHORT TERM – ADAPT and ADJUST
- LONG TERM – PROSPERITY and PROFITABILITY
CIATTI
GLOBALLY THINKING
Source: OIV 2018
WINE TRADED INTERNATIONALLY / GLOBAL WINE CONSUMPTION
CIATTI
QUESTIONS WE NEED TO ANSWER!v ARE WE A VALUE TO THE CONSUMER
v MILLENNIALS - HOW DOES THE WINE INDUSTRY CAPTURE THEIR ATTENTION
v CAN WE DEVELOP NEW AND INNOVATIVE PRODUCTS TO UTILIZE THIS AVAILABLE SUPPLY
v CAN WE GROW BY TAKING MARKET SHARE FROM OTHER ALC BEVERAGES (CRAFT BEER AND SPIRITS), IMPORTS, AND EXPAND EXPORTS
v HOW DO WE BECOME MORE INNOVATIVE AND COMPETITIVE
CIATTI
FINAL THOUGHT
DON’T BE FEARFUL
TODAY’S CHALLENGES ARE TOMORROW’S OPPORTUNITIES
PUT ON YOUR BOOTS AND GET TO WORK
Subscribev CALIFORNIA MARKET REPORT v GLOBAL MARKET REPORT
201 ALAMEDA DEL PRADO SUITE # 101NOVATO, CA 94949
THANK YOU
GLENN PROCTORGLENN@CIATTI.COM
415/458-5150
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