the u.s. wine market in 2030 and export/import market dynamics · 2019. 1. 18. · sale pistachio...
TRANSCRIPT
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The U.S. Wine Market in 2030 and Export/Import Market Dynamics
James Lapsley, Ph.D. Researcher, Agricultural Issues Center
Adjunct Associate Professor, Viticulture and Enology, UC Davis
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Topics to Cover
Demand for wine in 2030 Population growth and possible per capita
consumption changes Where will the grape supply come from? Planting dynamics in District 13 Understanding the effect of “Drawback” History and effect on bulk wine shipments Can Winegrapes Compete with Almonds?
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U.S. Population Projections Millions of People
2010 2020 2030 Increase
“White” 231 255.3 267.6 36.6
Black 42 44.8 49.2 7.2
Asian 17.3 18.8 22.8 5.5
Other/Mixed 18.4 15 18.9 .5
Total Population 308.7 333.9 358.5 49.8
“Hispanic” 50.4 63 78.6 28.2
Over 20 years 224.6 249.3 269.5 44.9
Source: U.S. Census Projections
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Two Straight Line Projections Total U.S. population is expected to grow from
308.7 million in 2010 to 358.5 million in 2030—a 16% increase. Table wine sales in 2010 were 278 million cases. A 16% increase would mean 322 million cases in 2030
Total adult population is expected to grow from 222 million to 269 million—a 20% increase. That projects to 333 million cases in 2030
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Adults and Per Capita Consumption, 1970-2012
134
147 154 164 173
182 194
211 222 228
1.05
1.78
2.58 2.29
1.98 2.13
2.48 2.81
2.98 3.08
1
2
3
4
5
50
100
150
200
25019
70
1975
1980
1985
1990
1995
2000
2005
2010
2012
Per C
apita
Con
sum
ptio
n (g
allo
ns)
Adul
ts (m
illio
ns)
AdultsPer Capita Consumption
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2010 Wine Market Council Study
Abstainer 40%
Core 21%
Marginal 14%
Beer/Spirits 25%
Percent Adult Population
Marginal consumers drink less than 1 glass a week, although they say they enjoy wine . They drank the other 9%
Core Consumers enjoy at least one glass of wine a week or more. At 21% of the adult population in 2010 they numbered about 47 million and they consumed 91% of all table wine—averaging 70 liters per person
Source: Wine Market Council
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Percent Adult Abstainers by Country, 2004
0
10
20
30
40G
erm
any
Fran
ce
U.K
.
Japa
n
Arge
ntin
a
Cana
da U.S
.
% A
dult
Abst
aine
rs
Source: WHO Global Status Report on Alcohol 2004
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Hispanics account for 58% of the increase in population
In 2010, Core Hispanic consumers were 3% of their ethnic group.
A 2005 study showed 23% of Hispanics drank some wine, lower than the general market
But Hispanics under 40 years old drank one more glass a month than did the general market.
Acculturated Hispanics drank more wine than their cohort
Hispanics have lower levels of abstaining than the general population
Source: Wine Market Council Private Study
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What if by 2030???
Hispanics adopt wine as they acculturate? Abstention decreases from 40% to 25% of adult
population? Wine consumption increases from 35% to 50%
of adults and Core Consumers grow from 21% to 30% of adults??
Core Consumers increase from 44 million to 81 million and continue at 70 liters?
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Adults and Per Capita Consumption, 1970-2030
134 147 154
164 173
182 194
211 222
239 249
260 270
1.05
1.78
2.58 2.29
1.98 2.13 2.48
2.81 2.98
3.56 3.8
4 4.2
1
2
3
4
5
6
50
100
150
200
250
30019
70
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
Per C
apita
Con
sum
ptio
n (g
allo
ns)
Adul
ts (m
illio
ns)
AdultsPer Capita Consumption
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Well, if that happens. . .
Table wine consumption would increase by 50% to about 430 million cases
We would need about 360 million gallons of wine more than in 2010
Which at 170 gallons/ton comes to 2.1 million tons of grapes
Where will the wine come from? Imports or Domestic production? Both?
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Percent Winegrapes Crushed 2012
District 11 19%
District 12 9%
District 13 30% District 14
8%
All Other Districts
34%
The San Joaquin Valley is VERY important in supplying wine grapes
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Central Valley Supply
Let’s assume that California maintains its current 61% share of U.S. Market. 360 million gallons x .61 = 220 million gallons
Let’s further assume that 40% will retail under $6 a bottle and will come from the lower Central Valley. 220 x.4 = 88 million gallons
This requires about 515,000 tons, which at 15 tons/acre requires 34,333 acres
Since 2001, District 13 acreage has declined by 21,000 acres.
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District 13 Bearing Acres Have Declined by 21% in 12 Years
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20
40
60
80
10020
01
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Bear
ing
Acre
s (th
ousa
nds)
But yields have grown from 10-12 tons/acre to 14-15 tons/acre
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Wineries have met demand by importing inexpensive bulk wine
0
0.2
0.4
0.6
0.8
1
1.2
1.4
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50
100
150
200
250
30020
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
12
Pric
e pe
r Lite
r
Lite
rs (m
illio
ns)
Bulk Wine Imports and Price per Liter
Bulk ImportsPrice per Liter
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Volume of U.S bulk wine imports by origin, 2009-2012
0
50
100
150
200
250
300
350
400
Argentina Australia Chile France &Italy
World
Lite
rs (m
illio
ns)
2009 2010 2011 2012
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Much Exported Wine is Shipped in Bulk
Argentina 45
Australia 53 Chile 37 France 20 Italy 31 Spain 51 U.S. 43
Flexitank in Shipping Container
Percent 2012 Wine Shipped in Bulk
Source: OIV 2013
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Bulk Wine Percentage of All U.S. Wine Imports, 2000-2012
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5
10
15
20
25
30
3520
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Bulk
Win
e %
of T
otal
Win
e
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Annual unit value of U.S. bulk wine imports and exports, 2007-2012
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2007 2008 2009 2010 2011 2012
Uni
t Val
ue ($
per
lite
rs)
Imports Exports
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Bulk Shipments Are Not Inexpensive
A container can handle about 5500 gallons (weight issues on roads)
$400-450 for the bag Freight Chile to Oakland? About $1800 Freight Adelaide to Oakland? Maybe $2200 Between $0.40-$0.50 a gallon plus hauling from
the port for wine valued at less than $4 gallon
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So what is a “Drawback”?
A return of paid duties and taxes (“drawback”) when an imported good is exported
Dates back to 1789 in the U.S. Allows for “substitution” of “commercially
interchangeable goods” i.e. the exporter need not export the originally imported goods on which duty and tax was paid IF the government determines the goods are “commercially interchangeable”
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What does this have to do with wine?
In 2001 a California winery received a “predetermination letter” from Customs and Border Protection defining table wines of the same color and within 50% of value to be “commercially interchangeable”
Similar letters were issued to other major wineries and drawbacks on duties paid on imported wine were claimed when wine was exported
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Defined in 2008 Farm Bill
In 2007 CBP moved to withdraw the letters of predetermination
In May of 2008, wine interchangeablity was written into the Farm Bill
“wine of the same color having a price variation not to exceed 50 percent between the
imported wine and the exported wine shall be deemed to be commercially
Interchangeable”
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Why is this important?
It encourages trade by reducing costs Duties and excise tax come to about $0.3457/L
for bottled wine and $0.4227/L for bulk wine In 2010 firms received $23 million in drawback
for bottled wine and $47 million for bulk wine As a percent of value, drawback is much more
important for inexpensive bulk wine and may equal 40-50% of the value
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Excise tax and import duty rates in 2011
Two liters or less
(bottled)
Over two liters but not over
four liters
Over four liters, MFN
(bulk)
Over four liters, Chile or Australia
(bulk) ($/liter)
Import duty rate 0.063 0.084 0.14 0.037
Excise tax 0.2827 0.2827 0.2827 0.2827
Total 0.3457 0.3667 0.4227 0.3197
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U.S. bulk wine imports and exports, 2000-2012
0
50
100
150
200
250
300
350
400
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Lite
rs (m
illio
ns)
Import Export
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Drawback encourages both imports AND exports
10
15
20
25
30
35
40
2000 2002 2004 2006 2008 2010 2012
Percent Imports by Volume U.S. Sales California Exports as Percent of Production
% Imports % Exports
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Friendly Competition?
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District 13 Bearing Acres
0
50
100
150
200
250
300
350
400
0102030405060708090
10020
01
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
$/To
n (2
012
dolla
rs)
Bear
ing
Acre
s (th
ousa
nds)
Bearing Acres$/Ton
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World map weighted by GDP in 1960
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World map weighted by estimated GDP in 2015
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Average Gross Revenue Per Acre District 13 Winegrapes vs. Fresno Almonds
1,000
2,000
3,000
4,000
5,000
6,00020
00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Dolla
rs p
er A
cre
WinegrapesAlmonds
Source: County Ag Commissioner Reports and Crush Reports
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Real Gross Domestic Product (GDP), with projections
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$10019
80
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
$ tril
lions
World
Developed economies less USA
United States
Developing economies
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The World Matters for Both Almonds and Wine
Almonds Wine
% World Production 80 7
% California Production Exported 70 17
% of World Shipments 90 4
California seems to have a natural advantage with almonds over other growing regions: Better (more reliable) weather at bloom, dry summers, and generally available water.
Increasing incomes in developing worlds have led to increased consumption of “portable protein”
No religious prohibitions against almond consumption.
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Total California Shipments (Domestic and Export)
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500
1,000
1,500
2,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Gal
lons
or P
ound
s (m
illio
ns)
Almonds Wine
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The future of Winegrapes in districts 13 and 14?
With average yields of 14-15 tons/acre, the region is very productive but is in competition with other bulk wine producing regions of the world.
Of the 105,000 acres currently planted in districts 13 and 14, 90,000 are over 10 years old and will probably be pulled by 2030.
Will those acres be replanted and another 35,000 added to meet my projected increased demand—or will wineries meet demand by importing bulk wine?
Replanting is probable only if major wineries commit to long-term contracts and if California winegrapes can compete with other perennial crops.
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Growers have alternative crops Sale Pistachio Almond Wine Grapes Walnuts
Production 3,500 3,500 12 6,000Price $1.97 $1.82 $400.00 $1.15Total Income $6,895 $6,370 $4,880 $6,900
Cultural Costs $1,680 $2,140 $1,132 $1,186Overhead Costs $504 $330 $410 $325Harvest Costs $389 $500 $483 $864Total Expenses $2,573 $2,970 $2,025 $2,375
Planted Acres 112.85 56.71 125 77Income per Acre $6,895 $6,370 $4,880 $6,900Expenses per Acre $2,573 $2,970 $2,025 $2,375Net Income per Acre $4,322 $3,400 $2,855 $4,525Sale Price per Acre $32,742 $24,000 $22,558 $35,396Capitalization Rate 13.20% 14.17% 12.66% 12.78%
Source: Correia-Xavier, inc.
PresenterPresentation NotesEmphasize to audience these rates reflect Owner-Operator estimates of value.
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Fresno County Harvested Acres
60
80
100
120
140
160
2001 2003 2005 2007 2009 2011
Harv
este
d Ac
res (
thou
sand
s)
Winegrapes
Almonds
Source: Fresno County Ag. Commissioner Reports
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Conclusion?
San Joaquin winegrape growers are excellent farmers.
They probably can out compete foreign producers in the long run
But can winegrapes compete with other crops? It seems likely that U.S. wine consumption will
increase by 50% and that by 2030 much of the wine consumed will be foreign.
The U.S. Wine Market in 2030 and Export/Import Market DynamicsTopics to CoverU.S. Population Projections �Millions of PeopleTwo Straight Line ProjectionsAdults and Per Capita Consumption, 1970-20122010 Wine Market Council StudyPercent Adult Abstainers by Country, 2004Hispanics account for 58% of the increase in populationWhat if by 2030???Adults and Per Capita Consumption, 1970-2030Well, if that happens. . . Percent Winegrapes Crushed 2012Central Valley SupplyDistrict 13 Bearing Acres Have Declined by 21% in 12 YearsWineries have met demand by importing inexpensive bulk wineSlide Number 16Much Exported Wine is Shipped in BulkBulk Wine Percentage of All U.S. Wine Imports, 2000-2012Slide Number 19Bulk Shipments Are Not InexpensiveSo what is a “Drawback”?What does this have to do with wine?Defined in 2008 Farm BillWhy is this important?Slide Number 25Slide Number 26Drawback encourages both imports AND exportsFriendly Competition?District 13 Bearing AcresWorld map weighted by GDP in 1960World map weighted by estimated GDP in 2015Average Gross Revenue Per Acre�District 13 Winegrapes vs. Fresno AlmondsReal Gross Domestic Product (GDP), with projectionsThe World Matters for Both Almonds and Wine Total California Shipments�(Domestic and Export)The future of Winegrapes in districts 13 and 14?Growers have alternative cropsFresno County Harvested AcresConclusion?