NOVEMBER 29, 2018

SAN JOAQUIN VALLEY WINE GROWERS ASSOCIATION

CIATTI COMPANY

GLOBAL WINE REPORT

DEDICATED BROKERS IN 8 COUNTRIES

GLOBALLY BASED TO BUILD YOUR BUSINESS WORLDWIDE

CIATTI COMPANY

CIATTI CO.WINE & GRAPE BROKERAGE

- 8 Regional Offices Worldwide

- Wine, Grapes, & Concentrate

- John Fearless – Hops, Malts, Barrels

- Global Perspective

- World Approach – Local Knowledge

- Today’s Goal: Discuss World Wine – Production & Usage

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OUTLINE

- Global Picture

- Total World Production- Ciatti – World Production - Country by Country – Comments

- Consumption & Sales

- World Consumption - USA – Sales Update

- California

- 2018 Vintage- Regional Breakdown

- Overview & Comments

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GLOBAL

PICTURE

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GLOBAL WINE PRODUCTION

CIATTI COMPANY

VINTAGEWORLD

PRODUCTION

2018 279 MHL

2017 248 MHL

2016 266 MHL

2015 273 MHL

Source: OIV

USA 9.0%

Argentina5.0%

Germany3.5% Australia

4.5%

New Zealand 1.0%

So. Africa3.5%

Portugal2.0%

Chile4.5%

Rest of World12.5%

China6.0%

France16.5%

Italy17.5%

Spain14.5%

Total 42.6 Million Tons

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KEY WINE COUNTRIES

US TONS Est.

2018 2017 2016 2015

ARGENTINA 2.80 1.98 1.92 2.64

CHILE 1.97 1.37 1.55 1.97

AUSTRALIA 1.97 2.12 1.99 1.84

NEW ZEALAND 0.46 0.44 0.48 0.36

SOUTH AFRICA 1.32 1.65 1.51 1.62

SUB TOTAL 8.52 7.57 7.45 8.43

CIATTI - WORLD GRAPE PRODUCTION

USA 4.70 4.40 4.43 4.10

GERMANY 1.49 1.14 1.37 1.34

FRANCE 7.04 5.61 6.88 7.32

ITALY 7.18 6.00 7.77 7.64

SPAIN 5.94 5.50 6.41 6.42

SUB TOTAL 26.35 22.65 26.86 26.82

TOTAL 34.87 30.22 34.31 35.25PREVIOUS YEAR VARIANCE 4.66 -4.09 -0.94

% 15% -12% -3%

WINE CONSUMPTION

& SALES

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WINE CONSUMPTION

- North America

- USA #1 Biggest in Volume & Value- Canada #11 Major World Buyer & Juice for Home Winemakers

- Europe

- France #2 Declining Consumption - Demographics- Italy #3 Stable Consumption – Exports Needed - Germany #4 Huge Bulk Buyer – Mainly Reds- UK #6 Declining US Volume- Spain #7 Drink Spanish Wine

- China #5 Growing Consumer Market – Key to World

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USA SHIPMENTS – 6 months ending June

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TOTAL CA WINE (-2%) (-2.4M CASES)(LAST 6 MONTHS)

- DOMESTIC (-1%) (-1.6M CASES)

- EXPORTS (-13%) (-1.2M CASES)

IMPORTS (6 months)

CASEGOODS (+1%) (+0.7 M/CASES)

BULK (-19%) (-3.8M/CASES)

TOTAL US Market (YTD)

- IMPORT & DOMESTIC (-0%) (-0.7 M/CASES)

Source: Gomberg-Frederickson

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TABLE WINE SALES – PRICE & VOLUME

Premium

$7 – 12 = 29%

Popular

$4 – 7 = 36%

Economy

Under $4 = 21%

Super Luxury $12 above = 13%

CALIFORNIA

2018 HARVEST

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CALIFORNIA STATEWIDE GRAPE CRUSH

CIATTI COMPANY

2

2.5

3

3.5

4

4.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ton

s in

Mill

ion

s

Winegrape Other Crush

Est.

4.3+

NORTH COAST

- Harvest

- Late and cool - Grapes sized up - Mid season rain- Capacity issues

- Market

- Chardonnay & Pinot Noir – huge volumes - Cabernet Sauvignon – new plantings arrive - Everyone is a seller

CIATTI COMPANY

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 2014 2015 2016 2017 2018EST.

2013 2014 2015 2016 2017 2018 EST.

590,000

CENTRAL COAST

- Harvest

- Late crop- Cool weather - Big yields

- Market

- Paso Cab Sauv to sell – cheap spot grapes- Monterey Pinot Noir & Chardonnay- Rhone varieties for Rosé

CIATTI COMPANY

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 2014 2015 2016 2017 2018EST.

2013 2014 2015 2016 2017 2018 EST.

615,000

NORTHERN INTERIOR

- Harvest

- Later than recent years- Cool growing season- Good quality

- Market

- Chardonnay and Sauv Blanc – solid vintage- Zinfandel – weak; more removals??- Cabernet Sauvignon – big- Pinot Noir – large but needed

CIATTI COMPANY

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2013 2014 2015 2016 2017 2018EST.

2013 2014 2015 2016 2017 2018 EST.

1,085,000

SOUTHERN INTERIOR

- Harvest

- Later than recent years- Mild weather- Quality vintage

- Market

- White varietal & generic in demand- Red varietals – slowing - White Zinfandel – big challenge - Concentrate

CIATTI COMPANY

1,800,000

1,850,000

1,900,000

1,950,000

2,000,000

2,050,000

2013 2014 2015 2016 2017 2018EST.

2013 2014 2015 2016 2017 2018 EST.

2,000,000

CALIFORNIA MARKET SUMMARY

- Historic 2018 crop

- Bulk wine market slow-increased inventories-prices will soften

- Distribution channels controlled by big wineries – challenge for others

- Opportunities for new brands, Negociants?

CIATTI COMPANY

OVERVIEW & COMMENTS

- No shortages around the globe

- Imports continue to US

- Need stronger sales

- Baby boomer vs millennials

- Wine has competition

- We’ve been here before…

CIATTI COMPANY

THANK YOU FOR YOUR TIME AND ATTENTION

JOHN CIATTI JOHN@CIATTI.COM

415.458.5150

CIATTI REPORTS / PUBLICATIONS

- California Market Report

- Global Market Report

- www.ciatti.com

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