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Dollars and Sense

SVB Financial GroupRob McMillan

EVP & FounderSVB Wine Division

Discussion Today

•Economy•Winery Specific Look

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What We Predicted for 2010 ….

•Trading-Down will end but Profitability Impacted•“L” Shaped Recovery•Discounting into the fall• Improving Affluent Consumption – with a continuing gulf•Price Pressure on wines in Distribution•Slightly too much inventory. Growers will be impacted.•Modest Improvement in Restaurant Sales•Distribution continues ambivalent toward small wineries•Sales growth in the 8% - 12% range overall for Fine Wine

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Economic Opportunity and Obstacles

o Factories Producing Moreo Consumers Spending More – Going Out Moreo Companies Hiring Moreo Stability of the Tax System/Rateso Improved Consumer and Business Sentiment ….. Buto Lower Home Prices & Unsold Home Inventoryo Higher Commodity Priceso Fed Has to Remove Stimuluso Walking Zombie States and Municipalitieso Sovereign Debt Defaults (PIIGS)o Higher Interest Rates ( …. Higher home and US Debt payments)o Non-Functioning Asset Backed Debt System

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Wineries vs. Growers

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Monthly Growth in Retail Sales- Consumers Spending More

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ECRI Weekly Leading Indicator Index

7Source: Economic Cycle Research Institute

Luxury Spending Making a Comeback

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Restaurant Same Store Sales

9Source: Demeter Group

NRA Current Situation Index

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Job Creation –Companies Hiring More

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Unemployment versus Wine Sales

Window of Affluence

13Source: Unity Marketing

Luxury Drought

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Unemployed and Underemployed

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Unemployment Trends - Will Take Time Still

16Source: Bureau of Labor Statistics

2016 ?

Single Family Housing Starts Bumping on the Bottom

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Long Term Interest Rates

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Wineries versus Growers

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Financial Condition of Wineries

20Source: Silicon Valley Bank Proprietary Research

84% of Sonoma Wineries Good+. Only 6% Very Weak

Credit Availability Since the Market Crash

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72% Said “More Difficult.”

Source: Silicon Valley Bank Proprietary Research

What Will You do with the Price of Your Wine?

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Inventory Positions in the Cellar

23Source: Silicon Valley Bank Proprietary Research

Fine Wine Financial Snapshot Q2 2010

Source: Silicon Valley Bank PGA Data

Can Wineries and Growers Really Get Along?

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Actively Participate in a SM Platform and Interact

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Don’t Actively Use SM as a Tool

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Use a CRM and Track Buying Patterns and Demographics

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We have a Digital Marketing Plan in Place

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A Dedicated Employee to Execute using Digital Tools

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Survey Customers to Discover Post-Purchase Experiences

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2010 Will be ………….

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

The best year in ourhistory

One of our betteryears

A good year A year in which wewill be pretty muchtreading water

A disappointingyear

One of our mostchallenging years

The most difficultyear in our history

Source: Silicon Valley Bank Proprietary Research

A Better Tomorrow ……. After tomorrow anyway

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2011 Will be …………….

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Grape Purchases vs. Price in 2011

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60 % Expect to buy more 65% Expect to spend less

Early Predictions for 2011

•Slowly Improving Restaurant Sales•Slowly Improving Economy with a Hangover•Continued Distribution Issues•Large Euro and US Economic Challenges•High Costs to Produce Wines with Lowed Price Points• Inventory Closer to Balanced than most think• Improving Consumer Economy with Hangover•Flat Pricing on Grapes except in Best Properties•Double Digit Growth in Fine Wine Sales and Flat Profit

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Presentation or Banking Questions:Email: Rob McMillanTwitter: @svbwineRMcMillan@svb.com707-967-1367

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