STATE OF THE WINEGRAPE INDUSTRYInformation provided by:

Steve Dorfman

TREE & VINE EXPONOVEMBER 12, 2019

24 DEDICATED BROKERS IN 9 COUNTRIES

GLOBALLY BASED TO HELP BUILD YOUR BUSINESS WORLDWIDE

INTRODUCTION

- CIATTI CO 9 REGIONAL OFFICES WORLDWIDE

- WINE, GRAPES, & CONCENTRATE, ETC

- PROCESSING AND STORAGE

- GLOBAL PERSPECTIVE

- WORLD APPROACH – LOCAL KNOWLEDGE

CIATTI

2

3

4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ton

s in

Mill

ion

s

Winegrape Other Crush

4.15

Est.

CALIFORNIA STATEWIDE GRAPE CRUSH

CIATTI

REGIONAL

MARKET

- HARVEST- LATER THAN RECENT YEARS- MILD WEATHER- SOME MILDEW PRESSURE

- MARKET- VERY QUIET- BIG WINERIES NOT BUYING

EXTRA GRAPES

SOUTHERN INTERIOR

1,800,000

1,850,000

1,900,000

1,950,000

2,000,000

2,050,000

2013 2014 2015 2016 2017 2018 2019 EST.

1,975,000

CIATTI

- HARVEST- LATER THAN RECENT YEARS- MILD GROWING SEASON - NOT AS COMPACTED AS

RECENT YEARS

- MARKET- NO SPOT BUYERS- NO “CLEAN UP” BUYERS- A FEW SMALL WINERIES BOUGHT

SPECIFIC VARIETIES- MORE REMOVALS

NORTHERN INTERIOR

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2013 2014 2015 2016 2017 2018 2019EST.

1,080,000

CIATTI

- HARVEST- LATER THAN NORMAL HARVEST- EXTENDED HARVEST HELPED MATURITY- YIELDS VARIED, NEW VS. OLD VINES - NO CLEAN UP ACTIVITY- FINISHED LATE BUT GOOD

- MARKET- SLOW MARKET - CA PRICING- MARKET SUSCEPTIBLE WHEN

OVER SUPPLY (PASO ROBLES)- TOO MUCH CAB PLANTED? - FRUIT UNPICKED

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 2014 2015 2016 2017 2018 2019 EST.

565,000

CIATTI

CENTRAL COAST

- HARVEST- BUYING ACTIVITY QUIET- LATE SEASON “CHEAP” BUYERS- CROP FEELS “NORMAL”- FIRE CHALLENGE

- MARKET- EARLY CAB BUYERS- SLOWED SIGNIFICANTLY - CAPACITY ISSUE- WINERIES BECOMING SELLERS- WINERY PRESSURE ON QUALITY

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2013 2014 2015 2016 2017 2018 2019 EST.

520,000

CIATTI

NORTH COAST

KEY

VARIETIES

- GRAPES- YIELDS LOOKS AVG - SOME MILDEW ISSUES- INTERIOR ALL GOT PICKED- AGING VINES

- BULK WINE - BACK UP OF INVENTORY- MOSTLY COASTAL (75%)- PRICE DROPPED, SOME

COASTAL NOW CA PRICE

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2013 2014 2015 2016 2017 2018 2019 EST.

670,000

CIATTI

CHARDONNAY

- GRAPES- YIELDS WERE SPOTTY- NO ADDITIONAL ACRES- SOME LOW PRICE ACTIVITY

- BULK WINE - MAY BE THE MOST BALANCED- ALMOST ALL CA APP - MARKET SLOWS AFTER FEB

0

50,000

100,000

150,000

200,000

250,000

300,000

2013 2014 2015 2016 2017 2018 2019 EST.

265,000

PINOT GRIGIO

- GRAPES- MOSTLY CONTRACTED- YIELDS AVERAGE- NEW PLANTINGS/GRAFTINGS

PRODUCING

- BULK WINE - BALANCED INVENTORIES IN

TERMS OF REGION CA/COAST- SHOULD WORK THROUGH

SLIGHT VOLUME ISSUES

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2013 2014 2015 2016 2017 2018 2019 EST.

115,000

CIATTI

SAUVIGNON BLANC

- GRAPES- RECORD CROP AGAIN?- ACREAGE MATURES- NEW PLANTINGS PRODUCING- MARKET HIT WALL- SOME GRAPES WILL HANG

- BULK WINE - LARGEST INVENTORY- PRICE DROP CONTINUES, NAPA

LOWER PRICE ACTION- MAJORITY COASTAL

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2013 2014 2015 2016 2017 2018 2019EST.

675,000

CIATTI

CABERNET SAUVIGNON

- GRAPES- QUIET MARKET- ACREAGE IN BALANCE?

- BULK WINE - SLOW DEMAND- DOESN’T FEEL AS BACKED UP- MOSTLY COASTAL 0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2013 2014 2015 2016 2017 2018 2019 EST.

250,000

CIATTI

MERLOT

- GRAPES- CENTRAL COAST SEEMS BIGGER

THAN NORTH COAST- BIG DEMAND DROP ON COAST- LATE SEASON CHEAP BUYS

- BULK WINE - INVENTORY ISSUES- LOWER PRICE ACTIVITY- MOSTLY COASTAL

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2013 2014 2015 2016 2017 2018 2019EST.

290,000

CIATTI

PINOT NOIR

- GRAPES- YIELDS DOWN- MARKET QUIET- HAND LABOR COSTS HIGH - REMOVALS CONTINUE

- BULK WINE - SLOW MOVEMENT - MOST IS LODI APPELLATION

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2013 2014 2015 2016 2017 2018 2019 EST.

350,000

CIATTI

ZINFANDEL

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

JAN. 2015 JAN. 2016 JAN. 2017 JAN. 2018 JAN. 2019 NOV. 2019

BU

LK G

ALL

ON

S A

VA

ILA

BLE

CABERNET SAUVIGNON CHARDONNAY MERLOT PINOT NOIR ZINFANDELCIATTI

CALIFORNIA BULK WINE INVENTORY

WINE

SALES

TOTAL CA WINE (-2%) (-2.9M CASES)(LAST 6 MONTHS)

- DOMESTIC (-0%) (-0.2M CASES)

- EXPORTS (-28%) (-2.3M CASES)

- IMPORTS (6 months)

- CASEGOODS (+5%) (+2.6M/CASES)

- BULK (-7%) (-0.9M/CASES)

TOTAL US Market (YTD)

- IMPORT & DOMESTIC (+1%) (+ 1.7M/CASES)

Source: Gomberg-Frederickson

USA SHIPMENTS – 6 months ending June 2019

CIATTI

2019 FIRST HALF - CA TABLE WINE VOLUME

Retail Price/750ml Eqv.

Price Segment Volume Change Volume Share

Under $4 – 5LUnder $4 - other

Economy - 2.8%- 6.8%

9.9%9.7%

$4 - $7 – 1.5L$4-$7 - other

Popular - 6.3%- 5.5%

15.3%13.7%

$4 - $7 – 3L Premium Box + 11.4% 7.4%

$7 - $9 Popular Plus - 3.2% 10.2%

$9 - $12 Premium + 1.8% 18.9%

$12 - $15 Premium Plus + 7.7% 7.6%

$15 - $20 Super Premium +9.6% 4.7%

Over $20 Luxury + 7.2% 2.5%

CIATTISource: Gomberg-Frederickson

TYPE % SHARE % CHANGE

BEER 47.7% -1.0%

SPIRITS 34.7% +2.4%

WINE 17.6% -1.9%

Source: Gomberg-Frederickson

BEVERAGE ALCOHOL TRENDS (12 MONTHS TO JUNE 2019)

CIATTI

VARIETAL % SHARE

CHARDONNAY 18.6%

CABERNET 14.6%

RED BLENDS 10.6%

PINOT GRIGIO 9.7%

MERLOT 6.4%

MOSCATO 6.2%

PINOT NOIR 5.2%

SAUVIGNON BLANC 5.1%

OFF PREMISE VOLUME BY VARIETAL

CIATTISource: Nielsen

CALIFORNIA MARKET SUMMARY

- OVERALL AN IDEAL SEASON IF GRAPES WERE CONTRACTED

- VERY CONSISTENT ALL YEAR – MARKET, WEATHER, TIMING

- SPOT GRAPE MARKET ACTIVITY NONEXISTENT

- BULK WINE MARKET CONTINUED TO SOFTEN; INCREASED INVENTORIES

- OPPORTUNITIES FOR NEW BRANDS/WINE BASED PRODUCTS

CIATTI

CIATTI REPORTS / PUBLICATIONS

THANK YOU FOR YOUR TIME AND ATTENTION

- CALIFORNIA MARKET REPORT

- GLOBAL MARKET REPORT

- WWW.CIATTI.COM

STEVE DORFMAN

STEVE@CIATTI.COM

707.321.3843