The Silicon Valley Bank 2014 State of the Wine Industry Report identifies trends and addresses current issues facing the U.S. wine industry, offering data and observations that help that wineries can use to develop their business strategies. Silicon Valley Bank's wine report is based on its in-house expertise as one of the largest bankers to the West Coast wine industry for nearly 20 years, a proprietary database of more than a decade of winery financials, ongoing research, and an annual survey of 450 West Coast wineries.

2. Silicon Valley Bank Wine Report
SVB's Annual State of the Wine Industry Report addresses current trends, conditions and future views
on wine industry growth, consumer demand trends and winery financial performance.
 Sales growth is expected to be the highest since the recession (6-10%), despite a tough economy.
 Wine supply is in balance heading into 2014.
 Stable pricing means good news for consumers.
 For wineries, increased grape costs and flat pricing means lower profitability.
Read the full report: www.svb.com/wine-report
State of the Wine Industry Report 2014
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3. Global: Production vs. Consumption (million unit cases)
State of the Wine Industry Report 2014
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4. Net Inventory Balance
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5. Net Inventory Balance by Retail Price Point
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6. Net Inventory Balance by Production Level
State of the Wine Industry Report 2014
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7. California Bulk Wine Inventory
State of the Wine Industry Report 2014
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8. 2013 Spot Market Grape Prices
State of the Wine Industry Report 2014
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9. United States GDP Growth Rate
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10. United States Government Spending
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11. Household Employment as a % of the
Labor Force and Population
State of the Wine Industry Report 2014
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12. Consumer Credit Outstanding: Revolving
State of the Wine Industry Report 2014
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13. Net Worth of Cohorts
State of the Wine Industry Report 2014
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14. Income by Cohort
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15. Fine Wine Buyers
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16. Income Correlates with Fine Wine Purchases
State of the Wine Industry Report 2014
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17. Total U.S. Wine Consumption
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18. Population Distribution by Age–1990
State of the Wine Industry Report 2014
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19. NASDAQ
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20. Population Distribution by Age–2020
State of the Wine Industry Report 2014
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21. Premium Planted Acreage on West Coast
State of the Wine Industry Report 2014
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22. Wine Industry Financial Performance
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23. Direct to Consumer Shipments Value
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24. Supply /
SUPPLYDemand Dynamics
/ DEMAND DYNAMICS
Short Term – “Hang Over”
Buyers
Source: Ciatti Company
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25. Chardonnay - Global Market
California
$/ Gal
Availability
California
N. Coast
Napa/Son
$3.25 – 5.00
$8.00 – 12.00
$10.00 – 16.00
Long
Balanced/Long
Balanced/Long
Global
$/ Gal Dlvd
Availability
Chile
Australia
South Africa
$3.40 – 4.00
$2.50 – 3.00
$3.00 – 3.50
High
High
Moderate
Source: Ciatti Company
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26. Cabernet Sauvignon - Global Market
California
$/ Gal
Availability
California
N. Coast
Napa/Son
$5.50 – 8.00
$13.00 – 17.00
$18.00 – 33.00
Long/Balanced
Short
Balanced
Global
$/ Gal Dlvd
Availability
Chile
Australia
Spain
$2.90 – 3.90
$4.00 – 5.25
$4.50 – 4.85
High
Moderate
Moderate
Source: Ciatti Company
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27. Winegrape Demand - Steady
 Buyers securing long-term grape supply
 Contract activity strongest in Coastal Areas
 Pricing should remain stable with a few exceptions
 +/- 30,000 acres planted in last two years
 2014 Crop size and Water concerns
Source: Ciatti Company
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28. Supply / Demand Dynamics
SUPPLY/DEMAND DYNAMICS
Longer Term - Balanced Market
Buyers
Buying
Sellers
Selling
Source: Ciatti Company
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29. 2013 Market Review
2013 Acquisitions of Notable U.S. Based Wineries and Brands
Target
Acquirer
Region
Comments
Alderbrook Winery
Bernie Orsi
Sonoma
Production capacity
Geyser Peak Wine Facility
Francis Ford Coppola
Sonoma
Production capacity
Sonoma Crush Facility
Carneros Vintners (The Vintners Group)
Sonoma
Production capacity
Rack & Riddle Facility
Duckhorn Wine Company
Mendocino
Production capacity
Yverdon Vineyard and Winery
Jackson Family Wines
Spring Mtn. (Napa)
Portfolio building
Viansa Winery
Vintage Wine Estates
Sonoma
Portfolio building
Clos Pegase Winery
Vintage Wine Estates
Napa
Portfolio building
Panther Creek Cellars
Bacchus Capital Management, LLC
Oregon
Portfolio building
Moraga Vineyards
Rupert Murdoch
Los Angeles
Lifestyle
Mayacamas Vineyards
Charles Banks and Jay Schottenstein
Napa
Lifestyle
Araujo Estate
Artemis Group (Owner of Chateau Latour)
Napa
Foreign buyer
Cleavage Creek
FCC North American Investment, LLC
Napa (Pope Valley)
Foreign buyer
Solena Winery
Jackson Family Wines
Oregon
Geographic expansion
Goosecross Cellars
Golden Equity Investments
Napa
Industry entrant
Silverado Hill Winery
Laird Family Estate
Napa
Opportunistic
Source: Zepponi & Company
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30. 2012-2013 Winery Purchases of Vineyards
Vineyard
Gallo
3 Vineyards
Planted Acreage
Location
1,277± acres



Monterey
Paso Robles
Lake County
3 in Sonoma
2 in Mendocino
3 in Oregon
1 in South Australia
Jackson Family Wines
9+ vineyards
1,629± acres




Foley
2 vineyards
450± acres


1 in Sonoma
1 in Lake County
483± acres


4 in Sonoma
2 in Napa
6 vineyards, bought by:
Others






Duckhorn
Paul Hobbs
Bill Price
TGIC
Ledson
Frank Family
Source: Zepponi & Company
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31. 2012-2013 Winery Purchases of Vineyards
Largest Acquisitions
(by planted acreage)
Most Desired Areas
(by planted acreage)
Other
Other
Sonoma
Foley
Gallo
Lake County
Napa
Jackson
Family Wines
Central Coast
Mendocino
Oregon
Source: Zepponi & Company
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32. The Future is NOW
Source: VinTank
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33. And It’s SUPER HARD aka
Welcome To The Most Competitive Wine Market in Human History
Source: VinTank
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34. And It’s Super Confusing and Demands Incredible
Amounts of Time (Learning & Usage)
Source: VinTank
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35. Even The Way We Define Relationships is Changing
Customer Relationships (past)
New Types of Customer
Relationships
Source: VinTank
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36. Some hard hittin’ social media stats
 An average of 1.5 million organic conversations about wine EVERY
DAY across ALL primary social media channels
 450K new people talking about wine on social media EVERY month
 Over 80% of those go unanswered by wine brands.
 Over 60M “quality” conversations about wine on SM in the last 5 years
from 600 million analyzed conversations
 Over 16 million people profiled that mentioned wine at least 1x on SM
Source: VinTank
State of the Wine Industry Report 2014
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37. Yes, Everything Digital is Growing
 Mobile traffic (Phone only, not tablet) is increasing to a meaningful
percentage - 2013 was the first year it topped 25% of traffic.
 E-com sales year over year were up 44% percent. Top 10% Vin65
customers had increases of at least 140%
 One large driver of sales was "shipping included". Shipping Included
outperformed 20% off in A/B tests
Source: VinTank
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38. Looking into 2014 for Digital & DTC + Wine
 Year of the mobile everything.
 Digital will become a viable alternative to traditional distribution for certain
brands.
 The DTC divide for wineries is maturing already.
 2014 will be the year of digital divide for wineries.
 Expect an increase in consolidation/attrition at the wine/tech vendor level.
 Location tools will be key assets for acquiring new business for wineries
with tasting rooms.
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39. Recommended Reading
 Mary Meeker’s Tech Predictions for 2013 - http://www.slideshare.net/kleinerperkins/kpcbinternet-trends-2013
 The Age of Context by Shel Israel and Robert Scoble - http://amzn.com/1492348430
 Your Brand, The Next Media Company by Michael Brito - http://amzn.com/0789751615
Source: VinTank
State of the Wine Industry Report 2014
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40. About the Report: The report is based on SVB's in-house expertise as one of the largest bankers to the West Coast wine
industry, a proprietary database of more than a decade of winery financials, ongoing research, and an annual survey of 650
wineries.
About Silicon Valley Bank’s Wine Division: Silicon Valley Bank’s Wine Division specializes in commercial banking for
premium wineries and vineyards and the industries that support them. SVB has the largest team of commercial bankers
dedicated to the wine industry of any bank nationwide. Founded in 1994, SVB’s Wine Division has offices in Napa and
Sonoma counties and serves clients focused in the fine wine producing regions of California, Oregon and Washington. By
virtue of its dedication to the wine industry, Silicon Valley Bank is able to support its clients consistently through economic
and growth cycles, and offer guidance on many aspects of their business, beyond traditional banking services. Silicon Valley
Bank is a member of global financial services firm SVB Financial Group (Nasdaq: SIVB), with SVB Analytics, SVB Capital
and SVB Private Bank. More information on the company can be found at www.svb.com/winedivision.
Contact Us: For more information about this report or Silicon Valley Bank’s Wine Division, please contact us:
Rob McMillanEVP & Founder Phone 707.967.1367, rmcmillan@svb.com
Bill Stevens Division Manager Phone 707.967.1373, wstevens@svb.com
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41. This material, including without limitation to the statistical information herein, is provided for informational purposes only. The
material is based in part on information from third-party sources that we believe to be reliable, but which have not been
independently verified by us and for this reason we do not represent that the information is accurate or complete. The information
should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision.
You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the
material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in
any other transaction.
Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement
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©2013 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>,
SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademarks. B_WD-13-13170. Rev. 01-14-2014
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