The Silicon Valley Bank 2015 State of the Wine Industry Presentation is a companion to the report of the same name. The presentation 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 600 West Coast wineries.
Silicon Valley Bank 2015 State of the Wine Industry Presentation
1. Survey Results and Economic Slides
2015
Silicon Valley Bank State of the
Wine Industry
2. 2015 Annual Wine Conditions Survey 26 January 2015 2
Table of Contents
Summary 3
Survey Respondent Profile 4
Demographics 9
2015 Price Projections 13
2014 Sales and Case Growth 18
Sales Channel Distribution 24
2014 Fiscal Year Review 29
Financial Health 33
Potential Sales 37
2014 Harvest 43
2015 Grape Expectations 47
California Drought Issues 51
Wholesale Representation 54
3. 2015 Annual Wine Conditions Survey 26 January 2015 3
Summary
• 82% of wineries reported overall financial health of "good" or better for 2014. This is up 7% over the previous year.
This trend is expected to continue as the grapes from three strong harvests (2012,2013, and 2014) make their way
into the market.
• Consensus view of 2014 shows 79% of respondents reporting having a good year or better. The Sierra Foothills, CA
region reported the largest proportion of disappointment which correlates directly to issues felt during the California
drought. Over 41% of respondents from that region reported feeling some issues from the drought.
• 60% of all wineries are projecting price increases per retail bottle with only 6% projecting a decrease in 2015. The
majority of increases are expected to be small across all price points except the >$69 range. Wines with a price point
>$69 are the most bullish with 45% reporting increases of moderate to strong.
• Wine sales continue to be dominated by the Baby Boomer generation contributing to 44% of all sales with Gen-X’ers
coming in at 29%. Three year trends indicate little change amongst the generational buyers in the market today.
• Overall, 93% of wineries reported the quality of grapes harvested as good/excellent for 2014. Wineries in the Pacific
Northwest further benefited from the 2014 harvest with 62% of Washington wineries and 85% of Oregon wineries
reporting higher yields than average. The next closest region was Napa, CA with 43% of wineries reporting higher
than average yields.
• Only 36% of California wineries reported a measurable affect from the 2014 California drought with the most
significant issues being felt in the Central Valley, CA, Central Coast, CA, and Sierra Foothill, CA regions.
4. 2015 Annual Wine Conditions Survey 26 January 2015 4
Survey Respondent Profile
• The number of winery responses totaled 582. If there were too few
respondents from a participating region, the data was deemed insignificant
based on the sample size and placed into “Other” categories or combined
with a neighboring region as defined below.
- Lodi & Other Delta Counties, CA includes (Livermore and Contra Costa, CA)
- Central Coast, CA includes (San Luis Obispo/Paso Robles/Santa Barbara)
- Mid-Coastal, CA includes (Santa Cruz/Monterey,/Santa Clara)
- Central Valley, CA includes (Solano, CA)
- Other includes (Alabama, Arizona, British Columbia, California, Connecticut, Hawaii, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Mexico, Michigan, Minnesota, Missouri,
New Jersey, New York, North Carolina, Ohio, Oklahoma, Ontario, Pennsylvania, Peru, South
Dakota, Tennessee, Texas, Vermont, and Virginia)
7. 2015 Annual Wine Conditions Survey 26 January 2015 7
16%
25%
24%
10%
7%
18%
< 5 Years
5-9 Years
10 – 14 Years
15 – 19 Years
20-25 Years
25+ Years
Operating Years of Experience
of Survey Participants
Source: Silicon Valley Bank Wine Conditions Survey
8. 2015 Annual Wine Conditions Survey 26 January 2015 8
21.1%
18.0%
14.9%
13.2%
8.9%
7.7%
5.2%
2.7% 2.2% 2.1% 2.1% 1.7%
0%
5%
10%
15%
20%
25%
Region of Survey Participants
Source: Silicon Valley Bank Wine Conditions Survey
10. 2015 Annual Wine Conditions Survey 26 January 2015 10
14%
29%
44%
13%
Millennial (21-36 year olds)
Gen X (37-48 year olds)
Boomers (49-66 year olds)
Matures (67+)
Average Sales by Demographic
Source: Silicon Valley Bank Wine Conditions Survey
11. 2015 Annual Wine Conditions Survey 26 January 2015 11
Year Over Year Demographic Sales Trends
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Millennial (21-36 year olds) Gen X (37-48 year olds) Boomers (49-66 year olds) Matures (67+)
2012 2013 2014
Source: Silicon Valley Bank Wine Conditions Survey
12. 2015 Annual Wine Conditions Survey 26 January 2015 12
Average % of Direct Sales by Age Group
Compared to Bottle Price
0%
10%
20%
30%
40%
50%
60%
< $15 $15 - $19 $20 - $29 $30 - $39 $40 - $69 > $69
Millennial (21-36 year olds)
Gen X (37-48 year olds)
Boomers (49-66 year olds)
Matures (67+)
Source: Silicon Valley Bank Wine Conditions Survey
14. 2015 Annual Wine Conditions Survey 26 January 2015 14
2015 Retail Bottle Price Projections
1% 1%
4%
34%
44%
14%
2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Strong Decrease Moderate
Decrease
Small Decrease Hold Prices Small Increase Moderate
Increase
Strong Increase
Source: Silicon Valley Bank Wine Conditions Survey
15. 2015 Annual Wine Conditions Survey 26 January 2015 15
3 Year Bottle Price Projection Trends
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Strong Decrease Moderate
Decrease
Small Decrease Hold Prices Small Increase Moderate
Increase
Strong Increase
2012 2013 2014
Source: Silicon Valley Bank Wine Conditions Survey
16. 2015 Annual Wine Conditions Survey 26 January 2015 16
2015 Retail Price Projections by Price Point
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
< $15 $15 - $19 $20 - $29 $30 - $39 $40 - $69 > $69
Strong Decrease
Moderate Decrease
Small Decrease
Hold Prices
Small Increase
Moderate Increase
Strong Increase
Source: Silicon Valley Bank Wine Conditions Survey
17. 2015 Annual Wine Conditions Survey 26 January 2015 17
Price Projections: 5 Year Comparison
0%
10%
20%
30%
40%
50%
60%
70%
2010 2011 2012 2013 2014
Decrease Prices Increase Prices
Source: Silicon Valley Bank Wine Conditions Survey
18. *Case growth refers to increase/decrease of cases sold over previous year
2014 Sales and case growth*
19. 2015 Annual Wine Conditions Survey 26 January 2015 19
Predicted End of Year Sales Growth vs.
SVB Actual Sales Growth
2011 2012 2013 2014
Predicted End of Year Sales Growth 13.70% 14.90% 13.00% 13.08%
SVB Actual Sales Growth 12.20% 7.70% 9.20% 10.00%
0%
2%
4%
6%
8%
10%
12%
14%
16%SalesGrowth
SVB
forecasted
6-10%
growth in
2014
Source: Silicon Valley Bank Wine Conditions Survey
20. 2015 Annual Wine Conditions Survey 26 January 2015 20
2014 Predicted Sales Growth
by Years in Business
22%
15%
13%
8%
7%
9%
0%
5%
10%
15%
20%
25%
< 5 Years 5-9 Years 10 – 14 Years 15 – 19 Years 20-25 Years 25+ Years
Years In Business
Wine Sales Growth
Source: Silicon Valley Bank Wine Conditions Survey
21. 2015 Annual Wine Conditions Survey 26 January 2015 21
Indicates regions where price increases could be taken
2014 Predicted Sales and
Case Growth by Region
0%
5%
10%
15%
20%
25%
Wine Case Growth Wine Sales Growth
Source: Silicon Valley Bank Wine Conditions Survey
22. 2015 Annual Wine Conditions Survey 26 January 2015 22
2014 Predicted Sales and Case Growth
by Price Point
0%
2%
4%
6%
8%
10%
12%
14%
16%
< $15 $15 - $19 $20 - $29 $30 - $39 $40 - $69 > $69
Wine Case Growth Wine Sales Growth
Source: Silicon Valley Bank Wine Conditions Survey
23. 2015 Annual Wine Conditions Survey 26 January 2015 23
2014 Predicted Sales and Case Growth
by Production
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1 - 2,500 2,501 - 5,000 5,001 -
10,000
10,001 -
25,000
25,001 -
50,000
50,001 -
100,000
100,001 -
250,000
>250,000 Overall
Wine Case Growth Wine Sales Growth
Source: Silicon Valley Bank Wine Conditions Survey
24. Tasting Room, Wine Club, Wholesale, Export, Other
Sales channel distribution
25. 2015 Annual Wine Conditions Survey 26 January 2015 25
2014 Average Sales per Distribution Channel
31%
22%
38%
3%
6%
Tasting Room
Wine Club
Wholesale
Export
Other
Source: Silicon Valley Bank Wine Conditions Survey
26. 2015 Annual Wine Conditions Survey 26 January 2015 26
Average Direct Sales per Channel by Production
1 - 2,500
2,501 -
5,000
5,001 -
10,000
10,001 -
25,000
25,001 -
50,000
50,001 -
100,000
100,001 -
250,000
>250,000
Other 9% 3% 6% 4% 8% 2% 5% 7%
Wine Club 26% 26% 25% 21% 19% 10% 10% 6%
Tasting Room 39% 37% 33% 24% 17% 11% 11% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Source: Silicon Valley Bank Wine Conditions Survey
SP17
31. 2015 Annual Wine Conditions Survey 26 January 2015 30
Yearly Success in 2014
7%
14%
79%
A disappointing year
A year of treading water
A good year
Source: Silicon Valley Bank Wine Conditions Survey
32. 2015 Annual Wine Conditions Survey 26 January 2015 31
Regional Detailed Overview of 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
The most difficult year in
our history
One of our most
challenging years ever
A disappointing year
A year of treading water
A good year
One of our better years
The best year in our
history
Source: Silicon Valley Bank Wine Conditions Survey
33. 2015 Annual Wine Conditions Survey 26 January 2015 32
-1.2%
5.3%
15.9%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
A disappointing year A year of treading water A good year
Average Growth of Wine Sales Based
on 2014 Success
Source: Silicon Valley Bank Wine Conditions Survey
34. Wineries view of the overall financial condition of the business
Fiscal health
35. 2015 Annual Wine Conditions Survey 26 January 2015 34
Financial Health: Year Over Year Comparison
Rock Solid Very Strong Strong Good Slightly Weak Very Weak
On Life
Support
Dead
2013 9.7% 17.8% 23.5% 24.8% 17.6% 5.3% 1.4% 0.0%
2014 12.0% 21.1% 24.1% 25.1% 13.3% 2.6% 1.4% 0.3%
0%
5%
10%
15%
20%
25%
30%
Source: Silicon Valley Bank Wine Conditions Survey
36. 2015 Annual Wine Conditions Survey 26 January 2015 35
2014 Financial Health by Region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Poor/WeakGood/StrongSource: Silicon Valley Bank Wine Conditions Survey
37. 2015 Annual Wine Conditions Survey 26 January 2015 36
Financial Health by Price Point
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
< $15 $15 - $19 $20 - $29 $30 - $39 $40 - $69 > $69
Poor/Weak
Good/Strong
Source: Silicon Valley Bank Wine Conditions Survey
38. Potential Sale of winery in the next 5 years along
with Succession Planning (passing control to children of owners)
Potential sale
39. 2015 Annual Wine Conditions Survey 26 January 2015 38
Potential Sale of Winery In the Next 5 Years
8%
3%
26%
38%
25%
A strong consideration
Will hopefully happen
Possible
Very unlikely
Not going to happen
Source: Silicon Valley Bank Wine Conditions Survey
40. 2015 Annual Wine Conditions Survey 26 January 2015 39
Potential Sale of Winery in the Next 5 Years*
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
It is being discussed Not Sure Probably will not happen
*original data consolidated into 3 categories Source: Silicon Valley Bank Wine Conditions Survey
41. 2015 Annual Wine Conditions Survey 26 January 2015 40
Potential Sale Based on Financial Health*
10%
24%
66%
Good/Strong
It is being discussed
Not Sure
Probably will not
happen
17%
37%
46%
Poor/Weak
It is being discussed
Not Sure
Probably will not
happen
*original data consolidated into 3 categories
Source: Silicon Valley Bank Wine Conditions Survey
42. 2015 Annual Wine Conditions Survey 26 January 2015 41
0% 5% 10% 15% 20% 25% 30%
There is a plan in place
We are discussing the possibility seriously
A hope, but we really don't know
Only a remote possibility
No chance
Succession Planning
(Children to Take Over Operations)
Source: Silicon Valley Bank Wine Conditions Survey
43. 2015 Annual Wine Conditions Survey 26 January 2015 42
Succession Planning by Region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
No chance
Only a remote possibility
A hope, but we really don't know
We are discussing the possibility seriously
There is a plan in place
Source: Silicon Valley Bank Wine Conditions Survey
45. 2015 Annual Wine Conditions Survey 26 January 2015 44
Quality of 2014 Grape Harvest
61%
32%
5%
2%
Excellent
Good
Average
Below Average
Source: Silicon Valley Bank Wine Conditions Survey
46. 2015 Annual Wine Conditions Survey 26 January 2015 45
Quality of 2014 Grape Harvest by Region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Below Average
Average
Good
Excellent
Source: Silicon Valley Bank Wine Conditions Survey
47. 2015 Annual Wine Conditions Survey 26 January 2015 46
Yield of 2014 Grape Harvest
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Low Yields
Ave Yields
High Yields
Source: Silicon Valley Bank Wine Conditions Survey
48. Purchase and Price expectations for next year’s harvest
2015 Grape expectations
49. 2015 Annual Wine Conditions Survey 26 January 2015 48
Grape Purchase Expectations In 2015
20%
50%
30%
Less Tonnage
Equal Tonnage
More Tonnage
Source: Silicon Valley Bank Wine Conditions Survey
50. 2015 Annual Wine Conditions Survey 26 January 2015 49
Grape Purchase Expectations by Region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
More Tonnage
Equal Tonnage
Less Tonnage
Source: Silicon Valley Bank Wine Conditions Survey
51. 2015 Annual Wine Conditions Survey 26 January 2015 50
2015 Price per Ton Expectations
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Lower Price/Ton
Equal Price/Ton
Higher Price/Ton
Source: Silicon Valley Bank Wine Conditions Survey
53. 2015 Annual Wine Conditions Survey 26 January 2015 52
Issues from California Drought
16%
47%
33%
4%
No Issues at All
Negligible Issues
Some Issues
Significant Issues
Source: Silicon Valley Bank Wine Conditions Survey
54. 2015 Annual Wine Conditions Survey 26 January 2015 53
0%
10%
20%
30%
40%
50%
60%
70%
Significant
Issues
Some Issues
Source: Silicon Valley Bank Wine Conditions Survey
Issues From California Drought by Region
55. Finding Wholesale and Overall Satisfaction with Representation
Wholesale Representation
56. 2015 Annual Wine Conditions Survey 26 January 2015 55
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
We do not try to use
Wholesale
Not a Problem
Some Effort
Difficult/Impossible
Source: Silicon Valley Bank Wine Conditions Survey
Obtaining Wholesale Representation by Region
57. 2015 Annual Wine Conditions Survey 26 January 2015 56
60%
30.3%
37.32%
14%
36.7%
21.87%
26%
33.0%
40.82%
0%
10%
20%
30%
40%
50%
60%
70%
2012 2013 2014
Satisfied Ambivalent Disappointed
Satisfaction with Wholesale Representation (YoY)
Adjusted to remove all wineries < 2,500 case production
Source: Silicon Valley Bank Wine Conditions Survey
59. 2015 Annual Wine Conditions Survey 26 January 2015 58
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Satisfied
Ambivalent
Disappointed
Satisfaction with Wholesale Representation (By
Region)
Adjusted to remove all wineries < 2,500 case production
Source: Silicon Valley Bank Wine Conditions Survey
60. 2015 Annual Wine Conditions Survey 26 January 2015 59
Financial performance of premium wineries
Source: Silicon Valley Bank Peer Group Database
Source: Silicon Valley Bank Wine Conditions Survey
76. 2015 Annual Wine Conditions Survey 26 January 2015 75
Gas Prices – 9 Month Average Retail
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
1/7/07 1/7/08 1/7/09 1/7/10 1/7/11 1/7/12 1/7/13 1/7/14
PX_LAST
Regular gas price ($USD/gallon)
Source: Bloomberg, Silicon Valley Bank
77. 2015 Annual Wine Conditions Survey 26 January 2015 76
Daily oil production
Millions of barrels per day
Source: Bloomberg, Silicon Valley Bank
78. 2015 Annual Wine Conditions Survey 26 January 2015 77
Potential fine wine consumer by age
Source: U.S. Census Bureau, Silicon Valley Bank
Percentage of families in group
79. 2015 Annual Wine Conditions Survey 26 January 2015 78
Trends in export volumes 2008-2013
Source: L’Organisation Internationale de la Vigne et du Vin
Six-year span (2008-2013)
80. 2015 Annual Wine Conditions Survey 26 January 2015 79
Worldwide production vs. consumption
Source: L’Organisation Internationale de la Vigne et du Vin
81. 2015 Annual Wine Conditions Survey 26 January 2015 80
Global consumption trends
Source: L’Organisation Internationale de la Vigne et du Vin
2000-2013
82. 2015 Annual Wine Conditions Survey 26 January 2015 81
Bulk wine available by region
Source: Turrentine Brokerage
Millions of gallons
83. 2015 Annual Wine Conditions Survey 26 January 2015 82
Supply and demand 2013 vs. 2014
Source: Turrentine Brokerage
84. 2015 Annual Wine Conditions Survey 26 January 2015 83
Financial performance of premium wineries
Source: Silicon Valley Bank Peer Group Database
Source: Silicon Valley Bank Wine Conditions Survey
85. 2015 Annual Wine Conditions Survey 26 January 2015 84
About Silicon Valley Bank Wine Division
Silicon Valley Bank is the premier commercial bank for emerging, growth and mature companies in the
technology, life science, venture capital, private equity and premium wine industries. Its 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 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
Silicon Valley Bank is the California bank subsidiary and the commercial banking operation of SVB Financial Group.
Banking services are provided by Silicon Valley Bank, a member of the FDIC and the Federal Reserve System. SVB
Private Bank is a division of Silicon Valley Bank. SVB Financial Group is also a member of the Federal Reserve System.