Survey Results Show Strong Financial Health for Most Wineries Despite Regional Variations

Survey Results and Economic Slides
2015
Silicon Valley Bank State of the
Wine Industry

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

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.

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)

Production Level of Survey Participants
32.5%
18.9%
13.6%
14.4%
7.0%
4.6%
5.3%
3.6%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%
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
Source: Silicon Valley Bank Wine Conditions Survey

7%
15%
27%
19%
21%
11%
< $15
$15 - $19
$20 - $29
$30 - $39
$40 - $69
> $69
Retail Price Points of Participants

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

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

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

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

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+)

Increases/Decreases to Retail Bottle Price
2015 Price Projections

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

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

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

Price Projections: 5 Year Comparison
0%
10%
20%
30%
40%
50%
60%
70%
2010 2011 2012 2013 2014
Decrease Prices Increase Prices

*Case growth refers to increase/decrease of cases sold over previous year
2014 Sales and case growth*

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

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

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

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

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

Tasting Room, Wine Club, Wholesale, Export, Other
Sales channel distribution

2014 Average Sales per Distribution Channel
31%
22%
38%
3%
6%
Tasting Room
Wine Club
Wholesale
Export
Other

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%
SP17

SP17 indicate what x axis represents?
Sona Pai, 1/7/2015

Average Wholesale/Export 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
Export 2% 2% 3% 4% 4% 9% 4% 6%
Wholesale 24% 32% 33% 47% 51% 68% 71% 75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%

% of Sales from Restaurants
15%
23%
30% 31%
36%
40%
31%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
< $15 $15 - $19 $20 - $29 $30 - $39 $40 - $69 > $69 Overall

Overview of 2014
2014 Fiscal Year Review

Yearly Success in 2014
7%
14%
79%
A disappointing year
A year of treading water
A good year

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

-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

Wineries view of the overall financial condition of the business
Fiscal health

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%

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

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

Potential Sale of winery in the next 5 years along
with Succession Planning (passing control to children of owners)
Potential sale

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

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

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

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)

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

Quality and Yield summary from the grape harvest
2014 harvest

Quality of 2014 Grape Harvest
61%
32%
5%
2%
Excellent
Good
Average
Below Average

Quality of 2014 Grape Harvest by Region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Below Average
Average
Good
Excellent

Yield of 2014 Grape Harvest
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Low Yields
Ave Yields
High Yields

Purchase and Price expectations for next year’s harvest
2015 Grape expectations

Grape Purchase Expectations In 2015
20%
50%
30%
Less Tonnage
Equal Tonnage
More Tonnage

Grape Purchase Expectations by Region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
More Tonnage
Equal Tonnage
Less Tonnage

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

Current effects felt from the drought
California drought issues

Issues from California Drought
16%
47%
33%
4%
No Issues at All
Negligible Issues
Some Issues
Significant Issues

0%
10%
20%
30%
40%
50%
60%
70%
Significant
Issues
Some Issues
Issues From California Drought by Region

Finding Wholesale and Overall Satisfaction with Representation
Wholesale Representation

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
Obtaining Wholesale Representation by Region

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

< $15 $15 - $19 $20 - $29 $30 - $39 $40 - $69 > $69
Satisfied 45% 28% 30% 35% 28% 49%
Ambivalent 29% 26% 23% 19% 27% 21%
Disappointed 26% 46% 48% 46% 45% 30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Satisfaction with Wholesale Representation (By
Price Point)

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Satisfied
Ambivalent
Disappointed
Satisfaction with Wholesale Representation (By
Region)

Financial performance of premium wineries
Source: Silicon Valley Bank Peer Group Database

U.S. dollar index
72
74
76
78
80
82
84
86
88
90
92
DXY Curncy PX_LOW
DXY Curncy PX_last
DXY Curncy PX_HIGH
Source: Bloomberg, Silicon Valley Bank

U.S. GDP
2.5
-1.5
2.9
0.8
4.6
2.3
1.6
2.5
0.1
2.7
1.8
4.5
3.5
-2.1
4.6
3.9
-3
-2
-1
0
1
2
3
4
5
3/1/11 9/1/11 3/1/12 9/1/12 3/1/13 9/1/13 3/1/14 9/1/14

ICE Brent Crude Oil
0
20
40
60
80
100
120
140
1/3/14 2/3/14 3/3/14 4/3/14 5/3/14 6/3/14 7/3/14 8/3/14 9/3/14 10/3/14 11/3/14 12/3/14
ICE Brent Generic

10 year treasury rates
0
0.5
1
1.5
2
2.5
3
3.5
Date 12/23/13 2/3/14 3/17/14 4/28/14 6/9/14 7/21/14 9/1/14 10/13/14 11/24/14
Rate%

Diffusion indexes of employment change
0
10
20
30
40
50
60
70
80
90
1/1/91
8/1/91
3/1/92
10/1/92
5/1/93
12/1/93
7/1/94
2/1/95
9/1/95
4/1/96
11/1/96
6/1/97
1/1/98
8/1/98
3/1/99
10/1/99
5/1/00
12/1/00
7/1/01
2/1/02
9/1/02
4/1/03
11/1/03
6/1/04
1/1/05
8/1/05
3/1/06
10/1/06
5/1/07
12/1/07
7/1/08
2/1/09
9/1/09
4/1/10
11/1/10
6/1/11
1/1/12
8/1/12
3/1/13
10/1/13
5/1/14
EMDINP1M Index Manufacturing Payrolls
EMDINP1M Index Total Private

Workforce in 2015
4.9
14.8
17.8 17.7
16.8 16.5 17.1 17.7
16.1
10.9
5.4
2.3
1.2
0.40
2
4
6
8
10
12
14
16
18
20
16-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+
Millennials Generation X Boomers Silent Generation
Sizeinmillions
Projected size of U.S. labor force (in millions) by age
Source: Department of Labor

Unemployed persons per job opening
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Job openings and employment
126,000
128,000
130,000
132,000
134,000
136,000
138,000
140,000
2000
2500
3000
3500
4000
4500
5000
5500
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Job Openings
Employment

Total private job openings, hires, openings and quits
0
1,000
2,000
3,000
4,000
5,000
6,000
1/1/04
5/1/04
9/1/04
1/1/05
5/1/05
9/1/05
1/1/06
5/1/06
9/1/06
1/1/07
5/1/07
9/1/07
1/1/08
5/1/08
9/1/08
1/1/09
5/1/09
9/1/09
1/1/10
5/1/10
9/1/10
1/1/11
5/1/11
9/1/11
1/1/12
5/1/12
9/1/12
1/1/13
5/1/13
9/1/13
1/1/14
5/1/14
9/1/14
Hires
Openings
Quits
Total private job openings, hires and quits (seasonally adjusted, in thousands)

Hires, total separations and employment
128,000
130,000
132,000
134,000
136,000
138,000
140,000
3000
3500
4000
4500
5000
5500
6000
Employment
Hires
Total Separations

Quits, layoffs and discharges
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Layoffs and discharges
Quits

Quits per layoff and discharge
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
12/1/04 12/1/05 12/1/06 12/1/07 12/1/08 12/1/09 12/1/10 12/1/11 12/1/12 12/1/13

Economic confidence
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Upper-income Americans ($90K+ in annual household income)
Middle- and lower-income Americans (less than $90k in annual household income)

U.S. Unemployment rate
5.6
5.8
6
6.2
6.4
6.6
6.8
7
7.2
5.6
5.8
6
6.2
6.4
6.6
6.8
7
7.2
11/1/13 12/1/13 1/1/14 2/1/14 3/1/14 4/1/14 5/1/14 6/1/14 7/1/14 8/1/14 9/1/14 10/1/14 11/1/14 12/1/14
Source: Bureau of Labor Statistics

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)

Daily oil production
Millions of barrels per day

Potential fine wine consumer by age
Source: U.S. Census Bureau, Silicon Valley Bank
Percentage of families in group

Trends in export volumes 2008-2013
Source: L’Organisation Internationale de la Vigne et du Vin
Six-year span (2008-2013)

Worldwide production vs. consumption

Global consumption trends
2000-2013

Bulk wine available by region
Source: Turrentine Brokerage
Millions of gallons

Supply and demand 2013 vs. 2014
Source: Turrentine Brokerage

Financial performance of premium wineries
Source: Silicon Valley Bank Peer Group Database

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.

Disclaimer
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 of exchange rates.
Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and
demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including
the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from
your own tax, financial, legal and other advisors, and only make investment decisions on the basis of your own objectives, experience
and resources. Opinions expressed are our opinions as of the date of this content only. The material is based upon information which
we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such.
©2014 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-14-13290 Rev. 01-15-15.

Survey Results Show Strong Financial Health for Most Wineries Despite Regional Variations

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Survey Results Show Strong Financial Health for Most Wineries Despite Regional Variations