A key report by Rob McMillan from SVB about the wine industry where he surveyed 598 wineries from their portfolio. For more information about the report - Email: Rob McMillan Twitter: @svbwine RMcMillan@svb.com 707-967-1367 If you tweet about this report, please use #SVB

1. Dollars and Sense
SVB Financial Group
Rob McMillan
EVP & Founder
SVB Wine Division
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2. Discussion Today
•Economy
•Winery Specific Look
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3. 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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4. Economic Opportunity and Obstacles
o Factories Producing More
o Consumers Spending More – Going Out More
o Companies Hiring More
o Stability of the Tax System/Rates
o Improved Consumer and Business Sentiment ….. But
o Lower Home Prices & Unsold Home Inventory
o Higher Commodity Prices
o Fed Has to Remove Stimulus
o Walking Zombie States and Municipalities
o 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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5. Wineries vs. Growers
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6. Monthly Growth in Retail Sales
- Consumers Spending More
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7. ECRI Weekly Leading Indicator Index
Source: Economic Cycle Research Institute 7

8. Luxury Spending Making a Comeback
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9. Restaurant Same Store Sales
Source: Demeter Group 9

10. NRA Current Situation Index
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11. Job Creation –
Companies Hiring More
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12. Unemployment versus Wine Sales
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13. Window of Affluence
Source: Unity Marketing 13

14. Luxury Drought
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15. Unemployed and Underemployed
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16. Unemployment Trends - Will Take Time Still
2016 ?
Source: Bureau of Labor Statistics 16

17. Single Family Housing Starts Bumping on the Bottom
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18. Long Term Interest Rates
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19. Wineries versus Growers
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20. Financial Condition of Wineries
84% of Sonoma Wineries Good+.
Only 6% Very Weak
Source: Silicon Valley Bank Proprietary Research 20

21. Credit Availability Since the Market Crash
72% Said “More Difficult.”
Source: Silicon Valley Bank Proprietary Research 21

22. What Will You do with the Price of Your Wine?
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23. Inventory Positions in the Cellar
Source: Silicon Valley Bank Proprietary Research 23

24. Fine Wine Financial Snapshot Q2 2010
Source: Silicon Valley Bank PGA Data

25. Can Wineries and Growers Really Get Along?
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26. Actively Participate in a SM Platform and Interact
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27. Don’t Actively Use SM as a Tool
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28. Use a CRM and Track Buying Patterns and Demographics
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29. We have a Digital Marketing Plan in Place
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30. A Dedicated Employee to Execute using Digital Tools
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31. Survey Customers to Discover Post-Purchase Experiences
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32. 2010 Will be ………….
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
The best year in our One of our better A good year A year in which we A disappointing One of our most The most difficult
history years will be pretty much year challenging years year in our history
treading water
Source: Silicon Valley Bank Proprietary Research 32

33. A Better Tomorrow ……. After tomorrow anyway
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34. 2011 Will be …………….
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35. Grape Purchases vs. Price in 2011
60 % Expect to buy more 65% Expect to spend less
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36. 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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37. Presentation or Banking Questions:
Email: Rob McMillan
Twitter: @svbwine
RMcMillan@svb.com
707-967-1367
If you tweet about this report, please use
#SVB
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