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Observations on the 2015 Preliminary Grape Crush Report

The wine grape crush declined from 3.9 million tons to 3.7 million tons (excluding raisin and table grapes), a 5% decline from last year. Generally, there were declines in coastal areas while the central valley had another strong harvest. Despite the decline in coastal areas, with the three preceding strong harvests, current forecasts do not predict any shortfalls of supply. As such, this harvest has brought supply back into balance with demand.

In analyzing the report, bw166 has identified two key metrics of interest for this harvest. The first concerns the concentration of winery owned/operated vineyards relative to open market purchases. On a statewide basis wineries owned or controlled 15.1% of all wine grapes crushed in 2015, down from 17.0% in the preceding harvest. This decline is mirrored in individual districts but of interest is the larger concentration of winery owned/operated vineyards in the coastal areas. For example, District 3’s (Sonoma) concentration was 34.5% in 2015 and District 4’s (Napa) was 40.9%. This dichotomy in concentration of vineyard ownership by wineries demonstrates that as coastal fruit gets more expensive, wineries are finding it more acceptable to control their grape sourcing and costs through outright ownership.

The second concerns the value and average price per ton for this year’s harvest. The total market value of all wine grapes crushed dropped to $2.88 billion from $3.43 billion, a 16.0% drop in value. This drop was driven both by quantity (3.70 million tons in 2015 from 3.89 million, a 4.9% decline) and market value per ton ($777.96 in 2015 from from $881.24, a 11.7% decline). The higher decline in market value per ton versus tons was caused by lower overall yields in the higher priced coastal areas. In other words, higher priced coastal areas represented a smaller share of overall tons in 2015 versus 2014, bringing the total value per ton down. In fact, prices within the coastal areas saw pricing increases. District 3 (Sonoma) saw average market value per ton increase to $2,465 from $2,343. District 4’s (Napa) increased to $4,417 from $4,071. District 7 (includes Monterey) was stable moving at $1,239. Lastly, District 8 (includes San Luis Obispo and Santa Barbara) saw market value per ton increase to $1,609 from $1,533.

The complete detail of the 2015 and 2014 harvests by district and key varietals can be downloaded from here.

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Report Timing

Question: Why do you wait so long to release your reports?

Answer: Our reports are dependent on various government data sources and we minimize the use of any estimates. Our goal is to release each report within three business days of the receipt of the last data sets required for any report.

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bw166 Publication Advantages

Question: Why have you started publishing beverage alcohol industry data?

Answer: There are 3 key factors that our reports address:

  • As we watch consumer interaction with the beverage alcohol category we are seeing much more cross-over of consumption. Most industry data focuses on either beer, wine or spirits. We are producing industry data across all three segments with a consistent and comparable methodology.
  • Having run divisions of public companies and private beverage alcohol companies for over 20 years I know there are numerous times when industry information is necessary. Some examples of requirements for industry information include; retailer presentations, wholesaler presentations, banking discussions, investor presentations, board presentations etc. Too often this requires working on periods that are not a calendar year or trying to put in perspective partial data, such as scanner data. The bw166 reports are structured to fill multiple needs across beer, wine and spirits.
  • We are inundated with published reports every day about trends in our industry. Often times these deal with a portion of the market or a very short period of time. The bw166 publications allow users to put partial reports from other sources in context with the total industry.
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Shipments vs. Depletions

Question: Why do you focus on volume entering distribution?

Answer: The source of our data is varied government reports at both the federal and state level. These reports primarily focus on tax collections which tend to occur when goods are shipped from a producer to a distributor. We believe this is a good measurement of demand in the marketplace. As everyone who has been involved in the industry knows, over time, shipments equal depletions which ultimately equal consumer take-away. Any discrepancy between shipments and depletions results in a change to inventory in the market. Obviously there are fluctuations on a month to month or quarter to quarter basis but generally on a rolling twelve month basis the overall inventory in distribution channels varies minimally.

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Data Verification

Question: How can a subscriber be certain that your data accurately reflects the market? Your wine data especially has some significant variances from other published reports

AnswerWe have gone back over a decade evaluating our methodologies on a month by month basis.

  • As a cross check we have tested our volume calculations versus actual taxes collected for the period 2003 to 2014. We are very confident that the industry is compliant regarding excise tax compliance as well as that most industry members do not choose to overpay their taxes. Click here for a view of the tax reconciliation. There are some tax offsets that impact excise tax collection that I am fortunate to have experience with. These include:
    • Small producer tax credit for beer,
    • Small Producer tax credit for wine.
    • Duty Drawback on still wines at no more than 14% alcohol.
    • 5010 tax credit for spirits.
  • In evaluating the tax reconciliation, the wine volumes had a slightly higher variance than beer or spirits. As an added cross check on wine volumes we looked at a simple inventory flow from 2003 to 2014 to further validate our methodology. This effectively looked at “Opening Inventory” plus “Total Domestic Production” plus “Total Imports” less “exports” less “ending inventory” equals “Wine Entering Distribution”. Click here for a copy of the bw166 Wine Inventory Reconciliation.