The Silicon Valley Bank 2016 State of the Wine Industry Presentation is a companion to the report of the same name. The Silicon Valley Bank 2016 State of the Wine Industry Report identifies trends and current issues facing the U.S. wine industry and offers data and observations 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 500+ West Coast wineries. Learn more at http://www.svb.com/wine-report/.

1. State of the Wine Industry 2016
Videocast Presentation
Rob McMillan
EVP & Founder, Silicon Valley Bank Wine Division
Follow Rob (@SVBWine)
Join the conversation at #SVBWine

2. Panelists
• Jeff Bitter, Allied Grape Growers
• Amy Hoopes, Chief Marketing Officer/EVP Global Sales, Wente
Family Estates
• Paul Mabray, Chief Strategy Officer of Vintank
• Rob McMillan, EVP & founder of Silicon Valley Bank’s Wine Division
2

3. Trends: Exports in Volume 2008–2014 (in Mhls)
Source: OIV 3

4. Worldwide Production vs Consumption (in Mhls)
Source: OIV 4

5. Trends: New Customers 2000–2014
Source: OIV 5

6. U.S. Wine Consumption by Volume
Source: California Wine Institute 6

7. Segment Performance in Table Wine
Nielsen Beverage
52 weeks 12-5-2015
$ Vol
Table Wine
$ Share
Table Wine
$ Shr Chg
Case Vol
Table Wine
Case Share
Table Wine
Case Shr
Chg
TOTAL TABLE WINE 13,226,095,260 100.0 - 159,757,531 100.0 -
TTL GLOBAL TBL BE 0-2.99 828,850,252 6.3 (0.4) 28,594,622 17.9 (1.2)
TTL GLOBAL TBL BE 3-5.99 4,041,378,691 30.6 (1.3) 68,618,309 43.0 (0.5)
TTL GLOBAL TBL BE 6-8.99 1,681,255,025 12.7 (0.9) 18,602,352 11.6 (0.4)
TTL GLOBAL TBL BE 9-11.99 3,049,547,575 23.1 0.7 25,347,167 15.9 0.9
TTL GLOBAL TBL BE 12-14.99 1,773,554,251 13.4 0.9 11,277,079 7.1 0.7
TTL GLOBAL TBL BE 15-19.99 991,226,591 7.5 0.7 4,759,017 3.0 0.3
TTL GLOBAL TBL BE >20 853,289,202 6.5 0.3 2,507,566 1.6 0.1
Source: Nielsen Beverage Group
7

8. Imported Bulk Wine to U.S.
Source: 2015 Annual Wine Conditions Survey | November 30, 2015 8
0
50
100
150
200
250
300
350
2009 2010 2011 2012 2013 2014
Top Countries by Volume
Chile New Zealand Australia Argentina Italy
MillionsofHectoliters

9. Shortfall in U.S. Production vs U.S. Consumption
9
Source: OIV.

10. Demographic Demand by Price Point
Source: 2015 Annual Wine Conditions Survey | November 30, 2015 10

11. YOY Changes in Cohort Purchase Share
Source: 2015 Annual Wine Conditions Survey | November 30, 2015 11

12. Premium Varietal Growth By Price Segment
Source: 2015 Annual Wine Conditions Survey | November 30, 2015 12

13. Generational Shape of U.S. Net Household Wealth
Source: Deloitte Center for Financial Services, Nov. 9th, 2015 13
Millennials will never move out!

14. Owner Price Projections:
Five-Year Survey Comparison
Source: 2015 Annual Wine Conditions Survey | November 30, 2015 14

15. 2015 Retail Price Projections by Production Size
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
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
Decrease Prices Hold Prices Increase Price
15
Source: 2016 Annual Wine Conditions Survey | November 30, 2015

16. 30%
23%
39%
4%
5%
Tasting Room
Wine Club
Wholesale
Export
Other
Wine Club
Wholesale
Percentage of Total Sales by Distribution Channel
DtC is Critical for Success
16
Source: 2016 Annual Wine Conditions Survey | November 30, 2015
Tasting Room
Almost 60% of the
Average Winery's
sales are direct
today.

17. Summary Findings
• Sales growth in fine wine in the range of 9%-13%.
• Imports will gain U.S. market share in bottled wine
• Low priced generic/jug wine, dying/dead
• Drop in per-capita and total domestic wine consumption temporarily.
• Large wine companies will continue to buy premium brands and
property.
• DtC still with strong growth but threatened with local regs
• Modest bottle price increases expected this year in fine wine
17

18. Forecast Changes in U.S. Cohort Purchase Share
(Fine Wine)
Source: 2015 Annual Wine Conditions Survey | November 30, 2015 18
12%
46%
27%
16%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Gen Z Millenial Gen X Boomers Matures
2015-2035
2015 2025 2035

19. Total Growth Rates of CA Regions
Source: Correia Company, CASS Grape Acreage Report 19

20. Napa Total Acreage
Source: Correia Company, CASS Grape Acreage Report 20

21. Napa County Vineyard
Source: Correia Company, 21

22. District 13 Fresno—Madera
Source: Correia Company 22

23. California Bulk Wine Inventory 2015
Source: Ciatti Brokerage 23

24. Direct-to-Consumer Shipments
Source: ShipCompliant, Wines & Vines 24

25. Financial Performance of Premium Wineries
25Source:SVB Peer Group Analysis Platform
12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 9/30/2014 9/30/2015
Gross Margin 54.5% 57.1% 55.3% 52.4% 53.7% 53.2% 53.4% 54.8% 56.8% 54.4% 56.1%
Sales Growth 21.2% 22.3% 2.0% -3.8% 10.8% 12.2% 7.7% 9.2% 11.9% 8.2% 10.7%
Pretax Profit 11.3% 16.3% 9.5% 2.2% 6.7% 6.1% 6.9% 6.6% 8.0% 5.7% 7.8%
45.0%
47.0%
49.0%
51.0%
53.0%
55.0%
57.0%
59.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
GrossMargin
SalesGrowthandPretaxProfit

26. Relative Magnitude of 2015 Harvest Quality
 Despite lower yields overall, all major wine regions reported “above average” or “excellent” harvest quality in 2015.
8.57
8.13
8.03
7.97
7.87
7.78
7.74
7.62
7.56
7.44
7.42
7.34
7.00
1 2 3 4 5 6 7 8 9
Oregon
Mid-Coastal, CA
Sonoma County, CA
Napa County, CA
2015 Average
Santa Barbara & San Luis Obispo, CA
Virginia
Sierra Foothills, CA
Washington State
Lodi & Other Delta Counties, CA
Paso Robles, CA
Other
Anderson Valley & Mendocino County, CA
1 = Historical Low 5 = Historical Average 9 = Historical High
26Source: 2016 Annual Wine Conditions Survey | November 30, 2015

27. Relative Magnitude of 2015 Harvest Yield
7.80
5.81
4.77
4.34
3.55
3.00
3.00
2.85
2.62
2.60
2.56
1.63
1.58
1 2 3 4 5 6 7 8 9
Oregon
Virginia
Washington State
Other
2015 Average
Lodi & Other Delta Counties, CA
Anderson Valley & Mendocino County, CA
Sierra Foothills, CA
Napa County, CA
Sonoma County, CA
Santa Barbara & San Luis Obispo, CA
Mid-Coastal, CA
Paso Robles, CA
1 = Historical Low 5 = Historical Average 9 = Historical High
27Source: 2016 Annual Wine Conditions Survey | November 30, 2015

28. Changing Landscape
2010 vs. Now…..
• Bearing Acreage (Up 10%)
• 500,000 to 550,000.
• Yield (up 5%)
• Average 2006-2010 - 6.8 tons/acre.
• Average 2011-2015 - 7.2 tons/acre.
• Imports (up 15%)
• 2006-2010 import average - 99M cases annually,
• 2011-2015 import average - 114M cases annually.
• Strength of US Dollar – DXY Index (up 25%)
• At end of 2010 was +/-80
• At end of 2015 was +/-100
Source: Allied Grape Growers. All rights reserved

29. Production Capability…..
2009 3,703,031 490,000 7.56
2010 3,588,985 500,000 7.18
2011 3,342,689 510,000 6.55
2012 4,018,237 525,000 7.65
2013 4,244,891 540,000 7.86
2014 3,894,397 550,000 7.08
2015 3,700,000 555,000 6.67
2016* 4,141,450 565,000 7.33
2017* 4,202,560 571,000 7.36
2018* 4,255,000 575,000 7.40
Average per acre yield from 2009-2014: 7.31
*2016-2018 assume approx 1% coastal & 6% interior attrition rates
Crop Year
Winegrape Tons
Crushed or
Estimated
AGG Estimated
Bearing
Winegrape Acres
Estimated
Average
Winegrape Yield
Source: Allied Grape Growers. All rights reserved

30. Over the Hump…..
Source: Allied Grape Growers. All rights reserved

31. Evolving Acreage
Base.....
Source: Allied Grape Growers. All rights reserved

32. What’s Hot, What’s Not….
Source: Allied Grape Growers. All rights reserved

33. Leading Varietals Planted….
•2015
•Cabernet Sauvignon - 31%
•Pinot Grigio – 17%
•Pinot Noir – 15%
•Chardonnay – 13%
•2014
•Cabernet Sauvignon - 29%
•Chardonnay – 17%
•Pinot Grigio – 12%
•Pinot Noir – 12%
•2013
•Cabernet Sauvignon - 29%
•Chardonnay – 14%
•Pinot Noir – 13%
•Zinfandel – 10%
Source: Allied Grape Growers. All rights reserved