Eleventh Annual Wine Symposium Announces 2002 Preliminary Survey Highlights.

Business Editors/Food & Wine Writers

NAPA, Calif.--(BUSINESS WIRE)--Sept. 12, 2002

Over 300 participants attending this year's Wine Industry Financial Symposium will focus on "Understanding the New Competitive Landscape", at the Napa Valley Marriott on September 17th and 18th. In conjunction with this 11th Annual Symposium, the results of the 2002 Wine Industry Financial Survey entitled, "Strategies for an Increasingly Concentrated Wine Market," will be presented by Robert H. Smiley, Dean of the Graduate School of Management at U.C. Davis.

The highlights from this year's survey indicate that the long-term view of wine industry participants remains positive although sales and profits for the next 1 to 2 years will remain flat. In fact, there are indications that the worst may be over -- the percentage of respondents indicating they expect declines in wine sales has fallen slightly for this year compared to 2001 and the percentages of those expecting three or more years of continued growth has risen by about the same amount. Of this group, wineries are the most optimistic while lenders are the most pessimistic.

The current trends in the wine business, according to the 254 wineries, growers, distributors, wine sellers and other professionals responding to the Survey, appear to be as follows:

OVERALL OUTLOOK FOR FUTURE - Respondents believe that the current flat sales and profits will last 1 to 2 more years with wineries and wine sellers being the most optimistic and growers and lenders being the least optimistic.

PAST 3 YEARS OF GROWTH - As was the case last year, the growth in premium wine sales over the past 3 years was attributed primarily to the strong economy with improved quality and health benefits of wine being next in order of importance. Price value, a new perceived driver of growth, moved into fourth position.

OPPORTUNITIES FOR GROWTH OVER THE NEXT 3 YEARS - Future drivers of growth and profitability are expected to be price/value, expanding consumer base, health benefits and improvements in quality, in their order of preference. Increased advertising and new marketing approaches also are expected to have an impact.

POSITIVE OUTLOOK FOR FUTURE - Over 70% of respondents assume positive growth by 2004, with the figure rising to 90% by 2006; wine sellers and lenders are the most optimistic and growers are the least optimistic.

OUTLOOK BY PRICE SEGMENT - The most positive outlook on growth is anticipated in $10-$14 segment, followed by the $14 -$24 category and then over $25. The least growth is anticipated in the $3-$7 segment, with expectations for the $7-$10 segment to be flat. Wineries much more optimistic about the over $14 segments than are wine sellers.

OUTLOOK BY RED VARIETALS - Over the next 3 years, Syrah followed by Pinot Noir each representing about 4% of the red wine market are expected to show the largest percentage increases, while Cabernet Sauvignon and Merlot, each now representing about 20% of the market, are expected to grow at a slower pace.

OUTLOOK BY WHITE VARIETALS - Over the next 3 years, Pinot Grigio followed by Sauvignon Blanc representing 1% and 5% respectively of the white wine market are expected to have the largest percentage increases, while Chardonnay, which represents over 40% of the market, is expected to grow at a slower pace.

CONTRAINTS TO FUTURE GROWTH - A Continued Down Economy and Global Competition are seen as the biggest possible constraints to future growth, followed by the Consolidation of Distributors and Anti-Alcohol Concerns.

EXPANDING THE CONSUMER BASE - The most popular ways to expand the number of wine consumers are to Make Wine More Fun and Approachable and to offer more Wine Education, followed by Increased Market Research and Lifestyle Related Marketing. The least popular approach was to Expand the Number of Products Offered.

POST 9/11 CONSUMER CHANGES - More wine is being Consumed at Home and is being Purchased at Chains and Club Stores, followed by a perception that wine consumers are More Wine Savvy and more willing to include wine as part of a more Healthy Lifestyle.

OTHER CONSUMER CHANGES IN PAST YEAR - Respondents also said that "younger people" (aged 25-35) are drinking more wine and that "conspicuous consumption" has waned and that many consumers want more inexpensive wines by the glass. By contrast, few respondents believe there is an increasing interest in two-glass servings of wine.

DISTRIBUTOR CONSOLIDATION - Wineries and vineyards see this as great a "constraint" to continued growth as global competition and almost as great a constraint as an economic downturn. Wine sellers saw little concern over the issue. Wine sellers were more concerned about anti-alcohol movements than wineries, vineyards or lenders.

IMPACT OF WINERY/DISTRIBUTOR CONSOLIDATION - Overall, respondents found that the greatest impact on the wine industry will be to increase the importance of marketing as well as encourage global competition and consolidation and reduce grape prices. Comparatively few respondents said distributor consolidation would cause a reduction in quality of wine or reduce wine retail prices. Wholesalers, however, were the most pessimistic when assessing the threats that winery/distributor consolidation will have on quality of wine and grape prices, competition and a retail prices.

Program Speakers on September 18th also include Walt Klenz, managing director of Beringer Blass Wine Estates, who will profile the globalization of U.S.-based Beringer through its merger with Australia's Mildara Blass; Joe Ciatti, President of Joseph W. Ciatti Company; who will assess the challenges of the current grape and bulk wine market; and Robert Hambrecht, managing director, Equity Capital Markets for W.R. Hambrecht & Co., who will examine brands that are successful in "easy times." Presenters on brands include Ted Baseler, President & CEO, Stimson Lane Vineyards & Estates; Jose Fernandez, CEO & President, Pacific Wine Partners; Jerome Lohr, President, J. Lohr Winery; Tom Meyer, VP Global Brand Director, Fetzer Vineyards

Bill Turrentine of Turrentine Wine Brokerage will oversee a presentation by Dennis Carroll, CPA, Principal, Cardinal Red Consulting, entitled, "Maximizing Brand Value through Supply Chain Management." Rich Cartiere, editor/publisher of Wine Market Report, will host a two-part panel that will examine current market conditions through the perspectives and insights of three key wine distributors and then look at consumer behaviors and characteristics as documented by three international analysts.

The program will conclude with a presentation by John Gillespie of the Wine Market Council, who will talk about "new strategies to grow the marketplace," and by Jerry Lohr of J. Lohr Winery will update the latest efforts by WineVision: American Wine in the 21st Century.

Complete copies of the 2002 Survey may be obtained in early October calling Waunice Orchid or Kathryn Archer at the Symposium Office in Napa at 800/927-6272 or 707/255-9222 or FAX [phone].