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Silicon Valley Bank Projects Bright Wine Future in 2011-2012 Report

Silicon Valley Bank (SVB) is projecting a bright future for the wine industry in its 2011-2012 “State of the Wine Industry” report presented online April 27 by Rob McMillan, Executive Vice President & Founder, SVB Wine Division.

Also speaking at the seminar was Vintank Chief Strategy Officer Paul Mabray, who offer the gathering his perspective on the digital outlook for wine.

“We believe we are at the beginning of another long-term steady growth pattern in fine wine sales,” said McMillan.

Highlights of the report (available in its entirety here):

Predictions for 2011-2012

  • Growth in luxury goods will outpace the rest of the economy
  • Trading up trend will accelerate in higher priced wine
  • Marginally improved pricing power at the producer level
  • Boomers and Gen X will support most of the fine wine recovery
  • Improving restaurant sales, specifically in full-serve restaurants
  • Producer level inventory closer to balanced than most seem to think
  • Shifting threats to the legal landscape for direct shipping
  • Flat or declining pricing on grape contracts except in best properties
  • Sales growth of 11% -15% with marginally improving profits
  • Slowly improving economy, but several issues that hold back prediction of a rapid return to the good old days.

Factors Leading To The Conclusions

  • Trading-down will end but profitability will be impacted
  • “L” shaped recovery
  • 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
  • Discounting into Q3 2010
  • Sales growth in the 8% -12% range overall for Fine Wine
  • Government Still Spending on Stimulus
  • Factories Producing More
  • Consumers Spending More –Going Out More
  • Companies Hiring More –Unemployment dropping
  • Retail Sales Improving
  • Stability of the Tax System/Rates
  • Improved Consumer and Business Sentiment … But
  • Huge Unknowns in Macro and National Economies, Geo-Political Risk, and Securitizations
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