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What Fred Franzia Said Tuesday That Shook Up His Unified Symposium Audience

Keynote speeches at the Unified Wine Industry Symposium are usually benign recitations of mostly known facts delivered in a polite tone resembling a British tea party with pastries and cute cakes. I’ve never see a speech get the whole Symposium buzzing.

But Bronco Wine Company CEO Fred Franzia’s speech hit the audience like a ton of bricks that had everyone buzzing:”Did you hear what Fred said? OMG! He took on everybody!”

Today’s issue of News Fetch had a link to one article about the speech: Two Billion-Buck Chuck

But there is nothing like getting the word directly.

The following is the text of Franzia’s speech. It’s not everything he said, but offers a glimpse at what got people talking. Read through the history/context to get to his toughest points.

 

 

TABLE OF CONTENTS

I.

Thank you

II.

California Wine Grape Growing History

A.

Wild Grapevines

B.

Father Junipero Serra

C.

Haraszthy Family

D.

My Grandfather, Giuseppe Franzia

III.

Wine Industry After Prohibition – 21st Amendment

IV.

People You Meet

V.

U. S. Wine Companies

A.

Pre Prohibition

B.

Post Prohibition

C.

Family Wine Business

1. Seghesio Family
2. Robert Mondavi Family 3. Louis Petri – Petri Family

VI.

Bronco

VII.

Where Is The Wine and Grape Industry Going?

A.

California Grape Growing

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B.

Appellations

D.

Sales Growth Forecast

D.

Vineyards of California (San Joaquin Valley)

E.

Drip Irrigation

VIII.

Research Money

IX.

What Issues Will Be Important In The Future?

A.

New packaging for Wines Such as a “Helix Bottle” and Amorim Cork

B.

Farm Labor (Lupe, Sandoval, 916/505-0946

C.

Mediterranean Diet Will Continue to be Important

D.

Inheritance Tax. This is a unified battleground we should oppose.

X.

Buy, Buy, Buy – Major Consolidation at all Levels of Three (3) Tiers

1.

Wineries

2.

Distributors

3.

Chain Stores – Retail Stores, Restaurants and Chain Stores

X.

Conclusion

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2016 UNIFIED WINE AND GRAPE SYMPOSIUM January 26, 2016 – 12:30 p.m.

First of all, I would like to thank John Aguirre and the Unified Wine and Grape Symposium for inviting me to speak. I would like to thank (Bill Pauli) you for coming and I intend to share my opinion on a range of topics.

II. CALIFORNIA WINE GRAPE GROWING HISTORY

Wild grapevines have been growing in California long before California was California. As most of you are aware, the 99 Highway heading south from Kern County to Los Angeles is called the “Grapevine”. The Grape Vine Creek coming off the Tehachapi Mountains flows into the San Joaquin Valley through our vineyards at 850 feet above sea level. Therefore, we will make the claim that the San Joaquin Valley was the origin of grapevines in California.

Father Junipero Serra is celebrated in California history as the man who led the construction of 21 missions along the California coast and in 1769 (over 247 years ago) introduced grapevines to the Missions.

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Haraszthy Family has been making California wines for six generations. General Vallejo founded Sonoma in 1835 and was the town’s first award winning winemaker. Agoston Haraszthy built California’s first commercial winery in 1857 and imported vast selections of European wine cuttings to America in 1861, over 159 years ago. Val Haraszthy, 5th generation, is actively selling his Haraszthy brand in the marketplace today.

My grandfather, Giuseppe Franzia. In May of 1893, 22-year-old Giuseppe Franzia (a legal immigrant) sailed from Genoa, Italy to Ellis Island in New York Harbor over 114 years ago. He continued by rail to San Francisco where he worked in the truck gardens. A year later, he moved to the Stockton area where he farmed rented land near the intersection of Highway 99 and Foppiano Lane. He married Teresa Carrara on July 7, 1900, after she arrived from Italy and the first of their eight children was born in 1901. In 1906 they purchased 80 acres near Ripon and, in 1912, the family moved their belongings by railroad flatcar to their new home. My father Joseph was born in there in 1912. Giuseppe made wine for his own use and in 1915 began what we could call commercial production of Franzia wines.

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The 18th Amendment in 1920, the beginning of Prohibition, ended Giuseppe’s first adventure in winemaking in the United States, but my grandfather continued as a grape grower and was shipping grapes to home winemakers in Chicago.

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III. WINE INDUSTRY AFTER PROHIBITION – 21ST AMENDMENT

The historic event repealing the 18th Amendment by the 21st Amendment was a major event in the evolution of wine in America. Without the pioneering and adventurous wine families that started their companies in 1933, the California wine industry would not be where we are today. Our family started over in 1933 and helped rebuild the San Joaquin Valley wine industry. The emergence of the American Wine Community following the DARK AGES OF NATIONAL PROHIBITION IS ONE OF OUR COUNTRY’S GREAT STORIES OF COMPETITIVE FREE ENTERPRISE. Today, eighty-three (83) years after the repeal of Prohibition, some states continue to shackle the wine trade.

All of us, growers and wineries, participate in the wine industry created by forward thinking, hard-working individuals that have prevailed over major obstacles.

  1. Prohibition of wine sales – 1918 – 1933.
  2. The Great Depression.
  3. The Wine Institute began in 1937 to help create a better platform to sell andpromote California wines. The Wine Institute’s mission “is to initiate and advocate public policy that enhances the ability to responsibly produce, promote and enjoy wine”. Image.

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  1. World War II. Bringing soldiers home from Europe with a taste for table wine.
  2. Much improved table winemaking skills and knowledge began in the 1950’s – 1970’s and beyond that led to better quality table wines being produced in California.

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IV. PEOPLE YOU MEET

The most interesting part of our wine and grape business is the variety of people you engage. You meet grape growers, winery owners, wholesalers, retailers, consumers and winery suppliers. Of course, the most interesting people are the grape growers: always strongly opinionated and always believe that their grapes are the best ones you will receive and that you should pay more money for their grapes.

Some interesting people that I enjoyed discussing wine business with are no longer here.

  1. Peter Seghesio – grape grower – bulk wine sales specialist.
  2. Robert Mondavi – the Master Talker and opinionated with tremendousforesight and belief in all California wines.
  3. August Sebastiani – the best down to earth winery owner. Called them theway he saw it.
  4. Ernest Gallo – one of a kind. Asked more questions and had moreknowledge of the wine business than anyone. A builder.
  5. Marvin Sands – also one of a kind. A buyer.
  6. Justin Meyer – truth about researchers at Davis, et al. and research ingeneral.

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7. Carl Wente – Good communicator and image maker for California wines. 8. Jack Welch – Export, business specialist and a very good mentor.
9. Harvey Posert – Public Relations expert – the dark side of the moon.

Others are still with us and I continue to learn from John DeLuca, Dick Peterson, Rudy Maggio, Charlie Mosesian, Arnold Cattani and the grape expert Ralph Pistoresi.

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V. U. S. WINE COMPANIES

A. PRE PROHIBITION

Founded

Korbel – Heck Brothers. My good friend Gary Heck is now leading this fine champagne and brandy operation.

1882

Wente Vineyards – Still going strong. Many generations in Livermore.

1883

Delicato Family Vineyards – Sam Jasper. Still going strong. Great strides in the last ten years to become a major branded table wine supplier.

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E & J Gallo Winery – Founded by Ernest and Julio Gallo and now being successfully managed by their sons Joe and Bob. Gallo Winery has truly led the California Wine Industry to the successful position we are all in today.

1933

Franzia Brand. Sons of Giuseppe and Teresa Franzia. Private, eventually to public held company and brought out by Cola Bottling of New York in 1973. Owned today by The Wine Group, 1981.

1933

Louis Martini Winery – now owned by Gallo.

1933

B. POST PROHIBITION

Ste. Michelle Wine Estates – Washington State’s largest producer. Innovator of Washington wines and a solid industry participant.

1934

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C. K. Mondavi Family Vineyards – Peter Mondavi (101 years old) and sons Peter and Marc. Still moving forward on solid ground. Immigrated from Lodi to Napa.

1941

Constellation Brands. Marvin Sands buys Canandaigua Industries in 1945. This powerhouse organization was started by Marvin Sands and with organic growth and strategic, timely acquisitions orchestrated by sons Richard and Robert who now have created a monster beverage company. Wall Street sure loves this stock!

1945

Trinchero Family Estates – Rob, Vera and Roger Trinchero. Tremendous growth. Very successful family business. Successful introduction of White Zinfandel has created a huge state-of-the-art new wine complex in Lodi, San Joaquin Valley. St. Helena to Lodi – the new trend.

1948

Wagner Family of Wine – Caymus Winery. A great family legacy. Innovators and still growing brands.

1972

Bronco Wine Company. All family founders are still active, but our starting point was 1973.

1973

J. Lohr Vineyards and Wines. Jerry Lohr is an outstanding innovator and strong industry leader, as well as a pioneer in the Paso Robles region.

1974

Francis Ford Coppola Winery. Another great innovator that has grown successful wineries in both Napa and Sonoma Counties.

1975

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Rancho Sisquoc Winery. Founded in 1977. Large ranch in Santa Maria Valley owned by Flood Family growing unique wines.

1977

Bogle Vineyards. Three generations. I have known all three Warren Bogles and Number III’s mother Patty. This Delta grape growing pioneer has grown to a two million case winery. Warren Bogle III is very successful grower and the family winery continues to build a strong brand.

1979

The Wine Group – Well managed and globally integrated wine supply company. More later.

1981

Jackson Family Wines. Very successful grower and brand building winery. Developing wineries and vineyards in many countries and states outside California.

1982

Treasury Wine Estates. Public owned stock. A major positive development in buying Diageo! Look for TWE to continue to be a major factor in the U. S. as it continues to build its international wine business.

2011

C. FAMILY WINE BUSINESS

Some traditional wine families have sold their legacy to corporate buyers and moved on.

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1. Seghesio Family – over 100 years. Peter Seghesio was a great wine man. Family history predates Prohibition. Once owned by Italian Swiss Colony – Asti Properties.

2. Robert Mondavi Family sold the namesake winery. Original Robert Mondavi Winery founded in 1966 by Robert and his son Michael. Robert Mondavi went to Lodi High School in the San Joaquin Valley. Robert and I toured 62 wineries in three countries in Europe in three weeks in 1972 and

had a great time. Robert was definitely one of a kind and a special advocate for California Wines.

3. Louis Petri – Petri Family. Louis Petri was born in 1913 and eventually joined his father and grandfather in growing the Petri Company, starting at 4,000 gallons in Escalon. Petri Wine Company, at one time bigger than Gallo, morphed into Allied Grape Growers, eventually became United Vintners and was purchased by Heublein.

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On July 15, 2003, Bronco purchased the Escalon winery from Constellation and renamed the winery Barrel Ten Quarter Circle Land Company – Escalon Cellars, Escalon, California.

Recently, our good friends at The Wine Group have allowed us to acquire the Petri trademark. Therefore, in memory of Louis Petri and his family’s legacy work in our great California Wine Industry, we are returning the name Petri Wine Company to the Escalon Winery.

My partners and I would like to thank The Wine Group for allowing us to acquire the Petri Wine Company trademark and to rename our Escalon Winery!

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VI. BRONCO

When we started Bronco our goal was to sell wine. At that time we never thought much about grape growing opportunities. During the seventies, Bronco operated as a large scale negociant.

In 1976 we entered into a joint venture with Getty Oil to build a crushing facility in Fresno and utilized Getty vineyard holdings as our primary source of grape supply. When Getty Oil sold out to Texaco, our grape Supply Agreement with Getty changed. This is when Bronco began to acquire vineyards or abandoned almond orchards. For those of you that do not remember, in the 1980s, there was an overplanting of grapes and almonds in the San Joaquin Valley. Fast forward 30 years later and we now see almonds again being grossly overplanted.

Some wine grape growers in California’s San Joaquin Valley are learning a tough economics lesson, causing them to pull out vines that are not economical to grow and are not in demand by wineries.

I predict today’s over-valued land prices are heading south and will be substantially lower in the next five to ten years. The grape market will continue to

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remain strong for the right varieties as sales will be steadily growing and there will be no rush to overplant grapes without a contract.

My partners and I are strong believers in free market competition, consumer choice and offering our customer very competitive prices on good quality varietal wines. To increase growth, we still believe that every restaurant should offer a $10.00 bottle of wine, in addition to other high priced wines and let their customers decide what to buy. Our company opposes government subsidies, including getting government money for research.

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VII. WHERE IS THE WINE AND GRAPE INDUSTRY GOING?
A. CALIFORNIAGRAPEGROWING
To my fellow California Grape Growers, why do you think that most wineries, including ourselves, have gotten into the grape supply business? Each grower deserves to make his or her land productive by planting the right grape variety and to grow these grapes more efficiently through use of drip irrigation.

Our company buys over 50% of our grape supply base from non-related growers. We have been buying grapes for many, many years from the same growers. This basic grower/winery relationship is built on trust and respect for each other’s independence. Over 85% of our growers sell grapes to us with no written contract. If the independent grower is not satisfied with our company, the grower is free to go elsewhere the following year without any contractual obligation.

Our family is a strong believer in free markets, competition and consumer choices. Bronco’s ability to adjust grape supply sourcing from our own vineyards is one of the reasons we have been successful in growing our wineries. Bronco will graft their vineyards – 1,000 to 1,500 acres – per year to get the necessary supply aligned to what is in demand.

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Our grandfather started as a grape grower over 110 years ago and my partners and I believe our San Joaquin Valley grapes are the most rewarding part of our company. Mr. McMillan, working for a coastal bank that makes loans to high end

wine producers may be crying wolf too loud about the San Joaquin Valley. If he has not noticed, it is the San Joaquin based and sourced wineries that are buying the coastal wineries. I will stand on our belief and not be misled by Mr. McMillan’s doom and gloom.

Now I see Allied Grape Growers Industry Winter Update saying more grapes should be removed from the San Joaquin Valley. We all know what Allied’s hidden agenda seems to be. The truth is we should be planting more better quality grapes and grow these grapes more efficiently in the San Joaquin Valley to attack the 40% of the wine market now being supplied by non-California foreign wines.

B. APPELLATIONS

There are now over 4,000 bonded wineries in California. Therefore, CALIFORNIA should be the #1 appellation. However, the appellation addicts

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have engineered over 90 different appellations in California. In my opinion, the appellation system caused the downfall of French wines and will do the same in California. California should be the one and only appellation to promote our home grown best quality wines.

C. SALES GROWTH FORECAST

Three major events occurred in the mid 60’s that have helped to accelerate sales growth.

  1. Table Wine sales exceeded Dessert Wine for the first time in the U. S. Market.
  2. Drip Irrigation was offered for sale for the first time.
  3. Sales of better produced Table Wine started to accelerate sales in themarketplace.

In 1967 Table Wine sales (36,900,000 million cases) exceeded Desert Wine sales for the first time. Today, fifty (50) years later, US sales of Table Wine exceed 327,000,000 cases.

My good friend Mel Dick of Southern Wine and Spirits stated the following: “The United States consumes 327 million cases a year. If the US drank (per capita) as

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much as the United Kingdom, instead of consuming 327 million cases, it would be 740 million cases per year. If we drank as much as France, per capita, we would be 1.6 billion cases.

My prediction is we will be selling over 1 billion cases of Table wine by 2040!

D. VINEYARDS OF CALIFORNIA (SAN JOAQUIN VALLEY)

The San Joaquin Valley has been and will be the major source of grapes to produce highest quality California table wines. Even though some Lodi growers want to secede from the San Joaquin Valley the facts are they send their property tax to the San Joaquin County Tax Assessor and therefore Lodi growers are included in the San Joaquin Valley whether they like it or not.

The San Joaquin Valley is the nation’s most productive agriculture region that relies mainly on groundwater to irrigate their crops. Each grower who owns land is already ahead of the game. The land-owning grower must efficiently grow the correct varietal grapes that are in demand in today’s market.
Only the San Joaquin Valley has the infrastructure to grow, process and supply the billions of gallons of high quality wines that will be necessary to supply the

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demand side. Speaking of the future, we believe it will be very bright for the California grape grower, especially in the San Joaquin Valley.
E. DRIP IRRIGATION BEGAN IN ISRAEL

The best of times and the worst of times are being caused by drip irrigation improving methods.

Simcha Blass in Israel invented drip irrigation while he was semi-retired. Israel is mostly a desert which forced special attention to preserving water long before California is finding it also necessary to conserve and make better decisions regarding our water resources. Water conservation is a way of life for the citizens of Israel.

While visiting a farm in Israel to supervise the drilling of a well, Blass had noticed an anomaly in a row of trees planted along a fence; one was much taller than the others. Blass knew that they were all of the same species, likely planted at the same time, and they all had the same soil, sun, climate and rainfall. Why, Blass wondered, was that one tree in the grow growing so robustly?

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Walking around the tree, Blass found a tiny leak in a metal irrigation pipe near the base. He suspected that these small, but steady drops of water were going to the tree’s roots and were the likely cause of its superior growth. The image of that tree stayed with him. Blass decided to explore whether that one outsized tree was an oddity or the precursor to a completely new way or irrigating trees and field crops.

Irrigating grapevines or trees drop by drop limits evaporation and delivers the water that the plant needs directly at its roots. The water savings with drip irrigation are significant – only four percent of the water is lost to evaporation or unnecessary absorption into the soil.

During World War II, there had been a revolution in material science. Plastic began to be used as a substitute for traditional materials like metal and glass. Plastic could not only serve as an inexpensive substitute for metal pipes, but it could be molded in very precise dimensions down to a fraction of a millimeter.

Drip Irrigation I-A was born.

On average, drip irrigation saved fifty to sixty percent of the water customarily used.

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BUT THE SECOND DISCOVERY WOULD PROVE TO BE EVEN MORE IMPORTANT THAN THE AMOUNT OF WATER IT SAVED: IN EVERY EXPERIMENT BLASS CONDUCTED, THE YIELD FROM THE CROPS WATERED WITH DRIP IRRIGATION WAS HIGHER THAN WITH OTHER KNOWN IRRIGATION TECHNIQUES. IT WAS AN INVENTION WITH THE POTENTIAL TO CHANGE THE WORLD OF AGRICULTURE.

On California’s 7.54 million irrigated acres, drip and micro systems are used today on less than 40% (36.9%) of the acres. Gravity (flood irrigation) is used on 60.2% of acres. Flood irrigation is an area that needs to be greatly reduced.

If you or any grape grower is not using drip as your water delivery system, you are wasting over 50% of your water resource and only getting 60% of the productivity you could achieve with drip.

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VIII. RESEARCH MONEY

Our company has been a long-time supporter of the voluntary American Vineyard Foundation. Fresno State University, in the heart of the San Joaquin Valley, has recently and finally seen some turnover, which gives the school an opportunity to hire new faculty and create a great practical Viticulture and Enology Department that can be responsive to the industry needs.

Even though, the two best research discoveries that I am aware in the last fifty (50) years are drip irrigation and the discovery and development of the Tehachapi Clone Pinot Grigio! Neither one was accomplished by a self- appointed University Ph.D. research team, but by normal farmers being observant. Our Charles Shaw Tehachapi Clone Pinot Grigio was recently awarded a DOUBLE GOLD at the recent San Francisco Chronicle Wine Competition.

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While our company has been a strong supporter of voluntary funding for research and the work of the American Vineyard Foundation, we have been very disappointed paying mandated money for government managed projects such as Pierce’s Disease (PD)/Glassy-Winged Sharpshooter. I wonder what Justin Meyer would say about the $600,000,000 of Federal money and California growers’ mandatory assessment that has been spent by this Glassy-Winged Sharpshooter Board. Our own company has spent over $2,000,000 on the Glassy-Winged Sharpshooter and I personally consider it a major misuse of mandated tax funds that has not been productive and/or solved the problem. Basically, a waste of money!

Our company owns over 25 square miles of vineyards in Kern County. We have never seen or trapped a Glassy-Winged Sharpshooter on our vineyards in twenty five (25) years of ownership. Obviously, Napa and Sonoma Counties are more conducive to incubating diseases than any other California grape growing area, but still want the rest of the California growers to pay for their research.

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IX. WHAT ISSUES WILL BE IMPORTANT IN THE FUTURE?

A. NEW PACKAGING FOR WINES SUCH AS A “HELIX BOTTLE” AND AMORIM CORK

If you have time, you should meet Steve Kemiji at “Amorim Cork America” to review the new Helix bottle and cork to see the direction our industry may be heading reference packaging. We will be introducing this Helix packaging on our Red Truck brand Red Table Wine. A very interesting and novel approach that has the advantage of a screw cap and the romance of a cork. Other new ideas will emerge and the market will change and adapt.

B. FARM LABOR (Lupe Sandoval, 916/505-0946)

Our company believes every grower should be a strong supporter of the “California Farm Labor Contractor Association” headed up by Managing Director Guadalupe Sandoval, to represent the best interest of the growers in farm labor and regulations that still keep cropping up. The ALRB Board is no friend to the California grape grower. The UFW is no friend of the California grape grower. My hat’s off to the Gerawan Family. The recent decision the Gerawan Family

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Company getting out of the table grape business. The message is you cannot force a company to subsidize a higher cost work force at the expense of their bottom line. It sure makes it appear that today’s California legislature is against the land owner farmer.

C. MEDITERRANEAN DIET WILL CONTINUE TO BE IMPORTANT

“ Following publication in the Reader’s Digest , September 1986 ,of the article “ The Ancient Secrets of Modern Nutrition” by the husband and wife team Carol and Malcolm McConnell, Wine Institute played a key “behind the scenes” coalition role in providing major funding and research assistance in commissioning the publication of the Mediterranean Diet book , “ Wine, Pasta, Olive Oil and a Long , Healthy Life” in 1987. /////
Collaborating with the New York Oldways Preservation Group and the Center for Nutrition at Harvard University Wine Institute privately hosted numerous media lunches across the country with the McConnells promoting the Mediterranean Diet for seven years leading to the adoption by the World Health Center in 1994.( In fact, two years ago John De Luca gifted to the Smithsonian American History Museum an original Diet Pyramid, featuring wine in the Smithsonian Wine and

Food Exhibit, that he kept in his private wine cellar all these years.) The

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significance for the vitality of the wine community, now and into the future, of the historic emphasis on the Mediterranean Diet by leading health officials and journals and newsletters, cannot be overstated. Major inclusion of moderate wine consumption in research findings stating the positive effects of fighting cardiovascular disease, diabetes, alzheimers, and just recently breast cancer have resulted in wine being put in the nutrition column away from disparaging attacks against “booze”, “sin taxes” “gateway drugs like heroin and cocaine” which besieged our wineries and growers in the 1990s attempts to cripple our communities with statewide and federal” sin taxes “ like the” nickel a drink campaigns and dimes against crimes”. In the internal debate at

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Wine Institute on how to respond to the dramatic attacks by anti-alcohol groups: whether to prepare for tobacco style litigation and legislation or very expensive

and doubtful public relations campaigns. The Board joined others on the side of supporting scientific research such as the Mediterranean Diet which clearly was the right choice and sustains our consumer attraction and positive views for our future growth and positive expansion for our wineries and growers alike.”

D. INHERITANCE TAX. THIS IS A UNIFIED BATTLEGROUND WE SHOULD OPPOSE.

What would be better for the California Grape Grower that owns vineyard land than “Zero” inheritance tax on their property?!

Now that should be a major goal for The California Association of Wine Growers and The Wine Institute to find common ground to do battle against the tax hungry government legislature!

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Today, if you own a vineyard free and clear with no debt, and you die, the government wants you to buy it back at 35% of their pre-determined fantasy price*. Not the price that you actually paid for the land!

Who dreams up these fantasy prices quoted in this article? “San Joaquin Valley Land prices range from $20,000 to $30,000 an acre”.

This Inheritance Tax burden is very harmful to the long- term well-being of the family Grape Grower and should be opposed by everyone in this room!

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X. BUY, BUY, BUY – MAJOR CONSOLIDATION AT ALL LEVELS OF 3 TIERS

1.

WINERIES

The three (3) largest US wine companies by volume had another banner year in 2015. The strong got stronger and bigger as consolidation of the industry continued. E & J Gallo winery, The Wine Group and Constellation Brands all have acquired more wineries, brands and vineyards.

Gallo now owns 14 wineries in California and Washington.
Constellation buys a craft beer company for $1,000,000,000 – or One Billion Dollars. Invest $1.5 billion into new beer production facility and also buys labels at will such as Meiomi.

DISTRIBUTORS

Larger wholesalers and supermarket chains are consolidating more in the last few years.
Southern pending merger with Glazers.
Wirtz is merging with the Charmer Sunbelt Group to form “Breakthru Beverage Group”.

Who else will be disappearing in the marketplace?

 

2.

 

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3. CHAIN STORES – Retail stores, restaurants and chain stores

 Mergers and acquisitions by Kroger, among others.  Invasion of Lidl and Aldo from Europe.
 Total Wine is emerging as a major player.

On and on it goes. Less competition and tighter channels to sell wine.

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XI. CONCLUSION

Our view of the California Wine and Grape Growing Industry is that the future is full of promise. As I said earlier, we can foresee that the current 327,000,000 cases sold in America will grow to annual sales in excess of 1,000,000,000 cases in America. There will be a need to grow many more California grapes, as well as processing and storage capacity to supply this growth. California produced wines have got to mean more to the American consumer to maximize this growth potential.

Therefore, as a grape grower, your land and what you grow becomes the most important long-term decision you will make. Your vineyards need to be grown more efficiently and become more productive per acre to be cost effective. You will learn to use less water, plant the right variety with the correct rootstock and achieve better production by utilizing drip irrigation more efficiently.

On a personal note, my partners and I want to thank everyone – grape growers, bulk wine and case goods customers and our fellow employees – for helping us grow our business and for the success we have shared. I also especially want to thank our glass, cork and label suppliers and all the equipment manufacturers that have helped us accomplish our success to date.

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One last thought for you today is that some good news you never hear about is how low cost consumer wines continue to make many friends for our California Wine Industry. Charles Shaw has now sold over 1,000,000,000 (one billion) bottles! Thank you Charles Shaw!

All the best to our California Wine Industry!

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