The Outlook for Table Grapes and Stone Fruit Agribusiness Management Conference Fresno, California October 31, 2002 Objectives Driving factors - Table grapes and stone fruit Production situation - California and Chile Bearing acreage trends Production trends Import/export markets Selected variety trends - California and Chile Outlook The WestMark Group 2 Driving Factors Pace of change - Global business environment Need for product differentiation - Avoid commoditization Consumer preference(s) - Variety, taste, appearance Retail consolidation = Greater buyer power Tough foreign competition (Chile, Mexico, China) The WestMark Group 3 Bearing Acreage Trends Source: CDFA; California Table Grape Commission California Table Grape Bearing Acreage Source: CDFA The WestMark Group 5 Bearing acreage summary Modest growth in stone fruit except plums over past decade Table grape acreage grew at a slower pace than stone fruit over past 10 years California stone fruit acreage - Flat past 5 years - + 112,000 acres Table grape bearing acreage increased 10% over past 5 years - + 87,000 acres The WestMark Group 6 Tree Fruit Production (boxes) Source: California Tree Fruit Agreement The WestMark Group 7 California Table Grape Production (21# Cartons) Source: Calif. Table Grape Commission The WestMark Group 8 Chilean Table Grape Production (000’s of boxes) Source: Eximfruit The WestMark Group 9 Production Issues GWSS remains a threat to table grapes Weather problems and soft prices plagued the 2001 table grape crop in Calif. Price volatility is a significant factor Significant increases in costs Energy Workmen’s compensation insurance Labor - Mandatory mediation law The WestMark Group 10 U. S. Table Grape Supply Source: California Table Grape Commission The WestMark Group 11 Import/Export Issues Chilean imports continue to be a major factor in the U. S. market (Chile supplies about 33% of total U. S. market) Total 2001-02 Chilean shipments to U. S. were about 15% higher than prior year Early season Chilean prices were strong End of season Chilean prices weaker due to weather problems and large supplies Mexican table grape imports are a growing competitive factor for Coachella growers The WestMark Group 12 Import/Export Issues (cont.) Port labor strike significantly interrupted table grape exports (Asia is a significant market) Impact of West Coast port has not been fully quantified Mainland China supplying some Red Globes to Hong Kong (depressing price effect despite lower qualities) The WestMark Group 13 Selected Variety Trends - Calif. 21# Cartons Source: CDFA; California Table Grape Commission The WestMark Group 14 Selected Variety Trends - Chile 000’s of 8.2k boxes; Source: Eximfruit The WestMark Group 15 Outlook American eating habits boost fresh fruit Increased emphasis on health “5 a day” Per capital consumption of fresh fruit and vegetables has increased 20% since 1970 Domestic table grapes movement and prices have been sluggish since late July West Coast port shutdown have disrupted key exports to the Far East - Full impact not quantified Unseasonably large supplies of table grapes in storage The WestMark Group 16 Outlook (cont.) Price differentials between large, vertically integrated producers and small producers are widening (marketing power, relationship with major retailers) Small producers with high quality can achieve good returns if they develop strategic alliances with large organizations that possess marketing power China represents an increasing competitive threat for some export varieties The WestMark Group 17 Outlook (cont.) Outlook for some varieties is gloomy (Red Globes) Plantings to match production to demand and timing Stone fruit - later varieties = higher production Table grapes - Crimson - Late season red seedless (has substantially replaced ruby seedless) The WestMark Group 18 Outlook (cont.) Liquidity, good capitalization, and lack of significant dependence on borrowed capital is critical Quality, marketing power, vertical integration, use of technology, and excellent management are keys to success The WestMark Group 19 Thank You! Mark W. Burrell Managing Partner The WestMark Group Bakersfield, Calif.