Another Hand

A controversial tax measure — one provision under discussion in a state budget plan
calls for $8.2 billion in new taxes — is designed to close a loophole for large corporations
and generate $1.1 billion for the state. But small businesses earning less than $5 million
in revenue may suffer the most negative effects.

"Although 80 percent of the total taxes would come from businesses with more that $5 million
in revenues, it is the 20 percent of the total businesses in California that make less than this
that will suffer the most" said Scott Hauge, founder and president of Small Business California,
a business advocacy organization.

Companies in California are permitted to carry forward net operating losses incurred in one year
and use them as deductions against earnings in future years. The proposed budget would suspend
the losses for three years. If a business operates at a loss — often the case with start-ups or
businesses that add employees, expand inventory or upgrade equipment — a business could not
carry over that loss in subsequent years to mitigate the tax burden.

One hellava hand!  Fold and deal again.

  

Tim Johnson
www.CaliforniaBusinessMinute.com

                                                                         
                                  A No Jive Diatribe

                                                    

California Gov. Arnold Schwarzenegger on Thursday ordered the pay for 200,000 state employees
cut to the federal minimum wage of $6.55 an hour and ordered the termination of contracts of about
22,000 independent vendors.

 “We do not have a budget, and as governor, I have a responsibility to make sure our state has
enough money to pay its bills,” said Governor Schwarzenegger. Without a budget in place, the

                                                                
 
Governor says the the state has no authority to pay vendors and contractors for goods and services
chargeable to Fiscal Year 2008-09, or for payroll for legislative staff, appointees, exempt employees and
payroll for other state employees beyond that required by federal labor law. He also says other bills
cannot be paid including:

• Highway User Taxes that are apportioned to the state, cities and counties for highway
  and road improvement projects
• Cal Grants to students in higher education
• Transfers to the Trial Courts
• Transfers to University of California, California State University and Community Colleges
• Transportation Revolving Fund disbursements
• Non-revenue limit school payments
• Payments for non-federally mandated social services programs such as:
 Community Care Licensing, Adult Protective Services, State Only Foster Care; State
 Only Adoptions Assistance and Cash Assistance Program for Immigrants
• Tax relief payments to low-income seniors and disabled persons.

Meanwhile State Controller John Chiang, who actually pays the state’s bills, says he will ignore the order
unless directed by a court. Mr. Chiang says there’s enough money to pay bills through September even
without a budget. The Governor contends the California Supreme Court has granted him the authority to
issue the order.

OK, let’s play this out. If a budget is not passed before September and the money runs out, then the State
will have to borrow.  It will cost money to do that, thus increasing the size of the deficit.

It has been 31 days without a budget. California does not need this lack of inaction. Put party politics aside
and find a compromise and get on with fixing the broken budget system. California’s solons passed a law
this week to rid us of transfats. What we need is less fat in a budget. We have already recalled one governor;
do Californians need to be thinking about recalling the state legislature?  

                                                                   
                                                                        BUDGET GODS

The 'Budget Gods' have shown their cards. There aren't any good ones. Fold - and get on with the business
of running this state. Win, loose or draw, California deserves a better hand.


  
Tim Johnson
www.CaliforniaBusinessMinute.com

                              

Celebrity CEO’s - Under Performers or Over Expectations?

Yet another study has been completed that illustrates that hiring and or retaining celebrity CEO’s are often bad for
the performance of a business. 

The report by two professors from the University of California system - Ulrike Malmendier, associate professor of
economics at UC Berkeley and Geoffrey Tate, assistant professor of finance at UCLA's Anderson School of
Management, studied the performances of celebrity CEOs.

The study theorizes that many CEOs fail to live up to the hype they generate and they tend to under perform once
they reach the top spot.  Intriguing as it may seem at a first glance, a second look might give a better perspective.
Maybe the expectations are too high from the people within the organization, its shareholders and Wall Street types.

According to Malmendier and Tate, the reason they fail to live up to the hype is an example of the mean reversion
model. The model suggests that any award winner performs extraordinarily to win a prize, but cannot maintain
that level of performance year after year.

In the book, Flexible Leadership: Creating Value by Balancing Multiple Challenges and Choices by Richard
Lepsinger, president of OnPoint Consulting and co-author Dr. Gary Yukl, they identify five problems associated
with celebrity leaders.

• Over reliance on the leader to solve all the company's problems
• Exaggerated expectations lead to exaggerated disappointments
• A single CEO misstep can have a catastrophic effect on profits
• Celebrity CEOs are too sheltered to be fast on their feet 
• Employees don't want to be led by a figure on a white horse.

Again fascinating, but even a celebrity CEO knows well enough that in today’s market you cannot afford to
be a flash in the pan. Today’s celebrity CEO hires publicists and advisors that identify opportunities for them,
not just in terms of their role as a CEO but also for their own best interest which means they are looking not
only at their own personal future, but how the company they also lead will catapult them to greater celebrity
status. They recognize that they need to address the mundane tasks of running a business, but their advisors
also identify ways for them to remain within the public eye, for example by leading community and social based
activities that not only give a stage for the celebrity CEO but also places a personable if not a warm side to them
and the often cold view of corporations, specifically the one they lead enhancing it further through their value
added activities.

Malmendier and Tate suggest that increased publicity causes distractions that account for underwhelming
performance. Again, while on the surface it maybe easy for one to agree with this statement, it is hard to fathom
that the celebrity CEO falls to such a level given they possess characteristics of achieving the prize, specifically
if they have signed a performance based contract.  And maybe that is the problem; the organization was so star
struck, it did not sign a performance based contract. So, who is to blame for the failure?

Lepsinger and Yukl believe that companies need to realize that effective leadership is not about glitz, glamour,
and charisma; it's about results. "Real world" CEOs must have the flexibility to respond to continually changing
conditions, he perspective to find an appropriate balance among competing demands, and the commitment to
drive coordinated action by leaders across levels and subunits.

"CEOs must be concerned with organizational performance, with doing all the things it takes to close the gap
between strategy and execution," he says. "And here's the thing: these are skills that don't necessarily make
sexy media stories and garner lots of camera time. They're behavioral. They are learned, not inborn. There are
no easy answers, just a lot of focused thinking and hard work-and realizing that is the first step out of the
star-struck land of the celebrity CEO and into the real world."

“There is nothing to be said against winning the award," said Malmendier, "but to keep that success going,
make sure the CEO's doing his job.” 

As stated above, isn’t that the responsibility of the company?


Tim Johnson
www.CaliforniaBusinesssMinute.com

GDP by state: Economic growth slowed in 2007

New estimates released June 5 by the U.S. Bureau of Economic Analysis show that economic
growth slowed in most states and regions of the country in 2007. Real gross domestic product
(GDP) growth slowed in 36 states, with declines in construction and finance and insurance
restraining growth in many states.1 Nationally, real economic growth slowed from 3.1 percent
in 2006 to 2.0 percent in 2007, one percentage point below the average growth of 3.0 percent
for 2002-2006.

 Real economic growth either slowed substantially or was unchanged in all eight BEA regions.
The Far West region experienced the largest deceleration, dropping from 4.1 percent growth in
2006 to 1.9 percent in 2007. Even the Southwest region, which led all regions in growth in 2006
and 2007, slowed to 3.7 percent, down from 5.1 percent in 2006. The two regions that did not
experience a slowdown in 2007 — the Great Lakes and Plains — were already the slowest-growing
regions in 2006.

The deceleration in growth in 2007 was most pronounced in Arizona, California, Florida, and Nevada.
Each of these states had experienced faster real growth than the nation since 2003, but slowed
dramatically between 2006 and 2007, to rates below the national average (Chart 2). In 2006, Arizona
and Nevada were in the highest growth quintile, and California and Florida were in the second-highest
quintile. But in 2007, Arizona dropped to the third quintile; California dropped to the second-lowest
quintile; and Florida and Nevada dropped to the lowest quintile. In Arizona, Florida, and Nevada,
construction subtracted more than 1 percentage point from real GDP growth. In California, construction
and finance and insurance combined subtracted one percentage point from real growth.

Three states — Delaware, Michigan, and New Hampshire — saw their economies contract in 2007.
Like the states above, construction- and finance-related industries were largely responsible for the
weakness. In Delaware, the decline was primarily due to a large decline in finance and insurance,
and secondarily due to a decline in construction. In Michigan and New Hampshire, declines in these
industries and in real estate, rental, and leasing were largely responsible for the decreases in real GDP.

In contrast, Utah had the fastest economic growth in 2007 (5.3 percent), growing at more than twice
the national rate. Durable goods manufacturing, retail trade, and real estate, rental and leasing led
the way in Utah, accounting for more than half the state's growth. New York was the only eastern state
among the ten fastest-growing states. Contrary to the nation and most states, finance and insurance
was a strong contributor to growth in New York. Finance and insurance along with real estate, rental
and leasing accounted for 53 percent of New York's growth.

Per capita real GDP by state in 2007
Delaware's per capita real GDP of $56,496 was the highest in the nation, 49 percent above the national
average. Delaware's ranking reflects a large concentration in the highly capitalized finance and insurance
sector. Mississippi's per capita real GDP of $24,477 was the lowest in the nation, 36 percent below the
national average. Nine of the top 10 states and all of the bottom ten states were in these groups,
respectively, in 2006 and 2007. In the top ten states, Colorado replaced Nevada.

Several states experienced actual declines in per capita real GDP in 2007. In addition to the states with
contractions in real GDP, economic growth slowed in several states to rates below population growth,
causing lower per capita real GDP.

              San Jose  Becoming  A  BioCenter

With more than $19 million invested in business incubator programs, the San Jose
Redevelopment Agency and the City of San Jose are getting a return on their strategic
investments.

According to a preliminary report, the bioscience sector in San Jose experienced a
year-to-year growth rate of approximately 28 percent from 2002 to 2008 -- a rate that
outpaces the Bay Area and the U.S. by a healthy margin.

"As a crossroad for ideas, talent and business, San Jose is delighted to attract and
grow companies working in biosciences," said Mayor Chuck Reed. "With the Redevelopment
Agency funding over the past decade, we have created the largest, most successful and
comprehensive business incubator program in the nation -- which includes the San Jose
BioCenter. We welcome a variety of bioscience companies to San Jose, from global
powerhouses to small companies. For innovators who envision their start-ups becoming
global leaders, San Jose offers access to talent, capital, and an entrepreneurial spirit that
 is unmatched around the globe." 

                                                  
                                                  San Jose Mayor
                                                     Chuck Reed

A recent PriceWaterhouseCoopers' MoneyTree survey found that of 40 investments in the
first quarter of 2008 in biosciences, $436.5 million was raised from the San Jose region.
These are more investments and dollars raised than any other region in the nation. According
to BayBio, a nonprofit trade association serving the life sciences industry in Northern California,
Santa Clara County has the largest concentration of bioscience companies of all counties in
the Bay Area. Further, according to the Milken Institute, $5.9 billion or 50 percent of the life
sciences gross product of the entire metropolitan Bay Area, $12 billion, is generated here.

A strong driver of this growth has been the San Jose BioCenter, the cornerstone for a life
science cluster located in San Jose's Edenvale Technology Park. The San Jose BioCenter
opened in 2004 and currently has 22 tenant companies and 10 affiliate companies, and has
created more than 150 jobs. These companies have raised more than $700 million in growth
capital, a type of funding that will help a company accelerate its growth.

"We have a world-class facility providing wet labs, capital equipment and laboratory services
which normally are only available to large companies. In addition, we provide business expertise
to first-time scientist-entrepreneurs as they turn their innovations into commercial products," said
Melinda Richter, executive director, San Jose BioCenter. "Our goal is to ensure our companies
reach their goal of getting their research to market."

About the San Jose BioCenter
The San Jose BioCenter is a life sciences and emerging technologies incubator providing
state-of-the art laboratory facilities, specialized research equipment, and best-in-class business
support services. The BioCenter's mission is to provide entrepreneurs with that "Big Company
Advantage" through facilities, equipment, resources, contacts and expertise they need to
commercialize their technology. Established in 2004 by the Redevelopment Agency of the
City of San Jose and operated by the San Jose State University Research Foundation in
partnership with Prescience International, the San Jose BioCenter provides a comprehensive
suite of laboratory and business services for emerging biosciences companies. For more
information, visit www.sjbiocenter.com.

                                                BayBio, BIOCOM and SoCalBio
                                   Establish the California Life Science Alliance 
                      to Promote California’s Leadership in Life Science Innovation

SoCalBio (the Southern California Biomedical Council), BIOCOM and BayBio, which together
represent life science firms and research organizations across California, today announced
an alliance to promote the state’s life science industry.

The California Life Science Alliance is based upon a memorandum of understanding signed
at the 2008 BIO International Convention in San Diego. Under the terms of the three-year
agreement, the organizations will pool resources and work together to address a range of
public policy issues.

The new alliance recognizes that California is the birthplace of biotechnology and the
undisputed leader in global biocommerce and innovation. But while the life science industry
is one of the state’s largest employers and economic catalysts, it has not garnered its fair
share of visibility and recognition.

“Citizens and elected officials tend to understate our industry’s vast contribution to
California’s economy and society as a whole,” said Joe Panetta, president and CEO of
BIOCOM. “By working together as an alliance, we can make sure that our representatives
in Sacramento and Washington D.C., as well as the public at-large, understand that the
life science industry is vital to California’s future.”

With more than 200,000 employees at about 5,000 establishments that generate more
than $70 billion in revenues, California’s life science firms and research organizations
represent nearly half of the world’s biotechnology industry. They employ a large workforce
and generate a financial impact rivaling that of other sectors such as film and television
production which is routinely heralded as one of California’s most important signature industries.

BayBio President and CEO Matt Gardner added ”For too long, California’s biotech industry
hasn’t been recognized for its economic impact, as well as its role in shaping the future of
healthcare. The Alliance announced today will help remedy this problem.”

The alliance will focus on public policy and joint advocacy efforts at the state and federal levels.
The three organizations will also collaborate on life science industry conferences and joint
purchasing group opportunities.

”Regions throughout the world are aggressively trying to lure our biotech firms and the clean,
high-paying jobs that go with them,” said Ahmed Enany President and CEO of SoCalBio, which
represents the life science and medical device industries throughout the greater Los Angeles
area. “Raising the visibility of this vital industry will help Californians understand that California
must work proactively to retain its leadership in biotech innovation and commercialization.”

California is the undisputed world leader in biotechnology, serving as home to industry leaders
such as Amgen, Genentech and Invitrogen. It’s also home to hundreds of smaller biotech, medical
device, diagnostic and scientific service companies, as well as a diverse range of service providers
that help the industry succeed. In addition, California is home to world-renowned research
institutions including UCSF, Stanford, UC Berkeley, UCLA, USC, UCI, Caltech, UC-San Diego, Salk
Institute and the Scripps Research Institution, which serve as life science innovation and talent
centers.

The California Life Science Alliance is open for participation with other regional organizations that
help strengthen the alliance and promote the life science industry throughout California. The
memorandum signed today does not constitute an agreement by any of the entities to provide
financial support for any individual project or activity.

About BayBio
BayBio is Northern California's life sciences association. It supports the life sciences community
through advocacy, enterprise support and the promotion of best practices and research collaboration.
BayBio represents more than 400 members involved in research, development, and commercialization
of life science technologies. Over a third of BayBio members are engaged in developing medical
technologies, diagnostics and research tools. More info about BayBio can be found at www.baybio.org

About BIOCOM
BIOCOM is the largest regional life science association in the world, representing more than 570
member companies in Southern California. The association focuses on initiatives that position the
region's life science industry competitively on the world stage, and on the development and delivery
of innovative products that improve health and quality of life. This includes initiatives in capital
formation, public policy, workforce development, and member services. More info about BIOCOM
can be found at www.biocom.org

About SoCalBio
The Southern California Biomedical Council (SoCalBio or SCBC) is the member-supported trade
association of the life-science industry in Greater Los Angeles. Its mission is to promote biomedical
and life science research, development, manufacturing and overall economic development in the six
counties (Los Angeles, Orange, Ventura, Riverside, San Bernardino and Santa Barbara) that comprise
the greater Los Angeles region. The organization’s programs assist local firms in accessing capital,
potential partners and business support services. They also promote technology transfer and workforce
training. More information about SoCalBio is available at www.socalbio.org.

                       
                                           
California Cures

California’s life sciences association, today released California Cures, a comprehensive
report examining the unique attributes equired for California to maintain the oldest,
largest and most productive life sciences cluster in the world. According to California
Cures, the state’s ife sciences companies are on the verge of investing close to $50 billion
over the next five years to manufacture 230 treatments in Phase III and create more
than 12,000 jobs per year in the process. The report also cites the State of California’s
lack of a long-term strategy to capture this massive, unprecedented economic opportunity.

The report lays out a roadmap for action by government and industry to ensure
that California’s statewide life sciences industry remains a cornerstone of
economic growth for both the State and the Nation. California Cures makes
specific recommendations in the areas of tax policy, infrastructure, education
and regulatory affairs that will help capture the return on California’s three
decades of investment in life sciences research.

According to Matthew Gardner, president of BayBio, “California has a rich history
of pioneering entrepreneurs who have churned out innovation at an extraordinary
pace. The California life sciences industry epitomizes that entrepreneurial
spirit and is a cornerstone of economic growth for the State and the Nation.
California’s elected officials have an unprecedented opportunity to capture the
economic boon offered by the manufacturing of these 230 new treatments and cement
the life sciences industry as a cornerstone to the state’s future, ensuring
long-term economic prosperity. Our policy makers must provide consistent policy
that encourages innovation, research, entrepreneurship and product manufacturing.”

Highlights of the findings in California Cures include:

In the next five years, 230 new treatments produced by California’s life sciences
companies will complete clinical trials and be poised for manufacturing. The
industry will invest $49.6 billion to manufacture these treatments.
Manufacturing jobs and general employment growth opportunities in life sciences
are high wage and benefit jobs with significant opportunities for career development.
In this current economic downturn, California’s life sciences industry is a bright
spot with robust company formation and 12,000 new jobs created annually. Fully 35
percent of global life sciences work is accomplished in California.       

                                            

Over the next five to 10 years, the industry forecasts up to $17 billion in annual
investments into research, facilities and jobs to produce 815 treatments, currently
in phase II and phase III, including the 230 on the verge of manufacturing.
The birthplace of biotech and a global center for R&D, California is poised to
be the epicenter for alternative energy biofuels and biomass.

California does not accurately acknowledge the timeline required for developing
biotech products. The state’s current 10-year carry forward provision for net
operating loss (NOLs) deductions assumes that a life sciences company reaches
profitability in three to five years after incorporation, while the average life
sciences firm does so in year 15.
California’s current tax environment discourages homegrown life science companies
from expanding here.

Highlights of BayBio’s recommendations in California Cures include:

Tax Policy
1. Create a 20-year carry forward provision on the treatment of corporate
   net operating losses.

2. Create corporate tax incentives for major investments in California.

3. Convert California’s R&D Tax Credit into a tax rebate.

4. Create a health information technology and life science early-stage
   investment incentive.

Infrastructure
1. Establish a new California Science & Technology Trust.

2. Incentivize local communities to zone biotech regions in their master
   planning documents.

3. Expand allowable uses for the California Infrastructure and Economic
   Development Bank.

4. Establish a major economic incentive for bioprocessing and biomanufacturing
   investments.

Education
1. Invest $150 million over 10 years in UC-oriented life sciences incubators.

2. Increase state investment in training centers of excellence.

3. Establish a science fellows program to serve the state government.

Regulatory Affairs
1. Establish a harmonization conference between CalEPA and U.S. EPA.

“We stand at a crossroads and California’s leadership position is at stake
with every clinical trial,” Gardner added. “We have the opportunity to decide
whether California will continue to be the world’s headquarters of the life
sciences industry or simply be remembered as its original source. Inaction
now will allow communities in other parts of the world to garner the jobs
and the dividends of manufacturing, as well as downstream investments made
by our industry as a result of California’s investment in life sciences
research over the past three decades. We must be proactive to keep California
biotech competitive in the global economy.”

California Cures is a discussion of the full potential this industry holds,
the economic role it can play for California, and the unlimited possibilities
that abound because of science. For a complimentary copy of the report and
accompanying CD-Rom, which chronicles the great deeds of California biotech.
Pease contact Travis Miller at (650) 871-7101 ext. 207 or travis@baybio.org.

TEAM CALIFORNA AT WORK

TeamCalifornia members are busy at the Biotechnology Industry Organizations
Worldwide Annual Conference in San Diego.  And with an attendance of over
22,000 visitors TeamCalifornia members welcome Governor Schwarzenegger
today as he addresses the industry that was born in California just 30 years ago. 
Biotechnology companies have what our member cities and counties want -
"It's clean and fuels the economy with a well-educated, well-paid work force", said
Joe Panetta head of BIOCOM the industry trade group for Southern California. 
Biotechnology is California's second largest high tech industry and members
like the City of Merced, Riverside County, City of South San Francisco, Cities
of Santa Cruz, Oceanside, San Jose and Dixon want to capture that growth. 
"Our members are here to connect with companies that are investing in California
and working to foster biotech clusters in their communities" stated Mike Ammann
President of TeamCalifornia and the Solano County EDC.

                                     

The California Pavilion photos you see here is the culmination of a year long effort
to welcome industrial, agricultural and pharmaceutical companies from throughout
the United States, as well as site locators, corporate real estate executives and
scientists.  "Biotechnology and related fields have something to offer every regional
area in California and each of our regions should be looking intently at how to become
involved in this leading growth industry", stated Ammann.  TeamCalifornia was one
of the four organizers of this Pavilion in cooperation with the State of California Labor
Agency, BIOCOM and BayBIO.


       



From:
Mary Ingersoll
Executive Director
TeamCalifornia


The California Healthcare Institute released updated information on California’s Biotech Industry.

The Biotech industry is growing with business and research generating $73 billion in revenue in 2006,
up nearly 20 percent from 2005. The state has an educated 2700 firms employing 270,000 workers
with an average salary of $71,300.

Including medical devices and diagnostics  firms, the state’s biotech company acquired 40 percent
of the 7.4 billion in biotech venture capital about three times as much as Massachusetts, the state’s
nearest competitor.

Additionally, the National Institute of Health awarded $3.3 billion in grants to researchers statewide,
significantly more than any other state.

Source:
California Business Minute, March 04, 2008

But as Crazy as a Barrel of Monkeys

In 2005 the California State Legislature passed SB118, a state law that prohibits
out-of-state retailers from shipping wine into California. Proponents of the bill told
legislators that there would be retaliatory legislation aimed at California as a result
of passing the law. And such is the case as Illinois has passed legislation that took
effect on June 1 that locks out hundreds of California wine merchants from selling to
retailers in Illinois.

The loss of market access results from many California winemakers not technically
being licensed as “wine producers,” but rather as retailers and distributors. The Illinois
law only allows those licensed as “wine producers” to ship wine to Illinois residents.
“We are talking about hundreds of California’s finest and most celebrated winemakers
being shut out of Illinois and prohibited from filling orders by their long time customers,”
said Tom Wark, executive director of Specialty Wine Retailers Association, an organization
that opposed the Illinois law. “The Illinois law was poorly thought out and even more poorly
written, as is typical of protectionist legislation.”

Many California winemakers do not obtain the “02” wine producer licenses from the California
Alcohol Beverage Commission since they are making their wine in someone else’s facility.
Instead, they obtain a combination “17 and 20” license which officially makes them retailers
and distributors. Retailers and distributors are prohibited from shipping to Illinois under the new
law taking effect June 1.

However even with the competitive barriers and domestic regulatory hurdles all is not lost, for the
opportunity to sell wine specifically internationally is as crazy as a ‘barrel full of monkeys’.

In an article by Kate Campbell, assistant editor of the Ag Alert from the California Farm Bureau,
“about half of U.S. wine exports are shipped to the European Union, accounting for $474 million
in sales, followed by Canada at $234 million. Japan accounts for about $63 million and Switzerland
imports $26 million worth of U.S. wine, while Mexico buys another $24 million in U.S. wine”.

But, it's the emerging Asian markets that are really taking off. Consider that wine sales to South Korea
are up 60 percent to $18 million. China sales jumped 74 percent to $16 million and Singapore is up 50
percent to $9 million.

In addition to the Pacific Rim countries, European trade is robust as well. Trade analysts say bulk
wine sales to Europe have grown faster than bottled sales, due to the growing trend of producers
shipping bulk wine abroad for bottling. This trend allows brand owners to efficiently make price points
in a very competitive wine market.

Total bulk table-wine exports jumped 22 percent by volume to 169 million liters and grew 25 percent
in value to $151 million. Total branded, bottled table-wine exports rose 9.5 percent to 207 million liters
and were up 3 percent in value to $635 million. Volume shipments to the European Union grew a healthy
7 percent in 2007 compared to 2006, but sales by value for these same shipments were slightly lower
because of the growing shift to lower cost bulk-wine shipments to these markets.

Fueled by strong gains in premium California wine volume, California wines sales to the rest of the
United States continued to increase in 2007 to a record-high 457 million gallons (192.1 million nine-
liter cases), up 2 percent compared to 2006. The retail value of these shipments increased 6 percent
to $18.9 billion, according to the year-end summary in the Gomberg-Fredrikson Report.

Total California winery shipments to all markets in the United States and abroad increased 3 percent
to 554 million gallons (233.2 million nine-liter cases) last year.

Wine industry consultant Jon Fredrikson says the long-term trend for California wine is favorable with
the U.S. wine market growing for 14 consecutive years, increasing 66 percent by volume from 1993 to
2007.

Though the economy is slowing, experts say wine is gaining market traction among American adult
consumers, and its likely wine consumption will continue to expand during the next decade.

While more than 95 percent of wine is delivered through the three-tier producer-wholesaler-retailer system,
many wineries have focused more on direct-to-consumer sales.

No monkeying around, cheers!