A new wave of family winery sales?
Interesting new report out from an analytical group, Scion Advisors, entitled Wine Industry Report Card: The First Wave of the Big Transition. The “Big Transition” is one in which “’A’ players transition from family to corporate and private equity ownership.” The report cites such recent examples as Stag’s Leap, Firestone and Duckhorn, although of course they could have stretched further back to include Rosenblum, Ravenswood, Mondavi and others.
According to the analysis, twenty-plus of these “A” brands are the juiciest targets for takeover (although the report doesn’t identify them), and when the corporations and equity partnerships run out of “A” brands, they’ll turn to “B” brands for the pickings. Scion advises these “B” brands to “prepare for sale [and] restructure and demonstrate solid bottom line results” in order to make themselves more attractive to takeover artists. If they do not prepare, the study warns direly, “…a majority of [“B”] winery owners looking to sell will end up as real estate sales, with little to nothing paid for the brand.” (And one presumes Scion Advisors would like to be the paid consultants for these “B” wineries.) The reports predicts that “Nearly 1,000 family-owned wineries on the West Coast expect to go through a change of ownership within the next decade.”
This is a sobering report, but not necessarily one to despair over. The industry has been through periods of consolidation before (the early 1990s was one) when gloom-and-doomers predicted everything would be owned by a few mega-corporations. But the genius of American (and Californian) entrepreneurialism has been that for every winery that gets sold to a corporation or equity partnership, 2 or 3 new ones flower up. (Anderson Valley is an amazing example of this. Almost all the wineries there are little ones that have come into existence in the last 10 years.) As bad as things look now, economically-speaking, there’s little reason to believe this trend will not continue, as young idealists and second-career types enter the business. Still, I believe Scion Advisors when they predict a wave of sales over the coming years, and it’s probably a good thing for the small family wineries (who sometimes don’t understand business as well as they might) to prepare for whatever’s coming.
I’m off to the Whitefish Mountain Wine & Food Summit, in Montana, to hold a couple seminars. See you next week. Be well.