On winery consolidation
“There’s nothing new under the sun.”
That’s from Ecclesiastes 1:9, which also says, “What has been will be again, what has been done will be done again.” One might have expected the Author of Authors to have taken the long view: not the next business quarter, but Eternity. So it is, or sometimes seems, for certain of us aging wine writers, who have seen and done just about everything—multiple times.
Now we have all this clamor about winery consolidation: Here’s an example, from Wines and Vines. The San Francisco Chronicle has another one, even calling the present era “buyout season.” And here is yet another, this one more specifically about Jackson Family Wines’ acquisition of Copain; the author, Dr. Vino, not surprisingly strikes a snide pose…but let us not digress from the formal point, which is that, yes, there has been a lot of buying activity lately on the West Coast, and not just JFW; Far Niente’s switch was big news. But the “nothing new under the sun” trope comes to mind because, when I first began writing about wine for professional publications, in the 1980s, the same thing was happening: much hand-wringing that all the little boutique wineries were being gobbled up. Every time there was a recession (1990-1991, the dot-com recession of the early 2000s, and certainly the Great Recession), the sky-is-falling prognosticators sounded the alarm: No more little wineries! But, somehow, family wineries remain in business—thankfully.
Face it, wine is a commercial product and thus subject to the business cycles and push-and-pull of capitalism. The average small family winery seems to have a life cycle: from startup to sale is, maybe, thirty years. And that makes sense. A guy or gal begins the winery in his or her twenties or thirties: thirty years later, he’s looking forward to Social Security, Medicare, and sleeping late, and may not have the physical capacity or the emotional temperament to continue the hard work of making and selling wine (especially if he’s also managing a vineyard). The kids may not want to continue in the family business. So what’s an aging winemaker/proprietor to do? Sell. It has always been that way and always will be. So there is no need to fret about this current wave of activity. It’s actually quite normal, and besides, I bet you that for every winery acquisition you read about in the news, five new family wineries are starting somewhere else in California or Oregon.
How many California wineries will make it to 100 years? Well, one or two already have: Beaulieu and Buena Vista, but they’re no longer owned by their founders. Inglenook planted their first grapes in 1871, but they’ve had multiple owners including, now, Mr. Coppola. Anyone else? Gallo’s going strong after 83 years; it’s likely they’ll hit the century mark. But compared to, say, Antinori (since 1385), California and Oregon wineries are just wee ‘uns. “What has been done will be done again.” Ain’t it the truth.
Steve,
And yet here’s the thing. It appears that there is lots of consolidation among producers, but in reality it’s a very tiny amount of consolidation when you consider just how many wineries there really are. The purchase of Copain by JFV is interesting for a number of reasons, it’s really insignificant in the scheme of things. Copain makes a tiny amount of wine. And there remain TONS of West Sonoma Coast producers that are independent.
If consumers want to buy from small independent producers, they have choice up the wazoo.
The amount of consolidation in the industry is truly small.
Agree with Mr. Wark, who usually knows what he’s talking about. Besides, Copain will remain a small winery, as will Penner-Ash, etc.
Unearthing another older comment chestnut:
“West Coast Wineries Are Up for Sale — Quietly”
http://www.winespectator.com/webfeature/show/id/49221#.UoI_yAMMzG8
“… ‘I’ve never seen more wineries for sale in California than there are today,’ [said Charles Banks, who through investment groups such as Terroir Selections purchased Qupé and Mayacamas Vineyards] … Banks … estimates that between 30 to 50 percent of California wineries are either in financial difficulty or aren’t as profitable as they could be.”
And let me add this observation.
In Silicon Valley, bootstrapping entrepreneurs start-up a venture, use “network effects” to attempt to scale up rapidly, bring in venture capital (since there are no sales revenue or profits to self-sustain the “burn rate”) to accelerate the process, and then sell out their core technology to another, larger company.
The original (now well-compensated) founders are lionized as heroes for deftly negotiating such “exit strategy” acquisition deals.
And the start-up cycle begins again for these “serial entrepreneurs” . . .
Selling out is okay for Silicon Valley. Not okay for Napa Valley?
In the meantime, something to be said for “too small to fail.”
Ripped from the headlines:
“Record Prices for Napa Vineyard Land”
http://napavalleyregister.com/news/local/record-prices-for-napa-vineyard-land/article_d98c1787-c272-574b-9740-5195d488b790.html
Excerpt:
“2015 was a banner year for Napa County land values, with the price of a prime acre of Napa Valley vineyard rising 14.8 percent, according to a report by the California Chapter of the American Society of Farm Managers and Rural Appraisers.
“To own a piece of the choicest land on the valley floor, a buyer will have to pay an average of $310,000 per acre, compared to $270,000 in 2014.
“‘Actual sales can go even higher,’ said [David] Ashcraft [broker and founder with Vintroux real estate]. ‘There’s a lot of nuance in the process of valuing those types of properties,’ such as soils, water, age of the vineyard, root stock, accessibility and the pedigree of the parcel.”
Yikes! — 310 “large” for an acre of land.
Servicing that land purchase debt pushes Napa Valley Cabernet suggested retail selling prices into the triple digit range.