Saturday, March 29, 2014

How Much is Your Winery Worth Today?


The Alcohol Beverage Market


Probably once a week someone asks me, what are multiples doing. What they are really asking is "are sales prices going up or down." As a banker I love that question because it means there might be a financing opportunity and a way I can help in an acquisition (...yes I do have a day job making loans as boring as that might sound.)  If you understand valuation theory and want to go straight to the answer to the question, skip down the page to the Current Public Company Multiples section.

Still with me? The answer for alcohol beverage companies is that multiples for craft breweries are at the top of the list, large breweries are at the bottom and wine multiples are in the middle. That makes sense because craft brew is the rage with strong growth. Both spirit producers and craft brewers are cutting into the market share of the traditional beer producers. That reflects in the valuation growth of publicly traded companies as seen in the chart following.

How does the growth rate in an industry segment impact the value of a company? A buyer of any company wants to be in a high demand-driven market because that spells opportunity. If you are buying a stock, you are betting that will go up in value and its the same thing with the buyer of a company. Wineries have been in a strong growth phase for more than 20 years now but we don't see public companies gobbling up wineries and driving up valuations.

Sunday, March 23, 2014

Are Standing Tasting Bars Better than Seated?


“Today, our bodies are breaking down from obesity, high blood pressure, diabetes, cancer, depression and the cascade of health ills and everyday malaise that come from what scientists have named sitting disease.”~ James Levine, MD, PhD

The votes are in and the reality is even with exercise and moderate wine consumption, the cumulative negative impacts of sitting behind a computer or gaming station can't be overcome by drinking more wine or with normal exercise regimens. That is really scary for people like me who work in an office. On the other hand, there is growing agreement that employees who work standing are not only more healthy, but they are more productive and creative than those who sit. That being the case, you would all of course naturally conclude that retail room sales people working in a standing bar should have a higher success rate converting visitors to buyers compared to sales people working in a seated venue. Of course you would conclude that ....

Sunday, March 16, 2014

What Percent of Tasting Room Visitors Buy Nothing?

Ridding the World of Melon Squeezers
One dark and stormy night (yes I used that one) ...early in my banking career in Mendocino County, I attended an internal banking event where Jim Miscol; one of our senior executives would speak. He told us what a great a job we were all doing then asked us to help change the culture of the Bank. He said we needed to "get rid of melon squeezers." What in the heck was he talking about? I had no idea where he was going but my mind started racing to possibilities.

He went on to explain his comment by talking about a grocery store he banked in a retirement community. The store was carrying too large a waste/spoilage factor in the produce section. As it turned out, the store had evolved into a social gathering place for seniors who would walk the isles with an RC Cola, freely sampling grapes and nuts like it was a smorgasbord, and squeezing melons and peaches while talking to friends. It was the analog prequel to SeniorMatch.com. The store owner was at a loss how to address the problem without chasing away his customers. How would you handle that situation?