What Will The Wine Business Be in 20 Years?

 

Its been pretty amazing to see the changes in the wine business in the past 20 or so years. The ways in which the business is different today would make today's business unrecognizable to someone pulling a Rip Van Winkle and waking to see what the business has become. No longer the pioneering slow-moving cottage industry, today the business is moving forward at an ever quickening pace.

 

One thing that was unimaginable even a decade ago would have been 'for sale' signs on a winery. Today its not that uncommon to find real estate professionals handling smaller winery and estate transactions, or straight vineyard sales. Similarly, a decade ago there wasn't much in the way of dedicated M&A advisors handling winery transactions. Silicon Valley Bank made an early attempt at it but couldn't really make it into a business. Today depending on how you count, there are between 3 - 5 dedicated practices selling winery properties. Makes you wonder where the business will be twenty years from now?

 

Last week SVB put out a white paper that followed up on a paper we'd released in 2008 looking at future winery transitions and sales. Its an interesting read if you've not yet taken a look.

 

The major finding of the report was 10.5% of wineries are strongly considering a sale, and a total of 31% would consider a sale with the right price.

 

As I worked on the paper I was thinking through the people who have sold and transitioned to the next generation over the past 20 years. It seems to me the early pioneers who founded the modern business thirty to forty years ago have already largely transitioned and the wineries next selling will be the ones started in the middle 1990's. That makes me a little verklempt thinking about that because those owners are people I've known since they started. Sometime its not easy thinking about the folks that have gone on, the personal assets that they brought and changes they helped foster. 

 

But the reality is that the new blood that is entering the business is helping move the ball forward, in more buttoned down business practices and by bringing new capital. The cottage industry that seemed so fresh-faced and in its real infancy when I started in the biz, has now become a far more mature business. Its not all grown up yet - but it is a teenager.

 

I had a discussion with an industry professional the other day where we talked about where this business will be in the next twenty years. My crystal ball sees that we will be far more international in our sales efforts, the Millennials will be the dominant consumer with the Boomers an afterthought, there will be more roll-ups of wineries to deliver great quality wines in larger volumes, we'll apply unimaginable technology to production and management, there will be more hedge fund and family office ownership, the AVA's outside the West Coast will find their stride with some being recognized internationally for their high quality unique wine production, and far from label consolidation, I expect to see double the number of wineries and labels. There are a few forward guesses.

 

What do you see when you look out 20 years? Where will be with sales, distribution, vineyards practices, consumption, etc.

 

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