How Much is Your Winery Worth Today?

Change Creates Opportunity

The 2019 SVB State of the Industry Report helped change the narrative in the wine business this year. While the industry remained focused on premiumization, I had to report in January that the positive elements that created the industry's astounding success over the past 25 years were hitting a wall. We predicted that M&A would slow this year and thus far, that appears to be a good call, notwithstanding the massive sale of about thirty of Constellation's wine brands to Gallo for $1.7BN.

There is plenty of activity still. Probably once a week both buyers and sellers ask me, "what are average winery multiples?" What they are really asking is "how much is my winery worth?" But there is more to the question. They also want some color on the business environment.

As a banker, I love those questions because it means there might be a financing opportunity (...yes I do have a day job making loans, as boring as that might sound.). 

The short answer to the headline question for today is there are still plenty of buyers but overall they are being a little more selective, and your winery and vineyard are probably not worth more than they were last year.

Without going into details on a long topic, we are presently oversupplied with grapes and bulk wine from most regions, and the upside to higher sales is for today - more limited than in the past when the rising tide of higher boomer incomes along with the belief in the health benefits of moderate wine consumption lifted all boats. Today millennial consumers are spirits and beer consumers and are trying to cut their alcohol consumption for health reasons.

There are activities that with certainty will return the growth rate in demand that we've been used to,  but that is another VERY long topic for another day. Buyers believe in the strength of the product and know there is upside given time, expertise, and focus.

As it stands, shrewd buyers and sellers are still finding agreement on price and repurposing valuable assets for tomorrow. Investors with a long view recognize the opportunity this current market change is creating. But with any sale, there has to be an offer, and an answer to the question, "How much is my winery or vineyard worth today?"

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?