I have read in several places that industry insiders believe about half of the US wineries will be up for sale within 5 years. The prediction came from Rob McMillan in the State of the Wine Industry newsletter and was based on a survey of more than 350 Napa Valley wineries. Why? Many are owned by Baby Boomers who are retiring. Wineries are a tough business with increased competition every year. It is business involving hard labor and capital intensive assets. But for most, it is a labor of love and they could not imagine doing anything else.
So, what does this mean for the industry? I have some thoughts on that.
- If you are one of wineries who might be selling, you need do some financial planning. You need sophisticated lawyers and accountants to maximize your investment. You also need to get a succession plan and start the transition process. It can take a few years to train staff, document procedures, and get your business in order for a sale. Check out John Warrilow’s Value Builder system and “sellability” scores for some ideas. There are other similar experts but I like his approach.
- If you are one of wineries who might be selling, now is the time to shore up your intellectual property assets. The value of your business as a winery is based heavily on the brand and good will as much as the value of the property, inventory and equipment itself. It also is based on protecting your trade secrets and proprietary information. You don’t want your trade secrets walking out the door with employees so you can’t sell your business for top dollar.
- If you are thinking of opening a winery, or expanding your existing winery, there may be some opportunities in the near future to purchase a vineyard. Start your research now and maybe you can make an offer before there is a broker involved and taking 10% commission.
- If you are thinking of opening a winery, you may want to do some contract winemaking and delay a major purchase as the price may be more competitive in the coming years. Buying existing operations has many benefits over starting a winery from scratch. You may want to be more conservative on your grape contracts to hedge against lower prices in the spot market that may result from so many vineyards being on the market.
What are your thoughts and predictions?