As we navigate the turbulent Economic times, we’d like to point out some better news. The following article in the chronicle points out the challenges facing many Napa wineries. Foreclosures, bankruptcies and forced sales are all on the rise. While that may seem scary, it’s good to remember tough economic times for the wineries translates into great deals for the consumer. Spencer and Daniels have bought several great deals lately which help the cash flow at wineries and bring you incredible prices.
Read the story and be sure to come in and enjoy the silver lining:
“In Napa Valley, 2010 may be a vintage year for foreclosures as the wine industry is squeezed by falling land values and a consumer shift to cheaper brands.
As many as 10 wineries and vineyards in Napa, where the most expensive U.S. wines are produced, will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.”
“We have 250 vintner clients saying this downturn is the worst in 20 years,” said Bill Stevens, manager of the bank’s wine division in St. Helena. “Anybody who was late to the party won’t have staying power.”
Land values in Napa Valley, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan.
Defaults rise
Napa winery and vineyard loan defaults rose fourfold to 18 in the 12 months through January, according to San Diego research firm MDA DataQuick. In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get.
The recession has set in motion a “secular change,” with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman, managing partner at Pleasanton’ Bacchus Capital Management LLC, a private-equity fund that provides mezzanine, or short-term, financing to wineries.
The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less-expensive labels, the industry consultant said in a report Friday.
Premium sales down
Sales of super-premium bottles – priced more than $15 – declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV, the Netherlands bank that finances agriculture businesses. Napa and neighboring Sonoma County are the top U.S. producers of premium wine, the bank said.
“No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult Cabernet” that can sell for $750 or more a bottle. “High rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.”
Kendall-Jackson, based in Santa Rosa, is the top-selling U.S. brand over $15 a bottle, said Eileen Fredrikson, partner at Gomberg, Fredrikson.
Super-premium wineries are likely to bear the brunt of changing consumer habits, and lenders will pressure clients who can’t cover costs to “seek solutions before the loan goes into default,” Rabobank said in a January report.
Less-expensive imports from countries such as Chile, Argentina and Australia are cutting U.S. winery margins, according to Stephen Rannekleiv, lead analyst on the Rabobank report.
Buying neighbor’s land
Bill Harlan, maker of Napa’s Harlan Estate Proprietary Red, which counts four perfect ratings from widely followed critic Robert Parker, said he expects to see foreclosures mount.
“No area is going to be unaffected by this financial meltdown,” he said in a telephone interview.
Harlan, whose Oakville winery is 60 miles north of San Francisco, has seen the distress up close. In December, he acquired 21 acres next door known as Diamond Oaks Winery from businessman Dinesh Maniar, owner of two Napa Valley parcels that are facing foreclosure, according to county land records and documents in U.S. Bankruptcy Court in Santa Rosa.
There have been few recent property deals because sellers are reluctant to accept the low bids they are seeing, said Tony Correia, an appraiser in Sonoma for Correia-Xavier Inc.
More than 30 wineries are for sale in California, Oregon and Washington, the most ever, according to Rob McMillan, executive vice president and founder of the wine division of Silicon Valley Bank, a unit of SVB Financial Group in Santa Clara. The properties have too much debt, were new arrivals to the wine market or have owners who are looking to retire as competition rises and profit margins fall, he said.
Some Napa land deals that were never publicly disclosed or confidentially recorded at the county assessor will unravel this year and in 2011, according to Vic Motto, chief executive officer of Global Wine Partners LLC, an investment bank and advisory firm in St. Helena that brokers property sales.” By Dan Levy Bloomberg News