Wave of U.S. winery sales expected to grow further

Wave of U.S. winery sales expected to grow further

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When billionaire Stan Kroenke, owner of Napa cult winery Screaming Eagle and a slew of sports teams including the Los Angeles Rams, bought a majority stake in iconic Burgundian estate Bonneau du Martray in December, shockwaves ricocheted around the wine world.

The historic property has belonged to the Le Bault de la Moriniere family since the French Revolution. Its grand cru Corton-Charlemagne is one of the planet’s great white wines.

Cabernet sauvignon grapes are dropped into a bin during harvest at the Quintessa winery in Rutherford, Calif. Many wineries are selling out as Baby Boomer owners retire. A survey found 30 percent were considering or expecting to sell within five years.

But that was only one of many high-profile wineries and vineyards to trade hands last year. In California and Oregon, more than 35 were sold.

Get ready for 2017: The Silicon Valley Bank State of the Wine Industry 2017 report, released this month, predicts a continuing vineyard land grab this year.

“This sell-off phenomenon is not a real estate bubble,” insists author Rob McMillan, founder of the bank’s wine division.

The Silicon Valley Bank serves both the tech industry and the wine industry; about half of its 350 west coast winery clients are in Napa. And this gives the bank unique insights into what’s happening in the U.S. wine world and what will happen next. Mr. McMillan’s annual missive has become the industry’s yearly report card. This year he looks back at the trends in 2016 and tackles what to expect in 2017 through the entertaining framework of the movie Jaws.

“In the wine business, there is blood in the water. The fishing is for premium wine assets,” he notes in the section on Land and M&A. More buyers want prime land in prestigious areas where there are fewer and fewer plantable acres. Sellers of the top estates can bargain hard as prices spiral upward.

In a survey of U.S. winery owners, for example, he found 30 percent of them were considering or expected to sell in the next five years, while another 20 percent said a sale during that time frame was “possible.” That’s a lot of wineries and land that might come on the market.

A prime reason the sell-off will continue, he says, is that Baby Boomers are aging out and want to retire. That’s the story behind the October sale of Oregon pinot noir estate WillaKenzie. Owner Bernard Lacroute had just turned 73, and his children had no interest in taking over the business.

Many small boutique wineries are also selling out to bigger wine companies for financial help, easier access to top grapes, and marketing muscle. It’s become harder and harder for even the best small brands to get their bottles on retail shelves.

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