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DTC Shipping now OK in PA

As reported in Wine Business.com, Governor Tom Wolf of Pennsylvania signed a bill permitting out of state wineries to ship wine to PA residents. There is a limit of 36 cases annually per person. The bill makes PA the 44th state in the USA to allow DTC shipments; it will go into effect August 8, 2016. Licensing procedures and other bill requirements may take some time to implement, but this does open up the 12th largest U.S. wine market to out of state wineries. Please contact us for more details.

The bill also provides for groceries and restaurants to sell wine to consumers.  Prior to the Governor’s signature on H 1690, alcohol sales were controlled through state liquor stores and sales were not allowed on Sundays.  The Sunday rule has been eliminated, although the Liquor Control Board will retain control of spirits sales for the time being. Find the full story here.

 

 

 

Last Chance to Register for the Vineyard Economics Seminar

The Wine Industry Symposium Group is hosting their 21st annual Vineyard Economics Seminar this Wednesday, May 25, at the Napa Valley Marriott Hotel.  The all day seminar includes breakfast, all seminar materials, lunch, and wine tasting at the conclusion of the event.  The cost is $400/person.

The line-up this year includes speakers from banks, accountancy firms, government entities, engineers, and brokers to name just a few.  Topics to be discussed cover a broad spectrum and include “the current grape and bulk wine market”, “vineyard risk factors”, “tax updates for growers”, the drought and lenders.  If you are interested, you can register below.

 

Vineyard Economics Registration

Recent Activity in Small Winery Sales

We’ve noticed a lot of activity in winery sales recently.  The list includes Copain, Far Niente, Patz & Hall, MacPhail, and Stryker of Sonoma to name a few.  Not all of the sales include real estate.  The buyers have been various, but one common trait of the sellers has been notable.  The selling wineries have been well-run operations.  These were not distressed wineries.  Not operations looking for a savior.  For any of you small wine operations looking for additional capital, now might be a good time to put the word out.

 

For news on the Far Niente investment, see the article in Wine & Vines here.

2015 North Coast Vineyard Acreage Down

Originally outlined in The Press Democrat, April 14, 2016, vineyard acreage in the North Coast was down slightly for the second year in a row. The breakdown of this decline is what is most intriguing. Napa, Sonoma, and Mendocino counties all decreased a bit, while Lake County acreage jumped 7.7%.

In an article titled “North Coast grape acreage losing ground,” Kevin McCallum suggests that cost and disease are the primary reasons for the increase in Lake County plantings. Cost is fairly straight forward as Napa grapes command an average $4336/ton, Sonoma at $2443/ton while Lake is at $1601/ton. Mendocino grapes are listed as $1520/ton. These prices per ton are tied somewhat to the cost of land and Lake County is significantly cheaper. Some winemakers have taken to blending Lake County grapes with fruit from Napa and/or Sonoma to reduce costs. Another cost factor has to do with a tight labor market and multiple years of drought.

Aside from cost, red blotch has been a huge problem affecting grapes in Napa and Sonoma. Some vineyards have been completely removed, but growers are hesitant to replant until more is known about the disease and how to prevent it. It seems that winemakers facing a dearth of grapes from Napa/Sonoma due to scarcity and/or cost can look to Lake County for fruit.

Who’s Doing the Drinking?

We posted a recent blog breaking down the drinking population.   While it’s true that Millennials (ages 21-37) now outnumber babyboomers (ages 50-67), there has been some debate over which group is actually drinking more wine. In an article in The North Bay Business Journal on April 4, 2016, Jeff Quackenbush discusses the enigma. There have been reports (Rob McMillan of Silicon Valley Bank) that baby boomers buy more bottles of premium wine (over $20) than millennials, while the Wine Market Council reported at their conference in New York that millennials buy more cases of all still and sparkling wines than baby boomers. The council then revised their figures to state that baby boomers consume more wine at each outing than millennials. The discussion is important if wineries take this information and craft their marketing strategies based on any one of the aforementioned reports. What the Business Journal concluded after much analysis was that baby boomers “drink more wine in total than do millennials, but the gap is closing”. So in terms of creating a marketing strategy for the future, it makes sense to target the growing drinking population of millennials.

Millennial Wine Consumption Up

Per Wines & Vines (3/17/16), the drinking population is now dominated by the Millennials (ages 21-38), followed closely by Baby Boomers (ages 51-69), then trailed by Gen X (ages 39-50) and lastly Seniors (ages 70+). Wine consumption in general has risen since 2000 with a compound average growth rate of 4%. In general, Millennials are drinking more wine than they were 2 years ago while Baby Boomers are drinking less.

What does this mean for wine producers? Well, one aspect of marketing to Millennials is the requisite use of social media. In particular, consumers use Facebook to talk about wine more than any other vehicle. Millennial drinkers are also particularly enamored with “red wine blends, sparkling wines, sweeter wines, some imports and anything new.” So committing to making that sweet red sparkler may make a lot of sense!

W&V Reports US Wine Industry Escapes Tariffs

Wines & Vines reported December 18, 2015 that Congress passed an omnibus appropriations bill that, among other things, repealed a Country of Origin Labeling requirement for beef and pork entering the US, that had been strongly contested by Canada and Mexico. The issue was so contentious that Canada had threatened to retaliate against American suppliers of goods if the law was not repealed, which would have meant substantially increased taxes on American wines entering those countries. You can find the whole article at: http://www.winesandvines.com/template.cfm?section=news&content=162490

In our own experience, we’ve found Canada to be a very difficult market to get our clients’ wines into. Not only is DTC shipping to Canada entirely off limits, but American wineries exporting to Canada have a number of hoops to jump through in order to get their wines into the Canadian marketplace, and must be very careful in following the laws. US wineries need to find a trustworthy distributor to place their wines into the mostly state-controlled system, and prices for US wines are typically 25-50% over stateside retail. If you’re looking at exporting to Canada or you need help tackling the compliance for your export orders, please contact us.

Premier Cru Sued Over Failure To Deliver Wine

The Contra Costs Times reported yesterday that a number of customers have brought suit against the wine retailed Premier Cru over a failure to deliver wines purchased as futures on its website https://www.premiercru.net/ “At least 10 investors, many from China, have sued Premier Cru since November 2014, alleging they paid for more than $5 million worth of expensive wine and only received a tiny fraction. All the plaintiffs share the same tale: As the wine deliveries fail to turn up, Premier Cru employees string along anxious investors with excuses, and the routine continues with false promises of cash refunds. Customers were told of wine pallets stuck in French ports or at sea en route to China, always coming up with a new delay, the lawsuits claim.” We know from personal experience what these plaintiffs went through, as we shared the same exact experience on our own as these other plaintiffs did: Purchased wines, which never arrived, strung out with lame excuses by their customer service reps over email. Read the full story here: http://www.contracostatimes.com/breaking-news/ci_29210042/wine-pyramid-scheme-customers-sue-berkeley-business-over

NVWM Announces Strategic Partnership With Achelous

Napa Valley Winery Management, a leading wine-industry support organization in the North Bay Area, announced today a strategic partnership with Achelous Partners, LLC, a New York and Netherlands based investment bank (http://www.achelous.com/) to offer Mergers and Acquisitions services. Winery Management provides federal, multi-state, and local compliance services, bookkeeping, and administrative support. The joint venture will allow Winery Management to have access to traditional M&A services for its clients, including sell-side mandates, buy-side mandates, valuations, and strategic advisory. Their team has been dedicated to creating shareholder value for clients through the origination and execution of both sell side and buy side transactions. For sell-side clients, value maximization means identifying and communicating the key attributes of the business or asset being sold to the most appropriate and qualified group of potential strategic and financial buyers. For buy-side clients, team members source acquisition opportunities through their knowledge and relationships within the wine industry and constant global travel.

APAC Recommendations Head to Board of Supervisors

The formal recommendations of the Agricultural Protection Advisory Committee (APAC) will go before the Napa County Board of Supervisors for an initial review on Tuesday, September 8, with revisions made by the Napa Planning Commission. The issues involved are contentious. The Napa Valley Vintners, for one, supports the “formal recommendations of APAC as they were initially drafted” (NVV email 12/4/15) which includes among other things a provision allowing wineries to maintain “vested rights.” The revisions made by the Planning Commission would not exempt wineries with existing rights who apply for any modification to their permit (or, who apply for a permit for the first time). Contact us for more details, or to determine whether the changes as proposed may effect you.

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