General

So You Want to Buy a Winery

Posted on May 25, 2021 by Admin

Things You Should Know Before Taking the Leap into Winery or Vineyard Ownership

Rule One: Passion and Commitment are definitely required for a successful winery or vineyard business.

The odds of creating a profitable vineyard or winery are very slim despite the fact that the US wine industry has experienced continuous growth since 1994 and is currently a $70.5 billion dollar market. According to experts, owning and operating a winery is capitally intensive with no formula for success other than finding the right place, terroir, and vineyard and giving it the needed years before the first commercially viable harvest can occur. And to be really successful, you have to be incredibly committed and passionate about what you produce.

Rule Two: Full immersion into the industry is required.

And not just in the industry but in the region you will be operating in. Have a clear idea of what you want to do with the property you may be considering. Do you want to sell fruit and have a nice home on a vineyard or do you was to produce wine? Selling grapes is usually more accessible financially but often does not cover the costs of operating a vineyard. However, growing and bottling wine offers better returns but requires larger capital expenditures upfront for equipment, facilities and staff. Both options require years of investment before you see any profit. Understand the economics of a vineyard and how to make the best use of it by surrounding yourself with people that can guide you, such as a viticulturist, a winemaker and a financial advisor who is knowledgeable in the wine industry.

Rule Three: Take a Real Estate Reality Check.

A commercially viable vineyard should be at least 10 acres. Research the pricing per acre in the areas you are interested in. For example, offerings in Napa will typically be higher priced than offerings in Sonoma or Mendocino Counties due to reputation and demand. Additionally, you will need to test for viruses, perform soil analyses, and know the weather in the areas you are considering. And it goes without saying that working with an experienced real estate agent who specializes in the wine industry is key.

Rule Four: Know the Costs of Doing Business.

You will need to plan for farming and maintenance of a vineyard, which can be done with a management company. It is typically a four or five year process before you will begin to see any money from selling grapes. In addition there are costs related to permitting, land preparation, and water management to name a few. You should be up and running during your fifth or sixth  for the vineyard, which doesn’t include winemaking facilities and processes, staff salaries, marketing, licensing, distribution, insurance, property taxes and other miscellaneous costs. And even if you have tons of passion, you still need to know what you’re doing. In short, operating a vineyard or winery is a lifestyle more than just a career choice. For those that are willing to take the risk and learn the ropes, this lifestyle can be an amazing, fulfilling adventure.

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By Michelle Magnus

Research for this article included:

https://www.worth.com/how-to-buy-a-vineyard/

Worth.com

Wine Industry Expectations for 2021-22

Posted on April 19, 2021 by Admin

The future for the wine industry can be summed up in two words: Direct-To-Consumer Sales.

The curve ball for the industry in 2020 was the COVID pandemic which had a sizable impact on wine sales. Wineries had to quickly change tactics in response as tasting rooms and restaurants went dormant. In a nutshell, sales shifted dramatically to online and direct-to-consumer purchases.

What to Expect for 2021-22:

Improved demand from consumers as hospitality, cruise lines, travel, concerts, sports and the like reopen, in addition to deferred events such as weddings.

How Wineries Can Make the Most of the Changed Sales Landscape:

Opportunities for marginal growth will be found by investing in ecommerce and digital strategies.

How Vineyards Factor In:

What’s critical is a balanced harvest supply in the West. Supply is the West is largely balanced going into 2021 but with low growth rates, a large harvest will put supply back out of balance. However, as California appears poised for a drought in the summer of 2021, over-supply appears unlikely.

In conclusion, the wine industry will need to continue to adapt in sales channels, strategies, tactics, and messaging to be successful in meeting the post-vaccine demand.

 

 

DIRECT TO CONSUMER CHANNEL MOVEMENT: Channel shifting was the byword for 2020 in grocery, smaller producer and direct-to-consumer channels. With tasting rooms’ closure in March, the consumer adapted and went online to purchase. The shift replaced lost tasting room sales. Online is now the greatest opportunity for producers in 2021.

 

 

 

 

 

 

OFF PREMISE VOLUME AND VALUE CHANGES: 2020 began with declining volume measures and discounting due to an acute oversupply of wine and overall flattening consumer demand. March lockdowns moved consumers to a panic-buying phase for wine, spiking wine sales growth above 60 percent. By the end of the year, total wine sales were about even with the prior year.

 

 

 

 

 

AVERAGE WINERY SALES CHANNELS PRE-COVID AND DURING COVID: Restaurants and tasting room sales made up about 43 percent of the average winery’s sales in April 2020, when the government issued shelter-in-place orders, closing both channels. Resilient producers immediately evolved to phone sales, ecommerce, Zoom tastings and curbside pickup, among other tactics. By November, the magnitude of the shift was apparent, with online sales showing the greatest total change.

 

 

 

 

ECOMMERCE TRENDS IN ALCOHOL: With consumers sheltering and working from home, online sales became important for all alcohol producers. Growth in delivery company accounts for companies like Drizly and Instacart exploded. We believe there is a permanent consumer shift to more online purchases of wine, which will expand with the coming of age of millennial consumers.

 

Information sourced from Silicon Valley Bank State of the Wine Industry Report for 2021: https://www.svb.com/trends-insights/reports/wine-report

 

Market Update for Wineries and Vineyards

Posted on March 18, 2021 by Admin

The global wine market is projected to grow at a CAGR of 4.28% during the forecast period 2021- 2026.

Product premiumization is one of the prime factors expected to fuel the growth of the global market for fortified wine in the upcoming years. Leading market players are concentrating on the development of new flavored fortified wines, to cater continuously to the changing consumer preferences. Marijuana-infused wines are gaining high popularity, specifically in markets, like the United States. It is possibly the most significant trend influencing the alcoholic drinks market, globally. Mostly, markets across the world witnessed consumers trading-up to higher-value products, primarily across a wide range of categories. This trend is prominent in the developed markets, like the United States. Consumers are keen to explore unique and interesting alcoholic beverages.

Asia-Pacific is leading in the demand for wine, with China dominating the market in the region. Notably, the consumption of red wine is more of a tradition in China, as the colour red is considered lucky in the country. Owing to this factor, China is one of the leading markets for red wine consumption, giving tough competition to France and Italy. Australia is second in the consumption of wine in Asia-Pacific, followed by Japan. Also, India is the fastest-growing country in terms of wine consumption and registered a growth rate of approximately 7% along with the Philippines, South Korea, and Vietnam are the other potential wine consuming markets in Asia-Pacific. Hong Kong has no import tax for wine, which is a driving factor for the market. 

Brazil and Argentina are other key countries, reflecting the future growth prospects in the wine market. The two nations are majorly driven by an expanding middle class, coupled with marketing campaigns run by major importers, such as Expand Importadora and Interfood Importação, which are aiming to promote the culture of wine drinking, particularly in the case of Brazil.

In August 2020, Californian winery Limerick Lane Cellars has launched a new wine brand in the United States, packaged in aluminum bottles.

In December 2019, E. & J. Gallo Winery announced to modify its agreement with Constellation Brands Inc. announced in early 2019, for the purchase of a portfolio of wine brands, along with six winemaking facilities located in California, Washington, and New York.

In February 2020, India got its first canned wine in the brand name of Dia Sparkler. The new canned wine has been launched by Sula Vineyards, which one of India’s most popular wine brands, in leading stores across India.

As per Mordor Intelligence analysis, COVID-19 made a major impact on the wine industry due to the forced closure of on-trade wineries in various countries such as the United States, United Kingdom, India, and others in order to control the impact of the pandemic. However, the current environment may provide an opportunity for the wine industry to recapture lost consumer attention. As per the analysis, the total wine volumes are up year-over-year as more people purchase wine to enjoy with meals at home majorly in European and North American countries. On the other hand, there is uncertainty if the current boost in the off-trade will continue after pantry loading depletes, the on-trade slowly reopens and consumption behavior returns to pre-Covid-19 levels.

Moving forward, the wine market is driven by increasing demand for wine, due to its health benefits and premiumization of wine products, coupled with innovation in flavor and more advanced distribution networks, globally.

Changing tastes and new preferences among consumers, along with increasing demand for new and exotic flavors, such as Riesling wine and other tropical fruit wines are expected to fuel the growth of the wine market.

–Article information obtained from Mordor Intelligence

https://www.mordorintelligence.com/industry-reports/wine-market

Coming Soon — Prop 19

Posted on February 13, 2021 by Admin

The Benefits of Prop 19:

There Has Never Been a Better Time to Sell Your Property

Spring is right around the corner and there has never been a better time to sell your California property. The combination of a red hot real estate market and a new law called Prop 19 has put homeowners squarely in the driver’s seat if they have a mind to sell. Prop 19 could, quite literally, open new doors for you. Come April 1st, Prop 19 goes into effect and this could free up many homeowners to sell and move elsewhere in the state of California without severe tax penalties.

If you are 55 years or older, a survivor of a natural disaster or severely disabled, you can now move anywhere in the state of California, up to three times, and transfer your current tax basis to a property of greater value without penalty. Eligible homeowners may now transfer their tax basis anywhere within the State of California, up to three times, to a property of greater value without being penalized at today’s tax basis. Previously homeowners were limited to transfers within certain counties and to homes of the same or lesser market value. Prop. 19 increases the number of times that certain people may transfer their tax assessments. If a person is 55 years or older, has severe disabilities, or lost a home in a natural disaster, the person may transfer their tax assessment up to three times now (up from one).

For those property owners age 55 and older, they will be able to blend the taxable value of their old home with the value of a new, more expensive home, which will result in positive property tax savings. For example, if a senior couple sold their home with an assessed value of $250,000 for $2 million and bought a new home for $3 million, the new home’s assessed value would be $1.25 million, which is the $250,000 assessed value, plus the $1 million increase in home value.

For those that have lived in their home for many years and realized huge amounts of equity and want to remain in California but have been reluctant to sell due to reassessment of today’s tax values, this new law will drastically reduce the tax penalties once associated with moving within the state.

If you are one of those California residents wanting to take advantage of Prop 19, first consult with your CPA. Then, call me for a free Comparative Market Analysis for your property to see what it’s worth in today’s red-hot real estate market: Mark Stevens, 707 322 2000 or email mark.stevens@theagencyre.com

The Road Ahead

Posted on January 20, 2021 by Admin

Now that it’s the end of January and the dust has more or less settled around 2020, we turn a collective eye to the road ahead. Despite high unemployment due to the pandemic, it is undeniable that real estate throughout the country, and in particular California, remains a bright spot in the economy. The question is: How will this bull market fare in 2021?

So far, most indicators point to a real estate market that will continue to be extraordinarily active and strong. For one thing, it appears that interest rates will remain at all-time lows. And secondly, the “urban flight” trend looks like it is here to stay for awhile as the desire for space and privacy grow hand in hand with working from home. What remains unclear is what role possible mass home foreclosures might play as government financial protections related to the pandemic continue to linger in limbo. For California in particular, more inventory on the market is what is needed to alleviate pent up buyer demand, so foreclosures may have little negative impact in terms of supply and demand. Time will tell.

If you are a seller, it is said that your home might not ever be worth more than it is now. The 2021 market is so far shaping up to be a sellers’ market. Both anecdotally and statistically, it appears that many California sellers–roughly 30%– are considering leaving the state altogether and likely heading for more affordable and less restrictive climes. States such as Texas, Arizona, Nevada and Tennessee are the top four destination trends. It will be interesting to see what the outcome is for so many transplanted Californians. Although California has its share of messy problems and complexities, it’s hard to deny the many benefits of living in California, prime among them the climate. In addition to climate, California is renowned for its personality as a progressive, cosmopolitan lifestyle-state that is truly unique to California alone. These are traits that are hard to recreate but easy to take for granted until you move elsewhere. Additionally, Proposition 19 will likely make it less punitive for older homeowners with a lower tax basis to relocate within the state, so that could free up inventory and create a more active market as well. And while some California sellers are choosing to move out of the state, there appears to be international buyers ready and able to take their place. In 2020 California was the top destination state for international buyers from China, Canada, India and Mexico, respectively.

So if you’re a buyer and wanting to stay in California while you realize the American Dream, what’s in the cards for you in 2021? More than likely, you will see housing prices remain high and inventory remain tight. What is almost certain is that if you are preapproved to buy, waiting for prices to come down is probably a lost cause. At some point you just need to jump in, regardless of the current bumps in the road. With interest rates at record lows, 2021 could be an ideal time for buyers to get in the California market. And, with average rents hovering at two thousand dollars and up, and programs available for lower down payments, it’s easy to see how buying a home sooner rather than later will save you money while building equity at the same time. At the end of the day, a home is an investment, especially here in California, but it is also much more than that: it is the place where your family can feel safe and protected from whatever life in the outside world brings us next.

If you are ready to make a move, we are here to guide you with over forty years of collective real estate experience in the North Bay area. Call 707-322-2000 or email mark.stevens@theagencyre.com

The Agency’s MVP & Chairman Award Winners of 2020

Posted on January 20, 2021 by Admin

The Agency is pleased to announce our Chairman Award and MVP winners of 2020. The newly unveiled Chairman Award recognizes the Top 5% of agents at the company and the Top 5% of agents in each region based on sales volume for the year. The MVP Award goes to the agent or agents who reached the top production based on sales volume companywide. Beyond their sales success, the winners are stewards of The Agency brand and core philosophy, representing our service-first approach and culture of collaboration in their work every day of the year. Congratulations to all of our award winners!