Vineyard purchase/partnership with winemaker thoughts

So let’s say I’m not super rich but have some money and have some friends who have some money. We all love wine and would like in some way to be part of the industry. Also, there’s something to be said for diversifying assets out of the stock market (generally, but perhaps even more now when it is at an all time high). Having said that, we have jobs that pay the bills and don’t want to quit those jobs. So that means the best wine investment would be something at least mostly passive, but we would also want it to be cool/fun, etc. Perhaps buying a small vineyard or two with contracted management…but I certainly don’t know enough about land/soil/mesoclimates/the market to make sure I’d be getting a decent deal. Also, my guess is that the best deals aren’t just out there with a for sale sign hanging on the vineyard, but come from opportunities known more to people in the industry than outsiders.

On a related note, I don’t know how many times I’ve heard the story on a wine podcast or blog or something about the young winemaker or assistant winemaker that has the personal side project/label dream in addition to the day job. To accomplish this, they have to source grapes and custom crush, as the winemaker/assistant winemaker gig doesn’t create the kind of cash necessary to own land. These stories also often talk about how they only got the grapes they wanted after a few wrong turns, or they didn’t have control of farming to do what they wanted, etc.

Is there an opportunity to partner with someone like this (let’s call him/her “Winemaker Chris”)? We (my friends and I and Winemaker Chris) find the location together relying on Winemaker Chris’ expertise, we supply the cash and get the vast majority or all of the ownership, Winemaker Chris gets a guaranteed fruit source, good pricing, and farming control in some kind of lease deal, etc., perhaps a slice of ownership or an opportunity to buy in at a fixed price in the future. Another alternative would be to also participate in ownership of the label in some way with Winemaker Chris getting the large slice of that in sweat equity. It would need to be set up in a way that creates appropriate incentive and value for both sides, and I haven’t thought through the all the details, but seems like it could work by putting the cash in from one source and the knowledge/expertise/sweat in from another.

We wouldn’t be doing this solely to make money, but out of the passion to help create something cool in this industry.

Any thoughts?

A similar idea is described here with the winemaker receiving half of all produced wine.

Well, as a winery owner and winemaker, and chief bottlewasher, and sales person, etc etc, who owns no vineyards, and does not see how I’ll ever own any in my area (Healdsburg)… I have a lot of opinions on this subject…

I was glad you included this: “We wouldn’t be doing this solely to make money, but out of the passion to help create something cool in this industry.”…

There will likely be no profit. ever. The rule is, that as long a you are growing, all the “profit” goes back into more grapes, barrels, equipment, better processes and staffing. There is no conventional financing available to small wineries.

I run a tight ship. I make all my wine personally (about 2500 cases) , have no winery staff, (except for harvest), and sell 90% direct, thru my tasting room in Healdsburg. This has been going on for almost 10 years. I figure I’m worth at least $80K per year, and I’ve never gotten any salary. I keep hoping!

I do like the work. I do like the business (mostly)… I have a nice wine cellar. I take a lot of winery sales trips to lovely locales. I don’t mind driving beat up old pickup trucks, and working alone in cold warehouses. I am especially privileged to live & work (rather Spartan-ly) in “Beverly Healdsburg”, which is no longer a working class community. I’m independent (sometimes to my detriment) , but I’m popular at parties, when I walk in with magnums of Pinot! My tasting room sells vintage Marantz systems, and vinyl records, and I get to tinker with those, to my hearts delight.

I take the satisfaction where I can, and most of the time it’s enough… .but it is not money, and there is no real clear path to that being plentiful, until I suppose, I’m forced to sell.

The biggest threat to my business is my health, and larger wineries, who are rapaciously buying up vineyards and tasting rooms locations in town. I can’t imagine that the corporately owned tasting rooms in town are profitable, yet most of them are owned by huge companies, and every year some smaller one bites the dust.

I get regular offers from well heeled friends who want to invest, and I am very clear with them that they’d only be buying some measure of prestige, (and a well stocked cellar) and that their investment would have no cash return until I decide to sell. I discourage them as I don’t want any illusions. The only “offer” I would really consider is if someone who is “famous” at some level would participate in selling the wine, like a washed up but well regarded rock star, or football player or entertainer. Making wine is fairly easy. Selling it all is damn near impossible.

It’s a great life, if you can compartmentalize the uncertainties, and you love, love, love wine, and the process of making it.

Ha! Interesting. But on a very quick read of the paragraphs, not exactly what I have in mind. I’m thinking more of like minded people working together to do something cool.

To simplify and reiterate some of what Eric said (great post, by the way, Eric), you probably won’t make any money doing this sort of thing.

Eric: Thanks for the reply and your thoughts. Yeah, I don’t think that investing in an existing winery would be great for me or for the owner/winemaker. I was thinking more of the land aspect (which seems like it troubles you as the big guys buy up all the land and therefore reduce access to fruit for people like you). One concept could be as simple as a deal where you agree to help me find the land with your expertise and in exchange you get a favorable contract for a few years to purchase grapes and farming control or something. And obviously I’m not talking about you, who has established your brand, but the mythical Winemaker Chris. Or I suppose it could be someone like you who wanted to do something new and start making Verdejo instead of Pinot or whatever as another side project. And the theory of how to make money on it for me is certainly not short term, but rather the increase of value in the land over time. Anyway,thanks again.

Doug: The theory on making money would be to buy a good vineyard (with expert help from someone in the business, in exchange for something) and let it increase in value over time. I have no illusions about it being profitable in the short term, just long term potential in the real property value. And if it could be in a cool partnership to do some project in the meantime, even better.

I have a small (<1ac) vineyard and I make the wine. The vineyard work, though enjoyable at many levels, is endless hard physical labor (with the exception of dormancy period).

Establishing the vines, training, pruning, thinning, spraying (and other pest control), fruit dropping, bird netting, harvest…and a million other things, all take a lot of time. If you can find good workers you can hire out some of this work - but then you will have other problems.

Though I love my vineyard I prefer the wine making. It is hard work too, but not as physical and, with the exception of harvest, not as much work. It would be easier to start by buying grapes and making wine.

I agree with Eric’s post and others who say it is a labor of love and very hard to make money. There is a romantic allure to viticulture and winemaking, but the difference between romance and turning it into a profitable business is like the difference between passion and prostitution (as with most businesses…)

Totally off-topic but the tasting room comment is very true. As zoning in Healdsburg (and other tourist communities) tightens up and enforces existing or proposed laws such as 1 tasting room per block face, the existing spaces grandfathered in with conditional use permits will only become more and more valuable. If you read winebusiness or other local papers you can see how difficult it is becoming to gain approval for a space zoned for winemaking, let alone tasting without appointments or any form of events. It is pretty clear that these existing properties will continue to sell rapidly.

Wouldn’t the whole reason the winemaker starts his own label to have majority ownership? How different is your example from their current jobs where they work as winemakers for someone else? (Not sure a tiny ownership is very compelling)

[urlhttp://arec.vaes.vt.edu/content/dam/arec_vaes_vt_edu/alson-h-smith/grapes/viticulture/extension/presentations/economics.pdf][/url]

The link above is to a dated presentation on the economics of viticulture in Virginia. Very worth a few minutes of review. Note that in the presentation, the land is already owned and not included in the analysis.

Absolutely. I must not be making myself clear. Although I’d be open to anything that makes sense, the main idea would be that I (my group) buys the land and owns the land. The winemaker owns his/her own project and makes/sells his wine. The “partnership” comes in the form of the winemaker finding the great site for me and in exchange getting a guaranteed fruit source that they love and can control farming of for a fixed period. And I get a buyer for the grapes for a fixed period from the beginning. Maybe he/she also gets a fractional ownership in the land and/or I get a tiny passive sliver of his/her winery, but maybe not even that.

I hear Ray Walker might be looking for something new to keep himself busy.

Perfect! Looking for someone I can totally trust without question.

As much as I hate to say it, as vineyard owner, you probably do not want to align yourself with only one wine label. The model seems to be, spread out your tonnage among several/many winemakers until one of them gets a huge rating or the equivalent national notice, then jack up the prices and sell everything (or all the best bits) to them with your vineyard name on the label.

In all honesty, if I hit the Lotto and could do something like you have in mind, I would chat up or read as much as possible about Josh Jensen and how he did his climate/terroir/geologic search for where to plant his roots.

Fascinating story and I bet there are places out there that would be fabulous for someone with the time and temerity to follow that path.

Or, find a wine you love and see if you can learn about the vineyard where it comes from and look for similar ‘lays of land’ to seek out.

AKA The Beckstoffer Protocol

Get together with some of your friends and make a couple barrels of wine and keep the rest of your money in the bank!

Eric’s post is spot on. When I hear of people wanting to invest in the wine biz and if they ask how money they’ll make in the first 5 minutes of the conversation…count them out.

I would like to address Eric’s thought on having a vineyard and selling grapes. Selling grapes to wineries and hoping to cash in on a high score works about as well as a winery trying to catch a high score. Scores don’t sell wine, people who bust their butt sell wine. As a full time grower (former winery owner) I’m looking for customers who have a plan, a sales system in place and a history of success. I’ve sold fruit to so many passionate folks that have no f*cking idea of how the sales and marketing aspect works and watch them fail. This business is a 20 year business, not a 5-10 year business.

Define “cool”.
You do realize that this will turn into another full-time job, right?

Cue the oldest joke about the wine business:
“How do you make a small fortune in the wine business? Start with a LARGE fortune.”