Wes, actually what you point out as risk is actually what worries me most about the prospect of doing this. I’m not quite as worried about the saved expense of putting my own time into it because I’ll make more doing what I’m doing now than it will cost me in lost cost savings to work on the project immediately and actively. But I do totally get (and fear) the concept of not being there from a risk perspective both with people and just events happening.
I have over 3,000 posts on WineBerserkers.com. I am well regarded there for my unparalleled wine knowledge, master-level palate, and dashing head of hair. Let’s talk.
Another aspect to consider is the business environment, let’s say, by county. People have commented how places like Napa and Sonoma feel over-saturated and threatened by the wine industry, so there are a lot of extra hurdles put in place by politicians, and some neighbors might not be so receptive. I’ve heard Santa Cruz County is a bureaucratic nightmare with busy-bodies throwing unnecessary road blocks at every step. Then, there are places like southern Santa Clara County, which is designated agricultural, where the bureaucrats view it as their job to be helpful. I’m sure many other ag counties are like that.
I ve been selling things to wineries since 1980 and am now fading into retirement. I have seen lots of wineries come and go. I’ve seen some people come to my office in old cars – like Jess Jackson-- and end up with their own fleet of jets. Indeed I remember la Crema being formed in the tasting room where I worked back in the late 70s. Rod Berglund reminds me that I warned them they would all end up bankrupt and I was right.
I am not sure what the formula for success is but it does seem an ability to foresee need, or was it luck, helps. Frank Woods, who started Clos du Bois, planted hundreds of acres in chardonnay in Sonoma County as he saw everyone else planting cabernet,. He thought, Americans love cold beverages, so maybe that might take off. If not, he told me,I will market the difference.
Long term, vineyard owners seem to do well, but in the beginning a vineyard is a hole in the ground you shovel money into.
“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.”
“We wouldn’t be doing this solely to make money, but out of the passion to help create something cool in this industry.”
My guess is that if you did not put your heart and soul into your winery you would not make this healthy profit.
I take it that Sean is interested in an agricultural real estate investment that happens to involve wine grapes, not a winemaking/winery investment as such.
The barrier to entry does seem to be higher in Napa and Sonoma. Areas of Mendocino and Lake County seem to provide better ROI from an investment perspective. The land is cheaper and there are actually areas that are undeveloped
The other question that fuels this question is what grape variety or varieties do you wish to concentrate on.
I know Blair Pethel at Domaine Dublere is looking for investors to own vineyards and lease them to him to farm. He is brutally honest about the economics of the investment, however: Paltry yields and no real money to be made until you exit.