Reports of winery flops are overblown

San Francisco Business Times - by Chris Rauber

Despite reports that a wave of foreclosures may hit Napa Valley’s wineries and vineyards, there are signs that rumors of Napa’s illness have been exaggerated.
“We have not received calls from folks desperate to sell their wineries,” said Eileen Fredrikson, of Woodside’s Gomberg, Fredrikson & Associates wine industry consulting firm, referring to recent media reports that a number of Napa foreclosures may be in the offing. “As with any industry, there is no one-size-fits-all story.”
That’s not to say there won’t be any foreclosures or forced sales, but that the big picture appears to be improving, at least incrementally.
In fact, foreclosure fears may have hit just as things are starting to look up for the hard-pressed high-end wine business. The San Francisco-based Wine Institute, which represents 1,000 or so California wineries, reported last week that fourth-quarter wine exports were up nearly 16 percent compared with a year earlier, possibly a sign the worst is over. Overall, U.S. wine exports dropped 9.5 percent last year.
But the year-end 2009 rebound gives California vintners, many of them in the greater Bay Area, “reason to believe that 2010 will be a good year,” said Wine Institute CEO Bobby Koch — or at least a stronger one than last year, which saw many wines that retail for more than $20 take a beating.
“We see early signs that the winery M&A market will begin a slow and gradual recovery this year, driven by a gradually improving wine market and a recovery of the capital markets,” said Vic Motto, chairman and CEO of Global Wine Partners, a St. Helena-based wine investment bank.
Although hard data is in short supply, Motto points to an early February Nielsen Co. report showing that off-premise wine sales increased 5.1 percent for the month ending Feb. 6, and 3.5 percent over the prior 13 weeks. The vast majority of that growth came from domestic wines, and wines priced from $9 to $20 or more contributed significantly to the improved figures.
And although Silicon Valley Bank warned of possibly as many as 10 foreclosures or forced winery or vineyard sales in Napa Valley this year and next, Motto notes that there haven’t been any significant winery transactions yet this year, “because wineries thinking of selling are waiting for a stronger seller’s market.”
The recession’s gnarly impact on higher-end wine sales, resulting in many consumers’ trading down to lower-cost alternatives, has had an impact on many high-end Napa wineries, Motto acknowledged, but he maintains that the wineries that are in serious trouble were headed that way before the recession hit.
Even so, even the optimists admit that the early budlike signs of a stronger high-end wine market are just that.

San Francisco Business Times