Washington wine growers harvested 34% more grapes in 2022 than 2021 (https://www.washingtonwine.org/press_release/2022-harvest/). The quality of the grapes was high grade as a result of the warm weather of late September and October in 2022 which finished the crop in exemplary manner after a long growing season. It is anticipated that the wine released in late 2023 (Whites) and later (Reds) will receive high marks from judges and consumers. The quality & quantity of grapes produced in Oregon was also strong last year ( https://www.oregonwine.org/blog/a-year-to-remember-reflections-on-oregons-2022-harvest/).
IBA, as the oldest business brokerage firm in the Pacific Northwest with two offices in both Washington & Oregon, has a long history of being an advocate for our regional wine industry and representing owners of businesses in the sector. The representation of a winery for sale is one of the most sophisticated, nuanced projects a mergers & acquisitions intermediary can undertake as a professional. The reasons for the complexity include that the business model can include agricultural, manufacturing, distribution, and retail elements. In addition, the sale of a winery frequently includes both business and real estate components. The real estate component can involve both owned and leased locations resulting in a need for representation by a professional with both business brokerage and real estate experience. IBA is one of the few M&A firms in the region that also has licensed commercial real estate brokers in Washington & Oregon. Experience and methodology are also needed to value products from grapes on the vine to juice in tanks to wine in barrels to finished product in bottles as a component of a transaction.
Returning to the exceptional product harvested in 2022, 2023 is a good year to start strategic planning or executing a sale of a winery with that product in the pipeline to offer as an asset to potential buyers. The wine industry business model is unique in that foundational components of revenue, red wines, take multiple years to mature to a deliverable state that will generate the maximum possible market value. This in a M&A environment mitigates risk for a buyer post-acquisition, as two to three years of revenue in the future will be largely predictable based on review of market values and demand for prior vintages.
Another strategic planning element to consider is that with climate change the historically strong wine production areas of California are now experiencing higher temperatures and water issues that are making it more difficult to produce gold medal winning wines (https://www.cbsnews.com/sanfrancisco/news/napa-countys-famed-wine-country-prepares-for-climate-change/). This situation is creating opportunities for Pacific Northwest wineries and grape growers to sell their businesses and real estate at higher values as a result of stronger market demand resulting from established California wineries ( https://www.winemag.com/2022/04/14/jackson-family-walla-walla-acquisition/ and https://wineindustryadvisor.com/2022/07/27/corollary-wines-purchases-57-acres-in-eola-amity-hills/) seeking to diversify their production and growing options.
Finally, in the case of Washington wines, in collaboration with excellent business development vision, leadership, and execution by the city of Woodinville (https://www.theurbanist.org/2022/05/17/woodinvilles-downtown-district-poised-for-major-growth/), a tourist destination for local, regional, national, and international wine enthusiasts has been created where wineries are able to enhance the sale of product directly to consumers at retail values. Selling wine direct to customers is fundamental for success and profitability for smaller wineries whether directly out of tasting rooms or via wine clubs, as shelf space in wine stores and groceries is limited, highly competitive, and offers brand awareness opportunities at lower profit margins when product is sold at a wholesale value through distribution networks.
Demographically, boutique wine industry entrepreneurs appear to be in a good environment for future success with the number of regular wine drinkers increasing and those consumers seeking higher quality product (https://www.theiwsr.com/key-trends-driving-the-us-wine-market-in-2023/).
If you are interested in learning about the wine industry as a business owner interested in selling your company or an entrepreneur attracted to this space, the members of IBA’s transaction team specializing in the wine industry would welcome the opportunity to talk with you. All conversations with IBA are held in strict confidence. 100% of IBA’s fees are payable upon performance at project completion.
The wine industry is one of IBA’s favorites to serve. It is one of the few industries where our spouses ask us how a meeting went and did we bring anything home with us to share.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, legal, and accounting communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.