Wednesday, March 10, 2010

Napa Valley Terroirists Caught in Crush

Vineyard Defaults Surge as Bargain Wines Hurt Napa
Napa land values, the highest among U.S. wine regions, are based on wine appellation, or a property’s geographical boundary, and soil quality, according to Correia, the appraiser.

As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank.

[Guambat presumes this refers to the Silicon Valley in the SF Bay Peninsula, and not the plastic surgeon district in LA.]

“We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”

[This may have a ring of familiarity about it to those who were there 20 years ago. The wine flowed like blood.]

Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak

Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick.

The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside, California. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less expensive labels, the industry consultant said in a March 5 report.

Sales of super-premium bottles priced more than $15 declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV

“No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult cabernet” that can sell for $750 or more a bottle. “High-rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.”

[Guambat got a good case of the screaming eagles last time he saw a 20$ bottle of wine. Shoulda got a couple of cases while he was at it.]

Mortgage defaults will also hit Napa residential parcels owned by hobbyists, or those who intend to produce 100 to 300 cases a year, said Deborah Steinthal, principal of Scion Advisors. In October, the Napa-based consultants forecast that “hundreds of properties will go into foreclosure.”

That’s the scenario facing Sandra Sutherland, who bought a four-bedroom house and more than seven acres of chardonnay, merlot and pinot noir grapes for $2 million in 2005. She and her business partner haven’t made loan payments to Charlotte, North Carolina-based Bank of America Corp. since January 2009.

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Blogger Jack said...

Guambat: Silicon Valley Bank established a branch in St. Helena at the height of the "dot-com" madness of some ten years ago. This was when an average of five new millionaires were created each day through the silliness of IPO-induced illusion of wealth. Many of these post-adolescents decided they were wine makers and moved their money into vineyard property.

Silicon Valley is the landscape roughly between Redwood City and San Jose and the name Silicon Valley was first spoken by one George Learned, a distinguished journalist who was trying to say Santa Clara Valley, but had wine-generated pronunciation problems that morning. His mispronunciation was directed to another member of the fourth estate, one Don Hoeffler. Hoeffler thought Silicon Valley would be a good byline for his column. He adopted it, used it, made it lingua franca. This happened at he bar at Tadich Grill in San Francisco. The undersigned happens to be the only now-living witness to this great event, but that's how it goes.

The boob doctors use a material called SILICONE, not SILICON. Silicon is what transistors are made of. Silicone is the sticky rubbery plastic stuff. It is made of silicon. Silicone Valley is a term sometimes given to the area around Broadway and Columbus in SF where the topless girlie shows have long since replaced good restaurants and jazz joints.

I personally think it's grand that there is too much good wine in inventory. Doing my bit to reduce the surplus.

Cactus Jack

10 March 2010 at 10:34:00 am GMT+10  
Blogger Guambat Stew said...

'Twas a carefully laid trap to catch one Cactus Jack, and it worked a treat.


10 March 2010 at 8:37:00 pm GMT+10  

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