A major shift in consumer sentiments and buying patterns is causing significant dislocation in Napa Valley, especialy among growers/wineries with poor financial positioning.
In the period 1991 to 2008, U.S. retail wine sales grew by 66% but fell by 3.3% between 2008 and 2009. Sales of bottles in the super-premium category ($30 and above) fell by 15% while sales in the premium category ($15 and above) fell by 10%. U.S. wine sales decline can be traced to three direct forces: (i) the impact of cheaper wine from Chile, Argentina, and other areas; (ii) consumers trading down in their buying preferences (there may be some causative influence between (i) and (ii); and (iii) a falloff in the restaurant wine sales market as recession-racked consumers stay home in droves.
Within this market environment, wineries are having a tough time moving inventory and some have resorted to such heretical practices as doing private label wines or selling in bulk. In the case of bulk wine sales, the sell price of the wine could be lower than the cost of the grapes to the winery.
The turmoil in the wine market has had significant knock-on effects for wine industry real estate. According to Silicon Valley Bank, as many as 10 wineries and vineyards will change hands in distressed sales or foreclosures between 2010 and 2011. Further, property loan defaults in the month of January were four times higher than one year ago.
Napa land values are currently averaging between $150,000 and $200,000 an acre for land planted with red varietals. This is a 15% decline from the 2007 peak. This reduction in land values is affecting everyone but even more so the new arrivals. These "newbies" made their money in real estate or finance, came into Napa with the romantic notion of crafting the next Screaming Eagle, and bought land at the peak of the market in pursuit of this dream. This approach has saddled them with enormous initial costs, costs which are unsupportable in a down consumer environment. And, given the decline in land prices, and bank credit tightening, it is very hard to refnance loans without a bulletproof story.
The strongest players in the industry are seeking to turn this turmoil to their advantage. For example, Bill Harlan, of Harlan Estates, has purchased 21 acres of an Oakville property called Diamond Oaks Winery from a businessman named Dinesh Maniar. This same Dinesh Maniar has two other properties in the area that are also facing foreclosure.
In a KQED forum on the state of the Napa wine industry, Robert Nicholson of International Wine Associates has stated emphatically that the sky is not falling. He sees the market experiencing some adjustment but continuing to be strong overall. The U.S. wine market, according to Robert, has a very strong core group of wine drinkers in that 90% of the the wine consumed is drunk by 20% of the population. He is very optimistic about the long-term prospects for the market as the 44 milion marginal drinkers, and those who do not currently drink wine, continue to be exposed to the beverage.
It is possible that current wine price declines will be the silver lining in that long-term picture painted by Robert. If lower wine prices solidify the marginal drinkers, and attract the non-drinker, it would have positive implications in that today's entry-level wine drinker is tomorrow's premium wine drinker.
Showing posts with label Bill Harlan. Show all posts
Showing posts with label Bill Harlan. Show all posts
Tuesday, March 16, 2010
Tuesday, March 9, 2010
Bond Estates Tasting: Why the Anticipation?
Why was Stacole Fine Wines able to bring together the group they did for the Bond Estates tasting? The answer is simple: Bill Harlan. Harlan, the force behind Bond Estates, was, and still is, the driving force behind Harlan Estates, a wine that has been described variously as "... one of the ten best wines of the twentieth century" (Jancis Robinson) and "... impossibly lush, incredibly concentrated reds." Harlan himself has been described as "... part philosopher, part real estate man ..." and "... genius behind one of Napa's greatest wineries" and "... something of a philosopher, a man with a well-articulated vision of what really matters in life."
William "Bill" Harlan was born in Southern California in 1940 and made the trek north to attend Berkeley from which he graduated in 1962 with majors in Communication and Public Policy. Harlan had his introduction to Napa while a student at Berkeley. According to Decanter Magazine, Bill made his money as a property developer. His signature real estate deal was the purchase and transformation of the luxurious Meadowwood resort on the east side of Napa Valley.
Bill was in Napa when Robert Mondavi opened his winery and he found Mondavi's story inspiring. He wanted to build his own winery and this led to 15 years of exploration including travels to Europe, a region whose wines he found to be fascinating. During these travels Bill formulated a philosophy that producing great wines required (i) great land and (ii) great people.
Bill helped to found Merryvale in 1982 and hired Bob Levy as the winemaker. Harlan was founded in 1984 with the purchase of 240 acres of prime land, 30 acres of which were devoted to estate vineyards planted to the classic varietals. Experimentation continued on the Harlan wine until the 1990 vintage was released in 1996. Merryvale was sold at this time so that the fullest attention of the winemaking team (to which had been added Michel Rolland, famed French oenologist and consultant winemaker) could be focused on the production of Harlan Estates.
Bill's philosophy and efforts have been vindicated by the market acceptance of Harlan. The wine rapidly achieved "cult" status as a result of its quality, lack of availability, and stellar Parker scores. The 1995 vintage was awarded a 99 by Parker while the 1997, 2001, and 2002 vintages all received perfect scores. While those lucky enough to be on the Harlan mailing list are offered the wines at around $250, the open market price can range from $500 to upwards of $2000, depending on the vintage.
Flush with the success of Harlan, Bill, in 1997, launched a collaborative venture with winemaker Bob Levy and vineyard manager Mary Hall to identify and produce "grand crus" of Napa Valley. While buying fruit for Merryvale, Bill had found many outstanding vineyards and in this new project -- called Bond --he sought to utilize these vineyards in the production of terroir-specific Cabernet Sauvignon wines. According to Decanter, the name Bond reflects the reality and promise of Bill's long-term relationship with the growers who produce the fruit for these wines.
So the group was brought together by the pedigree and promise of the Bond Portfolio. The pedigree as manifested in the accomplishments of Bill Harlan and his winemaking team. And the promise that lightning could be in a bottle of Bond.
William "Bill" Harlan was born in Southern California in 1940 and made the trek north to attend Berkeley from which he graduated in 1962 with majors in Communication and Public Policy. Harlan had his introduction to Napa while a student at Berkeley. According to Decanter Magazine, Bill made his money as a property developer. His signature real estate deal was the purchase and transformation of the luxurious Meadowwood resort on the east side of Napa Valley.
Bill was in Napa when Robert Mondavi opened his winery and he found Mondavi's story inspiring. He wanted to build his own winery and this led to 15 years of exploration including travels to Europe, a region whose wines he found to be fascinating. During these travels Bill formulated a philosophy that producing great wines required (i) great land and (ii) great people.
Bill helped to found Merryvale in 1982 and hired Bob Levy as the winemaker. Harlan was founded in 1984 with the purchase of 240 acres of prime land, 30 acres of which were devoted to estate vineyards planted to the classic varietals. Experimentation continued on the Harlan wine until the 1990 vintage was released in 1996. Merryvale was sold at this time so that the fullest attention of the winemaking team (to which had been added Michel Rolland, famed French oenologist and consultant winemaker) could be focused on the production of Harlan Estates.
Bill's philosophy and efforts have been vindicated by the market acceptance of Harlan. The wine rapidly achieved "cult" status as a result of its quality, lack of availability, and stellar Parker scores. The 1995 vintage was awarded a 99 by Parker while the 1997, 2001, and 2002 vintages all received perfect scores. While those lucky enough to be on the Harlan mailing list are offered the wines at around $250, the open market price can range from $500 to upwards of $2000, depending on the vintage.
Flush with the success of Harlan, Bill, in 1997, launched a collaborative venture with winemaker Bob Levy and vineyard manager Mary Hall to identify and produce "grand crus" of Napa Valley. While buying fruit for Merryvale, Bill had found many outstanding vineyards and in this new project -- called Bond --he sought to utilize these vineyards in the production of terroir-specific Cabernet Sauvignon wines. According to Decanter, the name Bond reflects the reality and promise of Bill's long-term relationship with the growers who produce the fruit for these wines.
So the group was brought together by the pedigree and promise of the Bond Portfolio. The pedigree as manifested in the accomplishments of Bill Harlan and his winemaking team. And the promise that lightning could be in a bottle of Bond.
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