Archive for the 'business of wine' Category

Vineyard prices in Burgundy

How much does that vineyard cost? In the video of the day, Alex Gambal, American in Burgundy, discusses vineyard prices in Burgundy and why he and his investors paid $10 million/acre for a sliver of land in Batard-Montrachet.

“It’s a way to preserve capital…You’re buying Treasury bonds today at 2%. What would you rather buy, US treasury bonds or a piece of grand cru in Burgundy where you’re getting 1%–and the dividend is bottles of wine! So it’s not a bad deal!”

I get the scarcity argument but there certainly are carrying costs associated with this type of investment. And weather may wreak havoc with a vintage as parts of the Cote de Beaune saw so dramatically this year so it’s not without risks. What do you think: is he oversimplifying things? Does it make you cry a little bit on the inside to see Burgundy land discussed as a functional equivalent of Treasury bonds?

Chart: Where is wine venture capital flowing?

wine venture capital There has been a spate of articles about a new gadget for preserving wine called the Coravin. What’s not been widely commented on is the fact that the founders raised a lot of money, notably almost $11.5 million in the last round.

The company, based in Burlington, Massachusetts, raised these funds from 106 equity investors, including restaurateur Joe Bastianich who had tested the product–formerly known as the Wine Mosquito–at his restaurant, Del Posto. The CEO, Nicholas Lazaris, ran Keurig before and after it was sold to Green Mountain Coffee Rasters.

Where does that put Coravin in terms of recent rounds of wine venture capital in apps and gadgets? At the top.

Two days ago, the team behind the label-recognition app Delectable announced a $2 million placement with angel investors. According to venturebeat.com, Club W has raised $3.1 million for their “personalized” wine club. The Danish company behind Vivino, also a label recognition app, has raised $10.3 million.

In previous non-winery M&A news, Lot18 raised $44 million though their last-completed round was in 2011. In December 2012, an anonymous group of investors from Singapore purchased a controlling stake in the Wine Advocate reportedly for $15 million.

NY Liquor Authority to Wine Library: “immediately cease and desist”

ny liquor authority New York law states prohibits wine shipments from New Jersey retailers to NYS residents. But you’d never know it since New Jersey is home to many wine shops that sell wine online to New York and beyond. One of the state’s highest profile retailers is Wine Library, popularized by Gary Vaynerchuk who once streamed 1,000+ videos from the store.

In a staggering change of direction, the New York State Liquor Authority has now decided to enforce the law on the books. In a letter dated 8/12/13 that has not been seen publicly even though it is on the SLA website, the SLA instructs Wine Library to “immediately cease and desist” sales to New York residents. Wine Library did not respond to a query for comment.

Over the past decade, New Jersey has turned into Read more…

The economics of wine and lobster

lobster chablis

The past few summers, wholesale lobster prices have plunged lower than the ocean floor. Yet lobster prices in restaurants have remained unaffected, a disconnect I have pondered over many a lobster roll washed down by Chablis or Champagne.

Apparently, James Surowiecki, who writes the New Yorker’s The Financial Page, has also stared down the same disconnect but he has taken it one step farther: he has written this week’s column about it.

In short, he finds that commodity pricing doesn’t apply to lobster since it is entrenched as a luxury good in the food world; cut the price and people may actually be turned off as they think it’s inferior quality. In the world of luxury products, psychology matters more than than the cost of raw materials.

He also notes Simonson and Tversky’s work on context-dependent preferences and choices. They found that if consumers were presented with a low-priced and mid-priced object to choose between, the selections would be split. But if a third, higher-priced object was added to the product mix, then consumers chose the mid-priced item 40% more often.

Lobsternomics has some application to the wine world. If input prices were to fall for high-end grapes, it’s unlikely producers would cut wine prices for the similar psychological reasons (indeed, we saw this with the flash sales after 2008 instead of outright price cuts).

Also, Simonson and Tversky’s work is applicable to wine lists where the mere presence of DRC on a wine list may move more malbec. What do you think about the effect of relative pricing on wine lists (or stores)?

But one way that the law of supply and demand is not repealed in the world of wine is when the cost factors go up. Then, as when hail vastly reduces supply, the relative scarcity forces prices up; whether they fall again remains a matter for empirical research–and consumer psychology.

The Daily Show on raisin growers

The Daily Show’s Jason Jones heads California to examine the National Raisin Reserve.

I hope he also got a chance to tap into the nation’s wine reserve, while on location!

Francois Pinault buys Araujo Estate #billionaire #napa

eisele vineyard

The famed Eisele vineyard of Napa Valley has a new owner: Francois Pinault, number 74 on the Forbes billionaires list. Pinault’s Artemis Group, which owns Chateau Latour among other wine properties, has agreed to purchase Araujo Estate Wines from Bart and Daphne Araujo. The price for the 162 acres, including the 38-acre Eisele vineyard, was not disclosed in this statement.

“Araujo Estate and its jewel, the unique Eisele Vineyard, have been producing consistently one of the very best wines of Napa Valley,” Frédéric Engerer, CEO of Chateau Latour, said Read more…

CEO: Wine.com “is doing fine”

rich bergson wine com

A financial blog posted that the private equity firm backing wine.com is “dumping their failed investment” in the company. Wine.com CEO claims the company “is doing fine” and has grown revenue to $75 million although he cites the “challenging” space that is wine online retail.

The blog, Growth Capitalist, reports that Baker Capital has retained Credit Suisse to shop their stake. One prospective buyer took a pass they report. The blog confirms the top-line figure but says that the company has yet to make a profit, so “bankers are left with little more than a nifty domain name to sell.” Venturebeat.com picked up the thread and says that the company’s “most reliable revenue model” involves the sale of gift baskets.

CEO Rich Bergsund hit back at the sale rumors, saying that the company hasn’t received outside funding since 2007 and has been cash-flow positive since 2009. He did elaborate on the difficulties endemic to the space: “wine is a challenging category online, due to regulatory constraints, shipping heavy glass bottles, extreme weather concerns and adult signatures required for delivery.” His full reply follows after the jump. On Venture Beat, Bergsund denied that the company was worth little more than the domain name–if it were true, he joked, he’d be the first to buy it. Read more…

The Vintner Group acquires Martin Scott Wines

martin scott wines Consolidation strikes the Empire State: The Vintner Group, the Virginia-based distributor, is acquiring Martin Scott Wines, a distributor based in Lake Success, NY.

Founded in 1990 by Martin Gold and Scott Gerber, Martin Scott Wines has grown to have a thick “book,” distributing wines from about 450 wineries, ranging from Domaine de la Romanée Conti, Bonneau du Martray, and Jacques-Frédéric Mugnier in Burgundy to Ponzi Vineyards and Chateau Montelena from the US.

The Vintner Group, formerly known as The Country Vintner, is an importer and wholesaler of fine wine and spirits. CEO David Townsend has led the company on an acquisition spree of late and the company now has operations in nine states in the mid-Atlantic and southeast. They now add New York, New Jersey, and Connecticut to that list. According to Shanken Daily News, the company recapitalized in the mid-2000s and now have Brockway Moran as a private equity partner.

What does this mean for the New York City wine market? If you’re in the trade, share your thoughts in the comments. Here’s a link to the press release.


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