The winery elephant bubble

[LTD]

the land and building alone in naramata is probably worth that

So the Chinese rich guy got ten acres plus Lang Winery, which had a reputation for
being one of the best wineries in Naramata for $2 million, and this guy wants almost
the same price - 1.85 million - for three acres, with a nothing winery that has zero reputation.

?

Don't think so.

when did it sell 2010 or 2011? ya I think so, pull your head out and have a look at land values in that area

[Thinktank]

it seems to me that many rich people got in the winery business I think to get deductions ....

The wine industry in now a major player in the Okanagan but it says it needs a break.

That’s the message the president of the B.C. Wine Institute delivered at a federal panel’s pre-budget consultations in Kelowna Monday.



I would like to pay more taxes so they ^^^ can pay less taxes.



https://globalnews.ca/news/2980749/wine ... tax-break/

[Jhunter199]

Can anyone confirm , or refute twobits' assessment of the industry. I don't really know anything about it , but I just assume that the info is far from accurate , considering the source.

I can tell you they most definitely did not have two years of inventory.

Any reputable winery that is producing red wine should always have minimum two years of inventory in stock. When was the last time you went to any winery, or liquor store and bought a great 2017 Cab Sauv? I can pretty confidently say no one has purchased a 2017 yet. The wineries are able to leverage the barrelled wine along with the bottled (that is being cellar aged for minimum 1 year) to the banks.

[twobits]

when did it sell 2010 or 2011? ya I think so, pull your head out and have a look at land values in that area[/quote]

LTD, you are a smart poster. But you have to ask yourself what drove these prices? Given what I have seen in storage, it is not profits. And given the consolidation happening with distressed properties, of which 10% make it to public media and view, ag lands have become akin to a penny stock of sorts with market makers doing a pump on profit potential that is just not real.
We are already in an oversupply situation. And that is why the Wine industry is lobbying for tax relief. They see the writing on the wall as they store wine they cannot sell and are looking for a lifeline in hopes that something will change.
Think people! Why would they lobby for tax relief if insane profits were driving the price of their property?? They are not growing marijauna with unknown future revenues to spike prices. They are already hiding product and pretending everything is good and the banks are going along with it as long as the assessed value of the land plus inventory covers the debt. I am sure some banks are already worried about their exposure but won't say anything because their public concern would just drive down the price of their secured collateral.
There will be a serious consolidation and closure of many small wineries in the next five years unless something very radical changes happen to change the wineries business model......and that would be markets, land values for growing, and gov't taxes.

[twobits]

Any reputable winery that is producing red wine should always have minimum two years of inventory in stock. When was the last time you went to any winery, or liquor store and bought a great 2017 Cab Sauv? I can pretty confidently say no one has purchased a 2017 yet. The wineries are able to leverage the barrelled wine along with the bottled (that is being cellar aged for minimum 1 year) to the banks.

Really?

Storage Needs for the Average Wine Drinker

At the risk of losing potential customers, let's be frank. The vast majority of wine out there today (95%?) is "ready-to-drink". Manufactured for immediate consumption, they will NOT improve with time. In fact they will start to degrade from the day they're corked - even if properly cellared. Proper cellaring will maintain your "ready-to-drink" wines much longer, but it will not improve them.

Someone once did a study of all the wine purchased from the LCBO shelves, and determined that the average length of "cellaring time" for all wines sold was something in the neighborhood of 14 hours! Producers know this, and develop most of their wines for this purpose. In general it is far less expensive to make "ready-to-drink" wine, so why not?

Not to say that "ready-to-drink" wine means low quality - far from it. There are very high quality and very expensive "ready to drink" wines (and grape types) that are simply not designed to be age-worthy. (i.e. The pot roast tastes great on the 5th day, but the leftover trout will not). Bottom line: if kept for only short periods, (i.e. few months) specialized storage is not an issue for the average wine drinker, the average wine, or any wine for that matter.

Most "ready to drink" wines can be safely stored up to 8 or 12 months or so without significant loss of quality as long as it is kept in an area with the following minimum conditions:

away from direct sunlight, between of 4°C and 18°C (40°F and 65°F), temperature does not fluctuate more than about 2 to 3°C (5°F) - at least not too frequently?! and relative humidity levels are greater than 50%.

Store it outside of these limits, and all wine is subject to passing their prime or spoiling in just a few months. Although the first two conditions can be easy to provide (if you have a basement), most people find it very difficult to provide the last two without some type of cellar or wine cabinet. So drink up folks, or better yet, call us!

So Okanagan wineries are storing both red and white wines for several years why? High end market? Or it just can't be sold before the next crop is processed?

https://www.finewinereserve.com/facts.php

[Gilchy]

2 separate issues:

-Indeed, these tiny wineries can’t make it long term, land prices are too high to justify it as a profit making endeavour without scale, unless the owner is truly treating it as a subsidized hobby. This isn’t a “dirty secret”, pretty widely known.

-Any manufacturing/ distribution industry will maintain a substantial inventory to ensure that there are never supply issues.

There isn’t a great conspiracy to hide the struggling industry, it’s simply market realities both ways.

Also, did no one on these boards want to start 2018 in a positive way? Read the posts here, and you’d think Camada’s economy is on the tubes, our PM is a closet terrorist, our city needs a new downtown, our industries are failing, no one ever financially succeeds, and on and on. Cheer up, people, things are generally going well, and life is what you make it!

[twobits]

The wineries are able to leverage the barrelled wine along with the bottled (that is being cellar aged for minimum 1 year) to the banks.

As an edit to my previous post....why leverage? Leverage means borrowing against assets. Profitable businesses do not need to leverage for operations. If they are making so much money, why are they leveraging an inventory that should have been sold before the next vintage year is available for sale?
Could it be the elephant in the room?

[Gilchy]

If you think that’s high leveraging, you should see how car dealerships work.

[Jhunter199]

Any reputable winery that is producing red wine should always have minimum two years of inventory in stock. When was the last time you went to any winery, or liquor store and bought a great 2017 Cab Sauv? I can pretty confidently say no one has purchased a 2017 yet.

Really?

To keep my answer short...

Yes

The article you posted was an interesting read, but it still is tough to argue the fact that no winery I have ever seen puts the juice in a bottle on the shelf in a matter of weeks. Is it drinkable after 14 hours? Maybe?
But then one should think, maybe the reason the Okanagan has so many mediocre wines is that they are rushed and sent for sale to early. I will argue that aging higher end Okanagan wine does make it better (to a certain age, 8-9 years) The climate controlled storage facilities that wine is being aged is not a new thing, its been happening for years.
Thats the plan for the old packing house in Naramata as well.

[twobits]

The goal of every winery is to sell out their current vintage before the next vintage is marketable. They may keep a small percentage of a particularly interesting wine to cellar, but that would be 5% or less even. Sorry, but for overall production volumes, the amount going into storage is nothing more than the lack of ability to sell the wine when it is ready for sale. The bulk of wines being put into storage are nothing special. Most don't even have VQA labels on them. How does one explain that other than an elephant in the room?
Where are the winemakers of these facilities debunking what I see happening? I would gladly defer to their explanation if backed by some production figures and what they need to cellar age for future sale that would require so much cold storage for the Okanagan Wine industry's annual output.
We'll even just ignore the fact that you do not cellar age, red wines especially, at 4 deg celsius. That temp is used to preserve, not age improve.