Foreclosure Woes Hit Napa Wineries

March 9, 2010 No Comments »

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California’s Napa Valley is the latest victim of the ongoing foreclosure crisis, according to a piece in BusinessWeek.

Land values in the area have fallen by roughly 15 percent from the 2007 peak, and demand for the costly wines produced in the region has slumped.

DataQuick said loan defaults have increased fourfold in the region, and an estimated 10 wineries and vineyards are expected to change hands via distressed sales and/or foreclosures in 2010 and 2011, according to Silicon Valley Bank.

Meanwhile, U.S. retail wine sales fell 3.3 percent to $29 billion in 2009 after rising every year since 1991, though consumption was still up 1.9 percent to 323 million cases last year.

But consumers are targeting cheaper brands, as sales of super-premium bottles, those priced more than $15, fell 10 percent last year, and ultra-premium bottles ($30+) fell at least 15 percent.

Imports from places like Argentina, Chile, and Australia are also cutting into profits, as are lower-end sales, with the 5-liter boxed wine product from Franzia that retails for eight bucks the top seller.

Napa land values are the most expensive among wine regions in the United States, with average prices $150,000 to $200,000 per acre for a red grape vineyard and $115,000 an acre for white grapes such as chardonnay.

California produces 90 percent of all wine in the United States, according to the U.S. Tax and Trade Bureau.

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