Business

Expect to see more sales, mergers of Paso wineries, study says

ldickinson@thetribunenews.com

Paso Robles’ vineyards and wineries are ripe for outside investment, but they also enjoy a high level of support from the local community.

Those are two insights from Silicon Valley Bank’s annual State of the Wine Industry report, a survey of more than 500 wineries that serves as a barometer of the industry.

Paso Robles saw sales of a few properties over the past year — and it could see more. The report forecasts a continuation of the flurry of mergers and acquisitions in the industry over the past few years.

“It’s a desirable growing area that’s every bit as much in demand as Napa and Sonoma, especially because of the good value for the quality of grapes and wine,” said Rob McMillan, who founded the bank’s wine division and authored the report.

McMillan said he expects to see more deals like O’Neill Vintners and Distillers’ 2016 purchase of Robert Hall Winery as interest rates remain favorable and baby boomers look to retire.

It’s a desirable growing area that’s every bit as much in demand as Napa and Sonoma.

Rob McMillan, author of the State of the Wine Industry report

Half of the overall survey respondents reported being open to a sale, and 30 percent said a sale within five years is likely or being considered. Twenty percent said it’s a possibility. The report noted that it’s not just large wine companies in the market for vineyards and brands — private equity companies, medium-sized players and even smaller wineries have joined the hunt.

“In the past, it was rare for a boutique or luxury winery to buy another, but we are now seeing more transactions in which existing smaller wineries are looking for vineyard and winery assets,” the report stated.

While many such transactions in a family-dominated industry don’t get publicly reported, McMillan predicted Paso Robles and other regions will see more deals like Chateau Margene’s 2016 acquisition of Roxo Port.

Other reported merger/acquisition action in the Paso area last year includes Fetzer Vineyardssale of its Five Rivers winery and vineyards in San Miguel to Trinchero Family Estates, as well as Treasury Wine Estates’ consolidation of segments of its wine production at the old Meridian winery following its acquisition of most of spirits giant Diago’s wine business in 2015.

Local support remains strong

Paso Robles area wineries reported strong local support for their operations and the tourism they draw — higher than any other California wine region except Lodi and other Delta counties.

In Paso Robles, 45 percent of participating wineries responded they were appreciated and publicly supported. That’s more than double the responses in Napa, Sonoma and Santa Barbara, where respondents were more likely to report being welcome but publicly opposed or unwelcome and actively opposed.

No respondents in Paso Robles reported being unwelcome and actively opposed, while 35 percent reported being welcome but opposed, mostly because of water concerns, McMillan said.

The region, he said, has succeeded in creating a hospitality experience that draws people from the denser population centers to the north and south.

If wine country gets too crowded and loses its charm, we will be killing the goose that lays the golden egg.

State of the Wine Industry report

“A lot of folks are bypassing Santa Barbara County and going straight through to Paso. Same to some degree with Monterey County,” he said.

But the Paso wine industry also has been mindful of maintaining a good relationship with the community at large, he said, through philanthropy and addressing potential concerns about traffic, noise and unchecked growth.

“If wine country gets too crowded and loses its charm, we will be killing the goose that lays the golden egg,” the report stated.

San Luis Obispo wineries were included with Santa Barbara, making it difficult to draw any conclusions about local sentiment in this area.

Sally Buffalo writes about wine, beer and spirits. Reach her at sallybuffalo@gmail.com or on Twitter @sallybuffalo.

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