Vineyards, wineries and brands – a year in review
Transaction values for vineyards, wineries and wine brands continue to show signs of improvement, however results remain patchy. The old adage of ‘location, location, location’ remains front and centre with buyers and is clearly reflected in the results we have seen over the last twelve months.
As a general comment, the range of buyers in the Australian wine category has strengthened over the last year or so, and there is a distinct trend towards existing Australian wine and vineyard businesses searching for further investments in the Australian wine industry – buoyed by a lower $A, and evidence that exports are growing and Australian vineyard areas have declined. Evidence of improvements in financial returns is starting to filter through in some sectors, so this will also provide an impetus for buoyancy across vineyard, winery and brand values.
There is a sense that the savvy buyers have concluded that market dynamics will soon lift profitability and hence asset and goodwill values. Accordingly, they are acting now ahead of any market changes.
So, what has been happening?
As a general comment, good vineyards and good brands in the right regions are seeing strong or improving results. The regional ‘hot spots’ currently are the Barossa Valley, McLaren Vale, Yarra Valley, Mornington Peninsula and Tasmania. Regions such as Margaret River, Adelaide Hills and Coonawarra have had some strong results, however these are not particularly uniform, indicating that site matters – for example, there is a wide disparity in Coonawarra vineyard values between terra rossa vineyards on the main road, versus the rest.
At the same time, large vineyards in less celebrated and commercial regions have seen a great deal of activity over the last 12 months, though not much joy for vendors. In most cases, these have been distressed sales, and buyers have been able to purchase these properties at low values.
Looking at these large vineyards, prominent sales have been the vineyards sold as part of the liquidation of the Littore Group. These vineyards, 923 hectares in total, have been sold to Duxton Asset Management, though the transactions have not yet settled. Duxton Asset Management invests in Agricultural assets and the Chairman is Ed Peter, part-owner of Kaesler Wines, Yarra Yerring and various other wine and vineyard assets. Duxton has also acquired the 800ha Macquarie vineyard near Euston, formerly owned by Bruce Chalmers.
Howcroft Estate Vineyards near Bordertown, comprising 412 hectares of red grape plantings, with a 609ML water licence was sold to Casella Wines for a reported $9,000,000- or $22,000/ha on average.
The sale of Josephine’s Vineyard (CMV Farms) in Robinvale was not a distressed sale. This is a 160 hectare vineyard and sold about 12 months ago for $1.5M. Adjusting for extra land and improvements on site, the vineyard sold for $8,500/ha approximately, without water. At the time, water was valued at about $2,000 per ML (now closer to $3,000), which would mean that the vineyard would have been valued at about $20,000/ha if water was included in the sale.
An overall rule-of-thumb for large vineyards with water would put values currently at around $20,000 to $25,000/ha. With water valuations currently at around $3,000/ML along the Murray Darling Basin, at an average of 6ML/hectare in warm climates, fully operational vineyards are selling at between $2,000 and $7,000/ha (without water), which is just a fraction of their establishment costs.
Winery sales are also sluggish, with the best results achieved when wineries are sold along with vineyards, inventory and brands or goodwill.
The first-class, modern Littore winery, Jindalee, near Geelong sold to the Costa Group for a reported $6,000,000, or $300/processing tonne capacity, demonstrating the priority for expediency over price in a liquidation sale – the bottling line alone was worth nearly $10M. Rossetto Wines, a 12,500 tonne winery sold for around $5,000,000 or around $400/processing tonne. The DalBroi family acquired the former Cranswick Estate Winery in Griffith from Californian-based The Wine Group on a vendor finance deal. This was a 20,000 tonne winery, well equipped, and reportedly transacted for around $6M or $300/processing tonne.
The Ryecroft winery, a 20,000 tonne winery owned by Treasury Wine Estates at the back of the McLaren Flat township was briefly put on the market – then shortly after, withdrawn – probably motivated by a change of strategy given the reality of selling an under-utilised winery.
These three wineries illustrate some of the dynamics currently before the Australian wine industry. Jindalee had major supply contracts with Coles, and the sale to the Costa family shareholders of the Costa Group (Fruit and vegetable producers, packers and wholesalers), also a major supplier to Coles, obviously signals an intent by Coles to continue with this format. The sale of the Rossetto winery to DeeVine Estates reflects the relative strength in the region of high-volume production, sales, and future sales opportunities. On the other hand, a 20,000 tonne winery in McLaren Vale has little market appeal in a region that is shifting up-market, with smaller-scale production runs.
Looking across the premium regions, sales surpassing $100,000 per hectare have been recorded in the Barossa and Yarra Valley recently.
The Gnadenfrei vineyard in the Barossa sold for over $450,000/ha a couple of years ago. This was a small, specific site that sold grapes exclusively to Torbreck for The Laird, and the sale (to Torbreck) reflected their strategic interest in securing the fruit source. More recently, Murray Street Vineyards purchased a 16.5ha Shiraz vineyard adjacent to their site for $2.36M. The vineyard was sold with a full crop and BIL water that exceeded the vineyard’s requirements, so deducting excess water and the value of the crop, the vineyard was valued at about $115,000 per hectare. Other sales in the Barossa include the Ebenezer vineyard at about $60,000/ha (37ha planted) and Magnolia Vale, which was sold to Calabria Family Wines last year.
Recent sales in the Upper Yarra for premium chardonnay and pinot noir vineyards (primarily) include the sale of Lusatia Park Vineyard to DeBortoli and the Guerin Vineyard (renamed Applejack Vineyard) sale to Giant Steps. Details on these vineyard sales are confidential but sales values have exceeded $100,000/ha. It is noteworthy that the best valuations for vineyards in the Yarra Valley have been achieved for very specific (and strategic) vineyards in the Upper-Yarra, or in the ‘Dress-Circle’ area near Healesville around Gruyere and Coldstream.
The Innocent Bystander brand and inventory was recently sold to Brown Brothers along with the adjacent site, the former White Rabbit Brewery – which will now become the home of Innocent Bystander and the Yarra Valley HQ of Brown Brothers. Whilst details are confidential, the result demonstrates the strength of the Yarra Valley as well as the strength of the Innocent Bystander brand and its future earnings potential.
McLaren Vale has, likewise seen strong results for strategic vineyards. The Duck Chase East vineyard sale and the Cascabel sale each saw results above $80,000/ha. However, there are several larger vineyards on the lower levels of McLaren Vale that have been for sale and not traded. It would be difficult to see results for these vineyards reach $50,000 per hectare.
Overall, the transition underway in the Australian wine industry is clearly evident in the sales results.
The right sites, in the right regions are seeing buyer interest, competition between buyers and decent prices achieved. Likewise, brands with future earnings potential that have genuine cache in the market are trading at healthy multiples. Buyers are spoilt for choice if they are searching for mediocre vineyards or brands, but the high-performing vineyards and brands will continue to set the pace.
Director, Gaetjens Langley
Published in Grapegrower and Winemaker – May/June 2016 edition