When a winery the caliber of a Chateau Montelena is offered for sale, there are many ways to assess its value.
Potential buyers would look at sales and revenue, with the latter being the far more important figure, since inexpensive brands—think Two-Buck Chuck—can run up impressive sales numbers.
Cash flow is important, too, but the nuts and bolts of a Chateau Montelena kind of operation is its Cabernet vineyard. Chardonnay, Riesling and Zinfandel provide cash flow, but the vineyard is the driver.
Would-be buyers know that the 100-acre vineyard, known as the Montelena Estate, can produce grand, ageworthy wines. But it may also be old and in need of replanting. While great Cabernet vineyards can yield wines that bring huge prices, Cabernet vines don’t have the kind of longevity of, say, Zinfandel, and these days most wineries trying to compete with the elite have retooled or overhauled their vineyards, and Montelena is probably in need of at least some replanting.
Still, the ground is great, as evidenced by the best wines, and these days prime Cabernet turf can go for $300,000 an acre. Witness the zany bidding for the J.J. Cohn Ranch a few years ago. The property, which is now co-owned by the owners of Scarecrow and Francis and Eleanor Coppola of Rubicon Estate, triggered a bidding war that steeply escalated the price.
Then there’s the physical plant, winery and cellar, and Montelena is a spectacular property. The winery has been candid about some of its serious cellar issues. But keeping cellars clean is something all wineries face and Montelena probably needs some work.
Finally, there’s brand equity, and Montelena has a name and reputation that few in wine can match. I think the brand has faded, and my guess is the owners, the Barrett family, believe this is a good time to exit.
They’ve really had a great run, from starting a winery from scratch, to winning the Paris Tasting, to defining a style of Cabernet and Chardonnay that did exactly what they wanted them to do: Be classic, long-lived wines. Are there more challenges ahead for the Barretts? Perhaps. Winemaker Bo Barrett is in his 50s and can still make wine and his wife, Heidi Peterson Barrett, also has her own label, La Sirena. But I suspect that Jim Barrett, Bo’s father, senses this is now a good time to bow out. He’s always been his own man and likes to call his own shots.
There could be other reasons, of course. Land values have tumbled lately and business types hint that selling now allows the winery owners to benefit from favorable capital gains taxes, which are now low, but might be twice as high if they are increased in a new administration. And great Cabernet vineyards don’t come up for sale very often.
But there are many wineries in Napa these days that are “old” by business standards and facing inheritance and succession issues. Last year the owners of Stag’s Leap Wine Cellars and Duckhorn both sold. Looks like it might be time for Montelena as well.
The challenge for any would-be buyers is to avoid seriously overpaying. Emotions run wild, even crazy, with some wine deals, whether it’s consumers throwing money at cult wines or millionaires throwing money at land. If the new owners pay too much, their best choice to recoup that cash is by increasing production, and that’s where a lot of wineries get into trouble fast.