The sale last year of Stag’s Leap Wine Cellars put the spotlight on the fate or fortunes of family-owned wineries.
In coming years more of these wineries, which typically annually sell 3,000 to 50,000 cases of wine, will decide whether to sell or transition to heirs.
In the case of Stag’s Leap, the sale didn’t surprise me. Warren Winiarski, the winery’s founder, and his family had explored the options of his succession and they decided the winery would be in better hands with a new owner, and I think they made a wise choice in negotiating a deal with Ste. Michelle and Tuscan vintner Piero Antinori. I expect many other wineries have been weighing the same options, although there aren’t enough Ste. Michelle’s out there to bail out everyone.
Dennis Groth, whose family owns Groth Vineyards, also in Napa Valley, is keen on keeping his business family-owned and sent me a study about winery ownership transitions, aimed at small, family-owned wineries. The report was compiled by Silicon Valley Bank, which I’m also sure works with winery clients to ensure smooth passages.
The study was sent to nearly 3,000 small wineries in California, Washington and Oregon, of which 247 responded. Among some of the findings:
Most want to keep their businesses in the family, but half expected a change in control within 10 years, and 25 percent expect to change hands within the next five years. That means more than 1,000 wineries could change ownership in that time frame.
But the study found that few are adequately planning for transition, which the bank says takes five to 10 years to properly execute, and are not aware of potential sale hazards, such as inheritance taxes.
Moreover, most of the winery owners are apparently ill-prepared for any transition, which is why so many suddenly run into troubles that result in the business being forced to sell. Not surprisingly, communications skills among owners and would-be heirs is poor. Those of us on the receiving end of many winery communiqués understand this quite well.
Even if wineries do plan ahead, that hardly ensures a smooth transition.
I expected that this scenario was developing, since most wineries were founded after 1975 and are mature if not ripe for change. Few wineries make it to the second, much less third generations. Moreover, the passion that fueled most vintners’ careers hardly means that the next generation has that same dream or determination. Turning the business over to sons and daughters whose interests lie elsewhere makes less sense than selling.
Today I’m meeting with Carissa Chappellet, who has been working on her family’s estate planning and what hurdles they face trying to keep the business in the family and the family happy as well.