Issue link: http://winesandvines.uberflip.com/i/197145
s u ppli e r s u r v e y Wine Industry Expansion Continues Suppliers say wineries and vineyards are growing in our sixth annual survey By Tina Vierra S uppliers are an informative resource for measuring the health of any industry. This year's survey of companies that offer equipment, supplies and services to the wine industry showed strong growth for the second year in a row—as well as some interesting replies to questions of expansion and credit. Continuing expansion In numbers even stronger than last year's showing, 86% of suppliers reported seeing wineries and vineyards expand this year. Some predicted that, given the large volume of the 2012 vintage coupled with predictions of an equally large 2013 harvest, growth will continue for up to four years while these vintages make their way to market. Regionally, suppliers report that expansion is more rapid in eastern wineries than on the West Coast. Vineyards faced challenges of drought in the West this year, and too much water on the East Coast. Central Coast wine regions of California, they said, have grown rapidly during the past 20 years, with Washington state booming for the past 10. "The 2012 harvest pushed wineries to get moving," one respondent noted. "Development and redevelopment projects are up and running at a pace I haven't seen in about seven years." new technologies to improve wine production and quality. As their clients' financial health improved during the past two years, they could implement what they've been planning. Looking before they leap Credit is still tight When asked about their impressions of the financial health of their industry clients, 66% answered that it was getting better, while 30% thought it was merely holding steady. Only 4% thought their clients' financial situations had declined since 2012. The cautious minority seemed driven by concerns about consolidation in the industry. "I'm seeing smaller producers facing cost challenges and ultimately selling out or being absorbed by large operations," one supplier commented. "Products from off shore are impacting the profitability for producers." "Consolidation is the key," agreed another, "with winery purchases of vineyards and other wineries and businesses from outside of California and the U.S. purchasing wine interests here." Several suppliers saw the bright side of a few quiet years for wineries: time to decide on improvements such as vineyard replanting, energy-efficiency projects and In a big contrast to the 86% of suppliers who see industry expansion, only 39% thought that credit and financing for wineries and vineyards were improving this year; 55% thought conditions remained about the same as last year for financing. Ben Narasin's report in Wines & Vines' September Wine Industry Finance Issue indicated that finance experts saw credit availability opening up, but only at the A+ credit levels that most wineries don't enjoy. Wine industry vendors seemed to be responding to conditions at the everyday winery-operations level, where a winery or vineyard might want a line of credit with its bank to buy new tanks, a bottling line, upgrade a facility, put in a new wastewater or solar thermal system, or replant a vineyard block. Wines & Vines asked Vic Motto, a global banker, founder and CEO of Global Wine Partners, to explain why the survey indicated credit is still tight at ground level. Performance of the Wine Industry Financial Health of Wine Industry Clients How would you describe the performance of the wine industry during the past year? What is your impression of the financial health of your wine industry clients? Grew 27% Rapidly 16% 66% Getting 52% Better 33% Grew 59% Slowly 63% 30% Staying 45% the Same 48% Remained 13% Unchanged 15% Retreated Slowly 0.3% Retreated Rapidly 2013 2012 1% 1% 4% Getting 30% Worse 19% 2013 2012 2011 5% 0 10% 20%30%40% 50%60%70% 42 W in es & V i ne s Nov e m b e r 20 13 0 10% 20%30%40% 50%60%70%