Issue link: http://winesandvines.uberflip.com/i/365438
W i n e s & V i n e s s e p t e m b e r 2 0 1 4 39 one panelist alluded to the difference be- tween wineries run as a business versus those run as a lifestyle. Banks need to see profits to support debt payments—not just in wine busi- nesses, but in businesses as a whole. Ultimately wineries have to produce good business, not just good wine, to be bankable. Several participants in our panel pointed out the growing importance of direct-to-consumer (Dtc) sales, both for businesses and for the financing opportunities they unlock. Dtc sales create an appealing asset both to businesses and lenders due to wineries' ability to control distribution, healthy margins and a consistent recurring revenue base. From tasting rooms, wine clubs, direct sales and evolving social and Internet marketing, Dtc has changed from "a choice for the winery to a matter of survival," says panelist Rob Mc- Millan of Silicon Valley Bank. Bankers recog- nize the trend and factor it into their assessment of the health of (and prospects for) potential wine brand clients. A well-run business, after all, has one eye on the present and another on the future. Dtc is also important on the equity side, according to panelist Quinton Jay of Bacchus capital. The two main advantages of building a healthy channel mix between Dtc and wholesale are the higher margin from Dtc sales and the consistency of revenue that wine clubs bring. equity and mergers and acquisitions (M&A) transactions have, again similar to last year, been robust. producers wishing to lock in long- term supply continue to buy up vineyards and wineries. Acquirers seeking to fill out a port- folio to complete their offerings continue to buy wineries and brands. Market recovery and the positive economics in wine have created a willingness to pay prices more aligned with what sellers are willing to accept than was the case two years ago. While large private-equity players have not returned to the market as in past years, beyond those extant, private investors have been seen re-entering the market. Strategic investors and large wine brands have contin- ued to make acquisitions as well. offers paid for wineries have increased, but remain well below historic highs. Finally, several panelists pointed to the growing activity in the pacific Northwest: california wineries expanding into Washing- ton and oregon—as well as various acquisi- tions in the region—all create demand for financing for those activities. C O V E R S T O R Y six prominent lenders discuss the happy state of wine industry finance. From left, Perry deLuca of Wells Fargo, Quinton Jay of Bacchus Capital Management, Mark Brody of Umpqua Bank, William Bishop of BMo Harris Bank, rob McMillan of silicon Valley Bank and Charles day of rabobank. bill rietzel