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8 W i n e s & V i n e s s e P T e M B e R 2 0 1 4 T his edition of the magazine contains our third annual wine industry finance report. A lot has changed since the first finance issue in 2012 presented a cautious op- timism about wineries' economic health. While the wine industry accepted then that the recession was over—sales were growing and the supply-demand situation was balanced—the lending picture in 2012 was not so bright. The bigger banks were still recovering from the recession and were afraid of risk. The smaller banks were more actively seeking lenders but may not have been tuned to winery needs. In the second annual Wine Indus- try Finance Issue last September, the industry outlook was not cautiously optimistic but just plain optimistic. The headline on author Ben Nara- sin's cover story was "Recovery Strengthens Wineries' Credit," and quotes like the following from a leading lender were typical: "There's a greater sense of confi- dence as a result of direct-to-con- sumer and distributor wine sales and merger and acquisition activity. All those things give people a greater sense of a sustained recovery…and more confidence going forward in building their brands." —Mark Bro- dy, Umpqua Bank This year the cover proclaims "Financial Outlook: Sunny" and Narasin's story (page 38) contains unequivocal comments like this: "Financial performance as a whole has improved along with the economy, thus creating stronger bal- ance sheets and ability to negotiate better terms from banks." —William Bishop, BMO Harris Bank how long will it last? The organizers of the annual Wine Industry Financial Symposium in Napa, Calif., aren't hemming and hawing either. The theme for the Sept. 22-23 symposium is "Let The Good Times Roll," and one of their promotional emails asked: "The wine industry is riding high, are you on top? How long will this ride last?!" That will be the next big question. When will the good times slow? Right now we see virtually no indication of slowing sales or a decrease in winery hiring. Check out the most recent data in our Wine Industry Metrics section on pages 10-13, or at wine- sandvines.com/metrics, where you can scan current and past met- rics from our market research team, Wines Vines Analytics, and our metrics partners Winejobs.com, IRI and ShipCompliant. One of the metrics we publish, the Winery Job Index, is espe- cially important to watch for the industry's economic status. It mirrored the 2008 bank crisis in real time and may well reveal the next downturn. Let's hope we have at least another two years of sunshine before that happens. Also, don't miss two articles about wine industry investment special- ists. Paul Franson recounts the career of retiring California vineyard investor David Freed (page 46), and Laurie Daniel interviews Charles Banks, the international vineyard and winery equity investor who founded Terroir Capital (page 49). Terroir, biochar and weeds Elsewhere in the issue we have sev- eral useful, practical articles about winemaking and grapegrowing. In- ternational viticulture consultant Dr. Richard Smart approaches the con- troversial topic of terroir by reject- ing the stand that terroir is all about a vineyard's soil and location (see the Practical Winery & Vineyard section, page 68). Also in the PWV section is an in- depth winery design article about Oregon's new Alexana winery (page 60) and a look into the legal impli- cations of expected new Internet do- main name suffixes related to wine by Chris Passarelli (see page 58). Three articles will especially inter- est growers and vineyard managers. Vineyard View columnist Dr. Cliff Ohmart explains on page 32 how biochar is made and how it's now being used in agriculture. Two oth- er articles by correspondents Peter Mitham and Paul Franson are all about weeds (page 52): weeds that resist herbicides, and herbicides that still kill weeds. Winemaker and winery technol- ogy guru Clark Smith returns with a Postmodern Winemaking column (page 36) that identifies four types of white winemaking from the most reductive to the most oxidative. Our monthly news coverage in the Top Stories section has im- proved over recent months, so be sure to visit pages 14-17, where you'll find a concise summary of the most important industry news as well as excellent reporting and analysis on the two big- gest business stories in wine as we went to press: Treasury Wine Estates' possible sale, and the latest developments regarding the California drought. E D I T O R ' S L E T T E R Soaking Up the Financial Sunshine Optimism reigns in the third annual wine industry finance report This year unequivocal comments from top lenders were common, as the economy and winery financial performance have improved. BILL ReITzeL