Issue link: http://winesandvines.uberflip.com/i/400294
W i n e s & V i n e s n o V e m b e r 2 0 1 4 33 reinforcements to handle the unexpected surplus of wine grapes. In the Pacific Northwest, Ken Linde, owner of Linde Vineyard Supply in Mon- mouth, Ore., said the recent spate of real estate transactions in Washington and Ore- gon has been good for business. (See "What's Behind the Northwest Land Grab?" on page 95.) Linde's 10-year-old business specializes in vineyard trellising, which has been booming since 2013, when Kendall-Jackson bought three vineyards that had been contracting fruit to numerous Northwest wineries, leav- ing dozens of producers with holes in their wine programs. New vineyards are going in to replace the fruit lost to K-J, and the Washington market continues to expand. "Last year was my biggest year ever, and we're on track to beat that again this year," Linde said. Randy Reicharge, president of GW Kent, said his company has opened a number of new winery accounts since harvest 2013, but business is not keeping up with the explosive growth of the craft brewery and craft cider businesses. From his view at the Ypsilanti, Mich.- based winery and brewery equipment sup- plier, Reicharge said he's seen more wineries starting to make beer. "They start out small with a little bit of beer for their tasting room," he said of winery clients who are part of the trend (most of them in the Mid- west and East Coast). "They're like a bar almost. They have big crowds at night, and it's a tourist attraction on the weekends." Obtaining financing Another area that experienced significant change since Wines & Vines launched its annual survey is the availability of financing to wineries and vineyards. In 2010 just 16% of suppliers said their clients' ability to find cash or financing was improving. This year that figure jumped to nearly 60%. Herron of Exchange Bank, a Santa Rosa, Calif.-based outfit that caters to many win- eries producing between 1,000 and 10,000 cases, said current financing is competitive for borrowers and "more available than it has been in a long time." In response, "Wineries are much more eager to spend," he said, adding that the bank has been seeing a lot of loan activity in the custom-crush sector as well as replanting and vineyard acquisition. "One thing we haven't seen is the num- ber of winery facilities growing," Herron said. "I think that is a function of a lot of wineries that built more than they needed before the downturn and regretted it." While long-term interest rates are rising, short-term rates (typically lines of credit) have not followed suit. Herron said he expects this to change in early 2015. "If the industry remains strong, and demand is strong for consumers," then rates are going to be less of an issue for winery operators, he said. Equipment financing rates are very com- petitive, Herron stated, while inventory financing remains more challenging, espe- cially for smaller producers. Raising prices Another first from this year's survey was the number of suppliers planning to raise their prices. When Wines & Vines asked the wine industry suppliers in 2009 whether they planned to raise prices during the next year, 23% of respondents answered affirmatively. This year that number jumped to 54%, with nearly 25% saying they plan to raise prices by more than 3%. Some wine industry suppliers said expiring tax incentives for investments in renewable energy will force them to increase prices, while others attributed adjustments to the increased federal minimum wage and inflation. As a vineyard trellis provider, Linde said his prices are subject to fluctuations in the price of steel, which he said is trending upward. "That has affected the cost per acre for a vineyard," Linde said. "Steel is probably the biggest component, and my commodities have trended up 3% to 5% in the past 12-18 months." Reicharge of GW Kent said he imports most of the company's tanks from Europe, and the euro is getting weaker. "The ship- ping costs are going up all the time, but the weaker euro should balance it out," he said. Other suppliers pointed out that wineries and wine retailers are also starting to raise prices once again. Mike Lynch, founding partner of wine industry marketing and public relations firm Big Bang Wine, said some of the win- eries that lowered prices during the reces- sion now are trying to resume those original values. Assessment of clients In fact, Lynch said many of his clients are the most profitable they've ever been. "Over the previous few years winery strategy was to cut costs to ensure profit- ability," he said. "I think most (wineries) have improved financially over the past year due to cost-cutting measures and increased sales." Nearly 58% of survey respondents said they think their wine industry clients' financial health is improving, while just 3% said it was getting worse. Herron of Exchange Bank said, "You've got two big harvests (from California) that are being released right now, and the prices are going up, so everybody is healthy." Clients' Access to Financing Which statement best describes your clients' ability to find cash or financing to pay for your products and services? Getting Worse 4% Industry Health in the Next Year Pricing in the Next Year Based on your orders and knowledge of the wine industry, what do you expect the industry to do in the next 12 months? In the next 12 months, do you expect to change the prices of your products and/or services ? Expand Slowly 69% Increase Prices by More Than 3% 25% Increase Prices by Less Than 3% 30% Expand Rapidly 15% Keep Prices the Same 40% Retreat Slowly 3% Decrease prices by Less Than 3% 2% Retreat Rapidly 1% Decrease Prices by More Than 3% 2% Remained Unchanged 12% Staying the Same 38% Getting Better 59% s u p p l i e r s u r v e y