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34 WINES&VINES November 2016 2016 SUPPLIER SURVEY F rom booming direct-to-consumer sales to available credit for expansion, wineries and vineyards are reaping the benefits of a thriving wine sector, ac- cording to Wines & Vines' annual survey of wine in- dustry suppliers. For the first time since Wines & Vines launched the survey in 2008, 100% of respondents said the financial health of their win- ery and vineyard clients was as good or better than the previous year. The results are markedly different from those reported in 2011, when almost 20% of re- spondents said their clients were "doing worse" financially than the year before. But just as the price consum- ers are willing to pay for wine is trending up, so too are the prices for goods and services offered to wine industry businesses. More than half of those surveyed indi- cated they plan to raise prices during the coming year. As suppliers of products and services to wineries and vine- yards, vendors are in a unique position to gauge their clients' businesses. One respondent from the packaging design sec- tor summarized that winery health "appears to be very good, based on our receivables." With a strong Consumer Confidence Index boosting the luxury goods market, wineries have cash in the bank and are paying their bills on time rather than waiting for the busy season to catch up on past-due invoices. Another respondent, a bot- tling equipment vendor, noted that wineries are making the most of the favorable economy by investing in new construction and filling their cellars with top- of-the-line winemaking equip- ment. Even those who aren't upgrading their facilities are re- evaluating their assets and mak- ing capital improvements, possibly encouraged by the low interest rates available to good candidates for credit. As technical sales director for BSG Wine Division in Napa, Calif., Ryu Yamamoto works with wineries big and small. "They all seem to be growing," he said. "Their sales are going up." EASY FINANCING A full 98% of survey respon- dents said their winery and vine- yard clients have the same or better access to financing for products and services as they did a year ago. Such free ac- cess to credit is significant, given that just six years ago 15% of suppliers said they planned to tighten credit terms for wine industry clients in the year ahead. As a special finance report in the September 2016 issue of Wines & Vines advised, "Now is an exceptional time to lock in long-term loans at advantageous rates….Rates remain low, (and) competition for loans among banks remains high." Bill Rodda, managing direc- tor of agribusiness for American AgCredit, agrees, saying that particularly in premium wine- growing areas, there is a per- ception that assets are going to increase in value. AgCredit is part of the Farm Credit System, a network that serves as the largest lender to vineyards and wineries, but commercial banks are eager to serve the wine in- dustry as well. "Ag has been perceived as a good investment by commercial banks, and the supply for lend- ing in the United States is still very strong," Rodda said. TRENDS AT WORK The availability of credit isn't the only factor behind winery expan- sion, however. The trend of large wineries gobbling up smaller wine producers promises to change the way these businesses are run, whether it means larger production or increased scrutiny on fruit sourcing. "Some smaller operations want to grow and take things to the next level," Rodda said. "But they may not have ade- quate capital," which can come in the form of investments such as GI Partners' deal with Far Niente Wine Estates or TSG Consumer Partners' larger ac- quisition of Duckhorn. And while larger players have been focused on securing vineyard sources and wine-pro- duction space (see "Mergers and Acquisitions From Both Sides" on page 15,) a handful of producers have hedged their Suppliers Agree on Industry Health Wine industry product and service providers say consolidation and premiumization will continue, and prices will rise By Kate Lavin FINANCIAL HEALTH OF WINE INDUSTRY CLIENTS What is your impression of the financial health of your wine industry clients? 80% 70% 60% 50% 40% 30% 20% 10% 0 Getting Better Staying the Same Getting Worse 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016