August 20, 2011

Calculating the EBIT of A California Vineyard

Because of the TIME it takes to start a vineyard, and the many relationships that need to be created between the wholesale distributers, resturants, lable designers – and more, most people are purchasing existing, producing Vineyards and Wineries.

To understand the Return on Investment (ROI), which I think is critical, it’s important to distinguish between the Investor’s expected return.  A vineyard producing a Good Quality wine, depending on the variety differs in price greatly from one that has a Premium wine brand.

I am currently working with buyers interested in purchasing a Premium Winery.  Specifically, these buyers are looking for a winery or vineyard property that had the quality to produce a $100/bottle + wine.

Here’s a disclaimer: Keep in mind the numbers here are examples to illustrate my point – only and are not a guarantee nor do they necessarily reflect what any given vineyard, or winemaker may or may not expect.

  • This bottle price translates to a case sales price of $1,200-$2,400/case.
  • 1If the wine is sold FOB (sold direct to wholesaler) from the winery, the sales price would be $600-$1,200/case.
  • If winery cost of goods sold are 50%, then the net margin would be $300-$600/case assuming all the product is sold direct to wholesaler.
  • If 100% were sold retail at a 20% discount, the net sales price would be $960-$1,920/case.
  • If the winery produces 5,000 cases, this amounts to total net income of $2.4 to $4.8 million.
  • Assuming an EBIT (Earnings before Interest and Taxes) multiple of 10 times, the sales price for the brand would be $24 million to $57.6 million.

I am currently working with several other investors who are interested in purchasing a property with good quality, not premium quality wines.  We would consider that to be a price point of $12/bottle or more in the United States. (the numbers above roughly calculate with this figure as well)

Our belief is that any winery that has established itself as selling $100/bottle plus wines will ask for a premium EBIT (Earnings Before Interest and Taxes) if the brand is to be sold with the winery.  A winery owners’ belief is that if it has established itself as having wines of the very highest quality and a history of receiving at least $100/bottle then they will ask for a much higher multiple if that sale includes the brand.

It’s also very common in Sonoma Valley and Napa Valley for vineyards to be sold without the Winery.  Vintners have many opportunities to take their grapes to Various WineMakers in the Area for production. If you are interested in Quality Vineyards currently for sale in Napa and Sonoma, please call Mark Stornetta 707-815-8749. I can also give you information about Vineyards and Wineries that recently sold in Sonoma and Napa Valley.   

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