Many people love the idea of the vineyard lifestyle; a moment with your eyes shut will no doubt allow your imagination to picture more than I could ever describe in a few lines in an article. But despite its allure as one of the most enviable lifestyles in the world, the steps from taking a fine wine from your cellar and enjoying a favorite vintage to becoming an owner of a vineyard may seem too far to realistically consider.
However, like so many adventures, it is all in the preparation - and the best way to prepare is to learn from those who have been on this same adventure; people who have learnt from experience and who can guide you, if not come alongside you, in the development of your project.
It is true that there is a lot to learn - but that is half the fun! And in my experience, people who come to Bordeaux from other walks of life - often with little more than a passion for drinking wine - are often those that are most innovative and successful. There can be no doubt that part of the enduring success of Bordeaux is that it has continued to welcome those from outside its borders for hundreds of years. It is in so many ways, an extroverted, outward-thinking culture here that quickly marries its history and expertise with new approaches and fresh ways of considering the wine-making process.
I can think of many examples of people coming to Bordeaux from other industries, knowing little or nothing about the French language, legal system, wine-making or agriculture but bringing with them expertise and wisdom that questions the status quo and opens new and exciting innovations. In fact, some of the most successful wine-makers are those who came to Bordeaux from other countries and industries.
There is no question that you have to start with a vision. Dreaming is the beginning of any great adventure - but whilst the dream is essential to launch the adventure, it must quickly be followed by methodical questioning. So where do most people fail? Well, in my experience, the most common misconception is that the wine will sell itself. This may be borne of the image of the Bordeaux Grand Cru Classé Chateaux, that over many generations have established such powerful brands that they do not need to worry about marketing - and the wine does indeed sell itself. But for the majority of Bordeaux vineyards, the world operates much the same as it does for most other businesses. A product is produced and brought to market and a brand is born and then developed over time. There are many nuggets of wisdom I could share but, if there is one take-away I would emphasize above all, it is that a successful wine project will only happen if there is an intelligent commitment to marketing. Whilst the product must, of course, be drinkable, this really is the anchor and if you have spent any time in business already, you are probably at least familiar with it, if not an expert.
So, what about plant age hierarchies, drainage, farm equipment, leafage systems, diseases, organic farming, plant density, farm economics, marginal utility of labor and resources, production costs, employment laws, ownership structures, the French legal system, harvesting techniques, malolactic fermentations, thermoregulation systems, waste water treatment, diseases, weather factors, PCP’s, grape varieties, stock, and so on? Sure, there are a lot of factors to get familiar with, but Bordeaux has been doing all of that for 2000 years and there is a wealth of expertise here that surpasses all other wine regions - bar none.
The market is (no pun intended) illiquid – that is, it is relatively small and vineyards typically don’t trade like an apartment in Manhattan or Hong Kong, for example. Choosing a vineyard the same way that you would choose a residence is a big mistake. A vineyard is not a residence but an operation - and therefore must be chosen in response to your strategy. And whilst its beauty and location will be factors, they must also be a part of a well thought through, strategic business plan.
Vineyards are often not openly on the market due to wine distribution sensitivities, as owners don’t want to alarm their wine buyers about a change in their circumstances. To give you an overview of the market, there are a total of about 7,500 Chateau vineyards within the AOC Bordeaux which covers a region of about 110,000 hectares (about 270,000 acres) representing 57 appellations in all. At any given time, there are between 150 and 200 chateaux available for sale (about 2% of the total inventory) and, of these chateau vineyards for sale, about 80% of them are under €5 million Euros in value.
Each year somewhere between 25 and 30 Bordeaux chateau vineyards change hands (in 2016 there were 28 transactions) and again, the majority of these sales are under €5 million in value. A typical sale cycle for a vineyard will be two years on the market (although as mentioned before, this does not necessarily mean it was openly marketed) and then six to twelve months in addition to finalize a transaction once a buyer and seller start their negotiations. Vineyard transactions, especially for more valuable vineyards, are commonly M&A transactions (Mergers and Acquisitions) whereby the shares of the company are sold. However, less expensive vineyards are usually sold as a collection of assets. With very rare exceptions, vineyards are always valued as assets as opposed to businesses based on EBIDTA.
Whether the Bordeaux vineyard lifestyle starts with a vineyard of €1 million in value or €10 million, the first step is the same: the vision - and a dream of living that vision out. There is a saying in the vineyard world that goes along the lines of: “How do you make a small fortune from vineyards? You start with a big fortune.” There are, of course, examples of this. However, in my experience, this only happens as a result of approaching the industry as if it is a passive investment that will run itself. In most cases, owning a vineyard is certainly not a passive investment but it is also not rocket science either and, as with any other operation - with good people around you - it can become one of the most rewarding endeavours ever undertaken.
Michael Baynes is co-founder and executive partner of Christie’s International Real Estate affiliate “Maxwell-Baynes Vineyards” - specialists in M&A work for vineyard transactions.
For further information please visit Vineyards Bordeaux.
Or contact Michael Baynes on 00 33 (0)5 57 84 08 82 or via email: Michael@MaxwellBaynes.com