Current assessment of the wine industry shows continued growth, as high-end brands and bottles priced in the mid-range continue to grab more market share. Premium brands expect growth in the double digits. This positive outlook for the future means both currently operating vintners and those looking to enter the industry may have an increased demand for winery loans.
Wine production in the United States has a long and colorful history. As far back as the 1500’s wine was produced by the Europeans who explored and settled America. Between the 1560’s and the 1650’s, wines were produced in Virginia, Florida, and what is now Texas, Arizona and New Mexico.
In the U.S., the first commercial winery was established in the early 1800’s in Cincinnati, Ohio and produced a sparkling wine from native Catawba grapes. Washingtonville, New York is home to what is commonly acknowledged as the oldest operating winery in America. It produced its first commercial vintage in 1839.
The late 1800’s saw a flourishing industry, especially in California. Ready to make its mark on the world stage, the industry was badly hurt by the 1919 ratification of the 18th amendment, commonly known as Prohibition.
Starting in 1920, alcohol production in the United States was banned. A small number of wineries were able to stay open by making sacramental wines (such as the one in Washingtonville, NY), but Prohibition decimated the U.S. wine industry as a whole. By the time it was repealed in 1933, wineries were gone and grape fields left abandoned.
And though it took decades for the industry to recover, when Prohibition was repealed, many owners took out winery loans, replanted or refurbished their fields, and started back into production. The U.S. wine industry was reborn.
The 1960’s ushered in the modern California wine industry and with that came vast increases in per capita wine consumption. In 1976, the international world of wine sat up and took notice of the high-quality wines coming out of California when a panel of French wine experts rated several California wines higher than top Bordeaux and white Burgundy in a blind taste testing.
California still has the highest wine production in the U.S. accounting for 90% of output. But other states are enjoying their own resurgence in wine production, especially Washington, Oregon, New York and Texas. In fact, almost every state in the U.S. has a winery.
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Winery Purchasing, Acquisition and Establishment
The purchasing, acquisition and establishment of new wineries is also a growing concern. Winery loans are used to both purchase and refurbish existing establishments, or to begin new, private estates. They are obtained by individuals, as well as by groups of investors – including publicly-owned corporations and privately held investment companies.
Financing for wineries includes traditional sources such as large commercial banks, local banks and private funding. There are banks, especially those located in noted wine regions, with dedicated resources for clients seeking winery loans. These financing specialists are not making decisions looking at a plan on paper while sitting in an office.
Instead, they are working alongside their clients in the field, walking the acreage and learning what the client wants and needs. They understand what it takes to manage and produce a successful grape harvest and they are comfortable in their knowledge of the large equipment used to produce both the grapes and the wine. They understand this is an investment in time as well as money.
Typically it takes years to produce an estate’s first bottling ready for release. These specialized financial experts are familiar with all aspects of the business, and understand the art, as well as the practicalities, of viticulture (growing grapes), wine production and bottling, marketing to the target customer, and product distribution.
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Wineries & The USDA
But traditional sources are not the only place to obtain winery loans. The business of wine production is a business of
agriculture. And just as the farmer raising corn looks to the United States Department of Agriculture (USDA) for financing, so too, can an American vintner.
Through the USDA, the Farm Service Agency, known as the FSA, is set up to provide dedicated support to American agriculture and this includes growing grapes for wine. Winery loans from the FSA can be used for grape cultivation start up, expansion of acreage for grapes, for the equipment and buildings needed for farming and production, as well as other needs.
The FSA also can also provide special assistance and winery loans for the traditionally underserved. This group includes women, Native Americans and African Americans, as well as others.
A small, but growing number of minority wine-makers are creating respected, high-end, award-winning wines. They are making an impact on the industry as more wine-lovers discover their products.
United States Small Business Administration
Another source for winery loans, as well as business assistance, for the minority owner is the United States Small Business Administration (SBA). The SBA has a long history of supporting women and minorities.
They help to level the playing field for this historically underserved market with loans for start-ups, and business expansion and growth, allowing these entrepreneurs an equal opportunity to compete in the global market. Crucial to a business’s success is expansion at the right time.
The SBA can be a source of money, when the opportunity to grow presents itself. And winery loans from the SBA may offer more lenient terms for the borrower as has traditionally been the case for other types of businesses.
Wine production by minority vintners is a trend that is expected to continue on into the next decade and beyond. For these groups, the FSA and the SBA can be valuable allies when traditional bank financing may be more challenging to obtain.
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Growth In The Wine Industry
Another growth area of the industry is the transformation to organic and biodynamic business practices. As more and more consumers demand pesticide- and herbicide-free products, growers and producers are striving to meet those demands.
Whether the vintner desires a completely organic operation or just wishes to reduce the reliance on chemicals, these changes not only bring a higher quality product to market, but they protect and preserve the lands used to grow the grapes. One of the largest financial outlays in wine production is for land. And not just any land will do.
The proper mixture of loam and alluvial soils, adequate drainage, and mineral content of the soil are just some of the properties that determine quality of land. Winery loans can be tied up in acreage, therefore protection of soil make-up, erosion prevention and freedom from chemical contamination all help to protect this large investment. Organic practices go a long way in protection of the land.
A wine producer can obtain winery loans to transform an already established business (or a new purchase) to meet the holistic, ecological and ethical approach that is the hallmark of biodynamic farming and production practices.
This financing can be used to offset the cost of converting to a more holistic approach including adding animals to the estate for more natural fertilizers to changing bottling techniques in order to negate the need for added chemicals.
Looking to the future, winemaking is still a growing – and transforming – industry in the United States. The U.S. continues to produce award-winning wines and move forward with innovation, ensuring its continued recognition as a respected producer of wines for the global market.
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