Australian vineyard and winery sales in the face of significant industry headwinds

Winery & Vineyard Sales

What impact, if any, have the various headwinds currently facing the Australian wine industry had on the market for vineyards and wineries in the country over the past 12 months? Sonya Logan spoke with one of Australia’s leaders in the sale of businesses in the wine and vineyard sector.

Despite the challenges currently facing the Australian wine sector — the closure of the Chinese market that has led to a large over-supply of red wine and red grapes among the most significant — there has been little difference in the number of vineyards, wineries and brands that have been placed on the market over the last 12 months compared with preceding years. “I don’t think there has been a whole lot of difference from previous years,” says Stephen Strachan, director of Langley & Co Advisors, a firm specialising in the sale of wineries and vineyards in Australia, particularly high value businesses. “The period during COVID19 was quieter, but I think it would be about ‘normal’ now.

“There are a number of transactions where larger companies are moving vineyards off their balance sheet but retaining fruit supply through leasebacks or contracts — for example Casella and Accolade — and there has definitely been an increase in this activity recently,” Strachan adds.

We are doing more work in cooler regions at the moment because that is where the demand is. Transaction values in Tasmania, Yarra Valley and the Adelaide Hills, for example, are strong and above the last five years. Other cooler regions such as Orange are

also strong. Stephen Strachan

Asked to describe the transaction values for vineyards, wineries and wine brands in Australia over the past 12 months compared with the previous five years, Strachan said there were regional hotspots where sales had been particularly strong. “We are doing more work in cooler regions at the moment because that is where the demand is. Transaction values in Tasmania, Yarra Valley and the Adelaide Hills, for example, are strong and above the last five years. Other cooler regions such as Orange are also strong. “I think the real challenge with vineyard and brand values will come from the regions that are overweight to red grapes, notably Shiraz and Cabernet Sauvignon,” Strachan continues. “There hasn’t been a whole lot of sales in these regions, so it is a bit early to say.” Despite expectations to the contrary, Strachan said Langley & Co Advisors hasn’t facilitated any transactions during the last year that could be attributed to the decline in trade with China or other market pressures, such as COVID-19. “Our firm hasn’t done a single transaction that we would describe as a ‘distressed’ sale due to the China impact. Our clients have been selling because they want to retire, for family reasons, etc. I suspect that parties will continue to sell for those reasons, but I don’t anticipate a rush of distressed asset sales. The wine industry has proven in the past that it is incredibly ‘sticky’ when there is a downturn,” he says. Of the vineyards put on the market in the last 12 months, Strachan says they’ve been a mixture of small, medium and large holdings. “The very large vineyards on the market have been the Casella vineyards — most of the remaining vineyards are much smaller.”

Although unable to disclose any of the notable vineyard transactions that Langley & Co Advisors has facilitated over the last 12 months or so due to confidentiality, Strachan did say the firm hadn’t observed a drop-off in values in the regions it is working in. “Values are strong,” he notes. With respect to prominent transactions of wineries during the same timeframe, Strachan said the Endeavour Group’s acquisitions of Oakridge Wines in the Yarra Valley, Josef Chromy in Tasmania and Shingleback in McLaren Vale were strong results. “They clearly indicate Endeavour’s confidence in those regions and in the brands specifically,” he says. Strachan said the right sites in the right regions continue to see buyer interest, with competition between buyers resulting in reasonable prices being achieved.

“Nothing has changed, and I don’t think it will. Good vineyards and good brands always have buyers, even in a downturn,” he notes.

In recent years, the range of buyers in the Australian wine category has strengthened towards existing Australian wine and vineyard businesses that have been searching for further investments in the Australian wine industry. This trend has continued over the last 12 months.

“The two big shifts that have been happening for a while are: the large pension funds and private equity firms buying vineyards from brand owners and leasing back to those parties; and the ongoing activities of buyers along the supply chain (not just traditional grapegrowers and wineries), for example, retailers and distributors.

“There are still lifestyle acquisitions from parties outside of the industry, but they tend to be lower-value transactions,” Strachan explains. Asked whether he could comment on rumours that some vineyards, particularly in Victoria and New South Wales, could not find buyers as going concerns so were subsequently being listed or sold as ‘farmland’, Strachan says: “I think this is happening. In reality there are properties that are more valuable as grazing or cropping land.”

Casella vineyards have been among the very large holdings placed on the market over the past year. Photo: Casella

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Summer 2022 · Volume 37 Number 1

SUMMER

• Oxygen – friend and foe • Hidden micro-oxygenation in the winery • Tackling climate change – is the industry ‘all in this together’? • Are grapes ripening faster? • Tasting: Vermentino

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