Understanding Vineyard Pricing

U n d e r s t a n d i n g
V i n e y a r d
P r i c i n g
Dianne Vernon
Bob Pennypacker

V e n i
V i d i
Vino!

You came.
You saw.
Now you want to buy a vineyard…
Like any other real estate transaction, it starts
with defining the parameters:
Where do you want your vineyard?
What varietal of grape would you like to
grow?
What sort of return on investment do you
expect?
AND….
How much are you willing to spend?
It’s all about finding the property that provides
the right balance between these four
considerations. Let’s get started…
Watch the video here:

Location, location, location…
Estimated Retail Dollar Volume
Planted Acres
Average $ per ton
$3,039,000,000
18,600 acres
19,000 acres
16,000 acres
$6,285/ton
$1,2449,000,000
13,000 acres
$1,283,000,000
$1,167,000,000
$3,526/ton
$2,729/ton
$2,713/ton
$2,085/ton
$197,000,000
2,600 acres
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Varietal, varietal, varietal…
We all know the first three laws of real estate.
Vineyards have an added level of complexity to that
by also emphasizing the grape varietal. The first
step is to understand what is out there. Sonoma
County has approximately 60,000 acres of vineyards
compared to Napa’s 48,000. There is a heavy
emphasis on red wine grapes due to our climate,
and Cabernet Sauvignon is king. Between the two
counties, there are a total of approximately 37,000
acres producing Cabernet wines with an estimated
retail value of over $4.2 billion.
Zinfandel is an important player around Healdsburg,
but between the two counties has only 6,300 acres
dedicated to it.
6,500 acres
$2,592/ton
$397,000,000
$3,390/ton
5,000 acres
$2,713/ton
$379,000,000 1,300 acres
$123,000,000
2,500 acres 2,600 acres
$168,000,000
$153,000,000
$1,608/ton
$2,025/ton
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It Starts with the bottle...
Average price per acre based $/bottle
Planted Acres
$/bottle
$/Ton
Tons
/acre
Gross
income
$422,000/acre
16 1,600 6 9,600
30 3,000 4 12,000
80 8,000 3 24,000
200 20,000 2 40,000
$63/bottle
$202,000/acre
$138,000/acre
$35/bottle
$137,000/acre
$126,000/acre
$27/bottle
$27/bottle
$21/bottle
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It’s fairly simple…
Farming
costs per
acre
Net Income
per acre
Return
Expected
price to
pay/acre
4,000 5,600 5.00% 112,000
5,000 7,000 5.00% 140,000
6,000 18,000 5.00% 360,000
6,000 34,000 5.00% 680,000
Vineyard prices are driven by how
much you can get for the bottle of
wine. There is a wine industry rule of
thumb that the price paid for a
bottle of wine is 1/100 th the price paid
for the ton of grapes it is made from.
For example, a $30 bottle of wine
will come from grapes that cost
$3,000/per ton. Using that, and
assuming a reasonable production
and return, we can extrapolate a fair
value of a given vineyard.
$191,000/acre
$128,000/acre
$26/bottle
$137,000/acre
$27/bottle
$34/bottle
$112,000/acre
$127,000/acre
$16/bottle
$20/bottle
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$819,000/acre
Interesting in theory,
$153/bottle
Estimated Retail Dollar Volume
Planted Acres
Price
Total
Acres
Vineyard
Acres
Nonvineyard
acres
Value of non
vineyard land
Value of
vineyard
$/acre return
net income
/acre
Far
cost
7,250,000 18.00 8.00 10.00 700,000 6,550,000 818,750 5.00% 40,938
9,500,000 38.70 36.00 2.70 270,000 9,230,000 256,389 5.00% 12,819
14,000,000 103.00 70.00 33.00 660,000 13,340,000 190,571 5.00% 9,529
7,375,000 90.00 30.00 60.00 2,400,000 4,975,000 165,833 5.00% 8,292
5,500,000 71.60 28.00 43.60 1,308,000 4,192,000 149,714 5.00% 7,486
5,850,000 54.00 49.00 5.00 350,000 5,500,000 112,245 5.00% 5,612
$256,000/acre
$59/bottle
$190,000/acre
$48/bottle
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ut...
How does this translate to actual sales of
vineyards?
ming
/acre
Gross
income
$/ton
tons/
acre
$/bottle
5,000 45,938 15,313 3 153
5,000 17,819 5,940 3 59
5,000 14,529 4,843 3 48
5,000 13,292 4,431 3 44
5,000 12,486 4,162 3 42
5,000 10,612 2,653 4 27
In reality, few properties are just
about the vineyard. There could be a
home or home site, there could be
undeveloped land and other
amenities which all have value .
Not all vineyards are planted to a
single varietal, and not all wines
contain a single varietal.
What this does , however, is give a
means to test the price of a vineyard.
The table to the left and the chart
below show a variety of active listings
and recent sales.
For example, the most expensive
property per acre was a Napa
vineyard with Cabernet Sauvignon.
The marketing stated that the bottles
made with these grapes fetch over
$150/bottle. Based on assumptions of
production and return, the price for
the land seems to be reasonable. Of
course, this would have to be further
vetted with hard data.
On the other hand, the $320,000 per
acre property in Sonoma seems a bit
of an anomaly. The value of the other
amenities on the property, the
production, and/or the return are
outside the industry norms and would
require further investigation.
Each vineyard is unique. This
approach is a starting point to help
guide both buyers and sellers toward
an accurate market value of a
vineyard property. That coupled
with the years of experience Bob
and Dianne bring will ensure a
successful transaction.
$166,000/acre
$150,000/acre
$44/bottle
$42/bottle
$137,000/acre
$27/bottle
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