Sep
27

Vineyard and Grape Values by Appellations

I received calls from people from people at least once a week, asking the question: How come the Napa and Sonoma Counties has such a spread in vineyard values per acre cost in the same county? We see the statistics stating that Napa Valley vineyard values on a per acre value run from $60,000-$350,000 per acre apiece. For Sonoma County, a price per acre vineyard value can vary from $60,000 up to $140,000 per acre in value in the same County.

My explanation is “American Viticulture Areas” (AVA) or commonly known as Appellations. So what is an AVA or Appellation?

Napa and Sonoma are both known as “American Viticulture Areas”. Within each of these Appellations are “Sub Appellations”. Each appellation is designated and licensed through the TTB, a federal department of the government that regulates alcohol, tobacco and firearms.

THE FORMING OF A NEW APPELLATION OR AVA

When a certain varietal of grape becomes dominant in a certain area, gains notoriety, and is recognized because of its high quality, the growers of that varietal in that particular area will gather together to form a petition for an AVA around that dominant varietal for that certain area. Thus, an appellation is formed.

The Northern California Grape growing regions in Napa and Sonoma Counties are known as some of the finest wine grape growing regions of the world. The main reasons are that the unique microclimates and soils mixtures are combined to offer some of best growing conditions for high quality grape vines and making world class wine.

Microclimates that start at the Pacific Ocean coast of the Sonoma County offer temperatures of cool days and cool to chilly nights. This offers a great growing condition for the lighter vines such as Pinot Noir and Chardonnay. The further inland we get the warmer the weather gets, offering the ability grow some of the finest Cabernet Sauvignon, Zinfandel, and other warm weather varietals.

The complexity of making wine starts with the grape. We all say: “One can’t make a good wine of bad grapes”. Combining what Mother Nature is able to accomplish with a great winemaker, we can end up with a great wine to drink.

Napa is said to be the “King of Cab”, and Sonoma is said to be the “King of Pinot Noir”. There are several other exceptional varietals that can be grown in these various AVA’s. It seems that these 2 dominant varietals are of the highest demand from these two Counties.

We have seen vineyard values in both of these counties accelerate in value from 100% to 300% every decade since 1950, with a slight setback 2008 through 2010. Currently, it appears that we are back on track and exceeding their values further than we did where we left-off.

We have produced graphs that show highs and lows in both counties of vineyard values as follows:
NAPA COUNTY producing vineyard values running from $60,000 to $350,000 per acre
SONOMA COUNTY producing vineyard values running from $60,000 to $140,000 per acre

We have also seen that per ton grape prices paid for the same varietal differ drastically between AVA and County. We see that Pinot Noir grapes in Sonoma County sell for from $ 3,000 to $ 12,000 per ton. In Napa, we see that Cabernet Sauvignon grapes sell from $ 2,000 to $25,000 a ton. The vast price difference depend on what AVA in that county the grapes came from and the established reputation of the wine made from these grapes.

However, while communicating with others specialists in our field, we never found any research on the breakdown of the price per acre of vineyard and price per ton of grapes sold broken down by each AVA/appellation. We feel that this information will help others to understand the difference of values of each of the appellations and the dominant grape varietals. We have put together a review of the main grape varietal within each sub appellation in Sonoma and Napa County. We have extended the information to include the average price per acre of vineyard in each appellation and the average income of the dominant grape for that particular appellation, to show how the values correlate with each other.

2014-09 Vineyard and Grape Values by Appellations.doc-1

2014-09 Vineyard and Grape Values by Appellations.doc-2

Of course, these values will constantly change, but these give you a pretty good basic idea on each appellation within Sonoma and Napa Counties.

VÉRAISON

Now that most all red grapes are going through puberty, AKA véraison, we see their true colors begin to shine through. It’s now time to watch closely our 2014 harvest is quickly coming to be. In the next few months we will be praying for warm to hot weather, little moisture, no frost and Mother Nature to be as good as she can be to us to turn out an above average crop this year.

All indications are that things look good and without any major surprises, we just may end with another banner year. I predict another record year for grape prices to increase as the demand for even higher quality wine pushes forward.

Right now the growers are tuning up their harvesters, retooling the wind machines, sharpening the picking knives and making sure they have enough help at harvest when the grapes scream my sugar is up….

WHAT IS AHEAD IN THE WINE INDUSTRY

All indications are that our super premium areas are doing just fine. Wine sales are on the rise withdouble digit sale increases over the years, nationally and internationally. Grape prices amaze everyone each year with record breaking per ton sales prices for highest per ton paid on certain varietals.

When I saw someone pay $35,000 for a ton of Cabernet Sauvignon in Napa County in 2013, I think back to 1993 when the average cost for an ACRE of producing vineyard in Napa County was only about $35,000. I am amazed every year at how far we push past the rest of the nation with our quality and increased values of vineyard, grape prices, and wine sales.

Of course, we cannot sit back on our reputation; we must maintain the professional, ethics and hard work to maintain and continue to set new records and even higher quality in this wonderful wine business.

SO, HOW ARE VINEYARD PROPERTIES SELLING?

The answer to that question is always supply and demand in referring to location, location and location. In this case the location happens to identify with the Appellation. It seems the higher-priced high quality wine producing vineyards are of the most demand. For example excellent Pinot Noir vineyard in the Russian River Valley, Sonoma Coast and Green Valley AVA’s are of high demand in Sonoma County.

In Napa County, Cabernet Sauvignon grape vineyards in Rutherford, Oakville St. Helena, Yountville, Diamond Mountain and Howell Mountain AVA’s are in the highest demand. There is a correlation with these areas known for the high quality fruit as well as top dollar being acquired for ton of their grapes. This is not to say any of the other appellations are bad. These appellations have promoted the quality of the wines and grapes and it has paid off by the higher prices.

We have seen a lot of the big high-quality wineries gobbling up premium grape vineyards to be made into their estate wines. In the long run, it is cheaper for them to own the vineyards than maintain a grape contract over the years, as the price per ton of grapes increase year-over-year.

We always have a steady flow of lifestyle buyers wishing to move to the Napa and Sonoma Counties to enjoy good wine country living. These buyers are looking for the ambience of a nice home among a few acres of vineyard to watch their grapes grow and enjoy a glass a wine at sunset. If you ever thought of selling or are just curious as to your wine country properties current market value, give me a call and let to come out and give you a confidential evaluation of your property with no obligation and perhaps make a new friend.

Our firm specializes in the sale of winery, vineyard and vineyard estate properties in Napa and Sonoma Counties for over 28 years. We are wishing you plenty of water this year and a very successful 2014 harvest, and hopefully increasing the bottom line profit margin.

Thank you,

John Bergman

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