Hancock acquires 46-acre California wine property

Post covid-19 challenges faced by small wineries in a market undergoing structural change were highlighted in a recent Rabobank report.

Hancock Natural Resources Group has acquired a 46-acre wine property in Sonoma County, California.

Winebusiness.com reported in late April that a Hancock-connected entity called Flat Iron Farms had purchased the property from Santa Rosa, California-headquartered Krasilsa Pacific Farms for $4.7 million.

“The vineyard was planted to in-demand varietals and is now coming into mature production,” Hancock global head of agricultural investments Oliver Williams told Agri Investor in an email.

Williams wrote that the property is located in a “premium wine growing region” and was planted with wine grapes after consultation with the Sonoma County Vineyard and Orchard Development Ordinance.

“We believe this age profile of the vineyard is well-suited to benefit from the improving market conditions,” added Williams.

Recent improvements have come after years when wine grape investments have faced headwinds in part due to a record-large harvest in 2018, he explained.

“During 2020, a tightening market was observed as demand held up and the wine grape inventory retreated closer to longer-term average supply levels,” according to Williams.

Small wine producers have faced uncertain and challenging conditions over the past year due to changes in consumption patterns following covid-19, according to Rabobank’s Q1 Wine Quarterly report. It describes changes in the market that have advantaged larger wineries and predicts resulting structural change could hasten ongoing consolidation in both the US and Europe.

“While large wineries were initially slow to build out their e-commerce capabilities, many (though not all) are investing to improve this area,” wrote global beverage strategist Stephen Rannekleiv. “Looking forward, small wineries will likely find innovative ways to connect with the market, but they will be competing with large wineries that are building increasingly sophisticated e-commerce teams.”

Private equity funds “have become flush with cash and are becoming more aggressive in pursuing deals” according to the report, which mentioned the combination of AGR Partners-backed Vintage Wine Estates and Bespoke Capital Acquisition Corp to illustrate the presence of special purpose acquisition company vehicles in wine markets.

The report also noted that the nature of wine consumption makes the market particularly tied to the pace of overall economic recovery from the pandemic, the durability of changes to dining habits and how investors react to both.

“PE funds may be well-positioned to acquire restaurants and small chains and roll them into larger, better-funded chains, (even in Europe, where chains have traditionally been far less prominent),” Rannekleiv wrote. “The shift from independents to chains will create more challenges for very small wineries.”