Some Basics on Land Prices & Their Effect on Wine Price

Over on Wine Business, there’s a section for real estate for sale.  Pretty much you see two general categories, wineries and undeveloped land.

Some extra background, it costs approximately $50,000 per acre to bring an acre of wine grapes fully online and into production.  That’s one part planting cost and another couple parts of the simple fact that it does cost money to farm grapes and it takes 5 years for a grape vine to be ready to produce high end wine grapes.

Let’s take this listing, a 12 acre parcel just outside Placerville in the Sierra Foothills.  The Foothills is an interesting region on a few levels and I can see Placerville being a draw for someone who wants some small town, with access to snow in the winter and warm summer temperatures.

I’ll assume that on that 12 acre parcel, that you can plant about 10 acres.  Gives you some space for a home, driveway and some other goodies that you’d expect at a working winery, like a barn.

Let’s also assume that since those vines are young, that you’re getting about 4 tons of grapes per acre. That gives you about 40 tons of fruit per vintage. Assuming some high quality fruit, I’ll go on the high end and assume you could sell the fruit for $2,000 per ton.

In essence you have an initial investment of $875,000 for about $80,000 in yearly revenue.

I mean it’s up to you to consider how that seems to work, but I’m guessing for most, those numbers don’t make much sense.

Thus is the continued and often exasperating financials of the wine industry.

BTW though, those numbers do work much better if you’re winery produces $50 Syrah from those grapes and is able to consistently sell that wine with an employee or two.

The post Some Basics on Land Prices & Their Effect on Wine Price appeared first on Uncorked Ventures.

from Uncorked Ventures