Should I Buy An Existing Vineyard Or Plant One From Scratch? This is a question I am often asked by people all over the globe.
If we can agree that the two vineyard projects, an existing vineyard and a yet-to-be constructed vineyard, will be identical except for age there are some quite obvious, and some not so obvious advantages and disadvantages to both approaches.
If in fact the two vineyards are equal in every way and that includes the purchase price versus the costs to build a vineyard, my initial reaction is why would you want to wait three to five years or more for a vineyard to mature sufficiently to produce grapes for wine and income?
But the fact is the two vineyards cannot be “equal” in age until our existing vineyard, in this case a four-year-old vineyard, reaches age nine years and the yet-to-be-built vineyards reaches age five years. Why? Because most winemakers will agree two, three and even four-year-old grapes don’t make good wine. In fact some winemakers will argue that the vineyards should be at least ten years of age to produce premium grapes thus capable of the resultant premium wine.
You can’t just look at the grapes in this scenario; you have to look at a pro-forma that objectively compares financially the two vineyards. I have created just such a Malbec Pro-Forma and the numbers indeed tell the tale. The yet-to-be built vineyard will take five or more years to generate the same cash flow as the four-year-old vineyard and another five years to produce an equal wine.
So why would one even consider constructing a vineyard?
A great question, and over the last four years I have supervised the construction of more than 50-acres of newly planted vineyards including the planting and maintenance of four different grape types, Malbec, Cabernet Sauvignon, Syrah and Chardonnay, I have earned my lumps and lumps there were many.
Why did I opt to plant new vineyards? Why do so many other vineyard hopefuls do the same? The single best answer is probably because of price. If you know what you are doing your money can build a lot more vineyard acres than buying an existing vineyard. And candidly it is fun to determine the type of grapevines, their future irrigation, drip v. flood, the type of posts, density of grapes and more. But you will need bushels full of money to subsidize your infant vineyards for three or four years and the nurturing includes workers, probably a tractor, a litany of farm implements, a worker’s house if you have more than 15 – 25 acres, and likely a commercial well.
I have never come across a vineyard owner who will sell an established, grape-producing vineyard at a cost comparable to a newly built vineyard unless there are major reasons why, e.g. the vineyard structure or maintenance is in decline, the grape type is not “premium”, the vineyard location and amenities are lacking; a worker’s house, barn, tractor, and all necessary implements or the availability and reliability of water might be in question.
There are several advantages of buying an existing vineyard in addition to instant income:
- Quality of the vineyard (ask an Agronomist to do a Report for you on the vineyard’s condition).
- Quality of the grapes (ask the Enologist from the Bodega who bought the grapes to make into wine)
- Quantity of the grapes. (ask for receipts proving the weight of the last harvest. By law vineyards and Bodegas must register the figures for each harvest and purchase)
- Opinion of the vineyard workers regarding the vineyard and how it has been maintained.
- Possible financing including IRA and 401(k) approved.
Our 1.48-acre vineyard Pro-Forma compares grapes to grapes, e.g. each vineyard with identical grapevines, infrastructure, irrigation, weather, maintenance etc., only the vineyards’ ages differ.
And the vineyards have been priced accordingly, the existing four-year-old vineyard will produce an amazing 6,000 kgs. (13,200 pounds) of grapes that can produce 3,720 liters of wine that if bottled, will produce nearly 5,000 (750ml) bottles of wine. And a potential income of US$5,000 will come from the March/April 2013 harvest. The yet-to-be built vineyard must wait four years for the grapevines to sufficiently mature to produce the same income.
If you have the time to wait a few years you can build from scratch and you can custom design a vineyard that meets your goals and objectives.
But if you want grapes and income now, why wait.
I invite any questions you may have. To contact me, or to request a copy of the pro-forma I prepared and referred to in this article, you can reach me via my website: www.lavidabuenavineyards.com.