originally posted by Christian Miller (CMM):
originally posted by Luca Mazzoleni:
1 Ha of vineyard land in the Matelica / Jesi appellations cost 20K to max 30K EUR, roughly. Many family-run wineries in the region operate in marginal economy. You get the picture. Your math is correct, EUR 3 / 4 is the common export price for entry level Verdicchio. Low demand for Verdicchio on both the domestic market and export markets doesn't help the producers, but it helps the consumers.
20-30k EUR planted or plantable bare land? Are most of the family-run wineries working on land that has been written off (at least mentally), because it was in the family for generations? Plus undervaluing their own labor, probably. Sounds marginal for any outside investor, for sure.
Conventional wisdom on the West coast these days would say, roughly, it's not feasible to survive making and selling under 20k cases at under $20-25/bottle unless it's most/all direct-to-consumer and even then it's dicey.
As hard to believe as it may be, I am talking a hectare of planted vineyard land. 50K Eur if your vineyard is in a prime site and your winery has a reputation and an established clientele. Around the year 2000, before the introduction of the EURO currency (which triggered a notable price inflation for all asset classes in Italy as well as the rest of Europe, sauf Germany perhaps) a hectare of vineyard land in Sicily, planted with 30 to 60 year old Nero d’Avola bushvines, in the finest spots around Pachino and Avola, complete with a century-old ‘Masseria’ (farmhouse) used to sell for ’20 milioni di lire’ (the equivalent of 10K Eur today). Just an example among many I could cite.
Those days are long bygone of course, but just two years ago a wealthy Chinese businessman who is a close friend purchased a 5 Ha wine estate in the heart of Monferrato (Piedmont), complete with fruit orchards, a perfectly functioning cellar with the relative machinery equipment and a beautiful XVIII century small ‘palace’ for around 700K Eur.
Unless you are in Barolo, Chianti, Montalcino, Valdobbiadene, Alto-Adige and the ‘Pinot Grigio belt’ of N/E Italy well the agricultural real estate market is still quite depressed in the rest of the country.
Obviously those growers in the Marches region of Italy who survive selling their entry-level Verdicchio at 3 / 4 Eur x bottle (and their top Verdicchio ad 7 / 8 Eur x bottle) they are 2nd generation or 3rd / 4th / 5th generation growers, meaning all the major fixed costs inherent to the foundation of the winery and the purchase of the vineyards are all long amortized. 'Undervaluing the daily labor'...yes very well said, that is what makes many family-owned / family-run wineries keep going (and when the family is short of young labor force, the Macaedonians, the Ukranians, the Romanians and the Albanians come in handy, they are all over Europe's vineyards today, Burgundy and Champagne included).
Last but not least, agricultural estates are not subject to any property tax in Italy (if you are a direct small grower or a Coop) and your annual revenues are subject to a moderate flat tax (25%).
This being said, for a young self-made-grower in the Verdicchio region starting his own winery today (likely with a conspicuous bank loan weighing on your shoulders) well the good old saying holds true...’if you want to make a small fortune in the wine industry, you better have a big fortune to start with’. Viticulture is a capital-intensive business and both the cash-flow and the return-on-investment are often far slower and poorer than the flashy world of wine magazines make wine consumers think.
Okay, if you do your homework well and your business plan is smart enoughafter 20 or 30 or 40 years you will reach the break-even point and therefore declare yourself ‘owner of a wine estate’ (to sell it out at x1.5, x2 or x3 times the initial price, if that’s the ultimate goal). In today’s perma-deflationary environment, I am not sure this game still plays out as it used to in the 70s, 80s and 90sunless you are in Burgundy, Barolo or Napa Valley.
