Vineyards are 30-year investments that require three years to get a crop (and cash flow), five or six years for the crop to mature, and seven years to earn a return. PPV developed all of its vineyards from scratch, a process that PPV co-CEO Dick Wollack described as a "a different kind of VC investment" in a San Francisco Chronicle article from January 2001.
The Silverado funds also develop vineyards from scratch. But development only accounts for a small portion of total acreage at any given time. "[Most of our property] is producing income," Freed says.
And whereas PPV limited itself to producing grapes for the highest end of the wine market, Silverado is as diversified as possible.
"If there's a weather problem in Santa Barbara, there may not be the same problem in Sacramento," Freed says. "And being in diversified markets is critical. We have 150 customers in all the varietals, and most of the price points up to $100 [per bottle.]"
More Sweet, Less Acidic?
Last year may have proved to be a turning point for both California vineyards and wineries.
After the most difficult few years in the history of the California wine industry when, post-financial debacle, consumers downshifted away from pricey Napa brands to cheaper vintages, demand for super-premium priced wines is climbing again. Sales of $20-plus wines grew at double-digit rates in both 2010 and 2011, according to Freund. Sales for under $3 and $6-$8.99 wines dropped last year.
In late 2011, the market for grapes suddenly shifted from a buyers' market to a sellers' market, Zepponi says.
"There has just not been a lot of acreage planted over the last few years," he says. "Wineries are trying to secure sourcing for their fruit not just for this year but on a multi-year level.
"It's the worst kept secret," he adds. "Everybody knows it now. We have to plant more fruit."
For people who invest in this tricky market, perhaps that will help them harvest better returns on their investments.
A former investment banker and veteran financial reporter, Ellie Winninghoff can be reached at: ellie.winninghoff (at) gmail.com.