04 November 2010

But at least beer is recession-proof, right? Right??

From Dave McIntyre of WashingtonPost.com's food section:

The economy has taken a toll on the Virginia wine industry this month as Kluge Estate winery near Charlottesville has been taken over by its bank, which appears determined to sell off the winery’s vineyards, inventory and property at auction. Sweeley Estate winery in Madison, north of Charlottesville, is also in foreclosure and several wineries are said to have decided to sell off their grapes this year rather than make wine because of high inventories of unsold wine.
The foreclosure and bank seizure are the latest setback for Patricia Kluge and her husband, William Moses, who established the winery in 1999 on several hundred acres of land not far from Monticello, where Thomas Jefferson struggled to establish Virginia’s wine industry more than 200 years ago.
If Farmers Bank of the Virginias has its way in selling off Kluge Estate, it will deal a severe setback to the Virginia wine industry. With 164 acres under vine, Kluge Estate is not only Virginia’s largest winery, but Kluge and Moses have been outspoken in their ambition to build the company into a powerhouse with national distribution for its Kluge SP sparkling wines, New World Red blend and Albemarle wines. A Kluge fire sale will send the message that Virginia’s wine industry is not ripe for outside investment.
It would be nice to think that similar fates are not going to befall microbrewers here and there.  For one thing, microbreweries are not real-estate intensive--ask anyone that's seen a brewery relocate from one industrial park to another, or close up the brewpub in favor of a less customer-friendly but more work-friendly location.  Thus, microbreweries are safer from recent volatility in real estate markets and financing.  Second, most microbreweries are built upon hard work and sweat, and aren't a creative bookkeeping dodge for farming or agriculture subsidies or tax shelters supposedly common with far too many boutique wineries.  Third, most brewpubs and micros around this region managed to establish themselves on reasonably secure financial footing before the current recession, and the few newcomers (like Ruddy Duck) seem, for the most part, to be doing all right.

But nationally, are there any micros or craft breweries a missed mortgage payment away from financial disaster?  I haven't heard of any such closings yet, but I'll confess I'm not looking very hard.


The Oriole Way said...

You definitely aren't looking very hard...


Brewing may not be as real estate or inventory intensive as the wine industry, but it still requires significant capital investment and careful cash flow management. Ask Brian Strumke if he thinks there's no risk to setting up a brewery.

JohnM. said...

How about four as well: Most regional micros and brewpubs aren't trying to sell coal and calling it gold. In other words, there actually seems to be some connection between the price you pay and the quality of the product you're buying.

Ever been to Kluge Alex? I have. Whether you like their wines are not, it was pretty hard not wonder if they hadn't over extended themselves just a bit with their facility (a huge, lavish estate with a deli, expensive paintings, numerous employees, etc.). They also had one of the more expensive tasting fees of any winery I know of in Virginia. Not to bash them, but I always found the vibe at Kluge to be pretty snobby and obsequious, and given what they had on offer at the winery (I would call their wine distinctly middle of the road for a Virginia winery), it was a bit off putting.

Alex, I know you aren't a big fan of Ratebeer or Beer Advocate, but a lot of people read and take stock in their beer ratings, and undeniably (I would argue) good scores in those publications stimulate sales. Conversely, in the wine world there are the "professional" publications of the Wine Spectator, Wine Advocate, Wine Enthisiast, etc.

Many local breweries have made beers that have scored quite well on RB and BA, and beers from Brewer's Art, Clipper City and Stillwater (to name a few) are obviously quite well regarded in those publications. Even outside of the Mid Atlantic, folks want to buy and enjoy their beers. Want to take a guess how well Kluge has scored with the Spectator and Robert Parker? Outside of Virginia, want to tell me how often you've seen Kluge wines available in a liquor store or restaurant?

While I hear you, I guess what I'm saying at the end of the day, do local breweries really have all that much in common with Kluge? Or do they have more in common with wineries like Chateau St. Jean, Montelena and Ponzi (all of whom seem to be doing quite well during the current economic downturn). Just my two cents, but I would argue the latter.

Alexander D. Mitchell IV said...

I haven't toured Virginia wineries in over a decade; I used to hit them up while doing "reconnaissance" outings for chasing Norfolk Souther steam excursions, which stopped running in 1994.

What I remember of the last few times I stopped in Virginia wineries (and a few Maryland ones as well) was this: The old-timers who have been around for ages--Boordy, Horton, Elk Run, etc.--were pretty much down-to-earth, unpretentious folks where the "tasting room" was a counter set up in front of the presses and bottling line. The newer start-ups were, as one might say, heavily into "production values," making sure that the place could double as a wedding hall and had tour bus parking.

Some of this syndrome can be seen in the brewpub and micro industry as well, with some now-major players like Stone and Dogfish really too big and commercialized to be thought of as "micro" even in spirit. And certain brewpub chains--such as DuClaw, BJ's, Gordon Biersch, Sweetwater, and Rock Bottom--at times at least appear to be run by consultants and focus groups more than brewers or brewery owners. (Notwithstanding that some of the above places all offer at least some good beer and/or creativity, but...)

"Middle of the road"? Gee, we don't know of any well-packaged, ostentatious breweries/brewpubs producing "middle of the road" beers, now, do we? [whistles off....]

Alexander D. Mitchell IV said...

Okay, ONE brewpub in Oregon. Sadly, as indicated by the comments, there could be more at play there than just capital costs--Roots Market and Ben & Jerry's aside, "progressive" business operators don't necessarily have the best track record for business longevity or acumen.

I'd like to think the lessons of the first wave of the microbrew renaissance of the 1980s sank in: "Get twice as much money as you think you need, and fewer investors," as Jim Lutz of Wild Goose put it last year.

JohnM. said...

""Middle of the road"? Gee, we don't know of any well-packaged, ostentatious breweries/brewpubs producing "middle of the road" beers, now, do we? [whistles off....]"

LOL!!! Yeah, I guess we sure do. Assuming we're talking about the same place, I've been told the reason their Fells Point facility went under had nothing to do with financial problems. Still, I see your point, and if ever there was a Kluge-like brewery here in Maryland, it's those guys. You make an excellent point.