IF there is one investment that has more to do with the heart than the head, it’s vineyards. It is also one that lends itself to jokes whose punch lines are always about losing money.
But that risk has never deterred wealthy people. Nor has the current economic malaise damped their spirits. These are people who made fortunes in profitable industries like shower doors and title insurance but define success in the winemaking business as breaking even. And most seem to accept the prospect of losing a manageable amount of money over many years.
The business was going along modestly until 2005, when
Today, his wine is served at the French Laundry and other fine restaurants in
“This wine business, we don’t make any money,”
He said the costs of making a high-quality but small-production wine make it difficult to turn a profit. There are the salaries of the vineyard manager and the winemaker and also the costs of the bottles, labels and corks, which, he said, are
Yet Mr. Ross’s story is far from a cautionary tale in the wine-growing regions of
He said the big risk for most wealthy enthusiasts is buying too much land too quickly at too high a price and then thinking that they will be able to get whatever wine they make distributed to wine stores.
“These people really don’t have the access or the ability to get distribution through the wine distribution network,”
Many people think if they can get a high score, as
“My first warning is, don’t go into the business looking for a certain score,” he said. “If you’re unrealistic, you’re going to be disappointed.”
Even winemakers who seem to be doing everything right struggle with distribution.
His distribution, he said, “rides along with Sebastiani,” a lower-end brand. His high-end Chalk Hill wines, with 40,000 cases a year, would be a blip on a distributor’s screen without the Sebastiani association.
Still, he said he was running his wine business as he did
Having spent tens, if not hundreds of millions, of dollars buying wineries since 2007, he has yet to turn a profit, but the wineries are at least covering their costs. Still, he said he was glad he had done it. “When you’re out in the vineyards, drinking your own wines, with your kids, it’s fun,”
Of all the winemakers and vineyard owners I spoke to, the one who has the least risky and most sustainable model of building his business was
In the intervening years, he cleared the land, planted the vineyards and built all the structures himself on what is now a 55-acre property. Before the vineyard started making its own wine in 1994, he sold the grapes to other wineries at a profit.
All along, he paid cash for every expansion until 2002, when he borrowed
“From an economic point of view, it takes 16 to 20 years to make a profit,”
For those with less patience, there are other ways to try to reduce the risk and financial outlay. Some people eschew the romance of roaming through their own fields and just set up a winery to make and sell wine.
“Vineyards didn’t appeal to me because I never really wanted to be a farmer,” he said. “Farmers are never happy.”
But he found a different set of challenges in having a stand-alone winery.
“Making high-quality wine was easier to do than selling high-quality wine,” he said. “This brand came out with an unknown name in mid-2008 and we struggled.”
Six years into the venture, though, he said the winery was approaching the break-even mark, but it took twice as long as he planned.
One thing these businessmen-vintners share is an amateur’s enthusiasm. They have enough money to hire experts and the business sense to watch profits and losses. It would be easy to criticize investing in vineyards as a rich man’s vanity. But it has always taken a lot of money to make wine and, on occasion, that investment pays off.
André Mentzelopoulos, who made his fortune in real estate and grocery stores, made a good bet. He bought Château
His daughter Corinne said he paid about
Ms. Mentzelopoulos said that despite all her family’s success — a 2003 transaction valued the chateau at
“You can’t predict anything,” Ms Mentzelopoulos said. “I don’t know the quantity or the quality of the 2012 vintage. I don’t know my sales or my profit. And if it rained from now until October, there would be no wine to speak of, yet the investment I have to make is still the same.”
It is no wonder that she said that the only time she relaxed was when “the grapes are nice and safe in the cellar.”
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