(Wines&Vines) - The Napa Valley Grapegrowers held its 2015 Ahead of the Curve seminar designed to inform growers about upcoming issues of importance on April 21. About 100 growers filled the hall at Carneros Inn to hear experts discuss the value of Napa Valley and what makes it special.

Most of the discussion revolved around numbers and dollars, but attendee Warren Winiarski, whose 1973 Cabernet Sauvignon helped change the world’s perceptions about Napa wine at the famed “Judgment of Paris” in 1976, commented later, “They all seemed to skirt around the real issue: Napa Valley is valuable because it makes some of the best wine in the world!”

The first speaker, Mike Sweeney, California state director of The Nature Conservancy, brought some perspective about preservation to the gathering by pointing out that 75% of the world’s land has been modified by humans. Protecting wild areas isn’t enough. “We must depend on agriculture to help preserve the habitat.” He added, “Ag preservation may be as important as land preserves.”

He also noted that we need to try new things, and because wine grapes are valuable, they provide a great place to experiment.

The issue of using land trusts and conservatories to protect and increase value of land permeated the whole seminar.

Running the numbers

Sean Maher, principal of Maher Advisors, then presented a concentrated summary of facts, figures and trends in wine production and sales leading up to land values.

In the process, he pointed out that grape values vary widely, even in Napa Valley. For example, while the median price for grapes in Napa County in 2014 was a healthy $5,920, grapes selling in the 10th percentile fetched only $3,750 per ton, and the 90th percentile went for $8,000 or more. By comparison, Lodi averaged $653.

Winery valuation

Many attendees at the seminar were likely interested in the valuation of their vineyards, particularly in light of recent sales. Maher highlighted the factors that drive winery valuation:

Investors value fast-growing companies more than their slow-growth counterparts, and all else being equal, smaller companies have less economies of scale, less marketing muscle and less efficiency—all factors that affect valuation.

Scalability, economies of scale and the capacity and resources to grow tend to produce strong earnings, while strength of cash flow and earnings gain higher valuations.

The values of wineries depends on perceived value of the brand as well as hard assets like vineyard property and production facilities, and even the perception of the appellation it’s in. Sellers as well as buyers need to understand and value the underlying asset base as well as brands.