$250 million Napa Valley winery sale marks return of Asian buyers

A South Korean company’s purchase of a pioneering maker of Napa Valley fine wine was notable for not only the $250 million price tag but also the return of buyers of California Wine Country assets from an emerging international market for luxury beverages.

A real estate development business that’s part of the retail conglomerate Shinsegae on Feb. 14 purchased Shafer Vineyards winery in Napa Valley.

The deal included 205 acres of vines in Stags Leap winegrowing region, on the slopes of the Vaca Mountains in Napa Valley and in Los Carneros appellation, plus a winery with 34,000 square feet of cave cellar and a use permit allowing up to 84,000 cases.

The Shafer family started the winery in 1972. Of the 36,000 cases of actual annual production, one of the best-known labels is Hillside Select cabernet sauvignon, whose roughly 1,400 cases of the 2017 vintage released in September were sold out at $325 a bottle.

While the North Coast has seen a string of purchases of wineries and vineyards by international players in recent years, it’s been upwards of a decade since a major investment from Asia, according to Robert Nicholson, whose Healdsburg-based International Wine Associates has advised or handled over $2 billion in wine business mergers and acquisitions since 1990.

“I don’t think we will see a wave of Asian buyers, but we’re in dialogue with a lot of European buyers,” Nicholson said.

He noted that the resurgence of the coronavirus specifically in China has slowed Transpacific deal-making.

The valuation for the deal is estimated to be 28 times operating net income, or earnings before one-time factors such as interest, taxes, depreciation and amortization (EBITDA), Nicholson said. Deal values for high-end wineries tend to transact at 15 times earnings and sometimes as high as 20, he said.

Notable recent North Coast purchases by an Asian investor was the 2014 sale of Quixote Winery also in Stags Leap for over $20 million to Jinta Vineyards & Winery and a Folio Fine Wines preproduction facility in Carneros by Kieu Hoang, a Vietnamese American.

Before that were a string of deals from Chinese buyers in 2011 and 2012. Goldin Financial Holdings bought the Sloan estate in Napa Valley’s Rutherford for $40 million. Zhang’s Winery bought 40-acre Lupine Hill Vineyard in Napa Valley for $3 million.

The buyer of Shafer is itself a significant player in South Korea’s beverage alcohol market.

“With the acquisition, we plan to further expand the group’s wine business by creating synergy with its Shinsegae L&B that is in charge of the wholesale distribution of wine and liquor,” a Shinsegae Property official told The Korea Herald. The newspaper also reported the property sales price, which had been undisclosed.

South Korea’s rise as a global maker of high technology such as smartphones and other electronics as well as automobiles and increasingly in demand entertainment has also raised the country’s stature as a destination for California fine wines.

The county is now Asia’s fourth-largest economy, and its imports of wine jumped 76% last year to $506.2 million, Yonhap News Agency reported reported from Korean Customs Service data. It was the first time the country topped a half-billion dollars in annual wine imports and more than double the $244 million imported in 2018, the outlet said.

France was the main source for wine in South Korea, followed by the U.S., Chile and Spain.

As for U.S. wine exports specifically, South Korea passed China in 2020, the first year of the pandemic, and lengthened that lead last year, according to federal figures compiled by Trade Data Monitor. South Korea expanded wine imports from the States jumped to $50.3 million (3.9% of U.S. wine exports) in 2020 from $27.1 million (just under 2% share) in 2019, and that jumped further to $76.1 million (5.3% share) last year.

U.S. exports of wine to South Korea have been growing since 2016, and the 2020 jump was fueled by purchases by young adults, according to Wine Intelligence.

By comparison, China imports of U.S. wine dipped in 2020 to $21.2 million (1.6% share of all sent from the States) from $39.2 million (2.8% share) in 2019 but rebounded last year to $38.9 million (2.7% share).

The drop for exports to China started in 2019 amid a trade war with the U.S. and higher tariffs, according to the San Francisco-based Wine Institute. But imports from the U.S. started to grow last year as China put tariffs on Australian wine, and importers in China took advantage of 25% discounts on tariffs.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.