Money is Why Your Wine Tastes Like That

Money Wine

The wine business isn’t about wine at all of course, it’s about money.

Romance doesn’t come cheap. That’s not unusual with any art. “The Offer” (Paramount+) is a TV limited series about the making of “The Godfather,” which a goodly number of people who are supposed to know, call it the greatest movie of all time.

I don’t like rating movies any more than I like rating wines, but should you chance to see the “The Offer,” it will occur to you that between the Mafia and Wall Street, it’s a miracle that movie got made at all.

There was, however, copious wine drinking (among other adult beverages) so at least the wine industry got a little publicity.

Ask any painter, sculptor or passing dance troupe and they will all tell you the same thing. Money always comes before art. I’m not saying it’s a good thing, I’m just saying it’s a thing.

If they discover a new DaVinci next week, where is it going to go? The Museum?

Absolutely not.

It’s going to the auction house. Probably Christie’s. Maybe make a few NFTs of the Mona Lisa and make some more bucks.

So, even if you’re dead, money comes first.

Money at play in the vineyards of the Lord

But, with wineries, money is the Goblin in the dark trees before the moon rises that you never quite see. This is because of the way wine is made and how it is distributed.

Stay with me here a second and I promise not to get too financial on you.

A vineyard planted from scratch takes three years to produce at all, and five years to produce grapes of commercial quality. Once it’s going, you only get cash flow from the vineyard once a year while, sadly, all the expenses go on every day.

And, God help you if the crop burns down in July or freezes in April because it’s another year before you get cash again. It’s like if you worked for a boss that only paid you once a year.

Even once you harvest the grapes it can be anywhere from a few weeks to a few years before the wine is ready to sell. Then, you put it in a warehouse and pay for storage. If things go poorly, or if you’re making higher quality, the inventory might sit there for 2 or 3 years.

All the while, the expenses have to be paid.

Once you ship, it can take 3-4 months to collect from a distributor (or a retailer) who may, in the meantime, go broke. And, you get nothing. All this means that money you spend today may not come back to you for 8-10 months if you count from harvest, and you ship right after bottling, or 8-10 years if you count from planting raw land.

Owners, even if they are corporations, must borrow from the bank in order to even have a chance at a profit. They need the financial leverage to get a decent return since it takes so long to get your capital investment back.

Usually, profit is the least of it. Cash is the question.

Other people do affirmations in the morning or yoga. I woke up in the morning and checked the bank balance every day.

If it was a minus number too many times, the winery would go broke. All those people that were depending on you are in trouble, and your best friends lose your phone number.

Which happens a lot. You just don’t hear about it because, in general, there is a continuity of labels from owner to owner or bank to bank, that masks the changes going on behind the scenes.

When most people find their favorite label at Costco they are not thinking about where the cash is coming from to support it or who owns it. Rightly so, they don’t care.

Each year, sometimes several times a year, I had to go to a meeting with my banker.

Years of these meetings have left me with a trauma I don’t seem to be likely to get out of in this lifetime. Years of therapy are clearly not working although smashing inanimate objects does seem to yield a little relief from time to time.

It’s easy to have 150-200 lives or more (counting family members of employees) depending on you getting it right with the bank.

And, that doesn’t count all the suppliers who rely on you for income.

So, what’s it like talking to a banker on behalf of 200 people or more?

Conveniently, I’ve given you a sample below.

I think the only thing you need to know to follow the conversation is that “covenants” have nothing to do with the Bible. They are rules you have to follow to get the loan—break the covenant and the bank can cancel the loan—and that balance sheets are a key part of financial statements that list all the stuff you own and owe.

In a winery’s case that can be not only wine but tanks, trucks, tractors, vineyard lands, buildings, bottling equipment and colorfully decorated waste baskets with “Life is too short to drink bad wine” painted on the side.

A typical life and death conversation between me and my winery banker:

Banks are not Starbucks. They are not built for you to lounge around and read the morning paper. They tend to be sterile, trustworthy looking edifices tending toward the monumental in style. Greek columns are not unknown.

It is apparently a cosmic rule that no banker can let you in the office any less than 30 minutes after the appointed time. This gives you plenty of time to wonder why you didn’t take piano lessons instead of going into wine.

Bankers are always on the phone with their boss, some high up personage of indistinct ability, who is often in a different city, and sometimes on a different continent. Their phone bills must be awesome.

The scene is the branch of a large bank in a small northern California town. There is always a laundry next door. I don’t know why. There just is.

The secretary snorts and nods toward the door without looking up. I think she wishes she had taken piano lessons more seriously, too.

I jauntily enter the office of the vice president to the assistant to the vice president of money. Aka, “the lender.”

(Putting down the phone).

“What can I do for you today?” he says.

“Give me money.” say I.

He looks at me like he had never seen a Martian before.

“Why?”

“Because, I don’t have enough.”

“How much money do you need?”

“How much you got?”

This is where the banker starts thinking he should have become a plumber.

“What kind of collateral do you have?”

“I shall give you my personal IOU.”

“Hmm..”

“Also, a whole bunch of wine in the warehouse that’s going bad because we can’t give the stuff away.”

Wine is like a banana. It slowly turns brown and goes bad. The browner it gets, the less collateral value it has. So, once its collateral value starts down, so does your loan.

Technically, it oxidizes, which is to say, it rusts.

Bankers do not enjoy rusty wines.

“I don’t think that will suffice.”

(I am thinking hard now.)

“How about tractor parts?…I’ve got some tractor parts loose in a cardboard box back in the shed. Might even be a wrench or two in there.”

For some reason bankers are never happy with tractor parts. It’s best not to even mention wrenches.

We did have an old ‘57 Chevy pickup that ran on alternate Tuesdays but bankers like old pickup trucks less than they like a warehouse full of rusted wine.

It’s subtle, but already I know this conversation is going badly.

“You’re out of covenant, he says, looking like a priest telling you that you are going to hell for the rest of eternity.”

“How many covenants do I have?” I say.

“126.”

“How many am I out of?”

“125”

There is a long pause while I try to figure out which one I’m still in.

Finally, he changes the subject.

“Have you read your balance sheet? Do you know what the biggest number on your balance sheet is? ”

“Twenty-six?”

It’s “good will,” $150,000 of good will.

“People do like us a lot.”

For the non-bankers among you, “good will” is not about how much people love you. It’s a number plugged in to represent the difference in what you own and what you owe, give or take. If good will is the highest number on the balance sheet, you probably don’t own anything of any actual value.

Like a box of old tractor parts for instance. The market value for used tractor parts is limited at best.

“‘Good will’ is air,” he says, “ It’s nothing. Zero.”

“Nada”, I say, “Naught, Tipota, Gun dad.”

I’m going multilingual here hoping to demonstrate how remarkably clear I am on the concept of nothing.

“Gun dad? Really?”

“It’s Scottish Gaelic.”

He pauses to collect himself. He does seem a bit confused. Maybe I should have gone with Tagalog. I’m interrupted in my linguistic musings by his rather stern voice rising ever so slightly in pitch.

“Nothing is not collateral. Nothing is nothing.”

“Yes, but it’s our nothing. Our nothing is probably worth more like 200K.”

Grace under pressure I say. Think on your feet. That’s what you need to talk to bankers.

The problem is, bankers want predictability and by now, at the 74th issue of this newsletter, you’ve probably figured out that wine is not into being predictable.

Wine can’t even spell predictable.

I spent 90% of my money on wine, women and song. I just wasted the other 10%.—Ronny Hawkins

Money, scratch, moola

In the end, I did get the loan. Two years later.

Running a winery is not as easy as it looks. To tell the truth, tractor parts really don’t make great collateral. But you’ve got to go with what you’ve got.

I just had to promise to sell my daughter if I didn’t pay the loan back.

Wine is Nature in a bottle. Nature is tough but bankers are tougher.

Overcoming bankers is harder than overcoming root louse for instance. Much harder. You can spray a root louse but you can’t spray a banker.

And, a winemaker can only work with the grapes he can pay for. And, the tanks, and barrels and bottles he can pay for. Bad grapes make bad wine. You can’t get around it. So does bad farming. Tractors matter.

Ergo, money matters.

So, I’m just saying that the next time you lift a toast to the winemaker, lift one for the banker now and then.

He’s probably more responsible for the way your wine tastes than the winemaker anyway.

You don’t learn this stuff anywhere else.