The United States government took over Fannie Mae and Freddie Mac the weekend before this issue of Wines & Vines
went to press. If anyone had been uncertain that a lending crisis was under way before then, the dramatic intervention by the Treasury Department at the two huge private/public lenders put that question to rest.
It seems ironic that the wine industry has been humming along nicely during these otherwise troubled economic times. Despite drastically shrinking home values, an unprecedented number of mortgage defaults, bank failures and an extremely expensive, never-ending war in Iraq, wine people in general have prospered. Wine sales have been very good, prices paid to growers have firmed, and both growers and wineries have invested in their businesses.
But it's important to note in this, our annual Winery & Vineyard Economics Issue, that the recent good times bring no guarantee of a long run. In fact, we know that the wine economy performs in cycles, and that the wheel keeps on turning. So now is the time to plan for the next phase, when grape supply becomes tight after years of surplus, when consumer tastes will continue to grow but may change to different varietals and regions, and when potentially huge issues like immigration/labor could explode with the bang of a gavel in Congress.
One area in which the overall economy has touched our industry is lending. While Fannie Mae and Freddie Mac are not holding a lot of vineyard and winery mortgages, their troubles and the implosion of housing values nevertheless have reverberated in wine country. Lenders in general, and not just those in residential real estate, quickly have gone conservative.
So today, wine businesses that are trailing the pack and need cash to catch up, as well as those that are doing great and need cash to meet larger demand, are sometimes finding it difficult to get help from their traditional lenders. Other sources of funding have noticed this need and are seeking out new business in the wine industry, Paul Franson writes in our cover story (see, "Tapping Money")
. He sketches out how four alternate channels for wine industry funding work: specialty banks, real estate investment trusts, mezzanine lenders and private equity. Anyone who is stumped with traditional banking and is unfamiliar with these new opportunities will find Franson's article very helpful.
To get another perspective on the wine industry economy, we sent our Northwest correspondent, Peter Mitham, to the annual conference of the American Association of Wine Economists in Portland (see, "Forecasting Grape Demand")
. This newish group is not afraid of controversy and is flexing its muscles by showcasing innovative economic research by its members. Two views on filtration
Two other articles in this issue are particularly worthy of mention. Both cover the topic of filtration. In the first, Dr. Richard Carey begins a two-parter on his own experimentation with a new filter medium (see, "Depth Filtration vs. Crossflow")
. Carey is a new contributor to Wines & Vines
but an old hand at winemaking and research. His work for us is a byproduct of our new association with Wine East
Carey starts by revisiting the differences between commonplace depth filtration using pads or sheets, and the higher-tech crossflow filtration using membranes. Then he breaks the news about a new product that he says will greatly improve depth filtration.
Tim Patterson, the guy with the hat who authors the Inquiring Winemaker column each issue (see, "Inquiring Winemaker")
, loves to expose the flaws in winemaking folklore. His modus operandi is to take an accepted adage like, "filtration strips the character out of a wine," and turn it inside out to see if it's verifiably true. In this issue he does just that. Reading his piece and Carey's will provide plenty of food for thought for any reader who hasn't examined his or her filtration practices lately.
I hope you get plenty of useful information from this issue. As always, write me at firstname.lastname@example.org
with any comments or critiques on how we're covering the wine industry.