When Umpqua Bank was looking to expand its winery banking business years ago, the competition was too formidable.
It's now closer to achieving its mission after one former competitor, San Francisco-based First Republic Bank,
SVB's team of wine bankers remains just as strong, though now under the umbrella of SVB's acquirer, Raleigh, North Carolina-based First Citizens Bank. But First Republic's wine banking team has joined Umpqua, giving the Pacific Northwest bank the stronger toehold in wine banking it long sought.
Umpqua and its
But as with any industry, helping a company through its toughest times builds the long-lasting relationships bankers always seek.
"A time like this can be the best time for the bank to go into the market," said Tory Nixon, Umpqua's president of commercial banking, adding that the team is focused on the companies who can navigate the "ebbs and flows" of each cycle.
Umpqua's wine banking team is co-led by Corey Dahline, a commercial banker focused on wine businesses' cash flows and loan needs, and Greg Newhall, who focuses on the private banking and wealth management needs of those business owners.
The wine business — whether vineyards, barrel makers or distributors — is "very family-centric," Nixon noted. And now that the First Republic band is back together, Umpqua can fully serve their personal banking and wealth needs along with their business ones, whether commercial loans or payments to employees and suppliers.
Wineries may also turn to bankers to finance what's likely to be a round of consolidation in the industry, said Rob Eyler, an economics professor at Sonoma State University who researches the wine industry. Some wineries will emerge from the industry's current retrenchment stronger, Eyler said, perhaps by scooping up others' operations or by investing in new strategies.
Others will likely close up shop, potentially leading to an "exodus" of independent wineries if the crunch is bad enough, he added.
"This kind of uncertainty … will lead some winery owners to say, 'OK, I think this is it, and I don't want the headaches anymore,'" Eyler said.
Some smaller operators are already folding, but so did the conglomerate Vintage Wine Estates, whose
"There are unique little wrinkles, depending on whether you're talking about one place or the other, but it is a global phenomenon," said Daniel Sumner, an agricultural economist at the University of California, Davis.
Older generations of wine aficionados are gradually dying off. Younger ones aren't discovering wine as quickly, with some of them choosing not to drink at all and others preferring canned seltzers and other ready-to-drink cocktails. One big question is whether they've merely delayed their shift to wine as they get older or whether the move won't be as pronounced as before, Sumner said.
As more younger wine lovers travel to famous wine regions in France or Spain, they may realize they don't "have to go overseas to have a European-style experience" and head to wineries in Napa, Sonoma and further north, said Sonoma State's Eyler. But that will require strong marketing and making the right strategic moves — which is where bankers like those at Umpqua or SVB could help.
Some may not succeed even if they make the pivots, potentially posing problems for banks as companies default on their loans.
But Nixon, the Umpqua commercial banker, said the bank is focusing on companies with strong cash flows, lower debt burdens and creative management teams. Whether it's wineries or dentists, Umpqua wants to work with owners who can "combine real business acumen with technical capability," Nixon said.
For example: What's the best way for wineries to distribute their product? Should they grow their own grapes, or buy grapes, potentially using derivatives contracts that provide certainty on grape prices? And how can they manage through catastrophic events like California wildfires?
"How they have to maneuver and be very nimble, it's impressive," Nixon said, "and it's hard work."
