Chatom Vineyards and Winery Offering Summary

Transcription

1 Chatom Vineyards and Winery Offering Summary

2 Executive Summary The most successful wine businesses build a unique brand leading to a loyal, even passionate, and ever expanding customer base. The Chatom Vineyards wine business has pursued this objective and is positioned to become a significant player in the Northern California wine industry. The following elements combine to create formidable upside potential to the Chatom wine business: An established 30 year presence in a growing wine region, the Sierra Foothills American Viticultural Area. Proprietary brand presence in the retail wine market. Established brand building infrastructure with a growing customer base. Fully equipped winery with a high ambience venue for retail wine events. Vineyard ownership yielding consistent and high quality supply of grapes. Excess grape production with opportunity for contracted grape sales. Idyllic vineyard location boasting a unique lifestyle venue for owner/operator. Exceptional location with uncompromised visibility and access off Highway 4, a primary artery connecting Sierra Nevada recreation areas to the Bay area. An inventory of 12,982 bottled cases and 31,652 gallons of bulk award winning wine. Current business operations can be improved in the term by implementing the following operational changes: Outsourcing to a consulting wine maker (historically the seller employed a full time wine maker). Reducing the amount of wine bottled and sold wholesale. Selling grapes and bulk wine to surrounding wineries after retail demands have been met. Continued focus on growing retail sales from the tasting room and from the wine club. Additionally, with capital investment, significant upside growth and profitability is possible, including: Excess grape planting capacity to sustain long term growth of the proprietary wine brands as well as near term demand for grape and bulk wine sales. Home site development at both the vineyard (12 sites) and the winery (1 site). An ideal location for development of an event center at the winery. This opportunity is priced as an asset sale, even though significant value has been created to build a sustaining brand, develop a supporting infrastructure, integrate vertically top to bottom, and grow a loyal and customer base passionate about the award winning wines. The initial heavy lifting has been done to make this a wonderful venue for an existing brand, a home for a wine maker, a lifestyle dream, or an industry player looking for expansion. Area History The gold came first...then the wine. By the 1850's the California "gold rush" brought miners from around the world to the Sierra Foothills. Many came from France and Chile and other places where people enjoyed wine. Vineyards were planted and wineries started to satisfy a cultural demand. The warm summers and cooler evenings in combination help the growers produce premium high quality

3 grapes. This beautifully unique and historical area, with its renowned restaurants and spectacular wines has attracted affluent visitors from the Bay Area and Southern California. The Sierra Foothills American Viticultural Area (AVA) was established in 1987 in the foothills of the Sierra Nevada Mountains. Over 100 wineries are located within the boundaries of the AVA. The Sierra Foothills AVA contains portions of eight California counties: Amador, Calaveras, El Dorado, Mariposa, Nevada, Placer, Tuolumne, and Yuba. The total area of appellation is 2,600,000 acres, one of the largest AVAs in the State of California. Chatom Vineyards Winery Chatom Vineyards boutique winery is viewed by many as the "Jewel of the Sierra Foothills". The Mediterranean style winery with its beautifully landscaped gardens creates an inviting atmosphere to relax and enjoy its award winning, ultra premium and luxury wines. The winery was established in 1990 and consists of a tasting/hospitality room, apartment, offices, a "rammed earth" wine cellar, and a covered crush pad. The patio area was designed for outdoor wine tasting and special events. The winery rests on acres in a picturesque area along the well traveled Highway 4 in Douglas Flat, California. Winery Production: The facility has 25,208 gallons of stainless steel cooperage, with ample room for expansion. Approximately 95% of the grapes accessed for wine production are grown on the seller's 744 acre ranch.

4 The seller reports that the winery has produced between 8,000 and 9,000 cases annually. A complete list of stainless steel tanks and equipment fixtures included in the sale is on file with the listing broker. The Chatom Vineyards Winery consists of three attached, well planned building structures; the tasting room, winery cellar, and crush pad. The tasting room and winery cellar were built in and the crush pad was constructed in Tasting Room: The two story building consists of a tasting and hospitality room, open and private office areas, two restroom facilities, kitchenette, a storage room, closet and hallways. The tasting room includes an attractive wood crafted tasting bar, tile flooring, textured and painted walls and ceilings, row and inset lighting. The second level apartment includes a living room, bedroom, kitchen and a bathroom. Winery Cellar: The "rammed earth" winery cellar is used for long-term storage of racked wine barrels. The wood and concrete constructed building has a metal roof. The foundation includes two floor drains. Adequate electrical and water outlets are available throughout the building. A 420 square foot loft was constructed and utilized for storage. Access is provided by two metal roll-up doors and two custom wood Mediterranean style doors which open into the courtyard.

5 Crush Pad: The crush pad is utilized for receiving and processing grapes. Several stainless steel wine tanks are located within the 4,532 square foot structure. The concrete and steel constructed buildings include a metal roof and floor drains. A 228 square foot equipment room contains the winery's glycol refrigeration equipment, which includes a Baltimore Air Coil condenser, compressor, pump, and glycol tank. Chatom Vineyards The Chatom Vineyard is situated in the picturesque Esmeralda Valley of Calaveras County in the Sierra Foothills of northern California. The acre ranch was established in the early 1800's. The vineyard was started in 1981 and includes 64 acres of premium varietals proudly consisting of Chardonnay, Semillon, Sauvignon Blanc, Cabernet Sauvignon, Merlot, Zinfandel, Syrah, Sangiovese, and five Portuguese varietals. There is an additional 60 acres of land suitable for vineyard development and 20 acres of farmstead, with the balance being native hillside used for limited cattle grazing. The ranch elevation ranges from 1600 to 2300 feet above sea level with steep to moderately undulating topography. The varietal soils range from clay and sandy loam to shallow rocky strata and have all proven to produce award winning grapes for Chatom Vineyards. Indian Creek runs through the property, providing irrigation and frost protection water to the vineyard as well as stock water for cattle and lush habitat along its banks. The farmstead is the site of the town formerly known as Esmeralda, with several of the original buildings still remaining. The building improvements consist of the main residence with a swimming pool, the

6 foreman's house and also a trailer which has been used for an assistant foreman. There are also two equipment sheds, two barns, a shop, and a garage/office. The main house was the site of a former post office, where Mark Twain posted some of his manuscripts. The ranch also has a number of historical Indian grinding rocks. It should be noted that portions of the subject property include mine claims from the gold rush days with mine shafts and antique mining equipment still remaining on site. The property is located at 7449 Esmeralda Road, San Andreas, California on the north and south sides of Esmeralda Road, approximately 1 mile east of the intersection of Dogtown Road and Esmeralda Road and approximately 8 miles from Angels Camp and San Andreas in Calaveras County, California. The property is located within the Sierra Foothills AVA, and in the Grape Pricing District 10. Vineyard Plantings: Chatom Vineyard's property includes 64 net acres of varietal wine grapes which are estimated to be 27 years old. The vineyards are on a 7' x 12' spacing pattern. The vines are trained on a bilateral cordon with a trellis system consisting of "T: post end posts, metal stake at every vine, and trellis wires. Some varieties have a 12" metal cross-arm with two catch wires. Other varieties have two vertical wires attached to the vineyard stake. Field Variety Year Net Acres Planted 1 Chardonnay Syrah Sangiovese (Brunello) Merlot (M4) Souzao Touriga Nacionale Sauvignon Blanc Cabernet Sauvignon Syrah Alvarelhao Tinta Cao Merlot (M1) Merlot (M2) Merlot (M3) Semillon

7 3 Zinfandel Tinta Barocco Touriga Nacionale Total Planted Acres: Unplanted Potential The pricing is based on a buyer's ability to plant 60 additional acres with minimal costs for water development. According to the vineyard foreman, the vineyard can actually support an additional 87 to 112 acres of planting. Given the demand in grape supply, this could significantly grow the value of the vineyard. Development of irrigation water would be required to accommodate all of the additional planting. Potential Planting Sites Minimum Acreage Maximum Acreage Field Lower Reservoir Hillside Haybarn Lower Land Pozar Property Esmeralda Northern Hillside Total Water: Irrigation water to the vineyard is provided by a pump and well, water diverted to two reservoirs and water from Indian Creek. The larger of the two reservoirs is capable of storing up to 21 acre feet of water, however, it is permitted to store 14 acre feet. A second reservoir located in the higher elevation is presently not utilized. Water is also drawn from Indian Creek. The main diversion point is the pump station below field #1. It is comprised of two 5 cylinder Duetz diesel pumps. There is also one diesel Kubota pump and one electric pump. This pump station is where all the water for the primary reservoir is pumped. This station also houses the main filtration system. The water supply is distributed to the vineyard blocks through a drip irrigation system. Frost Protection: The frost protection system utilized at the vineyard has both overhead sprinkler and wind machine capabilities. The overhead sprinkler system is throughout the entire vineyard while the wind machines are strategically placed through the vineyard blocks.

8 Zoning: The property is zoned "AP" (Agriculture Preserve Zone" on parcels and with a 50 acre minimum parcel size; and "U" (unclassified) on the balance of the property. Calaveras County Assessor's Parcel Numbers are , 009; , 008, 009, 010, 011, 012, 013, 014, and 016; and Business Overview Success Drivers: Location and Hours of Operation- The winery is ideally located on Highway 4, the major artery into the town of Murphy. The tasting room is open daily from 11:00 a.m. to 5:00 p.m. Given that the winery office and tasting room are located in the same building, staffing costs and other operating expenses are minimized (utilities, etc.). Calaveras County wine makers are working together to build regional brand awareness and are building a favorable reputation with retail customers. Chatom winery is one of a handful in the area that is open daily and very well located. This generates consistent retail traffic resulting in wine club membership growth and increasing retail wine sales. Quality of Wines- The seller and her winemaker have focused on quality wines aged to perfection. They currently craft the wines for 18 to 24 months, bottle and age for an additional 18 to 24 months, prior to release. Wholesale Distribution- Chatom Vineyards has built a solid wholesale distribution business that includes local restaurants and merchants, online wine clubs and merchants, and wholesale distribution companies both domestic and international. Orders are shipped from a warehouse in nearby Acampo. This revenue source is wide and diverse representing over 50 customers ranging from several hundred dollars to seventy thousand dollar in annual revenues (twelve customers exceed ten thousand dollars in annual revenue). Wine Club- Chatom Vineyards has built a loyal following of 800 wine club members and growing. These members are sent two bottles of wine on a quarterly basis for $39. This equates to approximately $128,000 in annual sales. In addition to the quarterly shipments, members are invited to a number of events throughout the year including Complimentary Wine Club Receptions, Mardi Gras Celebration, Summer and Harvest Dinners, and Holiday Celebrations. They also receive discounts on wine, merchandise, and events.

9 Products and Services: Currently Chatom Vineyards is offering twelve different wines through their tasting room and website. The varietals and retail pricing are as follows: White Wines Retail Price Chardonnay $ Sauvignon Blanc $ Semillon $ Red Wines Retail Price Cabernet Sauvignon $ Cuvee $ Merlot $ Sangiovese $ Syrah $ Syrah- Esmeralda $ Touriga $ Vino Dolce $ Zinfandel $ Pricing- The seller has kept her pricing competitive to neighboring wineries in the white varietals. She's kept her red varietals lower, in an effort to grow market share and move inventory. She believes that there is an opportunity to move pricing higher in the red varietals. Events- The winery hosts a number of events throughout the year that provide an additional profit center. Short Term Operational Improvement Strategies: Winemaker The seller recently made a strategic decision to hire a consulting winemaker rather than pay a full time wine maker. The new consulting winemaker comes highly regarded in the local wine industry. The change should have a significant impact on the bottom line results. Direct Sales- Although the wholesale distribution business has established a steady revenue stream, it comes at a significantly reduced profit margin. A dual strategy focused on growing the retail side of this business and more focus on selling excess grape capacity may have a very positive effect on overall profitability. Grapes and Bulk Wine- Historically the seller has used almost all of the Chatom Vineyard grapes for Chatom wine production. The ripening potential of Sierra Nevada region vineyards exceeds that of the more popular Napa/Sonoma region. This results in more demand for grapes and/or bulk wine than can be produced there. Chatom Vineyards is well positioned to benefit from this excess demand in two ways; an

10 opportunity to sell current excess grape capacity and additional planting capacity that could expand the excess capacity even further. Long Term Strategic Growth Opportunities: Vineyard Home Sites Development- The vineyard is legally comprised of 13 parcels, twelve of which are permitted home sites. Although the economy is not ideal to be developing homes at this time, prior to the 2007 recession, this type of development was prevalent in the foothills. Developers were acquiring vineyards with acreage and developing high end "Vineyard Estates". An appraisal performed for Chatom in December 2006 (available upon request by qualified buyers), indicated several purchases of comparable properties for this purpose. A buyer interested in the vineyard could sell these home site rights to a developer or undertake the development themselves. Additional Planting- The 64 acre vineyard has the capacity to nearly double its production capacity with additional planting. It is believed that the vineyard can support an additional 87 to 112 acres of planting, even though the price is based on only 60 additional acres. Given the demand in grape supply, this could significantly grow the value of the vineyard. Development for irrigation water to supply the additional planting would be required. Potential to Build a Wedding and Events Center- The winery has a location for building a Wedding and Events center. Should the buyer be looking for a opportunity to build this type of venue, it is set up perfectly for it. Winery Home Site Development- There is an opportunity to develop an additional home site at the winery. Chatom Wine Brand and Inventory: The company currently has an inventory of 12,982 cases of bottled wine and 31,652 gallons of bulk wine. Factoring the revenue value less requisite costs for sales and production, the value of the brand and inventory is $1,520,000. Inventory is being sold separate from the Vineyard and Winery parcels, as it will vary in quantity. An accounting of actual inventory will be performed at the close of escrow and the price adjusted accordingly. Please refer to the Maher Advisors Valuation Report for details on the valuation of inventory. The Chatom brand has built a solid reputation of award winning wines with a loyal following of wine club members. The seller has indicated that a potential buyer will be able to maintain the Chatom brand, should they desire to, or can rebrand under a new name. Winery Equipment: The winemaking facility has 25,208 gallons of stainless steel cooperage. Please see the Maher Advisors Valuation Report for a detailed list and corresponding value of equipment. The value of all equipment is $274,000. Winery Permit: The winery has established permit rights for production of wine that is a valuable asset to the business. The value of those rights have been estimated at $150,000.

11 Listing Price: The seller employed Maher Advisors, both a consultant in the wine industry and a member of the National Association of Certified Analysts, to prepare a Valuation Report of Chatom Vineyards and Winery. Based on this report, the list price is as follows: Chatom Vineyard and Winery Pricing Vineyard Parcel $2,930,000 Winery Parcel $1,820,000 Winery Equipment $274,000 Winery Permit $150,000 Total Winery $2,244,000 Chatom Wine Brand and Inventory (Subject to physical count at closing) $1,520,000 Total $6,694,000 A copy of the Valuation Report is available to qualified buyers. The seller will entertain offers to acquire the vineyard or winery separately. Also, the brand and inventory are being sold separately.

12 Chatom Vineyards' Award Winning Wines 2010 Semillon Gold- The San Diego International Wine Competition Gold- The Calaveras County Fair 2010 Sauvignon Blanc 95- JUSTWINEPOINTS.COM 2010 Chardonnay 96- JUSTWINEPOINTS.COM Silver- San Francisco Chronicle Wine Competition 2009 Cuvee Silver- Calaveras County Fair 2008 Gitano Sangiovese Gold- Calaveras County Fair 2008 Touriga Double Gold- San Francisco International Wine Competition Gold- Calaveras County Fair 92- JUSTWINEPOINTS.COM 2008 Zinfandel Best of Class Zinfandel- The San Diego International Wine Competition Silver- Calaveras County Fair 86- Wine Enthusiast 2008 Syrah Double Gold- San Francisco International Wine Competition Silver- The San Diego International Wine Competition 3 Stars (Brilliant)- Beverage Experts 97- JUSTWINEPOINTS.COM 88- Wine Enthusiast 2008 Merlot Silver- Calaveras County Fair 2008 Semillon 91 Silver- California State Fair Best of Class Sierra- California State Fair 2008 Chardonnay Double Gold- Calaveras County Fair Silver- Orange County Community Wine Competition 87 Editors Choice- Wine Enthusiast Magazine Silver- El Dorado County Fair 2008 Sauvignon Blanc Silver- El Dorado County Fair Bronze- Calaveras County Fair 90- JUSTWINEPOINTS.COM 2007 Touriga Gold- Calaveras County Fair Best of Show Red- Calaveras County Fair Gold- Orange County Community Wine Competition Silver- El Dorado County Fair 91 Silver- California State Fair 2007 Cuvee Double Gold- Calaveras County Fair 2007 Zinfandel Gold- Calaveras County Fair 95- JUSTWINEPOINTS.COM 87- Wine Enthusiast 90- My Purple Teeth Blog Review Bronze- Finger Lakes International Wine Competition 90 Silver- California State Fair

13 2007 Gitano Sangiovese 97- JUSTWINEPOINTS.COM 2007 Syrah Gold- Amador County Fair Silver- Calaveras County Fair 88 Silver- California State Fair 2007 Merlot 98- JUSTWINEPOINTS.COM 3 Stars (Brilliant)- Beverage Experts 2007 Cabernet Sauvignon Silver- San Francisco International Wine Competition Gold- Calaveras County Fair 3 Stars (Brilliant)- Beverage Experts 2007 Esmeralda Syrah Gold- Calaveras County Fair 96- JUSTWINEPOINTS.COM 2006 Syrah Gold- Orange County Community Wine Competition Bronze- Calaveras County Fair 90 Silver- California State Fair 2006 Chardonnay Double Gold- Calaveras County Fair 2006 Zinfandel Silver- California State Fair 88 Bronze- Calaveras County Fair 2006 She Wines Red Gold- Calaveras County Fair 97 JUSTWINEPOINTS.COM 2006 Merlot Bronze- Calaveras County Fair 2006 Semillon Silver- Calaveras County Fair 2006 Vino Dolce Silver- Calaveras County Fair