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BREAKING: Does Shafer Vineyards’ Sale to Luxury Brand Signal Wine Trend?

One of Napa’s most iconic wineries is changing ownership.

As reported by The Wine Spectator, Doug Shafer, president of Shafer Vineyards, on Wednesday announced that Shinsegae Property, a real estate and luxury brand firm based in South Korea, has acquired his family’s winery. The price tag is a reported $250 million and includes 225 acres of vines.

Shafer winemaker Elias Fernandez and the core winemaking and vineyard staff will continue with the winery for the foreseeable future.

Shafer Vineyards is one of California’s premier winemakers, with high-end offerings like Shafer’s Hill Side Select, and Relentless (winner of Wine Spectator’s “Wine of The Year” in 2010).

While winery acquisitions are nothing new, the Shafer acquisition is somewhat unique in that it is the first (in recent memory at least) that has been bought by a “non-operator”.

European and other international wine concerns have purchased several California wineries over the years, most notably Italy’s Grupo Antinori acquiring the iconic Stag’s Leap Winery in 2007 and France’s Louis Roederer and Moet & Chandon acquiring several independent California Champagne makers in the 1980s. But Antinori, Roederer and Moet are all winemakers themselves; their U.S. purchases were understandably focused on growth and synergies (expanded wine offerings, increased geographic presence, enhanced distribution capabilities and sharing of vitification and vinification technology and processes).

Shinsegae, on the other hand, has zero wine holdings, and its core strengths rely on real estate management, luxury shopping malls and ownership and management of premium entertainment venues. Further, it was announced that the Shafer team will remain at the helm for the foreseeable future, so Shinsegae does not appear to have (for now at least) any desire to actively manage its most recent acquisition.

So, what prompted Shinsegae to spend $250 million (USD) on a highly respected but “boutique” napa winemaker they won’t even manage? A “passive” investment? Highly doubtful.

While no “official” reason for the acquisition has been given to date, two reasons can be reasonably implied: Mainly, 225 acres of prime Napa real estate and – more importantly – a “luxury brand”. It can be safely assumed that Shinsegae looks at Shafer as the first of a growing portfolio of luxury “brands” that will be acquired and molded over time into “luxury destinations and experiences.”

It would not be surprising if a luxury hotel, a Michelin-star restaurant and exclusive residences are built within Shafer’s property in the not-too-distant future. “Winery visits” are becoming ever more popular with wine aficionados and other wealthy individuals, and organized tourism to “Wine Meccas” like Burgundy, Bordeaux, Piemonte and Napa are more commonplace with each passing day.

In some wine-growing parts of the world (like Argentina and Chile), winery lodgings are combined with golf courses, fine dining and other luxury attractions. This is a growing trend that will likely continue as more winemakers (operating on already thin margins and with high agricultural/climate risk) open their doors to “wine tourism” to gain additional revenue and brand awareness. Shinsegae may simply be stating that they want to be a major player in this space, and they’re staking their claim early.

“Wine” may be a low margin business, but “wine tourism” is not. Ergo, going forward the wine “profit” may not be driven by the actual product per se, but by the “experience” around it.

Editor’s note: Juan Ruiz is a finance and investment professional with over 30 years’ experience collecting and reviewing wines. He’s a graduate of New York’s Institute of Culinary Education’s Intensive Sommelier Program and a certified sommelier with the Court of Master Sommeliers, Americas.