Winemanow
Capital Markets Overview
and Wine Industry Trends
by Wiley Kitchell, Managing Director, Moss Adams Capital LLC
Capital Markets Overview
On the day this commentary is being written,
Monday of Thanksgiving week, increasing
concerns about a “nuclear” economic winter
throughout the European Union are competing
for attention with the announcement that our
US Congressional supercommittee is hopelessly
deadlocked and faces an almost certain collapse.
Both news items are doing a good job of driving
our equity markets lower (rather significantly, at
the moment) as they exacerbate public concerns
about the health of the US economy.
Capital markets and the consumer confidence
index have, of course, been walking a very
confusing, modestly upward-sloping path
recently. Had this article been prepared on
a similar date the previous month, we likely
would have highlighted the broadly positive
third-quarter public company earnings
announcements and noted that the majority of
economists believed the leading domestic banks
had successfully put their worst days behind
them.
We are in a period that requires companies to
focus, perhaps more than ever before, on their
production processes and strategic planning and
one in which banks and other capital sources
must know their clients and collateralize their
loans.
Despite the ongoing economic uncertainty and
dramatic public mood swings, many private and
public companies have experienced a strong
rebound in sales and earnings over the past
12–18 months. Companies that have successfully
positioned themselves today are realizing they
can do more with less—including a leaner labor
force—and that demand for their goods and
services has been, and is expected to remain,
healthy.
Wine Industry Trends
During 2010 the number of US wineries grew
by approximately 9 percent, to 6,785. The
increase in 2010 compares very favorably
to the recent growth rates in new winery
openings, of 2 percent in 2009 and 1. 5 percent
in 2008. The increasing number of wineries,
in what is typically a capital-intensive, long-production-cycle industry, underscores the prior
comments that, although choppy and uncertain,
the economy has been trending in a positive
direction over the near to intermediate term.
