Siduri Wines and Clarice Wine Company founder Adam Lee was sitting on a plane over New Orleans last week when he heard the news that his 26-year-old bank was in trouble.
But it wasn’t anger or fear that gripped him. Yes, he was nervous. He had $70,000 in balances with Silicon Valley Bank, the leading bank for California wineries, which collapsed on Friday, causing the largest bank collapse since the Great Recession of 2008.
But the overwhelming feeling, Lee says, was sadness and even concern at losing the critical and far-reaching support the bank had offered him and others in the industry. Working with a bank with a Santa Rosa branch and its own wine department for almost 30 years meant these bankers looked after Lee’s day to day business. They turned up crop after crop to sort grapes and feed the crew. His children babysat the children of wine department head Jed Taborski.
“It was a relationship,” says Lee, who sold his Healdsburg Siduri winery to Jackson Family Wines in 2015 and founded Clarice Wine Company in Windsor in 2017. “I think that’s going to get lost in this whole thing.”
On March 10 things had looked even worse. When the news broke, wine companies large and small, from Napa Valley’s CADE Estate Winery, which has four wineries and multiple vineyards and counts Gov. Gavin Newsom among its investors, to Maker, a women-owned canned wine company from the Bay Area swept up in unprecedented financial crisis, with many wineries struggling to keep payroll.
Now, it seems, the money will not be lost. Like many in his situation, Lee immediately opened an account at another bank and linked the two so he could wire his money “in case something went wrong.” On Monday, the Federal Deposit Insurance Commission set up a backup Silicon Valley Bridge Bank to cover accounts, even those above the $250,000 originally guaranteed by the government.
With the immediate danger past, Lee and the other 400 or so Silicon Valley Bank wine clients wait to determine who will step in to manage their money with the kind of inside knowledge they expect about what will happen to their other assets — like lines of credit worth hundreds of thousands of dollars — and how that experience will shape the future finances of a legendary California industry still enduring catastrophic losses from the pandemic and wildfires.
The SVB’s connections to the wine industry ran deep. Last year, she loaned wine producers $1.2 billion. Even three of California Gov. Gavin Newsom’s wineries — CADE, Odette and Plumpjack — are listed as bank customers, The Intercept reported earlier this week.
Lee has a $100,000 line of credit with Silicon Valley Bank, which he uses regularly to cover his harvest costs, from buying grapes and barrels to custom crushing and bottling services.
“Until that’s sorted out, I usually get up at 5 a.m. and watch the news to find out what’s going to happen,” he says.
That view is shared by the majority of wineries, vineyard owners, and other wine companies involved in Silicon Valley Bank, says Michael Haney, executive director of Sonoma County Vintners, which represents about 275 wineries. The association had its own assets in the bank when it was founded.
“Everyone’s gasping at this point,” says Haney, a Sonoma winemaker with 34 years of experience. “But I think people will learn from it and apply the lessons to find solutions. That’s what we did with the forest fires. Our wine community is very resilient.”
Most winemakers will tell you they know more about growing grapes than they do the business. But Haney predicts they’ll look for ways to diversify their assets based on this experience.
“People aren’t going to keep their money in one place,” he says.
Farther south, the wineries of the Santa Cruz Mountains, as the majority bank with other institutions, were largely unaffected by the fallout. Like some of their colleagues in Napa and Sonoma, the few who were Silicon Valley Bank clients declined to be interviewed. But their wine association spokesman told the Bay Area News Group that these wineries, which are mostly family-owned, had other sources to meet expenses during this time.
“We hope that another bank will take over the wine division of (SVB) as their insights and industry reports have been extremely valuable to the industry,” said Keikilani McKay, executive director of the Santa Cruz Mountains Winegrowers Association. “Many wineries and wine regions use their data to forecast and guide marketing and strategy.”
SVB wine department staff understood what growers and winemakers needed, says Haney. Sometimes, in a vulnerable industry where sales trends, demographic preferences, and winery visits can change dramatically from year to year, just having that support is worth it.
“Since 2017, we’ve dealt with wildfires, floods, smoke generation and of course now bank failures,” he says. “We have learned our lessons. In the same way that we learned how to create defensive space in wildfires, we can sort of bank that lesson.”
Source