Management leases and joint ventures: the wine sector is addressing ongoing uncertainties

Uncertainty is perhaps the term that best distinguishes the phenotype that has recently been revolving around the living organism of wine and everything related to the sector, and that is, declining consumption, the WHO’s health campaigns, the climate crisis, and the big unknown, tariffs. It is not a coincidence, therefore, that the wine sector is now turning to useful tools specifically designed to address the unpredictability and perplexities of this moment. One of the most widespread trends for wine companies in this specific moment involves the formula of leasing a business unit. This tool is well known in other fields, but it is essentially new for the wine sector, and in this specific case, it is called management leasing. “One can rent vineyards, or the winery, accommodations, hospitality or production areas of operative companies, while not having to immediately acquire (or cede) ownership”, Marco Giuri of Studio Giuri in Florence, explained. Giuri is one of the leading experts in wine law in Italy and is the promoter of relaunching an existing tool, which has been designed for the wine world, as he told to WineNews. “The advantage is precisely allowing other parties to introduce organizational, production and commercial innovations into the company you own, while, however, you do not have to give up your own share, and therefore allow yourself time to evaluate whether to return to management or make a definitive transfer. And, of course, whoever takes over, once the lease expires, can decide whether or not to buy”. Giuri further explained that this formula has only recently emerged in the wine industry, but that, on average, lease terms vary between 5 and 7 years, because “less than 3 years isn’t even enough time for the parties to concretely determine whether or not it's worthwhile to acquire or sell”.
Arecent example of using this arrangement occurred in Tuscany, involving “a family business that has 600 square meters of winery space and denomination vineyards, whose owners are less active than a few years ago and whose children are still unsure whether or not to take over the business”, the lawyer explained. “We discussed a 5-year lease with them at a fixed annual fee and a percentage of the turnover. Once the five-year term is up, there is the option to buy at a price defined in the contract. The lessee is still required to maintain the denomination certification and make improvements”. This means that those who grant a lease receive a fee, perhaps even a small percentage of the profits, and do not have to immediately sell the company, but can instead take the time to evaluate whether or not to do so. Meanwhile, those who are acquiring the business have the advantage of not immediately investing large sums in the acquisition, trying to bring the business to financial equilibrium or at least to a minimum return, and then, after a few years, having learned the business better, possibly considering acquiring it.
“A management lease is a waiting tool. It is flexible and customizable”, Giuri said, “an alternative to a sale, and a perfect intermediate solution to be able to manage this period of uncertainty related to the wine world. And also, and why not, to facilitate generational transition”.
Joint ventures are another growing and increasingly widespread trend in the wine sector. Why do wine companies join together? “Up until now, they have done so primarily to develop new markets and create a common sales network. However, the most recent trend is related to dealcoholized products”, Giuri said. “New companies are being formed to be able to share equipment and technologies for dealcoholization, thereby reducing costs, which are very high. In other cases, wineries partner with each other, aiming to create a specific wine, such as a Metodo Classico sparkling wine. Therefore, partnerships are formed with a specific winery, the technological assets, reputation, and expertise to create a new product that they otherwise wouldn't have been able to produce alone”.