Winemaking as a family sport

In most sectors, corporations tend to outperform privately held, family-owned businesses. Corporations better manage risks, access capital and handle institutional transitions. And yet, winemaking is one space in which family-owned businesses have persisted and outperformed, both in quality and in economics. In a study of the largest wine businesses from 2003 to 2014, only 4 of the top 10 wine firms by case sales were public corporations (https://wineeconomist.com/2015/05/05/family-wineries/).

Why is this? Family vineyards confer tangible benefits. At a tasting in Ribera del Duero, a set of trade buyers were asked to taste ~200 wines. Family wines substantially outperformed non-family wines (https://www.wine-searcher.com/m/2020/01/family-wine-affair-a-risky-business). An argument could be made that families, more than corporations, can act as long-term stewards of winemaking values and craftsmanship. 

Family businesses appear to outperform on certain financial metrics as well. A means test across 520 wineries reveals that return on assets and operating margin were higher on family wineries (https://www.sciencedirect.com/science/article/pii/S2444877X17300272). The authors suggest this is due to price advantages derived from long-term relationships or due to “lower agency costs” enabling an improvement in management costs. 

But family business are not without their complications, as we observed in the Mondavi case. Disparities in management perspectives, intergenerational transitions and varying levels of commitment and interest have plagued not only the Mondavis but many winemaking families globally.

And yet, winemaking remains a space uniquely suited to family sport. It is not an accident so many of the winemakers we encounter (the Mondavis, Donelans, and others) come from a lineage of winemaking.