Wine country goes back to basics — and online — as pandemic upends business


Selecting a bottle of wine to share over dinner was easy enough before the pandemic. Anyone might worry about paying too much or sounding silly when ording a fancy-sounding choice, but the ritual of picking a bottle to share, or glass to sip, had a way of making any meal out feel special.

That was until about five months ago. Now the idea of ordering wine, dining out or engaging in routine social gatherings, like birthday parties or anniversaries, involves weighing the potential risk of a run-in with the novel coronavirus, which the U.S. still struggles to tamp down.

The crisis has led U.S. households to rein in spending, hobbled entire industries and threatened the ruin of jobs. In other words, it’s the kind of public-health and economic shock that’s one for the history books. It might even be driving Americans to drink more.

The problem is they’re drinking more at home. And that’s had a sobering effect on much of the U.S. wine industry, which after a near quarter-century of growth, saw domestic wine sales drop 5% over the past 12 months to about $48 billion in June, according to data from industry research firm bw166.

Experts singled out March 20 as the day everything changed, when California, Illinois, New York and other states issued stay-at-home orders that came thundering down across the nation, forcing bars, restaurants and wine-tasting rooms and other nonessential businesses to shutter as authorities raced to control a wave of COVID-19 infections.

“When you add both the shutdowns of tasting rooms and closures of restaurants, 44% of sales fell out from underneath the wineries in one night,” Rob McMillan, an executive vice president and founder of Silicon Valley Bank’s wine division, told MarketWatch.

“It was a bad day to wake up.”

Like many other industries, wineries remain in the midst of an upheaval sparked by a global pandemic that’s been brutal on lower-income workers, but sparing Wall Street, where U.S. stock benchmarks, including the S&P 500 index,
SPX,
-0.20%
,
trade near record territory.

It’s not that consumers stopped drinking wine. Rather, diners who might in better times split a bottle at a restaurant, suddenly were rushing their carts through big-box stores and grocery aisles to fill up on necessities, including wine.

“Nationwide, retail sales blew up,” said Gary Obligacion, the general manager at the Post Ranch Inn, a luxury resort in Big Sur, Calif., that overlooks the Pacific Ocean, of the shift to at-home wine drinking at the onset of the pandemic. “People were in panic mode,” he said.

Post Ranch and its Sierra Mar restaurant recently reopened after a nearly three-month shutdown. For now, that still means only serving guests staying at the resort, who can order meals in their rooms or book at the Sierra Mar’s outdoor deck. But the restaurant’s thick, multipage wine book has been replaced by iPads that, like any wine bottles purchased for a table, are sanitized within view of diners.

“It’s all being done in a format for peace of mind around health and safety,” said Mark Buzan, Sierra Mar’s wine director, of the new protocols that make “any romantic notion about bringing a dusty, old bottle up from the cellar to present to a guest” a thing of the past.  

Two U.S. wine industries

The puzzle for smaller, premium winemakers to solve has been how to reach customers when retail sales have been booming, but mostly benefiting the nation’s wine Goliaths.

“There’s two wine industries,” McMillan said. “Roughly 75% comes through the largest 13 wineries,” he said, pointing to top sellers that include the E&J Gallo Winery, The Wine Group and Constellation Brands STZ. “They make wine, sell it to wholesalers, restaurants or grocery stores, and then it goes to the consumer,” he said. “The smaller wineries don’t get much wholesale attention.” 

What has been working, for some smaller producers, has been efforts to reach customers directly to spur sales, including online through their own websites, instead of relying on restaurants and others to create a buzz.

That’s meant repurpurposing staff and going back to the basics, including hitting the phones to drive sales. “It’s not like small wineries figured out overnight how to do outreach for online retail,” McMillan said. “For some, the only thing on their website was a shopping cart icon.”

This chart breaks down how sales have shifted at many U.S. wineries after shelter-in-place orders took hold, as producers ramped up business through wine clubs, online and over the phone.

Wine buying shift in 2020


SVB

Further into summer, as more restaurants reopened under new social-distancing rules, off-premise alcohol sales remained robust.

Spirits have led the charge higher, with sales jumping 29.3% for the week ended July 18, versus a year prior, while wine sales rose 19.7%, according to the latest data from Nielsen.

“A lot about wine is the story,” said Russ Colombo, a senior vice president at Baker Boyer, a lender in Walla Walla, Wash., focused on financing smaller wineries in the region. “The first bottle you sell or place at a restaurant is difficult enough,” he said, but after that “it’s all about momentum.”

For winemakers able to drum up their own support and sell directly to customers, a bonus is that they don’t have to pay a middleman, which can mean about twice as much profit for a producer when compared with wholesale transactions, Colombo said.

On the other hand, Colombo also called wineries “one of the toughest things to finance,” not only because of the fierce competition, but also because winemaking takes talent, a long view and probably luck.

“Winemakers are good at agriculture,” he said. “But for higher-end red wine, even before it hits the market, it could be two years. And in those two years, the world changes a lot.”

Wine Facts

One boon for smaller producers during the national tug of war over reopening, face masks and social-distancing restrictions has been visitors flocking to nearby wineries and vineyards for a bit of respite.

“Most high-end wineries that have tasting rooms are going to the reservations system,” Colombo said, adding that catering to fewer customers due to health-and-safety rules has been a positive for sales. “Winemakers, they find they can spend more time with their customers, tell their story and establish a personal relationship.”

And yet, there’s plenty of uncertainty. The earliest part of the 2020 harvest has kicked off in California’s wine country, while the state on Thursday reached the grim milestone of becoming the first state to report 600,000 COVID-19 cases since the pandemic was first detected in the U.S. earlier this year.

“What I can tell you is that it’s been an excellent growing season. The crop loads look average to high and you have to find homes for all of that fruit,” said Jennifer Putnam, chief executive at Napa Valley Grapegrowers. “But it’s a pretty intricate dance we do. You have to have a healthy workforce, good weather and people supporting Napa Valley agriculture and wines.”



Original source link

THE BIG MOVE: I work in Silicon Valley, but my job is now remote. I can finally live somewhere cheaper! Where should I go?


‘The Big Move’ is a new MarketWatch column looking at real estate and work-life balance.

Do you have a question about buying or selling a home? Do you know where your next move should be? Email Jacob Passy at jpassy@marketwatch.com.

I’m a tech worker in Silicon Valley, and my company recently informed us that we can work remotely indefinitely. There’s a lot I love about living here — including the easy access to Michelin-starred restaurants and to outdoor activities like hiking and surfing.

What I don’t love is the high cost of living. I earn all this money, and it goes on rent and transport and, yes, eating out. With everything that’s happened in the last six months, I have had long talks with friends about our future, and our relationship to our work.

There’s got to be some reward for all of the long days, right? I’m a renter right now, but I have enough money saved up to buy a home somewhere. I hate to leave, but several members of my friend group have the same idea. We’re done! My money would go much further outside of Northern California.

Where should I go?

Searching and So Over It in San Jose

Dear Searching,

Open Google Maps
GOOG,
+1.77%

GOOGL,
+1.80%

and take your pick.

You’re far from alone when it comes to working from home on a more permanent basis. As far back as May, major companies like Twitter
TWTR,
+0.42%

and Square
SQ,
+0.55%

— which are both run by Jack Dorsey — said they would allow many employees to work from home indefinitely.

A survey of more than 300 chief financial officers conducted by research firm Gartner found that around nearly three-quarter of them plan to shift at least 5% of on-site employees to permanently-remote positions post COVID-19. It appears that there’s something of a a movement afoot.

The pandemic has forced lots of people to rethink their living arrangements. Faced with the prospect of working from home for many, many more months to come, major cities like New York and San Francisco are seeing an exodus of folks moving to the suburbs.

And still more people are looking for cheaper housing in light of the pandemic-fueled economic downturn. Even before COVID-19, high-cost housing markets like where you live in San Jose were seeing people leave simply because it got to be too expensive.

So where were those people moving? An analysis of listing-view data from Realtor.com found that 62.8% of the homes San Francisco Bay Area shoppers looked at were in fact not in the Bay Area. Here are Top 10 counties with the most home-listing views from current Bay Area residents:

  1. . Sacramento
  2. . San Joaquin
  3. . Placer
  4. . El Dorado
  5. . Stanislaus
  6. .. Monterey
  7. . Los Angeles
  8. . Santa Cruz
  9. . Fresno
  10. .. Nevada

Buying a home like this in the Bay Area of California could cost you an arm and a leg — but looking further afield will provide you with many more affordable options.


Getty Images

“We are seeing a migration out of San Francisco to what we’ll call the North Bay, the East Bay, the Central Valley, and even Sacramento,” said Scott Fuller, a real-estate broker and founder of LeavingTheBayArea.com, a real-estate services firm that helps people relocate out of California.

“People are feeling like they’re being given some independence and some flexibility and they want what they would consider a better quality of life,” he said.

Many of the counties from Realtor.com’s list — including Sacramento and San Joaquin— are in the Central Valley. This region has become increasingly popular in recent years because of high home prices in areas like San Jose and San Francisco.

(Realtor.com is operated by News Corp
NWSA,
+1.84%

subsidiary Move Inc., and MarketWatch is a unit of Dow Jone, which is also a News Corp subsidiary.)

But moving to this part of California has its trade-offs. “The most exciting thing you could do is go to Safeway or maybe duck hunting,” said Pat Kapowich, a Silicon Valley-based real-estate broker. “It’s still really a bedroom community — you have to get in your car if you want to do anything exciting or fun.”


‘It’s still really a bedroom community — you have to get in your car if you want to do anything exciting or fun.’


— Pat Kapowich, a Silicon Valley-based real-estate broker, on the downsides to living in California’s Central Valley

It’s a bit of a resurgence of the drive-until-you-qualify phenomenon we saw in the housing bubble that preceded the Great Recession — people are moving to many towns and cities in this region despite the hours-long commute to work because they can afford to buy a home here.

For someone in your position, who can work remotely indefinitely, living in the Central Valley could make a lot of sense. It’s not too long of a drive to many of the amenities you like about where you live now — the beach, the mountains, and even Napa Valley’s wineries.

Plus, you need to consider the fact that you might want to change jobs eventually — and, if you do, your new job might not be remote. If you choose to buy in this region, you could theoretically commute to a job in Silicon Valley, if need be.

But let’s say that you’re tired of California living. There are many markets across the country where you could be happy. Again, one consideration should be whether the region has a thriving or growing tech sector. Along those lines, there are the usual suspects — places like Seattle, Denver and Austin.

But other markets Fuller and Kapowich identified as being popular among his clients also include areas like Phoenix, Nashville, Raleigh, N.C., and Boise, Idaho. Even more places to consider include Scottsdale, Ariz., Reno and Santa Fe or Albuquerque, N.M.

In most of these places “for $500,000 and less you can get into a home that’s going to be at least 3,000 square feet,” Fuller said.

Don’t miss:California’s emigrants aren’t all moving to cheaper housing markets

Fuller estimated that some 80% of his clients who choose to relocate fully outside of California still stay west of the Rocky Mountains. “They’ve got family or something that’s tying them back so they want to be within a couple of hours plane ride to get back to California,” he said.

Some of these cities — like Seattle, Nashville and Denver — will offer lots in the way of restaurants, entertainment and access to the great outdoors. Unfortunately, it may be hard to fully replicate the lifestyle you currently can lead in the Bay Area.

“Here you have all these activities within a 90-minute drive,” Kapowich said. “You can go surfing on Saturday and snow skiing on Sunday.”

Why didn’t I give you one or two suggestions?

These aren’t normal times, so instead I suggest you reach out to your network to see if you know people who live in those areas and get the honest truth from them about what lifestyle you could lead after you move. The pandemic is a time when we can and should lean on each other.

Take some time to narrow down where you might want to live, and then fly out to see if your most desired amenities are within a stone’s throw. If you have got close friends who have the same idea, you can pool your resources, creatively, if not financially.

It would be easier if you made some of these decisions together.



Original source link

Trump’s stimulus orders don’t seem to be feasible or legal, experts say


President Donald Trump’s executive order and memorandums to provide relief during the coronavirus pandemic don’t seem feasible or legal, experts said Saturday.

Trump made an end run around Congressional Democrats with an executive order and three memoranda aimed at boosting the economy. But experts said the wording of the orders raised more questions than answers.

Read:Trump extends unemployment benefits, defers payroll tax

For instance, the executive order will allow companies to not collect payroll taxes. But analysts said workers would still be on the hook to pay the taxes by next April 15.

Trump has been a big fan of a payroll tax holiday. But the tax break is not popular among Republicans and Democrats on Capitol Hill because these taxes fund the Social Security program.

One Trump memorandum would provide $400 a week in extra benefits. The federal money would come from disaster relief funds. Analysts questioned using these funds with hurricane season ahead. Cash-strapped states would have to pay $100 of the extra funds. The program may only last 4 weeks before it runs out of money,

Ernis Tedeschi, a former Treasury Department economist tweeted he didn’t think the unemployment insurance plan would work.

One Trump memorandum doesn’t create an eviction moratorium but asks if certain agencies can “maybe do something” about evictions, said Bharat Ramamurti, a member of the COVID-19 Congressional Oversight Commission, in a tweet.

Congressional Democratic leaders issued a joint statement trashing the orders and urging Republicans to return to the negotiating table.

Sen. Charles Schumer, Democrat of New York and Speaker of the House Nancy Pelosi called Trump’s actions “unworkable, weak and narrow.”

Diane Swonk, chief economist at Grant Thornton, said that Congress needs to pass legislation. The July employment report showed that job growth is slowing as the coronavirus pandemic spreads.

“The crisis is real, while the economy has already shown signs of losing momentum.” Swonk said in a tweet.



Original source link

Calculating America’s eviction crisis: Up to 40 million people are at risk of being kicked out of their homes


As President Donald Trump calls for another federal eviction moratorium, a new report has shed light on just how many Americans are facing housing insecurity as a result of the coronavirus pandemic and the associated economic downturn.

Between 30 and 40 million people in the U.S. could be at risk of eviction in the next several months, according to a report released Friday by a group of housing researchers. The report aggregated existing research related to the housing crisis caused by COVID-19.

The researchers said the current situation could be “the most severe housing crisis” in the nation’s history.

As the novel coronavirus first began spreading across the country and prompting business shutdowns, many state and local lawmakers took swift action to enact eviction moratoriums to protect people who suddenly found themselves without a source of income to pay their bills. Many renters were already in a precarious position before the pandemic: Research from the Joint Center for Housing Studies of Harvard University found that nearly half of all renter households were cost-burdened before the pandemic, meaning over a third of their income went toward rent.

Read more:Landlords must notify tenants about eviction proceedings in multi-family buildings, housing regulator says

At the federal level, the CARES Act placed a temporary moratorium on evictions for renters living in buildings supported by federal funding. But that moratorium expired at the end of July, and many of the moratoriums at the state and local level have also ceased.

“The vast majority of states lack protective eviction moratoriums and housing stabilization measures that could support renters facing rent hardship,” researchers wrote, citing work done by the Eviction Lab at Princeton University and health and housing law expert Emily Benfer.


‘The housing market embodies the inequality that was magnified and exacerbated by COVID-19.’


— Diane Swonk, chief economist at accounting firm Grant Thornton

Previously, research showed that people of color are disproportionately at more risk of being evicted currently.

More than one-quarter of Black renters nationwide missed last month’s rental payment, U.S. Census Bureau survey data show. And nearly one in six Black renters said they have no confidence that they will be able to pay the following month’s rent.

And even as the economy has recovered jobs lost because of the pandemic, America’s renters are struggling to make their monthly payments. Roughly a third of all renters nationwide failed to make a full housing payment as of the first week of August, according to survey data from real-estate website Apartment List.

The tenuous situation facing renters is in sharp contrast with the current state of affairs for homeowners and home buyers.

“The housing market embodies the inequality that was magnified and exacerbated by COVID-19,” Diane Swonk, chief economist at accounting firm Grant Thornton, wrote on Twitter
TWTR,
-1.45%
.
“My stomach churns every time I think of what the evictions will mean for homelessness, which was rising when we were at 3.5% unemployment.”

Mortgage rates have fallen to record lows eight times amid the pandemic. As a result, thousands of homeowners have refinanced their home loans in recent months, and many prospective home buyers have flooded the market looking to scoop up properties to lock in low rates.

Also see: Americans’ household debt fell for the first time since 2014 — but that doesn’t mean people are paying off their loans

Most homeowners who are facing financial trouble still have lifelines available to them. The CARES Act stipulated that any homeowner with a federally-backed mortgage could receive forbearance for up to one year. During that time, homeowners can make reduced monthly payments or skip paying altogether.

Once forbearance ends, homeowners who are still in financial trouble will have a wide array of loss mitigation options available to them to adjust their mortgages in order to avoid default or foreclosure.

Additionally, the Federal Housing Finance Agency, which regulates Fannie Mae
FNMA,
+0.95%

and Freddie Mac
FMCC,
+0.47%

, and the Federal Housing Administration have both extended foreclosure and eviction moratoriums through the end of August at least.





Original source link

Quicken Loans is going public: 5 things to know about the mortgage lender


Rocket Companies
RKT,
,
the parent company of mortgage lending giant Quicken Loans, has set the terms of its initial public offering.

The company announced Wednesday night that it plans to sell 100 million shares at $18 each — both below initial estimates. In July, the company said it planned to offer 150 million shares priced at $20 to $22 each. It plans to begin trading on the on the New York Stock Exchange under the ticker “RKT” starting Thursday.

Twenty banks are set to underwrite the IPO, led by Goldman Sachs
GS,
+1.42%

Proceeds from the IPO will be used to purchase businesses and Class D stock from Rocket Cos.’ existing holding company, Rock Holdings Inc., which is owned by the company’s founder and chairman Dan Gilbert.

Rocket’s IPO comes as the broader IPO market has kicked into high gear after a long dry spell as a result of the coronavirus pandemic. Recent offerings include Warner Music Group Corp.
WMG,
-1.07%
,
which returned to public markets in June after nine years of being private, and online insurer Lemonade
LMND,
+5.46%
,
which debuted last week.

Rocket is also going public as the mortgage industry has seen millions of homeowners request forbearance on their monthly loan payments amid record levels of unemployment.

The company’s leadership team mainly comprises executives from Quicken Loans. Jay Farner, who has served as CEO of Quicken Loans since 2017, will be the company’s CEO. Farner has been with Quicken for over two decades, and previously served as the lender’s president and chief marketing officer. Julie Booth, the company’s chief financial officer and treasurer, has been in this role at Quicken Loans since 2005.

The lender was originally founded in 1985 as Rock Financial. In 1998, Gilbert took Rock Financial public, but eight years later it was purchased by Intuit. At that time, the company’s name was switched to Quicken Loans. Then in 2002, Gilbert and other investors purchased Quicken Loans back from Intuit
INTU,
+0.10%
.

Don’t miss:The mortgage industry is facing a crisis because of the coronavirus — and borrowers could fall through the cracks

Throughout its history, Quicken has been at the forefront of the digitization of the mortgage industry. In 2016, Quicken Loans debuted the Rocket Mortgage brand with the claim that the company’s digital mortgage process could connect consumers with a mortgage in as little as eight minutes.

Rocket Mortgage has increased its market share to 9.2% in the first quarter of 2020 from 1.3% in 2009. Rocket Mortgage’s primarily digital mortgage lending process has proven popular with millennials in particular, who represent the largest generation of home buyers in the country. Among the consumers who applied for a home loan using the company’s online platform or app, 75% were first-time homeowners or millennials, the company said.

In 2018, Quicken Loans became the largest mortgage lender by volume in the U.S. by supplanting Wells Fargo
WFC,
+0.74%
,
in a demonstration of the growing dominance of non-bank lenders in the mortgage space.

Rocket Cos. also owns a range of companies across the financial services and real-estate ecosystems, include real-estate listing websites Rocket Homes, title insurance company Amrock and financial product search engine LowerMyBills.

Those other businesses could comprise a broader part of the company’s strategy moving forward. Earlier this year, the company’s CEO, Jay Farner, described to MarketWatch how Quicken Loans was aiming to develop new products and services designed to give homeowners a more comprehensive view into their assets.

“Your largest investment is your home, so why not more visibility into how that asset’s forming and more suggestions to improve that?” Farner said. “You’re going to see people bring more value to consumers that way. That’s what we’re focused on.”

According to its IPO prospectus, the company has seen its net revenue double over the past year. The company brought in nearly $1.4 billion in the first three months of 2020, as compared with $632 million during the same period last year. The company’s net income in the first quarter of 2020 was $97.7 million, after a net loss of $299 million a year ago.

Here are five things to know about Rocket ahead of its IPO:

The company’s profits depend largely on the direction of interest rates

Most of Rocket’s mortgage originations are refinances. Of the $39 billion in total originations in 2019, only 27% was for consumers buying a home. Consequently, refinancing represents a bigger part of Rocket’s business than the broader mortgage industry.

The drop in interest rates to historic lows in recent months has helped boost the company’s profits this year, as Rocket processed record numbers of loans. “If interest rates rise and the market shifts to purchase originations, our market share could be adversely affected if we are unable to increase our share of purchase originations,” the company said in the prospectus. A sustained low-rate environment could also prompt a decline in refinancing demand.

Shifting toward purchase loans isn’t foolproof either. As Rocket warns, higher interest rates make buying a home more expensive, which could also cause a drop in demand for those loans.

Fluctuations in rates also have an impact on the company’s servicing business and the value of its mortgage servicing rights. “Historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates,” the company said. “As a result, decreases in interest rates could have a detrimental effect on our business.”

Read more:Mortgage rates keep falling to record lows — so is now a good time to refinance?

People who purchase shares in the public offering won’t have much say in the company

Rocket’s current parent, Rock Holdings Inc., and its owner Gilbert, will retain aggregate voting power equal to 79% in the public company thanks to its ownership of Class D shares, which are afforded 10 votes per share.

“Accordingly, RHI will control our business policies and affairs and can control any action requiring the general approval of our stockholders,” the company said. That includes the election of board members, the adoption of bylaws and the approval of any merger or sale of substantially all of our assets. Rock Holdings will maintain this control as long as it owns at least 10% of Rocket’s issued and outstanding common stock.

The “Quicken Loans” name has a complicated backstory

In recent years, the company has embraced the “Rocket Mortgage” brand in favor of Quicken Loans. As the company’s filing with the Securities and Exchange Commission notes, it does not own the rights to the Quicken Loans trademark. It licenses the name and trademark from Intuit.

Intuit owned a separate entity, called QuickenMortgage, when it purchased Rock Financial in 1999, which it combined with Rock Financial’s mortgage business to form Quicken Loans. Even after Gilbert repurchased the company, Intuit remained the owner of the brand.

Rocket has entered into an agreement to assume full ownership of the brand in 2022 “in exchange for certain agreements.” Until that deal closes, Intuit reserves the right to terminate the licensing agreement if Quicken Loans breaches its obligations or if there are “certain instances where wrongdoing or alleged wrongdoing by Quicken Loans or any controlling person could have a material adverse effect on Intuit,” the company said.

Also see: Black homeownership has declined since 2012 — here’s where Black households are most likely to be homeowners

Investors shouldn’t expect to receive a dividend

Rocket currently plans to retain all future earnings and doesn’t anticipate paying cash dividends “for the foreseeable future” following the IPO. That means shareholders will have to rely on stock gains for returns.

Any future plans to offer a dividend could be further complicated by the company’s structure. “As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their respective jurisdictions of organization,” the company noted.

The company’s fortunes could be hampered by the privatization of Fannie Mae and Freddie Mac

The vast majority of the mortgages Rocket originates are sold into the secondary market, and its loans are securitized by Fannie Mae
FNMA,
+4.87%
,
Freddie Mac
FMCC,
+5.15%

and Ginnie Mae.

The Trump administration has prioritized the reform and recapitalization of Fannie Mae and Freddie Mac, which have remained in conservatorship since the 2008 financial crisis. Lawmakers in Congress have also advanced their own proposals regarding Fannie and Freddie’s future.

Whatever happens with Fannie and Freddie could affect Rocket’s business. It could lead to higher fees charged by Fannie and Freddie or lower prices for the sale of the company’s loans, according to the regulatory filing.

The Renaissance IPO ETF
IPO,
+0.73%

has gained 37% in the year-to-date, while the S&P
SPX,
+0.64%

only risen 0.3%.

This story was updated on July 28, 2020.



Original source link