Wineries and distilleries across the United States are increasingly relying on private credit for financing as traditional banks become more selective with lending. This trend emerges as the alcohol industry grapples with challenges like import tariffs and shifting consumer preferences regarding alcohol consumption. Consequently, private lenders are stepping in to provide loans, often secured by assets like aging spirits and vineyard land, offering an alternative to conventional bank financing.
Recently, several beverage distributors have secured loans through a direct lending collaboration between Wells Fargo & Co. and Centerbridge Partners. Prominent recipients include Hand Family Cos. and Southern Crown Partners. Earlier in the year, Cooper’s Hawk Winery & Restaurants, which operates a wine club and restaurant chain, sought private credit to refinance its existing debt. Their business model, centered around monthly memberships and in-person wine pickups, has garnered interest from private lenders who appreciate strong customer retention.
Matthew Harvey, head of direct lending at PGIM Private Capital, notes that financing deals in this sector range from large-scale wineries targeting the mass market to boutique labels emphasizing exclusivity. Financing structures are also diverse, encompassing traditional corporate loans and asset-backed loans collateralized by assets like barrels of whiskey or vineyard land. These asset-backed loans are particularly appealing when the value of the underlying assets, such as aging bourbon barrels, appreciates over time.
In March, InvestBev Group’s credit arm extended up to $50 million in financing to Lofted Custom Spirits, a contract distiller, using its inventory of aging barrels as collateral. Private lenders are also positioned to support businesses that regulated banks might avoid, such as cannabis farms or casinos. However, these lenders must also consider the preferences of their investors, who may have reservations about certain industries.
The current climate in the alcohol industry presents elevated risks for lenders. Declining consumption and import tariffs are negatively impacting sales for many producers and distributors. Several companies have even sought bankruptcy protection or entered receivership. For instance, Uncle Nearest, a Tennessee whiskey brand, defaulted on $108 million in loans and was placed into receivership. Luca Mariano Distillery (Kentucky) and Stoli Group U.S.A., owner of Kentucky Owl bourbon, have also filed for bankruptcy.
Despite these difficulties, some private lenders see potential opportunities in the sector’s complexity. Brian Rosen, founder of InvestBev Group, indicates that his firm can achieve returns as high as 30% on private credit deals involving alcohol businesses due to the specialized knowledge required. He points out that banks often perceive the sector as overly risky in the current market, while his firm is willing to provide funding where others hesitate.
Traditional banks haven’t completely withdrawn from the sector but are exercising greater caution. For example, Wells Fargo continues to offer revolving credit facilities alongside its direct lending partnership with Centerbridge Partners. Nevertheless, with consumption declining and tariffs further compressing margins, many companies are seeking capital from private sources.
Publicly traded alcohol companies are also experiencing pressure. Molson Coors Beverage Co., owner of several major beer brands, recently reduced its full-year financial guidance for the second consecutive quarter, citing weak consumer demand and a shrinking U.S. market share.
Industry experts suggest that while alcohol sales have historically demonstrated resilience during economic downturns—such as the COVID-19 pandemic or the 2008 recession—the current combination of challenges is creating a critical juncture for producers and distributors.
Bankruptcies in this sector present lenders with unique challenges compared to other industries. Taking control of a winery or distillery often requires specialized expertise and the necessary licenses. Kevin Griffin, CEO of MGG Investment Group—which acquired Spring Mountain Vineyard in Napa Valley out of bankruptcy last year—emphasized the importance of understanding how to liquidate assets or operate the business if needed.
As traditional banks maintain a cautious approach and industry risks persist, private credit is poised to play an increasingly significant role in financing American wineries and distilleries. This trend reflects both the difficulties faced by the sector and the willingness of specialized lenders to navigate its complexities in pursuit of potentially higher returns.