The life of a winegrower can be a stressful one. In Northern California, Oregon and Washington, cooler weather conditions caused the states to hold off harvesting. The threat of rain during this time only caused more agita. Throw in the possibility of fungus, viruses or pests, and it's a wonder how growers make it from one season to the next. The California vineyards, however, managed to dodge the bullets, taking in a generous harvest. For an industry so dependent on the weather, it doesn't seem like the kind of investment that would attract private equity.

On the contrary, Rob McMillan, founder of the wine division at Silicon Valley Bank, say he's seeing more and more alternative investors gravitate to the sector. "It's a very hot commodity," he cites, noting that it's part of bigger push from funds to move into agriculture. Perhaps a bigger driver, however, is that valuations have been cut in half.

Some groups, such as Bacchus Capital Management and Vinum Capital Management, are specialists in the sector, while other, more generalist funds have been showing a budding interest -- TPG Capital, Kohlberg Kravis Roberts, and Cerberus Capital Management, among them.

Part of the interest stems from a need for private capital. "There are a number of high end wineries that are available," said wine consultant Jon Fredrickson of Gomberg, Fredrickson & Associates.

The fine wine category started strong in 2010, with a growth rate of more than 10% year over year in the third quarter, according to McMillan, who places a bottle of wine over $20 in the high end bracket. He anticipates a mostly flat fourth quarter, as the industry began its rebound last year around this time.

Despite the improving fortunes, strategic activity in the space seems to be driven by distressed sales. Real estate investor Entertainment Properties, for instance, has a partnership with specialist investment bank Global Wine Partners and has been opportunistic during the downturn picking up assets, most recently buying properties related to Ascentia Wine Estates.

Meanwhile, the interest in Fosters' Treasury Wine business made headlines in September. Reuters reported late in February that the spinoff, likely going to private equity, remains on track.

Fredrickson, however, noted that should the auction falter, Fosters' could always resort to selling it off piecemeal, "which could be easier."

The taste for wine, however, seems to come in and out of fashion. Diageo and Constellation Brands shuffled in to buy some of the biggest US wine producers. Constellation's eventual sale of Almaden Vineyards, Inglenook and Paul Masson Winery -- divested at a fraction of what Constellation paid -- underscore the difficulty some have with the volatility of the sector.

Transactions in 2007 at times reach as high as 20x earnings. These days, Frederickson says, they're fetching 10x at most and often lower.

While the Fosters deal may reflect a desire to focus on core assets, while eliminating a distraction, most independent sellers, if they can hold out, have been.

“There haven’t been many deals done because prices tend to be based on asset values rather than cash flow," Frederickson says. "And sellers are looking for prices they thought they would have gotten in 2007.”