second annual wine industry finance issue

THE VOICE OF THE WINE INDUSTRY

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SEPTEMBER 2013

The Finance Picture

Winery Credit Strengthens 28 Top 20 Lenders of 2013 30 Q& A With Financiers 32 French Vineyard Prices 40
Kosta Brownes New Winery 44 wine east: Making Hard Cider 74

Winery Safety Regulations 52 Temecula Winery Restaurants 60 N.Y. Wineries Best & Worst Decisions 64

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Ben Narasin enture capitalist and freelance journalist Ben Narasin returns for the second year to write key parts of our Special Report: Wine Industry Finance (page 28). Lenders and investors tell him the action has shifted toward banks and slightly away from private equity.

In This Issue
V

A Member of Wine Communications Group Inc.

Rebecca Anderson Smith he FDA must inspect all wineries by 2018, attorney Rebecca Anderson Smith says in our Practical Winery & Vineyard section (page 52). Smith leads her firms food-safety compliance team, counseling growers, wineries and food processors.

EDITORIAL Advertising Editor West: Jacques Brix Jim Gordon Vice President & Director of Sales Managing Editor (707) 473-0244 Kate Lavin jbrix@winesandvines.com Midwest: Hooper Jones Staff Writer (847) 486-1021 Andrew Adams hooperhja@aol.com Senior Correspondent Northeast: Marsha Tabb Paul Franson (215) 794-3442 Contributing Editor marshatabb@comcast.net Jane Firstenfeld East: Laura Lemos Northwest Correspondent (973) 822-9274 Peter Mitham laura@boja.com Columnists International: Dave Bayard Winemaking: Tim Patterson (973) 822-9275 Grapegrowing: Cliff Ohmart, dave@bayard.com Glenn T. McGourty Advertising Manager Practical Winery & Vineyard Christina Ballinger Editor: Don Neel Associate Publisher: Tina Vierra PUBLISHING President & Publisher Wine East Chet Klingensmith Editors: Hudson Cattell, Linda Jones McKee; Operations Coordinator Writer: Richard Carey Caroline Shakeshaft Contributing Writers Laurie Daniel, Jean Jacobson, Andrew Reynolds, Chris Stamp, Fritz Westover, Stephen Yafa database development & information technology Database Manager Lynne Skinner Project Manager Liesl Jaros Database & Web Development James Rust Peter Scarborough Chairman Hugh Tietjen Publishing Consultant Ken Koppel

Chris Stamp he president and winemaker of Lakewood Vineyards, Chris Stamp, leaves grapes behind this month as he shares how to make hard cider. Stamp outlines approaches used by successful cider producers (page 74).

Postmaster Send address changes to: Wines & Vines PO Box 1649 Boulder, CO 80306-1649

Septembers Cover lbuquerque, N.M.based illustrator and painter John Rose designed the cover image that accompanies our Special Report: Wine Industry Finance 2013 (page 28). See more of his work at johnroseillustration.com.

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Bridget Williams Publishing Information Barbara Summer Volume 94, Number 9

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SEPTEMBER WINE INDUSTRY FINANCE ISSUE

WINE INDUSTRY FINANCE 2013

Economic Recovery Strengthens Credit 28

DEPARTMENTS

Contributors 4 Editors Letter 8

PRIVA EQUI

What Napa Farmers Want After 100 Years. By Jim Gordon

In this follow-up to our inaugural Special Report: Finance, published in September 2012, Wines & Vines finds the start of rate increases dont negate the low cost of borrowing. By Ben Narasin

CREDIT

Wine Industry Metrics 10

Winery Jobs, DtC Shipments Increase by Double Digits; Decline in Flash Offers Slows. Winery Acquisition Ups French Stake; SIMEI Returns; B.C. Winemakers Talk Tannin; Growers Brace for Syrah Decline; High Tech, Low Cost; Blind Trials; Wine Drinkers Lobby; Foley Buys Magazine; Hong Kong Prepares for Wine Fair. Plus News Bytes and Briefs.

News Headlines 14

Q&A: What Insiders Think 32

Panel shares views about trends, deals and rates.

28 44

Unorthodox Financiers 36 The Price of Prestige 40

TECHNICAL REVIEW

Funds and expertise with steady management. Prime French vineyard properties soar in price.

Tasting Room Focus 25 Product News 26

Latest Winery & Grower Offerings and Developments.

Finding the Right Fit 44

Faces & Forums 27

74

ASEV-ES Gathers in N.C.

Kosta Browne to crush in custom-built winery.

Inquiring Winemaker 68 Advertisers Index 81 Viewpoint 82

Vintners Keep Wine Writers Honest. By Tim Patterson

Inspection & Compliance 52

The FDA must inspect all U.S. wineries by 2018.

Melding Business and Wine Production. By Paul Franson

WINE EAST IN WINES & VINES

Amendment Deductibility 58
Expenditures may be capitalized or expensed.

News from Eastern North America 75

Food With Your Wine? 60

Virginia Tech Enology Team; Wine for Virginia Celebration.

Few limitations for Temecula winery-restaurants.

Best & Worst Decisions 64

New York state proprietors evaluate history.

NORTHWEST CENTRAL CALIFORNIA EAST

The Resurgence of Cider 74

Approaches to commercial cider production.
6 W in e s & V i ne s SE P T E M B ER 20 13

REGIONS FEATURED IN THIS ISSUE

COVERING NORTH AMERICA

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EDITORS LETTER

What Napa Farmers Want

he Napa County Farm Bureau celebrated its 100th anniversary in August with a wine reception and dinner outdoors at the Robert Mondavi Winery, including remarks by Warren Winiarski, founder of Stags Leap Wine Cellars, U.S. Rep. Mike Thompson and other dignitaries, and entertainment by a country-rock band flown in from Nashville, Tenn. It was a beautiful evening with civilized touches that contrasted sharply with what the first Farm Bureau gatherings must have looked like in 1913. One extraordinary aspect of the celebration was that the Farm Bureau recognized 70 member families who have been working Napa County land for 100 years or more. A large majority of these families now grow grapes on their land, but when they first arrived their farming was much more diverse, with an emphasis on cattle, grains, walnuts, prunes and other crops. They founded the Napa County Farm Bureau as a local political and educational force to help farming be profitable and economically sustainable. But what do Napa County farmers want from the Farm Bureau today? The group published a fascinating 36-page booklet including historical photos for the anniversary, and it contains some answers. The Farm Bureaus Centennial Committee interviewed dozens of the centennial family members, asking them what farming was like in the old days and what help their families need today to continue to thrive in farming. For a group of farmers whose main crop, wine grapes, is among the most valuable per acre in the United States (Napa Cabernet Sauvignon averages $5,100 per ton), they are not complacent about their successes. Many of them voiced apprehension about being misunderstood by the greater population, and some expressed anger about government intervention in their farming. It sounds like the Napa County Farm Bureau has firm marching orders from its oldest members. Here is a sampling of what they said:

Centennial members of the Napa County Farm Bureau speak up

Never let Prop. 13 (the state law that limited property taxes) be repealed.Communities who have 35% or more agricultural land use and/or employ a reasonable amount of the population in farm/ ag should have, at minimum, one elective course in agriculture offered at the high school level. Barberis family, came from Liguria, Italy, to St. Helena, Calif., around 1898 I will continue to promote farming and the preservation of farmland as a national security priority. When a nation cant feed itself, its people are at risk. Battuello family, came from Piemonte, Italy, to St. Helena in 1906 Reversion to the principles of dry farming. Ag that relies on a lot of water is not going to be sustainable too much longer, as more and more urban expansion will be looking for more and more sources of water. Its inevitable. Frediani family, came from Italy to Napa County via San Francisco, Calif., after the 1906 earthquake

Many of them voiced apprehension about being misunderstood by the greater population.

We feel farmings biggest hurdle is its consumer perception and understanding. There is inherent fear in the unknown. Information and education has been an agricultural focus, but its importance may be underrated. Gordon family, came from Ohio to New Mexico to Napa in 1851 Lower property taxes; keep the Ag Preserve (land protected from housing/commercial development with large minimum lot sizes, etc.); get rid of estate taxes. Not so many restrictions or permits; give farmers a break. Buhman family, came from Prussia to San Francisco to Napa in 1872 Farm Bureau must continue to lead the fight to keep our lands from being paved. We must renew the message of our Agricultural Preserve. Too many newcomers just want to cash in on agthey dont want to work in their own fields, caring for their own lands. They dont understand why we cannot over-commercialize our lands. We must draw hard lines or we will lose it all. Tofanelli, Dal Porto and DiGiulio families, came from Lucca, Italy, to Napa County in the early 1900s

Small operators are becoming an endangered species, and we need to do something to assure their survival. My focus is the lack of succession planning and the lack of family wanting to farm. When the parents get old they just sell to the big guy Pretty soon there will be no more little guys, just big guys. And the big guys some day will want to optimize their return on investments and will quickly abandon the soft farming practices that we all enjoy today. Stewart family, came from Marin County, Calif., to Napa in 1904
8 W in es & V i ne s SE PT E M B ER 20 13

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METRICS

Wine Industry Metrics

800000000
750 700 700000000 650 $ Millions 600 600000000 550 500 450 2012 2013

Latest Metrics
Complete metrics data is available at: winesandvines.com/metrics

533,075,041 Domestic Wine Sales

Winery Jobs, DtC Shipments Increase by Double Digits

Up 6% from 2012

500000000
400

400000000

Jan

Apr

July

Oct

Dec

A dramatically higher pace of winery hiring and a substantial increase in directto-consumer (DtC) shipments highlighted Wine Industry Metrics for July. Wineries boosted their hiring activity by 29% from the July 2012 level to staff tasting rooms and prepare for the 2013 harvest. DtC shipments were at their low point of the year, but that point was still 15% higher than in July 2012. In off-premise sales, domestic wine gained 6% in value. Jim Gordon

Source: IRI, Wines & Vines

Off-premise sales of domestic table and sparkling wines rose to $533 million in July compared to July 2012, for a 6% increase. Twelve-month sales were up 7%.

Off-Premise Sales Data Expands to More Outlets

Direct-to-Consumer (DtC) Shipments

250 250000000 200 200000000 150 150000000 100 100000000 50 50000000
Source: 0 Wines & Vines/ShipCompliant Model

2013

$ Millions

Up 15% from 2012

2012 2011

Editors note: Wines & Vines content for off-premise wine sales now includes a wider base of data from IRI, the market research firm, covering about 45% of all U.S. off-premise sales for table wine and sparkling wine. The data incorporates IRIs more inclusive multi-outlet and convenience store tracking, which includes food and drug stores, dollar stores, warehouse clubs, Target and Wal-Mart.

DtC Shipment Value

12 months August through July 50 Merlot h 6%

Jan

Apr

July

Oct

Dec 40

Direct-to-consumer shipments of domestic wine totaled $56,037,392 in July, surpassing the July 2012 level by 15%.
$ Millions

Winery Job Index

300 300 $240 250 250 Winejobs.com Index $200 2012

30

300

2013

20 Pinot Grigio h 24%

$160 250 200 200 $120 150 200 150 $80 100 100 50 50 $40 $0

Up 29% from 2012

10

0 2011

2012 2013

2012 2013

Source: Wines & Vines /ShipCompliant Model

150
Jan Apr July Oct Dec

Source: Winejobs.com

The Winery Job Index rose 29% in July as the beginning of harvest approached. The biggest increase in hiring activity was in winery hospitality jobs.
10 W in es & V i ne s SE PT E M B ER 20 13

100 50

DtC shipments of Merlot grew 6% in value in 12 months, while Merlot shrank in off-premise sales (see opposite page). Pinot Grigio/Gris just passed Merlot in off-premise sales, but it remained relatively small in DtC shipments. Still, Pinot Grigio/Gris grew 24% in the DtC channel compared to the previous 12 months.

GovtLiaison_Dir08

11/29/07

2:00 PM

METRICS

Domestic Wine Continues Rise

Pinot Grigio edges out Merlot for No. 3 spot
ff-premise sales of domestic wine rose 6% in July compared to July 2012, while 52-week sales totaled 7% higher than a year ago. The data from Chicago, Ill.-based market research firm IRI include domestic table wine and domestic sparkling wine. Imports grew less than 2% and saw their share of the market drop slightly to 20% during the 52 weeks. While the July data extend a long, steady, broad run-up in off-premise sales, performance in individual varietal categories was more dramatic.

points above and below that it grew at much faster rates, however, and was particularly hot in its second biggest category of $8-$10.99.
Red blends grow the fastest

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Share of Market by Varietal

52 weeks through July 14, 2013

WHITE ZINFandel 5% SAUVIGNON BLANC 6% Pinot NOIR 8% Red BlendS 8%

Riesling 3%

Chardonnay 27%

MERLOT 11%

Pinot Grigio 11%

Cabernet Sauvignon 20%

Blended red wines had the fastest growth rate of the major varietals, gaining 21% in sales (up $92 million) since last July. This category grew by 27% in the $8$10.99 price segment, which is its biggest, with $300 million. Red blends increased by double-digits in the next three higher price segments, too. The second fastest growing varietal was Fum/Sauvignon Blanc at 13%. Its strength appeared to come from a higher than usual average price of $8.12, and especially high growth rates in the higher price ranges, such as 22% in the $11$14.99 segment. Merlot and Riesling slipped by 2% and 3%, respectively, while white Zinfandel brought in 7% less (down $24 million) than in the previous 12 months. Imports from Australia stayed in a slump, decreasing 5%. Argentine imports began slowing their rate of growth. The 10% growth in 52 weeks slowed to 7% for the most recent four weeks. Jim Gordon

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Sales Growth Rates by Varietal

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Pinot Grigio now No. 3

25% 20% 15% 10% 5%

4% 7% 13% 11% 11% 21%

Chardonnay and Cabernet Sauvignon from all sources domestic and imported remained No. 1 and No. 2 in market share by value in U.S. stores tracked by IRI, but Pinot Grigio/Gris nudged Merlot out of the No. 3 spot by 0.3%. Both varietals rounded to 11% shares among the nine top-selling wine types. Pinot Grigio/ Gris sales were $711 million in the most recent 52 weeks compared to $697 million for Merlot, according to IRI. Merlot and Pinot Grigio/Gris from all sources experienced price increases of less than 1%. Merlot sales in 750ml format decreased 5%, while 1.5-liter sales dropped 1%. In contrast, Pinot Grigio/ Gris grew by 10% in both formats. Pinot Grigio/Gris is most popular in the $5$7.99 price category, where it generated $362 million and grew by 6%. At price

0 -5% -10%
n Chardonnay n Cabernet Sauvignon n Pinot Grigio/Gris n Merlot n Red Blends/Meritage Source: n Pinot Noir n Fum/Sauvignon Blanc n White Zinfandel n Riesling
-2% -3% -7%

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METRICS

The Flash Report

Flash SiteS COMPARED FOR JULY
Flash No. of Domestic Reseller July Offers Average Flash Average Pageviews* Price (750ml) Discount (000)

Latest Flash Data

Complete flash data is available to subscribers: winesandvines.com/flash

Decline in Flash Offers Slows

32% 39% 46% 44% 28% 34% 43% 51% 37% 7 89 117 29 98 6 286 297 98

Cinderella Wine Invino Last Bottle Wines Last Call Wines Lot18 The Wine Spies Wine Woot Wines Til Sold Out WineShopper

6 111 14 56 32 25 40 60 21

$29.67 $24.09 $29.29 $22.02 $17.82 $23.11 $17.45 $19.99 $18.51

A steady decline that began in January of the monthly total of flash offers for domestic wines abated somewhat in July, when the total number of offers (402) was only 11 less than July 2012. Invino accounted for more than a quarter of the offers with 111, more than double what the website offered in June. The number of unique wineries offering wines through flash sites in the first six months of 2013 is also higher than for the same period in 2012. So far this year, 2,045 wineries have offered wines compared to 1,964 last year. Looking at offers by winery location, Napa and Sonoma account for 65% of the offers this year, which is down from 71% in 2012. Offers for wines from New York wineries rose from seven in 2012 to 36 this year. Andrew Adams

Source: Wines Vines Analytics, winesandvines.com/flash *Source: Compete.com, July 2013

Number of Unique Wineries with Flash Offers

2012 350 300 250 No. of Offers 200 150 100 50 0
Jan Feb Mar Apr May Jun Jul 265 282 247 309 279 306 306 313 269 270 328 279 270 286

Summary of flash offers by state

Winery State County California Napa California Sonoma California all other areas Washington Oregon Pennsylvania* New York All other states 2012 1,100 1,012 606 116 100 18 7 17 2013 938 825 634 158 108 44 36 10

2013

Seven months through January 2012 and July 2013

* Refers to Newman Wines, which is based in Pennsylvania but sells California wines.
Source: Wines Vines Analytics, winesandvines.com/flash

Source: Wines Vines Analytics, winesandvines.com/flash

Flash Discounts for a Sample of sonoma county Wines Offered in JuLY

Discount Winery/Brand Winery Varietal/Type Vintage Winery State Retail Flash Price Winery Size Flash In Cases Site

13% Patz & Hall Wine Co. 29% 37% 50% 58% Deerfield Ranch Winery Plata Wine Partners Schug Carneros Estate Winery Landmark Vineyards

CA CA CA CA CA CA CA CA

Chardonnay Cabernet Sauvignon Chardonnay Pinot Noir Blend Red Zinfandel Syrah Pinot Noir

2011 2007 2011 2008 2011 2007 2010 2010

$40.00 $34.99 $38.00 $26.99 $30.00 $18.83 $42.00 $24.95 $32.00 $15.99 $24.99 $10.99 $45.00 $19.00 $65.00 $24.99

2,700 15,000 4,500 40,000

Good Juice Direct Wine Spies Prince of Wine Wines Til Sold Out

100,000 Lot18

41% Fort Ross Vineyard & Winery 56% Kunde Family Estate 62% Anaba Wines
Source: Wines Vines Analytics

75,000 Last Call Wines 25,000 Last Bottle Wines 6,500 Wines Til Sold Out

leading Flash sites

Company Name URL Principals Affiliation Operation
Cinderella Wine cinderellawine.com Gary Vaynerchuk Wine Library Releases one wine at noon and one at 9 p.m. M-F. Buys only from distributors. Invino invino.com Tony and Danielle Westfall Good Company Wines Offers two to four new wines daily for 48-72 hours, or until the wine is sold out. Last Bottle Wines lastbottlewines.com Cory Wagner Blicker Pierce Wagner Wine Offers one wine until sold out. Merchants (BP Wine) Last Call Wines lastcallwines.com Michael Rockower Canals Hamilton Wine Store, N.J. Offers four to six wines per day, available until sold out. Lot18 lot18.com Philip James, Kevin Fortuna Advertising platform for wineries to sell directly to consumers. The Wine Spies thewinespies.com Jason Seeber, Brandon Stauber Sells one wine each day, 365 days per year. Wine Woot wine.woot.com David and George Studdert Amazon One deal daily M-F. Emphasizes interactivity. Winery controls price. Wines Til Sold Out winestilsoldout.com Joe Arking Roger Wilco (liquor store) Sells one wine at a time from midnight EST until sold out. WineShopper wineshopper.com Rich Bergsund, Mike Osborn Wine.com One new event per day, with one to five products. Source: Wines Vines Analytics

12 W in e s & V i ne s SE P T E M B ER 20 13

Headlines
Winery Acquisition Ups French Stake
Purchase estimated at more than $100 million

SEPTEMBER NEWS

NEWS BYTES
Oregon State receives funding

he Oregon state legislature approved $1.2 million in funding to enhance

Oregon State Universitys fermentation sciences program. The funding will sup-

port university research in winemaking and brewing as well as distilled spirits. OSU, in Corvallis, Ore., plans to install a new research still, making it the first university in the United States with a working winery, brewery and distillery. winery sells for $20 million

alistoga, Calif.Araujo Estate Wines, the cult producer of wines from Eisele Vineyard in Napa Valley, has been acquired by Frances Pinault family through its holding company the Artmis Group, parent company of Chteau Latour in Bordeaux, Domaine dEugnie in Burgundy and Chteau Grillet in the Rhne Valley. The purchase includes the 38-acre Biodynamic and organically farmed Eisele Vineyard, the winery and cave complex, the Araujo Estate brand and existing inventory. The purchase price was not disclosed but is estimated by informed sources to be worth more than $100 million. The most recent comparable deal might be the $40 million a Chinese executive paid in late 2011 for the 600-case Sloan winery and vineyard, which winesandvines.com included 12 acres Learn more: of hillside vineyards Search keywords Araujo Estate. but not the brand. Those wines typically sell for $600 per bottle. Robert Nicholson, who specializes in mergers and acquisitions in the wine business at his International Wine Associates, recently handled the large sale of Mayacamas Vineyards to a former owner of Screaming Eagle, one of the most expensive Napa wines. Very few transactions of this magnitude occur, Nicholson said. It validates the efforts of Napa Valley vintners to produce world-class wines, but dont expect a rush of other such deals. The deal follows a long history of California winery startups backed by French money, including the creation of Domaine Chandon (celebrating its 40th year in business this year), Opus One (with its own first-growth connection via Chateau

co-founder and former CEO James Sinegal, bought the

The purchase of Araujo Estate Wines includes 38-acre Eisele Vineyard.

avid Edward Sinegal, the son of Costco

historic

In-

glewood Estate (not to be confused with Inglenook) in the Napa Valley town of St. Helena, Calif., for about $20 million. The deal, announced in early July, includes 30 acres (7 acres in vines), a stone winery with tasting room, a 5,500-case permit, main residence, guesthouse, pool, tennis court, lake, olive orchard and gardens. The new name is Sinegal Family Estate. Group buys Cleavage Creek

Mouton-Rothschild) and Dominus. More recently, French vintner Jean-Charles Boisset has made numerous California winery acquisitions. Artmis bought the Araujo property from Bart and Daphne Araujo, founders of the winery. The Artmis Group is the perfect buyer of this amazing vineyard we have called home for 23 years, Bart Araujo said in a news release. Frdric Engerer, CEO of Chateau Latour, added, Araujo Estate and its jewel, the unique Eisele Vineyard, have been producing consistently one of the very best wines of Napa Valley. The North American staff including the winemaking team will remain with the estate, according to Araujo. Bart and Daphne Araujo will stay at Araujo Estate until January to assist in the transition. They bought the 162-acre property under the Palisades southeast of Calistoga in 1990. It was first planted to vines in 1884 and has long produced famed wines bottled by such wineries as Joseph Phelps Winery and Conn Creek. The biggest other recent French buys in California have been by Jean-Charles Boisset, who acquired DeLoach, Raymond, Buena Vista, Lockwood and Lyeth. Paul Franson

Valley area of Napa County. The winery, which is set on 95 acres with 19 acres planted to Bordeaux varieties, had been owned by Robert Budge Brown, who died in a plane crash in 2011. The agent for the buyers said they plan to export wine to Asia under the Cleavage Creek and new Calla Lilly brands.

group from Hong Kong purchased the Cleavage Creek Winery in the Pope

14 W in es & V i ne s SE PT E M B ER 20 13

SEPTEMBER NEWS

Italian Equipment Show SIMEI Returns

Innovations in winemaking and grapegrowing will be on display at expo near Milan

ilan, ItalySIMEI, the massive, cutting-edge International Enological and Bottling Equipment Exhibition, will take place Nov. 12-16 this year in northern Italy, celebrating its 25th edition and 50th anniversary. The high-profile trade show and conference runs every other year at the modern architectural showplace of the Fiera Milano, just outside Milan in the suburb of Rho. Winery and vineyard personnel from all over Europe and dozens of other countries visit Milan to attend SIMEI and see the latest in winery equipment, supplies and services, often well before the innovations are introduced in North America. The equally impressive fair covering wine grape and olive growing, Enovitis, runs concurrently in the same location. Winemakers and growers from the United States and Canada who attend will get a preview of the tools and techniques that their European competitors are already using or soon will be. Suppliers of both large-scale and small-scale equipment are well represented. An added attraction this year for U.S. winemakers is that the event will not occur during Thanksgiving week, as it often has in the recent past. Many international attendees of SIMEI-Enovitis add on fact-finding trips to nearby wine regions such as Barolo, Barbaresco, Friuli, Trentino, Soave and Valpolicella. SIMEI and Enovitis together offer a complete technological itinerary for the wine-growing supply chain, from the vineyard to

SIMEI convenes Nov. 12-16 near Milan, Italy.

the production and packaging of wine. Visitors to SIMEI will be able to attend a very busy schedule of workshops and in-depth seminars, and have ready access to English translations when necessary. Unione Italiana Vini organizes the event. Figures from the most recent SIMEI in 2011 include: 700 exhibiting companies from 27 countries 48,000 visitors from 90 countries 12,000 tons of exhibited equipment and products 860,000 square feet of exhibition space For more information about SIMEI, visit simei.it/en. Jim Gordon

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SEPTEMBER NEWS

B.C. Winemakers Talk Tannin

University leader describes new cheaper, easier tannin assay coming soon

enticton, B.C. One of the Okanagan wine regions top enology researchers announced a new assay that he thinks could rival the well-established MCP (methyl cellulose precipitable) and Adams-Harbertson tests. Dr. Cdric Saucier, head of the chemistry department at the Okanagan campus of the University of British Columbia in Kelowna, B.C., announced his findings during a presentation to winemakers at the annual winesandvines.com British Columbia Learn more: Wine Grape CounSearch keywords B.C. tannin. cil conference held July 15-16. Im really happy to announce in advancethe masters thesis will be defended soonthat we have a developed a new gelatin assay, Saucier said It will take three hours. Its still a bit of

time, but you will be able to run samples in parallel. It will just need wine, gelatin, test tubes, distilled water and a UV spectrometerso no centrifuge. The assay Cedric arises from the Saucier thesis work of graduate student Dawn Visintainer, who is seeking a masters degree at UBCO. Saucier told Wines & Vines he expects Visintainer to defend her thesis by September and, all going well, release a paper documenting the assay procedure soon after. Preliminary results indicate the assay is reliable within 6%. Correlation of its results with those of the MCP and Adams-

Harbertson assays is encouraging. It should be pretty similar type of results, but with an even cheaper, easier method, Saucier said. The announcement comes as Saucier prepares to depart UBCO in September for a years leaveor longerto head the enology program at the Universit Montpellier II in Montpellier, France. Sauciers four years at UBCO have laid a respectable foundation for future enology research at the school, established in 2005 with the acquisition of the northern campus of Okanagan University College (now Okanagan College, based in Penticton). Saucier secured $1 million worth of research grants for UBC-Okanagan, funding that supported work toward the discovery of 37 new wine grape molecules, including the identification of 23 previously unreported stilbenes in red wine. Peter Mitham

16 W in e s & V i ne s SE PT E M B ER 20 13

SEPTEMBER NEWS

Winemakers Jeff Del Nin (from left), Lyndsay ORourke, Senka Tennant, Chris Tolley and Severine Pinte-Kosaka discuss the decline of Syrah vines with researcher Patrick Vuchot (right) during the B.C. Wine Grape Council meeting.

Grapegrowers Brace for Syrah Decline

Reduced vigor in popular B.C. clones leads growers to pull them out

enticton, B.C., CanadaMore than 500 acres of Syrah grow in British Columbia, where it is touted as a potential signature red grape for the Southern Okanagan. But presentations at this years British Columbia Wine Grape Council meeting revealed that the variety faces challenges. A large proportion of vinesperhaps as many as 200 acres are at risk of being pulled out due to a genetic trait in two specific clones that causes the vines to decline and die. Its really a genetic problem, Dr. Patrick Vuchot, who oversees research and development activities as winesandvines.com director of the Institut Rhodanien in Learn more: Orange, France, told winemakers during Search keywords B.C. Syrah. the closing plenary session at the recent B.C. conference held July 15-16. The problem has been observed on grafted vines in British Columbia as well as own-rooted vines in Argentina, Vuchot explained. It prevents the sap to come back to the roots, Vuchot said, noting that a key effect is to make vines less cold hardy, more susceptible to winter damage and, ultimately, less productive. The vigor of the plant decreases every year. Thats why they dont die straight away. Its not a disease. They get less and less vigorous, and then more and more sensitive, he said. Worse, because its not a disease, theres no cure. The only strategy for addressing the phenomenon is kind vine management that reduces stress on producing vines. The worst news for B.C. growers is that the most susceptible clones of Syrah are the two on which the industry was established in the 1990s: clones 99 and 100. John Simes, winemaker for Mission Hill Family Estate in West Kelwona, B.C., said phytosanitary restrictions largely prevented growers from accessing other clones during the 1990s. They were the only clones that Agriculture Canada actually allowed into Canada back in the 1990s, Simes said. They thought there were all these viruses, and they were protecting us. Turns out these viruses were already here, but (clones) 99 and 100 were the only two that were approvedunless you went to the United States. Syrah is now the fifth most-planted red grape in the province, with more than 546 acres planted and a harvest of 1,328 tons in 2012, representing 10.15% of the total red grape yield. Peter Mitham
Win es & Vin es SEPT E M B E R 20 13 17

SEPTEMBER NEWS

High Tech, Low Cost

Symposium speakers outline practical tools

Geni Whitehouse

apa, Calif.Amid weightier discussions of cloud computing, data security, social media and data mining, one session at this weeks Wine Industry Technology Symposium resonated with many attendees from small wine-making companies: free and low-cost software for wineries. Speakers CPA Geni Whitehouse and Internet consultant James Marshall Berry continued a four-year tradition of highlighting the best free and inexpensive computer-based technologies to help winery staff work more efficiently. And even though they discussed the topic a year ago, technology changes so fast that they had plenty of new ground to cover.

Its the no-brainer way to build a website.

James Marshall Berry
Since every company and service needs a website, the duo discussed ways to create and optimize them. Surprisingly Berry, whose business is partly creating such sites, pointed out that anyone can produce a good website with WordPress. Its the no-brainer way to build a website, he said. To help make your site conform with mobile platforms, ResponsiveCheck.com lets you check and adapt your site to collapse and display the most important information first. Likewise, BrowserStack can check your website for compatibility with any browser your viewers might use. The duo recommended Podio and Asana for product management, Intuits Weave to create simple to-do lists, Flipboard to customize Twitter offerings and especially Expensify. Just take a picture of your receipt, note the amount, and it will file it on the cloud and generate expense reports, Whitehouse noted. It can even issue expense checks. Protonic.com offers free technical support for any subject, while Jiwire will find free local Wi-Fi hotspots. Join.me lets you control your computer remotely (or lets someone else troubleshoot it) as well as organize on-air meetings. And for those who dont want to buy Microsoft Office or subscribe to Office 365, OpenOffice is a free suite with almost all the same capabilities. Whitehall and Berry highlighted a number of useful graphics programs. Sxc.hu offers many royalty-free images but will also lead you to better ones available for purchase, while pixlr does almost everything Photoshop doesfor free. Gliffy is a free alternative to Visio for creating flow charts, and while its not free, LogoTournament.com organizes a contest among artists to design a logo for $250 and up. Paul Franson
18 W in e s & V i ne s SE PT E M B ER 20 13

SEPTEMBER NEWS

Winemakers Blind Taste Trials

Unusual event in Napa Valley shows dramatic results regarding techniques
t. Helena, Calif.Rarely do winemakers get the opportunity to blind taste their colleagues experiments with wine quality, particularly examining the effects of various winemaking techniques in a controlled, peer-reviewed environment. A recent event called The Winemakers Tasting helped fill that vacuum for members of the Napa Valley Vintners. About 60 winemakers came to The Culinary Institute of America, Greystone, to blind-taste 21 trials involving harvest methods, yeast selection, fermentor type, extended maceration, oak types, closures and more. The results were dramatic in some cases. The winemakers votes favored machine-picked Cabernet Sauvignon over hand-picked by a 3:2 ratio in one trial. And they preferred hand sorting almost 4:1 to optical sorting for the same Cabernet grapes when they were all picked by hand. In a trial of barrelfermented Cabernet with six different ex-

Cameron Vawter tastes through blind trials at The Culinary Institute of America, Greystone.

tended maceration times from 15 to 135 days, the sample with the shortest time got the most votes, and the sample with the longest maceration got the lowest marks. Kristin Belair of Honig Vineyard & Winery is one of six winemakers on the advisory board for The Winemakers Tasting. We decided that if sharing the wines from vari-

ous trials weve done could help us make better wine, we would do it, she said. The other board members are Sara Fowler, Peju Winery; Kimberlee Nicholls, Markham Vineyards; Ted Henry, Jarvis; Joe Shirley, Trinchero Family Estates; and Jeffrey Stambor, Beaulieu Vineyard. Cooperages 1912 sponsored the venue, food and other logistics. We know that winemakers love to experiment, said Jason Stout, sales director. But few wineries have the resources to do all these trials themselves. By pulling them all together in one place, The Winemakers Tasting provides a new way winemakers can learn from each other in addition to learning from us suppliers. The May 10 tasting was by invitationonly for area winemakers to ensure the wine trials were relevant and the peer review was valuable. Stout said the tasting went well enough to consider expanding to other California regions in the future. Jim Gordon

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SEPTEMBER NEWS

A Wine Drinkers Lobby

Coalition aims to serve as voice of the consumer

he American Wine Consumer Coalition is aiming to represent the voice of the average wine consumer when elected leaders debate laws that could impact their access to wine. David White, the groups president, said the nonprofit 501(c)4 organization is committed to representing consumers at the federal level and with state alcohol regulatory commissions. Lawmakers, the alcohol trade and the media are not accustomed to hearing from the consumer when issues of access to wine are discussed, White said in a statement. That needs to change. Its simply irresponsible and unfair to continue down the road of ignoring wine consumer interests and looking out only for those members of the industry who have long gamed the system in their favor. Among the goals of the group is opening up more states to direct-to-consumer shipments from wineries and retailers and

changing other laws that restrict consumers access to buying wine. AWCC also takes issue with the 17 states that ban residents from buying wine in grocery stores, four states that ban the purchase of wine on Sundays and 15 states that ban residents from bringing bottles from home into restaurants. The group is currently urging Pennsylvania residents to contact their lawmakers in support of the direct-shipping bill passed by the state House of Representatives but awaiting deliberation by the Senate. While the coalition supports more direct shipping, it also seeks legislation to allow for shipping from out-of-state retailers, increase the limit on the number of cases that can be shipped and eliminating an 18% tax on shipped wines. Wine blogger Tom Wark will serve as AWCCs executive director. For more information on the coalition, visit wineconsumers.org. Andrew Adams

Foley buys wine tourism magazine firm

S
Video a wine

onoma, Calif.Foley Family Wines acquired a controlling interest in Touring & Tasting Marketing and

Media, which publishes Touring & Tasting magazine, hosts touringandtasting.com, produces the Wine Country Channel and owns country concierge service and conducts a wine cruise program. Touring & Tasting Marketing & Media was founded by managing partner Dan Fox and president Paul Arganbright in 1995. We now have the resources required to further expand and diversify Touring & Tasting, Fox said. Well immediately be expanding our audience through increased distribution in print, online and through our mobile apps and digital editions. Well also be creating new content syndication partnerships and building and providing more tools to help our clients be more competitive. Touring & Tasting Marketing & Media is based in Santa Barbara, Calif. There are no other plans for changes in staffing or in the way Touring & Tasting operates, Fox reports. Bill Foley, chairman of Fidelity National Title Insurance Co., owns numerous wineries and lodging properties, many acquired during the past few years. Based in Sonoma, Calif., the company owns 13 wineries located in Napa, Sonoma and Lake counties as well as Californias Central Coast, Washington and New Zealand. Paul Franson

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SEPTEMBER NEWS

Hong Kong Prepares for Wine Fair

Annual event drew more than 950 exhibitors and 20,000 visitors in 2012

ong KongAs a growing number of North American wineries and exporters have turned their attention to the Far East, Hong Kong has become a de-facto jumping-off point for those looking to sell wine in Asia. English and Cantonese share the distinction of official language in Hong Kong, a Special Administrative Region of China that shares a border with Shenzhen, a Chinese city with a population of 10 million, to the north. For many newcomers to Asia, the common language and western influence (Hong Kong was a British colony from 1842 until 1997) make Hong Kong easier to navigate, both literally and culturally. Starting Nov. 7, the Hong Kong Trade and Development Council will again welcome wine industry professionals from all over the world as it kicks off the Hong Kong International Wine & Spirits Fair. During the 2012 event, 957 exhibitors from 35 countries participated. The United States had the seventh-highest number of exhibitors with 36 participating. Seven exhibitors from Canada joined the fair in 2012, and more than 20,000 visitors attended, including more than 13,000 individuals from Hong Kong itself. The Wine Industry Conference following the opening ceremony Nov. 7 is dedicated to keeping up with global wine industry trends, with Maureen Downey of Chai Consulting discussing counterfeit wines and what authorities in Asia are doing about them. Editor

A crowd gathers around the California pavilion at the Hong Kong International Wine & Spirits Fair in November 2012.

Lisa Perrotti-Brown will speak about the future of The Wine Advocate in the Asian landscape. On Nov. 9 the halls at the Hong Kong Conference & Exhibition Center will open to the public, and residents of Hong Kong who work outside of the wine trade will be invited to sample exhibitors wines. For more information about the Hong Kong International Wine & Spirits Fair, visit hktdc.com/fair/hkwinefair-en. Kate Lavin

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News Briefs
CALIFO R N I A
Renteria purchases Carneros property

Nielsen promoted to winemaker

Wines & Vines welcomes news items from wineries, vineyards and industry suppliers located in the wine regions of North America. Send us your latest news by emailing edit@winesandvines.com. Items may be edited for clarity and brevity.

Joe Nielsen has been promoted from assistant winemaker to head winemaker at Donelan Family Wines in Santa Rosa. Nielsen joined Donelan in 2009 after working at wineries in Michigan and California.
Cakebread recognized with award

Winery in Santa Margarita, announced his purchase of the Bassi Vineyard in Avila Valley. The 112-acre property includes 30 acres of vineyards. Sinor and his wife Cheri founded their winery in 1997.
New winemaker at Dierberg and Star Lane

Denise and Oscar Renteria, owners of Renteria Wines and Renteria Vineyard Management, announced their purchase of the Brown Ranch Vineyard in the Napa County side of the Carneros AVA. The 40-acre parcel contains 21 acres of Pinot Noir and 8 acres of Chardonnay.
Sinor buys Bassi Vineyard

Dolores Cakebread, the wife of Cakebread Cellars founder Jack Cakebread, was named recipient of the Grande Dame Award from the Les Dames dEscoffier International group. The award recognizes a lifetime of outstanding professional achievement, excellence and charitable/community contributions within the culinary industry.
Monterey County group names new leader

Mike Sinor, winemaker and owner of SinorLaVallee Wine Co. in Arroyo Grande and director of winemaking for Ancient Peaks

Tyler Thomas is the new winemaker for DierTyler berg Vineyard Thomas and Star Lane Vineyard wineries in Santa Barbara County. Thomas most recently was winemaker at Donelan Family Wines in Sonoma County.

Kim Stemler is the new executive director of the Monterey County Vintners & Growers Association, which has 85 winery and grapegrower members. MCVGA chairman Paul Johnson, owner of Johnson Vineyard Co., said the hiring committee chose Stemler out of a pool of more than 100 applicants for her local knowledge and extensive connections.
Postmodern Winemaking book released

Clark Smith, a former columnist for

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Wines & Vines, has compiled his knowledge and philosophies about winemaking into the book Postmodern Winemaking, published through the University of California Press. The book is a collection of essays that describe Smiths ideas about the personal and creative engagement required to make exceptional wines of structure and mystery. Details: postmodernwinemaking.com.
Robert Biale hires new winemaker

nor regarding food and agriculture issues in the state.

Purple Wine names winemaking director

Antonio Trevino was promoted to the post of director of winemaking operations for Sonoma Wine Co. and Purple Wine Co. Trevino, who joined the companies in 2003, will supervise all winemaking activities, private-label programs, contract bottling and wine and grape sourcing.

in Dundee, Ore., opened its new tasting room. The 5,000-square-foot space features contemporary architecture and walls with striated cladding of cedar, Douglas fir and hickory wood that frame views of the estate vineyards and Dundee Hills.
New winemaker at Col Solare
Darel Allwine

Trester Tres Goetting is the new winemaker at Robert Biale Vineyards in Napa. Goetting most recently was winemaker for Krupp Brothers/Stagecoach Vineyards and Valley of the Moon Winery.
New winemaker at Thomas George

N O RTH WEST
Callaway joins Quails Gate

Cabell Coursey is the new winemaker at Thomas George Estates Winery in Healdsburg. Coursey is formerly the associate winemaker at Kosta Browne Wines.
Iron Horse CEO appointed to state board

Joy Anne Sterling, CEO and part-owner of Iron Horse Vineyards in Sebastopol, was appointed to the California State Board of Food and Agriculture. The 15-member panel is an advisory board to the gover-

Nikki Callaway is the new winemaker at Quails Gate Winery Okanagan Valley in West Kelowna, B.C. Callaway has worked at wineries in France and most recently was a winemaker at Mission Hill Family Estate, also in West Kelowna.

Darel Allwine is the new winemaker for Col Solare Winery in the Red Mountain AVA of Washington. Allwine joined Col Solare in 2003 and most recently was cellar master at the winery.
New director for Woodinville Wine Country

Sandra Lee is the new director of the Woodinville Wine Country trade association in Woodinville, Wash. Lee previously worked for JB Consulting Systems, a human resources and business Sokol Blosser opens new tasting room consulting firm. Details: woodinville Calling it a new standard in hospiAlainFouquet_Jul06 5/17/06 11:01 AM Page 1 winecountry.com. tality and design, Sokol Blosser Winery

www.alainfouquet.com alainfouquet@aol.com

Win es & Vin es SE PT E M B E R 20 13 23

SEPTEMBER NEWS

CENTR A L

materials include a slightly psychedelic image of Abraham Lincoln holding a glass of wine and the phrase: Join the party. The campaign was unveiled during the Illinois State Fair held in August.

2012. The economic impact of the tourism and wine industries was highlighted during a press conference and wine tasting organized by New York state Sen. Ted OBrien in late July.
New Hampshire sales reach record high

Iowa winery opens second tasting room

Wide River Winery based in Clinton, Iowa, opened a second tasting room in Le Claire, Iowa. The new tasting room is housed in a building dating back to the 1840s. The winery produces wines made with hybrid grapes from its 8-acre vineyard in Clinton. Details: wideriverwinery.com.
Illinois wine publicity campaign

E AST
Finger Lakes tourism revenues touted

The New Hampshire Liquor Commission reported that its wine and liquor retail outlets generated $604 million in total sales during fiscal year 2013, an increase of $39 million (or 7%) over the previous year. Renovated and relocated outlets as well as special sales events like Wine Power Buys were credited with the sales increase, according to a statement released by the commission.
EWE to feature distillation workshop

The Illinois Grape Growers and Vintners Association launched a new brand identity and advertising campaign for the states fast-growing wine industry. Using the tag line IllinoIsWine, the campaign is focused on building demand from consumers in the state. Some of the first

The Finger Lakes wine region of New York state contributed nearly $3 billion toward the state economy in 2012, according to statistics from the Empire State Development office. Tourism, largely driven by the areas wineries, provided 58,000 jobs in the 14-county regionand travel spending in the region rose by 2% (to $2.8 billion) in

The 2014 Eastern Winery Exposition, EWE, will feature a half-day distillation workshop covering distilling regulations as well as practical advice from winemakers who make grape and other fruit brandies. The workshop, sponsored by the American Distilling Institute, will take place March 6, after the main exposition, which runs March 4-5. The EWE features a trade show and winemaking seminars. Details: easternwineryexposition.com.

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SUPPL I E R S
Army veteran assumes winemaker role

gian-Ritchie joins the nursery based in Visalia, Calif., after more than 30 years in the banking industry. Luther Khachigian will remain the companys CEO and secretary-treasurer.
BSG hires technical sales manager

New sales rep for Spokane Industries

Winesecrets LLC in Sebastopol, Calif., hired Luke Bohanan as a production winemaker. Bohanan holds a masters degree in enology from the University of California, Davis, and is a former Army officer who served in Iraq as a combat engineer. Details: winesecrets.com.
Bucher Vaslin moves headquarters

Bucher Vaslin North America moved its California headquarters from Sebastopol, Calif., to 3100 Dutton Ave., Suite 146, Santa Rosa, Calif. 95407. The firms phone number remains the same, but its fax number is now (707) 535-0581.
Cal-Western Nurseries changes leadership

Ryu Yamamoto is the new technical sales manager at BSG Wine Division in Napa, Calif. Yamamoto has worked in sales and as consulting winemaker in New Zealand, Australia, Spain, France and Rus- Ryu sia. Details: bsg Yamamoto wine.com.
Cooper earns certification

Kevin Garasky is the new regional sales manager for Spokane Industries, covering Oregon, Washington, Idaho and Montana as well as Alberta and British Columbia. Garasky comes to Spokane Industries after working in sales in the insurance, financial services and medical supply fields. Details: spokaneindustries.com.
Nominations sought for innovation award

Bank of the West and Fruition Sciences are seeking applications for their Vintage Report Innovation Award, which recognizes groundbreaking practices used during the 2013 harvest. The winner will be announced at Fruition Sciences 2013 Vintage Report conference in January 2014. Application deadline is Dec. 6, 2013. Details: fruitionsciences.com.
Marketing firm now offers label design

Teresa Khachigian-Ritchie is the new general manager and vice president of Cal-Western Nurseries, assuming day-today management of the company from Luther J. Khachigian, her father. Khachi-

Tonnellerie Rousseau announced it had obtained the ISO22000 certificate meeting international standards for food safety. To earn certification, the cooper reports that it reinforced procedures for traceability and bolstered protections against possible sources of contamination. Details: artisanbarrels.com.

Talk Is Sheep, a marketing and design firm based in Sacramento, Calif., is now offering label-design services. The company had already been providing website redesigns and now can help wineries match their print and digital brand identities. Details: talkissheepmarketing.com.

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Product News
New NOPA test kit by Randox

Send us your latest offerings and announcements by emailing edit@winesandvines.com. Items may be edited for clarity and brevity.

new version includes functions to help manage tasting room activity, wine shipping and wine clubs. Updates include a complete ShipCompliant integration to streamline the compliance and shipping processes. Details: vinnow.com.

Randox Food Diagnostics is offering a new NOPA test kit for the 2013 harvest. Randox claims its new assay offers the widest ranges in the market: It has a minimum detectable concentration of 5.1 mgN/L and is linear up to a concentration of 500 mgN/L. Test results are ready within seven minutes. Details: randoxfooddiagnostics.com.

The new Coravin System is designed to enable users to pull a taste or a glass of wine from a bottle without removing the cork. The unit employs a hollow needle that pierces the foil and cork of a wine bottle. Once the needle is inserted, the Coravin dispenses argon gas to pressurize the bottle and essentially act like a miniature barrel-racking device. After the needle is removed, the pierced cork reseals itself, and the remaining wine is preserved under a layer of argon. Details: coravin.com.

Coravin wine-dispensing system

Lascar Electronics released three improved wireless data-logging sensors. The EL-WiFi-T+ is a temperature-only device with 0.2F (0.1C) temperature accuracy. The EL-WiFi-TH+ is a temperature and humidity data logger with a 0.4F (0.2C) temperature accuracy and humidity accuracy of 1.8%. The EL-WiFi-TP+ is a temperature-only data logger with external thermistor probe and a 0.2F (0.1C) temperature accuracy. The units have WiFi capability and integrated displays. Details: lascarelectronics.com.

Improved wireless data loggers

Transparent tank stave

Seguin Moreau unveiled transparent Plexiglas staves that offer a view into the fermentation process conducted in oak tanks. The cooper developed the staves for Chteau Mouton Rothschild in France as part of the Premier Grand Cru winerys cellar renovation that was completed this year. Seguin Moreau reports it provided the winery with 44 vats, each fitted with two of the transparent staves. Details: seguinmoreaunapa.com.

New piston pump for drums

Versatron case packer

Graco Inc. unveiled its new SaniForce 2:1 piston pump, which is designed to transfer liquids from drums and bins. The pump can handle low- to medium-viscosity liquids and can be inserted through a standard bunghole. Flow capacity ranges from 1.5 gpm at 60 cpm to 2.5 gpm at 100 cpm. Details: graco.com.

VinPerfect offers new options

Standard Knapps Versatron case packer with lowering head offers a fully programmable pick-and-place motion that can achieve positive placement to the bottom of each case. The lowering head module can be equipped with various gripper heads to provide safe, consistent, damage-free placement of products into each case with zero drop. Depending on the size of the product, the lowering head can operate at 30 cycles per minute. Details: standard-knapp.com.

Screwcap closure manufacturer VinPerfect released two new closure liners providing what it claims are distinct and reliable oxygen-transfer rates. The company reports its medium plus liner is designed for red wines that require slightly more oxygen in the bottle, and the light option is good for wines made with the intention of being more approachable while still young. Details: vinperfect.com.

New configurations for metering pump

Gamajet releases limited edition XXX tank washer

Moynos metering pump is now available in bare shaft, close-coupled and motorized configurations. According to product information, the bare shaft configuration is a good option for applications requiring a separate drive. The close-coupled configuration permits buyers to add their own motor, gear motor or variable speed drive, and the motorized configuration is the most compact model, which also comes with AC and DC variable speed drives. Details: moyno.com.

To celebrate its 30 years of supplying the wine industry, Gamajet released a limited edition XXX large tank washer. The tank washer employs Gamajets rotary impingement system, which combines pressure and flow to create high-impact cleaning jets. Details: gamajet.com.

New closure by Supercap

VinNOW software updated

26 W in e s & V i ne s SE PT E M B ER 20 13

Update Software Inc. launched the latest version of its VinNOW software system to manage direct-to-consumer wine sales. The

Italian closure manufacturer Supercap Srl. released its Nature synthetic cork, which it claims offers the design and appearance of natural cork with the qualitative advantage of a synthetic. The company worked with sommelier Luca Gardini to develop a product that protects all organoleptic aspects of a wine until its uncorked. Details: supercap.it.

Faces& Forums
Kevin Elder assists his teammate Lindsay Jordan during the varietal identification event of the Oenolympics, a series of wine-related challenges. ASEV-ES honors Helen Fisher from University of Guelph with the Life Achievement Award at its annual banquet this year in Winston-Salem, N.C.

NEWSMAKERS

ASEV-Eastern Section Gathers in North Carolina

Dr. Helen Fisher wins achievement award

the week of July 15 in Winston-Salem. At the annual banquet, Dr. Helen Fisher received the Life Achievement Award in recognition of her years of work as an associate professor of viticulture at the University of Guelph in Vineland Station, Ontario. Fisher, who received her Ph.D. from Cornell University in 1988, was the first woman to do extension work in horticulture in Ontario. In accepting her award, Fisher noted that in
Jackie Harris, Alex Fredrickson, Ethan Brown and DeAnna DAttilio emerged victorious as the over-all winners of the four events at this years Oenolympics at ASEV-ES.

inston-Salem, N.C.The American Society for Enology & Viticulture-Eastern Section convened

her years of working in viticulture in Ontario, she has seen the industry go from one of Concords, Sherry and bad hybrid wines to an industry that has matured and attained international recognition. Seven $1,000 student scholarships were awarded this year. Recipients included Sarah Bowman of Southern Illinois University, DeAnna DAttilio of Virginia Tech, Aimee Hasenbeck from the University of Arkansas, Cain Hickey from Virginia Tech, Dylan Rolfes from Iowa State University, Jennifer Savits from Iowa State University and Lindsay Springer of Cornell University. Two Cornell students received $500 awards

Outgoing ASEV-ES chair Fritz Westover (left) meets with Randy Ramey, viticulturist at Jones von Drehle Vineyards & Winery in Thurmond, N.C.

Raffaldini Vineyards & Winery winemaker Kylie Evans leads a tour of the property during the preconference visit to three Yadkin Valley wineries.

in the Student Paper Competition: Lindsay Springer and Lindsay Jordan. Linda Jones McKee
Win es & Vin es SEPT E M B E R 20 13 27

C FO IN VE ARNS CTE ORY

Special Report:

Wine Industry Finance 2013

Editors note: In the September 2012 issue of Wines & Vines we published the inaugural Top 20 Lenders List and the Special Report: Finance cover story to take you through the realities of winery and vineyard finance in its various forms and functions. Due to the success of that effort, weve decided to make it an annual event, tracking the top 20 lenders and their activities, and looking through the broader lens of wine finance during the past year through the eyes of an industry expert panel made up of executives from the Top 20 list and other industry finance insiders.

Status of winery finance today, page 28 Q&A with key financial players, page 32 Bacchus Capitals evolution, page 36 Europe vs. U.S. vineyard valuation, page 40

Recovery Strengthens Wineries Credit

By Ben Narasin
he story of wine industry finance during the past 12 months combines contradictions and consistency. The contradictions come in the form of increased activity, competition and expanded players

Wine Industry Finance 2013

Nascent rate increases dont negate the historically low cost of finance

in some areas of finance, contrasting with consolidation in other areasincluding the failure or exiting of some private-equity players entirely. Consistency comes in the form of uniformly low interest rates

throughout the year, although a window into increases has appeared of late, and it is rocking financial environments far beyond just those for wine. The backdrop for wine finance during this

28 W in e s & V i ne s s e pt e mbe r 20 13

COVER STORY

period has been one of continued economic and wine industry recovery. The upturn that we reported last year has continued, with increasing consumer demand for wine paralleling the perception of an improving economy following the recession. From a consumption standpoint, consumers are recovering and continue to increase their rate of purchases, says Rob McMillan, executive vice president and founder of Silicon Valley Banks Wine Division. Wine businesses that navigated the crisis have strengthened, resulting in greater credit worthiness. This increased bankability, combined with banks access to capital at record low rates, has generated increasing desire to lend into the now more secure and more profitable sector. Agriculture is one of the real bright spots in the California economy, and banks are starting to notice that, says Ernie Hodges, executive vice president of Farm Credit West. Its very profitable for most lenders and most growers.
Banks jump back in

The increased attractiveness of lending into agriculture (and wine lending specifically) has started to draw new players into the market. It is a borrowers market, with several commercial banks jumping back in due to the improved outlook, Hodges says. More banks mean more bidders for A+ credit quality deals, which puts pressure on

pricing, tightens interest rate spreads (the difference between what a bank pays to borrow money and what it charges to lend it out) and lowers rates for the best borrowers. Its not surprising to see credit offered at sub-prime (i.e. below prime rate) pricing in competitive deals, McMillan says. Borrowers with the A credit have the power now. As lending has increased, the opposite is true on the equity sideor, more accurately, the private equity side of the equation. There have been some major shifts, says Vic Motto, an investment banker and the co-founder, chairman and CEO of Global Wine Partners. The interest in equity capital has substantially diminished as losses, the collapse of a major vineyard fund and of a major REIT (real estate investment trust), the liquidation of the largest consolidation, the collapse of a specific wine fund and a hedge fund that invested in distressed properties foreclosing on those, has tempered the interest of outside capital that didnt have industry expertise. To illustrate this point Motto points to: CalPERS selling off its Premier Pacific Vineyards portfolio, the majority of which have been sold at somewhat distressed prices. Ascentia Wine Estates, which had a couple hundred million dollars of

transactions, which last year liquidated at a huge loss. Hedge funds that loaned to distressed wineries, foreclosed and now own them, like the former Kirkland Ranch. There may have been others. VinREIT, think over $100 million, liquidated all its properties at distressed prices. Mottos firm was involved in the creation of VinREIT, but it is no longer involved. The financial sponsor, Entertainment Properties Trust, a NYSE-listed REIT, decided to liquidate the VinREIT assets, implemented primarily in 2012. As the weaker players left the system, the remaining organizations began to standardize what they did well and better define their spaces in the market. Foley, Vincraft, Bacchus, weve all gone into our respective corners, says Quinton Jay, managing director of Bacchus Capital Management. Each is focusing on what we are known for and the strengths we bring to the table. One outlier, a relatively new player to the equity game beginning to garner attention, is Charles Banks of Terroir Capital. Banks first burst onto the wine scene with his involvement in the acquisition of Screaming Eagle. He now appears focused on building his own portfolio of premium brands through acquisition, most recently Mayacamas Vineyards in Napa Valley. Hes another player getting active, Jay says. Thats interesting to me. Another potential gorilla in the mist.

JOHN ROSE

Win es & Vin es sept em b er 20 13 29

COVER STORY Deal size up and down

Deal sizes during the past year have told a divergent tale, having both grown and shrunk. Deals on the lending side appear to be moving up, as growing concern about grape supply has increased interest in acquiring vineyard land, which requires larger capital commitments at scale than many

other winery investments. Meanwhile, equity transaction sizes tend to be trending down. Constellation Brands Inc. and other major producers have largely filled the gaps in their portfolios, and the consolidation of bigger wineries seems to have, at least for the moment, subsided to allow a lot of financial and operational digestion to take place.

Large winery consolidation has slowed, Motto says, and deal size is shrinking. As deal sizes have shrunk in contrast to the year before, interest rates have remained consistently low. Low rates existed throughout the year for high-quality credit, and in fact rates have fallen more due to compressed spreads from more aggressive competition.

The Top 20 Finance Companies

Company No. of Clients Portfolio Size Min / Max Products Offered Contact

National & International (Big) Banks

Bank of America Working capital lines, real estate loans for vineyards and wineries, equipment term loans, acquisition finance and leases. David Meddaugh david.meddaugh@baml.com (707) 293-2553 or Tom McComas thomas.mccomas@baml.com (707) 293-2552

Bank of the West

275+

$900 million+

$500,000 / $100 million

Working capital, real estate loans, vineyard Adam Beak adam.beak@bankofthewest.com development, acquisition financing, (707) 501-5136 equipment loans and leases, foreign exchange, global capabilities in all major wine regions with BNP Paribas and BNL. Working capital, term debt, crop loans, acquisition and equipment financing. John Flinn (916) 498-3841 or Mike Edwards (916) 626-9606

US Bank Wells Fargo $1 billion+

Min: $1 million None

Perry DeLuca Real estate loans, lines of credit, perry.f.deluca@wellsfargo.com insurance, asset-based lending, (415) 222-4646 equipment financing, barrel leasing, private banking and treasury management.

Large Regional & Specialty Banks

Comerica $500 million Michael A. Silva masilva@comerica.com (415) 477-3275 or Chris Thomson, cthomson@ comerica.com (916) 491-1304 Max: $40 million $1.1 billion $900 million+ $1 million / $50 million Acquisition and development loans, working capital, equipment loans. Working capital, revolving lines of credit, equipment loans and leases, real estate. Inventory, equipment, real estate, construction, vineyard development loans. Dan Smith dansmith@firstrepublic.com (707) 967-1502 Charles Day (707) 545-6887 William A. Stevens wstevens@svb.com (707) 967-1373 or Rob McMillan, rmcmillan@svb. com (707) 967-1367 Mark Brody markbrody@umpquabank.com (707) 252-5020 James Barrett james.barrett@unionbank.com (707) 968-9514

First Republic

125+

Rabobank Silicon Valley Bank (SVB) Wine Division

120 400+

Umpqua Bank

75

$200 million $376 million

$1 million / $25 million $1 million / $60 million

AR financing, revolving credit lines, equipment leases and loans, real estate term loans, vineyard development loans. Revolving credit lines, term debt, development and acquisition finance.

Union Bank

25

30 W in e s & V i ne s s e pt e mbe r 20 13

COVER STORY

However, at the tail end of our reporting it became clear that new activity by the federal government is starting to change that. Weve seen a pretty dramatic change in the past six weeks (as of June 24), says Mark Brody, senior vice president and manager of Bay Area Commercial Banking at Umpqua Bank. He leads Umpquas Wine

Specialty Group, where long-term (Treasury) rates are up 50-plus basis points. Theres a sense were off the bottom and will remain off the bottom. Were very definitely seeing upward pressure. Beyond the wine industry, the entire financial market is focused on this new reality. Short-term rates have not been meaningfully

impacted yet, but they likely will be, and long-term rates clearly have been effected. Of course, rates are still low overall. All rates are still very reasonable over a historic perspective, Brody says. If you have the use for the money, and the top-tier credit to get banks to compete, it remains an exceptional time to borrow.

Wines & Vines identified these financial institutions as the leaders in serving the West Coast wine industry, based on demonstrated involvement in vineyard and winery finance,

number of clients, size of portfolio, size of wine team and other factors. Some businesses chose not to disclose all the requested information.

Company

No. of Clients

Portfolio Size

Min / Max

Products Offered

Contact

Community Banks
Bank of Marin Exchange Bank 30+ 55 $25 million $116 million $500,000 / Business loans, operating lines of credit, $20 million construction and real estate lending. $100,000 / Working capital, construction, $30 million acquisitions, development and equipment finance. $100,000 / Real estate term loans, vineyard develop$30 million ment, construction, revolving/inventory/ crop lines of credit, acquisition financing, barrel & equipment leasing, mortgages. Matt Bartlett (707) 508-3376 Steve Herron herons@exchangebank.com (707) 524-3102 Jason Hinde jason_hinde@mechanicsbank.com (707) 967-4791 or (707) 535-6161

Mechanics Bank

75

The Farm Credit / Ag Credit System

American Ag Credit Farm Credit West 540 $1.125 billion $975 million Operating and capital loans, mortgage loans and leases. Operating and capital loans, mortgage loans and leases. Operating and mortgage loans, development loans and leasing. Bill Rodda brodda@agloan.com (707) 545-7100 Tom McGuire tom.mcguire@farmcreditwest.com (805) 434-3665 John Brandon john.brandon@fmfarmcredit.com (559) 276-4868

Fresno Madera Farm Credit

Insurance Companies
John Hancock Financial Services MetLife Agricultural Investments $200 million $10 million / Traditional long-term debt up to 20 $150 million years, mezzanine finance and equity investment. $2 million / Long-term fixed-rate loans from five to $250 million 20 years and adjustable mortgage loans. Dwayne Bertrand dbertrand@jhancock.com (617) 572-4644 Jonathan Holbrook jwholbrook@metlife.com (559) 470-6444 or Tom Bozzo tbozzo@metlife.com (559) 470-6447 Bill Beyer William.beyer@prudential.com (916) 789-4070

Prudential Financial

40

$650 million

$2 million / Long-term fixed-rate loans from three $200 million to 20 years.

Second-Lien Lender
Bacchus Capital Management 8 current + 1 investment paid off $1.5 million / First- and second-lien loans $7.5 million and direct-equity investments. Quinton Jay qjay@bacchuswinefund.com (415) 828-8898
Win es & Vin es sept em b er 20 13 31

FINANCE
Wine Industry Finance 2013

What Finance Insiders Think

By Ben Narasin

An influential panel shares its views on trends, deals and interest rates

highlights
Six executives from Wines & Vines Top 20 Finance Companies share their viewpoints regarding the state of wine industry finance.  Members of the panel represent traditional banks, a private equity firm, an investment bank and a farm credit organization.

his year Wines & Vines surveyed six of the most knowledgeable execu-

tives in North American wine industry finance about the past year and whats ahead. These banking veterans weighed in on the availability of credit, supply and demand, risk, interest rates and investment potential in areas from real estate to vineyard development to private equity.

Vic Motto: Activity has picked up some (on the M&A [mergers and acquisitions] side), with more sellers and somewhat improved buyer interest, but its still narrow. There was a period when private equity institutionsREITs, PE, hedge funds were very interested in the wine industry, though they knew very little about it. That has substantially diminished. In commercial banking it seems more competitive. Theyre aggressively seeking business. Banks are competing for loans. Quinton Jay: What has changed the most is that the economy has improved and deals are happening: deals that people want to do and deals that got closed. Were also seeing a lot of vineyard deals because wineries clearly need grapes for their projects, and there was no increase in plantings the past four to five years. No one was putting sticks in the ground. Mark Brody: Theres a greater sense of confidence as a result of DTC (direct to consumer), distributor wine sales and merger and acquisition activity. All those things give people a greater sense of a sustained recovery, greater confidence in the value of a property and more confidence going forward in building their brands. That confidence leads to more financing opportunities with the right kinds of players, and the banking industry has responded.

Rob McMillan: Weve had fantastic years. Its a combination of continued efforts, low interest rates and refinancings.

Perry DeLuca: The market is very competitive, and the competition continues to intensify. Banks are competing very heavily on deals, on the commercial banking deals they consider to be creditworthyand getting increasingly so. Ernie Hodges: We view the wine industry in a much more positive vein, particularly in the Central Coast. We see positive winery performance with improving sales, increased winery investment in equipment and an increase in winery startups. Demand has picked up, quality has improved, land values have picked up because the prices people are willing to pay have improved, and the overall view is positive. In general, outlook is positive and improving. As to vineyards, if a good piece of vineyard land goes on the market, its going to attract a lot of interest in a short period of time. Also, theres a lot of pending appraisals out there. There is a lot of demand. There is a statewide shortage of quality appraisers; all the lenders are scrambling to get appraisals done.

What has changed during the past year in wine finance?

Rob McMillan: One of the biggest changes: Everybody is looking for property. Thats produced a bit of a run on vineyards and vineyard financing. Next, a continuation of what weve seen for several years: the roll ups of wineries, and investments from internal wine players and externally. Theres been a lot of talk of China investing in the U.S., but you can pretty much name your country and (theyre) looking for deals. Theres a pattern of rolling up wineries.

Mark Brody: If youre a well-run company, its a buyers market. If youre less well run, its a lenders market.

Rob McMillan (Silicon Valley Bank) is executive vice president and founder of Silicon Valley Banks Wine Division, based in St. Helena, Calif. He manages a deal team and assists clients and bankers by sharing his views of the macro factors impacting the economy and the fine wine business. He has published reports of varied and emerging wine industry trends, and he lectures at numerous West Coast universities. He authors the banks annual State of the Wine Industry Report and speaks about the topic regularly.
32 W in es & V i ne s s e pt e m b e r 20 13

Mark Brody (Umpqua Bank) is a 30-plus year banking veteran currently overseeing Umpqua Banks commercial-lending activities in the Bay Area. He is senior vice president and manager of Bay Area Commercial Banking at Umpqua Bank and leads Umpquas Wine Specialty Group. Brody was CEO and general manager of Cline Cellars in Sonoma from 2001 to 2003 and founder of the Wine Advisory Group.

FINANCE

How have loan interest rates been affected?

Rob McMillan: Were at an all-time low for interest rates in my memory. Mark Brody: Rates have certainly dropped over the past year both in terms of compressed spreads for banks and the benign interest rate market that has existed, but weve seen a pretty dramatic change in the past six weeks with longterm rates up 50-plus basis points. I have a sense were off the bottom and will remain off the bottom. For the very best deals theres going to be an extreme level of competitionbut probably less so as one goes to the next tier down. Ernie Hodges: They didnt have far to go down at the beginning of the year. Its been four-and-a-half years since the Fed raised the discount rate. Were seeing some evidence of spread compression for better quality deals, and were seeing new entrants into the market. Rates until the last 45 to 60 days have been very stable and at historically low levels at both the short- and long-term side. In the past 45 to 60 days there has been a very significant increase in long-term rates. The Fed has said its not increasing short-term rates for a couple of years, but bond and general financial markets have already started increasing long-term rates by 60 to 75 basis points. Perry DeLuca: Were a LIBOR (London Interbank Offered Rate) based lender, and LIBOR has been consistently low. Our spreads have not changed over the last year. We see competitors put pressure on us on deals, with rates being very competitive, but its hard for me to say spreads have tightened over the past year. It was very competitive to start the year, and its very competitive now.

What was the deal climate over the past year?

Rob McMillan: Weve had fantastic years. Its a combination of continued efforts, low interest rates and refinancing. Its just a continuation. Its been a good couple of years for sure.
quIntOn jay: Were seeing a lot of vineyard deals because wineries clearly need grapes for their projects.

Vic Motto: Deals are getting done, but there are fewer deals in the industry than in the past, and the deals are smaller. Id characterize the majority of what was sold as wineries sold under duress by the lenders and wineries not doing well that sold. Of course Im talking about M&A to describe the sale of an operating businessnot the sale of a vineyard or an underutilized or unused winery. Thats not M&A; those are asset sales. Im seeing people talk about vineyard sales going crazy, but Im not seeing it. Any vineyard producing a good crop, those always sold. They sell in good times and bad as long as they are good properties. People saying vineyards are going crazy are the people trying to sell them.

Vic Motto: For M&A, buyers are much more averse to risk and conservative in decision-making. For loans, banks are aggressively competing with each other for good business. If you have good credit, its a great time for you; rates are very low and projected to remain there. Its a great time to get long-term money if you can qualify for it. Were slowly getting back to the conditions we were at before financial meltdown, and I see slow movement each year, but were not back yet. It is easier to qualify for a loan than it was a year ago. Banks are risk averse and cautious and want the best credits. Businesses with a predictable income stream and good balance sheet can get what they want today. Marginal and startup businesses will find it hard. Mark Brody: Every downturn some businesses shrink, go away or get acquired. The strong companies that emerge really differentiate themselves. In some ways its clear whos doing well and whos not at this stage of the recovery. Its easier to spot the companies you want to do business with as a banker. Perry DeLuca: A lot of the banks emerged from 2007-08 very healthy and liquid. You actually see more competitors on the lending side. There arent any lenders that I know of sitting on the sidelines waiting for the market to come back. I dont see a shaking out there. Over the last year, its clearly been a very strong robust market. Ernie Hodges: We believe some of the new players might be willing to compromise on terms and conditions that we are not willing to. Theyre throwing some really low rates out there, and in some instances they are getting some of those deals. There have been other commercial banks that have started forming agricultural lending that werent there three or four years ago. Ag is one of the real

VIC MOTTO: Any vineyard producing a good crop, those always sold. People saying vineyards (are) going crazy are the people trying to sell them.

Have the players, types of deals, risk tolerance or deal terms changed?
Rob McMillan: For loans, theres still a lot of competition for the best deals. Id underscore that. Thats where you can find sub-prime pricing on those deals. Now more than ever were seeing other banks, which come in and out of the business, coming back in. They tend to wait for the water to be fine to jump in; thats an indication of the (perceived lower) level of riskand a sign of more competition for the best deals.

Vic Motto (Global Wine Partners) is an investment banker and the co-founder, chairman and CEO of Global Wine Partners. He specializes in wine industry mergers, acquisitions and investments. He serves on the board of directors of several wine industry trade groups, universities and wine companies. He actively teaches, writes and speaks about the wine industry.

Quinton Jay (Bacchus Capital Management) is managing director of Bacchus Capital Management LLC, a private-equity fund specializing in equity investments and second-lien loans to the wine industry. At Bacchus, Jay sources and evaluates potential transactions and oversees the performance of the funds portfolio wineries. Prior to joining Bacchus, Jay was general manager of Artesa Vineyards and Winery, and prior to that he founded an independent wineryconsulting firm.
Win es & Vin es s ept em b er 20 13 33

FINANCE
bright spots in the California economy, and banks are starting to notice that. Its very profitable, but theres a lot of risk. You better know what youre doing when you get into ag lending. needs to be of a certain size before its interesting and yummy. Theyre not looking for 10,000 to 12,000 cases. Beyond those large consolidation deals, deal sizes have always been the same. Deals at the 20,000-50,000-case level, up to 100,000, are where the majority fit, and thats why deal sizes are always going to be the same. On the banking side, with the economy getting better, youre getting more lenders coming into the mix. More banks are coming in, but theyre coming in cautiously. Theyre still ratio-driven: If you dont make the ratios, they dont want you. Mark Brody: Deal size is about the same for those of us that play on all three categories: small, medium and large. Medium ($5 million-$25 million loans) is where we will spend most of our time. Very large deals will tend to be multibank deals, and well do those as well. If you look at the large companies, theyre buying up vineyards. Were seeing a lot of confidence expressed, at least by

Has deal size on M&A or loans changed?

Rob McMillan: Yes, if youre working on real estate, that goes up. In addition, the rollup players have a tendency to move prices up. Multiples are increasing as wellnot to top-of-the-boom multiples, but still very healthy. Purchases that are happening are good deals, not troubled, so the prices go up. Sales multiples are all over the map because the wine business is not a homogeneous model; some dont own vineyards, some do. If you look at a normal period, in a normal business environment, youd expect to see businesses selling in the eight to 12 times EBITDA range. You probably move that up to 10 to 14 times EBITDA in wine. Vic Motto: Deal size is shrinking. Partly because of distressed deals, partly because valuations on deals are shrinking, and partially because there are not as many large offerings. Consolidation has substantially happened, not taken a pause. Were seeing smaller transactions. Most of the large winery consolidation has slowed as larger wineries have consolidated. Valuations are tighter, but you must distinguish between distressed sales versus sales of functioning businesses, as there are both types happening. Quinton Jay: On the M&A side, deal sizes are relatively the same because of the way the wine business is. Large conglomerates fill up holes and have specific ones to fill, e.g., Constellation and Mark West; they needed a Pinot Noir at that price point. For (those sort of) transactions to happen for the big guys, a winery
ERNie HODGES: Ag is one of the real bright spots in the California economy, and banks are starting to notice that.

FINANCIAL SERVICES/BANKING/LEASING
Company Name AXA Equitable Finance American AgCredit Axton Wine Group LLC BMO Harris Bank Bacchus Capital Management Bank of America Bank of Marin Bank of the West Benedict Venture Group Comerica Bank Exchange Bank Farm Credit West First Community Bank First Republic Bank Fresno Madera Farm Credit Global Wine Partners Hansel Leasing Mechanics Bank Mission Capital PricewaterhouseCoopers LLP Prudential Agricultural Investments Rabobank NA Silicon Valley Bank, Wine Division Terroir Capital LLC US Bank Umpqua Bank Union Bank Wells Fargo Insurance Services & Commercial Banking Wells Fargo Wine, Food & Beverage Group Phone Website (209) 471-3622 axa-equitable.com (800) 800-4865 agloan.com (707) 320-2304 axtonwinegroup.com (415) 354-7510 harrisbank.com/commercialbank (415) 828-8898 bacchuswinefund.com (707) 525-2205 bankofamerica.com (415) 884-4583 bankofmarin.com (707) 501-5150 bankofthewest.com (509) 956-9463 benedictventuregroup.com (415) 477-3277 comerica.com (707) 524-3102 exchangebank.com (800) 909-5050 farmcreditwest.com (916) 774-7192 fcbconnect.com (415) 392-1400 firstrepublic.com (559) 277-7000 fmfarmcredit.com (707) 967-5315 globalwinebank.com (707) 544-2822 hanselleasing.com (707) 256-4343 mechanicsbank.com (707) 431-2678 missioncapitalfund.com (415) 498-6270 pwc.com (916) 789-4071 www3.prudential.com/ businesscenter/realestate/pmcc (707) 545-6887 rabobankamerica.com (707) 967-1367 svb.com (805) 617-3670 terroircapital.com (912) 942-9466 usbank.com (707) 252-5020 umpquabank.com (707) 968-9514 unionbank.com (707) 769-2900 (415) 222-4646 cybersure.com wellsfargo.com

PERRY DeLUCA: The market is very competitive, and the competition continues to intensify. Banks are competing very heavily on deals.

For more information about financial service, banking and leasing suppliers, see Wines & Vines 2013 Buyers Guide in print or online at winesandvinesbuyersguide.com.

Perry DeLuca (Wells Fargo Bank) is the industry head and team leader for Wells Fargos Wine, Food & Beverage group, based in Santa Rosa, Calif. He has worked in wine industry finance for more than a decade. Prior to joining Wells Fargo, DeLuca was the national head of Wine & Spirits/Beverage Distribution lending at Cleveland, Ohio-based KeyBank. He is an associate member of the California Wine Institute.
34 W in es & V i ne s s e pt e m b e r 20 13

Ernie Hodges (Farm Credit West) is executive vice president of Farm Credit West, where he has been since May 2008. Prior to that, he served as president and chief executive officer of Sacramento Valley Farm Credit. He serves as a member of the Farmer Mac Board of Directors and is a member of the California State Fair Agricultural Advisory Council.

FINANCE
the bigger players; people wanting to control, quantity wise or quality wise, the fruit that they use. I think that trend is going to continue. Perry DeLuca: Replanting and acquisition of new vineyard land is where we are seeing the most activity.

What does the supply-demand balance look like now?

Rob McMillan: Borrowers with A credit have the power now; the established brands that have been around since the 1980s survived the downturn swimmingly, and they came out with guns blazing and looking for growth. Those established brands have power. Vic Motto: For M&A its a buyers market. There are more people whod prefer to sell than whod prefer to buy. The number of buyers has consolidated, leaving fewer buyers. A lot of larger buyers who were filling in gaps have filled them. Were now seeing small and medium size wineries looking to grow their business by acquisition. Sellers are still in love with what they own, and buyers are cautious because they see a lot of turbulence in the market. Quinton Jay: On the banking side, the wineries that are healthy everybody wants to talk to. For those without as strong a balance sheet its, We can wait. On the private equity side theres still relatively the same number of players. Theres not a tsunami of players coming in, no ramping up or a bidding war. The ones that are there have their own specialties and people know what they are willing to do, they havent acted irrationally. Its still a buyers market. Mark Brody: If youre a well-run company its a buyers market. If youre less well run, its a lenders market. The borrowers that are creditworthy have been able to get all the credit they need at pretty attractive terms. Perry DeLuca: Its a healthy environment with a lot of competition. Competition brings out the best in all the participants. Ernie Hodges: Demand has increased, and there is significant competition. It is a borrowers market with several commercial banks jumping back in due to improved outlook for California agriculture and the wine grape industry. Therere a lot of people out there that want to dip their toes in the market, so borrowers have got some choices.

Better banking, bottled. Our strong lending support

moved Ryan Mobile Bottling into high gear so they could fll, label, and cork 100 bottles of wine a minute, delivering wine faster than ever before.
Contact us for a taste of what we can do for you: Matthew Bartlett, VP, Commercial Loan Officer Wine Business (707) 508-3376

Marin | Sonoma | Napa | San Francisco bankofmarin.com | Member FDIC

22th Annual Wine Industry Financial Symposium

The Global Environment for Wine

The Premiere Financial and Economic Event in the Wine Industry
September 23 & 24, 2013, Napa Valley Marriott

The Wine Industry Executive Survey and Wine Industry Financial Survey
Robert Smiley, Professor Emeritus, Director of Wine Graduate School of Management, U.C. Davis INDUSTRY KEYNOTE SPEAKER David Dearie, CEO, Treasury Wine Estates
Monday, September 23
Seminar & Symposium Registration: 11:00 a.m. Monday Networking Lunch: 11:45 a.m.1:30 p.m. Wine Industry Financial Seminars: 1:30 p.m.5:00 p.m. Reception and Dinner: 6:00 p.m.9:00 p.m. The Hudson House, Beringer Winery, 2000 Main Street, St. Helena, CA

Tuesday, September 24
Registration: 7:458:15 a.m. Wine Industry Financial Symposium: 8:15 a.m.4:00 p.m. Financial Sponsors Wine Tasting & Reception: 4:00 p.m.

For a full program, visit our website

www.winesymposium.com 707-255-9222
Win es & Vin es sept em b er 20 13 35

Registration opens end of July

FINANCE
Wine Industry Finance 2013

Bacchus Capital, Unorthodox Financiers

By Ben Narasin

Firm provides capital and expertise without removing management

am Bronfman completed his two-year stint at Diageo in 2004, after the wine and spirits behemoth acquired Seagram, the business his grandfather founded and his family had run for three generations. He set out to find a winery or wineries to buy, to return to the industry where he had spent his professional life. This turned out to be far more difficult than he had expected. Bronfman recruited his lifelong friend Peter Kaufman and Kaufmans business partner, Henry Owsley of Gordian Group, to act as his investment bankers, but whenever they found a winery to pursue, they got outbid. We realized we wouldnt win auctions, Bronfman said. It was just too tough to win. In one instance, when bidding on Chalone Vineyard in Monterey County, Calif., Diageo ended up buying the business for 50% more than Bronfmans group had offered. We kept getting grossly overbid by strategics, Kaufman said. Wed bid 12 times EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and theyd bid 18 times. The team began to look at the obstruction as an opportunity. We decided that while (paying high multiples of EBITDA) wasnt a good place to be as a buyer, if you were lending to the same companies, having that big valuation cushion beneath you would be a pretty good thing, Kaufman said.

Peter Kaufman, Sam Bronfman and Henry Owsley (from left) co-founded Bacchus Capital Management, where they also serve as managing partners.

The idea of lending created an opportunity to craft an alternative form of finance that would provide capital and expertise without having to remove the management team from the equationor bid irrationally against other bidders. Of course, with a lifetime of experience in the industry, Bronfman also wanted to find a way to leverage his knowledge and contactsand see the value of those assets recognized in the transaction.

We looked for ways to use my expertise and Gordians financial acumen, Bronfman said. Henry came up with idea to see if there was room for second-lien funding in the wine business. With that idea, Bacchus Capital Management was created.
Private equity business

highlights
Outbid in attempts to buy West Coast wineries, Sam Bronfman and partners decided to lend to the wineries instead.  Their firm, Bacchus Capital Management, evolved from mezzanine lending to taking equity stakes in Oregon, Washington and California wine companies.  Now with a focus on supporting proven winemakers, Bacchus leverages its talents in marketing, distribution and sales.

The business was structured as a Private Equity (PE) business. A typical PE model is to create a limited partnership whereby the operating principlesknown as general partners, in this case Bronfman, Kaufman and Owsleyrun the fund and provide a small initial investment in exchange for an annual fee and a percentage of the profits. The bulk of PE businesses are then funded by outside investors, be they private institutions or otherwise, who take no active role but receive the majority of the returns generated over the life of the fund in exchange for providing the capital to use for the funds investments. Funds typically last 10 to 12 years, although the money they raise may

36 W in e s & V i ne s s e pt e m b e r 20 13

FINANCE

be invested in a much shorter period. Bacchus launched as a second lien (or mezzanine) fund with an equity side pocket (a small allocation of capital to do direct equity investing within the funds charter). They raised between $40 million and $50 million and closed on the fund to pursue the model with wineries in January 2008. While commonplace in many other industries, before Bacchus the concept of secondlien finance did not exist in the wine industry. A second lien is much like a second mortgage: The lender provides capital in the form of a loan, but their security position stands behind the primary lender, i.e., the first mortgage. Because of the weaker security position, these loans are viewed as higher risk and command either higher interest rates, equity-style participation, or both. Equity-style participation could take a variety of forms: a percentage of profit, success fees, an equity percentage in the business or warrants or options to create the right to buy a portion of the business at a pre-agreed price if so desired by the lender. In addition, while the security position is behind the primary lender (such as the bank that lent on the land or building, the insurance company that provided long-term finance or the line of credit used for grape purchases), the security interest typically includes the right to foreclose on the business in the event of a loan defaultalthough generally in coordination with, or upon commitment to repay, the primary lender.

turns out, thats what we looked for in Bacchus: high-end wineries that needed additional growth capital or financial support. We did our first deal fairly quickly, Bronfman said, Cameron Hughes in 2008. Cameron Hughes, a ngociant-style U.S. wine business, was growing really fast, and the growth was outstripping their capital from their primary lender. So we made a second-lien loan to them, and they did a fantastic job of continuing growth. Hughes later repaid the loan, our one realized event, Bronfman said.

Difficulty gaining traction

After that initial fast close on a first deal, things ground to a halt. We had a heck of a time getting traction within the industry, Kaufman said. People didnt understand what a second lien was, and finding investments we felt comfortable with from a valuation standpoint wasnt easy. We only did one deal in the first three-and-a-half years. The firm eventually did more second-lien deals, but the partners soon learned that the barrier of communicating a new style of finance was more significant than expected.

hile commonplace in many other industries, before Bacchus the concept of second-lien finance did not exist in the wine industry.

The advantage to wineries and related businesses is the ability to draw additional capital when no capital would otherwise be available from primary lenders, and to continue to run their business without having to sell out. In addition, in the case of Bacchus, Bronfmans extensive network and his teams expertise in winery operations, distribution, sales and marketing could be an exceptional value. The Gordian team also brought financial expertise when needed. The original idea, before the fund, was to get a string of pearls, Bronfman said. Buy high-end brands and put together the sales and marketing into a joint effort. As it
Win es & Vin es s ept em b er 20 13 37

FINANCE

The model evolved, Bronfman said. The private-equity side of things became more interestingto portfolio companies and to uswhile the second-lien idea didnt seem to catch on as well. We got off a couple more loans and suddenly fell into this new model in the industry of partnering with winemaker-owners from an equity perspective, Kaufman said. They do what they do best, which is make great wine, and we do what we do well: aid in running wineries and putting in people to help with marketing and the rest. We focus on brands where our value-add is in marketing, distribution and sales, Bronfman said. Thats where my expertise is. Part of that focus has been to find great winemakers and back them. The equity focus came about when we started talking with people like Ed Sbragia, Bronfman said. Sbragia is the former winemaster for Beringer Vineyards and founder of Sbragia Family Vineyards in Geyserville, Calif. Ed is a fantastic winemaker, getting great scores, but (he) wasnt as strong on the business side and needed a partner to free him up to do what he does best: the wine. Sbragia, who goes way back with Bronf man, started talking to Bacchus when Sams bird dog Quinton Jay came around,

e focus on brands where our value-add is in marketing, distribution and sales. Thats where my expertise is. Sam Bronfman
Madrigal Family Winery and De Lille Cellars. Their focus on partnering with exceptional winemakers runs throughout the portfolio, including Joe Dobbes, founder and winemaker of Wine By Joe and Dobbes Family Estate in Dundee, Ore., and Bob Lindquist, founder and winemaker of Qup in Santa Maria, Calif. These people want to stay in the wine business, Bronfman said. Ed is a winemaker. Joe Dobbes and Chris Upchurch (founding partner and winemaker of De Lille Cellars in Redmond, Wash.) are winemakers. They dont want to sell their businesses. They need money to grow them. We can bring money and expertise. People see us as effective and good partners. And so a model was established that allowed Bacchus to deploy capital and expertise, much in line with the original focus on creating a string of pearls that predated the creation of the fund. Today, there are eight pearls on the string, and the team at Bacchus is working on raising their second fund, perhaps to add another strand.

Sbragia said. (Jay serves as managing director at Bacchus, where he is responsible for sourcing and evaluating potential transactions.) Sbragia had a lot of options, but he went with Bacchus for more than just capital. Im an operating guy. I needed marketing muscle. Bacchus brought that muscle by providing marketing, communication and finance assistance and even hiring an experienced GM, Steve Cousins. Sbragia raised money from Bacchus in 2011, while the impact of the financial collapse was still draining the wine business. When tough times come around, people go into a shell and try to protect what they have, Sbragia said. Thats not going to grow a business. I didnt want to do that. Bacchus also got the business focused. They got us on track.Bacchus came in and gave us resources and incentives.
Helping winemakers grow

After Sbragia, Bacchus went on to do deals with Maritime Wine, Panther Creek Cellars,

the bacchus portfolio

T
he Bacchus Capital Management portfolio is made of eight total deals: two debt and six equity, of which one is debt and equity, according to Bronfman. The firm is headquartered in San Francisco, Calif. Location Debt Cameron Hughes (Exited) Andretti Winery Qup Debt & EQUITY Wine by Joe Equity DeLille Cellars Madrigal Family Winery Maritime Wine Trading Collective, Nine North Sbragia Family Vineyards 100% Acquisition Panther Creek Cellars
38 W in es & V i ne s s e p t e mbe r 20 13

Annual Case Production 250,000 30,000 36,000

Vineyard Founder/ Acreage Winemaker 0 Cameron Hughes 42 Mario Andretti 54 Bob Lindquist

San Francisco, Calif. Napa, Calif. Santa Maria, Calif.

Dundee, Ore.

125,000

214 Joe Dobbes

Woodinville, Wash. Calistoga, Calif. San Francisco, Calif. Napa, Calif. Geyserville, Calif.

16,000 6,000 150,000 16,000

60 Chris Upchurch 40 Chris Madrigal 0 Chris Nickolopoulos 52 Ed Sbragia

McMinnville, Ore.

7,500

0 Tony Rynders, consulting

FINANCE
Wine Industry Finance 2013

The Price of Prestige

By Paul Franson

Prime French vineyard properties soar while ordinary land languishes

f youve seen the prices that some Napa Valley vineyards have sold for, you may be aghast. But the prices of prime grapegrowing property in Bordeaux and Burgundy, France, are even more staggering. While top vineyards in California have commanded $350,000 per acre (not counting the value of homes and wineries on the properties, or associated brands), those in Bordeauxs top appellations can sell for $800,000 per acre (1.5 million euros per hectare). Land in Frances famed Champagne region averages about $600,000 per acre. In Burgundy, the celebrated grand cru vineyards average more than $2 million per acre, and a few small vineyard parcels have sold for up to $16 million.

Paris

Champagne

FRANCE
Bordeaux
Pauillac St. Julien Margaux PessacLeognan Pomerol St. Emilion

Burgundy

Cote de Nuits Cote de Beaune

Lyon

highlights
 Top vineyard land in France commands very high prices compared to property in U.S. wine regions.  Less-famous French areas dropped in price during the recession, while prices in top appellations grew as much as tenfold.  Severe governmental restrictions about expanding vineyards can hamper growth plans.

Rhne Valley
Gigondas Chateauneuf-du-Pape

Languedoc

Nice

Worlds most expensive

Wines & Vines recently contacted multiple sources to determine current prices for planted, producing vineyards. Property with estates, wineries and established brands can cost far more, while unplanted land is generally cheaper but very difficult to plant because of government regulations.
40 W in e s & V i ne s s e pt e mbe r 20 13

Vineyards in Frances top regions are the most expensive in the world. One of the leading brokers of French vineyards is Vinea Transaction. Adam Dakin, a Scot who has lived in the Rhne Valley for many years, is one of the firms representatives at Vignobles Investissement, an affiliate of Vinea Transaction in Languedoc and the Rhne Valley. He represented Robert Mondavi Winery in what he called its very sadly failed attempt to acquire land and establish a winery in the region in southern France. He also helped Goelet Wine Estates, the parent company of Napa Valleys Clos du Val winery, acquire a vineyard, Chteau de Nizas, near the southern French city of Pzenas.

Prices in greater Burgundy can range by a multiple of 100, from outlying areas to grand crus, Dakin said. There are recent sales in Burgundy where they literally count the individual vines to calculate the value in the most prestigious crus, like 3,000 euros per vine times 10,000 vines per hectare. He said that Chinese buyers have bought as many as 50 lesser estates in Bordeaux during the past few years, and many are still looking. They havent generally bought top estates, but generic properties. A Chinese buyer did buy a top estate in Burgundy. Locals were up in arms when Louis Ng, a casino tycoon from Macau, bought Chateau de Gevrey-Chambertin for an unprecedented figure of $10 million. The

FINANCE

property contains a 12th-century building with just 5 acres of vineyards in one of Burgundys top appellations. In Champagne, the few properties offered for sale are generally acquired by large syndicates from the region, according to Dakin. Likewise, in Alsace, local buyers act before the public knows property is for sale. French investors are often interested in land near the Mediterranean coast for vacation properties, typically in the $13 million-$26 million range, notes Dakin. Many buy land to take advantage of tax laws that favor agriculture. Prices have been volatile in France, with huge differences between results in top appellations and those in ordinary properties. Prices actually dropped in generic, littleknown regions after spiking in 2000, while during the same period they exploded 10 times in the communes of Volnay and Meursault in Burgundy.
Variability within Bordeaux

Another local source is Galle Perreaux, property services manager for FrenchEntre. Things are quite complicated when it comes to the pricing of the different vine-

yard areas in France. Within one wineproducing region, there are several appellations where the price of the land varies a lot even in the same area. There are also vines without appellation, which lower the average a lot. Here are some examples that illustrate the regional price variations, as well as some within the same area. This data is based on average prices for vineyards for sale in 2012. Perreaux quotes prices for the Aquitaine region of France, which includes Bordeaux at $44,000 per acre for AOP (appellation dorigine protge, formerly AOC) vineyard land. Within Aquitaine, the Gironde area averages $49,000 per acre for AOP vineyard land, while Dordogne averages $6,000 for AOP vineyard land. Theres a huge variation depending on the prestige of the wine the land can produce as well as the rarity of the land on the market, she added. For instance, in Gironde the price of vineyards for Bordeaux-appellation red wine is $8,000 per acre, but Pomerol appellation averages $484,000 for AOP Pomerol vineyard land. Thats not even the most expensive, she added.

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French Vineyard Values

Appellation Bordeaux Bordeaux AOP St. Emilion Pomerol Mdoc AOP Pauillac St. Julien & Margaux Pessac-Leognan Rhone and South Ctes du Rhne Gigondas Chteauneuf-du-Pape Languedoc Roussillon Champagne Burgundy Burgundy AOP Cote de Beaune red Cote de Beaune white Cote de Nuits red Premier Crus white Premier Crus red Grand Crus Batard Montrachet Average Euros/Hectare 15,000 200,000 900,000 40,000 1,650,000 1,000,000 400,000 Average Dollars/Acre $8,070 $107,600 $484,200 $21,520 $887,700 $538,000 $215,200

16,500 130,000 340,000 11,500 1,089,000

$8,877 $69,940 $182,920 $6,187 $585,882

219,300 270,000 570,000 480,000 1,220,000 500,000 3,800,000 22,500,000

$117,983 $145,260 $306,660 $258,240 $656,360 $269,000 $2,044,400 $12,105,000

101 Second Street #120 Petaluma, CA 94952 707.781.3400 www.heffins.com License #0564249

Sources: Socits dAmnagement Foncier et dEtablissement Rural, Vinea Transaction, French Entre, International Wine Associates, Vignobles Investissements Dakin

Win es & Vin es sept em b er 20 13 41

FINANCE

Perreaux quotes averages in Burgundy of $118,000 per acre for AOP vineyard land, but within Burgundy the prices of some appellations vary widely. Grand crus (such as some vineyards in Vougeot, ChambolleMusigny and Puligny-Montrachet) average more than $2 million per acre. Chablis appellation land north of Burgundy proper averages $81,000 per acre. In Champagne the average price of vineyards is about $600,000 per acre. In southern France, the average price in Languedoc-Roussillon is $6,000, while in Provence its $24,000, and in the Chteauneuf-du-Pape appellation of the southern Rhone region, prices average $183,000.
Planting quotas

Change in French Vineyard Values

Appellation Bordeaux AOP Ctes du Rhne AOP Chteauneuf-du-Pape Gigondas Mdoc Pomerol Volnay Meursault Vosne Romane Champagne 1990 $11,836 $11,836 $53,800 $24,210 $26,900 $215,200 $53,800 $59,180 $67,250 $107,600 2000 $18,292 $18,292 $215,200 $80,700 $129,120 $457,300 $430,400 $457,300 $150,640 $269,000 2010 $10,760 $10,760 $204,440 $86,080 $134,500 $699,400 $699,400 $807,000 $279,760 $538,000 Change 1990-2010 -9% -9% 280% 256% 400% 225% 1,200% 1,264% 316% 400%

Dollars per acre. Converted from euros per hectare, source: Vinea Transaction

Leggett Immobilier is another specialist in the sale of French vineyards. Leggetts Jane Berry is based in the ancient Bordeaux city of Saint-milion and heads up the specialist vineyard department. She tells Wines & Vines, Happily, for the protection of the French wine industry, you cant just go planting vines wherever you feel like it.

There are two different laws, one covering re-planting rights (valid for eight years) and one covering new planting rights (two years). Each region has its set quotas, she noted. The owners must always uproot the same area of vines when they replant so production levels remain the same. Some growers simply set aside a few hectares of arable land so that when they need to replant the vines

Properties for Sale

Bordeaux Right Bank estate, $8.5 million
Leggetts Jane Berry mentioned a property from the Leggett Immobilier portfolio that may be of interest. The property is a Bordeaux Right Bank location with 44 acres of vines as well as a Louis XV-style house built in 1782. The vines are extremely well maintained, and another 12 acres are available for planting new vines. The appellation is AOC Ctes de Castillon. The soil type is clay-limestone and sand-clay with a subsoil of clay-iron. The average age of the vines is 40 years. The grape varieties include 55% Merlot, 27% Cabernet Franc, 13% Cabernet Sauvignon and 5% Malbec or Ctes. Production is approximately 10,000 cases per year. The price of the property is $8.5 million.

they can without going over their quota. She adds that a grower may buy a droit de plantation (right of planting) from a neighbor who is not using the full allocated quota. Planting rights are frequently traded or bought and sold on the open market. Berry says that in certain prime areas, such as Saint-milion and Cognac, new planting rights are extremely rare and there is a waiting period of many years. She adds, The EU has recently reached agreement on new laws that should safeguard the industry until 2030. The new system will allow new vine plantings to be managed for all wine categories with a maximum increase of 1% per annum.
Italy and Spain

Tempranillo property in Spain, $23 million

Rimotg, an affiliate of Christies International Real Estate in Spain, lists a winery for sale in Burgos in Ribera del Duero for $23 million. This operating vineyard offers 161 acres, of which 86 acres are Tempranillo vines, and some land is currently fallow. Both the planted vineyards and the fallow fields are totally organic. The seller also manages another 25 acres of vineyards that are not located on the property of the estate. These are also for sale. This corresponds, according to the rules and regulations for the Designation of Origin for Ribera del Duero, to about 18,000 cases. The vineyard also has a bottling plant, an impressive barrel room, a wine-storage cellar and a common room for the staff.

Prices in other parts of Europe are not usually as high as in France. Vignobles Investissements Dakin quotes typical prices for appellations in Tuscany. Non-appellation vines sell for an average $11,000 per acre, Chianti for $30,000, Chianti Classico for $54,000 and Montalcino for $161,000. In Spain, Torres, a leading wine company, passed along prices with a warning that prices of vineyards can change a lot depending on different parameters: Peneds land sells for about $16,000 per acre; land in La Rioja costs $30,000 per acre, and an acre in La Mancha costs about $8,000.
Back in California

P. F.
42 W in es & V i ne s s e pt e m b e r 20 13

International Wine Associates in Healdsburg, Calif., is involved in global mergers and acquisitions. Founder Robert Nicholson quoted recent sale prices in Burgundy and elsewhere and compared them with U.S. vineyard values. In California, we have a long way to go before we have maximized vineyard values, Nicholson said. We are only seeing the beginning of a long upward cycle for the value of top wine estates.

WINEMAKING

TECHNICAL REVIEW

Finding the Right Fit

By Andrew Adams

Kosta Browne is ready to crush the 2013 vintage in new, custom-built winery

n winemaking, as in many of lifes other pursuits, its the simple things that often matter the most. Michael Browne, winemaker and one of the founders of Sonoma Countys Kosta Browne Wines, knew he wanted the companys new winery to have three things: barrel storage, hot water hose stations and drains. The new Kosta Browne winery at The Barlow development in Sebastopol, Calif., has 9,000 square feet of temperature-controlled and well-lit barrel storage space, 37 Strahman hose stations with hot and cold water and compressed air and drains in every corner of the production areas. A few other luxuries also equip the new home of the well-financed winery with a sterling critical reputation for Pinot Noir. The professional kitchen, for example, is used for hosting wine club members and other special occasions, a large lab is equipped with top-of-the-line analytical equipment, a cold room for receiving harvested fruit and a custom-designed pneumatic punch-down system on rails above three bays of open-top fermentation tanks are among the highlights. Founding partners Dan Kosta and Michael Browne teamed with investor Chris

The Barlow is home to a variety of small businesses including brewers, distillers, cheese makers and other wineries housed in modern-looking buildings that evoke the sites past as an applepacking and distribution center.

Costello in 2001. After a string of rave reviews and high scores, the founders sold a controlling stake to the Vincraft Group

in a $36 million deal. Plans for the new location were in place prior to the investment, and Browne said the new winery is being paid for through wine sales. Our business is self sustaining, he said.
Built at The Barlow

Highlights
2  013 will be the first vintage Kosta Browne Wines spends at its new winery and crushes fruit from its own vines. H  oused at The Barlow development in Sebastapol, Calif., the winery will be part of a cluster of wineries and other small producers of premium products, but it will not have a public tasting room. W  inemaking staff will run grapes through a lengthy sorting process that will include an optical sorter before fermentation in open-top tanks. A  cold room, strict cleanliness and pneumatic punch-down devices are a few key ingredients that help Kosta Browne deal with a compact harvest season and a high bar for quality.
44 W in e s & V i ne s S e pt e m b e r 20 13

During a recent tour of the new winery, Michael Browne said he and his partners knew they wanted a new home, but the economics of building an estate winery didnt make sense to them. They evaluated a few other warehouse winery locations in Sonoma County but didnt really like what was available. An employee of their new parent company suggested they contact developer Barney Aldridge, who was looking for tenants for his project The Barlow, built on the site of a former apple cannery and rail depot in Sebastopol. Browne said they met with Adridge and liked his vision; they also decided that three of the planned buildings would fit their needs.

Wi w In Ne Em Ma Ak Ki In Ng G

We had the right space to design a winery how we wanted it, Browne said. The Barlow is a cluster of modernlooking buildings with roll-up doors. Tenants include breweries, a coffee roaster, a distillery, glass blowers, clothing shops and an ice cream maker. The concept is for shoppers to find unique wares while also getting a chance to visit producers in their working environments. In addition to Kosta Browne, the development is home to La Follette and Marimar Estate Vineyards & Winery tasting rooms as well as Wind Gap Wines planned production space. While consumers wont be able to walk into Kosta Browne to taste and buy a few bottles of wine (in fact its rather hard to even find the front door), Browne said theyre happy to be part of a pretty interesting and vibrant cluster of companies. The winery is permitted for 30 events per year, but Browne said they likely wont ever host that many. He said the winery doesnt plan to open a tasting room, and added frankly that to them such a move would mean something had gone wrong. We want to make sure its always a sought-out brand and coveted wine, Browne said. The winery sells 90% of its 14,000-case production directly to consumers, and the rest is sold to on-premise accounts. Right now the wait list has 300 to 400 people on it, and the average wait time is two to three years. Browne said hed like to add more people to the list after the big harvest of 2012, adding that the cellar staff will make 22,000 cases at the new winery this harvest.

mitch rice

Founding partners Dan Kosta (left) and Michael Browne flank partner Chris Costello.

This year will also be the first that Kosta Browne crushes grapes from vines it owns.
The first estate vintage

Bill Price, chairman of Vincraft and Kosta Browne, announced his purchase of Gaps Crown vineyard in the Sonoma Coast AVA at the start of the year. Kosta Browne is leasing back 37 acres of vines from the newly formed Gaps Crown LLC. The winery also just closed on 20 acres of Pinot Noir vines at Keefer Ranch in the Russian River Valley AVA of Sonoma County. In addition to Sonoma County, Kosta Browne sources grapes from the Santa Lucia Highlands AVA in

Californias Central Coast. In late June, Browne, associate winemaker Ryan ODonnell and Tony Lombardi, public relations and brand management director, were showing off their new digs. At the time the spotless winery only housed wine in barrel from 2012. As ODonnell walked into the cellar work area where a crew was racking barrels with Bull Dog pups, a Johnny Cash song was playing over the winerys sound system. ODonnell pulled out his iPhone and lowered the volume. The winery is not just plumbed for hot and cold glycol but for surround sound, too. ODonnell said workers can tie into any of one of several music-subscription services such as Pandora or Spotify or use a Bluetooth connection to link to the system in whatever room theyre working. The music can also be set to play in just one specific area. If the staff in the administration building is playing classical or smooth jazz for a VIP tasting, the guys in the cellar can be blasting heavy metal. You can rock out to whatever you want to, he said.
View video in the Wines & Vines Digital Edition. Watch Kosta Brownes 2012 harvest unfold in this time-lapse video produced by Ground Noise Industries and edited by Chris Browne. The winery was in its old location in 2012, but most of the equipment was brought to the new winery for this years harvest. Win es & Vin es S ept em b er 20 13 45

Natural light fills the barrel chai, which can be accessed by several roll-up doors large enough for lift trucks.

Wi w In Ne Em Ma Ak Ki In Ng G

TECHNICAL REVIEW

Despite being just off Sebastopols small but congested downtown, the winery has the space to make unloading grapes fairly fluid. Trucks will enter from the rear, forklift operators will unload the bins and empty trucks, then exit from another entrance. Its one of the few drive-thrus in Sebastopol, joked Lombardi. Part of the winery permit process mandated that trucks stay off Highway 116, which runs through the heart of the city. Trucks will have to reach the winery from Highway 12, which enters Sebastopol from the east, and Browne said it shouldnt be a problem. After unloading the bins, forklift drivers will then move them to a cold room if necessary. Browne said the room, which also doubles as extra storage space, can be chilled to 40F and gives Browne the flexibility to call a pick even if the winery is already processing grapes that day.
Quicker, more efficient

The winery has 40 open-top tanks ranging in size from 4 tons to 8 tons. Pneumatic punch-down devices run on the steel rails above the tanks.

All of Kosta Brownes fruit is picked at night to keep it cool, and the room helps ensure fruit stays at the ideal temperature even if the crush pad is too busy to process it. Last harvest, Browne said some fruit had to stay on the vine a little too

long, and the wine ultimately wasnt a fit for the Kosta Browne style. Quicker, more efficient is what we want at this facility, Browne said. This harvest, Browne said he plans to add a Pellenc optical sorter to the processing line, but the rest of the equipment made the move from the winerys old

location at Owl Ridge Wine Services, also in Sebastopol. Bins are dumped with a forklift into a Bucher Vaslin vibratory hopper that shakes out the shot berries and other debris. The clusters then fall onto a conveyor for manual sorting before dropping into an escalator that leads to an Arm-

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46 W in es & V i ne s S e p t e mbe r 20 13

winemaking

bruster Rotovib destemmer. ODonnell noted that not only is the Rotovib gentle, its also very quiet. In the final sorting step, grapes fall onto a Le Trieur sorter. The Le Trieur, conveyor and escalator are all sourced through P&L Specialties. Our sorting line is crucial to our overall quality, Browne said. Sorted and processed fruit is collected in T-Bins or gravy boats made by Burgstahler Machine Works in St. Helena, Calif. The gravy boats are stainless steel sumps with one side shaped like a funnel, which help forklift operators dump the bins cleanly into open-top tanks. Browne said the winery had collected fruit with regular half-ton MacroBins and moved them clear of the sorting line with a pallet jack. Now the winery has a few gravy boats, which are set on wheels and can be quickly moved out of the way when filled. Any step we can take away to make it more efficient well do it, Browne said.
Maintaining quality

Browne said wine quality has improved and been maintained through better equipment and a flexible approach in the cellar and vineyard. Grower rela-

tions have also been instrumental to the winerys success. Vineyard management has been crucial, Browne said. It is very hard to farm Pinot, especially at the high end.As we have grown, we have put much more effort into the quality of our relationships with our growers as well as the focus and quality of the farming. White grapes are dumped directly into a Willmes Sigma 8 press that can press 5-6 tons of whole-cluster fruit. The juice is pumped directly to 2,000-gallon slim stainless steel tanks for cold settling. After its clear, the juice is then racked to barrels for primary fermentation in French oak. Browne said he likes some barrel fermentation for the texture and mouthfeel it gives to the wine, but he doesnt like to push it too far. After about 40% of the total lot is done with primary fermentation, it will be transferred back to stainless steel tanks. Browne said the move helps the wine retain its freshness and stay focused. Were in California; why would you want to make a Burgundy here, or why would you want a Montrachet? His sentiment is also seen in the fastidious commitment to cleanliness at the new winery.

A clean, clean winery

Browne said Kosta Browne experienced some Brettanomyces-touched vintages around 2001 and 2002, and he never wants to deal with the yeast again. Any wine with a hint of Brett is outlawed from the wineryas is bacteria-rife kombucha tea. We are a clean, clean winery, he said. Brettanomyces may have a place in other winemaking programs, but Browne OR said its too hard to control and doesnt fit the winerys style. I dont like it, he said. I like the smells of fruit rather than other things.

CALIFORNIA
CALIFORNIA
Mendocino Sacramento

Kosta Browne Wines

Pacic Ocean

NV
Napa

San Francisco

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S O N O M A, C A L I F O R N I A 7 0 7. 9 3 5. 7 9 4 4

Win es & Vin es S ept em b er 20 13 47

winemaking

TECHNICAL REVIEW

He said Kosta Browne imparts complexity to its wines through the fruit itself, employing whole-cluster fermentation and bottle aging. How much of a wine is made with whole-cluster fermentation depends on the vineyard source and the vintage and can range from 8% to 25%. We determine the amount of whole cluster during harvest, Browne said. We also ferment the whole cluster separately at 100% and keep it separate for the entire barrelaging term. We can then blend back just what we need. Red fermentation occurs in more than 40 open-top, stainless-steel tanks, but the winery has oak vats by Tonnellerie Rousseau and Tonnellerie Saury and is installing some open-top Nomblot concrete tanks and already has three concrete eggs by Sonoma Cast Stone. Browne said he conducts a five-day cold soak for some cold extraction to help build fresh flavors. The soak also allows the must to coalesce and give the winemaking team an accurate picture of the lots chemistry. Reds are inoculated with Lalvin RC212. Browne said hes found it to be an efficient yeast that fits his style. He said he can count on the yeast to get the

In addition to concrete eggs, Kosta Browne will use open-top concrete fermentors this year.

Seeking a Director of Viticulture/ Winemaking in St. Helena, CA

 Directandcoordinatewinery/vineyardoperations fornumerousvarietals(Chardonnay, Zinfandel, Merlot, Cabernet Sauvignon/Franc, Petit Verdot, Sirah) Managestaffandgrowers Developnewproducts Blendwines Conductassessmentreviews
Travel required across five CA counties but primarily in Napa with expenses paid. Required bachelors degree or equivalent in viticulture, enology, biology, bio. science or closely related field plus 8 years experience. 3 or 4 year bachelors degree accepted from US or abroad. For full job details and requirements, please go to www.rombauer. com. Send resume to Lynn Sletto, Rombauer Vineyards, Inc., 3522 Silverado Trail North, St. Helena, CA 94574.

48 W in e s & V i ne s S e p t e mbe r 20 13

Wi w In Ne Em Ma Ak Ki In Ng G

job done without him having to worry about stuck or sluggish ferments. Browne limits his use of sulfur dioxide and inoculates the wine to provide a layer of microbial control. He doesnt let his wines undergo spontaneous (or native) fermentation, although hes experimented with the method in the past. I felt I had to work the wine more to do it, he said. I feel our wines are very complex, and its a style we love.
A catwalk to be proud of

S U P P O RT R E S E A R C H

AMERICAN VINEYARD FOUNDATION

&

W I N E I N D U S T RY N E E D S T H R OUG H T H E

The cellar area contains three banks of tanks made by Quality Stainless Tanks, some of which are variable capacity. The tanks are accessible from a catwalk, a source of some pride for the winemaking staff, as Kosta Browne has never had one before moving into the new facility. From the catwalks, fabricated by Dimensions in Metal, winery staff will be able to operate pneumatic punch-down devices from R.S. Randall and Co. that run along metal rails above the tanks. The winery also has a forklift punch-down attachment for managing fermentations in the vats and the concrete tanks. If a wine is running a little hot or starting to smell a bit reductive, the staff will splash the wine through a sump in an aerative pump over. We want our yeast to be happy here, ODonnell says. Reds are drained to portable tanks, and the must is shoveled into bins that are dumped into the Bucher Vaslin JBL basket press. The press can handle 5 to 6 tons with just a 45-minute cycle. Browne said they lose a little in volume with the Bucher but love the quick cycleplus, he says, the wine tastes better. The winery

Finding Solutions Through Research

For a wealth of useful viticulture and enology research and information, visit AVF.org, iv.ucdavis.edu, enologyaccess.org, or ngwi.org.
AMERICAN VINEYARD FOUNDATION
P.O. Box 5779, Napa, CA., 94581 T: (707) 252-6911 Email info@avf.org. Visit our Web site at www.avf.org for information on funding and current research projects

The winerys pneumatic punch-down system.

Win es & Vin es S ept em b er 20 13 49

WINEMAKING

Kosta Browne Wines

220 Morris St., Sebastopol, Calif. 95472 (707) 823-7430 kostabrowne.com Owners Dan Kosta, Michael Browne, Chris Costello Winemaker Michael Browne WINERY AVA Russian River Valley, Sonoma Coast

vineyard acreage

year bonded

DtC SALES

57
Winery Average Bottle Price

1999

90%
$68

Winery Case Production

17,000 Kosta Browne Wines 36,000 Sonoma County Average 80,000 California Average 44,000 U.S. Average
0 40,000 80,000

Kosta Browne Wines $22 Sonoma County Average $8 California Average $9 U.S. Average
$0 $25 $50 $75 Source: Wines Vines Analytics

the challenge

The founders of Kosta Browne knew they needed to expand, but they didnt want to buy or build a traditional estate winery and couldnt find the right fit in any of Sonoma Countys existing custom-crush facilities. Their search eventually led them to meet with a developer who had begun work on a novel project in Sebastopol, Calif. The development known as The Barlow houses small independent food producers, speciality shops and a few other wineries. Kosta Browne is the largest tenant in the development, occupying three buildings, all customized to suit the winerys needs.

Building the Winery

Architect Archilogix, archilogix.com Contractor Facility Development Corp. (FDC), fdc-corp.com Engineering Mechanical: Horn Engineers, hornengineers.com; structural: MKM & Associates, mkm-associates.com Electrical Cimino Electric, ciminoelectric.com Glycol G&D Chillers, gdchillers.com Plumbing InCom Mechanical, incommechanical.com

Making the Wine

Sorting table Delta, Bucher Vaslin North America, bvnorthamerica.com; Le Trieur, P&L Specialties, pnlspecialties.com Pellenc Selectiv, Walsh Vineyards Management, wvmgmt.com Armbruster Rotovib 10, Scott Laboratories, scottlab.com Two basket presses for Pinot Noir: Bucher JLB 20, Bucher Vaslin North America, bvnorthamerica.com; bladder press for Chardonnay: Willmes Sigma 8, Scott Laboratories, scottlab.com Dimensions in Metal, dimensionsinmetal.com Quality Stainless Tanks, qualitystainless.com; concrete open-top fermentors: Nomblot, Artisan Barrels & Tanks, artisanbarrels.com; concrete eggs: Sonoma Cast Stone, sonomastone.com Diemme Enologia Vintage 23, Collopack Solutions, collopack.com RS Randall and Co., rsrandallandco.com Air pumps: Yamada, Carlsen & Associates, carlsenassociates.com; positive displacement pumps: Waukesha, Carlsen & Associates, carlsenassociates.com; racking/filling wands: Bulldog Pup, Bulldog Manufacturing, bulldogmfg.com AaquaBlaster 360, Aaquatools, aaquatools.com Western Square Industries, westernsquare.com Accurate Forklift, accurateforklift.com

Optical sorter Crusher/ destemmer Press

Barrels
Tonnellerie Boutes, boutes.com Tonnellerie Remond, (707) 935-2176 Tonnellerie Rousseau, tonnellerie-rousseau.com Gamba USA/Botti Generazioni, bottigamba.com Tonnellerie Dargaud et Dargaud & Jaegl, Premier Wine Cask, premierwinecask.com

Catwalk and punch-down rail system Fermentation/ storage tanks

Press Punch-down devices Pumps

Moving the Wine

Bottling Top Shelf Mobile Bottling, (707) 312-0391 Bottles and corks MA Silva USA, masilva.com Capsules Ramondin USA, ramondin.com Label printing Tapp Label Technologies, tapplabel.com Warehouse Vintage Wine Estates, vintagewineestates.com Barrel-washing equipment Barrel racks Forklifts

50 W in es & V i ne s S e p t e mbe r 20 13

WINEMAKING

purchased another Bucher press for this year. The quality of the press wine is way better, and we can turn this thing all day. After pressing and during barrel aging, the wine undergoes regular analysis for VA and sulfur dioxide. Two Bucher Vaslin basket presses are The staff at Kosta used for red must. Browne can run all standard lab analysis in-house, but they do send out for microbiological work. Because Browne feels too much SO2 can rip the soul out of a wine, he monitors his wines closely and makes slight adjustments as needed. The lab is equipped with a Chemwell 2910 Autoanalyzer for enzymatic testing and staffed with a full-time enologist. During harvest, Kosta Browne will bring on three lab interns and 12 additional cellar workers. Four full-time workers, including a cellarmaster, staff the winery during the rest of the year. While harvest at any winery can be grueling, the season can be especially hectic at Kosta Browne. Every bin of each lot is generally analyzed for Brix, acidity and pH, and the same commitment to detail is given to each wine lot as it goes through the winemaking process. The winery receives fruit from three appellations that can often hit ripening at the same time. Because it specializes in just Pinot and Chardonnay, the harvest at Kosta Browne is often shorter than at other wineries but more intense. Our fruit all comes in during a short period of time, Browne said. If we do not have the proper equipment and facilities to deal with that fruit, then quality goes down. We have built a system where we can handle the fruit as it comes, and I feel we are better than ever before in terms of quality. In 1997, the founding partners made the first vintage of Kosta Browne wine with a hand-cranked destemmer. Since then, Kosta Browne has been catapulted to the top tier of Pinot Noir producers in California, and the winery now has a home that reflects its remarkable ascent.

A shipment of new barrels is lined up in the grape-receiving area.

Win es & Vin es S ept em b er 20 13 51

practicalwinerylibrary.com
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TECHNICAL RESOURCE FOR GROWERS & WINERIES

58 Deductibility of soil amendments By L. Gregory Scott and David G. Pardes 60 Temecula Valley: A side of food with your wine? By Elisabeth Deffner 64 New York wineries: Best & Worst business decisions By David Furer
winery safety

s F a F O O D A F E T Y

food safety modernization act

Inspections, compliance strategies o f and opportunities for comment S o e

BY Rebecca Anderson Smith,
Downey Brand LLP, Sacramento, Calif.

ineries have been subject to oversight by the Food and Drug Administration (FDA) for years, but because these operations pose a relatively low risk of food-safety hazards, the heavily burdened agencys focus has rarely drifted to wineries and vineyards. This paradigm has begun to shift, due in part to the enactment of the federal Food Safety Modernization Act (FSMA) in January 2011. The FDA is now seeking comment from members of the public regarding the reach, breadth and science relating to the potential impact of the FSMA on wineries. Several key proposed rules are out for public comment until November 2013, and more regulations (with additional opportunities to comment) are expected in the next two years. The resulting developments in food-safety regulation will have important implications for the wine sector. The FSMA requires the FDA to inspect every registered food facility in the United States, including wineries, by 2018. Alongside this inspection directive, the FSMA directs the FDA to implement certain key preventative measures

to ensure food safety in the U.S., including developing a food-tracing program and setting certain minimum foodsafety protocols for high-risk foods. The FSMA gives the agency considerable authority to develop and implement new regulations in pursuit of those food-safety goals.

The FSMA directs the FDA to inspect every registered facility in the United States, including wineries, by 2018.
As it attempts to meet the ambitious food-safety goals of the FSMA, the FDA is seeking science-based feedback and guidance from the wine sector regarding the way that this sector functions, and what food-safety concerns (if any) are actually at issue during the winemaking process.
FDA oversight of wineries pre-FSMA

The Federal Food, Drug, and Cosmetic Act defines food broadly, to include nearly anything (including wine) meant for human or animal consumption, and this broad definition brings wine under the FDA regulatory authority. Until recent years, any oversight that the FDA did exercise for wineries was cursory,

and winery oversight was left largely to other agencies. During the past 10 years, however, that pattern has begun to shift. After the passage of the federal Bioterrorism Act in 2002, any facility engaged in manufacturing, processing, packing or holding food for consumption in the U.S. was required to register with the FDA. Wineries, custom-crush operations and even mobile bottling operations all fell within the scope of this federal requirement and have been required to register with the FDA since 2003. The Bioterrorism Act also gave the FDA authority to impose record-keeping requirements on registered facilities and to enter and inspect those facilities under its federal food-safety authority, though winery inspections have long been the exception rather than the rule. Even without the FDA oversight, wineries have long been subject to a complicated regulatory structure, with multiple agencies exercising oversight over aspects of the wine operation. For example, the same wineries that submit FDA registration under the federal Bioterrorism Act are also required to register or obtain permits from the TTB. State and local regulations, including both state law and county health ordinances, can raise additional complications (though these issues are out of the scope of the current article).

52 p r acti c al w i ne ry & v i n e yard S EPTE MBER 20 13

TOGETHER
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winery safety
Requirements for Winery Facilities or animals. It also has the authority to hold (or administratively detain) a food product, if it has reason to believe it is adulterated or misbranded, to prevent it from entering the market. It is not clear how this labeling oversight will be impacted by TTBs current oversight of wineries. The FSMA directs the FDA to develop regulations that set out exactly how and when it will exercise this authority (FSMA Sections 206 and 207). Import controls: The FSMA gives the FDA authority to establish a certification program for importers seeking to expedite the FDAs review of their facilities and products. It also gives the FDA limited authority to set out regulations governing the treatment of imported products (FSMA Sections 302 and 304). Inspection authority: The FDA has authority, under the federal Bioterrorism Act, to inspect registered facilities including wineries and even mobile bottling lines. The FSMA directs the FDA to inspect every registered facility in the U.S. by 2018. Subsequent inspections will be based on risk assessments and facility compliance history. Even when the FSMA was adopted, however, it was clear that the limitations in Section 116 were directed at alcoholic beverage production, and not at ancillary activities at those facilities. Section 116 (c) includes a special directive: This section shall not be construed to exempt any food, other than alcoholic beverages from the requirements of (FSMA). For non-alcoholic foods, additional requirements apply. The onerousness of these requirements is often tied to the particular level of food-safety risk that a product poses. For example: Foods designated as a high-risk food, are subject to more intense risk-management procedures and testing, while foods subject to a kill-step during processing (including pasteurization, distilling, fermenting or brewing) enjoy more limited oversight. The FDA cites two reasons for this special treatment of alcoholic beverages. First, alcoholic beverage producers are already subject to considerable oversight by the TTB, which made additional oversight by the FDA redundant in many regards. Second, both the FDA and Congress have acknowledged that compared to other consumables, wine poses a relatively low food-safety risk and therefore may warrant lower priority from a public health perspective than other foods.
Pomace, hard press and other surprising foods

Requirement Facility registration through the FDA Record keeping Subject to FDA inspection Must comply with current Good Manufacturing Practices Subject to proposed Preventative Controls Rule* Subject to proposed Produce Safety Rule* Subject to FDA recall authority Subject to FDA administrative detention authority
* Not yet a final regulation

Applies to Any facility that manufactures, processes, packs or holds food for human or animal consumption in the United States (including wineries, truck-mounted bottling operations, custom-crush and storage facilities), but not most retail facilities or farms. All registered facilities. All registered facilities. All registered facilities. Most food processors and wineries that sell a) unpackaged, non-alcohol food including juice or grapes not destined for winemaking, or pomace destined for human consumption; or b) packaged non-alcohol food that composes more than 5% of the total facility sales. Farms or vineyards that grow, harvest, pack or hold raw fruits and vegetables (for example, table grapes or restaurant gardens), subject to limited exceptions. All food facilities, transporters and warehouses. All food facilities, transporters and warehouses.

Because the FSMA directs the FDA both to increase its inspection frequency and to conduct its operations in cooperation with state and local food-safety authorities, wineries are receiving new attention, both from the FDA and from state and local compliance officers. In fact, the FDA is explicitly authorized to rely on inspections of other federal, state and local agencies to meet its increased inspection mandate, so these regulatory requirements may continue to be considered side by side in the future.
FSMA today: An update to the status quo

with or be permitted by the Alcohol and Tobacco Tax and Trade Bureau (TTB) is excused from all but a few of the FSMA requirements. Still, the FSMA granted the FDA the following key authorities over winemaking operations:

The FSMA is the first major update to U.S. food safety law in 70 years, and it was designed to shift the focus of the law from a reactive system to a comprehensive, prevention-based, foodsafety program, from planting to shelf, across the U.S. Designed as a farm to fork approach, the FSMA touches every piece of the food and beverage production chain and implements variable (and often complex) standards based on the particular risks associated with certain food-production activities. Due in part to steady efforts from the wine sector and other stakeholders to educate Congress about the low foodsafety risk associated with winemaking, the FSMAs application to wineries was limited from the outset. Under Section 116 of the Act, a facility that produces an alcoholic beverage and must register

The FDA has publicly acknowledged that it sees wine production as a relatively low-risk activity, but it has also unambiguously stated that it will apply FSMA to wineries.
Registration requirements: The FSMA adapted the Federal Bioterrorism Acts registration requirements and requires wineries to register biennially with the FDA. If the FDA determines that the food manufactured, processed, packed, received or held by a registered facility poses a serious health risk, the FSMA allows suspension of that facilitys registration and bar the facility from selling its products until the risk is resolved. (FSMA Section 102). Mandatory recalls and administrative detention: The FDA may order a mandatory recall of a product if it determines that there is a reasonable probability that the product is adulterated or misbrandedand that the exposure to that product poses a health risk to humans

Section 116, however, does not take every activity at a winery out of the

54 p racti c al w i ne ry & v i n e yard S EPTE MBER 20 13

winery safety
scope of the FSMA. Wineries or breweries that a) distribute an unpackaged, non-alcohol food item; or b) sell prepackaged food in an amount greater than 5% of the total facility sales must comply with the entire Act with regard to those foods, even if they meet the requirements set in Section 116. For the purposes of the regulations, any food item that can be exposed to direct human touch during its stay at the winery is considered unpackaged, even if it is packaged (or repackaged) at the winery. This twist can pose some surprising pitfalls for unsuspecting wineries. A winery that assembles gift baskets containing bottles of its own wine and prepackaged boxes of crackers purchased from a supplier is receiving and distributing food other than alcoholic beverages (crackers) in a prepackaged form, and so would trigger FSMA requirements if these sales exceeded the 5% threshold. Conversely, a winery that presses and bottles estate olive oils would need to consider not only the core Section 116 requirements but also the broader foodsafety protocols of the rest of the FSMA. Honey, tasting room plates and other food items that are ancillary to the winerys primary winemaking function could also trigger additional food-safety regulatory oversight. When considering whether a winery also sells food, wineries need to remember that the FDAs definition of food is quite broad. Food products may even include products that are created during the course of wine production (juice, hard press or pomace sold to a third party, for example). As for the by-products of wine production, the FDA tentatively concluded that they become subject to the FSMA when they are physically separable from the alcoholic beverage they are used to produce. So, while grapes in the press are subject only to the core Section 116 requirements, pomace destined for animal feed triggers broader FSMA regulation. products that are not quite alcoholic beverages, though they are destined for that end use. In evaluating whether the Section 116 designations are triggered, wineries must keep in mind that the record-keeping requirements of the FSMA and the federal Bioterrorism Act require all facilities to identify where a food product came from and where it went. Wineries in the practice of selling juices and grapes to other facilities should be able to identify whether those products will be used in an alcoholic beverage, or whether they will be consumed as a non-alcoholic food, subject to the broader FSMA requirements.
FSMA tomorrow: Why the current proposed rules matter for wineries

The FSMA sets forth the general contours of broad new food-safety requirements, but leaves the FDA to fill in many details in the form of binding regulations. In January 2013, the agency began that proIn proposed regulations, the FDA sugcess by issuing two important draft reggested that it will consider only the nonulations (the Preventative Controls Rule alcohol food-production activities at and the Produce Safety Rule) for public such a facility subject to the broader review and comment. FSMA requirements, and apply Section The Preventative Controls Rule was 116s core requirements to the remaining issued under Section 418 of the FSMA, alcoholic beverage production occurring and it requires food processors to anaat the site. lyze food-safety risks at their facilities While these reassurances go a long way and put a plan into place to minimize toward protecting wineries, this physithose risks, taking steps to assure food cally separable analysis has serious safety that are above and beyond their implications for the wine sector: Where, existing current Good Manufacturing for example, does the sale of partially ferPractices (cGMPs). mented juice fall in this regulatory The proposed new rule will not apply scheme? Hard press? Juice sales to to activities within the Section 116 desiganother wine producer? The regulations nation, but it will impact activity in a are silent (or at the very ElectroSteam_June08 least unclear) 4/8/08 2:40 PM any Page 1 winery that involves either the sale or about these middle-ground sales of

The FDA is now seeking comment from members of the public regarding the reach, breadth and science relating to the potential impact of FSMA on wineries.

Archives of Practical Winery & Vineyard available at

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pr actica l win ery & vin eya r d S EPTE M B ER 20 13 55

winery safety
manufacturing of any foods that are physically separable from the alcoholic beverages produced by a winery. These foods include grapes sold for raw consumption (or to a buyer who will not be making wine with them), pomace sold as a component of a human food product, olive oil, crackers, cheese, honey, juices sold for non-alcoholic beverages and gift food baskets (provided that they exceed the 5% threshold). In particular, wineries should be aware that food sold as part of a pairing in a tasting room falls outside the scope of Section 116. Sale of these foods are regulated by the FDA under the FSMA. Although the FDA has not set a clear rule for it yet, the consensus is that tasting rooms off-site from a winery (for example, in a town square) will generally be treated as restaurants. Restaurants are subject to most, but not all, of the FSMA and have special requirements that are beyond the scope of this text. The FDA has also not taken a position regarding whether the sale of partially fermented juice, or unfermented juice sold for winemaking at a different facility, will be subject to the proposed rule (although by law, the exception in Section 116 should be read to apply only to beverages both above 0.5% alcohol by volume and intended for human consumption). Finally, the current Preventative Controls Rule governs only food products for human consumption: A new Preventative Controls Rule for animal foods (including pomace sold for animal feed) is expected to be circulated in 2014. Facilities that sell pomace as animal feed will be governed by that separate rule, and that activity will still be considered a food sale outside the scope of Section 116. Still, even wineries whose activities are firmly outside the scope of the Preventative Controls Rule should keep a wary eye on FDA deliberations. When the proposed rule was published for comment, the FDA went to great lengths to discuss, in broad terms, its interpretation of Section 116 and the role of that special section in implementing the FSMA as a whole. This analysis is important for every winery: Because Section 116 sets the initial bar for whether a facility or activity is bound by the larger FSMA regulatory regime, any decision that the FDA makes about Section 116 will have impacts far beyond the Preventative Controls Rule. The agency is expected to issue regulations elaborating on the Section 116 designation when it issues the final Preventative Controls Rule. Moreover, Section 116 facilities are still required to comply with the Acts core requirements, and they may still be subject to future rulemaking authority by the FDA as it continues to work to understand and apply the Act. Not all rules are issued simultaneously, so, while the Produce Safety Rule and the Preventative Controls Rule are currently out for public comment, other rules are expected to be circulated by the FDA soon.

Wineries are receiving new attention, both from the FDA and from state and local compliance officers.
Rules for foreign supplier verification and accreditation of third-party auditors (a key piece of the compliance process) were circulated in late July 2013, for comment by late November 2013. Rules about cGMP and preventive controls for food for animals (which will impact facilities currently selling pomace as animal feed), traceability protocols and import certifications are expected in the near future.

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56 p r acti c al w i ne ry & v i ne yard S EPTE MBER 20 13

winery safety
Final thoughts

While the core requirements for the wine sector are not entirely new, the FSMA increased inspection directive means that more wineries will be interacting with the FDA than in previous years. Wineries are currently subject to FDA inspection and should be prepared to demonstrate to an inspector that they are in compliance with the core requirements of Section 116. Facility registrations should be up to date, basic Good Manufacturing Practices should be in place, and winery personnel should be able to speak knowledgeably about the facilitys compliance with relevant county health requirements. For many wineries, this may mean revisiting their compliance efforts with an eye toward avoiding food safety pitfalls. For example, the FDA has gone so far as to pronounce that a truck-mounted bottling operation that travels from winery to winery is a food facility subject to federal registration requirements, because bottling wine is an activity included in the definition of manufacturing/processing, even under the pre-FSMA regulations. Careful attention to these regulatory details will serve wineries well. The question of what the FSMA will mean to the wine sector in two years or 20 is still an open one. The FSMA does grant the FDA broad authority, but the way that authority will be exercised depends heavily on the rules that are currently being developed and commented on. Onerous FDA oversight is not a forgone conclusion: The agency has sought (and will continue to seek) comments from members of the public regarding the reach, breadth and science behind each of its proposed rules. The FDA has publicly acknowledged that it sees wine production as a relatively low-risk activity, but it has also unambiguously stated that it will apply the FSMA to wineries. The current comment period is a unique opportunity for the wine sector: The FDA is actively soliciting feedback from the public regarding interpretation and application of Section 116 (the gateway to FSMA winery applications) in the context of the Preventative Controls Rule. In July 2013, the FDA announced its intention to extend the deadline for comments on the Preventative Controls Rule and Produce Safety Rule an additional 60 days, from Sept. 16, 2013, to mid-November 2013. Comments on the recent Foreign Supplier Verification and Third-Party Auditor Accreditation rules will be accepted until late November.

Further information about comment submission can be found at fda.gov/ Food/GuidanceRegulation/FSMA/ ucm261689.htm. PWV Rebecca Anderson Smith is an attorney in Downey Brand LLPs Food and Ag riculture L aw practice. Anderson Smith is a leader on the firms food safety compliance team, which is dedicated to counseling vineyards, wineries, farmers, grocers, ranchers and food processors on state and federal regulatory compliance issues, including the Food Safety Modern-

ization Act. She counsels clients about vineyard acquisitions, permitting and water supply issues. Anderson Smith practices in Downey Brands Sacramento, Calif., of fice, and may be reached at rsmith@downeybrand.com, or by phone at (916) 444-1000. Read more about winery responsibilities and record-keeping for FDA inspections in What Wineries Need to Know About the Food-Safety Modernization Act, a story from Wine Business Monthly, at winesandvines.com/pdf/ Howe_FSM.pdf

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grapegrowing

Deductibility of

soil amendments
BY L. Gregory Scott and David G. Pardes, PwC Private Company Services

uccessful farming requires a substantial amount of cash to be invested in developing and caring for the land on an annual basis. These land-related expenditures may be required to be capitalized or expensed, depending on the situation. Therefore, it is pertinent for taxpayers to understand exactly how to account for these expenses on their tax returns. Internal Revenue Code (IRC) Sections 180 and 175 provide opportunities for taxpayers to expense costs that too often end up being capitalized on the balance sheet, which directly impacts annual after-tax cash flow.
IRC Section 180: Soil amendments

not residual fertilizer that is part of the land value in a farm acquisition is depreciable. Substantial authority is extremely limited with respect to IRC Section 180. However, a private letter ruling (PLR) that was issued in 1991 (PLR 9211007) offers clarification on this issue.

IRC Section 180 allows for the deduction of anything used to fertilize, amend, neutralize or enrich soil to be used in farming. This would include the cost of labor associated with application of the soil amendments. For growers who process grapes into wine and are required to use the accrual method, the cost of soil amendments is capitalized into grapes in progress, moves into wine inventory and would not be deducted until the wine is sold and the expense rolls out of inventory through cost of goods sold. For wineries that primarily make wines requiring a lengthy aging process, this could mean that soil amendment costs remain on the balance sheet for up to three years or more. An election to deduct IRC Section 180 costs is made by taking the deduction on the taxpayer s tax return and is only effective for the tax year in which the deduction is claimed. As such, this deduction is not considered an accounting method. It is an election that must be made on an annual basis, which provides for flexibility since the taxpayer can analyze annually whether or not it makes sense to make such an election.
Residual fertilizer

One common question that has arisen as a result of this code section is whether or

In PLR 9211007, a farm corporation bought buildings, irrigation and the residual fertilizer supply included in the land. The actual land was acquired separately by two shareholders of the farming corporation (as individuals apart from the corporation) and leased to the farm corporation. It was the practice of the seller of the land to apply a truckload of fertilizer annually, which contributed to a high level of fertilization in the land. The farm corporation claimed depreciation deductions over a seven-year period for the amount that was identified in the purchase as residual fertilizer supply. The PLR specifically states that a taxpayer may amortize the cost of fertilizer applied to farmland over a specified period of time if the taxpayer in fact paid or incurred costs for the fertilizer and is exhausting it. However, the PLR goes on to say that a taxpayer must be beneficial owner of the fertilizer in order to be permitted an amortization deduction. Since the taxpayer (the farming corporation) leased

the property from two individuals, the corporation was not deemed the beneficial owner of the fertilizer, and the depreciation deduction of the residual fertilizer was disallowed. While the depreciation deduction was disallowed in this PLR, it clearly specified the requirements that would need to be in place in order for the taxpayer to properly deduct residual fertilizer depreciation. In addition to the beneficial ownership requirement, a taxpayer must: 1) Establish the presence and extent of the fertilizer, 2) Demonstrate evidence indicating the period over which the residual fertilizer will be exhausted. In order to obtain this information, it would be necessary to hire a licensed soil scientist or agronomist that would be able to test the soil and document the findings. The documentation by the soil scientist would specifically state the extent of the fertilizer and the extent of time it would take to utilize the residual fertilizer. It would also be important to break out the value of the residual fertilizer from the land value in the agreedupon purchase price allocation exhibit of the purchase agreement in order to identify the depreciable tax-cost basis. While a PLR is authoritative, the IRS is not bound by the conclusions in a PLR. It is only binding between the IRS and the taxpayer that requests the ruling and does not establish a precedent. However, PLRs may be used as a guide to understanding the position that the IRS may take in the future on similar fact patterns. Therefore, it is highly recommended that in the event a taxpayer decides to take the position to depreciate its residual fertilizer upon acquisition of land, care should be taken by the taxpayer to follow the guidelines set forth in the PLR.

Internal Revenue Code (IRC) Sections 180 and 175 provide tax planning opportunities for taxpayers to expense costs that too often end up being capitalized onto the balance sheet.
It is important to note that even if the PLR guidance is followed exactly, until primary substantial authority exists and clearer guidance from the IRS is published, it is within their right for the IRS to take a contrary position to the published PLR that would disallow the depreciation of residual fertilizer.

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As a result, we strongly recommend consulting with your tax advisor before proceeding with a course of action to take the position described above.
IRC Section 175: Soil and water conservation expenditures

the related tax years work paper files. Making the election to deduct soil and water conservation expenditures under IRC Section 175 is similar to IRC Section 180, where the election is made by taking the deduction on your tax return.

Another opportunity for farmers to accelerate soil-related expenditures is through IRC Section 175, which provides qualified farmers the ability to make an election to deduct soil and water conservation expenditures with respect to land used in farming, the prevention of farmland erosion or for endangered species. While IRC Section 180 provides the opportunity to accelerate costs that are normally expensed in the future through cost of goods sold, IRC Section 175 provides taxpayers the opportunity to deduct costs that would normally end up being capitalized into the basis of the land or as a land improvement depreciated over 15 years. Capitalization to the land is always the least favorable option since these costs would only be recovered upon the sale of the farm property, which is normally at a date in the indeterminate future. IRC Section 175 defines soil and water conservation expenditures to include: expenditures paid for the treatment or moving of earth, including (but not limited to) leveling, grading and terracing, contour-furrowing, the construction, control and protection of diversion channels, drainage ditches, earthen dams, watercourses, outlets, ponds, eradication of brush and planting of windbreaks. It includes any costs related to recommended recovery plans approved pursuant to the Endangered Species Act of 1973. Such conservation deductions are limited in any given tax year to 25% of the gross income derived from farming. In the event expenditures exceed 25% of the farming gross income, the excess is carried forward and deductible on the next years tax return (and again subject to the 25% limitation). In order to make the election to deduct such conservation expenditures, the expenditures must be consistent with any plan approved by the Soil Conservation Service of the U.S. Department of Agriculture or the recovery plan approved pursuant to the Endangered Species Act of 1973. If no such plan exists, the expenditures must be consistent with any soil conservation plan of a comparable state agency. Even though it is not required to include this information with the return, it is important to ensure this information is documented properly and retained in

For those wineries that primarily make wines that require a lengthy aging process, this could mean that soil amendment costs remain on the balance sheet for up to three years or more.
However, in contrast to IRC Section 180, when an election is made to deduct soil and water conservation expenditures, this method must be followed in subsequent tax years unless the IRS approves the change to a different method.
Summary

ized annually under a taxpayers current tax accounting methods. By reviewing current accounting methods and making these elections where appropriate, taxpayers potentially have the ability to take deductions in the current year for land-related expenditures, thereby reducing cash requirements for tax needs and increasing the availability of cash to invest in future business development opportunities. PWV Greg Scott is a tax partner at PricewaterhouseCoopers (San Francisco, Calif.) with 34 years of experience in public accounting. Scott has authored a textbook and instructs the course Taxation and Accounting for Vineyards and Wineries through UC Davis Extension. He is a coordinator and speaker at numerous California CPA Education Foundation Courses and various wine industry symposiums. David Pardes is a tax director at PricewaterhouseCoopers (San Francisco, Calif.) with responsibility for tax services to numerous vineyards and wineries including their owners. Pardes has been a guest speaker at UC Davis Extension and Walla Walla Community College. Pardes obtained his MBA from Boston University and a masters degree in taxation from Golden Gate University.

Overall, the elections available under IRC Sections 175 and 180 provide farmers with tax planning opportunities to accelerate deductions that might be capital-

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Pinnacle restaurant on a hilltop adjacent to Falkner Winery is surrounded by 15 acres of 38-year-old Cabernet Sauvignon and 4 acres of Merlot and Sangiovese vines.

TEMECULA VALLEY

A side of food with your wine?

BY Elisabeth Deffner

ocated in Southern Californias wine country, the Temecula Valley is home to 10 winery restaurants catering to an estimated 1.7 million tourists who go wine tasting there each year. Temecula Valley is 58 miles northeast of San Diego and 90 miles southeast of Los Angeles; its vineyard plantings range in elevation from 1,500 to 2,500 feet. The industry has worked closely with Riverside County to ensure that its wine country would develop in the most desirable way, notes Peggy Evans, executive director of the Temecula Valley Winegrowers Association. Thus, aside from property size, there are few limitations on wineries hoping to open a restaurant. (Winery restaurants are only permitted on sites that are 20 acres or larger.) Evans notes that the restaurants offer a great variety in terms of ambiance, style and menu, but she suggests that what they have in common is, perhaps, their biggest selling point. Its not so much the food, but the presence, she says, the great experience of having lunch in wine country. Still, an idyllic location is only one part of the equation for success. How do Tem-

eculas winery restaurants handle wine lists, menus and other issues so they can surviveand thrivein todays economic climate?
To list, or not to list? You might think a winery restaurants wine list would be the least complicated facet of operations, but there are different ways of approaching the issue.

John and Sally Thornton had no prior restaurant experience, but they were certain that the pairing of food and wine could only be beneficial for a winery. Originally silent partners in the Culbertson Winery, the Thorntons put their silence on hold long enough to st rongly suggest opening a restaurant on the same property. T he w i ner y (later renamed Thornton Winery) and restaurant opened simultaneously 25 years ago,

and today Thornton produces 7,500 cases per year (25% Methode Champenoise sparkling wine and 75% still wine). Open for lunch and dinner every day of the year, Caf Champagne (which seats 64 inside and another 64 outside, weather permitting) offers a menu of appetizers, salads and entrees. Each dish is listed with a suggested Thornton wine pairing; for example, the popular boneless beef short ribs, braised in a sweet, spicy mole and served over white corn grits, is recommended alongside Thorntons 2010 Cabernet-Merlot blend. Caf Champagne serves other labels plus beer, but Thorntons winessold by the bottle, by the glass (a 5-ounce pour averages $9) and in flights ($12 to $17 for four wines)are the big sellers, reports Thornton media director Linda Kissam. That is what visitors are here forthe Thornton experience. The restaurant wine list includes 25 Thornton wines12 red, seven white, and six sparklingand about 25 nonThornton wines. President Steve Thornton estimates that the winery sells 97% of its wine onsite through the tasting room, jazz concert series and restaurant. If a customer would like additional help, says Kissam, each Caf Champagne server receives training in the art of food and wine pairing. If a guest is not sure what a wine will taste like or does not like the suggested pairing, wait staff may offer a sample of a wine to a customer, so they can feel confident their wine choice is correct.

Thornton Winery offers a red wine flight of four 1.5-ounce pours of Mourvedre, Cabernet Sauvignon, Merlot and Estate Syrah.

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Caf Champagne staff are here to provide theinformation eachvisitorneeds to have a memorable experience, explains food and beverage manager Christine Lindemann. They are all well versed in the ingredients of every dish served and how those ingredients may be complimented by each wine on our wine list. Meritage at Callaway Winery, which seats up to 200, has a list that includes non-Callaway bottles, primarily so the restaurant can offer diners varietal wines that Callaway does not produce. The list features 11 whites and 16 reds by Callaway and 15 non-Callaway labels. Chef Mike Henry estimates that beverages bring in about 30% of the restaurants revenue, and about 30% of the wine sold in the restaurant is by the bottle. Callaway also offers 6-ounce glasses and 3-ounce tastes. Originally planned as a banquet center, Falkner Winerys Pinnacle Restaurant costs nearly doubled during permitting and construction to reach $3 million. To recover costs and improve the prospects of profitability, winery owners Ray and Loretta Falkner decided to have their banquet center double as a 110-seat restaurant. Pinnacle opened in 2006six years after Falkner Winery opened. Despite its early challenges, Pinnacle broke even in its second year. The troubled economy hit the restaurant hard, Ray Falkner admits, but it regained profitability in 2010. At this stage, the restaurants revenue is about 25% of the total operations, about where they want it, reports Falkner. Pinnacles wine list features 15 Falkner wines (six whites, eight reds and one Port); they sell between 500 and 1,000 bottles every month. Wines are also served by the glass, but not in flights. Bottles are pricier in the restaurant than in the tasting room, but if customers buy a bottle in the tasting room and bring it to the restaurant to enjoy with their meal, they pay a $20 corkage fee. Wine club members buy wine at half-price when dining in the restaurant. The only way we can run the business effectively is keeping a pretty clean distinction among the three different profit centers, Falkner says, referring to winery, restaurant, and banquet center. Since opening six years ago, the 90-seat Shortys Bistro has served Mount Palomar wines exclusively (by the bottle and by the glass, with no wine flights). We never considered serving other wineries wines, says Kris May, operations director at Mount Palomar Winery, one of Temeculas oldest wineries. The bistro has the sales to back up that decision,

Meritage at Callaway Vineyard & Winery offers guests an expansive view over the estate Cabernet Sauvignon vineyards.

selling an estimated 4,000 bottles per year. The wine list features seven white, 10 red and five dessert wines; the price for virtually every 6-ounce glass is $7.50.
What is on the menu? Variety is the spice of life and the key to repeat visits to winery restaurants in the Temecula Valley, where the bulk of visitors live less than 90 minutes away.

Jim Carter had a vision. He wanted to create a resort in the Temecula Valley, and a fine restaurant was an important part of that vision. The 480-seat Vineyard Rose opened in 2004, one year after South Coast Winery opened. From its first day, the 12,000-square-foot restaurant has served breakfast, lunch and dinner, making it very unusual among Temecula Valley restaurants. (The morning meal was necessary to serve guests staying in South Coasts villas.)

Very, very few Temecula winery restaurants actually serve dinner seven days a week, explains Vineyard Rose restaurant manager Nathan Rivera. I think, in large part, that also helps us. Three years after opening, Vineyard Rose was breaking even. Italianate architecture and lush landscaping, in addition to generous views of the vineyards, encourage diners to relax and savor meals made from local and regional products including some field to fork items from Carter Estates Gardens.

Frequent menu changes take advantage of the fresh seasonal produce and give visitors a reason to return often. A summer menu, for example, included dishes with summer vegetables and fruit, and emphasized seafood as a light entree option. Among winemaker Jon McPhersons recommended wine pairings are the frutti di mare in tomato-leek cream sauce ($32) with the South Coast 2010 Pinot Grigio, or vegetable cannelloni with herbed ricotta cheese and estate vegetables ($18) paired with the winerys 2008 Wild Horse Peak Tempranillo. Although chef Mike Terry is the captain of what our menus become, says community relations director Crystal Magon, Vineyard Rose menus are designed by a team that includes the winemaker. We are constantly cognizant of how our wines can showcase our food, and how our food can showcase our wine, Magon says. Vineyard Rose serves wine by the glass (6-ounce pour) and by the bottle, and it offers one flight of three 2-ounce pours with purchase of a gourmet cheese palette. The wine list is expansive, featuring 50 South Coast wines (white, red and sparkling) and more than twice as many wines by other winemakers. At Meritage at Callaway, chef Michael Henry creates diverse, seasonal menus that accentuate Callaways long history of fine Temecula wine. The cuisine is based on the small plate concept of big flavor and variety, with menu selections paired with the best of what Callaway Winery offers. The restaurants menu offers tapas, salads, entrees and dessert using local, sustainable and organic ingredients. Unique and flavorful entres, soup specials, and wine and tapas pairings are created daily.

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Food, wine, and ambiance are not the only tools to attract repeat customers
Perks: Many of South Coast Winerys club members live within 50-100 miles of the winery, says community relations director Crystal Magon. It is close enough that frequent visits are easy to schedule, as long as what the winery provides appeals to them. Club privileges include access to all the amenities at the resort, a wine club members-only area in its lush garden, discounts in the restaurant and access to the Carter Reserve Room, which can host a private party of up to 32 people. South Coast also hosts winemaker dinners quarterly. We have a loyal following that will come out regularly, adds Magon. We really try to reach out to the community. Music: At Thorntons Caf Champagne, a six-month-long Champagne Jazz Series draws not only music lovers but food lovers craving the gourmet supper the restaurant provides. The concert series launched when the restaurant was brand new, but has evolved into a huge draw. Thornton estimates that more than 600 people attend the showsfeaturing big-name smooth jazz artists (Kenny G was featured in a 2012 concert). Attendees have the option of purchasing tickets for general seating or a gourmet supper package, which includes a threecourse Caf Champagne meal served during the show. (A Pinnacle changes its MediterraneanAmerican menu every April and October to offer a new selection of appetizers, salads, sandwiches, and entrees. Popular dishes offered by the Pinnacle are the lobster mac and cheese, laced with prosciutto and paired with Sauvignon Blanc, and the ahi crunch salad paired with Falkners Super Tuscan-style Amante wine (blend of 50% Sangiovese plus Cabernet Franc, Cabernet Sauvignon and Merlot). Sometimes dishes that have been bumped off the new menu will be resurrected as specials, which run for one month at a time, though the dish is prepared in a different way each week of that month. It really drives repeat business, Falkner adds. Shortys Bistro changes its menu about every six months and offers small specials, especially for weekends. But its claim to distinction is the bread. Purchased from a San Diego bakery, the breads are delivered freshly made or even parbaked, so that the 1,500-squarefoot restaurant finishes the bread and serves it right from the oven. Likewise, Shortys Bistro strives to buy local, particularly produce. The menu features plenty of American disheslike a ham-and-cheese sandwich and spicy meatloafbut lists many offerings with a Mediterranean twist, like a grilled chicken sandwich served on pesto-spread herbed flatbread. grill operates on part of the property during the concerts, giving the general seating patrons a hot food option.) The concert series has always been a money-maker for the winery, says president Steve Thornton. But, perhaps not surprisingly, the economic downturn has hit Champagne Jazz as well. Luckily, these artists have very loyal followings. They support these musicians and the venues where they play. In addition to weekend concerts, Caf Champagne also holds Friday Lights live music performances from April through September. The restaurant also offers winemaker dinners, blending sessions and cooking classes. We are always trying to think of something special, Thornton adds. Classes: Meritage is one of several winery restaurants that host demonstration cooking classes to draw in customers, who get to taste-test the menu (and accompanying wines) as the cook prepares it. Business has definitely picked up over the (past) four or five years, says Mike Henry. We have a pretty decent local clientele. That is definitely what we have been pursuing people who come back three times each month or once each week. It is awesome to have customers like that. events. Open daily for lunch and Friday through Sunday for dinner, Meritage participates in slow-food events and pours wine at local festivals and other events. The Temecula Valley works pretty well together for promotion, and everyone is on the same page, adds Henry. At Falkner Winery, Pinnacle is an integral part of overall profitability. The original vision was that people dining in the restaurant would so enjoy the experienceand the winethat they would stop by the tasting room, and that people in the tasting room would so enjoy the wineand the experiencethat they would drop into the restaurant for a bite to eat. But during Pinnacles first two years, there were minimal crossover sales, Falkner recalls. They developed a training program for staff in the restaurant and tasting room, offering simple methods to encourage customers to linger at Falkner. They also placed information about different facets of the facility in different locations so diners could read up on the winery and tasting room, and visitors to the tasting room could look at the restaurant menu. Now there is a tremendous amount of synergy between the two. If it is very busy in the restaurant, it is going to end up being busy in the tasting room, adds Falkner. A tremendous number of diners say, I just came from your tasting

It is still very young, Kris May says of Shortys Bistro. Normally, you do not expect restaurants to throw off a great amount of profit in the first few years. We have seen a good returnand improving all the timewhich means guests coming back frequently.
Prime time or sideline? Can a winery restaurant be in the limelight, or is it necessarily always second fiddle to the winery itself?

Meritage at Callaway is the third incarnation of the winerys restaurant, explains Mike Henry (who has been with the restaurant since December 2007). In its previous incarnations, the restaurant was leased out to different operators; currently the company that owns Callaway is running the restaurant and employs Henry and all of the restaurant staff. The goal is certainly to turn a profit, Henry explains, but the restaurant is not viewed as the ultimate destination for customers. We are more set up to be an amenity at this point, a showcase, he says. At the same time, staff recognizes that local customers provide a more consistent revenue stream than the tourists who comprise the majority of their customers. Reaching out to localsa term Henry describes as people living within a 30-mile radiushas encouraged the restaurant to get involved in local chambers of commerce and wine country mixers and

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room, or I am going to your tasting room, what do you suggest I try? At Mount Palomar Winery, the eatery has grown from a simple sidelinea deli-style eatery offering nibbles that would appeal to wine-tastersinto a more prominent piece of overall operations. When new winery ownership came in six years ago, they saw the need for increased food servicenot to compete with other winery restaurants, but in order to allow the winery to do some of its own catering for weddings booked at the facility. (It was a smart move; about 45% of the restaurants sales come from events catered on-site.)
Benefts

Ideal for medium to large sized wineries

Advice for would-be winery restaurateurs Do not do it because you think it is going to be a fun thing; do it because you think it is going to be a good business deal. You have got to have a plan when you open a winery and a restaurant, or both. It is not easy, offers Steven Thornton, president of Thornton Winery. Location, location, location. It really is that important, says Jim Carter, founder of South Coast Winery. An important lesson for profitability is managing food and labor costs unmercifully. Stay on top of them and force changes when you see them getting unbalanced. Work with fewer people working longer hours so that they are all making money for you and themselves, says Ray Falkner, owner of Falkner Winery. Always ask for feedback, evaluate all comments and feedback from customers, peers and staff alike. Make changes when necessary, notes Kris May, operations director at Mount Palomar Winery. Echoing Henrys comment about winery cooperation, May speculates that competition is not a big part of the winery restaurant scene in Temecula. I think everybody gets their little share of business, she says. If visitors like the winery, like the ambiance, theyre going to stay there and have lunch, have an appetizer. They are out for the day, they are going to eat somewhere. PWV Elisabeth Deffner has written for the Los Angeles Times, Catholic Digest , and American Way. She resides, and goes wine-tasting, in Southern California. This is her second report in Practical Winery & Vineyard.

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New Y ork
Best Worst business decisions
Photo by Kristian Reynolds

wineries
BY David Furer

&

ew York state wines have been improving steadily in recent years. The increased technical expertise employed by growers and producers has been painstaking and slow, but identifiable results have been quantified with better sales, more medals and higher prices. Follow-through is assured by the ever-increasing number of tourists who flock to the Finger Lakes and Long Island, with coverage regularly provided by local and regional publications. The marketing and promotional work of the New York Wine & Grape Foundation and its director, Jim Trezise, is among the best of any state outside of the infinitely better-funded California. Rieslings (especially dry) and Chardonnays (both oaky, crisp and unoaked) remain the hallmarks of these regions, while increasingly better examples of solo Merlot or Merlot-driven blends along with the occasional Pinot Noir receive praise from more critics, assuring consumer awareness. But times were not always so easy, as we discover in this state overview of wine producers best and worst career decisions.

Dr. Frank Vineyard on Keuka Lake.

Anthony Road Wine Co.

Owner John Martini says he keeps moving along one step after another. I cannot think of any decision that has caused us a great deal of pain. We have grown slowly to 12,700 cases per year (60% red and 40% white wines) without investing an exorbitant amount of money. When pressed he admits, Probably the worst decision was not digging a well. We had one for a year or two, but it dried up. We had to buy water at a steady pace. All the water we used in 2012 at the winery came expensively out of a truck. The health department will not allow us to run the winery and separate tasting room without a steady supply, and we could not run our main source to the production facility without a special siphon.

We should have dug a well at the beginning and are now considering it. We do not have access to Seneca Lake, which we look upon, and besides, we would have to treat the water if we did. Martini attributes his best decision to dumb luck. We were lucky to get Johannes Reinhardt as our winemaker. We started in 1990 with the 1989 crush, and he arrived in 2000 after working at Dr. Franks followed by a return to his native Germany. He was not necessarily interested in coming back, but I called him, he called back, we flew him in, we spoke of philosophy without tasting any wines he had made, and he came back that summer. It has been a very good fit. When my wife Anne and I spoke with him we told him there would only be one winemaker and that will be you, so there is no second-guessing. Our son Peter joined the company 14 years ago and has improved our sustainable practices in 75 acres, making great strides to improve fruit quality with more attention to management practices such as leaf removal.

The flagship white wine is dry Riesling (11.9% alcohol and 0.08% residual sugar [RS]), which makes up 20% of white wine volume. A 30% Cabernet Franc/70% Lemberger blend (13.2% alcohol) is the flagship red wine. The largest volume red wine is Tonys Red (40% Cabernet Franc and 60% Rougeon at 10.3% alcohol and 3.3% RS).
Dr. Franks Vinifera Wine Cellars

We have been in business since 1962 with the oldest vineyards planted in 1958, reports current family majority owner Fred Frank. Dr. Konstantin Franks expertise in working with vinifera in cold climates gave him the impetus to start a renaissance in New York state. Fred Frank was working for Banfi Vintners in 1993 when, with his father Willy ailing, he took over the family estate and grew it to become what is probably the most recognized winery east of the Mississippi River. He and his cousin Eric Volz grow grapevines in the banana belt of Seneca Lake along with vineyards on Keuka Lake. Winemakers from Germany, Australia and California make this one of the most broadly scoped teams. Wines include long-finish and mineral-like Rieslings, Gewrztraminers and Rkatsiteli that are distributed in 35 states. Annual production averages 60,000 cases (76% white, 20% red, 4% sparkling wine). I think one of the worst decisions one that I am guilty of, something which can also be said of my father and grandfatherwas that, in the early years, tourism was not as popular as it is today. Years ago, if someone drove up, my pre-

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decessors would drop everything to host visitors. The tasting room was simple, even ramshackle, for decades. It was our failing for not placing emphasis on winery tourism, and the location on a long dirt road was also a handicap. A few years ago our country road was paved, and we have placed signs to help customers find us. Recounting the episodes that led him to his late discovery of business sense, he elaborates, My father (Willy) and grandfather (Konstantin) did not get along well; one was a businessman and the other a scientist. They clashed, working together only in 1984, until grandfather died in 1985. It was unfortunate, as they complemented each others skills so well, which would likely have encouraged more wineries to start out sooner than they did. They also did not take advantage of the great view we have of Keuka Lake from our original tasting room. The junior Frank has refurbished grandfather Konstantins original residence as a tasting room with a view of the lake, although it was a struggle between me and my father. When he passed away in 2006, we built a Tudorstyle facility for our 70,000 annual visitors, a tasting room that increased sales and remains a success today. Konstantin would use the ancient method to hill-up soils to protect vines as an insurance policy for future vintages instead of losing thousands of vines to winter-kill (a labor-intensive practice). My dad Willy and I discussed the various best microclimates within the Finger Lakes and buying a site with more moderate winter temperatures. I found a property in Hector (along a portion of 600 feet deep Seneca Lake), providing 5-10 F warmer air than other lakeside locations, and where the soils are perfectly well-drained. Over the years, it has allowed us to grow more tender varieties such as Riesling, Grner Veltliner, Saperavi and Gewrztraminer. It is steeper than most Seneca Lake locations, and has become a productive site, though it does complicate managing machinery and applying vineyard attention. Frank views the winery as coming full circle. Konstantin wanted all the worlds great wine grape varieties in a nearly experimental situation. Today, Fred Frank has carefully and slowly finessed some of that into what is probably Dr. Franks Vinifera Wine Cellars finest hour.
Fox Run Vineyards

photo by Jan Regan

Sheldrake Point Vineyard on Cayuga Lake.

room. The rests sells to other east coast states along with the United Kingdom and Denmark with the hope of expanding to Belgium and Holland. Fox Run receives 60,000 visitors annually. My worst decision was when I bought Fox Run, he says. When we were nego-

tiating everything was nice and green on what was then 25 acres of grapes. We closed and then harvested our first crop; the next spring I asked my vineyard manager about replants, normally calculated at about 1% occurring from winter damage. He replied there were going to

Owner Scott Osborn farms 50 acres of vinifera making 15,000 cases per year, one-third of which is sold in the tasting
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be about 5,000 replants (5.8 acres of vines). Rather than buying 25 acres, I purchased about 19, which ended up being a large reconfiguring of costs. Not knowing how many dead vines to expect should have been part of the deal, so it took several years to increase production. We eventually planted another 25 acres. At the time, we did not consider the varying topography of nearby Seneca Lake. Elevation of the vineyard is 650 feet at the top, down a gentle slope to 450 feet ending about 50 meters from the lake shore. tion, and we have renovated Hermanns original plantings of Chardonnay and Riesling over the past few years, concludes Bynke.
Macari Vineyards & Winery

Hermann J. Wiemer Vineyard

We planted some varieties in the wrong spot based upon air flow (and) probably should not have planted Merlot at all where I chose to plant it. Today, we know so much more about air flows affect upon vines. We can grow many varieties; the vines need to be grown in just the right places. If you have a slope to the lake with a slight rise within it, it can block air flow and create a settling effect; if you have vines susceptible to this in the winter, it can cause extensive damage. Osborn sang a far different (if briefer) tune expounding upon his best decision. It was talking the woman who became my wife out of her contracting job to work full-time for me when we had not yet married. She might not agree to that again, as she took a salary cut when she did, but she has been a great asset. We are known for Chardonnay and Riesling (both are best sellers), and the reds are Lemberger and Cabernet Franc. We have really rich soils, so working with Cabernet Franc along with employing radical leaf and cluster removal (to achieve 3.5- to 4.5-ton yield window) is helping us produce some exceptional fruit. It is very winter-hardy and ripens fully, which is important in a cool-climate region like ours. It is a learning process to make good reds here.

With a background in agronomy, Oskar Bynke (new co-owner in 2007) started at Hermann J. Wiemer Vineyard as a cellar rat in 2003 after working in distribution for Met Hennessy in New York City, taking over in August 2007 when Hermann Wiemer retired. Fred Merwarth has been winemaker since 2001 and is a partner with Bynke, while Wiemer is a consultant/adviser. Success is about human resources, Bynke says. Having the right team in place is of absolute importance. Our staff has many responsibilities. Taking time to manage, train and coach them so that all tasks eventually are executed with accuracy is veryvaluable. We have been really fortunate in the past five years. With our staff in place, Fred and I have been able to step back and to focus on more long-term strategy development while maintaining a birdseye view of the business. Having the right people changes the whole landscape: Life is no longer time-consuming and emotionally draining. Take the time to hire and train the right staff! Our early mistakes could have been customer service attitudes. We did not train our staff adequately with the right messages. When things did not go as planned,we found ourselves stepping in as owner-managers to address little details. That has all changed. We both retrained some staff and let others go. When you hire more and more people, you learn what you are looking for. Our current team in the retail shop, administration and winery production is phenomenal. Annual production15,000 cases (85% white, 10% red and 5% sparkling wines) includes: Riesling, Chardonnay, Gewrztraminer, Cabernet Franc and Pinot Noir. The new owners have gradually increased production (1,500-2,000 cases), mainly with Riesling. We planted 12 acres in 2008 that have come into produc-

Joe Macari (owner) is assisted full-time by his adult children Gabriella and Joe. Until recently Gabriella worked in a New York City marketing firm, allowing her to bring friends from a top Manhattan restaurant to their Long Island vineyard, friends who helped the Maccaris harvest Cabernet Franc. In the beginning we planted 60 acres, 40 in the second year, but what I had not realized was the pool of good people we needed to care for these vines, the elder Joe Macari recalls. It took so much time and effort and challenge to obtain the quality of fruit we needed. We always had some good fruit, but then we were growing enough to choose from. I also had a diversity of microclimates to work from; we now total 210 acres of vines, from different areas, and all with different clones and rootstocks. Annual estate wine production is 10,000-15,000 cases, 50% red wine, 50% white wine. Chardonnay is 55% of production. Macari Vineyards sells 5%20% of harvested grapes to other wineries. Cabernet Franc and Merlot are the largest volume red wines. Bergen Road (blend of Merlot, Cabernet Sauvignon, Cabernet Franc, Malbec and sometimes Petit Verdot) is the flagship red wine.

Asked about his predilection for preferring to contract with consultants over hiring someone full-time, he replies, I was able to source people such as Helmut Gangl from Austria nine years ago and Alan York from California. Macari found the mostly Guatemalan work force costly. We have 10 people who have been with us for 12 years, compared to California where most workers are second- or third-generation (and) wellaccustomed to the vines.

66 p racti c al w i ne ry & v i ne yard S EPTE MBER 20 13

wine marketing
Gabriella Macari said of the year-round big city visitors, It is difficult to get people to recognize we have vines to begin with on Long Island. Fortunately, what helped us was finding winemaker colleagues in France and Italy friendly and open. We are constantly inspiring our workers, and my brother, who has attended viticultural school, now manages the vineyards.
Sheldrake Point Vineyard

General manager Bob Madill (a minority partner along with Chuck Tauck) says, Our best decision was to buy the winery property on the midwest side of Cayuga Lake, where we now grow 44 acres of vines. It is a beautiful Finger Lakes location with 200 feet of waterfront on 155 acres. When they began, Madill described them as a group of semi-professional neophytes, which then included a real estate developer (in Las Vegas, Nev.) who told them, Man, you have got a great piece of dirt. They now look back after 16 years saying, You could not buy this for anything less than what real estate developers would pay. The partners planned to produce and sell 20,000 cases per year and developed

a business plan with spreadsheets showing how it could be done. We made hypothetical decisions to enable us to do that. None of us had run a farm before; we were professionals from other industries. We planted the first 5 acres of vineyards with sales and marketing smarts that we thought we had, and which turned out that we did not. The funny part of this is that we went off-site to have a planning session with our key people. Len Penichetti offered to join our meeting, looked at us and the plan and said, Do you know how hard it is to sell 20,000 cases? We did not know, so now we produce about 6,0008,000 cases, learning every year how to produce fine Rieslings and other varieties. A few years ago we were 85% to 90% ex-cellar sales, now we are 75% cellar door with 25% in-state distribution. This sort of wisdom comes from experience. You cannot come from other experience and juggle everything immediately expecting to have instant success.

Sheldrake Point wines include Riesling, Gewrztraminer, Pinot Gris, Waterfall Chardonnay, dry Ros, Cabernet Franc, Gamay Noir, Luckystone White (Riesling, Chardonnay, Pinot Gris and Gewrztraminer at 11.6% alcohol, 1.3% RS) and Luckystone Red (Cabernet Franc, Merlot, Gamay and Cabernet Sauvignon at 11.7% alcohol).

Ninety-five percent of our wines have alcohol levels not much above 12.5%, adds Madill. The exception is Gewrztraminer, which ripens well, not late, but develops full aromatic potential. The 2010 Gewrztraminer was 12.9% alcohol (7 grams/l RS), and the 2011 wine was 13.8% (4 grams/l RS). Occasionally, one or two reds finish at 12.7% alcohol. PWV

pr actica l win ery & vin eya r d S EPTE M B ER 20 13 67

Inquiring Winemaker

T i m P a tt e r s o n

Good Vintners Keep Wine Writers Honest

will never forget the day I spent blending wines with Steve Pessagno. A dozen years ago, on assignment from Central Coast Adventures, the now-defunct monthly magazine of The Monterey County Herald, a friend and I drove down to Lockwood Vineyard to join the veteran Monterey winemaker as he and his crew assembled the labels flagship red Meritage blend. I had been to some large tastings and done some blending trials for my own garage wines, but I had no idea what I was getting into. Five of us power-tasted our way through about 100 candidate barrels, looking for the choicest lots of all five Bordeaux grapes for the blend. Each barrel got marked with yellow chalk as an A (definite final blend contender), a B (useful if more of this variety is needed) or a C (dont bother), at the rate of about two per minute. Each halfminute evaluation involved popping the bung, pulling wine with a thief and dribbling it into five glasses; swirling, sniffing, staring, sipping and spitting; and finally grading (Steve had more votes), dumping leftover wine back in the barrel, and pounding the bung back in. Over and over. Having never really done this kind of thing before, my palate was shot and my head was reeling by about barrel 28; fortunately, I wasnt making any decisions, and Steve seemed entirely unfazed. Then, while we had a quick lunch, the cellar staff pulled samples from the A barrels and mixed up some trial blends, starting with the proportions that had gone into last years bottling. Steve popped a Van Halen CD into the stereo system, cranked it up nice and loud and started pouring glasses from calibrated beakers for all of us to evaluate. Given the soundtrack volume, the communication was more facial expressions than vocalization. Ten minutes

Highlights
A  day blending with Steve Pessagno taught the author about how highquality wine is made in the real world. P  essagnos training as an engineer was evident in his eagerness to customize cellar equipment. H  e believed the way to build his brand was by building his region (Monterey), and his hospitality was boundless.

want to taste at one sittingand having a ton of fun in the process. I learned a lot that day about what makes successful winemaking tick, and added Steve to my mental Rolodex of smart, engaged winemakers (without whose input this column wouldnt exist). Losing a valuable source in no way compares to losing a father, as his four sons did, or to losing a lifelong colleague, as so many winemakers in Monterey did, or to losing a tireless champion for his wine region, as the entire Monterey wine industry did. But without the hard-earned wisdom of hands-on winemakers, wine writers can easily get unhinged from their subject, as if their opinions determine whats in the bottle, not someone elses bone-crunching labors. Steve was one of my reality checks, and I will sorely miss him. Take it from a production winemaker Over the years, I probably spent less than 24 hours in any form of contact with Steve, counting the blending session and a couple other visits, lots of phone calls and emails, and the occasional shake-and-howdy at trade tastings. Nonetheless, he was one of the folks I recruited to do guest columns earlier this year while I was hibernating with a book manuscript. As it turned out, Steves take on what they dont teach you in wine school, Lessons Learned the Hard Way, came out in the June issue of Wines & Vines, a few days before he died. In the column, he offered a few pearls for the younger winemaking crowd and some I remember when that happened to me anecdotes for winemakers of my generation. For instance, Remember to periodically (and I might say thrice daily) mix your stuck fermentation tanks while they are being warmed. If you dont, I can guarantee that when you do try to mix the tank, the dissolved CO2 in the partially fermented juice will erupt and eject the contents up through the top manhole toward the winery ceiling. The mess on the ground does look like you lost a lot of wine, but it is usually not that bad. Trust me. Or my very favorite When an 8-inch must line connected to a positive-displacement pump starts to plug

into the whirlpool, Steve barked, This is all wrong!meaning not the blend, but the music, which was promptly replaced with some Dave Matthews. Things went much better. After about an hour, we all raised the white flag, well spotted with purple. It took Pessagno and his crew two more days to get it rightmostly, he explained to me later, to the strains of guitar wizard Joe Satriani. The reason this memory is so fresh in my mind is that Steve Pessagno died in his sleep June 8 at the age of 55, way too young. The reason its the lead-in to this column (being written two weeks later) is that this slightly wacky day taught me volumes about how actual humans make first-class wine in the real world. The genuine article is in another dimension from textbook winemaking, and much more visceral than ethereal visions about the expression of terroir. The heart of winemaking is pushing through the hard stufftons of grapes, fermentations that wont take, more samples than any sane person would

68 W in e s & V i ne s SE P T E MBER 20 13

(and is visibly swelling), it will eventually blow if someone doesnt stop the pump. Train your crush staff to keep an eye (and ear) out for processing sights and sounds that are abnormal. I can tell you that when the hose ruptures it will launch grapes over the top of a 32-foot tall building. These are clearly the life lessons of a production winemaker, someone who moved a lot of grapes through a lot of presses and tanks and barrels and hoses. I soon learned that Steves original training was as a mechanical engineerin later life, he often referred to himself as a recovering engineerand he brought an engineers skepticism and do-it-yourself-ism to winemaking as well. He was one of those winemakers who never met a tank he didnt want to customize. He had short patience for blather and nonsense, and a lifelong habit of asking why he should believe this or that piece of conventional wisdom. I got an entire column out of one of his show me stunts. Accepted wine dogma tells us that fine wines can only be made in small batches, and Steve could not for the life of him figure out why the same grapes would fare worse in a larger fermentor, all else being equal. So after a bet with Leo McCloskey of Enologix, whose company spe-

Steve Pessagno gets attention from his dog, Keno.

cializes in slicing and dicing the attributes of fine wines, Steve rigged up a trial at Lockwood, where he had plenty of tanks to play with. Side by side, he fermented the same Cabernet Sauvignon grapes in two fermentors of the same width-to-height ratio, one holding 14 tons, one holding 105 tons, with the same yeast, similar pump-over regimens and an elaborate system of sensors to make sure temperatures were uniform. When they ran the results through Enologixs battery

of analytical tests, sure enough, the big tank wonbarely, but it won. A quality guy For all his skill at large-scale production winemaking, Pessagno was a quality guy, in every meaning of the term. When he took over at Lockwood in 1991, the winery was saddled with a peculiar business model that focused on dozens and dozens of small-batch custom bottlings for restaurants and even

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Win es & Vin es SEPT E M B E R 20 13 69

wi n e m a ki n g

mail-order customers. The Lockwood Vineyard was planted to some of everything, including what Pessagno called some odd choices. At a time when few people had ever heard of Smillon, he remembered, we were making it in two different styles. Pessagno knew this was not the way to make quality wine, on any scale, and the project was losing money to boot. Starting in 1992, the vineyard was replanted with Bordeaux and Rhne varieties, the winemaking got in gear, and by the end of the decade Lockwood was pumping out 80,000 cases per year of very good winewith a good deal of it selling (this was a decade ago) for $30-$50 a bottle. The first time I met Pessagno was at an all-day press session hosted by a handful of Monterey labels (my memory tells me they were styling themselves as the Monterey Quality Alliance) determined to tell the world that Monterey could make great wine and banish forever its reputation for under-ripe, veggie Cabernet. The crew included the founders and/or winemakers from Morgan, Talbott, Chalone, Bernardus and maybe a couple others, as well as a slide show by Leo McCloskey (theres that name again) showing how Monterey Chardonnay had the perfect profile to go big time. Starting with the 1999 vintage, Pessagno began making wines under his own self-named label, and in 2005 he turned to its production full-time. He never dropped that pursuit of quality, and he never forgot that the way to build his brand was to build his region. He did a stint as a county planning commissioner, arguing that the wine industry was an asset for the area, not a nuisance; he helped found the Wine Artisans of the Santa Lucia Highlands, dedicated to

He never dropped that pursuit of quality, and he never forgot that the way to build his brand was to build his region.
advancing and popularizing that winegrowing area; he helped pull together the River Road Wine Trail, on which he was finally able to build his own winery. His hospitality was boundless; I will forever kick myself for never getting to one of his legendary paella feasts. Even though Pessagno wasnt a professional writer, he came pretty close to penning his own epitaph in that June column: 2012 marked my 30th harvest as a winemaker. I dont have to tell my winemaking colleagues that this is the one profession that makes your non-winemaking friends envious. You are never bored, you make decisions on the spot every day, you drink great wines and eat well, youre always learning something, and you meet the most interesting peoplemany of whom become good friends. Tim Patterson is the author of Home Winemaking for Dummies. He writes about wine and makes his own in Berkeley, Calif. Years of experience as a journalist, combined with a contrarian streak, make him interested in getting to the bottom of wine stories, casting a critical eye on conventional wisdom in the process.

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NE W S O F G RA P ES AN D W I NES I N EAS T ERN NOR T H AMER I C A

New Enology Team at Virginia Tech

lacksburg, Va.Just in time for harvest, Virginia Polytechnic Institute and State University has a full enology team in place. Starting Aug. 12, Dr. Amanda Stewart assumed the position of assistant professor of enology and fermentation in the Department of Food Sciences at Virginia Tech, wher she will work closely with Molly Kelly, who assumed responsibility for the departments enology extension programs Dec. 25, 2012.
Waterloo_Nov10.qxp 8/26/10 11:36 AM

University. Her graduate research involved When Dr. Bruce Zoecklein retired in 2010 yeast assimible-nitrogen and amino acid as professor of food science and technology, profiles in wine grapes of the East. the administration decided his position Kelly came to Virginia Tech from should be replaced with two winesandvines.com Surry County Community College faculty positions: one for enology Learn more: Search keywords in Dobson, N.C., where she develextension and another for enology Stewart Tech. oped the enology curriculum and teaching and research. managed the colleges 1,000-case bonded Stewart will also look for ways to work winery. Kellys research has focused on the with the subjects of wine and health with aroma composition of Petit Manseng. the universitys department of nutrition.She Linda Jones McKee holds a Ph.D. in food science from Purdue
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Win es & Vin es SEPT E M B E R 20 13 71

WineEastNews Wine Is Key to Virginia Celebration

Grapes from governors mansion included in red wine blend to mark 200th anniversary of landmark
ichmond, Va.How do you celebrate the 200th birthday of the nations oldest continually occupied governors mansion? In Virginia, there was only one answer: with a special bottle of wine designed to highlight the states growing wine industry. On June 27, Virginia Gov. Bob McDonnell and first lady Maureen McDonnell introduced 1813, a red wine blended from three different vintages of wine grown and produced in Virginia. The event commemorated the bicentennial of the Executive Mansion and also paid tribute to Acte 12, passed by the House of Commons in 1619, which required settlers in Virginia to plant and tend at least 10 grapevines. McDonnell has been a strong supporter of the wine industry since he first became governor. At the reception he noted, At the beginning of my administration, I made the promotion of Virginia wine and wine tourism key components of my overall economic-development and jobs-creation agenda. I also said that I wanted Virginia to be the East Coast capital of wine and wine tourism. Working with our partners in the Virginia wine industry, weve achieved success in both goals. Sales of Virginia wines reached an all-time high last year, and record numbers of tourists are visiting our beautiful wineries. With the unveiling of 1813, and the national and international marketing push behind it, I believe that well attract even more visitors to our wineries and see sales continue to grow in 2013 and beyond.

Gov. Bob McDonnell unveils Virginia wine blend 1813, which commemorates the 200th anniversary of the Virginia Executive Mansion.

Commemorative wine A total of 1,813 bottles of 1813 were produced, but they will not be sold. The wine will be used by the Virginia Wine Board Marketing Office to market and promote the Virginia wine and wine tourism industries. Planning for the introduction of 1813 began in 2011, when Maureen McDonnell planted 10 Chambourcin vines in the garden of the Executive Mansion. She enlisted the assistance of several Virginia wine experts and supporters, including Barboursville Vineyards

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WineEastNews
Composition of 1813
Varietal and Vintage Merlot 2010 Merlot 2010 Octagon 2010 Merlot 2011 Nebbiolo 2011 Chambourcin 2012 Chambourcin 2012 Petit Verdot 2012 Petit Verdot 2012 Petit Verdot 2012 Viognier 2012 Virginia Wine Board Member Winery or Vineyard Breaux Vineyards Chatham Vineyards Barboursville Vineyards King Family Vineyards Barboursville Vineyards James River Cellars Winery Executive Mansion Vineyard Silver Creek & Seamans Orchards The Vineyard at Point Breeze Veritas Vineyard & Winery Barboursville Vineyards Paschina led the winemaking process for 1813 with his industry colleagues. According to Maureen McDonnell, Virginias 1813 brings together several important pieces of the Commonwealths history and the special history of the Executive Mansion. Industry progress Gov. McDonnells administration has worked with the state General Assembly to establish a reimbursable tax credit program for the establishment or expansion of vineyards and wineries. Additionally, dollars for research, education and marketing programs placed in the Virginia Wine Promotion fund have almost tripled since 2010. In the past three fiscal years, the sales of Virginia wines have averaged more than 8% growth per year. Sales of Virginia wine outside the stateboth domestic and internationalhave increased by 39% from fiscal year 2011 to fiscal year 2012. Export sales of Virginia wines grew by more than 300% to more than 3,300 cases during fiscal year 2012; a significant portion of these sales were new sales to China and the United Kingdom. According to Annette Boyd, director of the Virginia Wine Board, Virginia is the nations fifth-largest wine grape producer, and according to a 2012 economic impact study, the Virginia wine industry employs more than 4,700 individuals. The Virginia wine industry contributes almost $750 million to the Virginia economy, and more than 1.6 million tourists visited Virginia wineries in 2011. Linda Jones McKee

general manager and winemaker, Luca Paschina; viticulturist and vineyard consultant Lucie Morton; King Family Vineyards winemaker, Matthieu Finot; Veritas Vineyard & Winery winemaker Emily Pelton and Virginia secretary of agriculture and forestry Todd Haymore. In August 2012 Maureen McDonnell, Paschina and Haymore harvested fruit from the Chambourcin grapevines at the Executive Mansion and took the grapes to Barboursville Vineyards to be fermented with grapes from the wineries and vineyards of Virginia Wine Board members. Because board members come from different AVAs in Virginia, the wine represents the states geographic diversity.

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Win es & Vin es SEPT E M B E R 20 13 73

The Resurgence of Hard Cider

Approaches to commercial cider production in New York and Vermont By Chris Stamp
Editors note: This article is the second in a two-part series about hard cider. The first, written by Linda Jones McKee, focused on the history of cider in North America.

WineEast

Winemaking

s noted in part one of this series (Ancient Beverage to Hot New Trend, Wines & Vines July 2013 issue), hard cider sales have tripled across the United States and Canada during the past five years. In her July 2013 article, Wine East editor Linda Jones McKee discussed why what was once the New Worlds most-popular alcoholic beverage all but disappeared from this country. This second installment about hard cider, or simply cider, will focus on the various styles and production techniques. While this article uses hard cider and cider interchangeably, it is important to note that the U.S. government defines hard cider as a beverage made from fermented apples of less than 7% alcohol. Any drink with alcohol greater than 7% but less than 14% is technically a wine (apple wine, in this case), but the term cider is now allowed in place of apple wine. Federal rules regarding taxation of cider/ hard cider are based on carbonation levels

Apples are harvested for Eves Cidery, which employs the mthode champenoise style.

Wine East HIGHLIGHTS

 The chemistry of apple juice combined with consumer habits and expectations present special challenges not ordinarily faced in the production of grape wine.  If apples are too low in sugar, cider makers leave them in crates to allow further ripening.  The bubbles in cider can come from a secondary fermentation or through forced carbonation.  Bottle-conditioned cider may be aged for one to three years before release.
74 W in es & V i ne s SE P T E M B ER 20 13

and alcohol content; therefore, they are an important consideration in product design and price point. Although cider is a fermented beverage not wholly dissimilar to grape wine, there are some important differences. The chemistry of apple juice combined with consumer habits and expectations present special challenges not ordinarily faced in the production of grape wine. Cider makers must contend with a number of factors that make cider less stable or limit the available tools that winemakers typically enjoy. Cider is a low-alcohol beverage, generally ranging from 2% to 8% alcohol. While this lower alcohol content is one of ciders charms, it leaves it more vulnerable to a host of microorganisms. Combined with potentially higher pH levels, high malate content, residual sugar and less tolerance for SO2 additions (due to carbonation and shorter bottle aging), cider makers must exercise great care throughout production to avoid spoilage. Mthode champenoise style: Eves Cidery Cider makers Autumn Stoscheck and Ezra Sherman own and operate Eves Cidery in

Van Etten, N.Y., where they grow the majority of their fruit on 20 acres of orchard. Of that, 12 acres are 40-year-old trees, many top-grafted to cider varieties. Two acres are eight-year-old cider apples and two are threeyear-old cider apples with the remaining acres planted this year. Total annual yield averages about 5,000 bushelsor 125 tons. Like other craft cider makers I spoke with, Stoscheck and Sherman stress the importance of apple varieties in the quality of the cider. While they grow and use about 60 different varieties of apples, Stoscheck says they have certain work-horse varieties. For example, in the early season Ellis Bitter is a major bittersweet blending component. Some other major varieties include Chisel Jersey, Dabbinette, Northern Spy, Golden Russet, Bramleys Seedling and Medaille dOr. Not all are blended. They produce two varietal ciders: Northern Spy (sparkling) and Kingston Black (still). Stoscheck says that most cider drinkers expect bubbles, and consequently only about 10% of their production is still and the rest is sparkling, produced through bottle fermentation. Stoscheck describes her style as minimalist. As a rule, she adds no sugar to the cider except as primer for the secondary fermentation in the bottle and as dosage at disgorging. Pressing usually occurs immediately after harvest, except on occasion when the fruit is lower in sugar than they like, in which case they leave the apples in crates to allow further ripening, a procedure foreign to grapegrowers. They blend the varieties at pressing to achieve an acceptably low healthy pH. Ideally they like to see a pH of 3.0, but sometimes they allow it to go as high as 3.75 for certain varieties. The juice is not settled or clarified, but immediately inoculated with DV10 yeast. Nutrient levels are typically low; to reduce stuck fermentations and potential reduced sulfur problems, they use yeast hydration nutrients and add yeast nutrients to the juice.

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Winemaking

Eves Cidery prepares to bench graft Geneva rootstock for a trial with Porters Perfection and Goldrush cider apple varieties.

An established apple orchard in New York states Finger Lakes region, where the wine industry has also taken off.

The cider is allowed to ferment out at 60F. Primary fermentation is usually complete by late fall or early winter. It is not unusual for the fermentation to stick near the end. After a short settling period, the cider is racked and receives 20-30 ppm SO2.

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Because of the high malate content in apples and its susceptibility to lactic acid bacteria, the cider makers add lysozyme as a precaution. Protein instability is common, requiring some level of bentonite fining. Treatment with bentonite must be withheld at least a week to 10 days after the lysozyme addition, as bentonite deactivates lysozyme. After the bentonite settles, the cider is racked again and given a tight pad filtration. At this point, the cider is ready to receive the priming sugar. Any ciders that have residual sugar from primary fermentation are analyzed for glucose and fructose. The amount of priming sugar added must take into account any sugars left over from the primary fermentation. It is also important to be sure the types of sugars are balanced before attempting the secondary fermentation. Most yeasts prefer to ferment glucose and fructose on a 1:1 ratio. While sucrose is a disaccharide of glucose and fructose (50/50), dextrose is just another name for the monosaccharide D-glucose. Stuck fermentations usually present a wine with a larger balance of fructose. Knowing the residual glucose and fructose levels, a cider maker can calculate what sugars should be used for priming to best promote a complete secondary fermentation. At Eves Cidery they add sugars to achieve a total of 12.9 g/L, enough to produce slightly more than 3 atmospheres of CO2. After the sugar addition, the cider is sterile pad filtered and bottled in 750ml

Champagne bottles with encapsulated yeast. The cider is left in tirage only long enough for the secondary fermentation to complete, whereupon it is hand disgorged. The dosage generally includes 25-30 ppm SO2 and varying amounts of sugar, depending on the particular product. Additionally, their sweetest ciders may receive some sorbate. The wine is finished with a Champagne cork and wire hood and retails for $15 per bottle. According to Stoscheck, they could sell three times their current production and are expanding their orchards to help meet that demand.

Cider makers must exercise great care throughout production to avoid spoilage.
Carbonated cider: Earle Estates Meadery Winemaker/cider maker John Earle and his wife Esther own and operate Earle Estates Meadery in Penn Yan, N.Y. They have been making excellent fruit wines for 20 years. In contrast to Eves Cidery, Earles approach to cider is more akin to beer than Champagne. He sources apple juice grown and pressed locally. The apples are held in cold storage and freshly pressed as needed, allowing for a fresh supply of juice throughout the year. Earle selects the highest acid juice from his

- DECAN T E

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supplier, and the pH of the juice is usually about 3.5. Like Eves Cidery, Earle does no clarification of the juice, agreeing that clarification results in a loss of flavor in the finished product. Juice typically ranges from 14.6 to 16 Brix, which he adjusts to 18 Brix and then inoculates with Epernay II (aka CEG, Cotes des Blancs). There is no pre-fermentation SO2 addition to the juice. Fermentation proceeds at 60-70F until it reaches the target alcohol level of 5%. Refrigeration is used to arrest fermentation. The cider is allowed a short time to settle before receiving 50 ppm SO2, racking and DE filtering through a plate and frame. Unlike Eves Cidery, Earle does not employ a secondary fermentation for carbonation, instead choosing to force carbonate the cider in his 300-gallon Zahn & Nagle carbonation tank. After adjusting the free SO2 to 40-50 ppm, he adds 200 ppm sorbate and filters the cider through sterile pads and a 0.45 membrane into the carbonation tank. The cider is chilled to 28-30F and carbonated. Earle gives the cider a week or more at around 10psi, believing slow carbonation allows for better bubble integration and retention. The freshly carbonated cider is counter-pressure bottled in 750ml sparkling wine bottles and finished with a crown cap. It retails for $9.99 per bottle. Mthode ancestrale: Bellwether Cidery Bellwether Cidery in Trumansburg, N.Y., is owned and operated by husband and wife Bill and Cheryl Barton. The Bartons started the business in 1999 after being inspired by travels through the cider regions of France. Like other cider makers I spoke with, Bellwether purchases freshly pressed juice year round from a local supplier. They also have a small orchard planted to traditional European cider varieties. Bellwether produces 10 different varieties of cider, both still and carbonated, ranging from very dry to semi-sweet, as well as a cider blended with tart cherry juice. Like Eves Cidery, 90% of their production is carbonated. The Bartons agree with the other producers I spoke with that most consumers expect bubbles. Bellwether produces a number of James Cummins feeds the pomace grinder at Eves Cidery in10:50 Van Etten, 9/29/09 AM N.Y. Page 1 force-carbonated ciders in a TitanRack_Nov09.qxd fashion similar

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WineEast
to Earle Estate, but they also produce a portion in the mthode ancestrale. These ciders are bottle conditioned but not disgorged as in mthode champenoise. Barton emphasizes the importance of blending different varieties of apples to achieve proper balance with respect to phenolics, acid, pH, Brix and flavor. He appreciates the bitter-sweet and bitter-sharp European varieties for their phenolics but believes they generally benefit from blending with some higher acid North American varieties such as Gold Rush. Unlike some producers who like to move the fruit from the orchard immediately to the press, Barton stores the apples for a period of time to reduce the starch and increase the sugar content. While primary fermentation still takes place on the lees, he uses pectic enzymes in the juice to improve settling and filterability later on. The fresh juice receives about 50 ppm SO2 to control wild yeast and lactic acid bacteria. When required, juice Brix is adjusted up to 16 with cane sugar. Barton says he is always experimenting, but EC1118 (Prise De Mousse) is his favored yeast. He regularly uses hydration nutrients when preparing his yeast for primary fermentation and adds nutrient supplements to prevent H2S. However, he noted that excessive diammonium phosphate can produce Jolly Rancher-like aromas that he prefers to avoid. Fermentation is carried out at 50-55F. Upon completion, the cider is racked, lightly sulfured and tight DE filtered. His primary fermentation techniques are identical whether the cider is to be force carbonated or bottle fermented. Only as the cider nears bottling do the two processes diverge. Cider destined for bottle conditioning is maintained at a low SO2 so as not to impede a secondary fermentation. The day before bottling, the cider is primed with 14 g/L sucrose, and the starter culture is prepared by rehydrating 0.5 grams per gallon of dry EC1118 to be bottled. Through the course of the day, cider is added to the culture to acclimate the yeast until the inoculant is built to about 10% of volume. The next day the active culture and cider are combined, mixed well and immediately bottled in 750ml Champagne bottles and finished with

Winemaking

Autumn Stoscheck adds 1 gram of encapsulated yeast to bottles at Eves Cidery. Sugar is mixed into tanks prior to sterile filtration.

a crown cap. No additional nutrients are added, as they promote too much yeast growth, resulting in excessive lees in the finished cider. Unlike Bellwethers other ciders, the bottle-conditioned cider is aged one to three years before release. Barton explains that the yeast needs time to fully autolyse. As it ages, the acid softens and the wine takes on a sweeter, more balanced palate. Bellwethers bottle conditioned cider retails for $16.95 per bottle. Head to head with the beer market: Vermont Hard Cider Co. Vermont Hard Cider Co., maker of Woodchuck Hard Cider, the largEasternWineLab_Mar09.qxp 1/22/09 9:47 making AM Page 1 est selling hard cider in the United States, has been hard

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cider since 1991. The broad presence of their products has no doubt played an important role in growing the market for cider. Vermont Hard Cider Co. does not press apples, but strives to incorporate as much local and regional juice as possible. They select juice within certain specifications, typically with higher acid levels. The juice is generally around 3.3 pH. If acidity is low, they will adjust it with malic acid. Target Brix is around 17 and may be augmented if necessary. Before racking, the juice is treated with enzymes to eliminate pectin and break down starches. They inoculate with a Champagne yeast and control fermentation temperatures to below 75F. The cider is fermented to dryness. Upon completion, the cider is cross-flow filtered to clarify and eliminate any protein instabilities. Depending on style, finished alcohol ranges from 5.0% to 6.9%. After blending and sweetening to a particular style, the cider is passed through 0.65m filter then a 0.45m membrane prior to bottling. Their hard cider is considered still and has an upper limit of 3.92g/L of carbonation, which they achieve through in-line carbonation on the way to a counter-pressure filler. Twelve-ounce bottles are their main package format, but they also package in 12-ounce cans, 750ml bottles, 22-ounce bottles and various keg sizes. The finished cider is usually around 3.6 pH. The entire production cycle, from inoculation to filling, can take as little as eight days. Vermont Hard Cider Co. is in the process of adding bottle pasteurization capabilities that will enable them to market a majority of their Woodchuck products as all natural. The future of cider The different styles and techniques employed by U.S. cider makers produce remarkably different products that can appeal to a wide range of tastes. I believe the market will continue to expand as large cider producersincluding international brewersthrow their advertising clout behind this once largely ignored beverage. The styles and economics of cider production are closely tied. If cider hopes to compete with beer, labor-intensive processes like mthode champenoise are not viable options. However, most boutique producers package in 750ml wine bottles to command prices similar to wine. Some larger operations, with greater economies of scale, have adapted production techniques to provide adequate margins to allow penetration into the highly competitive beer market. The increasing presence of cider tap handles at bars and restaurants bears witness to ciders growing popularity in North America. With freshly pressed apple juice now available all year-round, wineries might find opportunities to increase their bottom lines by utilizing tank space during the off-season. Anyone considering this would do well to understand that cider production comes with its own set of challenges as well as rewards. W E Chris Stamp is president and winemaker at Lakewood Vineyards in Watkins Glen, N.Y. He started his career in wine as winemaker at Planes Cayuga Vineyards in the Finger Lakes, and in 1986 took a position as enology research and extension associate at the Ohio Agricultural Research Development Center in Wooster, Ohio. When his family opened Lakewood Vineyards winery in 1988, he returned to New York to become the winemaker there.

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Calendar
SEPTEMBER
Sept. 1-30 California Wine Month, organized by
the Wine Institute, featuring events at wineries throughout the state. Details: discovercaliforniawines.com.

List Your Event: Please send the particulars, at least three months in advance of the event, to edit@winesandvines.com.

Nov. 14-15 Wine Tourism Conference in Port-

land, Ore. Details: winetourismconference.org.

Sept. 3 China Wine & Spirits Awards in Hong Kong. Details: cwsa.org.
Latest wine industry news Wine Industry Data Center Archive search Live reader comments

Sept. 20 Columbus Food & Wine Affair Grand Tasting at the Franklin Park Conservatory in Columbus, Ohio. Details: foodandwineaffair.com. Sept. 23-24 Wine Industry Financial Symposium, a two-day event covering business and economics issues in the wine industry at the Napa Valley Marriott in Napa, Calif. Details: winesymposium.com.

Nov. 15 Wine Trends: Whats Hot & Not in the Wine Business: a panel of journalists, publicists and data analysts winesandvines.com will discuss major To see more industry events trends and where the go to winesandvines.com and click Calendar. industry is headed, Sonoma State University in Rohnert Park, Calif. Details: ssuexed.com. Nov. 16 Great American Wine Fest in Portland,
Ore. Details: greatamericanwinefestival.com.

Nov. 18-19 Sustainable Ag Expo, the latest re-

NEWS SITE
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Sept. 26-29 Euphoria, a wine and food festival in

Greenville, S.C. Details: euphoriagreenville.com.

search and business trends at the Madonna Inn Expo Center in San Luis Obispo, Calif. Details: vineyardteam.org.

Oct. 11-14 Celebration of Harvest at Rancho Sisquoc in Californias Santa Maria Valley, organized by the Santa Barbara County Vintners Association. Details: sbcountywines.com.

OCTOBER

Nov. 20-24 Flavor! Napa Valley food and wine festival. Details: flavornapavalley.com.

You know how good your Zinfandel is...

Promote your wines to leading Zinfandel enthusiasts and extend your winerys relationship in the market.

Oct. 15-18 VITeff exhibition of sparkling wine technology in Epernay, France. Details: viteff.com. tival. Details: mvfoodandwine.com.

U N IVERS I T Y C O U RSES
Sept. 7/University of California, Davis Introduction to Wine Analysis: For serious home winemakers, winery lab employees and small winery winemakers. Enroll in section 131VIT221 at extension.ucdavis.edu/winemaking.

Oct. 17-20 Marthas Vineyard Food & Wine Fes-

NOVEMBER

Nov. 5-8 Southeastern United Grape & Wine

Sept. 7-Oct. 11/Brock University, CCOVI

Join Us!

We are champions of Zinfandel

Symposium, sponsored by the Viticulture Enology Science and Technology Alliance (VESTA) and Surry Community College at the SheltonBadgett North Carolina Center for Viticulture and Enology in Dobson, N.C. Details: ncviticulturecenter.com.

Online Distance Learning-WSET Level 2. Details: ccovi.ca/ce/courses.

Sept. 14/University of California, Davis

Americas Heritage Wine

Nov. 6-8 Shanghai International Wine & Spirits

Successful Home Winemaking: Designed for home winemakers with little or no experience. Enroll in section 131VIT212 at extension.ucdavis.edu/winemaking.

Become part of our proud legacy

Exhibition at the Shanghai World Expo Exhibition and Convention Center in Shanghai, China. Details: winefair.com.cn/wine/en.

Sept. 16-Dec. 9/Brock University, CCOVI

Nov. 7-9 Hong Kong International Wine & Spirits Fair. Details: hktdc.com.

Wine Appreciation-Exploring Varietals: A special interest course focused on the tasting of wines from Canada and around the world. Details: ccovi.ca/ce/courses.

Nov. 7-10 Garagiste Festival at Windfall Farms

in Paso Robles, Calif. Details: california garagistes.com.

Sept. 21-22/University of California, Davis

zinfandel.org 530-274-4900

Nov. 9 Tri-Cities Wine Festival at the Three

Rivers Convention Center in Kennewick, Wash. Details: threeriversconventioncenter.com.

Step-by-Step Winemaking: Learn winemaking while producing wine at the Robert Mondavi Institute for Wine and Food Science. Enroll in section 131VIT213. Details: extension.ucdavis.edu.

Nov. 12-16 SIMEI winemaking and bottling equipment showcase in Milan, Italy. Details: simei.it.
Zinfandel Advocates & Producers is a 501(c)(3) non-profit organization. ZAP is dedicated to advancing public knowledge of and appreciation for American Zinfandel and its unique place in our culture and history.

Nov. 2-9/California Polytechnic State University Introduction to the Wine Industry:

Explore the basics of winemaking and the origins of wine grape varietals. Details: extended.calpoly.edu.

Nov. 14 Napa Wine + Grape Expo at the Napa

Expo Fairgrounds in Napa, Calif. Details: napagrowers.org.

80 W in e s & V i ne s SE P T E MBER 20 13

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GUEST EDITORIAL

Viewpoint
We welcome commentaries from readers on issues of current interest in the wine industry. Send your topic idea to edit@winesandvines.com, and well contact you.

Melding Business and Wine Production

By Paul Franson

ver the years, Ive attended a few individual sessions of the University of California, Davis, Wine Executive Program and found them very interesting. This year I got a chance to immerse myself in the whole program. Although it was a big time commitment, I jumped at the chance. I knew that the program aimed to wed experts from the universitys wine and business faculties to present information aimed at wine business and marketing professionals as well as winemakers and growers. Though dubious about whether that was possible, I knew it would be useful to me, for my work crosses both worlds. It turns out, it did work. The program is held at the UC Davis Conference Center next to the Robert Mondavi Institute for Wine and Food Science, home of the new teaching and research winery and experimental vineyard. The program attendees included a diverse group of people: winery owners from around the country and even the world, winemakers and growers from big and small wineries, and managers from large wine companies in Californias Central Valley. The first morning included optional boot camps in either accounting and finance for non-financial managers or grapegrowing and winemaking fundamentals aimed at business managers. Enology professor Andy Waterhouse and Doug Adams, professor and biochemist in the Department of Viticulture and Enology, presented a fast-paced but comprehensive session that tied the subject together. The actual Wine Executive Program began after lunch with an overview by Robert

Smiley, former dean of the UCD Graduate School of Management and current director of the Wine Executive Program. Smiley, a familiar figure at the annual Wine Industry Financial Symposium, gave an insightful talk about the global wine business and different strategies that wine companies adopt to succeed. Then came a talk about differentiating wine brands, including developing a

Andy Walkers compelling and sometimes chilling presentation would fascinate anyone in the industry.
story to appeal to chosen customers. It was given by Brian Dunbar, managing partner and director of creative services at David & Goliath, a good example of an industry speaker augmenting those from the university. Tuesday brought two talks focusing on the technical side of the business. Professor and genetecist Andy Walker of the Department of Viticulture and Enology discussed challenges facing growersfrom diseases and pests to costs and mechanization. Its hard to believe Walkers compelling and sometimes chilling presentation wouldnt fascinate anyone in the industry.

Next came a topic dear to me, how to make the best quality wine under challenging conditions, notably economic pressures. Anita Oberholster, cooperative extension specialist in enology, ran though the winemaking process from harvest to bottling, pointing out what expenditures have the most impact. In the process she, like Walker, debunked many cherished myths in the wine world. Two sessions that I almost skipped but turned out to be among the highlights of the program: associate professor Robert Yetmans talks about financial management, then strategic cost management. Yetman, a member of the Graduate School of Management staff, was able to make both sessions fascinating (and understandable) while highlighting important concepts little appreciated at most wine companies. The last day featured three talks that hit home: vineyard operations of the future presented by Andy Walker (who emphasised pest, water and labor issues), and the winery of the future, a fascinating discussion by David Block, a chemical engineer and chair of the V&E Department. He subtly reminded us that while winemaking may be an art and craft, its also a chemical process. Finally Michael Maher, the senior vice president and general counsel for Jackson Family Wines, discussed legal issues including direct shipping, franchise and tied-house laws and labeling and branding. Looking back, I think the Wine Executive Program presented issues and material that are valuable to those making wine and those marketing it as well as administrators and executives. Its success was due not only to the subject but also the chosen speakers, most of whom were excellent. Who would expect a discussion of cost accounting to be so interesting? Its a big time and financial commitment (about $4,600 plus lodging), but likely to increase the skills and insight of all those who attended. It certainly did for me.

Paul Franson has written about wine, food and the wine country for both industry and consumers for more than 17 years from Napa Valley after escaping from Silicon Valley. He was a home winemaker until he moved to Napa, where he found too many good wines to drink his own.

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