Home / Archive / Rural Slickers
Saturday, February 04, 2012
Feature: March 2009
Rural Slickers
Urban wineries bring barrels and bottles to consumers
Story by Christine Stanley
The gritty industrial building where Jon Affonso has been making wine for the past 18 months looks nothing like a winery. Its lackluster façade and barred windows face Sacramento’s North 16th Street, where four lanes of traffic speed past and pedestrians don’t linger.
Why then is Affonso, a French- and American-trained winemaker, crushing and bottling nearly 2,000 cases a year in this old, cold warehouse?
“I walked in here and it looked absolutely awful, but I began imagining what it could do,” he says. “It’s not about foot traffic. It’s about good wine, and this is what I want.”
Urban wineries like Affonso’s Rail Bridge Cellars are springing up in cities across America. There are more than a dozen in San Francisco’s East Bay, and now winemakers in the Capital Region have embraced the trend. Both Rail Bridge and Revolution Wines have opened in Sacramento in the past two years; in February, Dancing Fox Winery and Bakery opened in downtown Lodi.
These new businesses in city centers or industrial urban areas are more than tasting rooms and boutique shops. Most do everything but grow grapes: crushing the fruit, fermenting it, barreling, bottling, labeling, packaging and selling the product. Winemakers like the model because it’s novel, close to home, cheaper and more efficient than vineyard operations. Consumers like it because it’s fresh, social and brings agricultural products to the city center.
A Donkey and Goat Winery in Berkeley opened five years ago and has joined the East Bay Vintner’s Alliance, a collective of nearly 15 urban wineries in and around Oakland. Like their peers, Donkey and Goat owners Tracey and Jared Brandt were lured by the ability to keep their passion for winemaking close to home. Plus, they didn’t need a huge plot of land or a ton of money to make it happen — “just our boot straps” says Tracey Brandt.
“The best part of not having a vineyard is that it’s been a buyer’s
market for a long time, so the only constraint is our budget.”
— Joe Genshlea Jr., co-owner, Revolution Wines
“The best part of not having a vineyard is that it’s been a buyer’s market for a long time, so the only constraint is our budget. If we want to buy Rutherford [Cabernet grapes], we can,” says Joe Genshlea Jr., co-owner of Sacramento’s 18-month-old Revolution Wines, a winery wedged down an alley off P Street in midtown. “We don’t have to plant a vineyard every time we want products; we can buy on the fly. From a cost standpoint, it’s really good for us. Vineyards are $20,000 to $30,000 an acre just to plant. Why go through the expense?”
Urban winemakers also tend to have more options if Mother Nature wreaks havoc on a harvest, though they can’t exactly cut and run from contracts and relationships.
“We work with five growers across several appellations under long-term contracts, and the fruit is planted and farmed to our specifications,” Brandt says. “I’m not tied in, but these are long-term relationships. I’m affected by weather. For us, we make Rhone varietals, so we’re not going to turn around and make [something else] because it’s cheaper or easier. Sometimes it’s tough luck.”
Running without a vineyard doesn’t have to mean settling for low-quality or damaged fruit, urban winemakers say. In 2007, Revolution’s Mendocino Grenache, which retails for $24, was named “Best in Class” for the north coast region at the 2008 California State Fair. Genshlea also trucks grapes from Clarksburg, Galt, Amador County and Washington, and produces about 1,500 cases of wine annually. As at Rail Bridge Cellars, some wine is sold on site, but much is sold through local vendors such as Taylor’s Market, 58 Degrees & Holding Co. and Ella Dining Room & Bar.
“As the industry has evolved and become less private, the location of the vineyard has become less important,” says Mike Fisher, founding partner of Global Wine Partners, an international investment bank devoted exclusively to the wine industry. “It’s relatively easy to move grapes, even if it’s hundreds of miles. They’re harvesting in smaller containers, so you get less deterioration of the grapes in transport.”
Shipping grapes can be relatively cheap, too. For Rail Bridge’s fruit, Affonso rents a flatbed truck for about $400 per day and moves the grapes himself. He says he’ll drive to the vineyards three or four times per year to collect the 25 tons he needs.
“We’re small, so the planning commission didn’t think
the
smell would be a problem.”
— Gregg Lewis, co-owner, Dancing Fox Winery and Bakery
It’s that kind of flexibility and savings that have made the urban approach appealing. Urban winemakers aren’t at the mercy of overhead costs or expensive land that needs constant labor, water and pest control, along with vineyard machinery and the cost to maintain it. At minimum, Affonso says, rural winemakers spend $1,000 per acre each year on those recurring vineyard costs.
“Traditional wineries have a lot of real estate. You have the land, the vineyard and the facility. If you have an industrial space, you own the equipment, but you probably lease the space,” Fisher says. “Plus, an urban setting is set up for wineries. Wine is really just low-tech manufacturing, and you don’t need a whole lot of square footage. You need the ability to process wastewater, and you need higher voltages of electricity. There might even be other efficiencies if you are able to share the space in a big warehouse building.”
Urban wineries can tap into the city’s utility grid and sewers; few have to deal with the rural hassles of treating and transporting wastewater.
Urban winemaking, however, has its own challenges.
Operations aren’t cheap. The 200-gallon stainless steel tanks needed for fermentation run $5 to $10 per gallon. The 100 French oak barrels Affonso uses at Rail Bridge set him back about $1,000 a pop, and his average monthly electric bill runs $7,500. So far, Affonso and investors are about $1 million in, but have yet to break even.
Likewise, Dancing Fox owners Gregg and Colleen Lewis have topped the $2.5 million mark for the purchase and renovation of their 10,500-square-foot historic building in Lodi. The equipment was nearly $750,000. Besides making wine from grapes grown on the Lewis’s vineyard in Clements, Dancing Fox will also offer counter service of soups, sandwiches and baked goods.
“It’s a combination bakery and winery because she loves to bake and I love to make wine,” Gregg says. “We’re right in the heart of Lodi and are the first winery to be located in the downtown. We’re small, so the planning commission didn’t think the smell (of yeast and fermentation) would be a problem.” None of the local winemakers ran into problems with smell or trouble with wastewater disposal or energy use, as they likely would have in a rural setting. They found plenty of other headaches, though.
“Permits were actually pretty expensive — special use permits, liquor licenses, professional fees, architects, a parking variance. The city was just heaping stuff on,” says Genshlea, who paid more than $20,000 in licensing and professional fees. “These are just little things that cause a lot of heartburn. But overall, I would give the city high marks.”
Urban planning, however, provided a boon; urban wineries tend not to have the strict zoning rules their rural counterparts face. Urban wineries are freer to sell what they want, when they want.
“If you have a rural winery, the zoning authority isn’t going to let you put (a) retail use in there. It’s too demanding on infrastructure, and people who live in rural areas don’t want a winery opening a restaurant next to them,” Genshlea says. “But being downtown, we can open a restaurant. If I had the money, I would do that.”
Money is key. The product is the primary draw, but to get it off the shelves, Revolution is counting on foot traffic, Rail Bridge is banking on word-of-mouth, and Dancing Fox is offering food and comfortable seating to attract customers. The Sacramento wines are available at some local retailers, but Dancing Fox’s bottles are only available on site.
Wine typically sells in a three-tier system: producer, distributor and retailer, with the winery getting only about 50 percent of the retail price, according to Fisher. Other models put more profit in the winery’s pocket. “If you can set up a retail system where you’ve got other things to attract people — a restaurant, a wine club, your website — people will be interested in coming to get it, and you get full bang for direct retail,” he says.
For Revolution, revenue has remained level while marketing efforts have increased. The winery participates in midtown’s Second Saturday promotional events, and its tasting room is open afternoons and evenings Thursday through Sunday.
“(In 2007) we did a little better at Christmas, but we had more media coverage then,” says Genshlea, whose revenue averages $20,000 to $30,000 a month. “I was hoping to be a little more on a growth mode, but I can’t complain. I’m actually pretty pleased.”
Affonso says he’s also on a growth path. He’s been encouraging wine sales through private events at his winery, though the police department has discouraged regular tasting hours because of his location.
Still, the long-term viability of the Capital Region’s urban wineries is unknown. At least one vintner whose farther along the urban winery path says managing growth is key, in part because it takes years to build inventory.
“We saw revenue growth with the first release of our wine, but it took 18 to 24 months to get it to market. We’re still not profitable because of the growth curve,” Brandt says. “You have to balance out your production and sales. You have to have those two things in check, and if you are constantly growing it’s going to be hard to catch up with your time-to-market cycle.”
Brandt says wine businesses such as hers typically have a five- to seven-year plan to get into the market and stabilize revenue and expenditures. After that, it’s a matter of maintaining balance.
“It’s not something that we’re going to have a whole lot of because it only works in selected instances. There are thousands of wineries in California, and only a handful would qualify as an urban winery,” Fisher says. “But it makes sense for the right group, and I do think we’re going to see more of it.”
photographer
Terrence Duffy
