Archive for July, 2012


Owning a Virginia winery

Posted on Jul 31 2012 | By

 A fulfilled vision for some but money & hard work are the reality 

The scene is repeated throughout the Old Dominion: undulating rows of verdant vines surrounding a tasting room where convivial conversation and tinkling wine glasses unfold before a backdrop of blue skies and mountain views.

But is the scene a mirage? What’s the reality behind calling yourself a winery proprietor?

With well over two hundred wineries gracing the rural landscape of Virginia, the dream has come true for a growing number of entrepreneurs seeking an income producing bucolic lifestyle. But be certain you aren’t wearing a pair of rose-colored wine goggles before taking the plunge. Measure twice cut once.

“Most people have no idea how complicated starting a winery can be,” says Dr. Bruce Zoecklein, Head, Enology-Grape Chemistry Group at Virginia Tech. “Before I agree to meet with a potential owner, I require them to complete a business plan.”

Zoecklein has written a comprehensive document, Winery Planning and Design, that guides a person through preparing such a plan. The CD formatted publication is available through the industry trade journal Practical Winery and Vineyard. 

Preparing a business plan is de rigueur for any commercial undertaking but is particularly important when venturing into the wine business. Most people contemplating the trade have little or no agricultural experience and making wine is grounded in farming.

Today in the Old Dominion, the supply of grapes is tight and growing more so each year. The blossoming number of wineries is outstripping planted acreage. A successful venture demands a consistent supply of fruit and owning both the tasting room and vineyard is key to a sustainable business.

The numbers
So what is the financial investment required to greet guests in a tasting room and pour them a glass of wine? For a winery to be profitable, production should ultimately be around 5,000 cases annually—60,000 bottles—or higher.  Producing wine below these levels often does not cover costs.

The investment will vary, but assuming that a quality—not high end—facility is built and outfitted with commensurate equipment, here are some cost estimates:

*Purchasing land suitable for grape farming can run from $10,000 to $15,000 an acre, well above the price of average farmland. High quality vineyard land is not found in abundance; some experts estimate less than ten percent of the state’s rural land is suitable for growing delicate wine grapes. In addition to agricultural considerations, land that possesses scenic views is important in attracting paying guests. Overall, to provide for expansion, purchasing a twenty-five acre site is a sound decision. Cost: up to $375,000.

*Planting a ten-acre vineyard with six varietals and installing trellising, well, irrigation system and purchasing a tractor and sprayer. Cost: $275,000.

*Building a 6,000 square foot winery with crush pad, cellar, tasting room, point-of-sale software and computers, crusher-destemmer, press, pumps, hoses, stainless steel tanks, oak barrels, forklift, lab equipment, office furniture, wine glasses and various additional supplies. Cost: $900,000.

*A newly planted vineyard does not produce sufficient fruit to make wine for three to five years. In the interim, the winery will need to invest in grapes, bulk wine and bottling operations to build its inventory annually until wine can be made from the owner’s vineyard. If an owner wants to maintain an inventory of 5,000 cases of finished wine and an equal amount of bulk wine, prices can leap dramatically until the vineyard is supplying the needed fruit. Cost $75,000 to $500,000.

*After the initial investment on infrastructure and wine, an operating fund of $100,000 should be available to sustain operations through the first five years. Typically, small to medium size wineries can take up to seven years or more to show a profit.

Tallying up the capital required for the basic operations comes to around $2 million. True enough, a much smaller winery will cost significantly less but also likely run in the red for an extended period of time. Building sales quickly to 5,000 cases annually is the shortest path to profitably.

Chris Pearmund

“Yes, for a bit less than $2 million a winery can open its doors. But, truthfully, I would encourage a serious entrant to marshal its resources and commit to a $3 to 5 million investment to do it right. Virginia needs larger producers to advance the state’s reputation and produce a rapid return on their investment,” says Chris Pearmund, owner of Pearmund Cellars.

Route to success
So how can a newly smitten winery owner lower the cost of his personal investment? Sweat equity and investors. Performing more of the work, hiring fewer employees and attracting capital from friends and business associates are proven ways to control expenses.

Unless an owner acts as both vineyard manager and winemaker, it can add an additional $100,000 or more annually to operating expenses to hire talented wine professionals. One viable approach for smaller operations is to perform these functions in-house but have a consultant guide them through critical production stages.

Outside money can also ease the burden of using personal funds, the challenge of qualifying for bank financing or having to pay top dollar for needed services. “When I seek out investors, I am looking for both money and talent. I try to attract an array of people with cash and business skills, says Pearmund.

“I want professionals in law, accounting, marketing, heating & air conditioning, food services, and landscaping to name a few. While these individuals are not going to work for free, they can provide guidance and a quick response to critical business questions. And when they do offer their services it’s at a good price,” he explains.

In Virginia wine, the 80/20 business rule generally applies as it does elsewhere; eighty percent of the business is generated by twenty percent of the accounts. While never an exact division, the rule holds true in most industries. Last year,Virginia’s 203 wineries produced 462,000 cases of wine, an increase of 11% over the previous year.

But just a half a dozen wineries produced over 200,000 of those cases; add in twenty or so second-tier wineries and the figure jumps to around 300,000 cases. That leaves around 175 wineries generating just 160,000 cases annually, or around 1,000 cases per winery, well below the profit generating level.

How do they survive? An owner performing much of the daily labor themselves is the key to viability. “Passion drives the success of smaller wineries,” say Zoecklein. “If a vineyard needs spraying at 3 in the morning, a committed owner will do it.”

And selling the finished wine can be even more demanding. The success of Old Dominion wine is closely linked to agritourism. There are very few wineries that can make money dealing with wholesalers.

Wine must be sold in the tasting room at retail prices to succeed. That requires spending hours at the tasting bar on weekends and holidays with wine lovers that are often escaping the rigors of stressful jobs and long commutes. Making their relaxation time a pleasant experience can be demanding on owners.

Pearmund says, “If a customer visits ten or twenty wineries over the course of several months and chooses not to return to your winery, ask why? If you can’t answer the question, do not expect to meet success.”

John Delmare

“A majority of wineries in the state are not operating as businesses per se,” says John Delmare, owner of Rappahannock Cellars. “And that’s not necessarily a bad thing. These are people who are enjoying a rural lifestyle, often with the help of their adult children and may be opened only three days a week. It’s a business model that succeeds through their labor and zeal.”

“But to create a business focused on the bottom line the work is significant. In the early years of building my winery, I worked eighty hours a week, seven days a week.”

Pearmund echoes his sentiments saying, “The work is endless, from securing ABC permits, label approvals, producing promotional materials, managing employee hiring and payroll, overseeing fruit purchase contracts, hosting wine dinners and much more.”

Zoceklin underscores the importance of enthusiasm in the business given its demands. “When an individual prepares an elaborate business plan and runs it by his accountant the reaction is often, ‘Wow, maybe you should just invest in condos in Vail.’ But that misses the point. If running a winery makes their heart sing, it’s not just a business decision. Some of the greatest satisfaction can come from building an enterprise from scratch and leaving it to their children as a legacy,” he states.

A somewhat controversial approach to building revenue involves hosting entertainment-style functions to build quick, steady revenue. Bachelorette parties, weddings, fundraisers and other large group events are a relatively easy sell given the bucolic setting of many wineries. Newer businesses can generate critical cash flow to help service debt by marketing such entertainment functions.

But balancing business needs with the concerns of local residents and county governments is important. Noise and heavy traffic on rural roads can raise the ire of nearby citizens and create a host of problems for an offending winery. As a whole, the industry is sensitive to such criticism and strives to act responsibly. But the issue further crystallizes the demands placed on many struggling young enterprises trying to succeed.

So what if an owner ultimately decides his decision to enter the industry is more work and less rewarding than envisioned? Does he simply sell and move on? “Selling a winery today and recovering your costs is problematic,” says Delmare. “There is not a vibrant market out there for even a profitable business. On the other hand, if owners can slowly build the business, their expenses will decline and sales increase. Most can survive and become prosperous. Patience is key.”

Today,Virginia is the fifth largest wine producing state in the Nation. Winery owners across the state can take pride and satisfaction in what is unfolding here and the role they are playing in achieving national recognition.

But as author David Bly ably wrote, “Striving for success without hard work is like trying to harvest where you haven’t planted.”

Published in the Summer 2012 edition of the Piedmont Business Journal.


Categories : WINE ARTICLES

In praise of Argow cabin

Posted on Jul 25 2012 | By

          Almost two years after restoration reviews confirm expectations

On October 29, 2010, a party—literally—of over fifty PATC members and friends dedicated Argow Cabin, located just outside the South District of the Shenandoah National Park, a mile hike west from milepost 70. The festivities of speeches, pork bar-b-que and hay rides culminated a five-year restoration project.

Standing on the covered porch that bright fall day, many of the attendees predicted the cabin would become a favorite of the outdoor cognoscenti. The thirty mile views from the side porch alone seemed to clinch that conclusion.

Argow Cabin Today

As the second anniversary of the cabin’s entry into the club’s rental system approaches, one need only flip through the log book or check out its availability on the PATC website to confirm its popularity. Let’s hope Travel & Leisure magazine doesn’t discover this place.

And what makes the cabin a magical spot to stay? Its natural beauty and history dating back to the Civil War. Samuel Eaton, the builder and first occupant of the cabin lived in the tumultuous era of the War Between the States. Time obscures what role Eaton played in the conflict but to gaze at the hand-hewn 13 inch thick chestnut logs is to look back at a time when a man’s success was often achieved by back breaking labor.

The restoration project is all the more remarkable when one views a photograph hanging inside the cabin taken in the early 1990s. The three story building had been abandoned for years and looked more like a decaying tobacco curing barn—with partial chinking and listing on its crumbling foundation—than a snug mountaineer’s cabin. Its days were numbered as the forest slowly closed in on all sides.

Then, two serendipitous actions occurred: the property was sold to the club at a favorable price by Keith Argow, a professional forester. And club member Jeff Testerman agreed to lead the restoration project. Testerman, a commercial construction project manager in Charlottesville, engaged his exceptional management and building skills to save the cabin.

One weekend a month for over five years, Testerman organized a group of some fifteen volunteers to slowly bring the cabin back to life. Given its location high on the evening side of the Blue Ridge, it required a steep ascent up a narrow, winding dirt road to reach the site. One transmission and an endless number of scratches on the crew’s vehicles were part of the project’s unfunded cost.

But on dedication day, only satisfied memories and a sense of accomplishment reigned among the work party.

So what has been the reaction among club members and the public since the cabin opened? PATC is in a unique position to assess renters’ experience through the evaluation of the cabin log books.

The journals are a throw back to the days when the written word prevailed everywhere. Today, it’s seldom one can read a diary-like journal of a person’s thoughts on living the outdoor life. There is a bit of Henry David Thoreau in all of us and his words resonate today for those seeking to briefly escape the stresses of modern society:

“I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived,” he wrote. Amen.

Soon after Argow was dedicated, an occupant penned these words in the log, “What a great job on this cabin. There were some veteran PATC cabin-goers in our group and many times over the weekend it was mentioned Argow is one of our favorites.”

A month later, some winter visitors recorded, “The Drive was closed (snow), so we backpacked in the six miles from the park entrance. Wow—what a beautiful cabin. We were so impressed with the quality in the renovation, the beautiful covered porch and the unbelievable view!”

The log book is replete with similar observations since the cabin became available for rent.

Testerman has continued on as the cabin’s overseer and says, “It’s gratifying to read the comments of folks staying at Argow. Yes, it was a lot work and toward the end our crew was eager to wrap the project up. But to see what was gifted back to the club is rewarding. I hope this mountain jewel is still sheltering visitors decades from now.”

Anyone who has stayed at Argow cabin echoes his hope.


Published in the August 2012 edition of the The Potomac Appalachian.

Argow Cabin View

Categories : HAGARTY TALES

John Marshall Tasting Experience

Posted on Jul 12 2012 | By

 Step back in time while tasting the wine 

John Marshall was considered the Babe Ruth of the Supreme Court. He wrote or co-wrote over a thousand legal decisions during his thirty-four year span on the court and was the longest-serving Chief Justice of the United States.

John Marshall

He was also related to Thomas Jefferson, his political adversary. While they often opposed each other on a range of national issues, it’s likely they shared a glass of wine on occasion given Jefferson’s reputation for hosting numerous White House dinners.

On July 14, the home of John Marshall will open to the public for the purpose of tasting the best of Virginia and international wines. The legendary Chief Justice would likely have cast a vote in favor of his home’s new purpose; perhaps even calling it a wise decision.

The home, Oak Hill Estate, is located adjacent to Barrel Oak Winery and was built by Thomas Marshall, John’s father, in 1773. The home is reached by entering the Barrel Oak property in Delaplane and following the signs. While not as impressive as Monticello or Montpelier, the seven-room frame house was nonetheless a home of note in its era. John Marshall took ownership of the estate when his father moved to Kentucky in 1785.

Today, the home has been restored but not extensively. Given the likely millions of dollars required to bring the property back to its original condition one can understand the scale of restoration.

One week prior to its official launch, Brian and Sharon Roeder, owners of Barrel Oak Winery and creators of the John Marshall Tasting Experience, hosted friends and valued customers to a preview of the unique tasting. My wife Jean and I and our friends Fred and Betsy accepted the special invite. We’re glad we did.

Oak Hill

After entering the home through the front entrance—with views of the rolling Piedmont countryside—we were escorted upstairs to a seated tasting. Our host, Andy Melton, a winery partner, explained how a guest would typically select one of five distinct flights of wines. However, only three flights were available for the preview audience given the gratis invitation.

Each flight appropriately had a legal theme:

The Circuit Tasting—“Sweet Piedmont”; four off-dry or semi-sweet wines from Virginia’s Piedmont.  $25

The Superior Tasting—“Best of the Piedmont”; four wines representing top wines from the region.  $35

The Appellate Tasting—“Best of Virginia”; four selections from quality producers statewide.  $55

The Supreme Tasting/Reds or The Supreme Tasting/Whites; four quality wines from around the world. $75

Each flight opened with a sparkler, the Fitz-Ritter Riesling Extra Trocken NV (extra dry) and ended with a Blandy’s 5 Year Malmsey Maderia; all six selections were served with artfully presented and tasty food pairings.

Everyone in our group selected The Appellate Tasting that featured:

2011 Rappahannock Cellars Viognier—Ducard Vineyard

2010 Jefferson Cabernet Franc

2008 White Hall Cuvee Des Champs

2009 Barrell Oak Winery Reserve Petite Verdot

The wines were paired with spicy raspberry preserves on brie; chocolate filled farm raspberries; rolled stuffed cucumber, and prosciutto wrapped dates.

Andy Melton & Mike Bunt tend to our needs

The flight was served on a modified aroma wheel tasting placemat reflecting the palate profile and tasting notes of each wine.

While we leisurely sampled the wine and food pairings for more than an hour, I was struck how unique it was to be sitting in an historical home in one of the most storied states in the Nation. History is my passion—along with wine—and the experience was enhanced given its location.

All the wine and food selections fulfilled our expectations but I anticipated more attention being given to the home and its history. While our knowledgeable host answered my inquiring-mind queries, I would have enjoyed a more docent-like explanation of the home and its former residents.

I could even envision a period costumed performer, similar to “George Washington” at Mount Vernon, ambling from room to room describing the home and its history.

The John Marshall Tasting Experience is offered by appointment each weekend from 11am till 6pm, through October. For more information, visit the Oak Hill Estate web site.

Oak Hill View


Categories : WINE ARTICLES