Sunday, December 7, 2003

Vineyard owners develop taste for business despite hardships

By Michael Wentzel
Gannett News Service

TORREY, N.Y. - For many people, a vineyard evokes a romantic dream of natural beauty and pleasurable work that yields a sophisticated and elegant product.

But a vineyard and small winery can be an expensive, labor-intensive and time-demanding business that must consider the risks of weather, pests, plant diseases and consumer tastes.

The startup cost for a new small winery in the Finger Lakes, N.Y., region easily can reach $3 million in the first four years and create substantial debt. Income grows slowly and a vineyard and winery require working seven days a week, every week of the year.

"A risk analysis of owning a winery wouldn't even come near reality," says John Martini, who started growing grapes on Seneca Lake 30 years ago. "Even the most pessimistic predictions are too optimistic."

But Martini, owner of the Anthony Road Wine Co. here, would not choose another life.

"The ability to plant a vine and see it end up in a bottle and see people enjoy it is very important," he says. "There might not be financial rewards, but there are psychological rewards."

Because individual wineries routinely go through an extended growth phase, profits rarely become cash in owners' pockets, says Jeff Franklin, senior vice president of the National Bank of Geneva, which has supported many Finger Lakes wineries with loans.

"Any and all cash gets plowed back into the asset," he says. "Like many businesses, wineries have to stabilize growth to get into profitability. Equity growth and long-term returns are what puts cash in the pocket."

Martini and his wife, Ann, bought 100 acres of farmland on Seneca Lake in 1973 to grow grapes and raise a family. They taught themselves the business while living in a trailer.

"Friends said start a vineyard and we did," John Martini says. "It wasn't because we were smart. We didn't know any better."

The Martinis initially sold their grapes to the Taylor Wine Co., and then to wineries across the state. In the late 1980s, they decided to go into the winemaking business, establishing Anthony Road, and introduced their first bottle of wine in 1990.

"We needed another market for our grapes," says Ann Martini.

Like many wineries, they hold weekend festivals and serve special foods to attract new consumers. John Martini drives to New York City every weekend to sell his wine at a Union Square market.

Still, the Martinis have monthly debt payments ranging from $15,000 to $17,000.

"We pay our bills. I sleep at night," John Martini says. "But I've signed away everything but my children."

Morten and Lisa Hallgren have taken a different approach with their new business, Ravines Wine Cellars, by keeping costs and debt low.

"We're starting out with the basics needed to make wine of high quality," says Morten Hallgren, 40, chief winemaker at Dr. Konstantin Frank's Vinifera Wine Cellars.

The Hallgrens borrowed less than $200,000 to launch the business. They sometimes swap wine or services for the use of equipment. They are buying handpicked Finger Lakes grapes for their first wines while they plant vines on their 17 acres.

The plan is showing early success. The Hallgrens won the award for the best dry Riesling at the World Riesling Championships at the Corning Museum of Glass in May.

At New Land Vineyard, Dale Nagy does most of the work himself. Sales have improved in each of the two years since he bought the vineyard but need to increase more, he says.

"I have to expand to grow or I'll stay in debt," Nagy says. "I believe in the quality of my wines."

The most important and most profitable point of sale for the small wineries is the tasting room. "If I can get people here for tasting, the wine will hook them." says Nagy. "I'm not looking to be rich. My plan is that this will be my living. My only regret is that I didn't do this sooner."

CFO in spotlight, off hot seat
LaSalle bets on rebound
Look Who's Talking: MARVIN LEWIS
Queen City rewind
Ex-CEO's mansion imperiled
Shutting down a business is tricky
Lessons from a pioneer
Buying wine here is a social occasion
Vineyard owners develop taste for business despite hardships
Business meetings
Tristate business notes