December 2014 Issue of Wines & Vines
 
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So You Want to Build a Small Urban Winery?

If only I knew then what I know now

 
by Jeff Morgan
 
 
Covenant tasting room
 
Covenant created an industrial chic tasting room with small kitchen, topped with offices above.

Since 2001, I’ve been making wine in other people’s wineries. And I’ve been in the wine business for 25 years. My own California brand, Covenant (which my wife Jodie and I co-own with Napa vintner Leslie Rudd), has been in business since 2003. So last year, when we were in a position to build our own small winery, I thought I knew what to do. I did, more or less. But I learned some lessons along the way that should be of interest to anyone planning a similar move.

From wine country to the big city
After a yearlong search for a space in Napa Valley, where we had lived for 15 years, we decided that an urban winery might be the best fit for us. We source grapes from vineyards that stretch from Lodi, Calif., to Napa Valley and into Sonoma County. But we didn’t need to live closer to those vineyards than the San Francisco Bay area. We also discovered that getting permits for an urban winery was easier in the city than in Napa Valley. (The building we leased was already zoned for industrial production, which includes production of wine!) Finally, our children had grown up, and we were looking for a larger, more diverse community than our tiny, rural village. It was time for a big change.

Once we found a suitable winery space—7,000 square feet of freestanding warehouse in the industrial zone of northwest Berkeley, Calif.—we put together what we thought was a reasonable budget. The idea was to keep things fairly simple—sleek, industrial and urban. The building—a metal shell built back in the 1960s with some rough mezzanine office space at one end and a concrete floor—needed a lot of work. We knew there would be some financial surprises, yet some things still cost a lot more than we imagined.

    HIGHLIGHTS
     

     
  • The author, winemaker Jeff Morgan, describes how he managed design and construction for a new urban winery.
     
  • Covenant Winery converted a 50-year-old freestanding warehouse in Berkeley, Calif., into a complete winemaking facility with a tasting room.
     
  • Permits were easier to get in Berkeley than in Napa Valley, Morgan found, and almost everything cost more than expected.
     

Construction
Construction costs will always depend on how much you need to build and what materials you use. In other words, the sky’s the limit. But if you don’t have limitless funds, find a reputable contractor who can scope out your project costs with you in advance. Plan on going about 25% over budget, even if everything goes according to plan. You can’t possibly anticipate all of your needs.

We financed the new winery with a loan from Wells Fargo Bank, which has a lot of experience working with wineries both large and small. (We are small: currently at about 6,000 cases annually, but growing.) It’s important to work with bankers who understand the wine business. They not only can help you anticipate needs, but they also help keep your eye on the bottom line.

Consultants
How much do you know about architecture and engineering? If your answer is “not much,” you’re probably going to have to hire professionals in those fields.

You’ll need an architect if you’re doing any construction that requires city or county permits. Sure, it’s helpful if your architect has previously designed wineries, but it’s probably more important that he/she has a good relationship with the city planners who dole out permits. (The same goes for your contractor.) We got lucky. Neither our architect, Fred Hyer, nor our contractor, Michael Feiner, had ever built a winery. But they are both good at what they do, and they understand how city government works. They listened to us describe our requirements and added their expertise to the equation. We got through the permit process reasonably quickly, and we managed (basically) to finish the production area and much of the rest of the winery in time for harvest—give or take a week or two!

We also got some serious assistance late in the game from mechanical engineer Chuck Magers, who was recommended to us after we realized we understood very little about how our glycol chiller worked and how to install it. We also were deficient in a number of other related areas, such as CO2 detection and night cooling. Chuck’s advice and calculations were invaluable.

Installing key winemaking equipment
One thing equipment reps/salespeople rarely talk about is the cost of installing the equipment they sell you. A new glycol chiller, depending on its size, might cost $20,000 to $30,000. A new, small compressor will set you back a little more than $10,000. Installation, however, requires more than a 480-volt plug. We got one bid for installing our Pro-Chiller refrigeration that was higher than the cost of the chiller! The same thing happened with our compressor. Eventually, we finally did these installations with our plumber and the help of our consulting engineer. It was a bit cheaper than some of the lower bids we received, yet still expensive. On the plus side, after doing the work ourselves, we had a better understanding of what we had purchased. Unless you’re equipped to do them yourself, add 20% to 30% for installations.

Insulation
If your winery is in a cave or a thick cement building, you might be able to get off lightly here. But our metal building (even in chilly Berkeley) soaks up a lot of heat. I had no idea winery insulation would cost so much more than the insulation in my house. Ultimately, we went with (x-cell) foam spray for both our roof and ceiling. Bids varied wildly. We went for the lowest bid: about $4 per square foot.

Roof
The ceiling in our warehouse already had fiberglass insulation. I figured that was good enough, but then we discovered that the roof had enough leaks to warrant significant repairs. So we decided to install an external 2-inch insulation on top of the metal roof as well. What’s another $30,000? It’ll keep the winery cooler and help us save on heating/cooling costs (I hope).

Drains
Old urban industrial warehouses weren’t typically built with trench drains. We tore out half the concrete floor to create a slope for water to run off where the tanks are positioned. That cost $20,000. Then we dug some drain trenches in the remaining concrete, too. Your choice of drainpipe will be critical. The best stuff (acid resistant polyethylene plastic sold under the Zurn or Fuseal brands) is too expensive for most of us. Cast iron is cheapest, but it corrodes quickly from the acid in wine. This can be mitigated by regular flushing. In between is ductile iron piping, which is what we purchased. It’s more resistant to acidity than cast iron, but not as good as the polyethylene plastic. Still, it’ll work, and it will last—especially if maintained with regular flushing.

Lighting and electricity
Get a good electrician. It won’t be cheap. And neither will your lighting fixtures if you buy nice-looking ones. You can’t just go to a lighting store and buy industrial lighting either. It’ll take four or five weeks to arrive. Of course, it’s taken us longer. The first supplier screwed up so many times we finally had to look elsewhere and lost three months. And remember that presses and other large pieces of winemaking equipment can require 480 volts. And your glass washer, which requires super hot water, will probably be 220 volts. (We’re still trying to get that wiring over to the kitchen!) Your glycol chiller will also boost your electric bill substantially when it’s on a lot—like during harvest and cold stabilization. Our monthly bill jumped from $400 in August to $2,500 in September!

Finally, you might want to install voltage meters on your press, chiller, compressor and other high-voltage equipment. The first time we used our press, we got a surge from Pacific Gas and Electric (PG&E) that blew out our press compressor and cost us a lot of money to fix. We kept getting these surges, which caused other damage as well. Finally, PG&E discovered they had loose connections in their transformer that were causing the problems. Ultimately, you need to protect the equipment you depend on.

Tanks, press and other crush equipment
Get ready for a shocker. New stainless steel tanks are expensive. (Oak and concrete tanks cost even more.) If you can find good used tanks, you’ll save money—maybe half of what you’d pay for new ones. Don’t forget you’ll still have to outfit them with glycol piping and thermostats.

Like used tanks, a used press and destemmer will cost much less than new ones. If you can find used equipment through a reputable dealer who can guarantee functionality, you’ll save money. We’ve used Carlsen Waukesha pumps for years and have had great experiences with both their equipment and service. So when Carlsen offered us a used press, hopper and destemmer at a great price with a warranty, we jumped at the opportunity. (Be wary, however, about buying used equipment from a winery that might be in financial straits. You may find you’ve purchased something that belongs to the bank.)

Also, remember you’ll need a forklift. Even used ones aren’t cheap; we paid about $20,000.

Outfitting the winery
Roll-up doors will cost you between $4,000 and $8,000, depending on their size and whether or not they are insulated. To save money, we purchased roll-up doors that open manually from R & S Erection.

For security in the city, get a camera or two along with your alarm system. It can be dangerous out there. We’ve found a great local company called Hi-Com Security. We also needed to do a lot of metal work creating fencing to protect the production area and the yard. Our metal door was also specially constructed along with our stairway. All the metal work was done very well and at reasonable cost—but still not cheap—by Jose Robledo, who is based in Napa.

If you are on city water, you’ll need a chlorine filter. (You don’t want chlorinated water in your winery production area. It heightens the risk of cork taint.) These filters are relatively small (about the size of a nitrogen canister) and cost about $2,000 (cheap!). They need minimal servicing. We found ours through Weeks Drilling & Pump Co. in Sebastopol, Calif.

Transport of materials
The cost of moving stuff around can be incredibly expensive. If you’ve got a small flatbed truck or large trailer at your disposition, you will save money. But you’re still going to have to hire folks to move your big-ticket items like tanks, presses, chillers and compressors. Our biggest one-time transport expense turned out to be for the crane company that hauled seven tanks, our press, hopper and destemmer about 100 miles for just under $7,000.

We also had to move about 400 barrels—some full and some empty. Forget about moving anything in an 18-wheeler for much less than $500. And if you’re entering the ranks of the newly fashionable urban wine scene, remember that your growers don’t really want to deliver grapes to the city. We bought a trailer for $5,000 that can haul about 3 tons behind my Ford F-150 pickup. But for larger loads, we’ve had to negotiate supplemental fees with a number of our growers or truckers.

Photo finish
Our first grapes from the earliest harvest in memory were picked Aug. 18. A week prior to that, we still hadn’t finished the glycol piping for the tanks, nor had we even turned on the chiller or tested the new press. Our electricity and hot water began working a week before the first pick, although Internet proved to be a problem. Comcast told us it would take 90 to 120 days for an Internet connection in Berkeley! That wasn’t acceptable, given that we have a business to run. So we found an independent provider who gave us Internet in one day—and at a better price, too.

Nonetheless, the winery was still a construction zone at first crush. We were finishing floors, painting walls in the offices and even painting six parking spaces outside the building (a city requirement). We also had to pour more concrete for a new sidewalk required by the city’s zoning laws. By Sept. 3, we had Pinot Noir in one tank and Sauvignon Blanc in another tank. The cellar crew was working on the wine, while right above them the construction crew was putting the final touches on ceiling insulation.

We finally got the front door installed, the exterior walls painted and the conference/tasting room almost finished in time for an opening party Nov. 2. Alas, the winery sign wasn’t quite ready by then, but at least we were able to make wine this harvest, and that is something we can be thankful for. (If we were in Napa, we’d probably still be waiting to get our winery permit approved.)

Bottom line
As any new winery project unfolds, there are bound to be surprises. Before getting started, make a detailed budget and try to stick to it. It’s the only way to anticipate or control costs. Give yourself a year, if you can, to plan and build. Remember to create a timeline with your architect and contractor, who will need to understand that ripening grapes do not wait for anyone. And just for good measure, assume harvest will be early!


Jeff Morgan is a partner in Covenant Wines, winemaker, winemaking consultant, writer and former professional saxophone player.

 
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LATEST READER COMMENTS
 
 
Posted on 10.30.2017 - 22:08:37 PST
 
Jeff,
Thank you for sharing your experience about building your winery. I think anyone that has build a structure for a specialized business could identify with much of what you learned. I know that i do from my prior business life before the wine business. However, building a winery is new territory for me and I think I will be able to use your advise. Thanks again. Mike Dickey
 
Michael Dickey
 
 

 
Posted on 11.30.2017 - 14:34:50 PST
 
I'm in the process of opening an urban winery. The pointers above regarding some of the upfront costs were really helpful. I was wondering if you wouldn't mind sharing estimated costs for month to month expenses. I thought I had everything covered in my business plan, but one of my advisers pointed out that I hadn't thought of everything. I want to be as accurate with my numbers as possible before I start recruiting partners.
 
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