In the weeks that followed the entire restaurant industry folded as one state after another ordered them closed. Millions of gig workers lost their jobs without warning and many restaurants will not open their doors again. This is all well-publicized information, but what about all the industries that feed the beast that is the restaurant industry in America? If we consider everything it takes to operate a restaurant, what industries are supporting that? Meat and produce purveyors, restaurant supply companies, and wine distributors, just to name a few.
Wine distributors and, by extension, wineries were hit especially hard when restaurants shut down as those sales account for a huge portion of their annual revenue. With restaurants either closed up or operating at a fraction of their normal business through take away, they are not buying wine from their distributors who, in turn, are not buying from wineries. Even large, well-funded wineries are struggling because of this trickle-down effect, so what about the small family-run wineries? It is these boutique wineries that are hurt the most in the wine industry. Though retail wine sales are booming, most small producers don’t make enough wine to sell to large grocery chains or regional wine retailers. Many of them sold primarily to restaurants or relied on sales generated by their now closed tasting rooms in addition to selling directly to their wine clubs.
This has led to small wineries having to make tough decisions quickly to avoid complete financial devastation. How do they keep their team and themselves employed? How will they pay their bills? How will they collect on payments owed to them when many of those companies are struggling just as much? Most importantly, how do they keep their teams, guests, and community safe as the country begins re-opening?
This is a struggle I am personally familiar with as the National Sales Director for Dusky Goose Winery, a small Willamette Valley, OR winery. Almost instantly my job went from flying all over the country for meetings and events to strategizing via countless phone calls and virtual meetings with my small team of co-workers on how to keep the business viable in the current state of the world. Like many other small wineries, Dusky Goose initially shifted our focus to online sales and have been navigating all the unknowns and new challenges that arise together, our small team taking an all-hands-on-deck approach.
Recently I spoke with Mike Willison, Director of National Sales for fellow Willamette Valley winery, Patton Valley Vineyard to see how they have been faring. “Overall, we are trying to stay optimistic rather than going into a complete panic. We made early moves to protect the winery, our jobs, and make sure that we don’t do anything that could negatively affect Patton Valley when things improve,” he said. What Mike is referring to is the decision many wineries have had to make about cutting their pricing to generate any income at all through retail sales, even if that means breaking even or taking just a bit less of a loss. “Not that we would want to, but we could cut our prices by any amount and it wouldn’t matter because we aren’t big enough to be in grocery chains,” Mike added. For a winery that sells primarily to on-premise accounts, the restaurant shut down has been especially taxing.
Many small wineries around the world are in triage mode, figuring out where they can make cuts on the hope they will survive, sometimes letting go of long time employees or choosing not to farm all of their grapes in the 2020 vintage so they can at least afford to harvest some of them in the Fall. These are painful decisions to make, especially for small winery owners who look at their career not as a job, but as a calling in life.
These are the people who tend their grapevines with the same care they would a child, who are out in the vineyards in blazing heat and miserable, soggy days affectionately doting on their vines. It is hard, backbreaking work and there are no shortcuts to producing high-quality fruit. Though Mike’s role is traditionally in sales, he is pitching in to help out in the vineyards so Patton Valley can save money on labor costs. “I look at myself as being a level one vineyard worker on a summer internship. If you didn’t already appreciate the work our vineyard management teams do before, you definitely will after a day in the vineyards,” he said.
In the southern end of Napa Valley, California Elise Nerlove, co-owner of Elkhorn Peak Cellars, grew up learning how to farm wine grapes from her father and co-owner Ken Nerlove, who established Elkhorn Peak Cellars in 1983. “Farming is a hard life. The farm comes first and we are at the mercy of the farm. As you work season after season you learn to accept what Mother Nature gives you,” she said. This mindset of rolling with the punches and adapting is necessary in the battle to save their family business.
Producing less than 1,000 cases per year, Elkhorn Peak Cellars sells primarily through their wine club, so they were not as affected by the restaurant shut down. However, while their business model has insulated them from that aspect of the economic downturn, it is now more vulnerable than ever as these conditions make growing their wine club especially difficult. “Now that it’s a multigenerational family business it’s no longer enough to sustain us financially like it was when I was growing up,” Elise said. Their sales and marketing plan for 2020 had included a focus on national travel to grow their wine club by pouring at wine events, partnering with hotels and hosting wine dinners. That plan, of course, is now squashed for the foreseeable future.
Without a tasting room and without the ability to grow their wine club, Elise and her father are understandably concerned about the future of their winery. One path they’ve taken is hosting virtual tasting sessions. This is an outlet that has proven to be very popular, especially amongst small wineries. Elise says “small wineries may actually be better set up to communicate virtually because we don’t have the option of inviting guests to a tasting room in the first place. We have to paint the picture of the vineyards and bring them to life without people being here to see it themselves”.
Another opportunity Elkhorn Peak Cellars and other wineries utilize is the exposure offered by Cellar Angels, an online wine curator of limited production, hand-crafted wines. Now in its tenth year of operation and specializing only in the Napa and Sonoma wine regions, Cellar Angels provides small wineries a national audience of wine enthusiasts through the Direct to Consumer channel rather than via retail. This allows Elkhorn Peak Cellars to grow their database without leaving the winery.
Elise is a long time advocate for small wineries in California, joining the board of Save the Family Farms in 2017. Save the Family Farms was founded the year before in 2016 by a group of winery owners whose objective is to keep micro-producers viable for future generations. The challenge comes in the form of the Winery Definition Ordinance, which was created in 1991 as a way to stop the explosion of wineries in Napa Valley in the 1990’s so the region could maintain its agricultural ruralness. While many agree that the creators of the WDO, as it’s known, had good cause and intentions for Napa Valley, the fact that the Direct to Consumer market didn’t exist in the 1990s combined with its one size fits all approach has left small family wineries at an extreme disadvantage, especially as they are unable to host tastings on their property without risking a significant fine.
“The bar has been set too high for regular people to participate in the Napa wine industry. It takes several years and costs up to $10 million to get a permit for a winery,” Elise explains. The goal of Save the Family Farms is to create a process for micro-producers that fits the small business model whose needs are not the same as the large wineries. If they can get a micro-winery ordinance passed, it would allow producers like Elkhorn Peak Cellars more direct access to consumers and would level the playing field between large and small producers. “This ordinance is do or die for us because if we want to grow, we need access to the consumers,” Elise said.
To the north, just outside Santa Rosa, CA, is Inspiration Vineyards where owner Jon Phillips planted his first vines in 2002. Another micro-producer, also making under 1,000 cases of wine each year, Inspiration Vineyards shuttered their tasting room on March 6th. “We’ve since pivoted to virtual tastings because we are only a team of three people and there is just too much to lose with harvest around the corner. We’ve already lost a tasting room employee due to them not feeling safe coming in to work and we may never open up our tasting room for walk-ins again. It might be by appointment only from now on,” Jon said.
Maintaining his small wine club is key right now, focusing on growing his relationships with his club members through weekly virtual tastings, where he entertains a core group each week. Elaborating on this point, Jon says “being able to maintain that relationship with my customers, even across the country, is so important. I really love interacting with them.”
As Chair Emeritus of Family Winemakers of California, Jon is deeply entrenched in the fight to give small family wineries a voice in the national market. Family Winemakers of California lobbies for changes to be made to U.S. wine laws to allow more free-market sales (i.e. less emphasis on the current three-tier system). Since the pandemic, this group has lost key members, canceled all of their 2020 events, and since tasting room sales typically contribute to their budget that has dried up as well. Now they are looking for alternative ways to sell wine while pushing the Department of Alcohol Beverage Control to change outdated systems.
Looking forward, Jon sees continuing to build relationships with his wine club members as his best avenue forward. Luckily, before the pandemic, Jon had the foresight to begin offering other services such as using his winemaking facility as a custom crush for other local winemakers. By diversifying, he gives his business a more stable platform to build upon. And, despite the grim news reports, there is plenty of available fruit for sale and plenty of people still looking to get into the wine business. “For everyone who says they aren’t making wine this year, there are an equal number of newcomers saying they want to make wine,” he says.
Jon will be ready to partially retire in a few years and plans to split Inspiration Vineyards with his production manager so he can take a step back. Jon has good reason to want to withdraw from the day to day a bit; his July 2020 wedding was postponed to next year due to the pandemic. It is another reminder that while the pandemic and repercussions of global shelter in place orders are clearly affecting the global economy, the human element of this situation we find ourselves in is taking the biggest toll.
In walking through the links from restaurant closures to wine distributors and finally to the small, family-run wineries we can see how each facet is affected by the current state of the U.S. Last on that food chain, even the most resourceful small wineries are left wondering how they will survive this mountain of a challenge. Since the pandemic, there have been rallying cries in cities across the country to support local businesses and therefore support your communities.
For wine lovers, it is of the utmost importance to remember that while you may not live in a winemaking region, small wineries become a part of your community each time you open a bottle and they need your support.