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A close look at Carneros Vintners’ new 3-million-gallon, custom-crush facility in southern Sonoma County reveals a fascinating account of creativity, unconventional financing from a publicly traded company, and unique site challenges, all of which hold significant lessons for the industry.
Carneros Vintners. Winery site above red roof. Click image to enlarge. Photo Copyright 2009, Wine Industry Insight.
LAND, PERMIT, FINANCING DOMINOS FALL INTO PLACE
Wine Industry Insight’s in-depth examination shows that when Dennis Rippey signed the documents to lease the property and finance his proposed winery, he capped a series of events that began in 2002.
On June 17, 2008, according to state, federal and a multiplicity of county documents and databases:
- CCC VinREIT (owned by Entertainment Properties Trust, NYSE: EPR) paid Carneros View Vineyards (a UCC Vineyards fund) $2.7 million for a 20-acre parcel on Stage Gulch Road in southern Sonoma County.
- Carneros Vintners (owned by Dennis Rippey) signed a 10-year, triple-net lease on the property with CCC VinREIT. The lease provides for two, 5-year options.
- CCC VinREIT agreed to provide approximately $5.8 million for the winery’s construction and improvements.
Kansas City, MO-based Entertainment Properties Trust has $2-billion+ in assets and has structured sale/leaseback arrangements with at least 10 wineries and vineyards including EOS Estate in Paso Robles, CA; Napa Valley’s Cosentino Winery and Duncan Peak in Hopland, CA.
Sale/leaseback arrangements can free badly needed capital for expansion and other uses.
Please see WII’s upcoming article: Entertainment Properties Trust: Freeing Up VinoCapital for more details.
CUSTOM CRUSH, SOUP-TO-NUTS SERVICE FROM SMALL TO LARGE LOTS
Carneros Vintners has graded the site, and applied for permits for 64,000 square-feet of building construction including:
- a 48,000 square-foot building,
- 2,218 square feet of office,
- 1,782 square-feet of storage and
- a 12,000 square-foot canopy over the crush pads.
Graded site for Carneros Vintners. Click image to enlarge. Photo Copyright 2009, Wine Industry Insight.
The building permit for the facility has not yet been approved, but that could happen within the next three to four weeks according to people involved in the process.
Tyson Rippey, vice-president and general manager for Carneros Vintners, told WII that the facility plans to have a 10-ton minimum on crushing, but that “if there was a lot of demand for half-ton or one-ton lots, we could expand easily to accommodate those.
In addition to large crushers that can handle up to 35 tons per hour, Carneros Vintners will offer a variety of bladder presses, crusher sizes, and a wide range of fermentation tanks.
“We’ll also have elevated gravity flow crushpads to facilitate truck unloading and to treat the fruit gently,” Rippey said.
The facility will provide crushing, fermentation, barrel aging, temperature-controlled storage and bottling.
FROM QUARRY TO WINERY
In November 2002, California and Sonoma County documents show that UCC Vineyard Fund of Napa originally applied for the winery permits through its subsidiary, Carneros View Vineyards.
Carneros View Vineyards proposed to locate a 600,000-gallon (250,000 case) winery, tasting room, and visitor center on the reclaimed land formerly occupied by a basalt quarry that had operated there since the 1940s.
The site — part of a 153-acre parcel at 4200 Stage Gulch Road — was acquired by UCC Vineyard Fund in 1998. The site is southwest of the County of Sonoma’s Refuse Transfer station and an associated landfill which had been closed
Carneros Vintners Location. Click image to enlarge.
After UCC and the county settled contamination issues from the adjacent landfill, UCC moved the quarry to a site above the winery site, and split off three small lots from their large parcel, Rogers Creek Vineyards, and carved out a 20-acre plot for their proposed winery.
THE DEAL: A LONG TIME COMING
That plot includes the old Cabral Ranch property and its ranch house, barn and outbuildings. Carneros View Vineyards originally planned to convert those buildings into offices, a tasting room and space for events.
Those plans were approved by Sonoma County on April 4, 2007.
Carneros Vintners, Site Plan
In March, 2008, Carneros View Vineyards amended its use permit to eliminate the tasting room and expand production from 600,000 to 3 million gallons. Under the new use permit (expected to be approved in May or June) only the previously approved 600,000 gallons will receive soup-to-nuts treatment. The remainder will be crushed, fermented, stored, then shipped off site in tanker trucks for barrel aging and bottling.
Finally, on July 1, Carneros View Vineyard requested that the County of Sonoma transfer all the permit rights and responsibilities to CCC VinREIT and Carneros Vintners.
CARNEROS VINTNERS: THE RUSH TO THE CRUSH
Rippey said plans are to open for business in time for this year’s crush.
But even if the company gets the building permit approved by mid-February, that leaves only five-and-a-half months to crush which typically begins in Sonoma County with Pinot Noir in late July to early August.
Construction experts say that the task will be helped by the recession which makes it easier to find contractors and labor. The lower workload among county planners and inspectors should also make it possible.
“The permitting is taking longer than we had anticipated,” Rippey said, “but we’ve got people lined up, and the pre-engineered metal building should go up quickly.
EASING INTO OPERATION, WINEMAKER KEY DETERMINANT
Tyson Rippey said that with the rush to crush, the operation would not push the limits of the existing 600,000-gallon permit. “We’re experienced with this sort of operation, but we’ll have new staff, so we’ll ease into things and not push it this year.”
He said that his big priority right now is hiring a winemaker. “We’ve had a lot of interest, but people are waiting to see who we hire as winemaker,” Rippey said.
Many of the customers who have already signed on, Rippey said, are customers of the Lodi operation. “They’ve been taking their Napa and Sonoma fruit to our competition. Now they’ll be using us.”
NEEDS, CHALLENGES & “ONE-NIGHT STANDS”
While the need for custom crush facilities is badly needed, the going can be tough for the operators.
Wine consultant Allan Hemphill, who has run custom crush operations, told WII that, “There is significant, and growing, demand for custom capacity. Wineries have not expanded their capacity in recent years to handle even the fruit coming on stream with current plantings; much less plantings that will need to occur to support modest continued volume growth.”
On the other hand, another source — a Carneros Vintners competitor who spoke frankly on conditions of anonymity — told us, “The big guys will only use custom if it is cheaper than expansion of their own facility, as a short term solution to a new brand opportunity or as a shock absorber for bumper crops.
“As a purveyor of these functions,” he continued, “the custom operator is always engaged in a “one night stand” with no power to force future performance in light crop years or when clients change strategy.”
For his part, Dennis Rippey and his family operation have thrived since 1991 when he started Lodi Vintners. Since then, he has grown the operation from one to six million gallons per year.
TRAFFIC & CONSTRUCTION HASSLES
The winding, two-lane, shoulderless stretch of State Highway 116 — known in this area as Stage Gulch Road — presents its own hassles for Carneros Vintners. Used by more than 20,000 vehicles per day, it is also one of the most dangerous roads in Sonoma County. In the past 10 years, at least 31 people have been killed in a three-mile stretch that winds past the Rippey’s new winery.
In addition, the road leading to Carneros Vintners is also the access route to the County refuse transfer station. Stage Gulch is used by trucks carrying approximately one-third of Sonoma’s garbage.
Because of this, the winery use permit contains a condition that all trucks and private vehicle traffic to the winery must enter the road by making a right-hand turn. The no-left-turn condition means that trucks carrying fruit from west of the facility, must bypass the turn-off, find a spot for left-hand turns and then approach from the east.
CalTrans says that its July 17, 2008 letter to Sonoma County asking how this requirement will be enforced has not yet been answered.
In addition, CalTrans has long slated the stretch for straightening and realignment. CalTrans told WII that the highway construction, which has been delayed numerous times since 2003, is finally slated to begin in January 2010 and completed in June 2013. Until that happens and the planned left-hand lane completed, the right-hand rule will continue to vex the winery, grape deliveries wine shipments and pomace removal.
================= CONTACT DATA ====================
670 W. Napa St., Suite H, Sonoma, CA 95476
Phone: 707-326-4503, fax: 707-940-4146