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North Bay Business Journal

Monday, May 19, 2014, 6:25 am

Wine: First Lake Co. wine warehouse planned

Also: Direct wine sales help distribution, analyst says

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    Jeff Quackenbush, Staff ReporterThe wine business in Lake County has grown to the point that it needs more of its own support businesses. And wineries in the North Coast’s high country may be getting their first public wine warehouse.

    Under a plan by one of Lake County’s significant owners of commercial property, the long-vacant 18,600-square-foot grocery store at High Street Village Center on Lakeport’s main thoroughfare would be transformed into an insulated, chilled and surveilled warehouse capable of holding up to 150,000 cases.

    Owners of a Lakeport shopping center plan to convert this former grocery store into Lake County's first public wine casegoods warehouse, shown in an architectural rendering here.

    Owners of a Lakeport shopping center plan to convert this former grocery store into Lake County’s first public wine casegoods warehouse, shown in an architectural rendering here. (credit: Rick Gunier)

    Called Lake County Wine Cellar, this service would allow vintners to store their finished wine locally, rather then having it trucked back and forth from public wine warehouses in Santa Rosa or Napa and American Canyon.

    “Some of the wineries that make people’s wine store it for them,” said Rick Gunier, marketing director for the venture and co-owner of North Coast Winegrapes. “With Lake County wine business’ having grown to more than 40 wineries now, a lot of people are driving over the hill to get this service.”

    One of the challenges for new wine producers in Lake County is the high cost for delivery companies to send a truck to move wine to back and forth between warehouses outside to county, he said. That’s made more challenging by the requirements of having a bonded delivery service and refrigerated trucks, especially during Lake County’s typically hotter summers.

    So delivery could be a service added at some point, Mr. Gunier said. Up to this point, a number of wine producers have been moving cases back and forth themselves.

    A barrel supply also has expressed interest in having a closer base of operations to serve Mendocino and Lake counties.

    When Lake County Wine Cellar opens, targeted for the end of this year, it will feature fenced-off cubicles in the storage area and a nearly 4,000-square-foot tasting and hospitality center in an adjoining building that used to hold medical offices.

    The tasting venue would be available to casegoods storage customers to rent for their own events, styled after a similar program offered by the Lodi–Woodbridge Winegrape Commission.

    “An incubator-type tasting room will help smaller wineries get more exposure,” Mr. Gunier said.

    A notable local vintner that has signed up so far is Gregory Graham.

    Local contractors lined up for the job so far are Turner Insulation of Kelseyville and Refrigerated Technology of Middletown. The proposal has garnered support from the Lakeport Economic Development Advisory Committee and the Lakeport city manager’s office.

    The former grocery space, which makes up half the shopping center, has been vacant for nearly a decade as the Ruzickas, who own a local engineering company, looked for a suitable replacement, Nancy Ruzicka said. Until it set its sights on a Windsor location, Oliver’s Market had been interested, she said.

    The tasting room will complement the center’s existing Thai and steak restaurants, Ms. Ruzicka said.

    Now, the center has just 1,500 square feet to lease.

    ***

    Rather than a threat to three-tier distribution, direct-to-consumer wine sales are complementary, top Nielsen alcoholic beverage analyst Danny Brager told an audience of more than 450 at the Direct Sales Conference in Napa on May 8.

    “E-commerce for wine has grown 17 percent year-on-year in dollars in the past eight years,” Mr. Brager said.

    It reached $1.57 billion last year on 3.47 million cases sold online last year, according to a recent report by Colorado-based ShipCompliant, which presented the conference, and Wines & Vines.

    While just a sip compared with the $15 billion in annual wine sales Nielsen tracks, direct sales are growing at faster rates in revenue and volume, Mr. Brager said, citing data from Nielsen and the report. Last year, sales in brick-and-mortar stores through at 4.5 percent and dollars and 1.3 percent in volume, while direct-to-consumer sales grew at 7.5 percent and dollars and 9.3 percent in volume.

    After a direct purchase, 47 percent of consumers purchased more of that wine in a store or shop, and 45 percent bought it in a restaurant or other on-premise-consumption venue, Mr. Brager noted, drawing from a fall survey by Wine Market Council.

    Direct sales gives consumers access to more than 12,000 wines, yet a typical grocery store carries only about 600. Though experimentation has been a demographic hallmark of millennial drinkers, the majority of wine direct buyers are baby boomers, Mr. Brager noted.

    Craft beer is facing its own “SKUmageddon,” with more than 2,500 craft brewers nationwide now vying for shelf space and sales accelerating 18 percent last year, Harry Schuhmacher, editor and publisher of Beer Business Daily told the audience.

    As a result, craft brewers are drawing on direct-sales techniques pioneered in the wine business, he said. Yet brewers are still barred from selling directly to consumers in many states.

    Send items for this column to jquackenbush@busjrnl.com or call 707-521-4256.

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