Projects make sense if they save costs, help grow sales

HEALDSBURG - The Seghesio winemaking family has found that an economic recession can be a good time to save money by spending money on construction that will make more money in wine sales.

It's a part of a "rightsizing" of previously planned projects some North Coast wine industry operations are exploring or implementing to align phases of the project with cash flow. Such phasing is being considered for the approved expansion of B.R. Cohn's cellar and events facilities in Sonoma Valley.

The Seghesio family is in the midst of a $2 million project aimed at increasing production 20 percent by adding barrel-storage space and installing new production and bottling equipment. Part of that project is the addition of a high level of insulation to the warehouse and a 50-kilowatt photovoltaic power system to reduce energy costs dramatically.

"These are projects the family has been looking at for the last couple of years," said President Pete Seghesio.

The family wanted to start the project in 2007 to meet a company goal of reducing the company's "carbon footprint" by 15 percent of that year's level by 2015.

"It just kills me to have these refrigeration units on during the summer, as they need to keep the barrel cellar cool," Mr. Seghesio said, noting that summer energy bills are double those of the rest of the year.

But in 2007, warnings of a coming recession and a drought-induced smaller crop put the project on hold, and the recession and frost of last year kept that project on the shelf. Yet with 15-year financing through American AgCredit, wine sales holding their own and construction costs about 20 percent lower than two years ago, partly thanks to mechanical systems installation and concrete pads by family member and contractor Dave Seghesio, the winery decided to undertake the project.

The big production crimp has been barrel storage, limiting production to 95,000 cases a year, according Pete Seghesio.

Architects Mike Palmer in Santa Rosa, in connection with The Fifth Resource, and George Beeler of AIM Associates in Petaluma, designed the facility upgrades.

Construction on a pad for new tanks and crushing equipment as well as a new 7,500-square-foot metal barrel warehouse supplied by Soule Building Systems of Cotati is set to start in early September and be complete by early next year. It will be built next to the existing barrel cellar, which also is getting an energy-efficiency upgrade.

On the steel skeleton of the cellar building will be insulated wall and roof panels, sourced from All Weather Insulated Panels in Vacaville, with insulating values of R-42 and R-60, respectively. That's about double what is typically installed for winery projects, according to Soule principal Allan Soule.

Nordby Construction of Santa Rosa is the general contractor on the new barrel building. Pure Power Solutions of Healdsburg is about half-done installing the solar system. ColloPack Solutions in Napa is set to deliver a bottling line with automated packing equipment in November, expected to increase productivity by up to 30 percent and reduce repetitive-stress injuries.

In Sonoma Valley, Bruce Cohn still plans to build an approved 3,000-seat amphitheater at his Sonoma Valley property to host his annual concert series and a 12,000-square-foot half-subterranean barrel cellar. But first he wants to undertake a smaller portion of the project, expanding the existing "long barn" cellar by 6,000 square feet, to reduce the cost of storing and transporting barrels from elsewhere.

"We're renting space in Napa, so all that money is going out the door anyway," Mr. Cohn said. "Debt service on the buildout would not be any more than the rent we're paying. I'm not taking on any more debt than I can support from sales."

Currently, he spends $120,000 a year to lease 12,000 square feet of south Napa warehouse space. B.R. Cohn would have to continue to store barrels there and transport the wine as gingerly as possible back and forth from the winery until the larger cellar is built along with the new amphitheater.

That phase, estimated to cost $3 million, will have to wait for a year or two for the financing environment to improve, according to Mr. Cohn.

"It's frustrating that after two and a half years to get the permit and then to have it all fall out and not do it," he said about the timing for the larger part of the project.

Until that time, he hopes to start construction in November on the $1.1 million long barn expansion and energy-efficiency upgrade, which will entail widening it and raising the roof to accommodate more barrels as well as adding insulation. Designed by Jim Henderson of The Fifth Resource, the expanded cellar is set to be ready for harvest 2010.

The plan is to allow weddings to be conducted in the cellar throughout the winter months to avoid having such events every weekend during the summer.