Warehousing moves to huge Windsor space on Shiloh

[caption id="attachment_27819" align="alignleft" width="329" caption="Alexander Valley Cellars co-owners Merritt Dahlgren and his sister, Marci Jacobs, expanded the business into one of Sonoma County's largest warehouses."][/caption]

WINDSOR -- Alexander Valley Cellars is centralizing its wine warehousing while tripling the size of its direct-to-consumer business in an expansion move to one of Sonoma County's largest distribution warehouses.

The direct-shipping side of wine casegoods storage is helping buoy a segment of the industry that has been affected by a general trend in the past two years toward delaying higher-end wine bottling as long as possible.

Alexander Valley Cellars signed a sublease with Constellation Wines U.S. for 170,000 square feet of the vacant 283,000-square-foot warehouse at 1010 Shiloh Road and has an option to expand into the remainder, according to Merritt Dahlgren, co-owner of Alexander Valley Cellars.

That might be needed by late 2011, he said.

"The direct-shipping side of the business continues to explode," said Mr. Dahlgren.

The 2-year-old fulfillment division, called AVC Direct, now ships out nearly 300 orders a day for about 80 clients.

When the company moved casegoods and administrative offices from 120,000 square feet at 551 Aviation Blvd. early this month, it picked up 50,000 more square feet of wine casegoods storage and office space.

That allows AVC Direct to expand from 10,000 square feet to 30,000 square feet at 1010 Shiloh. It accommodates a lot more racking and stationary conveyors for processing, but it also has office space needed for data input for direct-shipping orders, according to Mr. Dahlgren.

The division now has 13 employees. The company has 24 employees all together, working in the company’s three warehouses and truck fleet, and more than 200 clients.

The first nine months of 2010 had mixed business results for the 16 North Coast and Central Coast public wine casegoods warehousers that industry analyst Jon Fredrikson of Woodside-based Gomberg Fredrikson & Associates tracks as a leading indicator of future wine sales.

“We’re certainly not seeing a really strong response overall from this segment,” he said.

Shipments from all coastal warehouses were down 4 percent from the same period in 2009, with a couple North Coast warehouses having better results, according to Mr. Fredrikson. That’s better than last year, when shipments of five large warehousers in Napa and Sonoma counties declined 20 percent in the first half of the year from the same timeframe in 2008, as distributors slashed their inventories of high-end wine.

However, it’s not a perfect indicator, he said, because of shifting between warehouses; vintage factors, such as wines now being released from the large 2009 chardonnay crop; and a big emphasis on delaying bottling as long as possible, according to Mr. Fredrikson.

This pushback on high-end wine entering distribution has accelerated the shift in recent years toward direct sales to consumers and trade accounts. A number of direct marketing and fulfillment companies have started and expanded in the past few years to fill this need.

Airport Business Center built the steel-framed structure at 1010 Shiloh in 2000 for Allied Domecq, which used it mainly for the Clos Du Bois wine brand. Constellation Brands acquired Clos Du Bois and other North Coast wine operations in 2007, and Clos Du Bois’ casegoods storage at 1010 Shiloh was consolidated to other facilities.

Constellation’s lease on the building is set to expire in July 2015, according to property marketing materials from commercial real estate brokerage Keegan & Coppin.

Alexander Valley Cellars subleased 60,000 square feet in 1010 Shiloh earlier this year for overflow storage. Airport Business Center, which owns 1010 Shiloh and 551 Aviation, worked out a deal by which the warehouser would relocate to Shiloh in early December, at the same time neighboring nasal home care products maker NeilMed would expand into 551 Aviation.

Started in a 20,000-square-foot warehouse in Alexander Valley in 1985, Alexander Valley Cellars now has three facilities, including a 70,000-square-foot warehouse also in Windsor under a new three-year lease, and is owned by founder Marc Dahlgren’s children, Merritt Dahlgren and Marci Jacobs.

Having the central warehouse allows the company to devote the original warehouse to items clients don’t want disturbed too often by shifting around, such as wine aging in about 3,000 oak barrels, according to Merritt Dahlgren.

The new location also has separate receiving and shipping truck docks to increase efficiency inside the facility as well as a large area for trucks to maneuver when they arrive and a separate lane for trucks to exit. The current location posed logistical challenges for trucks coming and going, Mr. Dahlgren said.

The facility also sits on the Northwestern Pacific Railroad, potentially opening up shipments by rail when freight service is restored to the line.

For details on Alexander Valley Cellars, call 707-541-7252 or visit www.alexandervalleycellars.com.