The Covered Bridge Cellars Blog

What is a Virtual Winery?

In our Twitter profile under the bio line for @CBCwinery  (That's our Twitter ID) we have written the following:

 

"Covered Bridge Cellars is a virtual winery making ridiculously small amounts of Pinot Noir and Chardonnay at Crushpad. Tweets by Casey and Jeremy."

 

A recent new follower on Twitter via a Direct Message (DM) asked us a simple question: What is a virtual winery?

 

Below is our less than 140 characters repsonse:

 

"VW's don't own vineyards or winemaking facilities. @crushpad makes our wines to our specs. Check this article out: http://bit.ly/1304c "

 

The link is to an article from winebusiness.com about the technical definitions of a virtual winery as it relates to various winery licenses. The numbers are from 2005, but that's not important. Here are the key takeaways:

 

"As of November 2005, the number of wineries in the United States has increased to 5,364, according to the latest Wine Business Monthly proprietary research. This figure includes 3,606 bonded grape wineries and 1,758 "virtual," or non-bonded, wineries. The data excludes mead or non-grape wineries.

 

The Wine Business Monthly count includes 1,758 virtual wineries. Virtual wineries are wineries that do not hold their own bond. A virtual winery has a physical location (which may be at another winery), produces at least one brand, and has its own management and winemaker although the winemaker can be a consultant or work for multiple wineries.

 

Wine Business Monthly includes virtual wineries in the final count for several reasons. In many cases, a virtual winery acts in much the same way a bonded winery would act, differing only in that the virtual winery has to use an outside bonded facility to physically make and bottle the wine. It is also not uncommon for a bonded winery to have begun operations as a virtual winery and then eventually grow large enough to invest in their own bonded facilities. By definition, all virtual wineries have complete control over decisions regarding the wine, from vine to bottle."

 

So from a legal standpoint a virtual winery is simply "non-bonded." The article goes on to state that these entities often migrate to bonded status at some point. And if you look at more recent industry figures, 2008 for instance, you will see that bonded wineries indeed represent a greater proportion of the total. This could also mean that fewer virtual wineries are being formed relative to bonded wineries.

 

From a business perspective, the virtual winery model is very compelling. It's less risky, as large capital outlays are not necessary since the winemaking is essentially outsourced. Variations on this theme would include winemakers utilizing some other bonded wineries facilities, but making the wine themselves. They might already have fruit sources available, but not enough production to justify building their own winery. This is very common in the industry and the level of involvement by virtual winery "owners" varies considerably.

 

Take the Crushpad model for instance. Someone like David Dain, the proprietor behind Dain Wines, takes vacation time from his day job to go to the Crushpad facility to make his wines each year, whereas for us, getting fully involved in the actual winemaking process over several weeks is a challenge. And yet still, other brands producing commercial product at Crushpad might not have any desire to deal with the "wine production" aspect of the business at all, as they are content to simply market and promote their wines. Their only involvement might simply be to say to their winemaker: "just make the best wine possible, thanks!"

 

So that's pretty much it in a nutshell. We like the virtual winery model because it allows us to produce a high-end commercial wine product without the need to come up with a few million bucks for land, buildings, and equipment. Since the vineyard management, winemaking, compliance, shipping, fulfillment and back office work is completed by Crushpad, we have plenty of time to build close ties with our customers, which is something we really like doing. It also allows gives us time to enjoy the wines we make with family and friends. In a future post I'll delve into some of the defining charateristics of the Crushpad model since it really is unique to the industry.

 

Jeremy 

New Vine Logistics FAIL

The wine industry is reeling from the news that New Vine Logistics has gone belly up. This is really a disaster for any winery that was using the company's fulfillment and compliance services. The best account of what happened comes from Lew Perdue, editor of the blog Wine Industry Insight. The bottom line is that NVL was caught in a fatal cash burn scenario. The company's investors couldn't stomach any more red ink and refused to inject any more equity into the venture. Now, winery owners are left trying to figure out how to get their wine back and how they are going to ship it to customers in the future.

The ramifications of this collapse are broad. This is not good for the Direct-to-Consumer movement and it's obviously not good for the smaller wineries that need to outsource their wine storage, fulfillment, and compliance needs. We will have to wait and see the extent of the damage, but clearly there will be some producers whereby this event becomes the straw that breaks the camels back.

While this is obviously crappy news, at least it didn't happen during the holiday season, a part of the year where many wineries capture significant and much needed cash flow. If there is any positive news here, that would be it.

And just when you thought their couldn't be anymore "risks" associated with this industry, we are all reminded that suppliers need to be vetted and chosen carefully in order to avoid situations like this and that it's not just agricultural or weather related issues that need to be thought about from an operational and financial risk perspective.

As more details start to come to the surface it's comforting to know that the failure of a third-party logistics company is not something we have to worry about here at Covered Bridge Cellars. Crushpad has taken a vertically integrated approach to wine storage and order fulfillment. In 2007 the company updated winery customers on it's in-house logistics efforts:

Logistics - 2007

• Launched a logistics operation to improve shipping accuracy

• 15,000 square foot warehouse with 2 full-time logistics staff members

• Added address and compliance validation to reduce return shipments

• Increased options for shipment to include 1 and 2-Day Air Service

• Added software and weight validation resulting in less than .05% errors during our busiest month ever

• Initiated 3-Tier direct shipping project to increase distribution (starts Feb. 2008)

• Subsidized shipping one bottle nationwide to increase trial purchases

• Added shipment tracking numbers to order confirmation emails and order records

• Re-aligned shipping charges to better reflect per bottle costs

Crushpad's logistics warehouse is a state-of-art, temperature controlled facility, that has around eight full time employees dedicated to getting the wine out the door to customers. As with the winemaking, we have access to all the critical shipping and inventory data via a secure web-based interface. The entire operation is top-notch without a doubt. And Crushpad as a business is well capitalized, operationally sound, and cash flow positive--traits that are a tremendous competitive advantage for any company in the wine industry--particularly in this economic environment.

*UPDATE*

It appears the comments above about NVL not having an impact on our business were incorrect! Crushpad actual does use the company's services for shipping wine to three-tier states such as MA and NJ--although no wine is stored at NVL. We just got an email from Crushpad letting us and others know that shipping to MA and NJ is no longer an option. Of course, once a new vendor is chosen this option will be available again. This is part of the email that was sent:

"We can confirm that none of your inventory is at NVL. That is the good news.

The bad news is we are left with no legal shipping options for New Jersey, or Massachusetts. We are actively researching alternative solutions for these markets, and will update you as details are available."  

Shipping via three-tier is super expensive, something like $15 per bottle and it takes forever because the wine has to physically go to a distributor, then a retailer, then on to the consumer's address. No consumer is going to pay that, but we still wanted to keep it as an option.

When we purchase wine online we simply have it shipped to addresses in NH or CT, where direct sales are permitted. But not everyone has that luxury. This entire mess only highlights the idiocy behind the restricitve, anti-competitive, direct shipping laws in states like ours and elsewhere. If we could ship direct to every state legally, there would be no need for a company like NVL to offer a "three-tier" shipping solution.

As we get more information we'll update you as to what's going on. For now, it seems like we temporarily lost the ability to ship wine to MA and NJ via three-tier. What a bunch of BS.

Jeremy

Post Bottling Update (PICS)

So, thankfully, the inaugural bottling for Covered Bridge Cellars went off without a hitch. It was fascinating watching the action as our 2007 Hein Pinot Noir was finished and packaged into a full-on commercial product. The Crushpad crew---as you will see below---took great care to make sure everything was on point. Below is a series of screen shots that will give you a sense of what it was like watching it all unfold live via the internet. I mean really, how else would a virtual winery keep tabs on this process? As with all the pictures posted to the blog, you can click on them to get the larger version.

*EDIT* You can also go through the photo deck by clicking the "Next" button in the upper right hand corner of the larger image, its white so its tough to see.

An overview of the bottling line




Our Covered Bridge Cellars branded corks

Prepping the label roll

Feeding the roll into the machine

Labeling test run, notice the control  bottle




Fresh bottles ready to go through the line




Filling up the bottles with Pinot Noir




Using a caliper for quality control checks




Capsules being "heat shrunk" onto bottle necks




A case of juice ready for taping and storage




Finished bottles coming off the conveyor




Around 25 cases of Hein Pinot Noitr  : )



The End

I mentioned in the last post that both our wines would be bottled together, but that is not the case, our Alder Springs Chardonnay is actually scheduled for bottling Tues, Sept. 9th at 9am.  So I guess we get to do this all over again then!

Either way, getting our wine to this stage is a nice little milestone for Covered Bridge Cellars. Some of you might be wondering about our labels and what they look like. We are still waiting on a few things, but very shortly we will unveil them here on the blog. We will also have some updates on the design of our website which is coming along nicely--it too will be unveiled soon. In the meantime we are going to try and get back on a regular schedule of posting. There is lot's to talk about, but time is sometimes tough to find. 

Jeremy

A Visit to Crushpad and Anderson Valley: Day One Continued

The most exciting aspect of our first trip to Crushpad was the anticipation of getting to taste our wine. The evolution of wine in the barrel is one of the more fascinating stages of the entire winemaking process. In our home winemaking pursuits, we taste our developing wines multiple times after fermentation in order to get a sense of how things are progressing and to see whether or not we screwed anything up!

Typically we do this during racking and when the urge to break out the wine thief strikes us. Since our Crushpad wines have only been in barrel for a few months we weren't really sure what to expect. I think we just wanted to see that the juice was in good condition and free of any serious flaws or defects. The tasting notes that Crushpad sent us, as well as the feedback we got from Chris prior to the trip, were all really positive--but still, you sometimes need to check out/taste things for yourself.

After a tour of the major components of the facility, Chris found our Hein and Alder Springs barrels and we got our first look at our liquid assets, so to speak. I would characterize Chris as quite simply, a really cool guy. Hopefully, at some point we can do a little conversational blog interview with him, a la the style penned in the book New Classic Winemakers of California--an excellent read that I would like to explore in a future post. But for now I'll give you the notes on our wines, starting with the Alder Springs Chardonnay:

Wine is clear, MLF has not started yet, might have to inocculate in a week or so, light to medium straw color, medium weight, classic chard fruit coming through with nice honey, pear, and tropical aromas on the nose, still one dimensional on the palate with lots of acidity, clean finish.

The wine at this point seemed pretty plain vanilla and a little closed, which I guess is to be expected. However, I suspect that after MLF and some more time in barrel that the aromas mentioned above will become more concentrated and that the richness that the wine is now lacking on the palate will become readily apparent. Overall, we were very pleased with the quality showing through with this wine despite its youth. And for the Hein Pinot:

 

Clear, awesome color, med-deep garnet with purple hues, blueberry, raspberry, and blackberry blend of concentrated aromas on the nose, excellent balance and weight on the palate, silky texture and mouth feel with a subtle spiciness that dissolves nicely on the long finish.

Really, we could have fired up the bottling line and drained that barrel right there and we would have been ecstatic. In a word, our Hein Pinot is shaping up to be, awesome. There is richness and concentration, yet, also a subtleness and elegance that seem to coexist in perfect harmony even at this very early stage. Our goal for our Anderson Valley wines is to really try and strike a nice balance between power and finesse and I think we are right on track with this first effort. We should be getting some samples in the mail--of both wines--at some point so it will be really interesting to see what another few months will do for things. We'd like to try and get some samples out to the handful of brave souls on our mailing list, but need to get some more info on that. Overall, day one of our trip was really great. Now, if only Crushpad would open up a Boston facility so we could visit more often!

Stay tuned for Day Two, our first visit to Anderson Valley

Jeremy & Casey

A Visit to Crushpad and Anderson Valley: Day One

We had the great pleasure of escaping the wind, cold and snow of New England this past holiday season by making a west coast road swing to visit family in sunny southern California. During the second half of our trip we made our way up to San Francisco to check out Crushpad's new state of the art winemaking facility. We also had the chance to meet with our consulting winemaker Chris Nelson and taste some barrel samples of our Hein Pinot and Alder Springs Chardonnay, as well as some other juice. Below are a few pictures of the warehouse space that the nice folks at Crushpad call home. This first one is a somewhat distorted "stitched" image of the entire main production floor. You can click on this and any of the other photos to see a larger version.

Things were pretty quiet given that all the wine is "sleeping" at this point and we visited on a Friday afternoon before a holiday weekend!

A look at a small section of the barrel room. Somewhere in the middle of that rack is our lone barrel of chardonnay. The stack of T-bins to the right goes six high, three deep, and about 14 wide--and there were probably twice as many in the cold room.

Here is a look at two very excellent pieces of machinery: The Italian made GAI 1201 Corker Filler and GAI 6010 labeler. Click here to see a cool video from the Crushpad site of the line in action.

A sampling of some of the finished product.

The entrace to the winery.

I'll be posting all the pictures from our trip to the photo section of the blog after I do some more editing. Rather than getting into the barrel tasting aspect of our visit here, I'll continue with day one of our trip in a subsequent post. Stay tuned as there is more yet to come!

Jeremy