The cost of admission
- October 1, 2008
by Jim Raper
Starting a winery in Virginia isn’t cheap. But it’s a bargain compared to more established wine districts such as Napa Valley in Northern California.
Anthony Wolf, a state viticulture specialist and Virginia Tech faculty member, estimates that purchasing land and starting a vineyard in a prime location in Virginia will require an initial investment of about $12,000 an acre. During the four to five years that it takes for vines to reach maturity, the investment jumps to $20,000 an acre before a significant return can be anticipated. (Increasing the number of vines per acre — which can improve wine quality — can drive up the outlay by as much as 100 percent.)
So establishing a typical 25-acre vineyard in the state would cost in the neighborhood of $500,000. The same tract in Napa could require an investment of $10 million or more, according to studies done since 2006. Throw in a winery, equipment, a tasting room and a winemaker, and the cost in Virginia easily tops $1 million, and some people say that’s a conservative estimate.
In fact, many newcomers to the state’s wine industry are rolling out facilities from the initial opening that can serve as venues for weddings and other events. Events help pump up the income stream. (For stories on some of these wineries, see pages 64-70). Other established wineries, such as Barboursville Vineyards and the Williamsburg Winery, have opened full-service restaurants and inns to enhance their vineyards as a tourist destination. Other vineyards are taking the model even further by locating next to upscale residential developments.
Typically, a Virginia harvest yields five tons of grapes per acre — worth about $1,400 per ton. The income kicks in after the vineyard is mature and can last for the lifetime of the vineyard, about 30 years, promising a tidy agriculture profit even after labor costs.
In addition to the state’s 140 farm wineries, there are about 300 vineyards that sell grapes to wineries. Overall, the state’s wine-grape production stands at about 5,600 tons, making Virginia the nation’s fifth largest producer of vinifera grapes.
William Moses, CEO of Kluge Estate Winery and Vineyards in Charlottesville and a member of the Virginia Wine Board, says the state industry needs more commercial vineyards to increase production and extend the reach of Virginia wineries into other states. “The state needs to encourage planting a lot more vineyards to get wine down in the price range where we can be competitive,” says Moses.
Wineries, he adds, complement state efforts to preserve rural areas. “Not all farmland in Virginia can be vineyards, but I’m saying that grapes are a good cash crop.”
The Kluge Estate operation, started in 1999, has 229 acres of vineyards, and a rustic farm shop and tasting room — an investment of many millions.
Philip Strother, a lawyer who started Philip Carter Winery in Fauquier County this year, has represented wineries in legal matters. He says the Virginia Farm Winery Act provides a regulatory climate that encourages vineyard and winery development, probably more so than the laws of other states. Yet as the industry grows, he sees some county governments trying to clamp controls on winery events, seeking to reduce traffic congestion and noise.
Another challenge? Migrant labor. As some Virginia localities crack down on illegal immigrants, vintners in Northern Virginia are seeing a drop in the numbers of legal foreign laborers, who traditionally help with grape picking during the annual harvest. “We’re so reliant on migrant labor,” says Terry Holzman, owner of Prince Michel Vineyard & Winery near Culpepper. “Not everyone wants to pick grapes,” he adds. “It’s getting harder to find workers.”
Entrepreneurs in search of information about starting a commercial vineyard should be on the lookout this fall for the updated edition of the Wine Grape Production Guide for Eastern North America. Virginia Tech’s Wolf is the lead author and editor. For more information on the publication, go to http:faculty.vaes.vt.edu/vitis.