by Tamara Scully
New York State has 10 federally-recognized American Viticulture Areas (AVAs), including the most recent Upper Hudson designation. These designated areas indicate that wineries in the region are crafting a unique product, based on the distinctive characteristics of the geographic region, and are distinguishable from wines created from grapes from other areas. Wines with 85 percent of their grapes sourced from the AVA and fully produced in the region can carry the region’s label.
AVA designations are controlled by the Alcohol and Tobacco Tax and Trade Bureau (TTB). These distinctions can help wineries attract wine tourists to a region, branding the wines produced through common geography.
Northern New York (NNY) is home to several wine-growing regions, including the first cold-climate grape AVA designated in New York, the Lake Champlain Region. There are three official wine trails established in NNY: The St. Lawrence Wine Trail, the Adirondack Coast Wine Trail and the Thousand Islands-Seaway Wine Trail.
Lindsey Pashow of Cornell Cooperative Extension’s Harvest New York addressed common considerations associated with starting a winery in the NNY region during a recent webinar from the Northern Grapes Project. While her research and specific data involved NNY area wineries, the information is valuable to anyone with an interest in exploring the potential for opening a winery.
Target markets
“It’s not a competition among wineries,” Pashow said. “You’re actually working together to create a wine industry” in the region, she added. “Customers are all different. They enjoy sweet, dry, red and white wines. Encourage your customers to visit your neighbors.”
As with any business, knowing who your customers are going to be and how you are going to attract them is key. Will your winery be making a wide variety of wines? What types of wines are already being made in the region? In NNY, the 14 current and future wineries surveyed typically planned on six initial wines, and with eventual expansion of up to 15 to 25 types, including a wide array of fruit wines, Pashow said.
Very few, if any, NNY wineries are using distributors for their wines, primarily due to the smaller volumes being produced and the cost of distribution. The wineries offer in-state sales, both retail and wholesale, with very few out of state sales — which require state-specific licensing — being made. Selling wines at farmers markets offers another venue for direct sales.
There has been an effort to attract a local customer base, with most wineries adding live music or ongoing events in order to “bring back local business weekly,” Pashow said. Opening the winery for weddings, festivals and special events is also common.
If the local customer base isn’t enough for sales, what is the potential for creating a destination winery? Is the region at capacity for wineries, or will adding another winery help to expand the customer base by attracting more visitors? Is it likely that the area will become a destination region, if it is not already?
Startup costs
Every winery will need equipment. Harvest New York offers interactive spreadsheets to guide users in assessing the necessary equipment and likely costs of establishing a winery.
Deciding between new or used equipment, as well as determining the size of equipment to purchase, are other important factors. Depending on winery size and available capital, some less expensive equipment options include using glass carboys or plastic tanks, but the long-term feasibility of these options needs to be considered.
“Consider starting out small and purchasing larger over time” is the advice given by the NNY winery owners surveyed, Pashow said. She recommends that prospective winery owners “really spend some time and look at existing wineries.”
Spreadsheets in the Harvest New York toolkit also offer yield per vine and yield per acre calculations. These can assist wineries in planning for production based on the number of vines being harvested. This tool can also help determine production levels needed to justify winery expenses, as well as to determine the size of the tanks and other equipment needed.
Whether building new or renovating, permits may be required. Having a backup plan for the building, should the winery not be viable long-term, is one way to reduce risk.
The size of the building is important. Will it accommodate the production facility alone, or will it be used as a tasting room or an event venue? In the NNY survey, most wineries reported having space limitations and needed to expand after several years.
Costs of production
In addition to the costs associated with licensing, permits, buildings, equipment and labor, there is a cost for purchasing or producing the grapes. Determining whether it is more profitable to grow your own grapes or primarily purchase grapes or juice from others is another decision, Pashow said.
Data from two New York wine growing regions compared the cost of production per acre of a variety of grapes. Based on these statistics, simply growing and selling grapes was not a profit-making business and adding a winery to a vineyard was a way to capture the value of the grape crop.
“Just growing grapes and selling them, you’re not really making any type of profit,” Pashow said.
An inexpensive bottle of wine in the liquor store may cost as little as $5. What can you provide that adds value to that, and how much more money will your customer base pay for those attributes? At what price point will you be making money and attracting the needed sales volume? In NNY, the average sale price per bottle of wine was $12.
Starting a winery isn’t a one-size fits all proposition. Very few wineries in NNY were primary occupations, but rather were either opened after retirement from other careers or were supplemented with other sources of income.
“Everybody’s operation that we saw in Northern New York was different,” Pashow said. “It’s a significant investment for everyone.”