Introduction to the Wine Industry

Grapes

A wine producer requires grapes as a raw material.  These grapes can be acquired in several ways:

1. The wine producer can grow its own grapes.  This means it has full control over costs and their allocations.  The producer must acquire land upon which to establish a vineyard, or allocate land which is already under the control of the producer.  The producer must allocate money to the establishment of the vineyard, which will typically not have commercial yields until 3 years after planting, and in the case of the kosher wine industry, the grapes cannot be used or sold until the 4th year.  The costs for establishing a vineyard are high, but over long periods of time, the cost of the grapes becomes far lower than purchasing grapes.  The producer must be very careful to match grape varieties to land and climate, and to farm the vineyard properly in order to produce quality grapes. The wine producer is then forced to use the grapes he grows or to try to sell them at a profit.  He must be careful to put only enough land into vineyard to supply that which is required for his wine production.  Large vineyards favor automation, eith further potential cost reduction.
   
2. The wine producer can purchase grapes.  Over the long term, the cost of grapes is far higher than growing grapes, even in small vineyards.  On the other hand, there is no cost of establishing a vineyard, and grapes can be purchased immediately, without the lag time associated with vineyard establishment.  Furthermore, the producer need only purchase enough to satisfy his projections. He can purchase any varieties he desires, from any appellation, as long as they are available.  At a time of high demand, asking prices can reflect the demand, and the wine producer's costs rise accordingly.  The alternative, of long term contracts, alleviates much of the fluctuation, but binds the wine producer to the requirement to accept and pay for fruit even in the event of a business setback and declining sales.

  

Winery Facility

A wine producer requires a location to produce his wine.  The facility must be a bonded premise, and is subject to the regulatory whims of the state and federal governments.  There are various permits which must be acquired by the entity that controls the bonded premise.  Here again, there are several ways of going about this:

1. The wine producer can own the rights to his own facility, with his own bonding and permits.  Whether he builds his facility, purchases a facility, leases a facility or is an alternating proprietor within a facility, if he is producing wine under his own bond, his own staff may handle the wine and perform the actual production.  The producer will have access to all of the operational equipment available on site, to the extent that it is not being used by other entities also alternating proprietorships within the facility.  Typically, construction costs and equipment acquisition costs are high in a sole-proprietorship situation, with the requirement either to construct a facility or portion of the facility, or to purchase a facility inclusive of much of the equipment. Equipment is often already existing in an alternating proprietorship of an existing facility.  In any case, though, production costs are a combination of significant fixed costs accompanied with significant variable costs.  From a kosher producer's perspective, it is easiest to produce kosher wine in a facility dedicated to kosher production, where supervision costs, human resources issues and scheduling issues are kept to a minimum.
   
2. A wine producer can custom produce wine within an existing facility using the facility's bonding and permits.  Often, this requires the producer to remain distant from the actual production mechanics, with the facility's staff doing the actual work, in their own time frame, on their own schedule.  This lack of sensitivity is fairly typical within the industry.  The wine producer pays for space and operations on a per-ton or per-gallon basis, so that almost all costs are variable costs.  If wine is bottled in the process, the label may be owned by the wine producer, but the bottling is accomplished as a dba of the bonded facility.  From a kosher production perspective, this is more difficult than producing in a dedicated kosher facility.  If work is to be accomplished by nonJewish staff of the facility, wine must first have the status of "mevushal" (cooked).  If the work is to be done by the wine producer's workers, agreements must be drawn clearly delimiting how this will be accomplished while working concurrently with other winery production staff nearly overlapping in physical location and wine production needs.  Tanks require kashering at each use unless they are dedicated specifically to kosher production, and equipment must be prepared to accept kosher product at each kosher use.  Kosher supervision must keep track of the kosher product in the busy environment of a nonkosher facility.  There may be a requirement for full-time kosher supervisory staff in addition to production staff when required.  All of this is governed by some sort of agreement between the kosher wine producer and the nonkosher controller and staff of the bonded winery facility, and some sort agreement between the kosher wine producer and the kosher supervision entity.

Wine Production

Winery production is a complex blend of individual projects, sometimes iterative, and ongoing operations.  When a winery is small, it may have many individual projects devoted to production, while a large winery may have continuous operations performed by departments within the company.  For instance, a small winery may have the same three or four people actually involved in each and every step, thoughout the wine production cycle, while a large winery may have a crush team operating continuously during the season, a bottling line running nonstop throughout the year, with downtime only due to maintenance considerations.  In general, though, winemaking can be broken down into these steps:

Crushing

1. Grape Receiving- obtaining the fruit as the raw material
   

1. 5 ton Gondola- These are typically delivered hinged to flatbed doubles trucks, and each  full truck holds between 20 and 25 tons of grapes.  The grapes are generally dumped into a long stainless hopper with horizontal screw conveyor at the bottom, the dumping typically accomplished with a 5 ton hoist (although if one is careful, a 3 ton hoist can be used if necessary).  The grapes are conveyed to either drop into a crusher located below the level of the hopper, or into an inclined screw (or sanitary belt) conveyor as an elevator to drop them into a crusher at another level (typically ground level).
2. 3 ton Gondola- These are generally pulled behind tractors or trucks, as they have integral wheels, but are dumped into the same types of hoppers using the same types of equipment as are used for the 5 ton gondolas
3. 2 ton Valley Tank- Like the 5 ton gondolas, these are also hinged onto the tops of double flatbed trucks, typically 10 per truck, and typically are dumped the same way, using similar equipment.  The advantage to these is more intact grapes.
4. 1/2 ton Picking Bins- These can be transported in any kind of trailer on any kind of truck, are unloaded and dumped using a forklift with either integral bin dumper or separate bin dumper, into a much smaller elevated hopper feeding directly to the crusher, or to a ground-level hopper with an inclined conveyor to elevate the fruit to drop into a crusher or a sorting table, and then to the crusher.
5. Lug Boxes- These are the smallest delivery system, and are generally dumped by hand onto a sorting table or directly into the crusher/stemmer.
   

2. Crusher- converting the fruit to a manageable form
   

1. No Crusher-  A winemaker may decided to introduce grapes into a red wine fermentation vessel without crushing or destemming the grapes, performing what is known as "whole cluster fermentation".  A winemaker may decide to introduce white grape clusters into a press as a "whole cluster pressing".
2. Crusher-  A winemaker may decide to ferment a red wine with stems, or press white grapes without removing stems, and so may require only crushing
3. Crushing with destemming-  Clusters are typically mechanically destemmed, followed by crushing the grape berries themselves.  White crushed grapes typically are introduced directly into the press, while red crushed grapes are typically introduced directly into the fermentation vessel.

3. Press- separating juice or wine from skins and seeds, either before fermentation (white wine) or after fermentation (red wine)
   

1. White Wine  and some Rose' Production-  Crushed or intact grapes are either pumped, dropped or poured into the press from the crusher or grape receiving area. Pectic enzymes may or may not be added to help liberate more juice, and crushed grapes may or may not be held for a period of time to allow those enzymes to work at their optimal level  Juice drains off through perforated stainless steel screens and is pumped to a fermentation vessel, Pressure is exerted on the skins, in successively increasing amounts, forcing the rest of the juice through the screens, which is then pumped to the fermentation vessel.
2. Red Wine and typical Rose' Production-  Red must (fermented grapes, skins seeds and juice), either partially or totally fermented, is pumped or otherwise introduced to the press.  Free run wine, which issues through perforated screens, is pumped to a tank, and pressure is deployed on the skins, to liberate more liquid through the perforated screens, which is then pumped into the same or different tank to complete fermentation.

Fermentation- converting juice/must to wine

1. Bishul- Specific to kosher wine, if there is bishul (cooking), the optimal time from a quality perspective is before fermentation

2. Adjustments- Juice and Must is balanced for optimal acidity during fermentation.  If other adjustments are necessary, such as addition of nitrogen compounds and other growth factors for optimal yeast growth, this is accomplished now. High sugar musts can be diluted, and low sugar musts concentrated, during this stage, for optimal fermentation.

3. Clarification of White Juice/Musts- A winemaker may choose to reduce solids in the fermentation through prior clarification, either by settling in a tank, and racking- drawing of cleaner juice from above the settled solids, or by centrifugation of the juice

4. Cold Maceration of Red Must Prior to Fermentation- Aqueous extraction of color and flavor compounds can achieve a different mix than extraction effected by the alcohol during fermentation

5. Introduction of Yeast- Alcoholic Fermentation is typically effected through the biochemical action of yeast, either through an indigenous yeast population which is optimized and allowed to grow, or through introduction of a pure culture.  Each yeast variety and subsequent fermentation will lead not only to alcoholic fermentation, but also production of secondary compounds which can affect flavor and aroma, and to a lesser extent acid balance.  The winemaker will typically optimize the yeast variety used in the fermentation to his requirements

6. Fermentation- Conversion of grape sugar into alcohol, creating wine from juice/sweet must.  In the process, CO2 is produced.

1. White Wine- Temperature control and possible introduction of air can introduce variables controllable by the winemaker which will ultimately affect the flavor of the finished wine.  Fermentation vessels vary from tanks of various materials to oak cooperage
   
2. Red Wine- Like white wine, fermentation takes place in tanks of various materials, and temperature is variable to control the flavor mix and fermentation kinetics.  Air can likewise be introduced.  Additionally, color and flavor components are extracted from skins, which capture the CO2 produced during fermentation and create a cap above the fermenting juice, and which must periodically be mixed into the fermenting juice in order to effect flavor and color extraction, by various methods:
1. Pumping over- Low solids wine is pumped over the skin cap to mix.  This is typically performed when fermenting in large tanks
   
2. Punching Down- The skin cap is physically pushed back down into the fermenting wine to mix.  This is typically performed when fermentation is accomplished in smaller tanks and picking bins.
3. Rolling the tank-  Specialized equipment such as rotary fermenters, roll the entire tank contents, capturing the skin cap and rolling it under the fermenting wine.
4. Thermovinification- Subjecting the red must to heat in order to enhance extraction of color and flavor components from the skins, and then pressing early in the fermentation process and performing the balance of the fermentation without skins.
   
3. Malolactic Fermentation- Typically, red wines, and sometimes white wines, are inoculated with malolactic bacteria at either the partially fermented stage or immediately after alcoholic fermentation, but are sometimes allowed to proceed into the Cellar phase of production.  Malolactic fermentations are encouraged for the purposes of creating additional flavor components and enhancing stability by utilizing the small concentration s of sugar present after the typical yeast fermentation, thereby depriving spoilage organisms from this sugar as a food source.
   

Cellar Processes- producing palatable, stable wine from newly fermented wine 

1. Racking- After fermentation, yeast settles at the bottom of the tank and must be removed.  Likewise in reds, particulates from the skins settle.  The clearer wine is drawn off from above the settled solids

2. Adjustment- the chemical makeup of the wine may be enhanced by additions.  At the very least, sulfites are typically added as antimicrobials to reduce the chance of spoilage, and as antioxidants, to stabilize color and flavor.  Adjustments can take place any time prior to bottling.  Additionally, components can be physically removed from wine through ultrafiltration and reverse osmosis, and by other physical methods

3. Fining and Stabilization- chemical removal of unwanted flavor and color components any time after fermentation and prior to bottling. This entails mixing fining agents into the wine and allowing them to settle,then racking.  Some fining agents are used to remove materials which under certain circumstances can render wine unstable.

4. Barreling- certain wines, including most red wines, are placed in barrels for a certain amount of time.  Sometimes, the time is lengthy, and the wine is aged in barrel.  At other times, depending upon the wine, the winemaker may only desire the flavor of the cooperage from short residence time.

5. Aging- robust red wines and certain white wines are aged in oak cooperage for from several months to several years.  Sometimes, wines are aged in vessels other than oak cooperage.  This typically is optimized by storage in temperature-controlled rooms to eliminate fluctuations.
   

6. Bulk Storage- wine must reside in some sort of vessel before bottling.  The ideal storage vessel excludes air, has a controllable temperature, and is made from inert material.  Old wood cooperage can be used, in some instances, because it at least does not impart much flavor, having already been extracted.

7. Clarification- consumers desire a brilliant, crystal clear wine of whatever color.  This is typically accomplished by filtration and/or centrifugation, though it can be enhanced by proper fining.  It can be differentiated into rough (removing the coarsest particulates), fine (which renders the wine mostly transparent), polish (which renders the wine brilliant in clarity) and sterile (usually reserved for immediately before bottling) filtrations
   

1. Normal Flow Filtration- Forces wine through a filtration medium to capture particulates until the medium clogs and is discarded, and in successive filtrations can filter the entire particulate size range, rendering the wine sterile and brilliantly clear from an opaque starting point. 
   
2. Tangential (cross) Flow Filtration- By forcing wine across the medium, thereby clearing disruptive particulates from clogging the membrane, this can accomplish a near-sterile filtration in one pass.  Tangential Flow Filtration has become the new standard of the industry
3. Centrifugation- This is now a seldom-used method, but can have advantages depending upon circumstances.
   

8. Bishul (cooking)- In kosher wine production, there may be reasons to perform bishul as one of the cellar processes, rather than prior to fermentation.

Bottling- packaging and sealing wine in consumer-ready containers for storage, distribution to consumers, and use

1. Bottles and closures-  The typical packaging, whether glass or plastic bottles, with corks or other closures, these bottling lines are similar and often complementary. Bottles are typically palletized using boxes containing 12 bottles each on standard grocery pallets. 
   
2. Cans- This is the newest packaging method for still wine, and offers considerable advantages in less expensive wines, as it is easily recyclable, break-proof and tamper-proof, but it does require dedicated equipment not found in most wineries.
   
3. Bag-in-Box- This is a means of packaging wine in large-volume, inexpensive, recyclable containers, the relatively inert plastic bag furnishing liquid containment and the cardboard outer box furnishing structural integrity.  Requires dedicated equipment not found in most wineries.
4. Keg- a new packaging method more conducive to on-premise accounts than direct to consumers, using equipment more typically found in breweries.

Storage and Supply Chain- wine must be stored until needed by by purchasers

1. Pallets of wine are stacked in temperature-controlled storage warehouses until required by the winery or by accounts.

2. Often, some of these are transferred to temperature controlled consolidation warehouses, where shipments to distributors and retailers often originate, and sometimes shipments to consumers as well

1. Consolidation warehouses are accessible, located close to transportation. 
   

1. Highways
2. Rail Heads
3. Ports

2. Consolidation warehouses are for the convenience of the distribution chain, rather than the winery

1. Truckers can often get many brands at one warehouse, saving time and effort.
2. End users have all of the brands they are purchasing palletized together for optimal cost of transportation
3. Consolidation warehouses can often help develop a strategy to get wine to locations where there is little traffic, since they know the trucking companies, facilitating the needs of the end users and solidifying the relationship between the end user and the wine producer.

Users, End Users, Distribution Channels and Marketing

1. The wine business is highly regulated, in the United States and in each individual state

2. There are 4 tiers of distribution

1. Importer, or national or regional representative
2. Distributor
3. Retailer
4. Consumer
3. Wineries can sometimes bypass some of these tiers
4. Wineries are sometimes required to work within some of these tiers, due to specific requirements of state law
   
5. Each tier takes its own markup  on the wine the winery produces.
6. Bypassing tiers allows the winery to realize larger gross margins on sales, and higher profitability
7. Overall profitability depends upon optimized balance of sales between distribution channels.
1. More general tiers reach more people, but engage those people to a lesser extent.
2. More specific tiers, such as direct to consumers, engage those end users to a greater extent, generating greater sales and greater profitability per consumer, but reach fewer consumers.
   

Craig Winchell, Tel:  (707) 494-7095  Email:  ganedenwines@gmail.com