|Thursday February 17, 2005|
As most of you know, we had an open house last weekend featuring videos of Elvis and chocolates to munch on. We were pleasantly surprised that over 300 people stopped by on Saturday. Our sales were very good, so now I can pay a few bills. January was real slow. As a result of our sales we are now sold out of our 2003 Petite Sirah. Also, we have taken the 2003 Estate Cuvee and Zinfandel off the online order form. We are down to our last 8 cases of Estate Cuvee and our last 15 cases of the Zinfandel. We will still sell those two wines at the tasting room, but will no longer pour them. If anyone is interested in purchasing the 2003 Zin or Estate cuvee, just drop me an e-mail or phone.
Our new screwcap closures arrived yesterday with a few flaws, but overall they are acceptable. Our new Equipment will not arrive for a few more months.
Monday February 21, 2005
I have already been thinking of our pending 2005 Pre-Harvest Futures offer. Each year around April 1, I start offering wine that will not be produced until the Fall. Obviously purchasing wines from us at this early a time is a speculation, not only on the quality of the Vintage, but also faith in my capabilities of a winemaker. Each year I have become more confident that I will produce wines of superior quality. The prices for these pre-harvest Future offers have been at wholesale prices, even lower than what we sell to retailers. For the last 6 years, here is our total production and the prices for our Estate Zinfandel and Estate Cuvee (Our two best selling wines): 1999 (4000 cases), initial price $12/ Btl; 2000 (4500 cases), initial price $12.50/Btl; 2001 (4500 cases) , initial price $13.00/Btl; 2002 (4900 cases), initial price $13.25/ Btl; 2003 (5100 cases), initial price $12.50/ Btl; 2004 (About 4000 cases to be bottled), initial price $12.50/Btl. As you can imagine my costs for producing wine has increased substantially, but since I have produced more wine over the years, our cost per bottle has actually been about the same. Now that my production has decreased with the 2004 vintage my per bottle cost has increased well over 20% compared to 1999. I must unfortunately raise my initial prices for my Pre-Harvest Futures. I am sure most of you have noticed that most wineries of my size in Dry Creek Valley are charging about $30 for a bottle of Zinfandel. I will be charging $13 per bottle for my 2005 Zinfandel and Estate Cuvee, over 50% less than my competitors.
What I have not included in my new costs are many capital expenditures that we have spent starting in December. These substantial expenses, amounting to well over $100,000, will be finished sometime in June. First of all in November we started finishing the interior of our Guest House and final exterior concrete. Also in November we committed to a new bottling line that included a screwcap machine. The total cost after selling our old line will be about $40,000 and will be totally spent by June. Next we committed to a generator back-up and solar system for our main house which included our office with all the computers. It would have been nice to include the winery, but the costs would have been too much (we can actually survive just fine with the winery being down for a few hours--we do not use much refrigeration). Also the size of the solar panels and generator would have needed to be doubled. Right now we will need a 20 ft by 40 ft section in the first block of our vineyard for the solar panels. The generator should be finished by the end of February and the solar construction will start in April. The cost of both after California rebates, is hard to determine, mainly because the generator back-up has cost much more than I had expected. Total cost by this June will be over $60,000. This will not include the tax breaks and substantial PG&E savings over the years. Also there is no way to figure out how much the cost of electricity will go up over the next 20 years when I hope to fully recover my costs.
If I included all these extra capital costs into the bottle of our wine, the cost to produce a bottle would go up by over $2.00 for one year. BUT even if I figure no electricity savings (the substantial quality of my wine with screwcap can not be calculated either), over the next 20 years the cost would amount to only 10 cents per bottle. We should generate enough cashflow to pay for all these expenses in the next few months. Historically that is when most of our sales occur. December through February have been very slow months for us and that is when I still must borrow on our line of credit. I know, if I was charging as much as my competitors, I would not have to borrow. But as you know I want to offer the best prices I can to my loyal customers. As long as I can purchase enough of my toys, I am satisfied with our income.
In the past several years our winery has done well. Our cashflow (All money that comes in minus all money that goes out) increased from 1999 through 2003, mainly because we increased our production and our sales went up slightly. We had a big drain on our cashflow for several years while we constructed the Guest House, but those expenses are less now. With production expenses increasing dramatically now, coupled with lowering our prices in 2003 and 2004 (for the first time since starting our Guest House in 1999), my cashflow was negative in 2004. I had to borrow more money. We are still doing fine, but since I've decided to decrease my production in 2004 and now again in 2005, I must raise my bottle prices back to where they were in 2001. That year our initial price for Futures on Zinfandel and Estate Cuvee was $13.00 a bottle and as I stated earlier that is what we will charge in 2005.
As I have said before in this diary, I Love Making Wine!! In about three years our vineyard will be fully re-planted. I am excited with the potential new wines. Here is a map of our vineyard with the proposed and existing plantings. I hope to go back exclusively to Estate wines beginning as soon as the 2006 vintage. If full production is achieved, we could produce as much as 6000 cases. If production is limited, (as indicated on the map I have shown in each Block a production that is low--we could achieve more), we could produce about 4500 cases. The two new wines that will be evolving over the years are the Terre Melange and Escuro. The Escuro will be a very dark wine and consist of Petite Sirah, Cabernet and some of the other dark varietals. The Terre Melange will evolve into a wine of several varietals (not all Rhone) from different sections of the vineyard. We will probably only make a Sangiovese for the next few years, because those grapes are now purchased and we are planning to plant only 100 Estate vines this year. We will continue to produce all our other wines.
Recently I have been pursuing the possibility of custom crushing and also bottling for other labels. Some of these wines could be cellared and bottled by us (meaning the wine would be produced somewhere else) or some would be produced and bottled by us (we would produce the wine and bottle it under a different label, as we did with Brendan's Tipicita.) I am rambling here, and I hope most of you have understood what I have said, but my point here is that I want to make more wine. I don't like Marketing, and I do not want to travel to sell wine.
One way to sell more wine is to establish a Wine Club. I have been against Wine Clubs in the past because they force customers to buy wine they don't necessarily want. If we do start one, it would be very different than Wine Clubs at other wineries. In the future I'll have more to say about all I have said today.
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