A Family’s Journey to Becoming Winery Owners

Last week I kicked off writing again with the post So, you want to buy a Winery? If you enjoyed the article please subscribe via email, “like” the social media post where you saw it, or share it with others.

The intent of this blog is to mix in personal stories with the experiences and lessons learned of being a new winery owner. The mix seems to work for every cooking blog out there, i.e. 4 pages of stories and pictures and then 1 paragraph of recipe (it’s ZA’ATAR SHORT RIB STIR-FRY for dinner tonight!).

Before we get into the winery side of things, let’s start on a positive note. Puppies. Who doesn’t love puppies? Maybe next post we will start off with a dancing baby…

In the Spring of 2020 I went from traveling 300,000 miles a year on a plane to zero. Covid had hit and we suddenly had a lot more time to spend at home with the family. In between the 13th and 14th Zoom call of the day my mind would wander to what’s next? My day job continued to do well, Julie and I would split time at Hollyhock Vineyard and the Bay Area, and financially we were now in a place I never expected to be.

Just before Covid hit we had been contemplating buying a vineyard in Portugal on the Douro river and doing something similar to Hollyhock. If you have never been to the Douro it is a sight to be seen. When Julie and I first visited in 2014 we didn’t do much research ahead of time. After a 45 minute drive from Porto we began to descend into the valley and all of a sudden we were surrounded by Egyptian pyramids. Each level of a massive pyramid (mountain) was occupied with a single row of vines. The people were friendly, the Port wine amazing, the dry red wines were an absolute surprise, and it was affordable.

The idea was to purchase a small vineyard and qualify for the Portugal Golden Visa program. If you purchase a €350,000+ property and fix it up then you and your family can qualify for an EU Schengen Visa. After a few years you can become a Portuguese (and EU) citizen without having to live there full time. Dual Citizenship here we come! At the conclusion of a day job event in Lisbon I rented a car and did a whirlwind trip through the country in less than 24 hours to scout things out. Upon returning to the USA this little thing called corona virus entered our lexicon, borders shut down, and out went the idea of Portugal.

Around that time I had been keeping a watch on the Paso Robles vineyard market when the St. Hillaire Vineyard popped up for sale. It was a great property, well kept, but too similar and too close to Hollyhock. One night we were entertaining with the Vukelich family who were shopping in the Central Valley for a farm for their parents to live on and for them to have a vacation spot. “Mark, if you don’t buy St. Hillaire… I will. It is a perfect property for you two! Go read Small Vineyard Business Plan and make it happen.”

And they did! After renaming it to Vukelich Vineyards they have done amazing work there already. You can rent their farm house here.

While Mark and Heather went through the buying process for St. Hillaire/Vukelich, it led me to ponder putting down more roots and expanding in the Paso Robles area. Hollyhock Vineyard has been great for our family. We converted the farming to organic and sustainable. We have been able to provide income not only for our family but also for Juan who has treated the property as if it as his own. It has been rewarding to see visitor’s photos and the joy it has brought (maybe slightly less joy when things go wrong for visitors and we get a call 🙂 ). Julie and I have been hands on with harvest each year and even expanded to a legally bonded wine brand.

For investing, I find stocks, bonds, and mutual funds are boring. You can’t sleep in them and you can’t drink them. Thus I reached out to Paul Shannon at Pacifica Wine Division again.

  • Me: “Paul, keep your eye out for any west side vineyard properties.”
  • Paul: “You looking for a winery or a piece of land?”
  • Me: “Just land I think, I don’t want to own a wine brand. I like being a landlord.”
  • Paul: “Do you need a vineyard already planted?”
  • Me: “Nope, I have time on my side and can develop it”
  • Paul: “You sure? Putting in a vineyard is a lot of capital and permitting”
  • Me: “It can’t be too hard. Maybe I will put a winery on it some day and rent that too.”
  • Paul: “You sure? The county has gotten really strict on permitting, might be really expensive”
  • Me: “It can’t be that bad can it?”
  • Paul: “Will cost you millions just to permit”
  • Me: “Hmmmm……”
  • Paul: “You should buy Rotta Winery. It is a fully functioning winery and vineyard.”
  • Me: “No way. I went to Rotta a few years ago. Didn’t like it. People were rude. Weird site. We don’t want to be in the wine business”
  • Paul: “Perfect location, probably a good price, it’s historic”
  • Me: “No way!”

For the next few months Paul humored me and would send listings of land, vineyards, and a couple wineries. One of them was intriguing but the timing wasn’t right. It had multiple tasting rooms but no vineyard. Congrats to Rangeland who is now located there!

After each property Paul would send me, this exchange would happen:

  • Paul: “You should really check out Rotta”
  • Me: “No, Rotta is not good, it has a horrible reputation.”
  • Paul: “It would pencil.”
  • Me: “Ugh! Go away.”

Finally, after about six months Paul said the magic words:

  • Paul: “You should really check out Rotta… can’t you do some smart business or tax stuff with it?”
  • Me: “Ummm….. maybe?”
  • Paul: “Don’t you like to fix up old things?”
  • Me: “Ummm… yup I guess so”

Reflecting back on the past 20 years, my passion has been to take broken or worn out things and fix them up.

When I graduated from college I did not receive financial aid and financed the six figure tuition through student loans. After student loan payments I didn’t have much money to invest with. What I did have was sweat… sweat equity. In between shooting down nukes and debugging call center software I began buying old houses and fixing them up. Not because I intended to flip them but because I needed a place to live and I kept moving! Each time I moved I couldn’t bear to sell the house after the hard work I had invested so I would rent them instead.

I didn’t grow up being very handy but my mother did her best to teach (force?) me to learn how to paint walls and strip wallpaper. A couple of uncles taught me how to sweat pipes and do basic electrical. I learned the rest from Home Depot’s 20$ orange “Home Improvement 1-2-3” book, You Tube, and lots and lots of trials and errors.

I realized that I enjoy:

  • Learning about history and restoring things to be the best they can be
  • Being hands on, the action of doing something yourself, making mistakes, learning
  • The design process: including not only looks but daily use and function
  • The build process: something new every day to see
  • The community: providing work and livelihood to people who become your friends
  • The finished product… and the satisfaction that goes along with that

Lets Take a Look

I finally heeded Paul’s advice to take a look at the Rotta Winery For Sale.

Good Bones: when a property has been lived on for 112+ years and been able to operate through prohibition and two world wars it has to be solid. Furthermore, as we investigated we learned that the original owner had already done a large number of infrastructure improvements such as ground water, waste water disposal, new electrical service, foundations, etc.

Good Soil: the hills are made from solid calcareous shale. When you ‘rip’ the ground for planting you are bound to pull up massive boulders. This calcareous rock was once an ocean floor and provides the perfect ground for head trained and dry farmed vines. When you walk the property you are bound to see rocks with whale vertebrae or other fossils.

Location: Paso Robles Willow Creek AVA on the west side. There are 11 AVAs in Paso Robles and the west side Willow Creek AVA is considered one of the best if not the best. Think Turley, Saxum, Linne Colodo, Denner, and L’Aventure vineyards. Originally I wanted to be on Vineyard Dr or Highway 46. However, as I thought about what I would want to create as an end product I preferred to be just off of the main roads. Less overall traffic would lead to more privacy and a more relaxed vibe. Just around the corner or over a hill would be perfect. Plus, it is the only winery on Winery Rd and just off Vineyard Rd.

Good Neighbors: when you stand on the Rotta hill and look around you have nothing but high quality neighbors. Turley is not only a top winery but are dedicated to sustainable farming and heritage vines. Guyomar and the Stanislaus’ have led the way in steep slope farming. The Swan’s have been ranching cattle for decades, were close friends of the original Booker family, and have an excellent collection of whale bone fossils collected from our hills.

History: it has been settled since the 1800’s and operated continually as a vineyard and winery since 1908. It even has a very well written history researched by Libby Agran.

Reputation: in 1945 there is a news article describing how Rotta Winery produced and sold 85,000 gallons (35,000 cases) of Zinfandel. In 2010 Rotta had over 1,000 wine club members. In 2013 it was sold. Unfortunately the new owners were located out of country and had a number of strategy missteps such as trying to focus on scale and distribution at a time when direct to consumer and higher quality wine was leading the way. As such the reputation soured among the locals. For better or worse it had soured so much that by the time we looked at buying it people had just forgotten it existed. Heck, when someone asked on the Paso Robles Wine Fanatics Group who has the best Zinfandel in Paso not one person even mentioned Rotta. At least 3 people recommended Tablas Creek who doesn’t even make Zinfandel! It is easier to improve a reputation everyone has forgotten about vs. negative about.

Permitting: the property already had a historic study completed, a Minor Use Permit in place to operate as a winery, construction approval for both the existing fermentation building nd to restore the original winery ruins and tasting room. Depending on which documentation you believe it came with either a 20,000 case or unlimited case production permit. As I have learned since… this is a big deal.

Taxes and Financing: during the Hollyhock Vineyard and Small Vineyard Business Plan research I learned how taxes and financing are handled makes a huge difference in a purchase. In this case the property came with a large amount of inventory (33,000 gallons!) and equipment (tractors, winery, 300+ barrels, tanks, etc).

Hmmmm….. maybe there is something here. Just like when buying a vandalized house out of foreclosure you need to look past initial impressions and see what is possible and not just what is visible. Now the question is whether or not I can convince Julie that this property may not look majestic now but will be a property to last for generations. Just like the Bailey House in “its a Wonderful Life”:

Let’s do Some Research!

We invited Ryan and Nicole Pease from Paix Sur Terre over to join Julie during her first look at the property. When we walked into the member’s lounge there were fruit flies everywhere. As we went through the building we kept smelling something funky. We jumped into Ryan’s truck and drove up to the top of the hill. The views were amazing, but the zinfandel vines were not. Virus, disease, or lack of farming perhaps? After a harrowing journey down the other side of the very steep hill we came to the ‘bio swale’ which was supposed to be a natural way to remove impurities from waste water. It wasn’t maintained and smelled like…. impurities? We walked over to the metal building which served as the winery. It definitely wasn’t sexy, but it was at least cooled, had a large crush pad, and (mostly) working equipment. I believe Ryan gave me something like this lifeless stare:

The next trip was next door to talk with Ishka at Guyomar. If you haven’t been there I highly recommend it. He does a nice spread of food to pair with the wine and hosts you in his home. He shared stories of the ups and downs of the Rotta Winery and all of the things to be aware of or careful of. At the end Julie gives me the look of “Bill you crazy”. Fortunately, at the end, Ishka points out two things. First, the soil is tremendous for wine grape growing. Second, the permits are worth the price of the property alone. I give Julie the look of “Yup I be crazy”.

Julie had one last trick up her sleeve to convince me that “Bill you crazy”. It was the ultimate trump card… Lucas J. Meeker! Lucas is a close family friend of ours and his father started The Meeker Vineyard in Sonoma / Healdsburg in 1984 and has successfully run the winery for 37 years. Every Christmas Lucas would come (right after months of harvest) and educate us on all the horrible things that go wrong at wineries, why they are such tough businesses to be in, how things aren’t always so sexy, and the real pragmatic underbelly. He is also an avid teacher of the wine business.

Julie said, “Run it by Lucas, he is the Grinch, he will never approve and he will tell you ‘Bill, you crazy'”.

Lucas and I jump on a series of Zoom’s together and I walk him through everything I know. The location, the inventory, the neighbors, the equipment, the housing valuations, the typical Paso wine prices, fruit prices, etc.

Julie was right. Lucas did indeed say “Bill, you crazy”, but he didn’t stop there…

“Bill you crazy if you don’t buy this”

CHECK. MATE.

She Said YES. Now what?

Originally in this article I was going to cover more of the business considerations that go into purchasing or owning a winery such as valuation, financing, tax approaches, Williamson act, rough business model, the process, etc. but after talking with a few folks I decided to focus more on the story and the why rather than the mechanics. The rationale was that most people’s eyes would glaze over with the nerd aspects.

Since I should probably sell some wine to cover operating costs here is my offer: If you are interested in the nerdy business aspects I am happy to either jump on a Zoom with you or host you at the winery. You buy the wine to share and I will bring the spreadsheets.

Next week we will continue with the articles listed in So, you want to buy a Winery? and specifically how did we go from buying a winery with no intention of owning a wine brand to being focused on creating a wine brand. If you enjoyed this article or if it at least helped you procrastinate during a work Zoom call please subscribe via email, like the social post, and share with friends.

3 thoughts on “A Family’s Journey to Becoming Winery Owners

  1. Been to ROTTA to taste and enjoyed. The young couple that greeted us at the winery were knowledgeable and friendly. Will return again when in the area.
    Hope to stay at Hollyhoock also.
    Jim and Mary

    Like

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