Category: Financial

Vine to Value: Making a Grand Exit from Your Winery

Cyndi
ramp with the word Exit

By: Carlos Lowenberg, Lowenberg Group

For winery owners, the journey from vine to vintage is a labor of love, patience, and meticulous attention to every detail. It’s easy to get swept up in the business, but one important aspect that often gets overlooked is creating an exit plan. An exit strategy for a winery business is not just about the financials – it’s about preserving your life’s work and ensuring the future you’ve crafted can thrive without you.

  As a longtime business transition advisor, I understand the unique challenges and opportunities winery owners face. Timing is everything when it comes to viniculture Vintners must contend with weather, soil conditions, and market fluctuations that can make long-term planning difficult. Additionally, wine as a product has complexities – from branding and customer loyalty to aging requirements that span years, if not decades.

  I advise clients in this position to start their exit roadmap much earlier than one would expect. A solid five-10-year runway allows you to properly stage your exit while still being hands-on to groom successors and prime your business for an optimal transition.

Key Value Drivers

  For wineries, some of the most important value drivers that will attract buyers are the strength of your brand reputation, track record of wine quality and ratings, and sustainable environmental practices. Having a seasoned, proven management team in place is also crucial, as is cementing sources of recurring revenue like wine club memberships and contracted distribution pipelines.

  Transparency into your financials, operations, and sales will be non-negotiable for buyers assessing your winery’s value. Can you easily quantify production costs and pricing models? How efficient and modern are your facilities and equipment? Do you have rigorous quality control, food safety compliance, and chain of custody processes? The more you can showcase operational maturity and documented business fundamentals, the greater your winery’s valuation.

Taking Your Time

  Maximizing value in your winery prior to an exit is all about setting the stage for an optimal transition window. Buyers will scrutinize everything from your production capacity and equipment to your vineyard management practices. Are your facilities modernized and prepared to scale up seamlessly under new ownership? How automated are your processes? Do you have a proven supply chain and quality control programs to ensure consistency from year to year?

  The more you can demonstrate your winery as a turnkey business with documented, replicable processes and identified areas for growth and efficiency gains, the more it elevates your worth. Mature wineries that have successfully built their brand name and market presence while continuing to innovate will clearly be more coveted acquisition targets.

  I cannot overstate the importance of cultivating a stellar team to drive the value of your business.  Their passion and institutional knowledge surrounding your winemaking approach are invaluable. Retaining and incentivizing this core team through strategies like equity incentives or tailored succession plans prevents brain drain and keeps your proven playbook for distinctive, high-quality wines intact long after you exit.

  The patience and planning to strategically invest in the right areas over a multi-year period to strengthen your winery and brand value reap dividends in the form of top-dollar exit valuation and a smoother transition to the next regime.

Tax Advantages Through Planning

  I also can’t stress enough the importance of getting a head start on tax planning for your winery exit. With an issue as multifaceted as providing for your family and employees and mitigating your tax burden, a well-designed, long-term tax strategy is indispensable.

  Strategies like setting up trusts, gifting private stock to children and grandchildren, and finding tax-advantaged ways to transfer assets out of your estate can provide major savings over time. Charitable giving vehicles like donor-advised funds are another way to reduce your taxable income while benefiting causes important to you and your local community.

  If you plan to keep your winery operation within the family, exploring options like an intentionally defective grantor trust can allow you to freeze the value of assets transferred while removing them from your estate long before your exit. Life insurance policies can also be used to offset any inequitable distributions if not all children will end up involved. The possibilities are endless when you start planning ahead.

Building the Ultimate Advisory Team

  Given the intricate interplay of real estate, agriculture, taxation, distribution, and federal and state beverage regulations, you’ll want a team of experts guiding your vineyard legacy’s transition out of the gates. Assembling this team should begin two to three years before your target exit date. Vital team members include:

●    A tax attorney and CPA focused on estate, gift, and generational wealth transfers.

●    A vineyard operations consultant and winemaker with industry expertise to accurately quantify your assets, evaluate management, and represent fair market value.

●    A mergers & acquisitions advisor or investment banker to identify suitable buyers and negotiate favorable terms (this could also be completed in-house with the right staff).

●    A wealth manager to protect your personal assets throughout the transition.

●    Of course, at the core should be a seasoned business transition strategist who has helped other owners avoid pitfalls and exit successfully.

  This transition dream team will map out the unique considerations your winery needs like transferring real estate and land rights, assessing inventory and barreling assets, retaining key talent through earnouts or equity incentives, and account for legal distribution restrictions as you change ownership structures.

Leaving a Legacy

  There are few professional pursuits as spiritually rewarding as growing a winery business from the roots up. The wine flowing from your cellars is a vintage distillation of years of hard work, perseverance, and your vision brought to life. It’s only natural you’ll want that legacy preserved as you pour your last glass and hand over the reins.

  By being proactive and viewing your exit as the grand finale rather than an afterthought, you can dramatically increase the odds of a prosperous transition that provides for your family’s future while honoring the tradition and community you’ve established. Thoughtful planning and the right advisors are the keys to unlocking a fitting encore for your winemaking career.

  So let’s raise a glass to your next chapter, one that rewards the fruits of your labor while allowing your vineyards’ legacy to be grown and enjoyed for generations to come. Your journey from vine to value can have a storybook ending – if you start mapping that path today.

8 Proven Ways to Elevate Winery Revenue in a Changing Market

Cyndi
two people clinking their champagne glass

By: Jonathan Smalley, President and CEO of SmaK Plastics

The Times They Are A-Changin

According to CNN, global wine consumption has fallen about 6% between 2017 and 2022. Consumers have changed their drinking habits and inflation has eroded their disposable income.  That means nearly 1.9 billion fewer wine bottles were consumed last year than in 2017.

  Today, operating a successful winery requires more than just producing exceptional wines.

It demands a strategic approach to maximize operations space, production and labor, reduce overhead costs, and increase revenue and create growth.

•   The wine industry is evolving. Gen X-Z tastes are changing.

•   Wineries are at the intersection of artistry and business acumen.

•   Behind the scenes, winemakers and CFOs grapple with OpEx challenges.

•   At the same time, retail shelf space is getting more crowded – with flavored beverages.

  In this article, we will explore proven methods to increase winery revenue.

1.  Diversify Offerings to Attract a Broader Audience: An effective method to boost winery revenue is by diversifying product offerings to appeal to a wider customer base. While the core product remains wine, expanding into related areas such as events, food, and merchandise can significantly increase revenue streams.

     Silver Oak Cellars has successfully diversified its offerings. In addition to its acclaimed Cabernet Sauvignon, the winery hosts events like wine dinners and tastings. The winery’s online store also features branded merchandise, from glassware to clothing.

2.  Create a shelf space strategy – Evaluate and create modernized, distinctive labeling. Craft an eye-catching and distinctive packaging design for your Wine Club offers. Consider packaging that not only highlights your brand but also communicates the craft and quality of your wine.

     Create open communication with distributors and retailers about your differentiation and process. Collaborate on promotional events (where legal). Utilize data to ID regional preferences to tailor your product assortment. Consider P-O-S displays that showcase the craftsmanship behind your wines. Utilize shelf talkers and promotional signage to highlight unique tasting notes, food pairings, and any awards or accolades your wines have received        

3.  Expand Specific Production to Match Trends – Create craft beverages that meet emerging trends. Be a trendsetter. Consider new methods to expand your production to deliver new flavors that buyers want.

     Be aware: Buying used oak barrels used can sound affordable, but is risky. Used barrels can come with risk of bacterial contamination as well as a lower impartment of oak. And used tanks are not warranted by manufacturers.

4.  Implement Wine Club Memberships for Customer Loyalty – A new, modern wine club can create a loyal customer base, consistent revenue and a strong sense of community. Offer exclusive benefits such as early access to new releases, discounts on purchases, and members-only events.

     Ridge Vineyards is known for its exceptional Zinfandels and Cabernet Sauvignons. Ridge has a well-established wine club called the Monte Bello Collector Program. Members receive allocations of limited-production wines, invitations to member-only events, and access to library releases. This not only generates consistent revenue for the winery but also strengthens the connection between the brand and its customers.

5.  Enhance Online Presence and E-commerce – In the digital age, an online presence is crucial for wineries. Establishing a user-friendly website, utilizing social media, and implementing e-commerce capabilities can broaden a winery’s reach and drive sales directly to consumers. Invest in strong brand visibility and “edutainment.” Provide insight. Engage with your audience online and offline to create a community around your brand. A strong and recognizable brand can attract attention from retailers and consumers, and lead to increased shelf space.

     La Crema Winery has effectively expanded its online presence. The winery’s website offers a seamless e-commerce experience. La Crema actively also engages with its audience on social media platforms, and has created a virtual community around its brand.

6.  Optimize Production Space – Unleash the Cellar Potential: Say goodbye to wasted corners and hello to reimagined production. Evaluate every nook and cranny. Reorganize with precision. Utilize the space that is wasted on racking.

     Embrace flexible, movable vertical storage to increase capacity without sacrificing accessibility. Utilize stackable solutions to create skyward profits. Stackable fermentation, production, blending and aging solutions increase production, allow easy access, and deliver results. Easily blend without having to un-stack, un-rack and re-rack-and-stack barrels.

7.  Shorten the Distance and Vessel Use Between Processing Stages – Modernize your production Transfers. Reduce barrel transfer time with a streamlined, repurposed container layout. Redefine your processing flow to minimize transfer time, reduce labor, and eliminate spillage risks.

     Increase efficiency across all processes. Streamline labor-intensive tasks, from juice movement to cleaning, stacking, and maturation. Optimize productivity across your square footage. And vanquish the evaporation enemy.

8.  Embrace Modern Winemaking Techniques with Oxygen – Permeable Polyethylene Tanks:

  In recent years, wineries have increasingly turned to innovative winemaking equipment, such as poly, food-grade plastic tanks, to optimize production efficiency and cut costs. These tanks, made from high-quality polyethylene, present a viable alternative to traditional oak barrels.

  Oxygen-Permeable Polyethylene Tanks provide winemakers with a more cost-effective and sustainable solution. The use of plastic tanks aligns with sustainability goals. These vessels require less water and chemicals to clean, are lightweight and can be used for all winemaking processes, last more than 25 years, and reduce the demand for dwindling oak resources.

  Les Bourgeois Vineyards, situated in California, has successfully incorporated plastic tanks into its winemaking process. By investing in Oxygen-Permeable Polyethylene Tanks, the winery has reduced operational costs associated with barrel purchasing, maintenance and replacement. The polyethylene tanks allow Seghesio Vineyards to allocate resources to other aspects of production.

•    Poly tanks give winemakers scalability, and stackable use of production space.

•    Polyethylene vessels are sustainable. (Water and Labor Savings). These tanks can be utilized in all aspects of winemaking: production, fermentation, maturation and transport to bottling.

•    French oak barrels are produced at approximately two barrels per 100-year-old tree. Oak barrels must be sanitized using chemicals and large quantities of water. And they’re only good for 4-5 years.

•    Advanced, Oxygen-Permeable Polyethylene Tanks are long-lasting, controllable and breathe like a barrel.

•    Winemakers can easily and quickly expand capacity and space use. Polyethylene tanks are easy to move, clean and stack. And have low up-front capital cost.

Summary

   A combination of strategic planning, modern communication, customer engagement, adaptability to market trends, and new production techniques is required to grow winery revenue.

  Wineries can both build strong relationships with their customer base, and create sustainable higher margin revenue by diversifying offerings. At the same time, wineries must work strategically to create additional market pull, and shelf space. This can be created via consistent (short and unique) communication, and community building.

  Wineries must look forward to the future buyer profile and engage prospect/buyers via modernized wine clubs, enhanced online presence, and content.

  Wine owners and financial managers must also look at methods to reduce OpEx costs, streamline and increase production efficiency, sustainability and margins and revenue.

  These methods can help wineries steadily grow in a competitive market.

Author’s Bio

Jonathan Smalley, President and CEO of SmaK Plastics.  An expert in the production, fermentation, aging and transport of craft beverage and food production solutions. Over the last 20 years, he successfully directed the engineering and development of successful products for more than 4,000 global wineries, cideries and food processors.

Overview of Grape Crop Insurance

Cyndi
broken fencing and damaged grapevines

By: Trevor Troyer, 
Vice-President of Operations 
for Agricultural Risk Management

What is Federally subsidized crop insurance? What is Grape Crop Insurance and how does it work? 

The Federal Crop Insurance Corporation (FCIC) was created in 1938. Originally coverage was limited to major crops. It was basically an experiment at that time, until the passage of the Federal Crop Insurance Act in 1980. The 1980 Act expanded the number of crops insured and areas in the US. In 1996 the USDA Risk Management Agency (RMA) was created. RMA’s purpose was to administer the Federal Crop insurance programs and other risk management related programs.

  Perennials are very different from traditional row crops or vegetable crops.  But a lot of the risks are very much the same.  Drought, freeze, wildlife damage, fire/smoke and the list goes on. From what can be seen the risks can actually be more with perennials.  It doesn’t matter if it’s an apple orchard, avocado grove or vineyard, your investment is subject to the elements all year round. Things may happen after you harvest that might affect the following year’s crop production. 

  Grape Crop Insurance goes back to 1998, the current policy was written in 2010. Crop insurance is a partnership with authorized Insurance companies and the FCIC. Crop insurance is partially subsidized through the USDA. Currently there are 13 Approved Insurance Providers (AIPs) authorized to administer crop insurance policies with the USDA. Prices and premiums are set by the USDA per crop, state and county. There is no price/premium competition from one company to the next because of this. Independent insurance agents sell for these 13 different insurance providers.

  Grape crop insurance is available in the following states; Arkansas, California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Virginia and Washington. Crop insurance is not available for grapes in all counties though. Insurable varieties are also different between states and counties. As mentioned, before prices are different between states and counties as well. The USDA price for a ton of Pinot Noir in Oregon is different than a ton of Pinot Noir in New York.

Grapes are insured under an Actual Production History (APH) plan of insurance. An average of the vineyard’s production per variety is used. Grapes need to be in their 4th growing season to be insurable. A minimum of 4 years is needed to do the average, if the grapes have just become insurable then a Transitional Yield (based on the county and variety) is used in place of any missing years. A maximum of 10 years can be used to determine the average if a vineyard has been in production for that amount time. Basically, you are insuring an average of your tons per acre per variety.

  With crop insurance you cannot cover 100% of your average production. You can choose coverage levels from 50% to 85%. There is a built-in production deductible. Coverage levels are in 5% increments. Coverage levels are relative to premium, the lower the coverage the lower the premium, the more coverage you buy the higher the premium. It comes back to how much risk you feel safe with. For example, if you have Cabernet Sauvignon and your average is 5 tons per acre. At the 75% coverage level you would be covered for 3.75 tons per acre. You would have a 25% deductible (1.25 tons per acre). To have a payable loss you would have to lose more than 25% of your average production in a year.

  Crop insurance is designed to help a grower have enough money to be able to produce a crop the following year.  It is not set up to replace profits lost from an insurable cause.  I have had winery owners complain to me that it doesn’t cover the cost of how much their wine is worth.  While I can totally understand this, it is the growing costs that are being insured against loss. Crop insurance does not cover the production costs of making wine or juice etc.  Only the Causes of Loss that are listed in the policy are being insured against.  It doesn’t cover the inability of a grower to sell his grapes or broken contracts with wineries or processors. 

  Here are the Causes of Loss for Grapes from the National Fact Sheet from the USDA:

Causes of Loss

You are protected against the following:

•    Adverse weather conditions, including natural perils such as hail, frost, freeze, wind, drought, and excess precipitation;

•    Earthquake;

•    Failure of the irrigation water supply, if caused by an insured peril during the insurance period;

•    Fire;

•    Insects and plant disease, except for insufficient or improper application of pest or disease control measures;

•    Wildlife; or

•    Volcanic eruption.

Additionally, we will not insure against:

•    Phylloxera, regardless of cause; or

•    Inability to market the grapes for any reason other than actual physical damage for an insurable cause of loss

  Crop insurance is partially subsidized through the USDA. Premiums are subsidized from 100% at Catastrophic Coverage (there is an administrative fee though) to 38% depending on coverage level chosen.  A lot of growers “buy-up” coverage from 65% to 80% and their premium subsidy is around 50% to 60%. 

  Hopefully you don’t have a lot situations where you would have a loss.  But as a grower you need

to assess your risks.  These have to be taken into consideration for the growing region your vineyard is located in. Here are some other questions to ask yourself.  What are your break-even costs?  Do you know your cost of production with projected inflation? Have you evaluated the risk of a severe crop loss? What varieties are planted in your vineyard?  Some types of Vitis vinifera are more susceptible to weather issues than others. Are you able to repay current operating loans without crop insurance in the event of a loss?

  Our job as a crop insurance agent or crop insurance agency is not to convince you that you need crop insurance.  It is to help you make an educated decision, based on your risks, on whether or not you need crop insurance.  And then, if it is a good fit to mitigate your risks, to determine how much coverage is needed.  No one wants to have a loss but they do unfortunately happen.

Basic Mechanics & Benefits of the Alternating Proprietorship Arrangement

Cyndi
2 men looking at wine bottles on a table with a country map

By:  Louis J. Terminello, Esq. and Bradley Berkman, Esq.

Brand owners and wineries have options available when negotiating a wine packaging arrangement. This article will focus on the mechanics of an alternative to the standard contract packaging relationship. As a jumping-off point, contract packaging arrangements are one in which a winery will contract with a brand owner to produce and bottle wine for the brand owner. In the world of wine production, this is commonly referred to as a custom crush arrangement.

   It is a relationship of independent contractors, memorialized in an agreement where the brand owner pays a fee for the bottling services of the winery, and the winery, in most instances, delivers the final bottled product to the brand owner. The beverage alcohol licenses required are both federal and state production/winery licenses held by the winery, and almost always a federal wholesales license issued by the Alcohol Tax and Trade Bureau (TTB) – which is held by the brand owner – and other state licenses are required.

  All production reporting prepared and submitted by the winery and excise taxes, though almost always charged to the account of the brand owner, are reported, and paid by the winery. For all intents and purposes, the brand owner acts as both brand owner and distributor within the three-tier system and reports and pays excise tax at the state level, if required. Both parties benefit from this type of bottling arrangement. For the winery, this arrangement is an additional revenue stream. For the brand owner, a product can be brought to market without the high costs of investing in a production facility.

  Separate from the above arrangement, TTB has a unique licensing scheme available that may be more advantageous to wineries and brand owners for numerous reasons and is referred to as an alternating proprietorship arrangement.

Alternating Proprietorship Defined

  In the alternating proprietor relationship, an existing winery agrees to lease its winery premises to another party for the production of the “lessees” wine. The parlance typically used is “host” and “tenant.” The established winery acts as the host of the premises (think landlord) while the tenant “leases” the winemaking premises to produce its wine. There is an actual and permissible operational shift. Responsibility for, and the activities of, production may be taken over by the tenant operator. The relationship should be memorialized in an agreement between the parties, but the relationship requires application and approval by TTB before commencing production. 27 USC 24.136 (the Federal Code of Regulations) establishes the terms and requirements of the arrangement and is reprinted here for the reader’s review.

27 USC 24.136

§ 24.136 Procedure for alternating proprietors.

(a) General. Wine premises, or parts thereof, may be operated alternately by proprietors who have each filed and received approval of the necessary applications and bonds and have qualified under the provisions of this part. Where operations by alternating proprietors are limited to parts of the wine premises, the application will describe areas, buildings, floors, or rooms which will be alternated and will be accompanied by a diagram delineating the parts of the wine premises to be alternated. A separate diagram will be submitted to depict each arrangement under which the wine premises will be operated. Once the qualifying documents have been approved, and operations initiated, the wine premises, or parts thereof, may be alternated. Any transfer of wine, spirits, or other accountable materials from one proprietor to the other proprietor will be indicated in the records and reports of each proprietor. Operation of a bonded winery engaged in the production of wine by an alternate proprietor will be at least one calendar day in length.

(b) Alternation. All operations in any area, building, floor, or room to be alternated will be completely finished and all wine, spirits, and other accountable materials will be removed from the alternated wine premises or transferred to the incoming proprietor. However, wine, spirits, and other accountable materials may be retained in locked tanks at wine premises to be alternated and remain in the custody of the outgoing proprietor.

(c) Bonds. The outgoing proprietor who has filed bond as required under § 24.146 and intends to resume operation of the alternated areas, buildings, floors, or rooms following suspension of operations by an alternating proprietor shall execute a consent of surety to continue in effect all bonds. Where wine, spirits, or other accountable materials subject to tax under 26 U.S.C. chapter 51 are to be retained in tanks on the wine premises to be alternated, an outgoing proprietor who has filed bond as required under § 24.146 shall also execute a consent of surety to continue the liability of all bonds for the tax on the materials, notwithstanding the change in proprietorship.

(d) Records. Each proprietor shall maintain separate records and submit a separate TTB F 5120.17, Report of Bonded Wine Premises Operations. All transfers of wine, spirits, and other accountable materials will be reflected in the records of each proprietor. Each proprietor shall maintain a record showing the name and registry number of the incoming or outgoing proprietor, the effective date and hour of alternation, and the quantity in gallons and the percent alcohol by volume or proof of any wine, spirits, or other accountable materials transferred or received.

Summation of Basic Requirements:

  An examination of the code helps us parse out the basic requirements and responsibilities of the proprietor under the alternating relationship. Foremost, bear in mind that under this production paradigm, both entities, while conducting their respective operation, are treated as  proprietors under the law. Focusing on the requirements of the tenant proprietor, TTB requires that:

•    The alternating tenant proprietor must qualify as a bonded winery and obtain a Federal basic permit as a wine producer to conduct operations at the host’s location. 

•    The tenant proprietor must comply with record and reporting requirements of its operations by preparing and submitting its own operational reports to TTB just as any other fully functioning wine operation must do.

•    The tenant proprietor must obtain TTB approval of an application for a Certificate of Label Approval (COLA) before bottling the wine at the host’s location.

•    The tenant alternating proprietor must pay the excise tax for wine bottled and removed from the host’s location.

•    By extension, the tenant proprietor must hold an adequate bond to conduct its operations.

  There are a variety of benefits to the tenant producer under this production relationship. Perhaps the most significant, depending on the production levels of the host, is the availability of the reduced excise tax rates under the Craft Beverage Modernization Act (CBMA). The tenant’s own production levels are considered exclusive of the host’s production levels. The reduced tax rate, which may not be available under a standard custom crush arrangement, may now be available to the tenant winery contingent upon its own production levels which is an attractive benefit to the tenant proprietor.

  Note that TTB will scrutinize applications of alternating proprietorship to be sure the arrangement is not jeopardizing tax revenue, among other issues. Some of those additional areas of concern include an applicant’s attempt to qualify as a producer to take advantage of state tasting room regulations or to engage in direct-to-consumer (DTC) sales.

   Although these options may be available to a tenant proprietor, the spirit of the intent of this bottling relationship should be the guiding principle. All other benefits may be available and are certainly worth exploring. Experienced counsel should be consulted if any uncertainty is present as to the permissibility, processes, and procedures of structuring an alternating proprietorship arrangement.

What is the Most Important Decision in Choosing Grape Crop Insurance?

Cyndi

man on phone in vineyard looking at crop damage

By: Trevor Troyer, 
Vice-President of Operations 
for Agricultural Risk Management

What is the most important decision in choosing grape crop insurance?  Is it which coverage level to choose?  Is it which insurance provider to use?  Is it whether to insure all your grapes or only those that are the most susceptible to adverse weather conditions?  Is it checking to make sure the company you are going with has a good adjuster? Is it making sure the insurance company is local?

  Those are all important questions to ask.   But how can you answer all those questions?   You would need years of experience and knowledge of all the insurance providers.  You would need to personally know the adjusters in your area.  More than likely you don’t know the answer to those questions.  That is why the most important decision in grape, or another crop insurance decision is having a good and knowledgeable agent.

  Why is this important?  A good crop insurance agent is trained in all the aspects of your specific crop.  He or she knows which coverage levels do the best for making sure that your grapes are protected.  They are not going to just sign you up on the cheapest plan to get a commission.  They will go over why they think you should have a certain level.  Coverage in Grape crop insurance goes from CAT (Catastrophic 50% coverage with 55% of the price per ton value) all the way to 85%.   Depending on how many acres and locations you have choosing the correct coverage level is vital.

  A good agent will also go over which endorsements would be suitable for your vineyard.  What is Yield Adjustment? Why is this important.  Do you have more than one location?  They should speak to you about Optional Units.  (Optional Units allow different locations to be adjusted separately at the time of a claim.  This way production from one location is not co-mingled and therefore causing a claim not to be paid or reducing the claim amount.)

  A good crop insurance agent also knows which Approved Insurance Providers, AIPs, are doing the best with your crop.  Some insurance companies focus on row crops.  Others focus on certain areas of the US.  While some of these might be available in your area, they may not be the best option for your grape crop insurance.  Currently there are 13 insurance companies that are approved by the USDA to service crop insurance policies.  All thirteen may not be available in your state.  For example, in New York state only 8 of these 13 companies are active. It is important to have a good insurance company.  But you are probably not going to be able to determine that unless your agent is guiding you with that.

  Having a good adjuster is important as well.  A good agent knows which approved insurance providers have been doing well with Grape claims and which have not.  Claims should all be done the same but sometimes you might get adjuster that is new to grapes.  This can cause problems.  Agents have to stay out of the claims process per rules by the USDA, but they can help you make the right decision on which company to go with based on past experiences. Your agent can help answer questions about your policy and how it relates to a certain loss.  They can also send you material on how claims are paid out and losses are calculated.  An agent cannot ride with you and an adjuster to look at your grapes.  An agent cannot send you claim documents etc.  But they can make sure you understand your policy and the claims process.  And most importantly they can put you with an insurance company that has good adjusters.

  There are a lot of moving pieces to a crop insurance policy.  Perennial crops are fundamentally more complicated than a row crop like corn, soybeans or wheat.   You need an agent that understand the complexity and can help you navigate coverages and options.  Crop insurance policies and options can change every year.  Your agent has to be up-to-date and aware of all changes.  Just because an agent has an insurance license and they can sell crop insurance does not mean they are knowledgeable.  It also doesn’t mean they understand grape crop insurance.

  While crop insurance coverage is the same from one insurance company to the next.  Premiums are also the same for the same coverage from any of the approved insurance providers.  This doesn’t mean that each policy is structured the same.  What endorsements have you added? Do you have QL, Quality Loss so you can use pre-quality loss production in your database? Do you have Basic or Optional Units? What about Contract Pricing? All these things can be the difference in getting a claim paid.

  You should ask your agent how long they have been selling crop insurance.  Do they work with a lot of perennials.  Do they have other grape policies.  Just because they are local does not mean they know grapes.  Sometimes the best option is a national agency that works with grapes across the US and in multiple states.  How long have they been working with vineyards in your state?

  The person that is most important in your grape crop insurance is your independent insurance agent.  The more knowledgeable they are the better.  This is the person you have to place your trust in.  He or she can guide you through the complexity and help you tailor a policy that best suits your needs and locations.

The Essentials of Grape Crop Insurance

Cyndi

By: Trevor Troyer – Vice President at Agricultural Risk Management, LLC

Grape cultivation is an art that dates back thousands of years, producing some of the finest wines and fruits enjoyed worldwide. However, vineyard owners face a range of challenges, from unpredictable weather patterns to diseases that can decimate their crops. That’s where grape crop insurance comes in. In this article, we’ll explore the importance of grape crop insurance, its benefits, and how it can safeguard the livelihood of vineyard owners.

The Importance of Grape Crop Insurance

  Grape crop insurance is a specialized form of crop insurance tailored to the unique risks associated with grape production. Grape crop insurance is an Actual Production History policy.  You are using an average of your historical production to determine the expected crop tonnage and value. It serves several critical purposes:

Protection Against Natural Disasters

  Vineyards are vulnerable to various natural disasters, including hailstorms, frost, excessive rainfall, and wildfires. A sudden and severe weather event can devastate a grape harvest, leading to significant financial losses. Grape crop insurance helps vineyard owners recover from these unexpected setbacks.  You are also covered for wildlife damage which could include birds, bears, deer etc.

Financial Stability

  Grape crop insurance promotes financial stability for vineyard owners. It provides a safety net that allows them to continue their operations even in the face of adversity. This stability is crucial, as the grape cultivation process is a long-term endeavor, with vines taking years to reach full production potential.  Grape Crop insurance is there to keep you growing.

Support for the Wine Industry

  The grape industry is a cornerstone of the global wine sector. Grape crop insurance not only benefits vineyard owners but also contributes to the overall success and sustainability of the wine industry. It ensures a consistent supply of high-quality grapes, which is essential for winemakers and consumers alike.

Types of Grape Crop Insurance

  There are several types of grape crop insurance policies available to vineyard owners:

Yield Protection

  Yield protection policies provide coverage based on the actual grape yield. If the yield falls below a certain threshold due to covered perils, the policyholder is compensated for the loss.  You can choose coverage levels from 50% all the way to 85% of your historical average.

Whole Farm Revenue Protection

  This type of insurance covers all the crops on the farm, including grapes, making it suitable for vineyards with diversified agricultural operations.  You can have yield coverage and have Whole Farm Revenue Protection (WFRP) in addition as an extra layer of security.

Government Assistance

  The USDA provide support to grape crop insurance programs. Subsidies and incentives make these policies more affordable for vineyard owners, encouraging wider adoption and helping ensure the sustainability of the grape industry.  Your premium is partially subsidized through the USDA, the amount of subsidy changes with coverage levels.

Availability

  Grape crop insurance is available in the following states; Arkansas, California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Virginia and Washington state.   Crop insurance may not be available in all counties in these states.  But in a lot of cases, if you have a mature producing vineyard, you may be able to get coverage through a special request to the USDA.

Conclusion

  Grape crop insurance is an essential tool for vineyard owners, protecting their investments and ensuring the longevity of their vineyards. It safeguards against the unpredictable challenges of nature and diseases while promoting financial stability and supporting the larger wine industry.

B Cellars Embraces AI to Understand the Emotional Connection Between Brand and Consumers

Cyndi
Photo of B Cellars front entrance to their building

In the ever-evolving landscape of the wine industry, innovation is not just about viticulture and winemaking techniques; the new frontier is understanding the emotional bond between brand and customers. B Cellars, a trailblazer in the Napa Valley wine scene, took an early leap into the future by integrating artificial intelligence into its marketing and sales strategies. The results have allowed the company to carve out an enviable niche in the direct-to-consumer channel, which is the focus of their business model.

  In 2018, B Cellars distinguished itself as a pioneer in the winery-meets-AI space by employing Metis, a cutting-edge, AI-powered behavioral research program developed by a San Francisco-based company, Richey International. This move marked

B Cellars as among the first in the wine industry to seek consumer feedback through AI, with a focus on emotional connection to the brand.

  Metis, named for the Greek goddess of wisdom, was designed to delve deeper than traditional market research methods. It analyzes vast amounts of data, including social media and online review sites like TripAdvisor and Google Reviews, to provide insights into the emotional resonance a brand has with its customers and find best practices within specific industry segments. The AI searched for what consumers were saying about their experiences at B Cellars in comparison to a subset of other well-respected Napa Valley wine brands. It went a step further by also analyzing data from select non-winery businesses such as restaurants, hotels, and even retail stores; surprisingly, some of the most valuable insights for B Cellars came from analyzing the customer experience at Filson, the 130+-year-old Seattle-based outdoor clothing company.

  The next step was to invite past B Cellars guests to answer questions in writing. The instructions were clear and were meant to solicit thoughtful responses by noting respondents should “take as much time as you need to develop your response…we are listening carefully.” Participation in the survey was well above industry research norms.

  What Metis’ process revealed to B Cellars unlocked the essence of the relationships between B Cellars and their customers. Why did customers like the winery (apart from good wine)? What drove them to maintain a multi-year relationship? How could such a relationship endure when the customer was thousands of miles away?

  The answers became clear as Metis honed in on the core differentiators that consumers perceived about B Cellars: the “soul” of the brand was rooted in craftsmanship, terroir, and the idea of a lifestyle grounded in authenticity (as opposed glamour or floridity), plus appreciation of great quality wine, food, and entertaining in a manner that was elevated yet approachable. Metis found that while these elements were amply apparent to visitors to the B Cellars estate in Oakville, these factors were not highlighted effectively on the company’s website and online user experience. Simplifying and streamlining the website made it more inviting and accessible to potential customers and aligned better with the superior elements of the B Cellars brand. Once executed, the website simplification translated into a refined pre-visit experience between guests and the winery’s concierge team, which gave way to a unique arrival experience for guests.

  The insights B Cellars gained from the AI analysis of its in-person experience were also eye-opening. From Metis’ data analysis, the winery learned that their wine tastings were undervalued. So, they increased prices by an unprecedented 30%; this adjustment aligned the perceived value of their offerings with the high quality of their wines and curated food pairing experiences. The price increase also heighted the perceived luxury of the experience, which led to increased bookings to visit the estate.

  Furthermore, Metis’ insights led to a reimagining of B Society, an offering that encourages ongoing purchases of its wines. Before Metis, B Society wines were predetermined for its subscribers based on previous purchases; however, AI recommended a totally customizable wine purchase approach that allowed consumers more control over choosing selections for each shipment. Metis also challenged the B Cellars approach to Society gatherings. Today, gatherings are designed to encourage deeper connections between the B Cellars team and their clients by having more intimate gatherings and allocating visiting hours exclusively for returning guests. These changes have not only improved customer relationships but also reduced attrition rates, which now sit well below industry norms.

  The results of incorporating AI into the winery’s strategy have been remarkable. B Cellars enjoyed a 7% increase in annual winery visits with in the first year of implementing the Metis findings, plus a notable improvement in customer engagement, loyalty, and referrals. These changes underscore the potential of AI in transforming not just marketing strategies but the very fabric of the customer relationship. The key was deeply analyzing a comparable set of businesses and listening carefully to its customers, just as B Cellars had promised to do. In the final analysis, Metis showed that B Cellars customers wanted to believe in the winery’s ethos of integrity and authenticity. While most wineries market themselves based on what’s in the bottle, their scores, or a continuous stream of marketing campaigns,

B Cellars sought substance, which has translated into a durable emotional connection with its customers.

  The success of the B Cellars story provides a roadmap for other wineries to follow as AI inevitably becomes more integrated into all of our lives. The implications of the winery’s pioneering use of AI extend beyond their own success; it opens up a realm of possibilities for other wineries and vineyards. The wine industry, traditionally reliant on conventional marketing and customer relationship techniques, is already starting to think of AI as a viable tool for enhancing business models, especially in the DTC segment, which has grown significantly during and since the Covid-19 pandemic began in 2020.

  Moreover, the adaptability of AI tools like Metis means they can be tailored to different business needs, whether it’s refining product offerings, enhancing customer experiences, or developing more effective marketing strategies.

  The innovative approach of Be Cellars incorporating AI into their marketing and customer relationship strategies sets a new benchmark in the wine industry. As the industry continues to evolve, AI will undoubtedly play a significant role in shaping the future of winery and vineyard operations, not only in the sales and marketing spaces, but also in optimizing elements of the wine business like farming practices, supply chain, and even winemaking techniques. The experience of B Cellars using novel AI tools demonstrates that the fusion of technology and tradition can lead to unparalleled success in the wine world.

Exploring Accommodation Options at Wineries

Cyndi
Picture of front of a winery building entrance connected to 3 metal silos

By: Becky Garrison  

Wineries looking to provide their guests with elevated wine-tasting experiences might want to explore the option of offering accommodations at their winery or vineyard. Kristen Baxter, operations manager for Abbey Road Farm in Carlton, Oregon, said, “Our lodging is integral to our business model, as it allows winery guests and event guests to stay overnight while they are here enjoying wine or celebrating with us.”

  Carrie Bonney, general manager for Youngberg Hill (McMinnville, Oregon), concurs, adding, “Lodging contributes to our reputation for exceptional hospitality and helping to sustain and grow our overall operation.” In addition, their lodging serves as a revenue stream that supports their broader mission and allows them to invest in the enhancement and maintenance of their property.

  In Bonney’s estimations, this is just one piece of the experience they aim to provide our guests, and it complements their primary focus, wine. “By offering a range of comfortable and thoughtfully designed accommodations, we aim to create a welcoming environment where guests can relax, unwind and fully immerse themselves in a unique experience. This, in turn, enhances their overall visit and encourages return visits and positive word-of-mouth referrals,” Bonney adds.

Lodging Options Available at Wineries

  As noted by the following examples, the types of accommodations available at a given winery vary from a rustic cabin cozy for two to a luxury country-style mansion replete with five-star amenities.

  Lumos Wines’ (Philomath, Oregon) vineyard is situated on what was the H Bar H Dude Ranch back in the 1940s and 1950s. The one-bedroom cabin with indoor plumbing was one of the original guest cabins built in 1938 and can accommodate up to two people. They maintain this little cabin to keep the historical feel of the place. In another historical touch, their tasting room is in the old dude ranch’s dance hall barn.

  Colter’s Creek Winery & Vineyards (Moscow, Idaho) began offering lodging at their tasting room because they had an open space that needed remodeling, and they saw a hole in the Moscow lodging market to fulfill. They have four boutique rooms above their tasting room in Moscow available via self-check-in, with bookings that can be made through their website.  Different packages are offered, each room comes with a complimentary wine tasting and with enough planning, guests can visit the vineyard and production facility 45 minutes away in Juliaetta.

  Abbey Road Farm’s (Carlton, Oregon) Silo Suites B&B is housed in three-grain silos. Two of the silos were built in 2003 when the property was a grass seed farm. The third was added to complete the project the winery opened in 2019. The silos boast a grand entry and sitting area with a wet bar. Their five suites feature foam-topped beds, Jacuzzi tubs, luxurious bedding and ambient floor heating. Stays include a bounteous Oregon breakfast prepared by on-site chef/innkeeper Will Preisch.

  Youngberg Hill had already been functioning as an inn since 1989, when they planted their oldest blocks, the Natasha and Jordan blocks. They chose to maintain this inn as a nine-room bed and breakfast offering comfortable rooms and suites, an open-air deck, spectacular views for sunsets and stargazing, and a fireplace beside which to relax with a glass of wine. A two-course breakfast keeps guests fueled up for a day sightseeing around the Willamette Valley.

  In a similar vein, Hummingbird Estate (Central Point, Oregon) converted a historic private home and former orchard into a vineyard and tasting room, event space and inn. Renovating the home’s bedrooms into suites made the most sense for the space. Here, guests can enjoy a glass of chardonnay, syrah or pinot noir while taking in the view of grapevines from their windows. In addition, they have a vineyard cottage available for rent.

  Also, when Grosgrain Vineyards (Walla Walla, Washington) acquired their winery/vineyard property via a bankruptcy auction in 2017, the only structure on the property at the time was a house where the previous owner had made his wine in the garage.  They needed a significantly larger winery space, so they built their current winery and tasting room in an adjacent area. They considered moving into the house themselves but decided that it was better suited to use as a short-term rental, which would be a great way for them to provide a more immersive experience. The house has four bedrooms and four baths, all of which are en-suite, with the house rented as a single unit on a nightly basis.

  So far, the house has been a great way to host new customers who experience their winery for the first time, as well as their wine club members who can book further in advance and at a discounted rate. Also, this house provides a great way for them to host their national distributors and further educate them about their winery. While the revenue it generates has been significant, more importantly, staying at this home helps guests build a deeper connection with the winery.

  The Joy on the Anahata (which translates to the heart chakra in Sanskrit) Vineyard (Salem, Oregon) is a luxury wine country retreat and 6,500-square-foot home with seven bedrooms (four suites, two queen rooms and one twin room in the basement for a nanny or younger children.) This house sits on top of the vineyard at 550 feet with views in every direction, and the gated 30-acre property is fenced in for deer. Other amenities include a chef’s kitchen, living room, dining/family room and outdoor heated swimming pool and hot tub, as well as a basement with a wine cellar and ping pong and pool tables. This property is rented as a “hospitality home” designed for family retreats, work retreats, YPO retreats and, in some cases, smaller than 100-person weddings. As they don’t have a tasting room built yet with their wines poured at Carlton Winemakers Studio, this house provides an opportunity for guests to taste their products as they collect their information.

  Bianchi Vineyards (East Wenatchee, Washington) chose to rent the two-bedroom house on their property as a short-term Airbnb experience. In addition, they have two RV spots with power and water. Some guests visit the tasting room for their complimentary tasting. Others enjoy hiking, skiing and concerts at the Gorge Amphitheater.

Recommendations for Designing Lodging at a Winery 

  Bonney stresses that offering lodging is not for the faint of heart. “This can be a significant undertaking, but it is also an excellent enhancement to your guest experience and can put your winery on the map as a unique destination. While it can eventually enhance your overall revenue streams, a great deal of investment is involved.”

  Meghann Walk, general manager for Hummingbird Estate, reminds those looking to invest in lodging that while lodging is an extension of their long-standing tradition of hospitality, it is not passive income. She reflects, “The inn is our most stable but also, in many ways, the most constantly demanding aspect of our business. There is no such thing as only answering phone calls during open hours. Make sure you are prepared for this.”

  Before launching a lodging program, Bonney recommends conducting market research for your area, determining lodging demands and assessing the type of accommodations guests will want. Along those lines, familiarize yourself with zoning and permitting regulations for your area before you start any work.

  Also, Baxter notes that conducting market research into other lodging options in your area can enable you to curate a unique experience from competitors to help you stand out. “Consider putting together packages unique to your property and potential discounts for loyal wine club members for additional benefits,” she says.

  In designing the lodging, Bonney recommends ensuring that the overall design provides a comfortable and memorable experience for your guests. Think about room options and various views, private patios and accommodating children or pets, as well as sustainable practices, such as energy-efficient appliances, water conservation, composting and eco-friendly amenities. In addition, consider if you want to offer wine tasting and breakfast as part of the lodging experience or if those will be separate options for purchase.

  Don’t neglect security and safety. Consider outdoor lighting, security cameras and post-emergency exit procedures for guests to see.

  Also, Bonney stresses that wineries need to ensure they have the appropriate trained staff. In addition to scheduling and maintaining guest reservations, they must know local restaurants, tour operators, spa services and other area happenings. “Anyone from the front desk staff to the housekeepers who will be interacting with guests must excel in customer relations,” she said. Baxter offers this cautionary reminder, “Your housekeeper will be your most valuable and least replaceable employee.”

  A CRM (customer relationship management) staff member will be needed to help maintain contact with guests, book rooms and provide an online booking option. Along those lines, online travel agencies like Expedia and Tripadvisor can help expand exposure.

  Finally, Bonney recommends that those seeking to add lodging as a service, embrace it fully. She proclaims, “You and your staff can create a holistic and integrated experience, develop new ambassadors for your brand and most importantly, sell more wine!”

The Producers’ Blind Spot

Cyndi

The Role of the Municipality and Local Ordinances and the Producers’ Operational Goals

picture entitled zoning ordinance zoning and land use planning

By:  Louis J. Terminello, Esq. and Bradley Berkman, Esq.

Let’s face it, many of us, likely including the writer(s) and readers alike, find the making of wine, beer, and spirits not only to be a labor of love that allows oneself to create artistic expressions in bottles, but we also find the trade and its finished products to be pretty darn exciting. It’s very much a lifestyle industry, that, simply put, is fun.

  Even in the arena that this writer operates in – that is, alcohol beverage law – the romance of the trade is far from lost. There is, however, one especially important regulatory area that is often overlooked by beverage alcohol producers and even legal practitioners in the field: the role of municipal ordinances and zoning regulations and its impact on beverage alcohol sales, service, and for the purposes of this article, production. It is doubtful that many winemakers, distillers, and brewers find this topic engrossing but without proper guidance and planning, a misstep at the local level could lead to disastrous consequences.

  Briefly, most in the trade understand the role of the federal and state governments, particularly those who produce beverages. Licensing schemes, reporting requirements, excise taxing structures, and trade practice issues (as in tied house) are all federal and state concerns. In fact, some local jurisdictions, namely cities and counties, do enforce local alcohol licensure and regulatory schemes that some readers may be aware of, but that is not the focus of this article. The issues that require parsing out in the limited space here are land use concerns and the various local administrative processes and procedures that affect all actors in the alcohol industry. Put another way, package stores, bars, restaurants, wineries, breweries, and distilleries alike must comport themselves and comply with local ordinances and zoning regulations.

Advent of Craft

  And along came the craft producer, and the spider sat down beside her. The rise of craft wineries, distilleries, and breweries has brought about a nuanced set of local challenges, encompassing aspects such as production facilities, warehousing for potential distribution, and the popular tasting room –often referred to as the bar. Not to be overlooked at the craft venue, are food sales in the various forms that they could take, including a restaurant on the premises or the ubiquitous food truck.

Zoning Districts-What are they?

  With the municipal jurisdiction in mind, i.e., a city or county, one must carefully analyze the zoning district within the city or county that is the site of the proposed operation, prior to commencing any real investment in building out the facility. Of course, an essential part of this process is having a detailed business plan that outlines all operational issues of the facility. A full understanding of the contemplated uses is essential. In land use terms, a use can be best described as the economic activity permitted in the zoning district. Sticking to our theme, as applied to a typical craft operation, “uses” may include activities such as “manufacturing” and “retail” operations, as examples.

  With the above in mind, many counties and cities are delineated into zoning districts. A zoning district, in simplified terms, is a local subdivision of a municipality where certain activities or uses are permitted within the subdivision, and by extension, some activities or uses may be precluded. Staying with the craft production analysis, some zoning districts may permit manufacturing uses and not retail, while in others, retail may be permitted but not manufacturing and, in some districts, neither may be permitted at all. By now, the prospective manufacturer should realize that aligning all desired operational uses with the zoning district is essential before build-out. Imagine investing significantly in a wine production facility where the contemplated revenue stream is to come from tasting room sampling and sales, only to discover late in the build-out process that the retail sales of alcohol are not permitted within the zoning district. Someone is about to lose their job!

  Other considerations that the readers are likely familiar with, as applied to alcohol, are distance requirements. Virtually every municipality and the zoning district within has distance separation requirements from alcohol businesses and certain other types of venues such as schools, religious establishments, and other alcohol beverage licensees. Being aware of these requirements is mandatory prior to commencing any construction on a sort of alcohol facility. As stated, lack of knowledge of the foregoing will lead to problems.

Available Remedies to Certain Land Use Problems

  In certain instances, contemplated producer operational uses are not permitted by right. That is to say, and using this as one example, the retail sales of alcohol from a tasting room may not be automatically permitted in a zoning district. However, certain administrative procedures may be available to the producer that will allow for specific uses within the zoning district only after process and approval.

  These exceptions generally take the form of conditional use permits or special exceptions. These administrative remedies may be available depending on local ordinances. These exceptions usually require an extensive application process and public hearings before zoning boards and city commissions where the public generally can attend and offer support, or criticism and objection, to a desired operation. These procedures are quasi-judicial in nature, where arguments are heard and made by the producer and the producer’s counsel to board members and the commission. As noted, the commission may approve the proposed operation and issue a conditional use permit. As the name suggests, these permits come with conditions affixed that must be complied with. If they are not, the holder then risks cancellation of the permit. Negotiating conditions is an integral part of the process between the local government and the producer. Clearly, the goal is to not include conditions that adversely affect operational objectives. It is worth noting that these are quasi-judicial proceedings. Records of the proceedings are established, and should the commission deny the issuance of a permit for a stated and unsubstantiated reason, the applicant has the ability to take the matter to state court and appeal the decision.

  Other remedies to zoning restrictions include perhaps the familiar “variance.” Back to our craft operation… imagine that you’ve located the perfect wine-making facility. All the stainless steel tanks fit nicely in the plant space, the layout allows for the contemplated bottling line, and just by chance, there’s a perfect space that can be the dedicated tasting room. The only problem is that the Church of the Sacred (pick your deity), is within 100 feet of the tasting room and as such, retail sales of alcohol are not ordinarily permitted. Well, if available, a variance could be the solution. In essence, a variance is a request to deviate from the specific zoning requirements within the zoning district. The process generally includes public notice and hearing but is a potential solution to all sorts of distance separation requirements.

  The above is merely a basic primer on zoning and land use issues that may affect wine, spirits, and beer production and sales issues. Municipal matters and zoning issues are complex areas of alcohol beverage law that are often overlooked by producers of beverage alcohol. In the contemporary production environment, particularly in the craft area with its complex and mixed-use environment, a producer would be well served by doing their land use homework or working with experienced counsel prior to groundbreaking. After all, the goal is to sell the drink produced, not to drink it to numb the pain of poor land use planning.

New Grapevine Crop Insurance Coverage Now Available

Cyndi
stormy dark skies over a vineyard

By: Trevor Troyer – Vice President at Agricultural Risk Management, LLC

The USDA Risk Management Agency has just released the new Grapevine crop insurance plan.  This has been something that vineyard owners across the US have wanted for years.  Coverage is now available starting for the 2024 crop year. The sign-up deadline is November 1st in all states where it is available.

  The states where you can obtain this new coverage are: California, Idaho, Michigan, New York, Ohio, Oregon, Pennsylvania, Texas and Washington.  It is not available in all counties though.  The counties that are listed in the actuarial documents are not the same as the Grape crop insurance program.  This new program is available for grafted grapevines only in 91 counties.

  What is covered with this new insurance product?  The Causes of Loss that are listed in the Grapevine Crop Provisions are below:

      11. Causes of Loss

      (a) In accordance with the provisions of section 12 of the Basic Provisions, insurance is provided only against the following causes of loss that occur within the insurance period:

(1) Freeze;

(2) Hail;

(3) Flood;

(4) Fire, unless weeds and other forms of undergrowth have not been controlled or pruning debris has not been removed from the vineyard;

(5) Insects, diseases, and other pathogens if allowed in the Special Provisions; and

(6) Failure of the irrigation water supply if caused by an unavoidable, naturally occurring event that occurs during the insurance period.

      (b) In addition to the causes of loss excluded in section 12 of the Basic Provisions, we will not insure against damage other than actual damage to the vine from an insurable cause specified in this section

  The vine needs to be completely destroyed, or is damaged to the extent that it will not recover in the 12-month insurance period from November 30th.

  Any damage other than damage to the grapevine from an insured cause is not covered.  For example, chemical drift, terrorism etc. are not covered.  Failure to follow good farming practices or the breakdown of irrigation equipment are also not covered.

  For the grapevines to be insurable they must be adapted to the area they are being grown in.  They must be being grown and sold for fruit, wine or juice for human consumption.  The vines must be grafted to be insurable as well.  The Crop Year begins December 1 and extends through to November 30 of the following year. You must have a minimum of 600 vines per acre to be insurable also.

  Vines are classified into 3 stages of growth for the policy.  Here are the exact definitions:

      (a) Stage I, from when the vines are set out through 12 months after set out;

      (b) Stage II, vines that are 13 through 48 months old after set out; and

      (c) Stage III, vines that are more than 48 months old after set out.

  Values are determined by the Stage (age) of the vine and the county they are located in.  Obviously Stage III vines are worth more than Stage I vines.  These prices are set by the USDA Risk Management Agency.

  Vines are insured in four different categories; Group A, Group B, Group C and Group D.  Without listing all the varieties in each group, which would take up a lot of space, suffice to say that any variety can be insured.  Group A for example has Concord, Niagra and other natives and some hybrids.  Group B has mostly hybrids such as Chardonnel, Diamond, Elvira, Vidal Blanc but does have some Vitis vinifera like Reisling.  Group C has the most European grapes, Cabernet Sauvignon, Chardonnay, Gamay and others but does have hybrids as well.  The catch all is Group D which has “All Other Varieties”.  You can select a different coverage level for each Group.  You could have 60% coverage on your Group A and 75% coverage on your Group C vines. Depending on which vines you think are more at risk.   If you choose Catastrophic Risk Protection (CAT) level for any vine type then CAT will be applicable for all of your insured vines in that county.

  You can choose coverage levels for your Grapevine insurance from CAT (Catastrophic) to 75%.  CAT insurance is 50% coverage but you only get 55% of that 50% value per vine. Coverage increments are 5%, so you have 50%, 55%, 60%, 65%, 70% and 75%.   There is a sort of a double deductible with Grapevine insurance.  You have a damage deductible and a value/price deductible.  For example, if you choose 75% coverage you would have a 25% damage deductible.  That means that the first 25% of damage is not payable.  So, if you had 30% of your vines killed because of a freeze you would have a payable claim of 5% (30% minus 25% deductible).  There is also a value deductible as well. Again, if you have 75% coverage you would have a grapevine value deductible of 25%. For example, if the grapevine is Stage III in California in Napa County it would be worth $39.  At the 75% coverage level the dollar amount for that vine would be $29.25.

  There is an optional endorsement that changes the damage deductible.  This endorsement does cost a little more but is worth it, in my opinion.  This is called the Occurrence Loss Option or OLO for short.  It changes the damage deductible to a 5% damage trigger.  If your loss is 5% or more of the total value of the vines in a unit you would have a payable loss.  Plus, you are paid on the full value percentage of the loss.  So, if you had a 30% loss, you would get paid on the full 30%.  This does not change the value percentage of the coverage level, if you choose 50% you get that amount.  You cannot exceed the total insured value, Liability, of the vines in any case. 

  OLO has been available for other types of insurance like citrus trees, avocado trees etc.  To keep premiums down growers often elect lower coverage levels with OLO.  That way you are likely to get a claim paid but the premium is not too high, you just get a little less per vine.

  Once you sign up and complete all the forms with your agent, they are then submitted to the underwriter.  The underwriter will open an inspection and an adjuster will come and take a look at your vineyard.  The adjuster will determine if the grapevines in your vineyard are insurable.  The vines could be uninsurable for any of the following reasons.  The vines are unsound, diseased or in someway unhealthy.  They could have been grafted within a 12-month period before the beginning of the insurance period. Or they could have been damaged prior to the beginning of the insurance period.  Once the adjuster has completed the inspection, it is sent to the underwriter and then on to the USDA Risk Management Agency for final approval. 

  If you have damage from an insured Cause of Loss, you should contact your agent to get a claim opened.  It is always best to get a claim opened up sooner rather than later.  48 – 72 hours after discovering damage is best.  I know that a lot of growers want to wait and see how much damage there is before they do anything.  It is always better to get a claim opened up rather than wait and see.  If there is not enough damage then you just let the adjuster know.  After you open up a claim an adjuster should be out within 10 days to inspect the vineyard.  Do not remove any damaged vines until it has been inspected!

  This is a good program, and it will provide protection to vineyards that need to mitigate losses from Freeze, Hail, Flood, Fire etc.  But you will have to determine, with your agent, whether or not it is a good fit for your vineyard.  Some growers and locations have less risk than others.  While some areas are constantly pummeled by the elements and other factors.