Wine Made the Co-op Way

Michael Mondavi is back in the wine business — with a twist.

Three and a half years after being ousted from his job running the Robert Mondavi Corporation, the famed winery founded by his father, Mr. Mondavi is sharing a small new winery with start-up vintners in a venture he calls a winemakers’ studio.

Mr. Mondavi, 64, certainly does not need the rent. His share of the nearly $1.36 billion from the subsequent sale of Robert Mondavi to Constellation Brands amounted to more than $100 million.

But he says the studio concept broadens the scope of his business, increasing its power with suppliers and distributors, while providing entrepreneurial winemakers an entry into the market without requiring significant capital outlays.

“To compete with the big guys, the small family-owned wineries need to be both independent and interdependent,” Mr. Mondavi said. “Own your own vineyard, maintain your personality and style, but be interdependent on everything else, like buying glass and negotiating with distributors.”

It’s a new model for new-age vintners. California’s reputation for quality wine originated with entrepreneurs and immigrant families who borrowed from banks to buy land and relied on their own sweat equity while waiting for their vines and their wine to mature.

But few take that path today.

Aside from some superboutiques offering wines at $100 a bottle and up, most of the wine made here these days is produced and distributed by multinational beverage giants or spirits manufacturers. Today’s wine start-ups are often “virtual” wineries, little more than a brand name and a label on a bottle, supplied by one of the state’s “custom crush” operations, which make wine to specification for numerous clients. These can lead to good wines, even great ones, but the individual nose-in-the-barrel element is missing.

Not only are the start-up costs of a bricks-and-mortar winery prohibitive for many small operators, but getting the finished product onto store shelves is an even bigger challenge.

“Big distributors have hundreds or thousands of brands, and each has a number of 800-pound gorillas,” Mr. Mondavi said. “These 800-pound gorillas tell them what to do. I know because I was one.”

Indeed. Robert Mondavi shipped over 10 million cases in 2004. By contrast, Folio Fine Wine Partners, as Mr. Mondavi’s new venture is called, plans to stay below 50,000 cases from its own production here.

That will be spread among five brands owned by members and friends of the Mondavi family: Hangtime, I’M, Medusa, Oberon and Spellbound.

Mr. Mondavi and his wife, Isabel, own 10 percent of the business. Their son Rob, 36, president for winegrowing, owns 39 percent; so does their daughter, Dina, 31, the creative director. The company’s employees own the small remaining share.

To give greater heft to its business, Folio imports wine from Italy produced by the Frescobaldi family, as well as wines from Spain, Austria, New Zealand and Argentina. Altogether, Folio sold about 300,000 cases last year.

“Our import portfolio is $40 million-plus in sales, so I can get the attention of the distributors to the point where I can at least present Oberon or I’M,” Mr. Mondavi said. “I was convinced that if we just did our own 100 acres and 40,000 cases, we could never get enough clout in the market.”

Riding piggyback on Folio’s overall business are several much smaller winemakers. For these winemakers, the studio offers access to a level of equipment they could never begin to afford, representation at Folio’s tasting room, and a chance to place their wines with restaurants and retailers they could not reach independently.

“When Folio was starting up, I saw the people they were bringing on for sales, and I knew them from Mondavi,” said Tina Cox, who, with her husband, Mike, is producing 800 cases of pinot noir at Folio under the Mayro-Murdick brand. “They had the relationships with the wholesalers and retailers, and they really loved the wine.”

A passion for the product is a requirement for entry in the Folio studio, Mr. Mondavi said. “We will not custom-make wines like the custom-crush operations. We will only work with winemakers who will be hands-on. We want them here seven days a week during the harvest.”

The studio concept, Mr. Mondavi said, began with the Carlton Winemakers Studio, in Carlton, Ore., which opened in 2002. Rob Mondavi produced a pinot noir there before Folio acquired its own winery.

Carlton was the brainchild of Eric Hamacher, a self-described “winemaking gypsy,” who had made wine in a series of borrowed winery spaces across California and Oregon, along with his wife Luisa Ponzi, and their partners, Ned and Kirsten Lumpkin.

Mr. Lumpkin, a successful contractor, owned a vineyard but needed a winemaker. Together, Mr. Lumpkin and Mr. Hamacher built an environmentally benign winery tailored to the needs of small producers.

“The whole idea of a shared winemaking facility is you don’t need to be that fifth-generation winemaker that already has everything paid off,” Mr. Hamacher said. “You’re not locking up all of your capital waiting for your first vintage to arrive.”

The Carlton studio has the capacity to produce 18,000 cases of wine, which is currently shared by 10 winemakers, including Mr. Hamacher.

Each is individually licensed, and they operate under an alternating proprietorship that allows them to label their wines as “produced and bottled by,” which connotes an independent winery, as opposed to “cellared and bottled by,” which indicates that the wine was produced in a facility owned by another entity.

This licensing arrangement also allows each owner’s wines to be poured in the studio’s tasting room, and for direct sales to customers in states, like New York, that restrict such shipments.

“We’re all independent wineries working under an alternating proprietorship, and that’s what differentiates us from custom crush,” said Andrew Rich, who produced 7,500 cases last year, making him the largest winemaker at Carlton. “Custom crush is, ‘Here are my grapes, call me when it’s in the bottle.’ We’re all doing what we’re doing by ourselves.”

To be fair, established custom-crush operators work closely with their client winemakers, who are often intimately involved in the various steps from grapes to wine.

And some of California’s most sought-after “cult” wines have been produced at these facilities, including Pahlmeyer, Marcassin and Bryant Family, all of which were crushed, blended or aged at the Napa Wine Company, a big custom-crush operation just down the road from the Robert Mondavi Winery in Oakville.

Indeed, custom crush often serves as a launching pad for new vintners while they establish a brand and raise capital for a brick and mortar winery.

Last year, there were 1,587 virtual wineries in the United States, according to Wine Business Monthly, an industry magazine. That’s down 171 from 2005.

But few of those have actually disappeared: 153 of those no longer considered virtual wineries are now counted among the nation’s bonded wineries. Winemaker studios provide a way to acquire bonded status without the capital outlay of building a winery and buying equipment.

“The trend in the wine industry clearly is to tie up less capital,” said Cyril Penn, Wine Business Monthly’s editor in chief. “There are quite a few of these kind of cooperative ventures sprouting up that are different spins on it.”

Another new model is Les Garagistes, a winemakers’ “village” that plans to break ground next spring in American Canyon, a formerly neglected area between Napa and Vallejo.

Les Garagistes will offer 12 winemaking spaces about 4,500 square feet in size, which can be leased by individual winemakers or groups. Capital equipment, like crusher/stemmers and wine presses, will be shared, and the wineries will surround a central courtyard with a café and a tasting room.

“For somebody who’s making 500 cases of wine, owning a winery doesn’t make sense,” said John Hawkins, a partner in Les Garagistes.

“The very small people have to go to a custom-crush facility,” he said, “but once you get a little larger, our option is very attractive, because custom crush is not cheap. This is a needs-based concept.”

By Lawrence Fisher.