October 25, 2014

South River Vineyard: It’s About the Hunch

For Northeast Ohio vineyard owner Gene Sigel, it’s premonition over planning.   Despite being just a few credit hours short of holding a doctorate in economics, Sigel never bothered writing a business plan for his South River Vineyard in Ashtabula County.

“I don’t have a business plan, I never have. I’ve always been driven by hunches. Somebody else may say ‘that’s so stupid,’” says Sigel, who started his viticulture career as a vineyard manager for Chalet DeBonne Vineyards, Madison Township, in April 1994.

Sigel’s first hunch was that northeast Ohio’s nascent wine industry was set for explosive growth. Accordingly, in 1995 he and his wife Heather leased two acres of prime vineyard and planted it in Riesling. Seventeen years later, South River has the largest planting of vinifera (40 acres) in the Grand River Valley Appellation, and total vineyard holdings of 140 acres.

 

Sales have grown from 370 cases in 2002 to 3,700 in 2011.  And, as Sigel suspected, the industry itself has taken off. There are at least 20 wineries within a 25-mile radius of his vineyard. Even the recession hasn’t put a damper on this success.

“We got into an industry that has a very stable customer following,” Sigel says.

Key to developing and retaining that base is another one of Sigel’s hunches that lead him to dismantle and relocate an 1892 Methodist church building that he found in Portage County at his vineyard.  The tasting room is a sanctuary for whispered conversation over one of South River’s 15 varieties (reds are their specialty.)  The colored panes of the church’s original windows ensure only warm hues linger here; a stone porch with classical Greek architecture at the rear of the structure provides a sunny alternative with stunning views of the rolling vineyard.

“People come here and occasionally mention they like the wine – ‘ fine, thank you for that’ – but more often people come and say they like the view, the tranquility and the stars at night, the lack of urban clutter,” he says.

Gene Sigel subscribes to the witticism that the “best way to make a small fortune in the wine industry is to start with a large one,” but he also says wise use of capital can go a long way toward ensuring success.

Planting site:

His number one suggestion to that end: Buy the best growing site possible and invest in proper drainage to ensure maximum productivity. Pay attention to topography, use temperature recorders to predict vulnerability to winter damage and factor in the possible cost of wind machines if the readings show a wide variation on the same plot (In his vineyard, it is a 20-degree differential).  In Ohio, also consider aggressive tiling if the property is wet; at South Vineyard, they tile every row, which has helped increase the hardiness of the vines and quality of their fruit.

Location:

Site is also important when it comes to attracting business. Look for a retail location that is on a wine trail or busy highway. “If people have to work hard to find you, you will have to spend more money on marketing,” Sigel says.

Buy equipment for future needs today:

He also suggests that equipment purchases be made with future growth in mind. Sigel, who also manages the neighboring Chalet Debonne vineyards, says they made the mistake of not planning for growth when purchasing equipment. “I sold a lot of used, small equipment, so I could buy larger, more durable equipment,” Sigel says.

Buy a signature building:

Investing in unique architecture is also smart, Sigel says. South River Vineyard’s tasting room is an 1892 Victorian church. Sigel says having unique architecture generates curiosity, and if it can be part of your vineyard setting, that’s all the better.

Invest in people:

Finally, Sigel says vineyard owners need to keep in mind that the wine business is, by its nature, human-capital intensive. “It’s not like working in a factory,” he says. “It takes a year to see everything once … the whole process, and then you have the variable of Mother Nature. There is a tremendous human capital investment in the winery.

Beyond the tasting room’s porch is a stone pavilion that cleverly masks the wine cellar beneath. This 3,500-square-foot cavern is actually a pre-cast concrete box culvert, the kind used in highway construction. Sigel saw the idea successfully used by other wineries, and, on a hunch, decided to make the investment during the winter of 2009, a time when most business owners were hoarding cash and reducing debt.  The accelerated depreciation feature of the American Recovery and Reinvestment Act sealed the deal for him.

“The recession really spurred us to look seriously at our business and say ‘let’s take on some debt, because the things you can buy right now, like buildings and equipment, will never be cheaper.'”  Acting on this hunch paid off with increased traffic and stronger sales.  “The last three years have been the busiest for us,” Sigel says.

His latest hunch is that the wine industry in Ohio is reaching a saturation point, and the new emerging opportunity is in craft distilleries.

“When I looked at the tripling of the size of the wine industry from 2000 to 2010, and I looked at the proliferation of new craft brands on the beer side, I realized that (growth) process was just starting in micro-distilleries,” Sigel said.

However, when Ohio’s restrictive laws prevented Sigel from opening a craft distillery in Ashtabula County, he worked with state representatives Ron Young and Casey Kozlowski to draft legislation that expands the number of craft distillery licenses and allows the sale of carry-out product and tastings at the Ohio distillery.

By the time Ohio Governor John Kasich signed House Bill 243 in December 2011, Sigel had invested $175,000 in restoring an old barn to house his distillery and $150,000 for a still, mash cooker and boiler. He is tentatively calling his new venture “Red Eagle Distillery,” but has licensed it under the South River Vineyard name.  Although he and Heather own South River, the distillery is their first venture that does not include some sharing of resources with Chalet Debonne, where Sigel still serves as vineyard manager.

See related story: More Midwest Wineries Adding Distilled Spirits

Sigel says the new law will be good for tourism (four craft distilleries have already applied for permits); provide another outlet for regional grain, orchard and vineyard products; and give winery customers yet another reason to visit.  By no means, however, is Sigel abandoning his “first love.” Additional plantings of Chenin Blanc and Savignon Blanc are planned for this spring as Sigel continues to search for new varieties that will flourish in the appellation.

While Sigel follows his hunches, he’s not careless. He conducts research and isn’t afraid to copy the successes of other operations. When he and Heather were weighing the craft distillery idea, they traveled to successful operations, talked to the owners, and learned about the distillation process.  But at the end of day, it comes down to following the hunch.

“My hunch told me that this was a good investment, based on the growth of tourism,” Sigel says of the winery’s 2009 expansion. “Somebody may look at it and say, ‘That’s not a good business model to work with,’ but it’s been successful for me. I’m not encouraging somebody to follow their dreams, but sometimes that’s just as effective as miles of spreadsheets and projections.”

Comments

  1. well said. nice article…

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