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A serious local wine industry is taking root in region

Is the area content to be a niche player, or is it gearing up to be Napa Lite?

Photo by Ben Banks
Sovereign Estate has 2,500 vines planted with Marquette grapes on the
shores of Lake Waconia.

You can’t wander a rural highway in Minnesota (or Wisconsin) these days without stumbling on a winery. Yes, a winery, in a state not known for its grape crop. But it’s not the equivalent of running a mountain guide service on the plains. There is some there here.

Local wines make up only about 1 percent of state wine sales, but the regional wine industry is tapping a deep vein of interest in wine, as well as wine tourism, which may actually be driving its boom. That dichotomy is perhaps why area winemakers are still struggling to pin down just where the local wine industry is headed.

Minnesota’s wine industry is growing phenomenally fast, but it’s also very young and in the middle of a classic adolescent identity crisis. Katie Cook, an enologist at the University of Minnesota, says that resolving that crisis is going to be key to the industry’s long-term success.

Local wineries are still trying to find their sweet spot, she says. “If you look at the history of wine over the last 200 years, the wineries that survived are distinct and high-quality.”

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Currently, Cook says, many wineries are trying to focus their output on what’s already on the market and familiar to consumers. The problem is that local wines—both what’s being made right now and what can realistically be made from grapes that will grow here—lie well outside the national trends of the past decade or so.

As wine writer and wholesaler Bill Coy puts it, “Nobody grows malbec in Minnesota.” That’s what American wine drinkers have come to love and expect: big, dark, tannin-heavy wines. And that’s exactly the opposite of what you get from the grapes that grow here. Cold-climate wines tend to be lighter in body, lower in alcohol, more acidic, and, at the same time, sweeter. That sweet finish, a result of the winemaker trying to balance out natural acids, is probably the strongest association drinkers have with local wines. As the national palate starts to swing back toward sweet wines—which trend-watchers say is happening—local pours may get a boost.

Booming but tiny

The local wine industry has emerged over the past two decades almost out of nothing. In 1990, there were two licensed wineries in the state awaiting sourcing. Today there are more than 60, with 41 of them actively selling wine, according to the Minnesota Grape Growers Association. (Add five more on the Wisconsin side of the Mississippi). The rest are either hobby wineries or in the early stages of development. Four out of five of the wineries in the state have opened since 2002.

Grape growers, who naturally got into the game a little earlier than the wineries themselves, show similarly explosive growth. While today there are more than 600 vineyards in Minnesota, before 1990 there were fewer than 20.

According to Brigid Tuck, an analyst at the University of Minnesota Extension who has coauthored studies on the state’s wine industry, the growth in vineyards is slowing, but the growth in wineries—both the number of operations and the size of the industry—is continuing.

“In 2008 we were concerned that it looked like there might be a glut of grapes on the market,” she says, “but the wineries have come on-line to pick up slack.” Tuck’s research shows 84 percent of local wineries grow at least some of their own grapes. While commercial grape growers often sell grapes to wineries, a surprising number do not. By 2007, researchers at the University of Minnesota had measured the total economic impact of the grape and wine industry in Minnesota at $36.2 million, including the wineries themselves, along with the vineyards that supply them and the related tourism. By 2011 that impact had grown to $59 million, Tuck says—impressive considering it occurred during the nation’s worst economic downturn in 75 years.

According to a survey by the Midwest Wine Press, Minnesota and Wisconsin have the fastest-growing wine industries in the region, measured by the number of operations, while the Minnesota Grape Growers Association puts the industry’s annual growth rate at 28 percent.

That’s jaw-dropping, but it’s worth putting in perspective.

“The market hasn’t really hit the point where it’s saturated. You’re looking at the number of wineries, but most of the wineries are producing less than 5,000 cases of wine. They’re very small,” cautions Cook. “If you look at all the production in Minnesota, it’s less than Beringer [winery] in California.”

The grape growers association puts the state’s total production at about 125,000 gallons last year (a case of wine equals about 2.4 gallons). That leaves plenty of room for continued growth, according to Terry Savaryn, secretary of the association and co-owner of Sovereign Estate Winery in Waconia. “The potential is still huge,” she says. “Wine has now surpassed beer in sales in Minnesota. If we get to just 2 percent, we’ve doubled. There’s still a lot of room for educating the public about Minnesota wines and for improving the product.”

Minnesota winery financials dossier

On average, each Minnesota winery registers annual sales of $310,500.

Minnesota wineries spend an average of $78,800 per winery on labor per year.

On average, each winery employs two full-time, year-round employees.

Total Minnesota winery employment stands at roughly 350.

On average, each winery relies on 610 hours of volunteer labor each year. (2012 data)

Tourists rule the market

A big chunk of the Minnesota wine industry is driven by tourism and events. Our geography forces grape growers (and therefore most winemakers) to cluster along the few rocky bluffs and hillsides, off the fertile, wet, glacially compacted plains, which grape vines hate. That has led to the easy creation of a handful of wine trails—along the Mississippi River (Great River Road) and the Minnesota River, for example—that bring in day-trippers who come as much for the experience, the scenery, and the fresh air as the wine itself. Wineries have also become a hot location for weddings and charitable functions.

Nearly all wineries have tasting rooms where they do a brisk—enough—business serving tasting flights to the curious, most of whom go home with at least a bottle or two as a souvenir. In fact, many small wineries don’t sell off-site at all, and it’s typical for area wineries not to have much distribution outside of their immediate area. The Minnesota Farm Wineries Act allows retail and wholesale sale directly to stores and restaurants within the state; a distributor is required to sell nationally, so few, if any, Minnesota wineries sell outside the state. But it’s a moot point, really, as they already sell as much as they can produce.

Those day-trippers and wedding planners don’t just pull into the wineries’ long dirt driveways (or, increasingly, into well-appointed paved parking lots), buy wine, and leave. They have lunch in town, visit a historic site, buy gas and snacks, maybe even stay overnight. Tuck’s U of M study estimates that wine tourists injected about $14 million into local economies in 2007—a figure she is sure has grown in the past six years. That’s nearly a third of the industry’s total economic impact on the state.

Cause and effect is difficult to divine, but the relevance of this agritourism to the local wine industry means the typical local wine consumer is not a wine snob. The U of M’s Cook describes the Minnesota winery patron as someone who is excited about local products. “They drink wine, enjoy wine, but they’re not connoisseurs,” she says. “It’s mostly generation-X women, women in their 30s and 40s, and a lot of young people, as well. They’re a little more open-minded and they’re still developing their taste preference. It’s also people just looking for a fun drive on a Saturday.”

Built on passion

Garvin Heights Vineyards, sitting on a bluff overlooking Winona, is a typical Minnesota winery in many ways. It is, in the words of owner and winemaker Marvin Seppanen, “very much a mom-and-pop organization.”

Seppanen and wife Linda opened their doors in 2007. Today they produce between 5,000 and 10,000 bottles a year, which they sell entirely in the Winona area, largely on-site. “We’re a tourism business,” he says. “Our customer base is Chicago to Fargo, but about 30 to 40 percent is people out of the Twin Cities doing a trip along the Mississippi River.”

It’s also a business built on passion. The Seppanens started growing grapes before they ever decided to make a business of it. Now they make wines from most of the cold-hardy grapes introduced by the University of Minnesota’s viticulture researchers, primarily single-varietals such as Frontenac, Marquette, and La Crescent. Unlike an increasing number of Minnesota winemakers, Garvin Heights doesn’t buy grapes or juice from California to supplement the local stock and produce wines that taste more like California vintages. Instead, they rely on what they grow and what they can buy from their neighbors in Winona County.

“It’s just supporting the local industry,” Seppanen says. “We want to say it’s a local product and really try to educate people about the wine that we have.” While Seppanen still tells visitors at his tasting room that his La Crescent “has Riesling-like characteristics,” he’s finding that more and more consumers know the varietals by name.

Like most Minnesota wineries, Garvin Heights doesn’t try to compete on price. “We’re at a higher price point because basically our wines are handmade,” Seppanen says. “I’ve seen operations that could do all of our annual production in one hour.”

Finding a future

Minnesota wines are, by and large, competing for a very difficult place on wine store shelves: the $15 to $20 price point. It’s a saturated market, filled with high-quality, high-prestige, well-known wines from around the globe. Casual and younger drinkers are more likely to reach for easy-to-find and easy-to-drink bottles less than $10.

“Since [regional] wines are not competitive on price, it’s about building loyalty,” says Tuck, “getting people to try something from a cold-hardy grape or try different grape varieties and become loyal customers.”

But building a following is hard when customers don’t yet have a good grasp on what they’re buying and often can’t source it at a local retailer anyway. Because the amount of grapes grown in Minnesota is still minimal and their flavor profile limited, many wineries buy California grapes, which, even with shipping taken into account, are still cheaper. (The Minnesota Farm Wineries Act requires 51 percent of production to be from local fruit.) While that controls costs, it can confuse the consumer. It’s hard to educate drinkers about the distinctive characteristics of a Minnesota Frontenac when half of what’s in the bottle is California merlot.

While wineries are, separately and collectively, still trying to work out the best niche for each varietal, Cook says she can see Minnesota’s future as a specialty wine region, one that may someday become known for light rosé and high-quality dessert wines. She compares it to the Tokaj region of Hungary, a cold/hot climate known worldwide for heady, sweet, and complex whites. Its enthusiasts are passionate and willing to spend on good bottles, but, as even Cook points out, “that’s not something you open every day. So that’s a harder sell for people. You can make only dessert wines—that’s great; but can you sell only dessert wines?”

In the meantime, many of Minnesota’s winemakers are hanging their hopes on the local food and beer movement, which continues to pull local wine along on its coattails, and the growing popularity of wine among younger generations (once you’ve got them hooked, says Coy, “they’ll never be beer drinkers”).

And there’s the Marquette grape.

Twin Cities BusinessMarquette is one of the area’s newest, introduced in 2006, and some of the first wines made from it are coming to market now. It’s one of the first cold-hardy grapes to produce a bigger, drier, more tannic table wine—something you might, in fact, drink every day. As many as a third of newer area vine plantings are now Marquette.

So that puts the regional wine industry at a crossroads, a situation any adolescent would recognize. The choice: Play it safe with a very good table wine for the locals or try to capture a global—or at least national—market with an outstanding niche product. Or go big and try to do both.

Tricia Cornell is a Minneapolis writer and the author of Eat More Vegetables: Making the Most of Your Seasonal Produce.

This article is reprinted in partnership with Twin Cities Business.

Wine and profit: Deliciously elusive

“Before my father died, he used to joke that I was the only one who had ever made a living off the wine industry in Minnesota,” says Nan Bailly, owner and winemaker at Alexis Bailly Vineyard in Hastings. When her father, David Bailly, planted his first vines in 1973—the first vineyard in Minnesota—he was a lawyer with no aspirations of making grapes or wine his primary source of income. He did, however, have six kids: free labor.

Today, Alexis Bailly is the state’s oldest winery, and one of the best and most respected. Nan Bailly studied winemaking in France and New York’s Finger Lakes region before coming back home in 1990 to run the winery.

She is the best positioned to discuss whether winemaking could be a profitable business here.

The real profitability of her business is not in the wine itself, but the tourism trade. “Wine is maybe almost secondary,” she explains, with a note of irony, as a woman passionate about good wine. Alexis Bailly Vineyard expanded a few years ago, adding a store that sells cheese and other products. It also capitalizes on its gorgeous Hastings location near the bluffs of southern Minnesota.

Brigid Tuck has also pondered the question of winemaking’s viability in the state. She is an economist with the University of Minnesota’s extension service, who, with U of M professor Bill Gartner, has delved deeper into the economics of the local wine biz than anyone else. “That’s a really good question,” she says. “It’s on my mind as well.”

For most regional wineries, it’s still early days, and financial data is limited and overloaded with start-up costs. It’s clear that local wineries face obstacles that even those in neighboring states that share our climate don’t. The Minnesota Farm Wine Law requires at least 51 percent of the grapes that go into local wine to be grown here.

That, according to Bailly, ties her hands. “I still maintain that it is not practical to grow grapes in Minnesota,” she says, “And I’ve made more [Minnesota-grown] wine than anyone else. My wines were produced from 100 percent Minnesota-grown grapes for our first 25 years in business.” But in the interest of quality and profitability, she now also buys grapes from other regions.

Labor costs are another obstacle. Bailly describes them as “astronomical. I can’t recoup that on a bottle of wine.” Her staff includes herself, two full-time employees, a handful of part-time employees—larger than the average local winery’s. And she coaxes as many friends and family members as she can to help with the harvest.

Tuck says that the use of volunteer labor is very common in Minnesota’s vineyards and wineries. “But if they’re using a lot of volunteers,” she wonders, “how sustainable is that in the long term?”

Wine and weather do battle the world over, but Minnesota’s fickle climate messes with the books in ways beyond what anyone in Napa Valley could contemplate, Bailly says. Two years ago, she lost 90 percent of her crop to a spring frost. In 2012, she had one of her largest harvests ever; “It’s a roller coaster ride.” But she, like so many other winemakers, is hanging on tight. —T. C