Smarter Business: Case Studies

Grgich Hills Estate

Photo: Grgich Hills Estate

Challenge

In the ruthless U.S. fine wine industry -- famously concentrated in the Napa Valley, home to over 400 wineries -- vintners are constantly searching for a competitive edge, a way to distinguish their luxury product from the next boutique winemaker. The high-end wine business strategy emphasizes quality over quantity -- which means making a well balanced, complex wine that expresses the distinct characteristics of the land, known as terroir, where the grapes were grown.

Among the greatest challenges facing wine producers are pests (like Phylloxera), viruses, fungi, soil depletion and variations in climate that can prevent the sensitive grapes from maturing perfectly. In 2003, the family-owned winery, Grgich Hills Estate, began experimenting with biodynamic farming to help save their Yountville Vineyard, which was suffering from the leafroll virus. The leafroll virus often delays grapes from reaching maturity, retards sugars, lowers yield and wine quality, and increases acidity.

Despite these challenges, which are most often tackled using toxic chemical herbicides, pesticides and petroleum-based fertilizers, an increasing number of wineries, like Grgich Hills, have begun to turn to organic and biodynamic farming.


Strategy

First conceived in 1924 by Austrian scientist and philosopher, Rudolf Steiner, the biodynamic agriculture method is a holistic, regenerative farming process that incorporates unique farming practices in addition to requiring USDA organic ceritification. In addition to avoiding chemical inputs, biodynamic farming involves building soil health,  incorporating biodiversity, and using locally sourced natural inputs by integrating plants and animals. The Demeter Biodynamic certification was established in Europe in 1928 and in the U.S. in 1985.

 In 2003, experts advised Ivo Jeramaz, Grgich Hills’ Vice President of Vineyards and Production, to rip out the estate’s Yountville Cabernet Sauvignon vines, which had been consumed by the leafroll virus. But instead of incuring the costs of starting afresh, Jeramaz decided to try biodynamic techniques in an effort to rejuvenate the plants with very detail-oriented natural practices.

“Biodynamics rejuvenated the previously hardened soil, allowing it to hold higher concentrations of nutrients and water longer, which better sustained the vines,” says Jeramaz. “It also strengthened the plants’ immune systems and seemed to improve the robustness and life of the vines.”

The Cabernet Sauvingon vines recovered and still produce successful wines today. The results were so convincing that over the subsequent three years Jeramaz converted the rest of the Grgich Hills’ 366 acres. In 2006 the estate became 100 percent certified organic and biodynamic.


Results

According to Jeramaz, biodynamics help reduce business risks associated with viticulture by making the vines more resilient to pests, fungi, viruses and even changes in climate (particularly drought). He argues that biodynamics also reduce input costs, including: lower investment in replacement vines (as vines live longer and vintners don’t need to buy new vines as often), cheaper natural ingredients that replace expensive chemical inputs, and using dry farming practices that reduce water costs. Cutting out chemical spraying also provides a safer environment for workers.

Jeramaz is the first to admit that there are also business costs associated with biodynamic practices, including: a moderate annual cost for certification, lower crop yields and some increased labor costs. However, he asserts that Grgich Hills’ overall biodynamic production costs are 10 percent lower than the average estate grown Napa Valley winery in the 30,000 to 70,000 case range. (Grgich Hills produces and successfully sells an average of 66,000 cases annually.)

“Biodynamics and fine wine is the perfect match because it’s all about flavors and sense of place. It’s not about the winemaker, the techniques or expensive manipulation in the cellar. It’s about naturalness.” Jeramaz calls biodynamics “natural, frugal and smart farming.”

Biodynamic farming also helps establish a market niche, says Jeramaz, by creating a specialized high-quality natural product that appeals to an increasingly interested consumer base. “A wide variety of clients are very interested and sommeliers at up-scale restaurants welcome biodynamic wines because they really like the taste, which gives you a foot in the door at restaurants that were previously uninterested,” he says.


About

Grgich Hills Estate is a family-owned winery founded in 1977 by Mike Grgich and Austin Hills of the Hills Bros. Coffee family. Today it encompasses 366 acres of estate vineyards in the Napa Valley that are certified organic and Biodynamic.

In order to qualify for Demeter Certified Biodynamic status, a farm must first meet the same 3-year transition requirement that NOP certified organic farming requires.  NOP and ISO 65 accredited organic certification is available through Demeter’s sister company, Stellar Certification Services, at no additional licensing fee. Then the farm must meet the additional Demeter Certification requirements.


Resources

last revised 6/16/2011

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