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Serving: MI

Michigan's wine industry risky but resilient

The COVID-19 pandemic put a dent in sales, but the industry is bouncing back.

Winegrape growers who add value to their crops by producing wine and selling it in tasting rooms managed to dodge the vine-killing polar vortex this past winter, only to have the COVID-19 pandemic pick away profits on the retail side.

Tasting rooms and other in-person ag businesses not considered essential were locked down from mid-March to June, presenting a cascade of problems beyond the dammed-up revenue stream.

At Lemon Creek Winery in Berrien Springs, Mich., 90% of the wine made there is sold through the tasting room, says Jeff Lemon, the winemaker and owner with brothers Tim and silent investor Bob. The 8,000- to 10,000-case winery was opened as a value-added venture in 1984, after a year when the market was flooded with Vidal Blanc grapes, the farm’s primary variety at the time.

Jeff and Tim also are partners at Lemon Creek Fruit Farm, an eighth-generation farm with a 165-year-old history.

At the farm, the initial impact of the pandemic was minimal as safety precautions were put into place to space workers out in fields. “And we staggered people when they came to work to prevent mixing when clocking in,” says Tim’s son Tyson, who helps with business affairs and reporting, but also has a full-time, off-farm job with GreenStone Farm Credit Services.

Twenty-six varieties of winegrapes grow on 170 acres, while another 30-plus acres include apples, peaches, sweet cherries, blueberries, nectarines, pears and apricots. The pandemic has changed how Lemon Creek Fruit Farm runs its U-pick operation.

“We had to spread it out by taking people out into fields on people movers, and preventing congregating while loading and unloading,” Jeff says. “We would accommodate families, but also space people out if it was just a couple.”

At Lemon Creek Winery, business is everything but normal. The tasting room was shut down for March and April. In May, curbside sales and pickup were added, as well as online ordering, which was never offered before. Still, sales were 70% below normal. As doors started to crack open in June, sales began to resume, but in a different fashion.

“People started feeling safer going out, but we had to make major changes to the way we do business,” Tyson says. “We have been very strict on following the standards and rules for opening. No one is going into the tasting room; it’s all outside under tents with tables spaced apart.”

Masked customers order a flight (five, 2-ounce samples out of the more than 40 labels) of wine for tasting and carry it on a custom-designed, oak tray back to their tables, where they then can remove their masks. A description of the wines and winemakers tasting notes are supplied at the tables.

“At times, we are at the allowable capacity, which is 100 outside,” says Jeff, whose wife, Cathy, has been the tasting room manager for the better part of their 36 years in the business. Their daughter Kaitlyn has now taken over much of what is now the "tasting room and tent" responsibility. 

“Sometimes people have to wait for properly distanced seats to become available,” Jeff explains. “They order flights at one [outside] door of the tasting room and pick them up at another door.”

On a positive note

One blessing, Jeff notes, was the great summer weather. But as the air turns crisper, new plans are underway. “We’ve got another tent coming with sides and heaters, and we’re going to add a fire pit,” Jeff says. “Most of all, we want the staff and customers to feel safe and comfortable.”

While sales are now on par with last year at the Berrien Springs location, sales have suffered tremendously, down 90%, at the Lemon Creek Winery tasting room in Grand Haven, Mich., which only offers curbside sales on weekends. Jeff says he wished he put up a tent there as well, but time and resources were limited.

Added losses may be down the road, as there is concern for a drop in winegrape demand. “We utilize 20% of the grapes we grow for our wines and sell the rest to wineries throughout the Midwest,” Tyson says. With retail sales through tasting rooms down across the country, those retail winegrapes may not have a home.

Revenue generated by special events and festivals hosted by the winery also has taken a major hit.

“Everyone in this business is burning through some equity,” Tyson says. “There will probably be a fair amount of rebalancing or restructuring where needed. Newer ag businesses will have a little harder time because they haven’t had time to build that equity and establishment.”

Both the farm and winery received federal Paycheck Protection Program funds to help with employee payroll, and the winery received a grant from the Michigan Small Business Restart program to help retrofit the business by covering some of the expense in restarting.

A peek into Red Top, Gravity wineries

Farther south of the Lemons’ operations in southwest Michigan, Rockie Rick and his wife, Allison, own and operate a 30-acre vineyard with 12 winegrape varieties and two wineries, Red Top and Gravity, in Baroda, Mich. Each winery has a completely different style of wine, with Red Top having less traditional offerings, Rockie says, and each with a tasting room. Also, there’s an additional tasting room located in South Haven, Mich.

“We are in close proximity of Chicago and Grand Rapids, as well as Indiana and Ohio," Rockie says. "We are smack dab in the center of a whole lot of people that want to come to southwest Michigan to visit wineries and beaches and have a great time. It’s allowed for growth every year.”

This year is more of a challenge. “We were shut down for a few months, but it’s been very busy since reopening," he says.

In March, when the tasting rooms were closed, Rockie told his staff to take a break, keeping only one employee in the vineyard and a winemaker. A little more than a month into the shutdown, he was approved for the Payment Protection Program and began to bring back staff. “But we were not open to public, so there was no point for tasting room staff," he says.

“We went through some savings, but eventually we were able to make enough money to cover weekly, basic bills by being open a few hours on the weekend to sell takeout wine,” says Rockie, noting special sales were offered to attract buyers.

The first week of June, visitors were welcomed back by masked servers practicing extra sanitation measures and socially distancing. An outdoor space also was added to spread out customers.

“I spent a better part of month looking at loans and grants,” Rockie says. “I was turned down at first, but eventually got a USDA ag grant to help with the expenses of reopening.”

Getting into grapes

Rockie and Allison saw the wine industry expanding and the opportunity in the mid-2000s. They planted winegrapes, mostly viniferia, in 2005 and established contracts with other Michigan winemakers who wanted those varieties.

While Allison was teaching school, Rockie worked in the vineyards during the day, and after buying a bus, started a wine tour business. One bus turned into many buses.

“I noticed how attractive the wine production and tasting business was,” says Rockie, who grew up growing peaches and apples, but has a master’s degree in business. Eventually he sold the buses to focus on wineries and vineyards. Gravity was established in 2011 and Red Top in 2017, and now 100% of his grapes are used in wine production there.

“I’m in two separate businesses. I’m a grape grower/winemaker, but I’m also in the hospitality business where I create products and experiences people enjoy on their time off,” he says. “Both have promising but slightly different outlooks.”

He says Michigan continues to be great destination for wine tasting and is dependent on car traffic, varying from other winemaking regions that produce wine and ship to destinations all over the world.

“Because of that, thousands of people come to this area wanting a lot of different styles of wine," Rockie says. "As growers, we’re blessed and cursed by it because we have to grow a lot of different varieties, even some that don’t do so well in Michigan.”

Years ago, Viniferia varieties were planted to a lot of acres, but are more cold sensitive than French American hybrids.

“That was all great for 20 years, but in the last six years, we’ve had three polar vortexes that have wiped out crops,” says Rockie, who notes that 90% of his crop was lost to the 2019 polar vortex. “The grape growing business is extremely volatile. You never know what you are going to get, so we have to focus on grapes that grow well here and help mitigate risk.

"I adjust my vineyards to provide for my tasting rooms. This year is a great crop, both in quantity and quality. I’m excited about the vineyards this year, optimistic about Michigan’s wine industry, and ready to leave COVID-19 behind.”

TAGS: COVID-19
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