Is Napa running family winegrowers out of business?
This article was written and published by The San Francisco Chronicle.
One group, Save the Family Farms, says the county’s tasting-room laws make it impossible for their small wineries to compete
Written by Esther Mobley Dec. 24, 2019
In Napa Valley, a group of small-scale family winegrowers says the county’s current laws have made it impossible for their businesses to survive.
Napa County has a strict permitting process for opening tasting rooms, designed to curb some of the valley's tourism congestion. But some small wine producers argue that those permitting rules shouldn’t apply fully to them. That’s why they’ve formed Save the Family Farms, an organization that hopes to create a legal pathway for small winegrowers to host visitors at their vineyards even if they haven’t built an expensive winery.
They say that hosting visitors — and selling their wines directly to them — is the only way to maintain a viable wine business these days, even as they sit on some of the most valuable agricultural land in the country.
“We’re land rich and cash poor,” said Bill Wolf, who founded the group in 2016 and who produces 500 cases of wine a year from his 9-acre Eagle Eye Vineyard in eastern Napa County.
The Nerlove family, another of the group’s members, has owned a 28-acre vineyard in Jameson Canyon, where they grow Pinot Noir grapes, since 1983. They make 1,000 cases of wine a year — a minuscule volume — under their Elkhorn Peak label, whose bottles sell for $27 to $50.
When the Nerloves sell their wine at restaurants and wine shops, they give up about half the bottle price to the middlemen — the wholesaler and retailer. Direct-to-consumer sales, then, are the only option for small wineries like theirs, the Nerloves say. And how do wineries sell wines directly to consumers? Simple: tasting rooms.
But the Nerloves are not allowed to host visitors for wine tastings or sell wine at their property, because they do not have a wine production facility, nor could they afford to build one, says Ken Nerlove, who runs Elkhorn Peak with his daughter Elise Nerlove Rutchick.
“It would cost us at least $5 million to build a winery,” Nerlove said, an estimate that county planning commissioner David Morrison confirms. (Like most wineries of its size, Elkhorn Peak uses a shared winemaking facility offsite.)
That’s why the Nerloves have joined Save the Family Farms, whose 16 members have, for the last two years, met regularly with the county planning department with the goal of putting a resolution before the county’s Board of Supervisors. Their proposals include establishing a new class of winery, a “micro-winery,” which would not require the same strict and costly use permits of larger wineries. Morrison expects a draft to take shape by February or March.
At stake, the group says, are more than their individual businesses. They believe that if families like theirs aren’t allowed to compete — if Napa’s multigenerational family vineyards become financially unsound — the very character of Napa Valley hangs in the balance.
“I want to turn this farm over to my daughter,” Nerlove said. “There’s got to be an avenue that will make the business economically viable for her. We don’t want to have to sell the land.”
Napa County’s laws concerning tasting rooms, in particular the 1990 Winery Definition Ordinance, originally sought to control development and tourism in the county’s agricultural areas. Among other things, the ordinance prohibits building a tasting room in an agricultural zone except when it’s an accessory to a winery.
“Otherwise a tasting room without a winery is just a bar,” explained Morrison, “and that’s not ag use.”
Thanks to strong agricultural protections in the county — going back to the 1968 Napa Valley Agricultural Preserve, the first of its kind in the U.S. — any development in agricultural zones has to tie back to farming. “You have vineyards, the vineyards allow you to have a winery, which allows you to have tastings,” Morrison said.
The Save the Family Farms members see themselves as the unintended casualties of this well-meaning ordinance. The difficulty and expense of building a winery has grown tremendously in the last 30 years.
Today, obtaining a permit to build a winery can take as long as three years, including lengthy studies required as part of the process. Bill Wolf estimates that his permit, acquired in 2010, cost him $200,000, between the permit cost itself and the required studies. Once it was approved, he decided he didn’t have the funds to proceed with construction.
In addition, the already-high cost of construction has ballooned — almost doubled, according to Morrison — in the wake of the 2017 fires, which wiped out 650 homes in Napa County.
For many years it was common for small winegrowers to illegally hold tastings at their vineyards, in defiance of local laws. Enforcement was not a county priority. That changed around 2014, as the local economy began to recover from the recession. “We saw a new spurt of growth, and a lot of new wineries started coming in who weren’t familiar with Napa County’s rules or traditions,” Morrison said. “There has been an increased need for code enforcement.”
First offenders might receive warnings, but one group member, Maroon Winery, was ordered by a court to pay more than $20,000 in civil penalties and restitution after being caught multiple times holding illegal tastings.
To comply with the law, Elkhorn Peak stopped holding tastings in 2012. They say business has suffered. They still have loyal wine club members, but Rutchick has been disheartened by her attempts to open other sales channels.
Why can’t these families open tasting rooms in downtown Napa? Within the city, which is not zoned for agriculture, they could rent any storefront. But Rutchick says she doesn’t make enough wine to justify the expense of rent or hiring staff.
What she envisions for their would-be guests is not an elaborate visitor center on the level of Robert Mondavi. “We’d walk them through the vineyard, taste grapes from the vine, taste wine at a picnic table,” Rutchick said.
That sort of intimate, no-frills experience is becoming lost in contemporary Napa, she adds, in this era of the Prisoner Wine Co. — the valley’s biggest new tasting room, outfitted in prisonesque decor. “We should be able to coexist with the mega tasting rooms,” Rutchick said.
To create a legal framework within the confines of existing county law, Save the Family Farms is proposing a new category, “micro-winery,” which would be able to obtain a different sort of use permit than larger wineries. A micro-winery could produce a maximum of 10,000 gallons a year, and its owner would have to live at the property. It would have to perform some part of the fermentation onsite in order to qualify as a winery.
Micro-wineries, under the proposal, would be able to accept visitors by appointment only and be limited to 5 vehicles per day.
Napa Valley Vintners, the county’s leading winery association, said through spokesperson Michelle Novi that there’s already a regulatory pathway for small family farms to host tastings — to build a winery.
“New wineries, regardless of size, should be required to meet the existing requirements as outlined in the Winery Definition Ordinance,” Novi said.
As they await the next steps, Napa’s family winegrowers think their cause, once it’s more visible, will earn lots of public support. Don’t people want to encourage multigenerational family farming in a place like Napa Valley?
“The small family farmer is a dying breed,” Nerlove said.