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Rising costs make LI vineyards a challenging passion

David Shanks, owner of Surrey Lane Vineyard Orchard

David Shanks, owner of Surrey Lane Vineyard Orchard Farm in Southold, on Thursday, June 29, 2017. Credit: Randee Daddona

Profit margins at Long Island wineries have always been thinner than a grape skin, but a labor shortage, rising property taxes and costs that keep the price of a bottle of local wine relatively high have made running a vineyard a challenging passion.

Ownership of Long Island’s more than 50 vineyards and wineries is in a slow transition, as the first-generation pioneers who worked hardscrabble potato fields into lush green vineyards on both East End forks pass their love of the industry on to their children or sell to new owners.

In most cases, the offspring of those owners have taken on the long hours and labor-intensive work of managing Long Island’s 3,000 acres of vineyards, learning the region and navigating the challenges of operations, marketing and weather. The region produces around 500,000 cases of wine a year.

“It’s the biggest misconception that if you own a vineyard, you’re rolling in it,” said Giovanni Borghese, co-owner of Castello di Borghese Vineyard and Winery in Cutchogue, who puts in seven-day workweeks since taking over from his parents, Marco and Ann Marie Borghese, who died days apart in 2014.

New buyers are entering the region, most notably with the recent sale of Shinn Estate Vineyards and Farmhouse in Mattituck. The property was sold for $2.1 million, according to Kevin Webster, chairman of the board of assessors for Southold Town, to former Wall Street financier Randy Frankel and his wife, Barbara. Like many before them, the outsiders face a learning curve.

“So much labor-intensive work goes into growing grapes that it’s really difficult to make a profit,” said David Shanks, owner of Surrey Lane Vineyard Orchard Farm in Southold and a former chief executive of the Penguin Group USA publishing conglomerate. He began farming the land in 2014.

Since then, he has come to realize that growing grapes and making wine is “really an incredibly risky business.”

“You are basically putting all your expenses up front and hoping you’re not going to get a storm [at season’s end] that knocks you out,” he said. “You could conceivably have no revenue.”

Meanwhile, wages for a mostly immigrant workforce have increased to as much as $15 an hour or more as the number of laborers to prune and tend vines and pick grapes has declined in the past several years, owners say. Some vintners said part of the decline has been due to the federal immigration crackdowns.

Retaining enough workers can been a challenge for reasons that go beyond pay, said David Page, former co-owner of Shinn Estate with partner Barbara Shinn. “It always will be a problem as long as there’s pushback from people who are uncomfortable when they see someone in their community who doesn’t look like them,” he said.

“Labor costs are getting very expensive, and the labor pool is almost nonexistent,” said Kathy Le Morzellec, president of Palmer Vineyards in Riverhead and daughter of its founder, Robert Palmer, who died in 2009. “We strive every year and are very close to breaking even.” But then new costs crop up — last year a rebranding of the company’s label and logo, and refurbishing of some operations.

Difficulty finding buyer

Palmer has been on the selling block since 2009 but has found the market for a buyer difficult, in part because of Riverhead Town’s high assessed value of the 5.5-acre winemaking facility, Le Morzellec said. The vineyard’s challenge to the tax assessment, with little success so far, has been ongoing since 2008. Annual taxes on those acres have increased from $52,591 in 2008 to $63,742 this year, based on an assessed value of $2.4 million. Palmer values the land at $1.4 million — the current asking price.

In contrast, Palmer has listed 60 acres in Cutchogue for $1.5 million.

The high taxes are “a big sticking point with people who show interest in the property, because the numbers just don’t make sense, and I can barely afford to pay the taxes,” Le Morzellec said.

Laverne Tennenberg, chairman of the board of assessors for Riverhead Town, disputed the notion that any of the parcels are overassessed. She said that the entire 61.3 acre Palmer property in Riverhead comprises four lots with a total assessed value by the town of $3.3 million. Yet, the property is listed online with an asking price of $5.375 million.

“It’s technically one parcel,” she said. “It can’t be subdivided without planning board approval.”

In Cutchogue, Borghese has been putting in seven-day workweeks since taking over ownership with his sister, Allegra, three years ago (she is now pursuing a doctorate unrelated to the vineyard). He hawks the wine in farmers markets as far away as Manhattan and wants to turn the family home connected to the vineyard into a guesthouse, while farming more of the vineyard’s 85 acres. He is not doing it for the money, he said, noting the operation is just breaking even.

On a recent afternoon, he worked the tasting room alone, answering phones and pouring wine for the day’s last tasters. “I say yes to a lot of things. I like to fill my plate,” Borghese said.

Borghese is focusing on marketing and sales, but also trying his hand at other aspects of the business, he said. “In time I’d like to learn more about the farming side of the business, the chemistry of wine-making.”

All the work at Borghese is done by hand, and there isn’t a lot of room for extra cost. “I have an extremely modest salary,” he said. “I want to see the vineyard sustain itself and create a great product and happy memories for people who come and visit.”

He aims to address the seasonality of the business by “making ourselves a winter destination” by scheduling winter events, “and getting a better presence in restaurants.”

From CEO to grape grower

Surrey Lane’s Shanks has been working to build his own legacy. With the help from vineyard manager Steve Mudd of Mudd Vineyards, and with wine-making by Roman Roth of Wölffer Estate Vineyard in Sagaponack, Shanks is making the difficult transition from global publishing chief executive to grape grower. It hasn’t been without its challenges.

“I’m glad in a way this is my second act,” he said, referring to his former life as a publisher. “If I was a young person with a family and expenses, I don’t know whether I would have done this. I go back and forth between loving it and saying, ‘Why aren’t you out golfing and fishing?’ ”

One avenue he is pursuing to help shift the equation in favor of making money is to invest in a tasting room. “What I found is if you don’t have a tasting room, it’s pretty difficult to make money,” he said.

Wineries with tasting rooms can get a premium by selling wine by the 2-ounce taste, the glass, the bottle and the case. Surrey Lane can’t get those high prices through its current sales channels. One problem for Shanks is the red tape he must get through to get the tasting room zoned and approved. “It takes a long time,” he said.

Another big challenge is good, cheap wine from overseas that is often priced below Long Island wines on store shelves and elsewhere. “All this product is coming in, and it’s cheap,” he said. “They don’t have the taxes or labor costs we do.”

Shanks and his wife have two daughters, one of whom is actively engaged in the farm, which also produces vegetables for its Southold farmstand.

He said he is “getting close” to break-even and believes a tasting room could tip the balance in his favor. “I’m in a good spot now that I have the equipment [purchases] behind me,” he said. “If I could sell more wine to the consumer, I’d be there.” Surrey Lane produces just under 1,000 cases a year on its 25 acres of grapes.

One of the local vineyards and wines Shanks admires is Paumanok Vineyards in Aquebogue, where owners Charles and Ursula Massoud have raised three sons who manage all aspects of the operation, and have produced consistently top-rated wines. “My children are in the process of retiring us,” Charles Massoud said. “Had it not been for my sons, I might have sold and got out of it.”

Instead, the business has thrived. The family vineyard is marking its 35th year, and Charles Massoud said only five years have seen a bad outcome, primarily because of weather. “In general, Mother Nature has been very generous to us,” he said.

The winery generally sells all the wine it makes each year, Massoud said, and the demand is such that Paumanok recently acquired an additional 25 acres and plans to cultivate it with new vines as soon as next year.

Time, observation pay off

Massoud said time and keen observation have made the difference for Paumanok. “We’ve learned to work with our environment. It takes time. Now we know it quite well,” he said.

Paumanok’s operation has continued to evolve, selling its original fermenting tanks and upgrading the bottling line, becoming the first on Long Island to switch to screw caps from cork. “You have to keep up with technology and innovation,” he said. “The change is accelerating rather than slowing down.”

It’s one of a handful of Long Island wineries that have cracked the New York City restaurant market, in part because about 20 of its wines have 90-plus scores out of 100 with Robert Parker’s Wine Advocate, a prestigious list.

“There was a time we used to cry, ‘Why is New York City not supporting Long Island wine like San Francisco supports Napa?’ ” he said. “Today we don’t say that anymore. New York is one of our major markets.”

But challenges persist. Massoud noted that costs for labels, packing and the bottles themselves amount to $12 per bottle — before wine ever hits the bottle. “Those are the factors that make our wines somewhat higher priced,” he said. “The economics are against us.” But higher quality wines can justify the price of Paumanok wines, from under $20 to upward of $75.

Massoud isn’t complaining, except for the time he spends filling out government forms documenting his wine sales. The state gets one form each time he ships a bottle to another state, listing the customer and the amount of wine bought, even though there’s no state tax.

“Today I’m literally an unpaid worker for the government,” he said.

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