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Business: Is McKinney the Next Napa?

Making wine in Dallas is a tough business. Texas weather is unpredictable at best, which makes growing grapes difficult. Then there’s the distribution problem—hometown winemakers have to compete with the big guns in California for space on the shelf. But
By Jessica Shapard |

ON AN EARLY JULY MORNING, THE TEMPERATURE is already pushing 95 degrees, but the nearly 50 cowboy hat-wearing, Wrangler-clad farmers standing in John Wales’ front yard don’t seem to mind. Wales is an international pilot for American Airlines who lives in McKinney. But he’s also a winemaker. His front yard is a 3-acre vineyard called Wales Manor. And today, as the farmers listen with their thumbs hooked in their belt loops, Wales is spreading the word on Texas’ newest cash crop: grapes.

“This is a straight production facility,” Wales says, motioning to the metal frame structure behind his house that serves as his bottling and winemaking plant. “It’s no different from a barn or grain silo.”

The farmers nod when they hear these familiar terms. While these men and women know farming, they don’t know grapes, and they certainly don’t know wine. Wales is doing his part to help them catch up. After all, Texas is the fifth-largest wine-producing state in the country behind California, Oregon, Washington, and New York. By 2020, state officials hope Texas will be number two.

Grape growers expect the spike in Texas wine production because of an upcoming vote on September 13 that could change the way wineries in the state do business. Smaller wineries such as Wales Manor stand to gain the most from Proposition 11, which is on the ballot that day. The proposed piece of legislation is complicated enough to drive someone to drink, but basically it puts wineries in the jurisdiction of the state instead of local governments, where it’s been since the days of prohibition. Wineries in dry areas would be able to manufacture, bottle, label, package, and sell wine. Most important, they’d be allowed to pour a glass or two for a potential customer.

Proposition 11 will likely pass. That’s the first hurdle. But making wine in Dallas is still a tough business. First, there’s the growing part. There are mixed reviews about how suited the Dallas climate is to wine production. Hot, arid days and cool nights are the ideal conditions for grapes, which means Texas’ weather is half-right. And well-drained soil is a must. Wales says the soil conditions in Collin County are actually similar to those of Bordeaux, France, but he agrees that getting the grapes to thrive is tricky.

“I killed 3,000 plants the first time I tried it,” he says. “The hard part is figuring out how to grow them, because what works in California doesn’t work here.” Dallas weather is unpredictable to say the least, and Mother Nature can be particularly vengeful. Hailstorms can knock out an entire crop of plants, and the humidity in Dallas alone is sometimes unbearable for the grapes.

As a safeguard, wineries do what all good businesses should: they spread the risk. Most local wineries don’t plant all of their grapes in one location. Wales’ 3 acres in his front yard only supply about an eighth of the wine he’ll produce this year. The rest of his grapes he buys from growers in Fannin County, Grayson County, and Parker, Texas, near Plano.

It’s been said that the secret to making a fortune in the wine business is to start with one. It’s funny because it’s true. Not only is owning a vineyard labor-intensive, but it also takes about four years before a new grower actually sees his first harvest. Then, once the grapes are picked and turned into actual wine, that process can take anywhere from three to 24 months. And there’s substantial cost with setting up a vineyard: about $18,000 an acre to establish it and take it to year five.

Wales calls Jerry Delaney, president of Delaney Vineyards in Grapevine, “the pioneer of the wine industry” in this area. But even someone with a proven track record in a wine-friendly (and aptly named) city like Grapevine spreads his risk. Delaney has about 10 acres of vineyard in Grapevine and 100 more in Lamesa, Texas, near Lubbock. Delaney Vineyards is the biggest name in the area and the sixth-largest producer in Texas. To put it in perspective, however, Delaney produces about 25,000 cases of wine per year, whereas the typical big-name winery in Napa makes around 2 million.

Because he already has a major distributor, Delaney doesn’t face many of the pre-Proposition 11 problems that smaller, boutique wineries like Wales Manor do. But he still has to deal with the stigma attached to Texas wines. Texas’ history with wine production only goes back about 25 years, and it wasn’t very good at first. “Some say it could strip paint off furniture,” Delaney says. But, as Texas vineyards have matured, so have their wines. Many Texas wines are now winning national awards.

The smaller wineries not only have to fight the bad perception of Texas wines, they also have to struggle to get distribution. The recent consolidation of local distributors has hurt wineries across the state. Five years ago, Delaney says, there were seven major distributors in Dallas, and today there are only two, Glazer’s and Republic Beverage. Delaney and many other major Texas wineries still have to fight for space on the shelves of local liquor and wine stores, not to mention elbowing their way onto wine lists at local restaurants. And because Dallas is such a large and attractive market, nationwide distributors receive pressure from Napa and Sonoma to sell and market California wines to the city, often pushing homegrown wines to the back of the line.

According to Susan Combs, commissioner of the Texas Department of Agriculture and a grape grower herself, Texas doesn’t need to supply wine to the rest of the country because the demand here at home is strong enough to handle all the wine that the state can make. There’s a saying that every time an old bourbon drinker dies, two wine drinkers come of age. In Texas, that number might be closer to three or four, and there are plenty of bourbon drinkers to spare. Currently, Texas wineries are only supplying about 10 percent of the demand for wine in the state. If and when Proposition 11 passes, that number should go up, along with the number of local wineries and vineyards. Combs believes that the tendency of Texans to support their own will go a long way in boosting the local wine industry. Tourism to Texas’ wine-producing regions should go up, too.

Combs also believes that the winemaking business can be a profitable one—even on only a few acres. The profit margin on selling grapes is much higher than it is for the majority of other crops grown locally, such as hay, corn, and wheat. For example, wheat generates about $14.50 per acre, as opposed to $242 per acre of grapes. Blake Bennett, an economist with the Texas Cooperative Extension at Texas A&M, says Wales Manor in McKinney has the capacity to make 50,000 bottles of wine. With an initial $500,000 cash investment (banks are not keen on lending money to wineries due to the high risk), Bennett says John Wales should expect a profit of $80,000 per year in two years. Until then, he’ll probably be breaking even—all contingent, of course, upon his selling 44,000 bottles of table wine at $4.50 per bottle and waiting for 6,000 bottles of reserve wine to age for two years.

Wales has opened up his financial records so that local farmers won’t have to reinvent the wheel when starting up their own vineyards. Also, Grayson County College in Denison offers classes in grape growing and winery management to help out beginners.

Which brings us back to John Wales, teaching those farmers about winemaking in his front yard. About a month after they left, in August, Wales Manor had its first official harvest. After a busy month of picking, crushing, de-stemming, and pressing grapes, Wales now has his first precious batch of Cabernet Sauvignon fermenting in tanks. He’ll bottle it in November. With a little luck and a favorable vote on September 13, those bottles will soon be on store shelves and wine lists locally and elsewhere. If not, at least he’ll be able to drown his sorrows.

Photo by Sean McCormack

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