Chapter 24: Pinot Noir (2)
TL: Hanguk
I pedaled the Bicycle like crazy and when I arrived at the farm, I tossed my bag into the shed and headed up. As I went up the path between the lush grapevines, I could see the noticeably reduced number of workers cleaning the drip lines for watering, and far in the distance, Dad and Mom were checking the stem water potential.
“Our son came early?”
The moment she saw me, Mom lifted her sun cap and smiled brightly.
“I finished a bit early. Were there any additional orders for Vinegar?”
Dad, who had been carefully checking the SWP (Stem Water Potential), lifted his head and spoke.
“As a matter of fact, an additional order for one thousand bottles came in for next week. Like before, if we leave the boxes at the farm entrance, Mr. John Anderson will load them up and take them.”
“If it’s a thousand bottles, Dad and I can handle it just the two of us.”
“Right. We can bottle the Vinegar over the weekend and set it out before dawn.”
“But Dad.”
“Huh?”
“Have you thought about what to do with the money from selling the Vinegar?”
For a moment, Dad and Mom looked at each other as if flustered.
“Well...”
“You were going to use it to pay back the bank, right?”
“That too, and we should keep some cash on hand so we can be prepared if something happens later, don’t you think?”
“That’s right. I think that’s the right thing to do too. But...”
“But?”
I agonized over how to explain it, and then, thinking there was no other choice, I decided to go straight at it.
“A movie called Sideways is being released around October this year.”
“Sideways?”
"Yes. It's about wine and love, so to speak."
“And?”
“I read the synopsis, and it’s about Pinot Noir. Ah, sit down for a moment.”
First, I had my parents sit down in the shade of the grapevine, and I plopped down as well and began to talk.
“Pinot Noir is a grape variety different from the Cabernet Sauvignon we grow. It’s a variety from the Burgundy region of France, with thin skins and a light ruby color.”
Mom asked, her eyes sparkling.
“So it’s a bit different from ours?”
“That’s right. Cabernet has thick skins and a deep color, so it has quite a different kind of appeal from Pinot Noir.”
“Oh, so?”
“The main content of the movie is about Pinot Noir. As you know, Hollywood movies don’t just end with people watching and enjoying them, they have a considerable influence on people. So...”
As I was about to give a long explanation, Dad cut in right away.
“So you’re saying, ‘People who watch the movie will look for Pinot Noir, and demand will increase sharply,’ right?”
Clap!
I clapped my hands and pointed at Dad.
“That’s exactly it.”
“Hmmm...”
I thought he would naturally say no, but surprisingly, Dad seriously pondered it. Come to think of it, even though he failed, hadn’t Dad run a business before?
“But the movie has to do well, right? What if it fails?”
The fact that he was asking this meant I had piqued his interest enough, so I thought I had already passed half of the hurdle in persuading him.
“Dad, let’s think about it carefully. If we secure Pinot Noir and the movie fails? We can just sell that Pinot Noir well. As long as the price doesn’t crash, the likelihood of us taking a big loss isn’t high.”
“Hmm...”
“But if, on the contrary, the movie does at least moderately well? The price of Pinot Noir will skyrocket, and we’ll make a big profit.”
“So you’re saying we should make money that way.”
I leaned my upper body even further forward and spoke with sincerity.
“Dad, I don’t want that money just so we can buy a better house and a better car.”
“Then?”
“More capital lets us expand the farm and the facilities on a larger scale. Even now, but as time goes on, economies of scale will come to dominate agriculture. The larger the farm gets, the cost per area goes down and profits increase. And by diversifying the varieties, it becomes possible to overcome instability in profits depending on the popularity of each variety.”
Mom, who had been listening, spoke with an anxious expression.
“What if we take a huge loss doing that?”
“We have to make sure it doesn’t come to that. Anyway, we started with just 40,000 dollars. And by making Vinegar, we earned more than that. On a farm capable of producing 50,000 liters, we only made 20,000 liters, and if all of that sells, it’s enormous profit. Crops don’t just disappear.”
“Well, that’s true...”
Perhaps because she already had experience cultivating, Mom also accepted it without much resistance. Dad, who had been biting his lip and thinking, spoke.
“So in the end, you’re saying we should use the funds we’ve secured now to buy Pinot Noir in advance... but where do we store what we buy?”
“Ah, don’t worry about that. There are places called Custom Crush, where you borrow someone else’s winery facilities and have your grapes made into wine on consignment. When contracting with a Pinot Noir farm, we tie it into a multi-year supply contract, contract at the barrel stage, and then move it to the Custom Crush facility.”
“Ah, so you move it from the grape farm to a contract winemaking facility?”
“That’s right. If we lease barrels or tanks there and just pay a monthly usage fee, the initial cost isn’t that big.”
“Then the monthly cost would be the issue, right?”
“For wineries that properly produce high-quality wine, the monthly cost isn’t a big problem. That’s because they contract with restaurants by the case. For example, restaurant representatives come to the winery, taste the wine in the barrels, and make advance contracts by case price, paying 20 to 30% as a deposit.”
“Then about how much is it?”
Dad seemed unable to calculate it right away and turned it over in his head. I also thought it through for a while before answering.
“So... let’s calculate using the cheaper end of Pinot Noir. If it’s about 12 to 13 dollars per bottle, that’s low-priced daily wine, right? A wine case usually has 12 bottles. That comes out to about 150 dollars.”
“Right.”
“If we contract 50 cases with one restaurant, that’s 7,500 dollars, and if we contract with 10 places...”
“75,000 dollars? If we receive 30% of that as a deposit, that’s 22,500 dollars. That’s not bad.”
“Right? And that’s not the end. Even if a lot of money comes in with the initial contracts, if we suddenly need cash later, we can also take out a loan using the barrels in the warehouse as collateral through an ABL (Asset Backed Loan), at about 60%.”
Dad, who instantly understood everything I said due to his past business experience, had his eyes shining.
“Where would be good?”
Meaning, which farm would be good.
“Anderson Valley and Sonoma County. Both are known for having good Pinot Noir quality. The downside is that they aren’t daily wine grade, so the initial cost is higher.”
“If the movie takes off, wouldn’t something a bit higher grade sell better than daily wine grade?”
“Of course.”
“Alright. Going as-is wouldn’t be right, so we should prepare.”
“Prepare?”
“We can’t go looking like this. We need to dress up properly. Honey, iron a suit for me to wear tomorrow. I need to go to the bank right now.”
Dad hurriedly ran down, and Mom, who was left behind, stared blankly, then suddenly turned her head toward me.
“Hey, then if Pinot Noir is that good, what about ours? Is it not that great?”
“Come on, Mom. That’s not it. In Napa Valley, Cabernet Sauvignon usually goes for around 3,900 dollars per ton, while Pinot Noir is around 2,100 dollars per ton. Ah, that’s the price when it’s raw grapes, before it’s made into wine.”
Mom was startled and her eyes widened.
“That’s almost double?”
“So even slightly decent grapes were all sold off by the previous farm owner, Mr. John Anderson. To go bankrupt while owning such a good farm. Tsk, tsk, tsk...”
“Exactly.”
“The continuous drop in wine prices over the past few years must have been a problem too.”
“Wine prices dropped? Why?”
“Since everyone is producing wine, wine prices have dropped a lot. The raw grapes, Cabernet, are expensive, but wine isn’t, I guess you could say? It’s funny, right?”
“Then what do we do? Do we keep selling Vinegar?”
“That’s right. Our farm has nothing to worry about. We’ve already secured a solid sales route through Vinegar. And after putting so much care into growing the grapes, we’ll let about half of them age in barrels while waiting for the right time. Cabernet Sauvignon originally increases in value the more it ages.”
“Then will the Pinot Noir you and your dad are trying to buy be different?”
“That’s a bit different.”
I grinned. After the release of Sideways, Pinot Noir prices surged by 15% in the first year, then an additional 25% compared to the previous year, bringing wealth to Pinot Noir wineries. So it couldn’t help but be very different from Cabernet Sauvignon.
The next day, after going to school, I made the excuse that I wasn’t feeling well, finished only the morning classes, and then headed with Dad straight to Russian River Valley in Sonoma County.
“The place we’re going to now is the best?”
“Pretty much.”
Not now, but later, after the movie Sideways came out and Americans began to go crazy for Pinot Noir, the place that received the highest valuation was precisely the Pinot Noir from Russian River Valley.
“Why is that place the best? Is there a reason?”
“Good question. First of all, Pinot Noir needs a large temperature difference between day and night. At least between 10 and 15 degrees. During the day, 22 to 28 degrees is good. At night, 10 to 15 degrees is just right. If daytime temperatures are too high, the sugar content becomes excessive, which isn’t good.”
“Ohh-”
“And Pinot Noir does well when there’s fog.”
“Fog?”
“Yes. Morning fog preserves acidity while suppressing the rise in sugar levels. If ocean breezes blow in on top of that, it’s the best. When you also consider the terrain and soil, Russian River Valley is one of the most optimal regions in the world.”
“Wow... I see.”
Dad, who had been nodding, asked again.
“But I was thinking, setting aside saving money to expand facilities... how are we going to expand the farm? All the suitable land is already being used as farmland.”
“Of course I’m not saying we should buy unused land.”
“Then? Are you saying we should acquire an existing farm? Like Redwood Farm? Come on, is that easy? Redwood Farm was a farm that came out because of bankruptcy by chance. There can’t be many farms like that.”
“Who knows. What will happen...”
I knew. In late 2004, a massive wildfire would sweep across California.
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