December 1, 2000

16 Min Read
Uncorking the Secrets of Wine Storage

Uncorking the Secrets of Wine Storage

Making this highly specialized ancillary work for yourself-storage business

By George McCord


At Plantation Self Storage in Bluffton, S.C, the door and outside walls of the wine-storage room, which are visible from the storage office, have been faux painted to look like the exterior of a wine-storage building in France.

As an ancillary to the self-storage industry, wine storage is not foreveryone. It is a niche market that works only under special circumstances. Butin those instances where it does work, it can be rewarding for the storageoperator on many levels. Wine storage can produce a per-square-foot returnexceeding that achievable when utilizing the same space for traditionalclimate-controlled storage. But even if the return per square foot were the sameas for normal storage, the rarity of wine storage as a service, together withthe upscale image it contributes to the industry, provide a marketing benefitfor the overall storage facility far in excess of its cost.

The Market

Potential markets include urban areas with a concentration of apartment orcondominium housing that traditionally are short on storage space. Otherpotential markets include resort, vacation or second-home areas where visitorsmay find it necessary--or more economical--to carry wine collections with them.The market for wine storage, not ideal for areas where houses generally havebasements, obviously has more potential in areas where homes are lacking instorage space with climate and humidity suitable for the storage of wine.

There are several segments of the market to target for wine storage. Theprimary segment includes individuals who wish to purchase wine in bulk to storefor their own personal enjoyment. Last year, wine consumption in the UnitedStates exceeded $18 billion, and continued growth in consumption is projected.An increasingly active segment of that expanding market includes investors orcollectors who may purchase wine to store for resale at appreciated values.Restaurants may need off-site storage space for their commercial cellars. Thereare also wine clubs and tasting groups who pool their resources to acquire winesfor their mutual enjoyment, and need to jointly store their wine in a communalspace.

The important thing to remember about wine storage is that it is trulyancillary to the primary business of renting self-storage units. If nothingelse, it will bring customers into the facility that may not otherwise havecome. The result is exposure of the facility to another demographic segment ofyour marketplace, and expanding the range of potential storage customers.

Design and Construction


Individual lockers should be constructed in sizes that accommodate the storage of wine cases. Although cases may vary in size, a typical California cardboard carton will generally fit in a space 12-by-12-by-14 inches. This case size should be the basic building block of the wine-storage lockers.

If the market is there, wine storage can be presented in several forms. Itcan exist simply as small lockers designated in a climate-controlled portion ofyour storage facility--you label this space as "wine storage" andmarket it as such. On the other hand, wine storage can be created in yourfacility as a specially designed room with a dedicated HVAC system, whichproduces the precise temperature and humidity conditions that are ideal for thepreservation and maturation of wine. The local marketplace, the overallcharacter of your storage facility, and the image you wish to convey topotential customers will determine the level of sophistication you build intoyour wine-storage area.

Assuming you decide to create a dedicated, full-service wine-storage optioninto your facility, the storage room should be designed in accordance withseveral basic standards. The primary goal should be to create an environment inwhich a temperature of 55 degrees and a humidity level of 70 percent can beconsistently maintained. This is done by first wrapping the room in plastic, andthen providing a vapor barrier on the inside of the room with an insulationrating of R22 in the walls and R30 in the ceiling. The drywall applied over theinsulation should be green board, which better resists moisture. The green boardshould be covered with a hardcoat finish by troweling drywall mud over theentire surface of the walls. The walls can then be painted for a final finish.

Two refrigeration units, dedicated specifically to the wine-storage room,should be used. This creates a redundant system that will maintain the requiredconditions for the wine in the event one of the units goes down. In addition,installing a back-up generator to operate in the event of a power failure willfurther protect against any damage. This becomes important to the client baseyou are trying to reach, and will become a significant marketing tool. Thecollector, investor or individual who cares about his wine will want to be sureit is maintained under ideal conditions at all times.

Individual lockers should be constructed in sizes that accommodate thestorage of wine cases. Although cases may vary in size, a typical Californiacardboard carton will generally fit in a space 12-by-12-by-14 inches. This casesize should be the basic building block of the wine-storage lockers.


Any mix of locker sizes can be designed depending on the anticipated market demand and size of the room. It may be prudent to initially construct only a portion of the lockers, and then see what demand actually develops. If you end up with several commercial customers or large collectors, you will want to construct more larger units as opposed to smaller ones targeted toward individual customers.

By constructing a unit that is 24 inches wide and 24 inches deep, four suchcases can be stored on each level or row. In a module that is 24-by-24 inchesand at least 90 inches tall, you will have the capacity for six rows (levels) offour cases each, or a total of 24 cases. This module can be divided into threelockers of eight cases each, or two lockers of 12 cases each. This 24-casemodule can be doubled in size to produce a module with a capacity of 48 cases.

Any mix of locker sizes can be designed depending on the anticipated marketdemand and size of the room. It may be prudent to initially construct only aportion of the lockers, and then see what demand actually develops. If you endup with several commercial customers or large collectors, you will want toconstruct more larger units as opposed to smaller ones targeted towardindividual customers.

The lockers themselves can be constructed from several kinds of materials andcan be designed to fit the image you are trying to create. They can range fromsimple plywood boxes, to cages of wooden slats, to elaborate oak lockers withlouvered doors, or any combination thereof. Some permeable surface, such as thatprovided by slats or louvers, is preferred in order to assure proper circulationwithin the lockers. The lockers can be spaced on three-foot aisles within theroom. A rolling staircase should be provided to allow convenient access to theupper-level lockers.

Security

A well-designed wine-storage room will ensure the security of its contents.Access should be allowed only to tenants storing wine. A separate electronickeypad can be installed at the entry to the wine room that opens the door onlyto those with the proper code. Video-surveillance cameras should be placed inthe room and integrated into the monitoring system of the self-storage facilitygrounds.

In addition, the temperature and humidity controls for the cooling unitsshould be tied to an alarm system that monitors the conditions in the room. Ifthe temperature or humidity exceeds certain preset limits, an alarm will soundto alert the manager of the facility. During off hours, the alarm can bemonitored by a service that notifies the manager and the HVAC serviceman of anyproblems.

Decorating the Wine-Storage Room


In addition to creating ideal storage conditions and individual lockers, which are the basics of wine storage, the room and surrounding area can also be decorated to enhance its marketability.

In addition to creating ideal storage conditions and individual lockers,which are the basics of wine storage, the room and surrounding area can also bedecorated to enhance its marketability. At Plantation Self Storage in Bluffton,S.C, the door and outside walls of the wine-storage room, which are visible fromthe storage office, have been faux painted to look like the exterior of awine-storage building in France. On the inside of the room, a mural depicting awine cellar lined with barrels gives the illusion of depth to the room anddresses up a back wall between lockers.

At the East Bank self-storage facility in Chicago, wine storage is in thebasement and is accessed by an open staircase decorated with old barrels andmurals depicting wine-country scenes. At the very least, a special decorativedoor can be used to set off the entry to the wine room. The Plantation facility,for example, features a hand-carved mahogany door designed in a wine motif. Thisattraction clearly calls attention to the wine room, and provides an image foruse in its marketing materials.

Marketing and Amenities


Some permeable surface, such as that provided by slats or louvers, is preferred in order to assure proper circulation within the lockers. The lockers can be spaced on three-foot aisles within the room. A rolling staircase should be provided to allow convenient access to the upper-level lockers.

The marketing program for wine storage should include a brochure separatefrom that of the general self-storage facility. It may even include a separatename and logo for wine storage. Plantation Self Storage calls its wine-storagefacilities "Plantation Cellars," and has created a separate logo toidentify them. Annie's Attic calls its wine-storage facilities "LaCave."

Other amenities can serve to enhance the image and marketability of awine-storage facility. Strongbox Self Storage in Chicago has a tasting roomadjacent to its wine-storage area. There are booths and bulletin boards filledwith information about wine and the facility's wine club. Wine products andaccessories can be sold in the retail area of the storage facility office. Aholding room can be established to accept deliveries of wine for customers,including purchases sent directly from wineries. (Be sure to read the sidebar on"Grumbling Over Grapes" for more information on how this works.) Awine club can be established among those customers storing wine at the facility.They can participate in the purchase of wine at case prices, or glassware andaccessories at volume discounts. Wine tastings can be conducted by local winemerchants.

Services

Among the services to be offered to customers is the certification ofconditions under which their wine has been stored. This is particularlyimportant to investors seeking to establish the provenance of their wine forprospective purchasers. Instruments are available for use in the wine-storageroom that constantly record the temperature and humidity in the room. This datacan then be fed into a computer to create a perpetual record of the cellarconditions in order to assure the accuracy of the certification.

As stated initially, wine-storage is not for everyone. But in the propermarket, it can provide per-square-foot revenue in excess of that achievable bystandard storage. And even if the revenue were the same as regular storage, themarketing benefits of this unique form of storage will generally outweigh theadditional development cost. Its real value to a self-storage facility is inhelping to increase overall rentals. That is the core of our business, and canbe greatly enhanced by the inclusion of wine storage as an ancillary service.

An attorney by training, George McCord has more than 25 years of extensiveexperience in a wide range of real-estate and development projects. He hassupervised the acquisition, financing, construction, syndication, marketing andmanagement of apartment properties, office buildings, resort hotels, shoppingcenters, residential and industrial subdivisions, condominium projects, marinasand self-storage facilities. His current company, Southeast Storage, currentlyhas close to 600,000 square feet of self-storage under development. His facilityin Bluffton, S.C., Plantation Self-Storage, was named overall winner asSelf-Storage Facility of the Year in 2000. Mr. McCord is a member of the SelfStorage Association, serving both on its regional board of directors and as vicepresident for the Southeast region. He is also a frequent participant inindustry programs regarding the development and operation of self-storagefacilities.

Plantation Cellars
Wine Storage Rental Rates
Rental Rate = $1.50 per case, per month

Locker Capacity

Rent Per Month

Rent Per Year

8 Cases

$12

$144

12 Cases

$18

$216

18 Cases

$27

$324

24 Cases

$36

$432

48 Cases

$72

$864

72 Cases

$108

$1,296

84 Cases

$126

$1,512

112 Cases

$168

$2,016

180 Cases

$270

$3,240

Plantation Cellars
Wine Storage
Summary of Wine Storage Lockers

Framed Module Size

Number of  Modules

Total No. of Lockers

Case Capacity of Lockers

Total Case Capacity

24 Cases

26

28
36

12 Cases
8 Cases

336
288

36 Cases

1

2

18 Cases

36

48 Cases

7

2
10

48 Cases
24 Cases

96
240

72 Cases

1

1

72 Cases

72

84 Cases

4

4

84 Cases

336

112 Cases

4

4

112 Cases

448

180 Cases

1

1

180 Cases

180

 

 

88

 

2,032 Cases

Plantation Cellars
Wine Storage Construction Cost
Project Data

Area of Wine Storage Room

640

Number of Lockers

88

Case Capacity

2,032

Total Cost Per Square Foot

$110

Construction Cost Breakdown

Framing

N/A

Insulation/Vapor Barrier

$2,200

Drywall - Green Board

$400

Drywall - Hardcoat Finish

$1,400

Painting

$1,200

Refrigeration/Humidification

$15,400

Standby Generator/Transfer Switch

$5,400

Temperature/Humidity Data Recorder

$600

Electrical - Wiring & Set Up Equipment

$2,500

Electrical - Light Fixtures

$1,250

Entry Door

$4,300

Wine Lockers

$36,000

Total Cost

$70,650

Plantation Cellars
Wine Storage Income
Rent per case per month = $1.50

Locker Capacity

Number of Lockers

Total Cases

Rent per Month

Rent per Year

8 Cases

36

288

$432

$5,182

12 Cases

28

336

$504

$6,048

18 Cases

2

36

$54

$648

24 Cases

10

240

$360

$4,320

48 Cases

2

96

$144

$1,728

72 Cases

1

72

$108

$1,296

84 Cases

4

336

$504

$6,048

112 Cases

4

448

$672

$8,064

180 Cases

1

180

$270

$3,240

Total

88

2,032

$3,048

$36,576

Total Capacity

Cases

2,032

 

Bottles

24,384

 

Potential Income
Rental rate per case per month: $1.50
2,032 Cases @ $1.50 = $3,048 per month
$3,048 per month x 12 = $36,576 per year
Total Potential Annual Income $36,576
Less 10 percent vacancy $3,658
Net Annual Income $32, 918

Income Per Square Foot
Total income @ 90 percent occupancy $32,918
Total square feet in wine storage room 640
Income Per Square Foot $51.44

Grumbling Over Grapes
Free the Grapes! fights regulations on interstate deliveries

By Matt Morgan

What do you do if a package is delivered to your self-storage facility for atenant, and that package has a return label that reads "Smallville WineBottlers Inc."? Do you accept the package and proceed as usual?

Think again.

As more commercial and residential tenants in various parts of the countryuse their units to house wine collections, self-storage operators haverecognized wine storage as a new niche market. In our November 2000 issue,frequent Inside Self-Storage contributor Jim Chiswell advised thoseconsidering this ancillary service to "go slowly and do plenty ofresearch." Operators frequently accept packages for tenants as a courtesy,but signing for wine could get them into trouble. Here's why:

Currently, nearly half the states in this country will not allow directinterstate shipping of wine to consumers. These states are:

· Arizona
· Arkansas
· Delaware
· Florida
· Georgia
· Indiana
· Kansas
· Kentucky
· Maine
· Maryland
· Massachusetts
· Michigan
· Mississippi
· Montana
· New Jersey
· New York
· North Carolina
· Oklahoma
· Pennsylvania
· South Dakota
· Tennessee
· Texas
· Utah
· Virginia

In 11 other states, as well as Washington, D.C., shipping is restricted invarying degrees: Alabama, Alaska, Connecticut, Hawaii, Nebraska, Nevada, NorthDakota, Ohio, Rhode Island, Vermont and Wyoming. Twelve states have reciprocalagreements, where one state will allow shipment from another if it is permittedto ship wine across its borders in return. The participating states in thiscategory are California, Colorado, Idaho, Illinois, Iowa, Minnesota, Missouri,New Mexico, Oregon, Washington, West Virginia and Wisconsin. In Louisiana, NewHampshire and South Carolina, only licensed wineries may ship between states.

One organization, Free the Grapes!, is fighting for small wineries and thewine connoisseur--who just could be a tenant of yours. Free the Grapes is anonprofit organization whose goal is to fight regulations that limit the directshipment of wine to consumers across state borders. The group consists of145,000 wine consumers and associations representing more than 1,000 Americanwinemakers.

What the group wants is of a serious nature--encapsulated by its symbol, anangry purple grape with its fists clenched and ankles shackled. The group'smission, simply described, is to ensure consumer access to fine wine. In aroundabout way, Free the Grapes wants to make it legal for you to sign for thatpackage of wine, better serving your wine-storage customers.

According to the organization's website (www.freethegrapes.com),less than 5 percent of wine produced at America's 2,000 wineries is shippeddirectly to consumers. Greed, the group contends, is what keeps organizationslike the Wine and Spirits Wholesalers of America in pursuit of furtherrestriction of interstate commerce. "Distributor middlemen are aggressivelytwisting the 21st Amendment to entrench state-sanctioned monopolies in winedistribution," the site reads.

Free the Grapes has come up with its own voluntary "wine industrycode" that, when adopted, will make sure wineries ("licensees")administer to applicable laws. The third item of the code reads: "Cartonsused to direct ship wine to adult consumers must be conspicuously labeled with aminimum notification 'signature of person age 21 or older required fordelivery,' and must include a return address and other language required byspecific state laws. Licensees may opt to further identify the contents,including words such as 'wine enclosed' or 'contains alcohol.'" The codelater states, "...licensees must notify purchasers that the recipient willbe asked to show identification upon delivery."

It appears to be an uphill, wine-bottle battle, but Free the Grapes is makingprogress. What happened in North Dakota in April 1999 is a good example: Thestate originally drafted a bill making it a felony to ship wine directly to thestate. But after weighing public opinion, lawmakers passed a revised bill thatstruck a balance between giving wine lovers what they want--direct shipping--andpreventing minors' easy access to wine.

Free the Grapes recommends contacting your state alcohol regulatoryauthority for detailed shipping information particular to your state; www.wineinstitute.orgalso has up-to-date listings. Chiswell has a helpful website for thoseconsidering wine storage at their self-storage facilities, www.selfstorageconsulting.com.

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