Uncorking the Secrets of Wine Storage

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Uncorking the Secrets of Wine StorageMaking this highly specialized ancillary work for your self-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 for everyone. It is a niche market that works only under special circumstances. But in those instances where it does work, it can be rewarding for the storage operator on many levels. Wine storage can produce a per-square-foot return exceeding that achievable when utilizing the same space for traditional climate-controlled storage. But even if the return per square foot were the same as for normal storage, the rarity of wine storage as a service, together with the upscale image it contributes to the industry, provide a marketing benefit for the overall storage facility far in excess of its cost.

The Market

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

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

The important thing to remember about wine storage is that it is truly ancillary to the primary business of renting self-storage units. If nothing else, it will bring customers into the facility that may not otherwise have come. The result is exposure of the facility to another demographic segment of your 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. It can exist simply as small lockers designated in a climate-controlled portion of your storage facility--you label this space as "wine storage" and market it as such. On the other hand, wine storage can be created in your facility as a specially designed room with a dedicated HVAC system, which produces the precise temperature and humidity conditions that are ideal for the preservation and maturation of wine. The local marketplace, the overall character of your storage facility, and the image you wish to convey to potential customers will determine the level of sophistication you build into your wine-storage area.

Assuming you decide to create a dedicated, full-service wine-storage option into your facility, the storage room should be designed in accordance with several basic standards. The primary goal should be to create an environment in which a temperature of 55 degrees and a humidity level of 70 percent can be consistently maintained. This is done by first wrapping the room in plastic, and then providing a vapor barrier on the inside of the room with an insulation rating of R22 in the walls and R30 in the ceiling. The drywall applied over the insulation should be green board, which better resists moisture. The green board should be covered with a hardcoat finish by troweling drywall mud over the entire 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 required conditions 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 will further protect against any damage. This becomes important to the client base you are trying to reach, and will become a significant marketing tool. The collector, investor or individual who cares about his wine will want to be sure it is maintained under ideal conditions at all times.

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.


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 such cases can be stored on each level or row. In a module that is 24-by-24 inches and at least 90 inches tall, you will have the capacity for six rows (levels) of four cases each, or a total of 24 cases. This module can be divided into three lockers of eight cases each, or two lockers of 12 cases each. This 24-case module 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 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.

The lockers themselves can be constructed from several kinds of materials and can be designed to fit the image you are trying to create. They can range from simple plywood boxes, to cages of wooden slats, to elaborate oak lockers with louvered doors, or any combination thereof. 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.

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 electronic keypad can be installed at the entry to the wine room that opens the door only to those with the proper code. Video-surveillance cameras should be placed in the room and integrated into the monitoring system of the self-storage facility grounds.

In addition, the temperature and humidity controls for the cooling units should be tied to an alarm system that monitors the conditions in the room. If the temperature or humidity exceeds certain preset limits, an alarm will sound to alert the manager of the facility. During off hours, the alarm can be monitored by a service that notifies the manager and the HVAC serviceman of any problems.

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 be decorated 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 from the storage office, have been faux painted to look like the exterior of a wine-storage building in France. On the inside of the room, a mural depicting a wine cellar lined with barrels gives the illusion of depth to the room and dresses up a back wall between lockers.

At the East Bank self-storage facility in Chicago, wine storage is in the basement and is accessed by an open staircase decorated with old barrels and murals depicting wine-country scenes. At the very least, a special decorative door 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. This attraction clearly calls attention to the wine room, and provides an image for use 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 separate from that of the general self-storage facility. It may even include a separate name and logo for wine storage. Plantation Self Storage calls its wine-storage facilities "Plantation Cellars," and has created a separate logo to identify them. Annie's Attic calls its wine-storage facilities "La Cave."

Other amenities can serve to enhance the image and marketability of a wine-storage facility. Strongbox Self Storage in Chicago has a tasting room adjacent to its wine-storage area. There are booths and bulletin boards filled with information about wine and the facility's wine club. Wine products and accessories can be sold in the retail area of the storage facility office. A holding 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.) A wine 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 and accessories at volume discounts. Wine tastings can be conducted by local wine merchants.

Services

Among the services to be offered to customers is the certification of conditions under which their wine has been stored. This is particularly important to investors seeking to establish the provenance of their wine for prospective purchasers. Instruments are available for use in the wine-storage room that constantly record the temperature and humidity in the room. This data can then be fed into a computer to create a perpetual record of the cellar conditions in order to assure the accuracy of the certification.

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

An attorney by training, George McCord has more than 25 years of extensive experience in a wide range of real-estate and development projects. He has supervised the acquisition, financing, construction, syndication, marketing and management of apartment properties, office buildings, resort hotels, shopping centers, residential and industrial subdivisions, condominium projects, marinas and self-storage facilities. His current company, Southeast Storage, currently has close to 600,000 square feet of self-storage under development. His facility in Bluffton, S.C., Plantation Self-Storage, was named overall winner as Self-Storage Facility of the Year in 2000. Mr. McCord is a member of the Self Storage Association, serving both on its regional board of directors and as vice president for the Southeast region. He is also a frequent participant in industry programs regarding the development and operation of self-storage facilities.

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 a tenant, and that package has a return label that reads "Smallville Wine Bottlers Inc."? Do you accept the package and proceed as usual?

Think again.

As more commercial and residential tenants in various parts of the country use their units to house wine collections, self-storage operators have recognized wine storage as a new niche market. In our November 2000 issue, frequent Inside Self-Storage contributor Jim Chiswell advised those considering this ancillary service to "go slowly and do plenty of research." 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 direct interstate 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 in varying degrees: Alabama, Alaska, Connecticut, Hawaii, Nebraska, Nevada, North Dakota, Ohio, Rhode Island, Vermont and Wyoming. Twelve states have reciprocal agreements, where one state will allow shipment from another if it is permitted to ship wine across its borders in return. The participating states in this category are California, Colorado, Idaho, Illinois, Iowa, Minnesota, Missouri, New Mexico, Oregon, Washington, West Virginia and Wisconsin. In Louisiana, New Hampshire and South Carolina, only licensed wineries may ship between states.

One organization, Free the Grapes!, is fighting for small wineries and the wine connoisseur--who just could be a tenant of yours. Free the Grapes is a nonprofit organization whose goal is to fight regulations that limit the direct shipment of wine to consumers across state borders. The group consists of 145,000 wine consumers and associations representing more than 1,000 American winemakers.

What the group wants is of a serious nature--encapsulated by its symbol, an angry purple grape with its fists clenched and ankles shackled. The group's mission, simply described, is to ensure consumer access to fine wine. In a roundabout way, Free the Grapes wants to make it legal for you to sign for that package 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 shipped directly to consumers. Greed, the group contends, is what keeps organizations like the Wine and Spirits Wholesalers of America in pursuit of further restriction of interstate commerce. "Distributor middlemen are aggressively twisting the 21st Amendment to entrench state-sanctioned monopolies in wine distribution," the site reads.

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

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

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

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