Abstract
Anthony Decker (name disguised at his request), director of farming at Cypress Lane Estate in Lake County, CA, was excited to harvest a newly developed 210-acre vineyard of sought-after Cabernet Sauvignon. This vineyard was expected to deliver Napa Valley-quality fruit at a fraction of the Napa Valley price. However, Decker approached the harvest with some trepidation, as increasing labor shortages were exerting financial pressure on vineyard operations, while the business was already hampered by narrow margins. Decker wondered how he could save on labor costs. Could mechanical farming reduce costs without damaging the quality of the fruit? This case explores the approximate scale at which financial benefits will be realized from long-term mechanical harvesting. Analysts can compare the costs of hand labor to machine labor, and assess the financial implications of either scenario, as well as identify the qualitative impacts. This case also discusses California’s ongoing wage legislation, agricultural overtime labor laws, and immigration issues.
Highlights
We had been primed to be the world-class wine growing American Viticultural Area (AVA)
Investors and growers were seizing an opportunity made available by skyrocketing grape prices from neighboring Napa, Sonoma, and other AVA’s across California
Lake County The AVA of Lake County is in Northern California, bordering Mendocino to its west and neighboring Sonoma and Napa Valley to the south (Exhibit 1)
Summary
Lake County The AVA of Lake County is in Northern California, bordering Mendocino to its west and neighboring Sonoma and Napa Valley to the south (Exhibit 1). Regardless of the crop produced, Lake County offered rich qualities in terroir largely due to the extinct volcano, Mount Konocti This dormant volcano provided porous, well-drained soil on its ridgeline, allowing water to collect in Clear Lake and vast underground reservoirs in the surrounding valleys. The added benefit, in addition to cost savings, was fruit quality, as Lake County Cabernet Sauvignon was being farmed in conditions similar to Napa Valley’s hillside wine grapes. Napa hillside grapes commanded a premium price compared to wine grapes grown on the valley floor. Together these factors had contributed to the growth of Lake County’s grape growing industry, even tracking the price trends of Napa Valley Cabernet Sauvignon. Napa County’s Cabernet Sauvignon price increased an average of six percent per year from 2007 to 2017, matching the average year-over-year rate of Lake County (Exhibit 2).[13]
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