Regional Wine Industry Gets Legs

Winery numbers grow as cold-hardy grapes, dedicated growers take root

BY ROB SWENSON

Wineries and vineyards are moving out of the hobby stage and making noteworthy contributions to the economies of Upper Midwestern states.

Wineries with tasting rooms and event facilities are creating profitable niches in visitor industries in Minnesota, South Dakota and North Dakota. Growing grapes and other fruits for wine also creates options for small farms, but the regional agricultural sector continues to be dominated by crops such as corn, soybeans and wheat.

Minnesota has the oldest and largest wine industry in the three-state region. But South Dakota has experienced solid growth in recent years, and North Dakota is starting to grow, too.

More growers in the region say they are making money raising grapes and selling wine, according to Bill Gartner, a professor of applied economics at the University of Minnesota. Gartner has coauthored several studies about vineyards in northern states.

Wineries are no longer just hobbies and side ventures captivated by the historic romance of the business.

“In the past, if you made enough money on other sources, you’d pump money into wineries. Now they’re becoming businesses,” Gartner says.

Growth of the industry has been fueled by the development of hardy varieties of grapes, which are capable of surviving cold winters.

Minnesota has approximately 45 licensed wineries, South Dakota has 22, and North Dakota has nine, and more are being developed.

“What we’re seeing here in terms of growth is pretty remarkable,” Gartner says. He foresees continuing growth, though probably at a slower pace than in recent years.

Despite the growth of the industry in northern states and elsewhere, California remains what Gartner calls “the big gorilla” of U.S. wine production. “Compared with California, everyone else is a drop in the bucket,” he says.

Most wine produced and sold in northern states is consumed locally. So an area’s population is a limiting factor. That puts sparsely populated states, such as the Dakotas, at a disadvantage.

In addition to weather, growers and winery operators face other challenges, including occasional opposition from critics of alcohol consumption.

State laws also can be a problem in, for example, distribution. Since Prohibition was repealed in 1933, a hodgepodge of state laws has emerged to regulate the wine and beer industry.

Patience and upfront investments also are required because grapes are perennial plants. A few growing seasons must pass before vineyards can produce wine-worthy fruit.

Minn. Leads Region

Minnesota’s first winery opened in 1978 in Hastings, according to the Minnesota Grape Growers Association. But it took until 1997 for Minnesota to have three wineries. Minnesota now produces more than 150,000 gallons of wine a year.

“The emergence of cold-hardy wine grape cultivars in the 1990s created a new and rapidly expanding industry of small vineyard and winery enterprises in states across New England, northern New York and the Upper Midwest,” according to a June 2013 report about vineyards and wineries in Minnesota.

The report was coauthored by Gartner and by Brigid Tuck of the U of M in partnership with the Northern Grapes Project. The project involves a coalition of researchers, extension specialists and professionals from 13 states.

Terri Savaryn, secretary and director of marketing for the association, expects that 45 wineries will be open to the public during the coming tourism season in Minnesota. Savaryn is with Sovereign Estate Wine in Waconia.

Wine tasters are like antique shoppers in that they like to make multiple stops during outings, Savaryn says.

“I keep telling everyone in our neighborhood to plant grapes,” she says. “That will change the dynamics of the town. We can create our own little micro-winery industry.”

Her winery is about 30 miles west of the Twin Cities, putting it in a rural setting close to a large base of potential customers. Two other wineries are located within a few miles of Sovereign Estate, which creates collective drawing power.

Like many wineries in the region, Sovereign Estate Wine includes rental facilities to host receptions and other events.

“We want to be a big player in the industry. This isn’t a hobby for us. We want to produce the best Marquette in Minnesota,” Savaryn says, referring to a relatively new and popular grape variety used to produce red wine. The grape variety is among several varieties developed at the U of M.

Ron and Kim Wothe, owners of Glacial Ridge Winery in Spicer, were recently named the Minnesota Encore Entrepreneurs of the Year by the U.S. Small Business Administration. The award is for entrepreneurs older than 50 who have demonstrated success for at least three years.

Ron Wothe was 58 when he approached an SBA lending partner for help in establishing the first winery in the Glacial Lakes area. At Glacial Ridge, visitors can sample wines, listen to music outdoors on Thursday nights and book events such as catered receptions.

“They come for the wine and maybe go home with some wine and a shirt. We sell what we can,” says Ron Wothe, who previously worked in grocery management. “Our special events probably drive this thing.”

The study on Minnesota by Tuck and Gartner reported that in 2011, grape growing and the winery industry contributed $59 million in economic activity to the state. Of that, $16.4 million was generated by vineyards, $22.1 million by wineries and $20.5 million by tourists.

Tuck and Gartner also wrote a report about vineyards and wineries in South Dakota and North Dakota. Because of the relatively small size of the industry in the two states, data from the Dakotas were combined into a single report issued in January 2014.

In 2011, the economic contribution of grape growing and the winery industries in the Dakotas was $26.4 million, according to the report. The total includes 665 jobs and $8.8 million in labor income. Vineyards contributed $880,000, wineries $11.6 million and tourists $13.9 million.

SD off to Good Start

Some people call Eldon Nygaard the godfather of South Dakota’s modern wine industry. He started researching wine laws in 1995 and acquired the state’s first winery license in 1996.

Nygaard is a farmer and an attorney. He is also a former college professor and former state legislator. He and his wife, Sherry, operate the Valiant Vineyards Winery in Vermillion and Stone Faces Winery in Hill City.

Nygaard planted his original vineyard at his farm near Viborg in 1993 and then found out that South Dakota lacked enabling legislation for making wine. Laws and regulations have been enacted. But provisions for shipping wine out of the state remain cumbersome, Nygaard says.

The Nygaards currently employ 43 people, including

10 full-time workers, at their two wineries. Since entering the business, they have employed 256 people, including a number of University of South Dakota students.

Growth of the industry in South Dakota has mirrored the pattern in other states, Nygaard says. “It starts off kind of slow, then takes hold. I would say in the last five years, we’ve doubled the amount of wineries in South Dakota,” he says.

In 2013, South Dakota surpassed the 100,000-gallon mark in wine production, according to Ty Eschenbaum, an agricultural development representative for the state Department of Agriculture. “It’s a new industry, a growing industry that is really taking off,” he says.

Bob Weyrich, past president of the South Dakota Winegrowers Association, jokes that wineries make a bettertasting product than the state’s other alcohol-making industry: ethanol. Weyrich formerly worked as an agricultural development specialist for the state and promoted specialty products, including grapes. Now he is employed by the Prairie Berry Winery in Hill City.

Growth in South Dakota has been dramatic and sustained, he says, but the industry remains still in its infancy.

Anne Fennell, a professor in the plant science department at South Dakota State University, is among the educators involved in national research projects on wine production. Growing grapes and other fruits for wine are

“thinking persons’ crops,” she says. In addition to combating factors such as weather conditions, producers have to plan years in advance. Vines have to grow for several years before they produce grapes capable of tasting good and bringing return on investment.

Fennell likens wineries to farmers’ markets in the way they can positively affect the quality of life in an area. Repeat sales — a reflection of product quality — are crucial, she says.

Seven percent of the wine consumed in South Dakota is produced in the state, she says. “That is actually pretty good.”

Jim Hagen, South Dakota’s secretary of tourism, considers wineries a key sector of agri-tourism. “We’ve been promoting them for a few years,” he says. “It’s a great niche for us. It shows that South Dakota is more than Mount Rushmore or Crazy Horse or Deadwood and theBadlands.”

ND Poised for Growth

Wine production is a relatively new industry in North Dakota, but it’s positioned for growth.

“It’s definitely a niche that we’re interested in helping to pro- mote. It’s a good fit with our other agriculture,” says Dean Ihla, tourism development manager in the tourism division of the North Dakota Department of Commerce.

A concentration of wineries is developing in the Fargo area, which officials say will lend itself well to group promotion.

Greg Krieger of Long Shadow Vineyards in Galesburg is the president of the North Dakota Grape and Wine Association. He’s also an agronomist. He does not operate a winery. His vineyards are more of a hobby than a business, he says. However, he is optimistic about the overall future of the wine industry in North Dakota.

“It’s very promising. Some of the flavors we can get in wines are just remarkable,” he says.

Greg Cook, who is building the 4 Elements Winery near Casselton, is also the chair and a professor in the chemistry department at North Dakota State University. “All of these things kind of start out as hobbies,” he says.

North Dakota is in the early stages of developing its wine industry, Cook says. He expects the state to have about a dozen wineries operating in another year.

“I think the Fargo area, by having five or six by 2015, will be more of a destination,” he says.

Harlene Hatterman-Valenti, assistant head and professor in the plant science department at NDSU, also says the state’s wine industry is steadily growing. “I think we’ve already made a good contribution, but I think it can get better,” she says.

Hatterman-Valenti likes that North Dakota, unlike states such as Iowa, requires wineries to primarily use fruits grown within the state. She’s also encouraged by law changes that have made distributing wine within the state easier. She says she’s impressed by the level of cooperation wine makers, winery operators and viticulturists demonstrate. “Their willingness to work together and help each other out is neat and ideal,” she says. PB

Rob Swenson Contributing writer RobSwensonMediaServices@gmail.com