Sustainable & Organic Winegrowing Practices:

With Examples from Fetzer Vineayards p y

Ann Thrupp, PhD

Manager of Sustainability & Organic Development , F t Vi dFetzer Vineyards

and Associate, CA Sustainable Winegrowing Alliance

UC Davis, August 2007

OutlineOutline• Introduction• Examples of sustainable practices used by a

“green” pioneer - Fetzer/Bonterra vineyards • The business rationale: Motivations, Economics

of using sustainable & organic practices • Comments on the CA Sustainable Winegrowing

Program & Reflections

Sustainability in Agriculture or Business: A broad concept often viewed as a goalA broad concept, often viewed as a goal

Sometimes called the “Triple Bottom Line”

E i llSustainabilitySustainability

Economically Viable

Socially Socially Environmentally

sound

yyResponsible Responsible

Ensuring viability over time…benefiting current & future generations

Concepts ofConcepts of Sustainable & Organic Agriculture

Some people perceive these concepts on a linear continuum…

Conventional IPM Biointensive IPM Organic Biodynamic

UNSUSTAINABLE S U S T A I N A B L E ORGANIC & BEYOND

However, this linear perspective is somewhat narrow.

A lt ti i l l itAn alternative view reveals more complexity …

The Sustainability ConceptRelationships betweenRelationships between

Organic & Sustainable Agriculture & Other Concepts

Sustainable

Agriculture Organicg Organic

Biodynamic “Sustainable”y

Integrated Pest/CropManagement

Sustainable” winegrowing is a

much broader concept,

Why Use “Sustainable” Practices?M ti ti d B fitMotivations and Benefits

C t lit i t• Create quality improvements• Consumer demand rising for organic products &

environmentally sound practicesenvironmentally sound practices • Concern about social and environmental

responsibility and protection of healthresponsibility, and protection of health • Complying to & avoiding regulations

Competitive advantages (differentiation)• Competitive advantages (differentiation) • Cost & risk reductions “Doing the right thing”… win-win approaches

Source: Fetzer Vineyards, & Thrupp, 2002, “Fruits of Progress”

Why? Multiple Forces Behind ChangeWhy? Multiple Forces Behind Change

SOCIAL AND ENVIRONMENTALCHALLENGES & ROLE OF NGOs

CONSUMERS

SUSTAINABILITYINCREASING

IN IMPORTANCE

ROLE OF NGOs

GOVERNMENTSCOMPETITION

INVESTORS & ANALYSTS

EMPLOYEES

Learning from Pioneers: Sharing S ccessf l E periencesSharing Successful Experiences

Bonterra brand: Made from 100% organically grown grapes

Fetzer Vineyards is recognized as a leader in sustainable and organically grown grapes.

Largest organic wine producer in US. Sales = 200,000 cases/yr

as a leader in sustainable and organic practices. Annual Sales = 3.8 Mill. cases

Spreading innovation: We are actively involved in the CA Sustainable Winegrowing Program & other outreach

Background on Fetzer and BonterraFetzer and Bonterra

Vineyards

• Founded by Barney Fetzer & family in 1968 Home in Hopland Mendocino County CA• Home in Hopland, Mendocino County, CA

• Bought by Brown Forman Corporation in 1992 M i b d F t (V ll O k ) d• Main brands: Fetzer (Valley Oaks) and Bonterra Vineyards, created in 1994Pioneer in developing sustainable business• Pioneer in developing sustainable business practices for 20 years; also leader in social responsibility and fighting underage drinkingresponsibility and fighting underage drinking

FETZER’S COMMITMENT TO SUSTAINABILITY

EEconomicP fit bilitProfitability

EEnvironmental SocialEEquity

Responsibility

e3 = “The Triple Bottom Line”e3 = The Triple Bottom Line

Walking the Talk...g• Certified Organic Vineyards - 1,800 acres• Comprehensive Recycling • Energy and water conservation • Renewable energy• Renewable energy • “Green” building• Worker Safety & Health • Environmentally friendly purchasing & packaging• Watershed restoration

Wildlife protection• Wildlife protection • Community programs• Carpools & biodiesel p…. and more….

How & why did this start at Fetzer?

• Fetzer established an organic garden in 1984 with diverse plants and foods, to pair with winesp , p

• Impressive results in food taste & quality and soil recovery; so, started using organic methods in ine ards in 1984 85vineyards in 1984-85

• Results were good, so continued expansion oforganic practices in vineyards, motivated to g p y ,improve quality

Basic Approaches for Growing Winegrapes Organically & Sustainably –

used by Fetzer & Bonterra Vineyards

• Elimination of synthetic chemicals• Building the health of the soil• Conservation & enhancement of biodiversity• Conservation & enhancement of biodiversity • Recycling of resources and nutrients • Conservation of natural resources • Using a systems approach to farming• Protecting health & welfare of

employees and communities p y• Maximizing quality of the

product (grapes and wine)

Economics? Cost of organic production was not significantly higher, and worker risks reduced, positive results

Management of Solid Wastes: “Reduce, Reuse, Recycle” –

Started effort in 1990, aimed to reduce dump costs

Recycling has reduced our waste sent to the landfill by y g y96% since 1990 – from 1,724 cubic yards to 60 cubic yards! (Zero Waste Team)

Saved 3200 cubic yards from going to landfill, and saved over $220,000

1600

1800

2000

ill

3.5

4

M

113%

1200

1400

1600

to lan

df

2.5

3

illion Ca

600

800

1000

yar

ds t

1.5

2

ases Prod

200

400

600

cubi

c

0.5

1

duced

96%1724 cy

0

1990 1992 2000 2005

060 cy

Energy Conservationgy• Installation of many

different methods to conserve electricity, natural gas, propane and diesel

• Examples of Electricity • Examples of Electricity conservation methods:

• Tank insulation• Refrigeration motor controls

Li hti t fit • Lighting retrofits • Motor Upgrades• Electrodialysis – new tech

• The RESULTS: Over 1 Megawatt of savings in electricity AND i i i f li

Example: Insulation “Jackets” on white wine tanks – reduces

AND mitigation of climate change

energy use by approximately 30% in tank room.

Renewable EnergyRenewable Energy 1. Green Energy - Fetzer was first CA winery to

h 100% bl i 1998purchase 100% renewable energy - in 1998 2. Solar Power for Administration Building - 1999

40 kW photovoltaic system; 55 000 kWh a year40 kW photovoltaic system; 55,000 kWh a year provides 75% of building’s energy use

3. Solar Power for bottling facility - 2006901 kW photovoltaic system 1.1 million KW a year ! Largest in CA wine industry; provides 85% of energy in bottling facility85% of energy in bottling facility

4. Biodiesel used in tractors & trucks

These energy practices greatly reduce our GHG emissions and impacts on climate change

- 901 kW photovoltaic system (2006) - RV-MMA buys, installs, operates system - Fetzer Vineyards buys electricity generated- Long-term contractual arrangement

Economics of Fetzer’s Renewable E St tEnergy Strategy

Green Energy Contract (long term) gy ( g )– 1998 became a direct access customer – Began purchasing 100% renewable energy

Higher cost per KWh at first Implemented energy conservation

total energy bill energy prices locked in

Results: cost savings;This removes Results: cost savings;environmental benefits;point of distinction &

m2200 metric tons of CO2 out of atmosphere

mitigates climate changeannually

Alternative energy and efficiency in t t d i d titransport and vineyard operations

• Biodiesel used in tractors and big-rig trucks – Diesel made from vegetable/soy sources– Reduces dependency on oil

Reduces CO2 emissions and pollution– Reduces CO2 emissions and pollution • Carpools for employees • Improved efficiency for truck travel (trucks don’t• Improved efficiency for truck travel (trucks don t

travel empty) • Electric vehicles for

on-site maintenance

Green Building Highlightsg g g• 1985, Red Barrel Room

– 90,000 sq ft, earth berm d id li i t tharound sides eliminates the

needs for a cooling system.• 1992, Cellars,

– wall between fermenting areas, saving over 75,000 kW a year.y

• 1996, Admin Building– Dirt walls, recycled wood,

energy efficient lightingenergy efficient lighting, motion sensors, wool carpet, night air cooling, ecofriendly insulation andecofriendly insulation, and solar panels

Water ConservationWater Conservation• Source - mainly from Russian River

– Share w/fish, farmers, families

• Pump and treat water onsite– Use ultraviolet filtration in place of chlorine Use ultraviolet filtration in place of chlorine

• Drip Irrigation in Vineyards- Irrigation timing is done according to analysis of

soil moisture & vine water status • Measure to manage: Conserve ~17%

of water• Reduced bottling sterilization time• Heat exchanger• Leak patrol• Re-circ pump

• Winery Wastewater- treated, held & reused on vineyards

Conservation of Habitat and Biodiversity in vineyards and landscape:in vineyards and landscape:

Examples from Bonterra Vineyards

Cover Crops in Vineyards:Attract beneficial insects, conserve biodiversity, , y,

increase soil fertility & organic matter, sequester carbon

Can the full economic benefits of cover crops be quantified?

Conserving biodiverse habitat attracts hundreds of raptors, owls, & beneficial snakes pand other wildlife (deer, coyotes, bobcats, etc.)

Watershed Restoration &at Fetzer & Bonterra Vineyards

W t h d• Watershed conservation & creek restoration projectsrestoration projects - Dooley Creek -1994 & 04- McNab creek - 2004

• Collaboration & funding with government agenciesgovernment agencies - cost share programs

HUMAN ELEMENTS – “EQUITY” “The soul of the company is found in theThe soul of the company is found in the

hearts of its people”

• Rewarding creativity: Encourage employees to pursue new ideas

• Employee educational• Employee educational opportunities for advancement

• Employee programs: English as a y g gSecond Language, car-pools, etc.

• Awards for E3 accomplishmentsU i S f t & H lth P• Unique Safety & Health Program

• Community & charity programs: scholarships, river cleanup, etc.scholarships, river cleanup, etc.

Outreach, Opportunity & Awards• Fetzer and Bonterra have

won many prestigiouswon many prestigious awards for outstanding environmental performance,

d f t t di iand for outstanding wines• Brown Forman is also integrating

sustainability and socialsustainability and social responsibility in all other brands, facilities, & operations – CORE; and active in the Century Counciland active in the Century Council

• Fetzer provides education & outreach to other growers, wineries and the public;wineries, and the public; collaborates with scientists, educators, government agencies

New Marketing Initiative: Fetzer Green TourNew Marketing Initiative: Fetzer Green TourIncrease awareness and educate consumers on howthey can make an environmental differencethey can make an environmental difference

Events: 25 consumer events and tastingsTiming: May 2007 - April 2008 g y pElements include: Fetzer “Green” TV, radio promotions, local PR, consumer sweepstakesPartnerships: Toyota (TBD) National Arbor Day Foundation (Confirmed)

The Business Case for using S i bl P i FSustainable Practices at Fetzer

• News project ideas are evaluated through the 3 EsNews project ideas are evaluated through the 3 Es at Fetzer (economics, environment, and equity)

• All capital projects must meet the “bottom line” (IRR) of return in order to be approvedof return in order to be approved

• Most of these practices have documented economic benefits; and also help reduce risks

• These practices help produce great quality wine• These practices help produce great quality wine • Our approach builds good relations with regulators

and neighbors • Environmental awards generate media attention• Environmental awards generate media attention,

which helps marketing/sales • Consumers are paying attention! There are market

advantages in being genuinely “green ”advantages in being genuinely green.

It’s also “doing the right thing”… being socially responsible

California Sustainable Winegrowing Program

• Fetzer participates actively in the• Fetzer participates actively in the CA Sustainable Winegrowing Program (SWP), which promotes sustainable practices amongsustainable practices among growers and wineries in California

• Centerpiece of SWP – Workbook on “C d f S t i bl Wi i“Code of Sustainable Winegrowing Practices” – 14 chapters on numerous sustainable practices

• More than 1,300 wineries and vineyards have completed the SWP self-assessment, and more than 5,000 have attended educational seminars

Practices Included in the “Code of Sustainable Winegrowing Practices” for Vineyards & WineriesWinegrowing Practices for Vineyards & Wineries

“From Ground to Glass” – Total of 227 criteriaViti lt• Viticulture

• Soil Management • Vineyard Water

• Winery Water Conser-vation & Quality

• Material HandlingVineyard Water Management

• Pest Management Wine Quality

g• Solid Waste Reduction• Environmentally

preferred purchasing• Wine Quality • Ecosystem

Management

preferred purchasing• Human Resources • Neighbors & Community • Air Quality added in ‘06• Energy Efficiency • Air Quality added in ‘06

Lessons Learned: What makes thisLessons Learned: What makes thisLessons Learned: What makes this Lessons Learned: What makes this program effective? (Key Elements)program effective? (Key Elements)

• Active participation of growers & vintners, government agencies, scientists and other stakeholders.

• Comprehensive in scope: Addresses interlinked environmental, economic and equity goals.

• Building bridges – between environmental andBuilding bridges between environmental and agricultural interests win-win solutions.

• Innovative measurement system – and transparent reporting of the results to the publicreporting of the results to the public.

• Leadership by pioneers – eg, Fetzer Vineyards• Serves as a model for other crops, states, and p , ,

businesses

WHAT ARE COSTS & BENEFITS OF ORGANIC WINEGROWING?ORGANIC WINEGROWING?

Bottom line: It is hard to generalize! The costs forBottom line: It is hard to generalize! The costs for organic winegrowing vary a lot, depending on region, specific site, labor costs, and management intensity.

N th l i d d t fNevertheless, we reviewed data from:Fetzer vineyards – Mendocino county; and other growers for Fetzer Cost data from UCD ag economists – Sonoma county

These so rces sho that cost of organic inegrapeThese sources show that cost of organic winegrape production is approximately the same as conventional. It can be 5-10% more expensive or sometimes costs less.

Returns of organic production are often greater (especially if producers gain a premium)

However, the transition period usually has higherHowever, the transition period usually has higher costs (for new machinery, etc.)

Costs of Production for these factors$($ per acre)

250

225220

150

200 Organic (Fetzer inMendocino)

Conventional (Avg in

115120

0

100

150Mendocino)

$

01587

307770

0

50

l l tTotals for these five Categories ($/acre):

Organic = $434

Diseas

e Con

trol

Insect

Control

Weed C

ontro

lFert

ilty M

gm't

Certific

ation Conventional = $520

Dis I

Source: Fetzer Vineyards, 2004

Yields and Total Operating Costs (Costs per A d C P T )Acre and Costs Per Ton)

3000

2765

2857

2000

2500Organic (Fetzerin Mendocino)5

6

2765

1500

2000

Conventional(MendocinoAvg)

4.7

4.343

4

Fetzer Organic

C

Tons$

588658500

1000

1

2

Conven-tional

5880

Total$/acre

Total$/ton

0Yield (Ton Per Acre)

Source: Fetzer Vineyards and Mendocino Ag Commissioner for County Yield Average

BOTTOM LINE:

U.C. Davis Study Summary In Sonoma: Results Confirm that Organic Costs/Ton are LowerResults Confirm that Organic Costs/Ton are Lower

than Conventional Costs/Ton

600

480500

600

457

300

400Organic (inSonoma)Conventional(Sonoma)

$

100

200(Sonoma)

0Total Costs ($)

per ton Source: Livingston, per ton g ,Pete, 2003, UC Davis, Agricultural Economics

Comparisons: Costs of Organic Production in Oth R i G ’ d tOther Regions - Growers’ data (Dollars/Acre)

2986

3204

29242500

3000

Organic in N.Mendocino

23552469

27652986

1500

2000

MendocinoOrganic in SierraFoothillsOrganic in Hopland(Mendocino)

2355

1000

1500Organic 2nd case inSierra Foothills Organic in Sonoma

Conventional in

0

500

Total Operating Costs

Mendocino

THIS SHOWS THAT THERE ARE A RANGE OF COSTSTotal Operating Costs ARE A RANGE OF COSTS, DEPENDING PARTLY ON LOCATION .

Recent data: Organic Wine & Beer*g• Retail sales of organic wine & beer in US:

– Grew 48% from 2002 to 2003Grew 48% from 2002 to 2003– Reached a total of $54 million in 2003 – Of that total, wine sales were $50 million

Thi b & i t h d th• This beer & wine category had the highest growth rate of all organic food categories(N t l F d M h di J 1 2004 b d l(Natural Foods Merchandiser, June 1, 2004, based on sales

from natural grocery/food stores)

Organic Wine sales in the US in 2005 reached $80 million. This is 28% higherthan the sales of organic wines in 2004 t a t e sa es o o ga c es 00(Organic Trade Association, 2006)

* Note: These figures include both categories of organic wine

Thank YouThank You

Contact Information:Contact Information: Ann_thrupp@b-f.com

F t /B t Vi dFetzer/Bonterra Vineyards,Tel: 707-744-7588