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From the New York Times article by Alice Feiring, Published July 19, 1998

EARNING IT; Bottling a Second-Career Dream

“Mr. Kiken's interest in wine started innocently enough. It was 1973, he was 30, and he read an article about wine in his dentist’s office while waiting for a root canal. With characteristic enthusiasm, he plunged into intense study and tasting. Twenty years later, to the shock of his New Jersey wine-tasting group, he quit his job as chief financial officer at the Leucadia National Corporation, an insurer in Manhattan, and headed west with his wife, Evelyn.

“Mr. Kiken (pronounced KICK-en) bought 40 acres on Diamond Mountain in the Napa region, outside Calistoga, for $1.4 million and built himself a home and a winery, called Reverie. His modest goal was to make ‘the best red wine in the world.’ He is not there yet, but he is gaining considerable acclaim.”

“In 1997, The Wine Spectator cited Reverie as one of a dozen new wineries to watch. Then came a recommendation by Robert Parker Jr., the wine rater. ‘Terrific raspberry nose that leaps from the glass,’ Mr. Parker wrote in his publication, The Wine Advocate, of Mr. Kiken’s 1995 Cabernet Franc, priced at $35. Mr. Kiken now sells every bottle he produces, and his wines are on the lists of restaurants including Jean Georges and the Four Seasons in Manhattan. ”

“Though Mr. Kiken has had more rapid success than others, he is by no means the only winemaking refugee from the corporate world.”

“For the most part, this is a labor of love, not a fabulous investment. First-time winemakers hear ad nauseam the old joke: ‘How to make a small fortune in the wine business? Start with a large one.’”

“It helps to have work experience that can translate. Mr. Champ had a background in chemistry and experience in marketing. And when Leucadia invested in a financially troubled California winery, Mr. Kiken learned about the potential financial pitfalls of the business.”

“Mr. Kiken had no marketing or sales experience, so he has learned on the fly about finding distributors and working the market, choosing to sell only in California and states he likes to visit: New York, New Jersey and Florida. On such trips, he makes contacts and sales calls and attends trade shows. He also publishes a chatty semiannual newsletter, updating winery visitors about the harvest, new varietals and the like.”

“But can such vintners make a profit? That is generally not the goal, Mr. Perdue said: ‘When people make life-style choices like this, they’re looking for a break-even situation, or something that doesn’t lose too much money. Having a gigantic return on assets doesn’t figure in as one of the prime considerations.”

“Vic Motto of Motto, Kryla & Fisher, an accounting firm in St. Helena, Calif., specializing in the wine industry, has held people’s hands through the winemaking process for 16 years. ‘If you don’t have a million dollars of annual discretionary assets, you probably shouldn’t even think of entering the market,’ Mr. Motto said.”

“‘The typical winemaker with a winery invests $3 to $5 for every dollar of sale, less for a custom crush,’ he added. ‘Can you make money? Maybe in 15 years.’”

“Still, a devoted winemaker has a chance of seeing a decent return, especially by entering the market with wine that sells for at least $20 a bottle. ‘Wine has never been as profitable as it has been in the past three years,’ said Jon Fredrickson of Gomberg, Fredrickson & Associates, a San Francisco company that tracks the industry. ‘There have been at least 10 times more successful start-up wineries than failures.’”

“The typical winery investor who visits Mark Brody, a vice president and manager at the commercial banking office of Sanwa Bank in San Francisco, is male, 50 or older -- and someone who could easily start his business without a loan but does not want to tie up that much cash.”

“Napa Valley is the most expensive viticultural area in the country. Land already planted with disease-resistant, grape-bearing vines sells for more than $60,000 an acre. Plantable land costs considerably less -- $20,000 an acre. But going the bargain route involves as many as five years for the vines to bear usable fruit, and often two more years to get the bottles on the shelves. That is a seven-year wait to see any return on investment -- six years if the product is white wine, which requires less aging.”

“Because of the large overhead involved, prudent newcomers ease their way into the business. The cheapest way to start -- the ‘custom crush’ method -- is to rent equipment and to buy other people’s grapes.”

“This path is commonplace; Mr. Kiken said it takes $250,000 to produce a modest 2,500 cases. Three to four years later, when those cases finally reach the shelves, profitability is unlikely, but cash-flow break-even can be reached, he said, if the bottles each sell at $22 to $23.”

“Produced this way, a red wine, from crush to bottle, could be ready for that Robert Parker rating in little more than 18 months. Mr. Kiken started out on a variation of this plan, but he always used his own grapes.”

“‘There’s nothing wrong with a custom job,’ Mr. Kiken said, ‘except that the more control you have over your wine, the more you can control your own destiny.’”

“Mr. Brody, the banker, warns every prospective winery owner seeking a loan about the risks and the barriers. Even so, he admits to some envy. With complete conviction, he said, ‘Doesn’t everyone who loves wine have a dream to make it?’”

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