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A Hinsdale Cellars Exclusive: Wine Cellar Management

By Marc Lazar
Cellar Advisors

Sales of fine and rare wine increased 30% in 2005 over 2004 numbers, and this includes only auction data. Similar rates of growth are also occurring through retail and direct purchase channels as well. With such a dramatic increase, collectors nationwide are facing an inventory management, logistics, and organizational crunch. Simply put, where is all this wine going?

In this article, we will discuss the basics of wine cellar management and tracking a wine collection, with anecdotes gleaned from our experiences with real world collectors and the various pitfalls common to serious collectors. The four domains of custom wine cellar management, as they apply to the private collector are purchasing, storage, organization and data management.

Wine Purchasing

The contemporary wine market is truly a global bazaar. Collectors have many venues to purchase fine wine, including out of state or overseas retailers, auctions or brokers. The central tenant of wine buying is that we buy by the case and drink by the bottle. Multiply this phenomenon across the various purchase locations, and it is quite easy to loose track of acquisitions or have a backup of wine arriving at your doorstep. Likewise, a substantial number of purchases are being made over the internet and for wines which will not be immediately delivered. These pre-arrival or futures offerings are attractive for many reasons, but a collector must vigilantly track these transactions to ensure that the exact wine and proper quantity ordered are ultimately delivered. Likewise with direct sales from winery mailing lists. Depending on the producer, some mailers offer wine that will not ship for at least a year. In many cases, wines are held for seasonal temperatures appropriate for shipping.

An attractive option for collectors who frequently buy from a single or small number of merchants is to consolidate shipping. Many vendors will store your purchases for a small fee or even free of charge until you have a sufficient quantity, even enough cases to justify truck shipping. While having a pallet of wine delivered may seem excessive, above about 25-30 cases, shipping individual boxes via common carrier (UPS, FedEx, etc) is not cost effective. Further, truck freight can be temperature controlled, from pickup to destination. As a guideline, a single pallet of wine will hold around 70 cases of wine. Collectors should note that auction houses will usually store wine and consolidate as well. Recently, the leading online wine auction house, Winebid.com, reconfigured their warehouses at substantial cost to allow customers to consolidate purchases. Not only does consolidating save shipping expense and reduce the risk of extreme temperature, but a single large order is actually easier to track and manage than countless small shipments. From our experience, single and double bottle shippers can pile up quite quickly, and many a collector simply toss them in the wine cellar unopened. This is a recipe for what we call the “cellar orphan” or bottle(s) which a collector forgets ever buying or receiving.

Wine Cellar Storage

A natural extension of the purchase volume mentioned above is the need for sufficient storage. Many collectors start buying long before they have a “proper” wine cellar, so the chance to build a custom wine cellar is an exciting turning point in the lives of many wine lovers. While we encourage all clients to invest in a home cellar, the planning, timing, and management of such a project are not the same for everyone. Having a home cellar is the ultimate in easy access, both for deliveries and consumption. Almost without exception, collectors using offsite or 3rd party storage facilities exclusively, enjoy their wines less frequently. There are situations where a home cellar may be impractical, but almost everyone has enough room for at least a 30-60 bottle stand alone wine unit.

A very common pitfall in cellar design is underestimating the future size of a collection. From an access standpoint, management and organization of a wine cellar that is “too large” is much easier than one beyond capacity. A common sighting in our travels is a cellar where our client drinks only from a few select boxes (usually recent arrivals) that are stacked right in front of the cellar door. Boxes have become so backed up that a client cannot even walk into their cellar. Further, the upfront costs of building a slightly larger wine cellar are much lower than expanding sometime in the future. Rack space is usually priced per bottle, but room prep, insulation, cooling equipment become proportionately less expensive with increasing size.

Beyond the physical space, we urge wine enthusiasts to do soul searching about their collecting habits when designing a wine cellar. Do you collect champagne, large format bottles, half bottles (splits)? These formats provide the most common headaches if space is not allocated ahead of time. Also, many collectors fail to think ahead to future purchases. Flexible design, with bins and racking that can accommodate a range of bottle types and sizes is always best.

Regarding off-site storage, we encourage many clients to consider this option for at least part of their collection. If we assume an average storage cost of $2 per case per month, it costs $24 per year to store a single case of wine. To build a cellar, we can conservatively assume a cost of $10 per bottle space. This translates to $120 per case. In other words, storing wine offsite for less than 5 years is actually cheaper in most cases than building a home cellar or expanding an existing cellar. Furthermore, removing young wines from your cellar can make a collection easier for management and reduce the temptation to drink wines which are not approaching maturity.

Organization & Inventory Management

Every collector has his own idea of what an organized cellar would look like. With Cellar Advisors clients, we spend a great deal of time trying to understand how a client accesses their collection and what type of system is most intuitive for that individual or family. Generally speaking however, we use some variation on an “appellation by producer by vintage” model. That is, zones of the cellar correspond to wine regions or grape types, with producers and vintages sorted together. For wine cellar management, we encourage clients to place older wines towards the bottom of racks and the youngest wines at the top. Think of the common term “vertical collection.” Likewise, grouping all wines in the same region this way allows for easy reference to other producers within the same vintage or consecutive vintages. Exceptions do occur, and include rapidly maturing vintages which need immediate attention, or particularly stout wines which need time beyond what their age might suggest. Also, we notice that even the best organization and inventory management system is no substitute for impulsivity, so wines ready to drink are displayed invisible and easy to reach areas of the cellar.

We encourage clients to reserve a section of their wine cellar for “everyday” or “grab bag” wines where stringent organization is not necessary. Finally, one must have a plan if space becomes tight in a main cellar. We employ two main avenues for arranging off-site storage. One is to assign a vintage cut off, where new wines are off-site, and the other is to use a sample selection model. In this arrangement, the main cellar may hold only a few bottles of any given wine, with the remaining bottles of a case being stored offsite. In this way, your wine cellar is a “snapshot” of the entire collection, and depleted bottles can be replaced over time.

Data Management

The final and most important aspect of wine cellar organization is inventory tracking. A cellar is constantly in flux. Without consistent, up to date information about quantity and location, finding a specific bottle becomes increasingly difficult. Without a doubt, the gold standard of inventory management is an interactive software package. The most commonly tracked data points besides wine descriptors are location, quantity, drinking ranges, critic scores and purchase/sale history. A well designed software package will also integrate the topics discussed above, including tracking pre-arrival orders, wines in transit and those stored off-site or at vacation homes.

Once cellar software is deployed, the data is only as good as the ongoing maintenance. There is no short cut for data entry of new purchases, but the most common pitfall is the depletion of consumed or removed bottles. To assist in this aspect, consider a barcode system. Several packages offer barcode support, where a bottle being removed need only be swiped by a PC-based scanner.

Several vendors provide software packages, with one standout. Vinfolio and Vintrust are full-service wine retailers who offer inventory and wine cellar management services as an extension of their sales and storage offerings. While these barcode based packages are adequate for most collectors, there are complications with entry of existing inventory and ancillary charges for various features. The industry standard is a product called CellarTracker. This shareware, web-based interface is the largest and most popular wine database with over 15,000 users and 2.5 million bottles tracked. CellarTracker also supports integrated scores and tasting notes from Steven Tanzer and real time auction price valuation. While space constraints limit the discussion of this product, we urge you to visit cellartracker.com to learn more.

One final consideration with regard to proper data management is wine collection insurance. Many collectors underestimate the size of untracked custom wine cellars by 25% or more, and similarly underestimate its current replacement value. Wine insurance is inexpensive and can be added to better homeowner’s policies or purchased as a stand-alone product through fine arts carriers. Collectors with complex cellar/storage arrangements should verify that wines are covered off-site and in transit as well.