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Painted Rock Estate Winery founder John Skinner (Carey Tarr)
Painted Rock Estate Winery founder John Skinner (Carey Tarr)

SUCCESS STORIES

Why 5,000 is a 'magic number' for stock broker turned wine maker Add to ...

Since the release of its first wine in the fall of 2009, Painted Rock Estate Winery Ltd. has been raking in accolades and awards.

Founded by former stock broker John Skinner, the company’s vintages have enjoyed remarkable early success – in addition to twice earning Lieutenant Governor’s Awards for Excellence in British Columbia Wines, Painted Rock was ranked as the top B.C. winery in 2011 and the No. 3 winery in Canada for the last two years at the Wine Access Canadian Wine Awards.

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But success didn’t come overnight. The journey from concept to cash flow started back in 2000 with a dogged hunt for the right dirt. Three years later, Mr. Skinner finally found it in British Columbia’s Okanagan Valley – a former apricot orchard at Skaha Lake in south Penticton that had lain fallow for 17 years. Following a massive cleanup of the tree stumps still dotting the property, he took a full year to prepare the soil and source the right clones and varieties before planting 25 acres with syrah and Bordeaux reds, plus a little chardonnay.

After nearly 30 years in the Vancouver brokerage business, at Yorkton Securities and Canaccord Capital, Mr. Skinner, 54, says his transition to the wine industry was a steep learning curve. But with the help of a team of expert winemakers, including Bordeaux consultant Alain Sutre, and advice from B.C.’s wine community, he’s been able to aim for the top right from the get go. His profitable winery generated revenue of $1.5-million in 2012, and is on track for more than $2-million this year. Globe and Mail wine columnist Beppi Crosariol has called Painted Rock “a new cult-wine star.”

Although Mr. Skinner has invested in a lot of companies, Painted Rock is his first personal entrepreneurial venture. The winery is co-owned with his wife Trish, who takes care of the back office while Mr. Skinner does sales and promotion. They have six employees, rising to as many as 20 during peak season. There are no other investors as the Skinners want to create a family legacy for daughter Lauren, who earned her MBA in Bordeaux, France, and son Riley, who’s just finished university, if they choose to become involved.

The company’s ultra-premium wines, priced mostly between $35 to $55 a bottle, are currently sold across Canada, as well as in China and Japan.

Why did it take so long to find a property?

If your end game is to produce a 10 out of 10 wine, you need a 10 out of 10 property. You’re always going to be at the mercy of your terroir. If you’ve got the best terroir, you can produce the best wines. I also didn’t want a property that had legacy problems that might cause trouble later. With this property, I wasn’t buying anybody’s headache – and it’s a 10 out of 10.

You’re very hands-on with sales and promotion. Why did you choose to be the public face for Painted Rock?

Customers don’t want to see a salesperson come in to sell your products as much as they need to hear from the proprietor. The business is all about trust, because if you’re asking $55 a bottle, which we do for our top blend, they have to trust that you’ve done everything you’ve said you’ve done to get there in the vineyard. They look at you eyeball to eyeball and you have to defend why it’s worth that much. Once we have enough vintages under our belt so that trust is implicit, then I’ll be able to delegate sales.

How do you defend those price points?

I’m obsessed with over-delivering. We go to incredible lengths to make these wines. It’s a contract you make with the consumer. I’ve understood that since day one. You really have to be a value proposition and to be compared internationally. I’m on the road all the time. I was in China for a month last year and I’m going to London in May for the London Wine Fair.

We’re releasing our fourth vintage now. We’ve never raised our prices. We sell out every year, all 5,000 cases. I’m trying to improve my efficiencies, not cutting corners. With the passing of federal Bill C-311 [meant to allow wine purchases across provincial borders], I can sell my wine across Canada. I sell almost all of it myself. I’m the agent, although we have agents in Ontario and Alberta. The majority of our wines are sold to restaurants and through membership in our wine club on our website. If I can tighten the relationship between Painted Rock and our end user, and keep the middle man out, we can hold our prices down.

A lot of people say there are still barriers, especially in Ontario.

There are, but I sell my wines in Ontario. Right now, the LCBO is turning a blind eye and people are selling into Ontario, but there’s no provincial legislation that says, ‘hey, go ahead and do it.’ In B.C., there is. B.C. has lowered the barriers and allow British Columbians to buy Ontario wines and ship them in. Good on them. It’s good for the Ontario wine industry and B.C. wine consumers. The spirit of Bill C-311 is to allow Canadians to buy Canadian wine. Can you imagine if you couldn’t get Bordeaux wines in Paris without piles of fees associated with it, like what happens to my wine when it gets to Ontario? But business is happening anyway. I can’t give them very much because I can’t discount my wines. We don’t need the channels of the liquor boards. I want to ship to Canadians directly.

How important are international shows and competitions?

Very important for Painted Rock. Local and regional competitions are good but if you want to get better, you have to start putting your wines out there. Last year, I sent my wines to the Decanter World Wine Awards [in London] and the Syrah du Monde competition [in France], where they won medals.

I want to know how well we’re doing on a world stage, not just amongst our peers. My initiative in London is brand building but it’s not just about Painted Rock. I’m excited there’s going to be other Canadian wineries there.

Are competitions how you got your wines into China and Japan?

Yes. I think we’re doing the right thing but the only way to know is to hold your breath and send them in to be reviewed. It’s the most humbling thing on earth but you’ve got to do it because they’ll taste them blind. I only send my wines to competitions where the judges are highly qualified. It’s tough love but you’ve just gotta do it. In our first three vintages, we won two Lieutenant Governor awards twice. That told me – and not only me but our buyers from China – that we’re doing something right.

Was your strategy to go for the top end from the beginning?

Absolutely. I thought if it was going to be a legacy family business, I wanted something that we could be proud of. You can’t go halfway and you can’t cut corners. When I started to research it, I found some truisms I’d heard [about top vineyards that make world-class wines] to be true, such as the magic number of 5,000 cases. From an an ultra-premium model, the 5,000-case model is very effective. We planted 25 acres and that translates into 5,000 cases....If you look at all the premium wine-growing regions of the world, that number resonates. The model is all about attention to detail and the pursuit excellence. Once you grow past that number, you can lose focus. We don’t want to get bigger; we want to get better.

The business plan evolved when I realized that I wanted expertise and needed to look farther afield. So I hired Alain Sutre, a wine consultant from Bordeaux, and quickly realized that was the ticket to get where I wanted to go. After nine years, we’re getting there.

Do you plan to increase production to keep up with demand?

The business plan is all about the price appreciation model, not a growth model. It’s about getting better, not bigger. I never want to produce more than 5,000 cases [annually].

What challenges did you have at the start?

The learning curve was vertical: I had to learn about agriculture. This was all part of the due diligence we did in picking the site. You have to measure the heat units, hours of sunshine, air movement – there are a myriad of different things.

Fortunately, I’ve put together a great team. The biggest advantage for me was that I spent a career in the brokerage business doing investment banking deals where I had to surround myself with a community of experts and then make decisions. So if I looked at a mining project, I’d send in my mining guys. Then as a group, we’d decide if it was a good investment. I’ve done the same thing here.

I owe a debt of gratitude to our regional community because they were very generous in sharing the successes and failures of their plantings. I had a number of lunches with wine owners and makers and they gave me a shopping list so I had the benefit of their experience. They saved me a lot of heartache. I wouldn’t change a thing that we’ve done in the vineyard right now.

Is it hard to make money in this industry?

When I first started selling the wine, for every bottle I sold, I probably had to taste a bottle with the consumers. It gets back to that issue of trust. In year two, I tasted with 80 per cent of the consumers. In year three, I tasted with 20 per cent and in year four, I just get orders. You have to build trust but you also need third party validation [from competitions].

We’ve only been on the market for three years and are turning a profit. The amount of wine I had to promo to get the wine out there early was quite substantial – and you don’t really factor that into your business plan. It was necessary at the beginning but now we’re there. We don’t discount or give away wine. We’re earning our place in the market and meeting that thin strip of consumers who are looking for the kind of wines we’re producing. We still have a lot to learn and can be a lot better. We’ll be able to move our prices up more when we as a region are better recognized. I want demand for our [Canadian] wines to come from all over the place. We’re competing on quality, not price. Price will take care of itself over time.

What’s been the biggest change in the transition from stockbroker to entrepreneur?

I had been transitioning out for some time. My office was filled with bottles and labels and pictures of vineyards. You need your community, and my buddies from the brokerage business were wonderful about letting me bounce ideas off of them for the branding. I’d have them look at the bottles and the labels and ask what they thought. It was a nice community of rather sophisticated wine people.

In all honesty, that’s always been our target market. I looked at the community of people that I knew and thought, ‘these guys all know and collect wine. I want to make wine for them.’ But you can’t cut corners. They can buy wine anywhere, so if we want to sell them Canadian wine, it better be good.

I’ve never worked so hard in my life. I wear a lot of hats. For two hours a day, I’m a farmer; for three hours a day, I’m a salesperson. I have a proprietor-driven mandate with a lot of wine maker dinners in my future. You do this out of passion. There are decisions that, if I had to defend them in front of a board of directors, they’d have fired me. You’ve got to make decisions that you just know in your gut are right decisions and live with them.

What kind of decisions?

Like my oaking strategy. Right at the beginning, I bought 180 new French oak barrels at a cost of $1,300 a barrel. If I was to bring [used] oak barrels into my winery, I’d be putting my wine at risk – you can bring in disease or introduce other foreign things. But if my consultant says we need new oak again because the fruit could really benefit from it, I’m buying it. I can’t risk cutting corners. You gotta hold your breath when writing cheques like that. And I’m selling those $1,300 barrels the next year to the competition for $300 a barrel. That’s tough on a business plan. Those are hard economics. But I wouldn’t change anything. We came out of the gate very strong.

What’s next?

I want to build an inn and a restaurant but it’s really anchored on this brand that I’m obsessed about. Painted Rock has to be a superlative brand before we do any of the next step. I’ve bought the properties around the perimeter so that’s secured the long term beauty of the area so I have developmental control. That was out of fear that somebody else might put ketchup on caviar.

What I’m intent on doing now is just improving year after year. It’s all about our dirt. I want to know every year what little things we can do to improve so that when we harvest one planting block, it’s perfectly consistent from one corner to the other. That’s the journey.

What’s your advice to people entering your industry?

It’s still early. There are too many wineries that are under-capitalized but there’s a large and growing group that are aiming higher. There’s room for more. Come on in. Find some dirt, plant and hold your breath.

And in general to entrepreneurs?

You have to be fit to work these kind of hours. You also have to see progress. If I didn’t see the incremental improvements, I wouldn’t feel as emboldened and encouraged. We get such good feedback, that it gets me up early the next day.

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