At LangeTwins Winery & Vineyards the family is seeing their business fuel costs soar from about $250,000 four years ago to more than $1 million by the end of this season.

"Our pricing for the product we grow isn't going up, so we're absorbing the additional costs when our margins are already thin," said Randall Lange, who owns the vineyards over a four-county area in northern California with his twin Brad and their wives. Their children own the winery.

Many petroleum- and mineral-based fertilizers, pesticides and insecticides have also more than doubled in cost since last year. "That's affecting margins and creating a tremendous financial strain on producers," confirmed Karen Ross, president of the California Association of Winegrape Growers (CAWG).

Growers are looking for every possible way to reduce costs. "As one person said, 'we're no longer into recreational tillage because any time we take a trip through a vineyard that isn't absolutely necessary, we're minimizing the profitability of this year's situation,'" said Ross, who recently heard from many growers at seven agricultural state hearings.

"People emphasized the need for more research to help us come up with viable alternatives to increase our efficiency, which is the most important thing we can to do to improve how our industry operates over the next few decades," she said.

Lange agreed and said research into more drought- or mildew-resistant grapes might be part of the solution. "We're adjusting our agricultural practices as much as we can to reduce fuel use but LangeTwins' long-time philosophy of sustainable farming means we've already done a lot of that adjustment."

Several years ago, LangeTwins customized its harvesters so the machinery could be used nearly year-round to cultivate, trim and spray three or four vine-rows simultaneously. "We wanted to cover the acreage in less time and justify a higher income for more specialized operators," Lange explained. "Fewer passes means we're creating less dust and particulate matter and obviously burning less diesel."

LangeTwins mows every second row instead of cultivating it on a yearly rotation. "Mowing takes less time and energy, but we found it necessary to cultivate a row every other year because the ground becomes rutted," Lange said.

Using more efficient turbine engines instead of aspirated ones has also created greater efficiency.

To cut down on the use of mildew-controlling sulphur, LangeTwins categorized its varietals into three groups with Chardonnay tending to be the most susceptible to mildew and Cabernet being the least. "By developing 8-10-12-day or 10-12-14-day schedules for spraying, we reduced the amount of sulphur to the point where it shocked us," Lange said. The year he tracked it, LangeTwins' sulphur use went from 216 o 144 tons.

All this requires diligent managing. "Your operators have to make darn sure they're doing the rows they should be," Lange said.

LangeTwins has been working at reducing its environmental footprint for more than a decade. Solar panels generate 95 percent of the energy required to run the agricultural water pumps. "The solar energy we produce goes into the grid and our meter rolls backwards when we're not using that electricity," Lange explained. "By determining the amount of kilowatt hours we needed, engineers told us the correct number of solar panels to install so the project wouldn't be overly expensive."

The winery has managed to mitigate higher energy costs so far because of the solar panels installed about 10 years ago. Panels on the equipment sheds, office buildings and the winery generate about 92 percent of the energy at the LangeTwins' office headquarters in Acampo, California, just outside Lodi.

ENERGY AUDITS, WORKSHOPS

When LangeTwins planned the brand new winery that opened three seasons ago, the family took advantage of the Savings by Design program offered by the PG&E Corporation (the parent company for Pacific Gas & Electric). "At the blueprint stage, the PG&E consultants not only recommended products that would use less electricity, but explained the payback time in terms of energy savings so we could make a good business decisions," Lange said. "They gave us advice on lighting, electric motors, chillers--everything requiring energy use."

Afterward, PG&E surveyed the completed winery and issued the Langes approximately $350,000 in rebates for their chosen energy-saving equipment and other initiatives such as insulating their hot-water tanks and pipes.

Ross said the energy conservation workshops and audits sponsored by the California Sustainable Wine Growing Alliance and PG&E have been embraced throughout California's wine industry.

She credited federal and state tax incentives for making it feasible to invest in alternative energy. "With additional research, we can probably find ways to do smaller scale projects that are site-specific or to get more players to generate and sell energy to the grid," she added. "A whole new infrastructure needs to be created to make all of this really take off, and I think high petroleum costs will create the incentives to invest in that kind of infrastructure development."

One such initiative is taking place in the Niagara region at Constellation Brands Inc.'s Inniskillin Wines. The winery teamed up with StormFisher Biogas last November to start capturing the methane gas from decomposing grape skins and seeds. "The 1,000 to 2,000 tonnes of pomace a year generate enough gas to power 30 to 60 area homes on a continual basis," said Ryan Little, StormFisher's vice president of business development.

Without government assistance, however, the costs of investing in alternative energy sources can be prohibitive for even the largest of enterprises. "Payback on investment is often so long that from an economic standpoint it becomes very difficult to justify it in some cases," said Mike Martin, Constellation Brands Inc.'s vice president of corporate communications.

FUEL SURCHARGES, RAIL, NEW BOTTLING FACILITY

The dramatic rise in fuel prices and the resulting higher costs for virtually all inputs have prompted Constellation to introduce fuel surcharges.

"We also have taken pricing up in Australia, the United Kingdom and the United States to offset some of those higher input costs and, in the case of the U.K. in particular, duty increases," Martin said. "Whether distributors choose to pass on those higher costs is a decision they'll have to make."

Martin said Constellation doesn't make the decision to increase prices lightly because of the possible inflationary effects, but its management felt it had no choice. "It's not only fuel," he emphasized. "Other input costs--everything from the plastic made from petroleum to high-fructose sweetener because of the demand for corn to produce ethanol--have gone up."

Constellation is looking at every possible means of mitigating higher energy costs. In the U.K., it's establishing a bottling facility as part of a new huge distribution warehouse opening next year at the Port of Bristol to handle Australian imports. The 50-acre site will have 20 acres of roof space and be able to store 85,000 pallets stacked seven high. With a yearly capacity of 150 million bottles, the bottling facility could handle enough wine to fill 15 Olympic-sized swimming pools.

"We expect significant transport savings both in terms of bulk wine imports as well as U.K.-based transport costs through more efficient distribution efficiencies (by reducing the number of existing depots) handling and order picking," related Philip Malpass, vice president of communications for Constellation Europe.

The Bristol setup is part of Constellation's worldwide efforts to reduce its environmental footprint. Martin is heading up an internal steering committee that is evaluating worldwide corporate social responsibility initiatives. Constellation is specifically examining the carbon footprint protocol that the Wine Institute adopted in collaboration with its kin organizations in Australia, New Zealand, South Africa and the United Kingdom earlier this year.

"As with anything this complex, there are difficulties to be worked out, but once they are, our operations people will decide whether to adopt this protocol and, if I had to bet money, I would say they will because it has been put together by all the key organizations involved in our core markets," said Martin.

Constellation is also working with consultants to determine what environmental footprint metrics would cover the operations of its approximately 60 facilities worldwide. "Europe measures this differently from the U.S., so we're trying to establish metrics that would be accepted globally," Martin explained.

The supply chain group at Constellation is re-assessing all transportation modes. "To the degree we can, we're transporting more raw materials and finished products in the U.S. by rail because it's three times more energy efficient that trucking across long distances," Martin confirmed.

FEWER TRIPS, MORE CAR-POOLING, LIGHTER BOTTLES

Fetzer Vineyards is saving about 40,000 diesel gallons annually by making sure their delivery trucks never travel empty. "We started this initiative in 2001 to reduce our environmental footprint, but it has saved us a lot of fuel costs," said Ann Thrupp, Fetzer's manager of sustainability and organic development. "By always picking up bottles, corks, capsules, barrels, shrink wrap or drums of machinery lubricant after delivering our wine at the port, our trucks make 800 fewer trips a year, which adds up to about 200,000 saved miles and 444 tons less carbon dioxide."

In addition to installing solar panels for its green building headquarters and winery more than a decade ago, Fetzer built a large solar voltaic system at its bottling facility in 2006. It generates 1.1 million kilowatt hours or 75 percent of the energy required to bottle almost four million cases of wine a year.

The latest initiative is to reduce the weight of its glass bottles.

"By making our bottles lighter, we'll use less glass and less fuel to transport the same number of bottles."

Fetzer is also among the wineries offering commuter vans to employees willing to share a ride to work. "The employees pay for the gas but it costs them less by using our vans," Thrupp explained.

Carpooling and/or taking public transportation to work board meetings and wine events are becoming increasingly common, according to Allison Jordan, director of environmental affairs at the Wine Institute and executive director of the California Sustainable Winegrowing Alliance. "I think environmental consciousness and good company are just as much factors as fuel costs, but given the continued rise, it is probably tipping the scale in favour of carpooling and public transportation," she said.

So is the fact that virtually everything required to grow grapes has gone up in price. CAWG's Ross said she's hearing about fuel surcharges being introduced on a broad range of inputs. They are also increasingly becoming a part of the discussion for grape prices and contracts. "The higher fuel costs are too big of a hit to be fully absorbed at any end," she said. Yet it's still too early to assess the full impact. "We almost have to get through a growing and sales season to see where adjustments will happen from the grower to the winery and then from the winery to the consumer pipeline."

PROFITS GOING DOWN, PRICES GOING UP?

Nick Frey, president of the Sonoma County Winegrape Commission, said growers are examining the costs-benefits ratio of all their operations. Some are looking at making fewer passes in the vineyard by possibly using fungicides effective for longer intervals. "Growers have to analyze whether fewer passes make economic sense because, while some fungicides now work up to 21 days, their sprayers may work slower and traditional sulphur dust is probably cheaper to use than anything else."

Frey anticipates the higher fuel prices will translate into less mechanical tilling as well as steeper costs associated with both the harvesting and trucking of grapes.

He also expects most growers to end up with less profit. "There's no escalator clause in existing contracts to cover higher fuel costs," Frey explained. "If the price is too low for the grape grower to make any money, there'll probably be some negotiation, but I can't see putting a fuel surcharge on the price of grapes. So our margins will be squeezed."

Frey and others are hopeful that a strong demand for California's Pinot Noir, Chardonnay and Cabernet Sauvignon will generate higher prices in new contracts. "Those contracts tied to the average county price might also go up as average costs rise," he said.

Jon Frederickson, president of wine industry analysts Gomberg Frederickson & Associates, shares that optimism. "If this had happened when California had a huge surplus, it could have been a disaster," he said. "But right now we don't have a lot of surplus, and import prices are through the roof because of the weak American dollar. So I think we're going to get through this with high grape prices because supplies are so short."

He cited the unease after the 9/11 terrorism, economic downturns, some very big crops as well as major consolidation by the big wine companies that have gone offshore for large volumes of wine as reasons for a lack of significant new plantings in California since 2001.

"Except for Pinot Noir and Pinot Grigio, there hasn't been much planting," he said. "So we're on the verge of running out of wine in California, especially since it's been very hot which points to shorter vintages.

"If it weren't for the high energy costs and other factors such as the mortgage lending debacle causing a downturn in the American economy, there might already be shortages," he added.

California's short supply and a possible further rise in import prices because of fuel surcharges on ocean transport might bode well for other North American wine regions, too.