The Challenges of Starting an Urban Winery

Forget rain or bugs. Lysanne Tusar, who makes wine in Hong Kong, has landlord issues.

Colleen DeBaise By Colleen DeBaise

Ask most winemakers about the pitfalls of harvest, and they talk about excessive rain or pesky bugs. Lysanne Tusar, owner of the 8th Estate Winery, has a more unusual problem: the rising cost of rent in the city.

Far from the rolling hills of Napa Valley, Tusar makes her wine on the third floor of a warehouse building in Ap Lei Chau, an industrial district on Hong Kong’s Southern side. Tusar buys flash-frozen grapes from the world’s most fertile regions — Australia, France and America’s West Coast — and turns them into oak-aged wine off the urban streets of this densely populated city. Marketing her wine as Hong Kong’s first-ever vintage is a competitive advantage over imports, she said: “It hasn’t had the heartbreak of being bounced all over the globe.”

But now Tusar faces a real estate problem. Seven years ago, she spent about $3 million she had raised from family and a few investors to set up her unusual winery in an 8,000-square-foot rental space with rooms for wine-making equipment, barrel storage and offices, plus a wide terrace for events. The venue, actually two connected spaces, is controlled by two landlords. One of them decided in March to raise the rent by 200 percent. “He was getting dollar signs in his eye,” she said.

Given only 30 days to decide, Tusar opted not to renew the lease, and gave up half the space. She was forced to cancel this year’s vintage. Typically, she produces 40,000 to 60,000 bottles of wine a year, which she sells to local restaurants and bars, as well as to corporate and individual clients. “We just physically couldn’t do it,” she said. She also closed the winery’s events business, which had contributed about a third of the company’s revenue, and laid off a couple of employees (she still has one employee, a facilities manager, who has been with the winery from the start).

While Tusar has an inventory of 50,000 bottles, she needs to find new space — or change her company’s direction, perhaps by franchising or licensing the model outside of Hong Kong, which potential partners in Beijing have suggested. She is still thinking through her plans: “Do we replicate the same thing? Or do we modify based on what the market is demanding? There are a hundred questions now being thrown at me.”

Seven years ago, Tusar, who is from Vancouver, began the business to tap into Asia’s growing fondness for wine. Despite its lack of vineyards, Hong Kong is the continent’s wine hub, with annual consumption now hovering at about 3.5 million 9-litre cases, about 42 million bottles — and expected to grow another 17 percent by 2017, according to a survey commissioned by the French trade group Vinexpo.

Tusar had heard about the process of flash-fleezing grapes when wineries in Canada were dealing with gluts of fruit about 10 years ago. “A grape can be frozen solid in six minutes,” she said. “Once something is frozen, transportation is fairly easy.” Discussing the matter with friends and family one night over dinner, she said, “Well, shoot. If you could in theory have a winery anywhere in the world, where would you go?”

Tusar, who had worked in beverage marketing, immediately thought of Asia, specifically Hong Kong: “a great city for many reasons, from languages to international perspectives to a great logistics center with a port.” Not being able to shake the idea, she headed there to assess the viability of an urban winery and decided to give it a shot. (See the related video, produced in 2011, about how 8th Estate got its start.)

The challenges have been plenty, starting with patience, which is a necessity in the wine business. “I can’t really think of another product that you have to sit on for two years before you can sell it,” she said. It’s also been difficult to sell people — especially connoisseurs — on the concept, although 8th Estate wines have won accolades, including silver and bronze awards in the 2012 Shanghai International Wine Challenge. And while Hong Kong dropped its wine tax in 2008, cementing the city’s reputation as a wine hub, the move also brought increased competition from imports.

Tusar declined to disclose her revenue but said “we were right on the threshold of turning a profit” — until she lost half her space: “I am having an absolute heart attack right now with the stress.”

The silver lining, she said, is that it’s “sort of forcing me to look at this, and evaluate if we should start multiplying and broadening our horizons.” While she could simply find a new space — her equipment is mobile — she wonders whether it would be better to spend her resources trying to tap new markets, such as mainland China or beyond Asia. She has considered trying something similar to a franchise model.

More than anything, Tusar would like a partner. “I don’t want to do this alone anymore,” she said. “It’s definitely not a source of pride. I really need help.” She has been talking to individuals who have backgrounds in food or manufacturing, but finding the right partner has not been easy, in part, she said, because “there is no one out there who has done exactly this.”

Since losing the space, Tusar said, it has crossed her mind a few times to walk away from the business. “There are days when you feel so threadbare and down,” she said, but so far she’s sticking with it: “I still adamantly and wholeheartedly believe in the concept.”

Do you have any suggestions for Tusar?

Read Full Transcript

Woman Business Owner Lysanne Tusar, CEO and Founder, 8th Estate Winery

Lysanne Tusar (LT): The idea of anything international can initially be very intimidating. I went about getting over that by simply jumping in and holding my breath and hoping for the best – which I wouldn’t necessarily recommend.

I was born and raised in Vancouver, British Columbia, Canada. And I’ve been in beverage marketing for the majority of my career. I’ve been around entrepreneurs all my life. My dad is the ultimate etrepreneur. And it just seemed to be a natural move to become an entrepreneur myself.

CARD: It was New Year’s Eve 2005 when inspiration struck.

LT: The 8th Estate Winery came about actually over a dinner party believe it or not and it was just a meeting of minds – people who has already been in the wine industry. People who like to drink a lot of wine. Ah freezing of grapes to make wine is-is the premise. If you can freeze grapes, um and then transport them great then in theory you could put together a winery anywhere in the world. And the more I researched into the potential of this, it just became more and more evident if this didn’t get explored, I wouldn’t be able to sleep at night.

CARD: At 27, Lysanne sold her car, sold her house, left her boyfriend behind and traveled to Hong Kong.

LT: Hong Kong is such a great city for-for many reasons, from languages to international perspectives, to a great logistics center with the port. If I were to do this in Vancouver there are plenty of wineries within a short drive that are excellent. So you would be competing with the local market in that regard. Of course there is a lot of wine in Hong Kong. It’s a massive global wine hub. But there’s no vineyards anywhere close by.

CARD: In October 2007 Lysanne started The 8th Estate Winery producing Hong Kong’s first local wine.

LT: The wonderful thing about wine is that it’s not a formula whatsoever. It’s very passionate. It’s very artistic. It’s almost the perfect storm of having the right grapes and the right talent by far from an exact science. And I think that’s what makes wine really exciting. Every year we go to a different location in the world and source our grapes. So the first year we started off in Washington state, simply because it was a good year and it was close to home. And the second year we went to Italy. And the third year was Australia. We’re trying to take advantage here of being able to pick and choose from the best the world has to offer. In general we produce anywhere from 40 to 60 thousand bottles per year. So it sounds like a lot but in a-in a city like Hong Kong – it’s just a drop in the bucket really for the amount that’s consumed here.

One of my recommendations for anybody trying to be an entrepreneur is a support system. And unfortunately I didn’t have a lot of that support. And over the years finally have built my own little support network here of some very strong female entrepreneurs within the city. It really takes talking to somebody and having somebody tell you directly – “No, you’re not- um you’re not off base – that’s what everybody’s going through.” And that alone just, it really propels you – it really keeps you going.

Sometimes things happen quickly and the timing is correct and you just jump in. And at the end of the day – you know, taking those leaps is, you have to give yourself credit that yes it’s going to be scary, yes it’s going to be frightening. But if you don’t do it, I think the long-term regret would be far more frightening and far more scary.

Credits

Producers – Victoria Wang and Sue Williams
Director – Sue Williams
Editor – Merril Stern
Director of New Media and Outreach – Karin Kamp
Director of Photography – Jerry Risius
Production Assistant – Erika Howard
Assistant Editor – David Scorca
Music – Killer Tracks

Photo Courtesy of:
Christopher Shay

Posted: June 15, 2014

Colleen DeBaiseThe Challenges of Starting an Urban Winery