L/O/G/O

Supply Chain CSR Initiatives –

Wine IndustryConsultants: Timothy Barba, Joseph Fidago, Kim Finney, Doug Keeley, Justin Smith

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DESCRIPTION OF INDUSTRYSection One

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Background

Consultants to Small / Medium sized Winery in Southern, California

Leverage trend towards affluent, health, environmental, social demographic

Emphasis on Sustainability by: Use of biodynamic grapes Re-use of byproducts Eco-friendly packaging Public education/awareness

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Current Status of the Industry

How is the wine industry doing lately?

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Industry Snapshot

Worldwide there are now 360 certified vineyards and/or wineries, with a total 20,000 certified vineyard acres.

Of the major wine producing countries, France leads the list with 138 certified operations that include Burgundy's acclaimed Domaine de la Romanée-Conti.

The United States is second with 70 certified operations.

As an indication of increasing interest in Biodynamic farming, Demeter USA’s winery and vineyard members increased from 5 to 60 between 2005 and 2009, and as many as 20 new growers and wineries were expected to be added during 2010.

Wine is one of the higher-profile Biodynamic products in the marketplace.

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Future of the Industry

There is an increased awareness of the environmental and health aspects of business in society in general.

One example is the use of CFLs (Compact Fluorescent Lights).

CFLs put out equal or greater light, use 1/3 of the electricity, and last over 10 times longer than a normal bulb.

As referenced by the fact that there was a Green Sustainability Conference in Buffalo back in 2001, this has been on people’s radars for quite some time.

We will address this increased awareness through these new CSR initiatives.

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PROFILES OF COMPANIES SELECTED FOR CASE STUDIES

Section Two

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Wineries already using Biodynamic

Established in Sonoma, CA ~30 years ago.

Family owned business that switched to Biodynamic wine making in the mid 90’s.

Their entire portfolio of wines is certified sustainable, organic or biodynamic.

Want to be known as the “green winery”. “Great wine has green value”.

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Wineries already using Biodynamic

Family owned and run. Mission is to craft small lots

of wines from organic and biodynamic grapes using the best of old and new world winemaking techniques.

Premium “boutique” winery with a case production of 8,000 annually.

Located in Nice, CA, near Clear Lake and Napa Valley

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Other Industries – Great Lakes Brewery

Started by two brothers in September 6, 1988

Mission: focused on “environmentally respectful and socially conscious” as well as high-quality beer, service, continuous improvement and education to consumers.

Currently brews over 100,000 barrels a day

Located in Cleveland, Ohio

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Other Industries – Tennessee Short Mountain Distillery

First distillery in Tennessee, referendum passed November 2010

Construction began March 2011

Family owned and funded

Roots in moonshine Wheat from first farm in

Cannon County to be organically certified

Mission is to provide sustainability to the community and local farmers as well as the environment

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Other Industries – Aurora Organic Dairy

Located in Boulder, Colorado

Founded in 2003 Produces/markets

private label and store-brand organic milk and butter

One of the principles is the comfort and humane treatment of the animals on their farms

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DEVELOPMENT AND IMPLEMENTATION OF CSR PRACTICES

Section Three

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Stakeholders

Consumers (health/taste)Growers (economic)Employees (employment/health)Company owners/stockholdersLocal communities (economy/environment)Local government (tax revenue)

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The Business Case – Business Matrix

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The Business Case (Inside-Out)

ProcurementOperationsOutbound LogisticsMarketing and Sales

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The Business Case (Outside-In)

Local Demand ConditionsRelated and Supporting IndustriesFactor and Input DecisionsContext for Firm rivalry and strategy

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McKinsey 7s Framework

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Biodynamic® – What is it?

“A type of organic farming that incorporates an understanding of “dynamic” forces of nature not yet fully understood by science” – Biodynamic Farming and Gardening Association

“It’s the oldest ‘organic’ agriculture dating from 1924 - came about when a group of central European farmers felt that the industrialization of agriculture had rendered their soils less healthy, their seeds less fertile, their crops less nourishing and their own health less certain” – Monty Waldin Biodynamic expert

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Why Biodynamic?

Traditional production involves use of chemical fertilizers and pesticides

Greater corporate awareness of own social responsibility

Raised public awareness of environmental and health concerns

Desire to become market leader in sustainable production of wine

Increases competitiveness versus others engaged in this same movement

Environment Health SustainabilityBottom line

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Quality and Taste

In addition to the environmental and health benefits from this initiative, there is evidence that this method of viticulture produces better tasting wines which will lead increased profits.

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How will we incorporate Biodynamic® into our business?

We will partner with local growers that are - or will become - Biodynamic® certified to supply our grapes.

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Sustainability Gameplan

Produce

Market

Sell

Monitor

Expand

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From Grape waste to Biofuel

Grape Pomace can be made into a pellet blend after oils and nutraceuticals have been removed.

With Glycerin added it has the same attributes as straw or wood without the air quality concerns.

Run the pellets through a gasifier and it can be turned into combustible gas which can be sold as renewable energy to power companies.

After gasification the charcoal pellets can be used as reusable filters as good as other filtering methods on the market.

Biggest possible use is in home heating to replace wood used in pellet-burning stoves.

What can be done with the mountains of waste produced by the wine and juice industry?

Use it to make Biofuel!!

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From Grape waste to Gourmet Oil Grape seeds can be cold-pressed

into Merlot or Chardonnay oils The added benefit – its good for

your health - it contains:- polyunsaturated fatty

acids (omegas 3, 6, and 9)- antioxidants- phytochemical

Unlike olive oil, grape oil takes a high heat during cooking

More than a ton of grapes is needed to produce just one gallon of grape seed oil.

Flour from grape seed, milled from dried grape pomace (bread with high antioxidants)

5% of the net revenues from sales of grape oils are being contributed to scholarships at Heritage University where Lieber previously taught.

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Grape Seeds and Youth

Scientists studying grape seed extract found that it was beneficial in the treatment of symptoms of: Free radical damage and poor

circulation Chronic Venous Insufficiency

(CVS) Varicose Veins Macular Degeneration Diabetic retinopathy

Grape seed extract applied topically acts as a natural Alpha-Hydroxy Acid which improves skin tone and reduces wrinkles thus it is used in many cosmetic lotions

High concentrations of antioxidants found in grape seeds were found to be better than synthetic - making it a good choice for vitamins.

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Grape waste to Fertilizer

Waste has the ability to become compost: The ground up waste

(seeds, stalks, skin and pulp) sits for three months and is then reground to make compost

Can be used to fertilize vineyards or bagged and sold

Mixed with water it is turned into liquid fertilizer

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Wine Wastewater to Renewable Hydrogen Production Wastewater comes from cleaning

equipment, grape disposal, wine making and other processes.

Typical way of treating wastewater from wine production: Sludge ponds (sludge build-up will

occur) Strong odor Possibility of EPA fines

New Treatments: Use of electrolysis combined with

special microbes Penn State Environmental Engineer’s

system (tested at Napa Wine Company vineyard)

Wastewater is converted and cleaned Cleaned water is safe to use to irrigate

vineyard Hydrogen is captured

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Uses for waste in other Industries

Great Lakes Brewery Beer delivery truck runs on straight

vegetable oil, reclaimed and filtered restaurant oil

Spent brewery grain used to feed local farmers livestock, also used to make beer bread and pretzels, also used as compost for fertilizer

Tennessee Short Mountain Distillery Used grain is feed to livestock, manure

is composted with other organic material and used to fertilize the fields

Aurora Organic Dairy Dry-vac manure replaces water flush

(saves 400,000 gal. of water per year) Milk parlor wash water (100%) recycled

for crop and pasture irrigation Compost used to improve soil and

fertilize crops29

Packaging - Overview

2 Options – both 100% Biodegradable PLA plastic wine bottles (750ml) Wine box from Landaal (5 liter)

Reduced waste Reduced energy consumption in

productionNo added cost compared to glass

bottles

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Packaging – PLA Plastic Bottle

Comparable in price to glass bottles Used in China by Wine/Sake producers for past

few years Poly Lactic Acid (PLA)

Made from compressed corn starch or sugar cane Compressed into “fabric” that can be formed 100% Biodegradable, but can also be recycled

Compared to Petroleum based plastics Requires less energy to produce Emits less greenhouse gasses Less and less hazardous waste from manufacturing Sustainable - produced from a renewable resource

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Packaging – Value Chain

Impact (compared to other packaging options) Inbound Logistics – renewable resources - no shortage of raw

material Operations – less waste, standard bottling equipment can be

used (cost savings) Marketing/sales – no additional cost for consumers, green

initiative Outbound logistics – sturdier packaging leads to less breakage in

transit After Sales Service – packaging can be recycled or 100%

biodegradable Procurement – multiple suppliers Technology Development – evolving & decreasing cost

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Packaging – Social Impact

Inside – out Supported by the value chain initiatives Cost effective draws interest from non target

consumersOutside – in

green packaging benefits environment fits target consumer

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Public Awareness & Education

National: Partner with Publications Publicize a wine portfolio

Local: Education for children & Adults Wine Tastings (festivals, etc.) Suppliers

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National Public Awareness & Education

Publications: Create Biodynamic wine course W/publication Creates a credible branded training program Creates national awareness & interest in a new

wine segment. Provides instant credibility to the biodynamic wine making.

Media: Food Network Biodynamic wine portfolio Similar to the Wente Vineyards deal Establish credibility, generate exposure National exposure, credibility & increased

mindshare.35

Local Public Awareness & Education

School Education: Student field trips Provides local students hands on biodynamic

education Benefit: Create sustainability awareness &

seasonal job interestAdult education: Biodynamic classes for

adults Provide adult geared education about BD

farming best practices. Benefit: Create sustainability awareness as well

as interest in biodynamic farming. Attract potential employees .

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Local Public Awareness & Education, Cont.

Wine Tastings: Partner with local media outlets to advertise wine tastings Create Fall/Spring/Summer festival concepts Create local biodynamic winery awareness. Benefit: Marketing + education + biodynamic winery exposure.

Partnerships: Suppliers

• Create a educated and sustainable supply chain.• Benefit: Sustainable and biodynamic practices are adopted

throughout the supply chain. Local agriculture universities/colleges

• Continuing education in sustainability and farming• Benefit: Educated work force

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Public Awareness & Education – Social Impact

Inside – out Supports industry segment & job growth Promotes sustainability education Positive long term impact on environment

Outside – in Increased demand for products Brand recognition & brand sustainability

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RECOMMENDATIONS FOR REPLICATION OF CSR PRACTICES

Section Four

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Recommendations for replication of CSR practices

Document current process, roles and responsibilities

Conduct internal lesson's learned review's frequently

Participate in regular CSR training and review against current process and update with best practices.

Conduct annual benchmarking with recognized leaders in the industry or cross industry's. Review against current process and update with best practices.

Update documentation and revision history.

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L/O/G/O

Thank You!

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Referenceswww.wikipedia.comwww.thewineorak.comwww.biodynamics.com www.benizer.comwww.ceago.comwww.winesandvines.comhttp://en.wikipedia.org/wiki/Bioplasticshttp://www.sustainableisgood.com/blog/biodegradable/page/4/www.decanter.comhttp://www.theplanetbottle.net/The Washington Post – March 28th -The Environmental Impact of the wine we drink

5minmedia. (2011). Turning Grape Waste into Organic Compost. Daily Motion. video. Retrieved on April 13, 2011 from http://www.dailymotion.com/video/xevdf7_turning-grape-waste-into-organic-co_tech.

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References continued

Arvanitoyannis, I., Ladas, D. & Mavromatis, A. (2006). Potential Uses and Applications of Treated Wine Waste: a Review. International Journal of Food Science and Technology. 41. PP. 475-487. Retrieved on April 12, 2011 from http://depa.fquim.unam.mx/amyd/archivero/Potential_uses_and_applications_of_treated_wine_waste_7296.pdf.

GreatLakesBrewing.com. (2011). Sustainability – Other Sustainability Projects. Retrieved April 15, 2011 from http://www.greatlakesbrewing.com/sustainability/other-sustainability-projects.

Hansen, Melissa. (2007). From Pomace to Pellets. Good Fruit Grower. April 1, 2007. Retrieved on April 13, 2011 from http://www.goodfruit.com/Good-Fruit-Grower/April-1st-2007/From-pomace-to-pellets/. 43

References continued

Innovation Center for U.S. Dairy. (2010). Sustainability in Practice. Aurora Organic Dairy. Retrieved April 10, 2011 from http://www.usdairy.com/Sustainability/Commitment/SustainabilityInPractice/index.html.

Shortmountaindistillery.com. (2010). Integrating a Distillery into Sustainable Permaculture. Retrieved April 15, 2011 from http://www.shortmountaindistillery.com/page/2/.

US News and World Report. (2009). Renewable Hydrogen Production Becomes Reality at Winery. October 6, 2009. Science. Retrieved on April 15, 2011 from http://www.usnews.com/science/articles/2009/10/06/renewable-hydrogen-production-becomes-reality-at-winery.

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References continuedVitaminstuff.com. (2011). Grapeseed Extract. The Herbs Section. Retrieved April 15, 2011 from http://www.vitaminstuff.com/herbs-grapeseed-extract.html.

WaterWorld.com. (2011). Winery Benefits from Green Reclamation Technology. Retrieved on April 15, 2011 from http://www.waterworld.com/index/display/article-display/articles/industrial-waterworld/2010/issue-4/feature-editorial/winery-benefits_from.html.

GlobalWarming.com. (2010). A Brighter Tomorrow Using LED Lighting. http://globalwarming.com/2010/05/a-brighter-tomorrow-using-led-lighting/

Seeking Solutions to Environmental Concerns. (2001). http://www.bizjournals.com/buffalo/stories/2001/10/01/focus3.html

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