Business

Railex to build $20M wine storage center near Wallula

The Railex shipping company plans to build up to a $20 million wine storage and distribution center near Wallula for wine from Ste. Michelle Wine Estates.

The 500,000-square-foot building will be an expansion to Railex's Wallula operation, allowing it to store up to 10 times more wine and adding an estimated 25 employees.

"It's 11 football fields under one roof," said Jim Kleist, senior vice president of West Coast operations for Railex.

The project will bring private investment in the Port of Walla Walla's Dodd Road Business Park up to $70 million since 2006, said port Executive Director Jim Kuntz.

Ste. Michelle Wine Estates, which produces about 65 percent of the wine made in Washington, has signed a long-term lease for most of the warehouse, and plans to contract with Railex to transport domestic and imported wines throughout the United States.

And on Wednesday, Port of Walla Walla commissioners unanimously approved leasing 30 acres just east of Highway 12 to Railex and selling the land to the company as soon as a sales agreement and some boundary adjustments can be completed, Kuntz said. The land will be sold for about $450,000.

The new bonded wine storage and distribution center will mean a significant expansion of the work Railex does for Ste. Michelle, officials said. Railex began storing and transporting wine for Ste. Michelle more than three years ago.

Currently, about 1 million cases of the company's wine are distributed annually by Railex, Kleist said.

In addition, trains from Washington now deliver produce, such as apples, onions and frozen vegetables, to the East Coast in their refrigerated, temperature-controlled freight cars.

Rob McKinney, Ste. Michelle vice president of operations, said partnering with Railex just makes sense.

"We are great at making wine and growing grapes, and that is what we want to focus on," he said.

He said the goal is to shift more wine to rail transportation. About 25 percent of their wine is moved by rail. That gradually will increase to about 50 percent, starting early next year.

Ste. Michelle will continue to receive wine orders and will pass the orders to Railex, which will store the wine and transport it, McKinney said. The winery will continue to schedule its own truck freight.

McKinney said rail cars are more efficient for shipping wine and will help reduce the company's carbon footprint by moving bigger loads instead of more trucks.

Ste. Michelle is the largest wine producer in the Northwest. It owns Washington wineries such as Chateau Ste. Michelle, Columbia Crest, Snoqualmie, Northstar and Spring Valley. It also co-owns Col Solare on Red Mountain with Italy's Antinori family.

Ste. Michelle Wine Estates, which is headquartered in Woodinville, has 10 brands in Washington, one in Oregon, four in California and partnerships with 13 others, including Dr. Loosen of Germany.

The new building will allow Railex Wine Services -- the new subsidiary Railex is creating for wine storage and transportation -- to store up to 5 million cases of wine, Kleist said. It is scheduled to open in February 2013.

While Ste. Michelle will lease most of the warehouse, some room will be available for other wineries, Kleist said.

"Ste. Michelle is going to be the major tenant," said Kari Leitch, vice president of communications for Ste. Michelle Wine Estates. "With the quality of our products and the size of our operation, this makes for a great system. We are able to get our wines into the hands of our customers around the country and transport them in a green manner with as high a quality as possible."

A recent $2.8 million capital appropriation from the state will help with infrastructure improvements in the business park for this project, Kuntz said.

The money -- secured by Sen. Mike Hewitt, R-Walla Walla, and Rep. Maureen Walsh, R-Walla Walla, and Terry Nealey, R-Dayton -- leveraged the $20 million investment by Railex, he said.

The Dodd Road Business Park is a model port project, Kuntz said. The port bought agricultural land for the project in 1994, secured water rights and added infrastructure that brought the private investment.

The new distribution center will add about $320,000 in property taxes for various taxing districts in Walla Walla County, Kuntz said.

"This is a large investment for Walla Walla County," he said.

Once the new warehouse is open, Kleist said, they will shift wine from their current facility to the new one, allowing it to be used for other commodities.

Railex already has a 215,000-square-foot facility in the Dodd Road Business Park, where the company can store up to 500,000 cases, Kleist said. It primarily is a transload facility.

The company's rail cars, in addition to being temperature controlled, are packed so that there is no void, Kleist said. They use air bags, foam and other materials to make sure the quality is preserved.

Ste. Michelle has strict guidelines on how their wine is handled, including maintaining the temperature throughout transportation and delivery, Kleist said. It's an important factor in how Ste. Michelle wine remains consistent across the country.

"Ste. Michelle is trusting us to take care of the product, and we take it very very seriously," Kleist said.

It takes about five days for Ste. Michelle wine shipments to arrive on the East Coast. Railex also has distribution facilities in Delano, Calif., and Rotterdam, N.Y.

And Railex plans to open a southeast distribution facility, possibly in Florida, next year, which Kleist said will hopefully allow them to completely cover the East Coast.

-- Kristi Pihl: 582-1512; kpihl@tricityherald.com

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