COPIA Continues to Defy Definition

amcintosh@sacbee.com
dryan@napanews.com
mtreleven@napanews.com
jbonne@sfchronicle.com
diane. peterson@pressdemocrat.com
paul@napalife.com
info@copia.org

ATTN: COPIA Please pass to Mr. McGuire

To:

Garry McGuire-COPIA,

Jon Bonne- San Francisco Chronicle,

Andrew McIntosh-Sacramento Bee,

David Ryan, Jennifer Huffinan, Mike Treleven, Kevin Courtney - Napa Valley Register, '

Diane Peterson-Santa Rosa Press Democrat,

Paul Franson-Wines & Vines/Napa Life

SUBJ: Summary Comments on COPIA

My name is John Olney and I am a wine writer via blogging. My phone is 707-299-9548 My site information is: http://www.twccwcmp.blogspot.com/ E-mail: thewinecntrvclb2@aol.com .

I have published my observations on our web site about COPIA as derived from my own research, visitations to the complex, and your published articles, quoted comments, etc. I have provided you a copy of Part One of my analysis & review so that you can examine what I quoted from your comments/work.

Please feel free to contact me with your complaints, observations, etc. I will be happy to discuss any possible erroneous statements or misquoted comments I might have made and work on correcting my article.

Best regards, John Olney

COPIA Continues

to Defy Definition
By John M. Olney, November 24, 2008
Copyright, all rights and privileges reserved
Wine Country Marketing & Promotions, 1325 Imola West, #409, Napa, CA 94559
Web site: http://www.twccwcmp.blogspot.com/ E-mail: mailto:thewinecntrvclb2.

COPIA, since its inception, has competed with the winegrowing industry of Napa County and all its associated tourism. A simple review of the list of serious donors to the concept of an American Center for Wine, Food and Art will reveal the absence of the backing of the winegrowing and tourism industry on the whole.

The Napa Valley Vintners Association, representing about half of the wineries of the county, does almost nothing to promote COPIA. The same is also true of the larger organizations of the Family Winemakers of California and The Wine Institute of California. There is no Wine Spectator or other media partner supporting and marketing COPIA. There is no Leslie Rudd contributing vast sums of money to develop dedicated programs that would draw attention to and interest in COPIA. Wine Enthusiast, Wines & Vines, Constellation, Foster’s, Gallo, Diageo, Sutter Home/Trinchero, Francis Ford Coppola/Rubicon, etc. have not stepped forward to “adopt” COPIA. For obvious reasons there is no requirement that any of these organizations should be held accountable for not pushing COPIA. They each have their own agenda to push in support of their respective members and programs.

There are no continuing art or museum endowments from which permanent and meaningful exhibits and displays can be produced to attract attendance.

There is no shining star to lead a team to produce a professional show.

This is Part One "A" of a two-part assessment of the past and future for the COPIA complex. Presented below is a review of COPIA's disappointing past based on my assessment. Part One "B" will be posted very shortlyPart two, in draft at this time, will suggest what the complex could become In the future.

Reference articles:
THE SACRAMENTO BEE - DATED JULY 20, 26 & 27, SEP. 8 & 28 Blog -NOV 12,. 24, 2008
NAPA VALLEY REGISTER- DATED JULY 25, SEP. 27, Nov. 13/14, & 16-editoriaI, 23, 24, 2008
SAN FRANCISCO CHRONICLE - DATED SEP. 26, 2008
SANTA ROSA PRESS DEMOCRAT - DATED SEP. 30, 2008
WINES & VINES - OCTOBER 16, 2008

"...our goal of becoming the leading consumer wine and food destination..."The July 25, 2008 Napa Valley Register article, "Copia: We are integral to Napa - Leaders cite ambitious plan for financial stability" by David Ryan, NV Register City Editor, quotes Mr. Garry McGuire written statement that says:

" ... In the past four months we've made significant progress in moving toward our goal of becoming the leading consumer wine and food destination, both on our campus and online."

If this is so, then why did COPIA cut back its operations on October 1, 2008 to weekends only while other Napa Valley operations (such as the Culinary Institute of America in St. Helena) are able to remain open all week long? And, then came word from COPIA that it was shutting down all operations effective December 31, 2008 But, no sooner did they say that then they closed their doors in a sudden and unannounced manner! This does not seem to correlate to the statement, "significant progress!" In fact, just the reverse occurred.

The COPIA "Model"

Mr. McGuire was quoted in the Press Democrat article dated September 30, 2008, as follows:

"The core business is shifting away from a museum and a discovery center and toward producing original content and distribution of food and wine knowledge," said Garry McGuire, president and CEO of Copia. "It's a completely new business model, but part of it stays the same."

I do not understand how it can be a "completely new business model" when Mr. McGuire goes on to say "but part of its stays the same." These are conflicting statements. It is either a "completely new model" or it's a "modified old model."

Mr. Franson, in his October 16, Wines & Vines article, "Copia Struggles for Relevance," says:

"McGuire wants to focus on content creation and delivery, and franchise the Copia concept out to profit-making groups like the Ritz Carlton project now going in across the river. He's already announced plans to open an expanded satellite in San Francisco next year-Copia already shares a space in San Francisco's Ghirardelli Square, where it gives classes and holds functions. "

From the same article we learn the following from Mr. McGuire:

"McGuire said he wants to keep the restaurant, upcoming wine bar and store, but he welcomes complementary tenants. He's talked to nonprofit groups that are potential tenants, such as the Napa Valley Museum, but they have their own financial problems."

In just over two months, we’re told two different stories about the definition and future of COPIA, I can’t help but wonder where all the donation money went from the recent Baron’s Ball at the St. Regis which is a benefit for Copia: to the bond holders or for the for-profit San Francisco COPIA “franchise?”

COPIA food preparation and wine pairing

These programs were competing with too many facilities that can offer more than COPIA has to offer. Listed below are some examples of the competition in just Northern California but there are many others throughout the state and the rest of the USA.

Culinary Institute of America, St. Helena: bachelor degree/certificates (see below for more)

California Culinary Academy - San Francisco: CertificateAssociate's,

International Culinary School at The Art Institute of California - multiple locations including San Francisco: Associate's, Bachelor's Culinary Arts, Culinary Mgmt, Wine, Spirits & Beverage Mgmt, Bachelor's, Culinary Arts, Culinary Management

Kitchen Academy - Sacramento: Diploma

Culinary Arts, Professional Baking & Pastry Institute of Technology -
Clovis, Modesto, Rosevllle: Diploma Baking & Pastry, Culinary Arts, Baking & Pastry Arts

In terms of food preparation, processing and presentation right here in Napa County, COPIA must compete with the ever popular up valley Culinary Institute of America (CIA) located in St. Helena which has entire programs funded and/or supported through the generous donations of Mr. Leslie Rudd. He is owner of six wineries distributed between Napa and Sonoma Counties, the Dean & Deluca and Oakville Grocery retail food and wine store chains and ‘The Press Restaurant.” Additionally, Wine Spectator magazine supports the CIA programs. CIA offers both on-site and online food programs in which students can actually earn a degree and/or certification that carries the full force of the reputation of the CIA programs. Additionally, CIA is home to the California Vintner's Hall of Fame and the CIA Wine Spectator restaurant.

Although Mr. McGuire uses the term "campus" to describe the food, wine and art activities of COPIA, I am unable to find a stated course curriculum at the COPIA itself or online which clearly leads to a recognized collegiate/trade school degree or certification.

But, there are yet more competing programs to what Mr. McGuire says he wants to implement and both were also started by funding of Robert Mondavi:

"The Great Chefs" program at Robert Mondavi winery in Oakville

The $25 million dollar donation from him to open the Robert Mondavi Institute for Wine & Food Science at UC Davis.

Where will COPIA - whether in San Francisco or any other city, or any of its potential"franchise," operations - ever find the market penetration budget to compete with the above well established schools and/or programs?

Wine Knowledge

Not once during my eight visits to COPIA was there a staff member discussing the 40 different wines available from the ten wine dispensing machines. There was no printed material available for all of the wines. The cost to use these machines varied from $1.00 to $4.75 for a taste and from $6 to $18 for a full glass. And interestingly, COPIA was at the same time offering free wine tasting just across the aisle from these machines. Just recently the only other downtown Napa tasting room (Stave Lounge) with such machines closed its operations down.

I have almost three years of experience in tasting room service and winery tours (Mumm, Silverado Vineyards and Andretti winery.) I did sit-down lunches and dinners with smaller groups (20 or less) to groups reaching as many as 50 plus. I talked about the vineyards, fermentation (including malolactic), riddling, bottling, aging in wood and racking, the wines themselves and the owners and winemakers. I made presentations on the history of Napa Valley and the winery at which I worked at the time. The wine tasters wanted that interchange with the tasting staff, learning about the wines, winemaker, owners, historical information and stories. The automatic dispensing machines are obviously impersonal and much is lost in the wine tasting experience without the knowledgeable winery staff educating the taster.

Almost all of the subject articles cited at the beginning of my comments mention Mr. McGuire's ambition to sell wine via the Internet. COPIA does not grow grapes and make wine; instead it must buy it as a reseller. I cannot help but wonder how he expects to compete with the likes of Wine.com, Amazon.com, BEVMO, Wal Mart, Safeway, Longs, JV's, the 5,000 plus wineries of the USA, and the list goes on and on. Where will Mr. McGuire derive sufficient money to establish merchandise inventory and implement a market penetration plan and advertising program? Is this really a “franchise-able" element of the "COPIA model?"

The "franchising" of COPIA
Mr. Franson, in his October 16, Wines & Vines article, "Copia Struggles for Relevance," says:

"McGuire wants to focus on content creation and delivery, and franchise the Copia concept out to profit-making groups like the Ritz Carlton project now going in across the river. He's already announced plans to open an expanded satellite in San Francisco next year-Copia already shares a space in San Francisco's Ghirardelli Square, where it gives classes and holds functions. "

First of all, the Ritz Carlton is NOT "now going in across the river;" instead it is a very long time away from reality. I became a close friend to a former senior member of the Ritz Carlton advance-planning group. They and companies like them conducted market analysis that included an examination of COPIA's public record, annual reports. Their people would have asked about the success or failure of COPIA. Thus, these companies would have seen that COPIA was not meeting visitor expectations, that it was losing substantial sums of money each year and that it was headed for failure and bankruptcy. More specific to the topic, there are financing problems among the Ritz Carlton investor group and even if those could be worked out in these tight economic times the hotel complex probably wouldn't open until at least three years from today.

A Sacramento Bee article of July 20, 2008 reported "Copia consultants had forecast paid attendance of between 467,900 and 522,400" for 2006. The Napa Valley Register article of Sep. 27, quotes Mr. McGuire as reporting that attendance went up to 150,000 in 2007 compared to "146,472 attendees" the SacBee article reported that COPIA saw for 2006.

I do not understand how Mr. McGuire knows that there were 150,000 COPIA attendees since there are neither turnstiles nor general admission ticket purchases to document the accuracy of his count? I can't help but wonder what he based his count upon? Furthermore, I wonder why there is such a large discrepancy between the consultant's estimates and actual attendance numbers reported for 2006. What did the consultant base their count on? I will be interested to find out the latter.

The Napa Register article of Sep. 27, 2008, points out that:

"Since it opened in 2001, Copia reportedly lost between $5 million to $15 million yearly. Copia's 2007 annual report. listed a deficit of $14 million." .

The public record, IRS Form 990 for non-profit companies for COPIA, shows a steady decrease in new membership fees and reoccurring membership "dues" representing an approximate 11% drop since 2004.
"Fiscal year...........................2004...................... 2005.......................2006
Membership........................$429,969............... $373,431..............$360,654"

These consistent annual operating losses and decreases in membership seem to speak to fading interest in COPIA programs. It will be interesting to view the 2007 and 2008 fees/dues number since COPIA terminated charging a general admission fee and thus "membership discounts" on admission fees ceased to exist.

Based on just these two economic factors, I find very fascinating that Mr. McGuire believes that there would be any interest by investors to buy a COPIA "franchise."1 just wonder if Mr. McGuire conducted a market assessment/feasibility study to determine the potential for a successful COPIA located in San Francisco or any other city. If he did not, then how does he conclude that the results would be different in any other city than it has been in Napa?

Decreasing COPIA Debt
Mr. Franson, in his October 16, Wines & Vines article, "Copia Struggles for Relevance," writes that:

"McGuire said he wants to keep the restaurant, upcoming wine bar and store, but he welcomes complementary tenants. He's talked to nonprofit groups that are potential tenants, such as the Napa Valley Museum, but they have their own financial problems."

First, I fail to understand how such a “free rent" offer would benefit the COPIA bottom-line, the bondholder's investment and the bond insurer's possible liability.

Second, who pays to turn on the $50,000 /month utilities again?

Third, what guarantee would COPIA have been able to provide a non-profit if they gave up their current location and moved into COPIA that they won't be evicted should COPIA go bankrupt and the bondholders seize the property? The non-profit, free rent tenants would have to scramble to find another location.

In an article by Jennifer Huffman, NV Register Business Writer, September 27, 2008, Mr. McGuire is quoted as follows:

“McGuire is considering all options. For example, Copia doesn't have to own its Napa location, said McGuire. "We have a tremendous amount of debt on the building, so if someone would take that on, we'd be willing to sell it," he said. "We'd love to rent back from them as a tenant." However, "I think it's unlikely that someone would be willing to pay $80 million for the building.

The $80 million dollar question is how can we unlock the potential of the building? That's why we are looking at another facility that is unencumbered by debt," said McGuire.

Rumors circulated that Copia would file for bankruptcy. Not true, said McGuire. "Filing for bankruptcy is not something that management or board has in our plans at this time," said McGuire.”

More recently in an October 16, 2008 article in Wines & Vines, Paul Franson commented as follows:

“For one thing, the building is clearly not worth $78 million, especially in today's troubled economy. McGuire is trying to eliminate Copia's debt one way or another. "I want to be debt-free by the end of the year, preferably without a bankruptcy, but all options are open, " he said.

One possibility is for the mortgage holders to reclaim the building and lease out part to Copia-and part to other tenants. Unfortunately, 40,000 square feet of the open space isn't very useful.”

Given the down turn in the economy I just don't see how the COPIA organization is going to find any investor(s) willing to purchase the site at this time even at bargain basement prices. If one was to approach the current bondholders I don't think it would be likely find a favorable audience. They already have a huge investment with no return on that investment to date. Why would they be interested in sinking more money into the complex, which as Mr. McGuire says isn't "worth $80 million?" Should COPIA go bankrupt then the bondholders will likely inherit the building and land anyway.

The bondholders already know that COPIA has been a failure, so why would they want them as a tenant? Could Mr.McGuire's planned activities, which he purports to be "franchise-able," actually derive sufficient income to pay the rent that any new owner would have to charge per square foot for such a large, high value building/land complex? By the way, an extensive remodeling budget would be required to make it habitable to other business types.

The alleged importance of COPIA to the new developments around downtown Napa:
The NV Register article, "Copia: We are integral to Napa - Leaders cite ambitious plan for financial stability" by David Ryan, NV Register City Editor, quotes Mr. Garry McGuire, COPIA's CEO:

"If you look at the mission of (I-bank) it's to help facilitate lending that creates economic development and prosperity," McGuire said. "Clearly if you follow that line of thinking, Copia ... has helped in very significant ways with economic development, jobs, hotels and the prosperity of Napa....

1f I-Bank had not helped facilitate loans for Copia, none of that would have happened."

The concept that the Oxbow Public Market, Westin Verasa, The Riverfront, Napa River Terrace, Ritz Carlton and others came to Napa to be in close proximity to COPIA is a huge overstatement. These companies came because the 500 plus wineries draw visitors/tourists who want quality wine tasting, dining, lodging, entertainment and shopping. None of these facilities, including COPIA itself, could have been built north of Napa in the corridor to Calistoga due to the Agriculture Preservation zoning restrictions. That leaves American Canyon and Napa as the only realistic locations for such new facilities.

Although American Canyon was growing rapidly before the sub-prime loan meltdown and home foreclosures, it offers no surrounding amenities such as fine restaurants, lounges and upscale retail shopping outlets needed in very close proximity for the clients of the hotels who want the finer things and the style of life that wine country conveys.

The improved Napa River shoreline plans and availability of flood control to protect physical assets, as well as provide safety to the patrons, offers everything such quality companies want. There is the pleasantness of the river walk while watching the river flow and the wildlife that resides on its shores and in the water. There is the Opera house, the Symphony, Jarvis Conservatory, parks, etc. There are the four close-by golfing facilities, the Outlet Stores and more. There are cocktail & restaurant facilities and some have live music available, and to a smaller extent retail shops carrying quality products. The list of amenities goes on for locating on the available land around the Napa River.

MY CONCLUSIONS

The entire corridor from Napa Terrace Street going along McKinstry to First Street and running west and east between Soscol and Silverado Trail ceased to be an area designed for the vast majority of Napa County residents the day construction began on the redevelopment of the Napa River Oxbow properties.

There was the prestigious Buto Restaurant that was way overpriced for local consumers to enjoy on a routine basis. It failed and was followed by the mostly local attending Cuvee Napa Restaurant that has struggled but managed to stay afloat.

Along the riverfront, at the end of the street, is the fairly new Napa River Terrace Inn with its fairly expensive rooms, meeting space and lovely terrace directly overlooking the river. Certainly, these lodging facilities are not designed to cater to local residents.

Almost tangent to this complex, going south along McKinstry and the riverfront is the brand new Westin Verasa with expensive hotel rooms, hotel condo apartments, plentiful meeting/conferencing room space, the top star and very expensive La Toque Restaurant and The Bank Lounge. The facility is priced for the most affluent of the local community and tourists who are prepared to pay higher costs while on vacation. It is not designed to cater to the middle class working family that makes up the main population of Napa County.

On the West Side of McKinstry is located the depot of the Napa Valley Wine Train which must be considered a novelty whether from the standpoint of the local or by the visitors to the county. It survives just because of that novelty status as all who have never before experienced a train ride and can't wait to experience such an excursion which is further enhanced by the magnificent Napa Valley vineyards and hills and the service of quality food, wine and theatrical entertainment. This is not to say that others who have grown up using trains wouldn't enjoy the experience, because they too come and climb aboard for the pure enjoyment of such a beautiful ride with all its amenities. But it remains a commercial enterprise that will not experience frequent re-visitation by the same local or tourist individuals.

As one approaches the intersection with First Street along the east side of McKinstry starts the recently completed Oxbow Public Market Place with its 25 plus entities consisting of a bakery, ice cream parlor, hamburger joint, wine tasting facilities, butcher, spices, pots & pans and much, much more. I have walked through the main building many times since it first opened comparing the prices of the food related products and to my amazement I find that the shops are way overpriced for the vast majority of local residents. Certainly visitors staying in the hotels and inns are not buying these food products to take back to their rooms or distantly located homes. I suspect that the owners who also developed the San Francisco Ferry Building Public Market Place and the Vacaville Nut Tree Market Place are suffering deeply during these very troubled economic times.

Now moving east along the riverfront is the COPIA complex that I have already discussed.

Moving yet further east along the riverfront is the former location of JV's liquor, wine and beer store. This property wraps around going north along the Silverado Trail road and is the site that interested the Ritz Carlton investment group. Regardless if they are able to complete their proposed project or not, this prime property will eventually be sold to an upscale hotel, resort, condo and/or mall developer.

Scattered along First Street going along the south side and the north side towards Soscol are other restaurants, wine tasting rooms and miscellaneous shops mixed with small, old but well maintained residential homes.

Clearly all the commercial properties described above mark this Oxbow Riverfront property as the “Boardwalk & Park Place of Napa.” It is the Rodeo Drive of Beverly Hills, the Downtown Walnut Creek Redevelopment District and the Santana Row complex of downtown San Jose.

It represents large tourist room tax revenue, employment salary tax, sales and property tax revenues to the city and as such you will not see the property under-utilized economically for such noble social benefit, non profit ventures as teen clubs, skating rinks, jails, homeless shelters, farmer’s markets and similar projects which could never produce the revenues that such valuable property does and will represent in the near future under development by commercial, for profit ventures.

This area has become one of extremely high economic value designed from the city's standpoint for the extraction of tax dollar revenues and from the commercial enterprises' standpoint, profits, and all derived from the visitor/tourist and the more affluent residents, part-time residents and absentee property/business owners associated to Napa County. And, this last statement represents the consumer market for which one must design a development plan for the future use of the COPIA complex and adjacent empty properties.

Any realistic market assessment plan for the “Boardwalk & Park Place property” cannot only analyze the product such developer interests have to offer but must weight their analysis towards the consumer likely to visit the area. COPIA used the concept of their products of wine, food and art and then searched for a consumer market which they thought was just sitting around waiting for them. They assessed wrong!

Our concepts for the property consider the marketable consumer already being attracted to the area and we feel that developers have to have in mind products that represent the kind of products they come to enjoy and buy. Developers should plan to cater to those who stay at the expensive existing lodging facilities both adjacent to and located just short distances away from the COPIA complex as well as future luxury facilities planned and developed for the area. We also believe developer planned products should be attractive to the more affluent residents, part-time residents and absentee property/business owners associated to Napa County. Additionally, we think they should plan to attract the guests from the Meritage Resort, Silverado Resort, Napa River Inn, Meadowood Resort, Auberge Du Soleil, Calistoga Ranch, The Riverfront, Solage and other similar facilities catering to those desiring the “wine country lifestyle.” They ride in their limos and/or are driven in their own vehicles to shopping, wine tasting, dining and entertainment venues that interest them.

Our group believes that the package design could produce a “Boardwalk and Park Place ” as “The COPIA Riverwalk & Drive of Napa Valley.”