With proper planning, training, and targeted marketing, niche markets — such as wine rooms and ice arenas — can become profitable sidelines.
You're doing a comfortable business servicing refrigeration systems for convenience stores, supermarkets, and restaurants. But, you just know there's more out there waiting to be tried, and you want to explore it. That's where niche markets come in. Niche markets are nothing new to the business world, but they're often ignored by refrigeration contractors who are too focused on the primary bill-paying services, or too busy to investigate them seriously.
However, once you become established in a niche market, you can use it as a way to keep technicians busy, expand the business, and create a hedge against declines in the core business. If the niche really takes off to become a core business, all the better.
The key niches we found to be most popular among refrigeration contractors are wine cellar construction and cooling, and ice arena projects.
ARC Mechanical Contractors, Bradford, VT, has been in business since 1947. President/owner Will Buskey says ARC was introduced to residential wine cellar projects by way of the HVAC installations it performed in the high-end home market. Its commercial wine cooler business grew from its association with an exclusive resort nestled in the woods of Vermont. It also performs wine cooling for supermarkets.
Buskey advises refrigeration contractors to know and respect the demands of high-end homeowners and wine collectors, and be prepared to customize the project.
“High-end homeowners — those who often entertain, and are wine enthusiasts — are very particular. Equipment has to be concealed, and décor is very important. Some might prefer a brick interior, like something from the Middle Ages. We've installed others with white plaster walls, to resemble an Italian décor.
Buskey says the most particular group are wine collectors or wine investors, who'll purchase high-priced wines, and hold onto them for resale later. “They're not interested in the décor but they do care about temp and relative humidity,” Buskey warns.
Buskey uses two main types of cooling:
A Trane or York ducted system, with a Copeland or Tecumseh condensing unit as the exterior unit.
For a wine investor or commercial resort or hotel, the system would consist of a refrigeration coil inside the cooler to maintain temperature.
“In some cases, we use low velocity, which doesn't take very much humidity out of the room.”
Buskey insists that precise controls integration is an essential part of wine chilling. “If you're controlling the pressure, you're controlling the temperature,” he says. “We have to install refrigeration pressure controls in the coolers in order to maintain temperature. The condenser will operate at whatever temperature setting has been programmed.” He prefers to use Sporlan controls.
“We're also very fussy about humidification,” he continues. “We use electronic steam humidifiers, to maintain 55% to 65% relative humidity. If you used some type of humidification that wasn't 100% pure steam, you could end up with some mold issues; 100% pure steam reduces the likelihood of mold.”
The cooler must be built correctly. You must include a vapor barrier, and include proper insulation.
Consider the materials used in the interior construction. If you're using brick or stone, the size of the humidifier may have to be increased. Brick or stone absorb moisture.
You have to know how to work with general contractors. Be sure your installers can handle custom sizes. And of course, your technicians have to know refrigeration.
Establish an Internet Presence
Bill Almquist, president, Almcoe Refrigeration, and the 2009 Contracting Business Commercial Refrigeration Contractor of the Year, has completed multiple wine cellar projects. He says buyers of new, high-end homes frequently surf the Internet to find wine cellar contractors. He also recommends home builder shows as a way to strike up relationships with general contractors.
And frankly, you have to know what you're doing.
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“Make sure your engineering and technology is sound, and be certain you're buying equipment competitively. Many times, if you're trying to penetrate a market, you don't get the best prices because you've never done it before.”
And, as with any service, Almquist says you have to deliver on your promise of precision work. “Wine cellars must be sized absolutely correctly to meet the correct temperature and humidity. If there's too much moisture in the cellar, the labels will come off. If it's too dry, the corks will dry out and ruin the seal,” he says.
Just One Piece in the Puzzle
Louis Hobaica of Hobaica Services, Phoenix, AZ, has been one of the Southwest's leading installers of residential wine cellars. However, it's not essential to the success of the family business. A niche, Hobaica says, should be just one piece of the business puzzle, one that can compensate for downswings in other departments.
“By having wine cellars as a niche business, we can better adapt to business cycles.”he explains. “If, for example, we performed $500,000 in wine cellar services in 2007, a third of that in 2008, and even less in 2009 — that's okay. The new home construction and remodeling basically wasn't there during that time.”
Hobaica says a well-diversified business can shift focus on a dime, to an area that's more applicable to the current business demand. “If one niche goes dry for awhile, don't worry about it, it'll come back,” he says.
Before a contractor pops the cork on wine cellar installations in new homes, he or she must determine the quality of their relationships and experience in new home construction subcontracting. It's hard enough to become established as a comfort system provider for new homes, without trying to add a specialty service such as wine cellar cooling. Additionally, a contractor must also strike up relationships with wine business owners.
“A successful wine cellar business involves developing relationships with luxury home contractors, restaurant and wine bar owners, and wine retailers. For example, we attend wine tasting events or special events at wine bars.” Hobaica explains. “We also research the county records website to find posted building permits, and send direct mail to new homeowners, once the utilities have been turned on in neighborhoods.”
Hobaica Services has a solid history in commercial refrigeration. It was their cornerstone business when the company opened it doors in 1952. Residential HVAC was added during the 1960s, when the replacement of evaporative coolers with air conditioning took hold.
Hobaica technicians are therefore able to able to apply some of its commercial refrigeration expertise into designing their own wine cellar equipment. Hobaica's technicians usually install mini-split air handlers for the wine cellar interior. The outdoor section consists of a commercial high temperature Copeland® refrigeration condensing unit with an outdoor enclosure, modified with specialty controls.
“Nearly 100% of the time we'll install the expansion valve in the outdoor unit, similar to a mini-split air conditioning system. We use a fan cycle control, high- and low-pressure safety controls, a pumpdown solenoid valve with coil, and a contractor relay,” Hobaica explains.
“The indoor section may be a wall-mounted unit, a cassette style recessed in the ceiling, or a remote-controlled air handler with necessary ducting. The most popular air handler we use is the LG Art Cool series. We convert them to operate off of a 24 volt signal. Typically, we'll use a condensate pump with those pumps that are used with mini-split systems' air conditioning air handlers,” he says.
Keeping Ice Arena Crowds Cozy
Harty Mechanical, Austin, MN, has built a successful business in geothermal ice arena heating and cooling since, in addition to its other commercial HVAC services established in the early 1970s. Harty provides the services with design engineering assistance from its sister company, Earth Energy and Ice, LLC, a distributor of high efficiency equipment designed for use in geothermal systems
A key to our success, says Ken Roche, service manager, is to know the building, and what works best. For example, knowing that infrared heating at this location is preferred over forced air heat for other arena applications.
“Forced air equipment isn't very practical in an arena, unless you're dehumidifying the space,” Roche says.
“We use infrared heating for the spectator areas, which is a radiant direct heat, without compromising ice temperature. You don't want to overheat the players, or have them skating on soft ice.
“Radiant heat is absorbed by the objects occupying the space, rather than the space around them. The spectators feel the immediate warmth.”
Skillset, Bonding Considerations
Roche says key questions a contractor must ask include, “What type of company are we?” Also, “What do we offer to complete the project?”
“Having a one-stop shop makes it more financially manageable, and you save time that would be spent trying to find subcontractors. You also need to be large enough to carry bonding for multi-million dollar jobs,” Roche cautions.
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Harty Mechanical and Earth, Energy & Ice perform due diligence prior to each installation. They perform an arena energy studies based on standards established by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE), to determine if any of the arena's existing equipment can be retained.
“If the existing equipment is below the ASHRAE standard, we recommend an energy retrofit. We remove the antiquated refrigeration equipment, and, based on affordability, install either a hybrid type geothermal system using fluid coolers, or a full geothermal heat pump and field system,” Roche says.
A full geothermal system includes application-specific heat pumps. Harty uses geothermal refrigeration equipment manufactured by IceKube, based in Manitoba, Canada. They're also the exclusive dealer for the systems in the Northern U.S.
“We determine the customer's needs, and size the geothermal system based on immediate and/or future needs,” he says. “We'll use the heat pumps with a ground loop geothermal field, sized according to the application. If it's a “single sheet” arena (only one rink), we size it for one sheet with building waste heat capability. Instead of putting heat in the ground, we'll use it to heat or dehumidify the building.”
In the absence of a full engineering and design staff, a contractor must team up with an engineering firm or firms that understand ice arena technology and geothermal systems. Then, you have to bring on the skill sets needed to service an ice arena after the installation.
“Arenas come in many shapes and sizes. Some use conventional refrigeration equipment with freon or ammonia, then use glycol or brine as the transfer fluid. Additionally, the multi-staged heat pump and geothermal technologies require another totally different skill set all together,” Roche says.
Plan Well in Advance
Contractors who are successful in these and other niche markets advise others to follow a similar game plan:
know your strengths and where to find support from manufacturers or construction/engineering professionals
establish a marketing plan that will reach key customers
be wise about pricing, and buy equipment competitively.
Vintage Equipment Selections
Dan Phillips, owner, Wine Cellar Services, Santa Ana, CA, says most contractors get started in this market when an existing restaurant customer or supermarket decides to add a wine room. Or, it could be a homeowner request.
“You could also be called in to service the existing wine cellar equipment of someone who isn't your customer, which then allows for a possible upgrade,” Phillip suggests.
Wine Cellar Services manufactures 10 different styles of evaporators, some of which are available in seven different sizes. Technical support is provided by an experienced staff of experts.
Wine Cellar Services also makes custom-designed evaporator coils to fit different applications. They can be soffeted into ceilings, ducted in, hidden behind the racks, or mounted in the wall and hidden behind a wood grille. Others are polished aluminum, for a ultra-modern look. Phillips says proper coordination of an installation requires the HVACR contractor to works with a builder who can build the room properly. Then, the refrigeration contractor steps in, to install the cooling system and customized racking.