How To Start Your Own Winery Business
Owning your own vineyard is perhaps the most romantic dream and many of us have toyed with this idea. But anyone who works in the industry will tell you starting your own winery won’t be an easy thing to do and the romantic images are hardly a reality.
But if something is difficult, it doesn’t mean it is impossible. Nothing should stop you from starting your own winery, you just need to make sure you focus on all the right things and plan your business venture well.
This guide will help you consider whether owning a vineyard is the right thing for you and help you focus your research on the right tracks. You’ll also read about the main aspects of setting up a winery and the different routes you can take in order to get into the wine business. You’ll also learn about the importance of marketing and the channels for finding support.
In this articles, you will learn about 1) doing a winery for the right reasons, 2) do your research, 3) three different routes to starting out, 4) understand and define your audience, and 5) look for support.
DOING A WINERY BUSINESS FOR THE RIGHT REASONS
Before you start imagining yourself sitting on a beautiful porch, sipping your homemade wine, you need to understand the realities of wine business. Running your own vineyard is by no means an easy thing to do and if you aren’t in it for the right reasons, you are very likely to falter chasing an impossible dream.
Although it is naturally possible to make money with a winery, you shouldn’t expect to become a rich person overnight. While you can start turning in money quicker by buying an established winery (as you shall see below), it will still take around three to five years for a particular grape type to develop into a quality wine. This means that you won’t become a rich vineyard owner overnight.
Running a vineyard is definitely a long-term investment and you could have to wait for a decade or two before you start to reap benefits. If this isn’t what you are looking for then you are better off searching for other types of investments.
Not everyone gets into the business as a quest to make some money. If you are just looking to turn your passion for wine into a hobby, then you don’t need to bury your dreams. As you will see later on in the guide, there are different ways to get into the wine business and your goals as a winery owner might influence which of these routes you take. The key is to understand the realities of starting and running a winery and to make sure your own goals fit these realities.
DO YOUR RESEARCH
Before you go and buy a vineyard, you need to conduct proper research to ensure you know what you are getting into. As mentioned above, starting out and keeping a vineyard alive won’t be easy and you want to be on top of what to expect before you make the commitment.
A proper research isn’t just to guarantee you know what you are getting into, it is also to ensure you make the right choices to help you succeed with your winery. You don’t want to start growing grapes, for example, that aren’t suited for your climate.
The main areas of research as follows:
1) Locate the ideal location for your winery
Location is crucial for running a vineyard. While it might sound like a lovely idea to open a small vineyard at your parent’s old country estate, the soil might not be suited for growing grapes in the first place. Furthermore, different climates are good for different types of wine, so you need to understand this.
As a rule of thumb, grapes tend to prefer regions with warm summers and short, mild winters – frost being a key threat to grapes. You want to treat your grapes with plenty of sun.
Places such as Napa Valley, California in the US, Boudreaux in France, and Barossa in Australia are among the world’s most famous wine regions. In fact, locating your winery near other vineyards can be a good idea, as you’ll have great support network and professional network surrounding you.
If you aren’t very confident in understanding the soil requirements, it is always a good idea to consult a professional.
2) Select the grape type
Once you have some idea of your ideal location, you naturally need to start thinking about the grape type. As you might have gathered already, the soil can have an impact on the kind of grapes you are able to grow – by selecting your location you are likely to limit your grape options to a few. You can, of course, also pick the grape first and then find the suitable location.
The world’s grape types used in wine are divided into three different species. The most popular one of them is Vitis vinifera, used in nearly 99% of all wines. You might know the grape type from the wines it is used in such as Cabernet Sauvignon, Chardonnay and Pinot Noir.
You’ll also have Vitis labrusca, which is mainly grown in the northeastern US and Canada. The third major species is called Vitis rotundifolia grape. These grapes are very sweet and often used in dessert wines.
The below YouTube video has more information on the grape varieties of the world:
3) Make detailed cost calculations
As mentioned above, starting a winery is not easy nor is it cheap. Just like with any business venture, you must do research on costs to guarantee you don’t end up in financial difficulties.
The key to understand is that starting your own winery will probably cost at least twice the amount you think. As you’ll seen below the starting investment might depend on the route you take, but be aware that you won’t have a lot of income coming in for the first few years. So, you need to have plenty of money to invest at the start and a way to live without the income from the winery.
Naturally, the investment needed also depends on the scale. If you aren’t expecting to sell your wine bottles in their hundreds of cases, you won’t need as much. But if you want to create a real business with your winery, six or even seven figure investments aren’t uncommon.
4) Overcome red tape issues
You’ll encounter a lot of paperwork when setting up a winery. A lot doesn’t mean just a few forms here and there, running a winery will means long nights of filing forms and plenty of red tape you need to overcome.
There are some national differences naturally, but you should expect to have to deal with a number of licenses and permission from ministries in charge of alcohol and beverage departments. You also need to sort out the health and safety regulations. This is all before you can start organizing or the usual business paperwork, such as taxation, sale tracking and computing.
Make sure you understand the amount of paperwork required beforehand and look at some of the forms. If you aren’t comfortable with this aspect of the business, you can find help from consultancy and accountancy firms, for instance.
5) Options for diversification
Finally, it is a good idea to look into aspects of diversification before you get started. Making a lot of money from wine production might not be enough, so you need to plan for ways to diversify your income source.
Perhaps you could include a small B&B type of service to your vineyard or offer tours for tourists on your farm? There are different ways you can put your vineyard and knowledge for use and ensure you have other sources of revenue while you also focus on your wine.
THREE DIFFERENT ROUTES TO STARTING OUT
There are three different routes to starting your own winery. Depending on your expertise, available investment and your goals for the winery, you should pick the most suitable of these routes.
#1. Set up a vineyard
The first is naturally to start your own vineyard from scratch. This is often the most favored option and naturally gives you plenty of freedom in terms of finding the ideal location, selecting your favorite grape type and creating the kind of wine brand you want.
From these different routes, starting from scratch is the hardest route in terms of the amount of work you need to do. While it gives you the above freedoms, it does require a lot more work and you need to wait for quite a long time before you start reaping the benefits.
While the above section on research, gives you plenty of knowledge in terms of the things you need to sort out when starting a vineyard or a winery, here is a recap of the things it’ll take:
- The licensing requirements – You need to sort out the licensing requirements before you get started. The licensing requirements are different depending on national and state legislations, but in general, you must fulfill certain health and safety requirements, as well as get the approval to grow and sell alcoholic products. If you are planning to sell your wines at the vineyard, you often require further licensing for that.
- Facility approval – Once you have set up the facilities to produce wine, you need to get them checked. You need to have regular facility approvals conducted to ensure everything is up to standards.
- Location – You need to pick your vineyard location based on the soil conditions and the type of grapes you want to grow (See section on research).
- Trellising and irrigation systems – You need to ensure the soil and farmyard is suitable for wine cultivation. Grapes need plenty of sunlight and water, with a proper irrigation system to ensure your grapes don’t get soaked.
- Raw materials – As well as picking the grape type, you’ll also need to sort out other raw materials. If you are looking to be in charge of the complete winemaking process, you’ll need to get tannins, minerals and sugars.
- Equipment – In addition to raw materials, you also need to get all the equipment sorted out. You’ll naturally need plenty of cultivation and farming equipment to keep your grapes in good condition. But you’ll also need the fermentation tanks, filtration equipment, bottling line system and equipment to label your wine bottles.
- Distribution – You’ll need to manage the distribution of your wine as well. This means ensuring your wine bottles get in one piece to the shops. Depending on your ambitions, you might need to sort out distribution routes from region-wide to nation-wide or even international routes.
#2. Buy an established winery
You could also skip many of the above steps and opt to buy an established vineyard or winery. This still involves plenty of work and you will have some ability to change the branding of the wine, for example, but in general, it is a bit easier. You most likely won’t need to worry about distribution routes, setting up the equipment and raw materials and you might even have an established brand you can use.
On the downside, starting with an established winery will require a lot more money in many instances. Professionals in the field say you need to pay at least 30% more often when you are buying a winery, so think whether you can afford it.
On the other hand, you’ll be able to enjoy the fruits of your labor much quicker. You won’t need to spend time sorting out the regulatory issues and the grapes are already growing. The start-up time is typically up to five years shorter. So, if you are looking to get started with a winery quickly, this is much better option to the above route.
Since so many things are already sorted out, the learning curve is shorter and easier. You just need to get to grips with what is already in place – no need to learn how to get it all started.
If you find a vineyard in sale, don’t immediately go to the bank and organize a loan. You need to do some research into what makes the current owners sell the winery? You don’t want to spend a lot of money in buying a vineyard that isn’t working, especially if the reasons behind the downfall are something difficult to correct or overcome.
#3. Focusing on the retail part
Lastly, if you are purely looking into getting to the wine business, you should consider focusing on the retail part instead. The wine industry has plenty of different opportunities available, not all of them mean you need to become a wine-farmer.
You could start working with a passionate farmer and just be in charge of the branding and retail aspect of creating the winery. You could even consider buying grapes from established farmers and make your own blends. You’d need to get a location for creating the bottling unit and spend money to get the equipment needed, but it might be a good idea if you don’t have a passion for farming.
UNDERSTAND AND DEFINE YOUR AUDIENCE
No matter which route you take, starting out your own winery is not just about the grapes and bottling. You will need to focus on branding as well if you want to succeed with your project.
Here are some basic tips for getting your marketing up to speed:
1) Defining a target audience
Like with any product, it is crucial you do some basic market research and set up a target market for your wine. Ask yourself what type of wine you are making? Is it a dessert wine, a high quality wine for passionate wine enthusiasts, or a cost-friendly wine for average consumer?
Wine brands even go as far to have the average buyer in mind. Perhaps your wine has the flavor to appeal to foodies or maybe it is for young professionals having a good time. The key is to clearly create the perfect wine for your audience.
2) Learn about marketing your product
Marketing has changed a lot with the technological revolution and you need to do some research in how your wine is best marketed. It is a good idea to look what other producers around you are doing – not to copy, but to get ideas!
Learn about the traditional methods, like direct marketing and newspaper marketing, but also focus on the new marketing methods of social media. As you have a target market in mind, you can aim your marketing efforts to appeal to this audience.
3) Generate interest
People won’t just start picking up your wine bottles in-store – you need to generate a buzz around the product to ensure the target market finds them. There are plenty of ways to do this. You could be organizing competitions, special events and giveaways to ensure people are interested in testing out your product. Make sure you are also present in different farmer’s market events, local celebrations and different wine events across the country.
In addition, you shouldn’t wait for having your wine ready for sale. It is crucial to start marketing your wine even before it hits the market. This could be through social media campaigns or even some sort of kick-starter projects.
LOOK FOR SUPPORT
Don’t let the above information put you off either, as there are plenty of ways to find support. Don’t think about doing it all on your own, use the expertise of people who have already done it.
It is especially important to join your country’s wine producer associations, as well as look for help for new start-ups. You can also often find regional associations and these can be a great source for help and support during the setting up process.
Furthermore, if you’d love to run a vineyard but you are a little unsure about the farming aspect of starting a winery, you can get help from estate managers. You could still live and breathe wine production, but you’ll have someone else looking after the more hands-on aspects of farming.
On the other hand, if you just want to run your winery as a hobby, it still doesn’t mean you shouldn’t enjoy some financial fruits of your labor. But instead of running a business yourself, get someone else to deal with the business side of winemaking, while you just enjoy owning a vineyard!
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Dear fellow entrepreneurs and readers of Entrepreneurial Insights / Cleverism! In autumn of 2014 …