Wineries are Small Businesses, Too

Happy Small Business Week! I have been thinking a lot recently about the fact that most wineries are part of that quintessentially American story:  entrepreneurship.  What better time to acknowledge that fact than during a week dedicated to celebrating the vital role of small businesses in our economy and our culture?

There are almost 9,000 bonded wineries in these United States.  Yet, approximately 90% of the wine consumed in the US last year was sold by the top 10 companies.  This means that the American wine industry is principally made up of very small wineries selling locally produced wines directly to customers in their communities.   In other words, winery owners are small business owners.

To celebrate their week, I am offering to those hearty souls – the American wine entrepreneur — a few of the success-strategies I have observed over my 30-year (!) career working with small business owners:

  • Know Your Numbers It is surprising but not uncommon when I work with a winery to find that the owners do not know the actual costs of producing their wines, and most importantly do not know that cost in relation to what the product is being sold for (net, of course, of sales incentives and other direct selling costs.)   It is a boring but necessary part of running a wine business to understand which products are working, and which are not, in the only sense of the word “working” that should matter to a business owner: profits.
  • Do Not Fall In Love Being passionate about your winery is an important component of selling wines in a crowded marketplace.  However, the successful business owner makes rational decisions.  I have great admiration for a client of mine who has tried twice to launch products based on a varietal he loves working with as a winemaker.  But twice the wines have failed to take hold in the marketplace.  And so for a second and final time he has effectively “shot the product in the head” and moved on.
  • Be a Businessperson First, Winemaker Second I like to say, somewhat tongue in cheek, that I can tell a winery that is run by a winemaker by the number of SKU’s it has.  Back in my commercial banking days, a client called me during harvest, very excited, to say “I have an opportunity to get some incredible Syrah grapes… What do you think I should do?”  To which I replied, “It is better to let your business plan guide your grape purchases, than to have it the other way around.”
  • It’s About Selling, People Wine quality is necessary.  Authenticity and a compelling “story” are important. But it’s selling that separates the men from the boys in this industry.  And by “selling”, I mean (see above) getting your wine(s) into the hands of the end consumer at a price that allows you to pay your bills, reinvest in your business, and make a good living.

It has been an honor throughout my career to work with the entrepreneurs who are such a vital part of the American story.  These are the people who generate two out of three new jobs in our economy.  In the wine business in particular, with its capital intensity, regulatory hurdles, and stiff competition, those who choose to take a chance and set out to start their own company are real economic heroes.

So to all of you, keep fighting the good fight!