It is becoming increasingly more difficult for small wineries to navigate the business terrain in light of the continued consolidation that is taking place among wholesalers, and the escalating operating-cost structures that have resulted from a supply shortage of grapes and bulk wine.
[caption id="attachment_68796" align="alignright" width="300"] Mario Zepponi, Cody Jennings[/caption]
Before jumping ahead with the purchase of a large acre estate in Napa Valley, it is essential to assess the marketplace for your potential brand. The vast majority of business in the U.S. wine industry is dominated by larger wine companies. Approximately 90 percent of U.S. wine production is controlled by the 20 largest wine companies.
Given that competitive landscape and other potential contenders, how do you hope to stand out? How robust is your business plan, and do you have trusted partners? Are you utilizing the banks resources and knowledge of the industry? And finally, how do you plan to roll out your wines to turn a sale and make a profit?
These are all questions small-winery owners should be asking -- and finding the right answers -- if they hope to succeed.Command the brand
Define and embrace a core brand identity. The reality of the marketplace is that a wine brand is first identified by its primary varietal category and then by other factors such as retail price point, vineyard appellation and brand personality.
In order to build value in a winery, an owner should envision the business as one wine bottle among many on a retail store shelf. Why would a consumer purchase your wine as opposed to other competing brands that are available, some of which may be offering attractive discounts or price‑to‑quality value propositions?
For every varietal category, there are highly successful small- to mid-sized wineries that command distinction in a varietal category that large wineries cannot emulate. For example, Screaming Eagle with Napa Valley cabernet sauvignon wines, William Selyem with pinot noir wines from Sonoma County's Russian River Valley, and Kistler with Russian River Valley chardonnay wines.
A winery is better able to identify its customer base if it is aware of its brand identity and characteristics. The incidental benefit is that it permits a winery owner to have a more realistic understanding of how best to spend a limited marketing budget.Plan for action