Morgan & Moore; Want to start a winery?

Wines & Vines,  June, 2008  

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Welcome to our world. Between the two us, we've done just about every thing you can possibly think of in the wine industry. We've grown grapes, made wine, sold it, promoted it and written about it. In fact, between consulting and running our own small wine operations, we continue to be involved with just about everything that makes our industry tick (or not tick, as the case may be). And, uh ... yeah ... we must admit that we haven't always gotten things right during our illustrious combined 50-odd years in the business.

But, as we all know, we learn from our errors. In this monthly column, we plan to share lessons from our diverse experience to help you avoid common mistakes and chart a program to best achieve your professional goals. Each column will address a particular subject related to some aspect of our industry--from production to marketing and sales. We'll probe the nitty-gritty and lay it out for analysis as we have lived it.

In this introductory column, we've elected to touch on a variety of subjects. Moving forward, we plan to focus more on some topics briefly covered here, including: financial planning, creating a product mix through grape sourcing and barrel selection, how to select a custom crush winery, and also how to navigate the world of wine distribution. We hope you'll let us know what you're thinking, so that we may understand how best to address your interests. Feel free to contact us through edit@winesandvines.com.

Three types of winery owners

This being our initial foray, we thought it appropriate to begin with the business of starting a winery. Many of you already know how daunting this can be from first hand experience. Other readers may grow grapes and/or work in someone else's winery. And a number of you may be home winemakers revving up for commercial production. Regardless, we recognize three basic categories of winery owners:

* Those who have made their living in an other arena and have entered the wine business as an avocation

* Those who may have a lot of money but are still careful about expenses, and don't have a high tolerance for losing capital

* Those who have a bank loan and need to pay it off.

Ultimately, no one likes to lose money. Yet getting into--and staying in--the wine business requires an intense outlay of capital. If you anticipate your needs well in advance and create what amounts to an "agenda roadmap," you can avoid pitfalls, save money and focus more on winemaking and sales than putting out fires.

From the very beginning, it's good to have a game plan--even if you have to spend a little money to do some strategic planning. If you've already gotten started, you still want to do the numbers. This may seem obvious, but it's amazing how many people we've met who have started making wine commercially before doing any financial planning. After you've created an annual budget or three-year plan, make sure you double-and triple-check your cash flow analysis. Stay tuned for more concerning this start-up phase in a future column.

Let's assume for the moment that you don't own vineyard land and that you intend to make your new wine in some kind of custom crush facility. Finding the right place to produce the kind of wine you desire is not something to be approached lightly. As more and more independent winemakers arrive on the playing field, a wine country custom crush industry is growing to accommodate them. Each one of these wineries, however, will have its own way of doing things, its own technical parameters and limitations and its own fee structures. In an upcoming article, we'll discuss more specifically what to look for in selecting the right custom crush winery.

Raw materials: grapes and oak

On the vineyard front, you can't go far without raw materials. Where do you plan to source your grapes, which varietals will you be producing, and what price will you pay per ton? In places like the Napa and Russian River valleys, most of the best grapes already are spoken for. So how do you go about finding grapes of distinction?

Let's not forget about oak. If you are using barrels, what coopers and kinds of oak do you intend to purchase? The euro is not working in your favor, and American oak and adjuncts might not fit your wine program. What will you do? More on this later.

So when can we stop thinking about spending and look forward to making money? Many people forget it can take between six months and three years for a finished wine to filter into the marketplace. With red wines, two vintages might be aging simultaneously, which means increased delay on investment returns.

Rely on three tiers

Eventually your wine will be ready to sell. But keep in mind that unless you have been anointed by one or two wine critics--and you can guess who they are--you will need to rely on a network of customers that spans the three-tier system. Direct-to-consumer sales should be an integral part of your sales plan. But until you've got a large list of committed buyers--which can take many years to accumulate--you will also need to pursue distribution through traditional wholesalers and brokers.