A Successful Winery Is More Than the Fruition of Great Chemistry

May 17, 2012 by  Filed under: Management 

You want to expand your knowledge of the wine industry? It isn’t enough to know how to farm and harvest a grape crop and then make the wine, it is equally important to know the business side of making wine. Sonoma State University now offers a series of courses that leads to a Certificate in Wine Business Management, dedicated exclusively to business issues of the wine industry.

It is easy to forget that the start of winemaking is still rooted in agriculture. All those majestic rows of trellised vines we see when driving through wine country are the efforts of farmers. Today the process has advanced with descriptions such as sustainable, eco-friendly, and bio-dynamic. In the final analysis, growing grapes for wine is still farming; not that dissimilar to farmers that grow tomatoes.

A friend of mine is the winemaker at a great winery in Napa. Recently I had the opportunity to taste one of her highly rated red wines and really liked the aromas and the flavors. I ask her how she got these great attributes to come forward in her wine and she said, “I must start with great grapes because you can’t make a great wine from anything less than a great grape.”

All of this leads me to making a point: wine making is a linear process that is a blend of science, experience and Mother Nature. But, giving wine its commercial value is a discipline that is all business. To the consumer, wine might be about romance, introspection, and maybe recalling, with fondness, other times gone-by. Most of all, wine is a business! Obviously, wine must be sold at a profit in order for the vineyards to grow grapes, the winery to build facilities, suppliers to produce products (bottles, corks, capsules, labels, etc.) and winemaker’s to produce wines for their markets.

The academic aspects of making wine have traditionally focused on viticulture and enology and that approach is rooted in chemistry. A couple of the most noted universities in California for training future vineyard managers and winemakers are UC Davis and Fresno State University. However, Sonoma State University is launching a complementing set of courses that stresses the study of the business aspects of making wine-Wine Business Management.

Many years ago a journalism professor asked our class: “What is the purpose of a newspaper?” Many students came up with esoteric answers such as: to inform people of injustices; right societal wrongs; keep politicians honest; and to show that honesty prevails. Well, the correct answer is that the purpose of a newspaper is to make a profit. The business of wine is exactly the same; winery owners must make a profit. Making a 100 point wine will help sell the wine, but if it isn’t done at a profit the chemistry of growing the grapes and making the wine is all for naught.

To give makers of wine skills beyond the traditional chemistry and science approach to making good wine, Sonoma State is approaching their certification offering with the idea that winery owners (and want to be owners) need to focus on the things that keep the business moving forward profitably. Be creative in the business of wine while focusing marketing, finance, operations, planning and people. Sonoma’s approach is to assume the winery has great winemaker’s but might be less sophisticated on the business side of producing and marketing their product.

Business always is evolving, even in wine. The business tools people acquired as little as 5 years ago are out-dated now. For example, look at the impact social networks have had on marketing and distribution.

Today a private/family wine operation is confronted with issues that large wine conglomerates have specialized departments to address. The private wine operation must handle issues that run the gambit from succession planning to hospitality. Ignorance is not bliss; it can lead to ruin.

Wine Business Management is probably a focus that needs constant attention or the edge is lost and then it needs to be refreshed. If a person has taken executive courses in winemaking leading up to a decision to getting into the wine business, ask yourself: Did that focus help you with other dimensions of the business? For example, did you focus on:

• Domestic and international market economics as it relates to costs of goods. In today’s environment owners need to understand the competition from other markets. All countries have a very aggressive approach to marketing their own producers.

• Distribution… a big consideration at all stages of a winery’s life cycle. Consideration must be given to profitability and strategies towards all channels such as wholesalers, restaurant sales, direct sales programs, etc. What worked well 10 years ago may need to be re-examined in light of new trends. Tasting Rooms impact the business in the areas of distribution, marketing, branding and customer service. Lack of attention to the hospitality side of the business (as a channel of distribution) could result in lost revenue opportunities and controlling that channel.

• Are you using the latest economic analysis tools to spot cost changes, pricing and management trends? Are you spending sufficient time doing some strategic planning?

• Marketing encompasses so many aspects of the wine business-pricing, branding, sales, advertising, customer service, packaging, PR and promotions, so be cognizant of the currency of your skill in this area.

• Part of marketing, distribution and branding has to do with the impact of e-commerce on the wine business. A winery need’s to be up-to-date in the trends and developments of e-commerce such as blogs, website functionality, CRM (customer relationship management) and search. Today there are more than 500 blogs relating to wine in the U.S.

• Finance is an area of the business that is most difficult to understand as it isn’t just about debits and credits but it touches on cost of goods, use of credit, impact of discounting, cash flow, budgeting; all departments of a winery are impacted.

• Regulatory issues relate to government (local, state and federal) and issues relating to trends in sustainable farming and winery practices. This touches on branding as there are trends in the industry today relating to the environmental practices that allow wine to be branded as bio-dynamic.

Making a wine could be the easiest part of the wine business. Selling it to the consumer at a profit, now that is the real task. A trial and error approach to managing the wine business is definitely the wrong approach, especially when there are some real important sources available to help a winery owner get the odds of perpetual success more in their favor.

Steven S. Lay has been in the travel and corporate meetings business for 30 years and is now focused exclusively on small luxury corporate gatherings in Wine Country. More information about his company, Symtrek Partners, is available at: http://www.symtrekpartners.com

Mr. Lay has held “C” Level positions in large private and public companies. These companies, in addition to the travel corporate and leisure business, include the defense industry and e-commerce. Prior to launching Symtrek Partners, Mr. Lay was the Vice President of Exhibitor Sales for a major exposition company.

Symtrek Partners is a resource to any company contemplating a highly effective meeting, event or function for a small corporate group. Symtrek Partners is very interested in discussing ideas and options. To initiate a contact e-mail: stevelay@symtrekpartners.com or call 707-927-4205

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