Today, wine can be found almost anywhere. Demand for wine in the U.S. is high - in fact, there are about 240 million Americans who drink wine. There's no wonder you want to start your own wine business. Whether you're a certified sommelier, an avid fan of wine, or a business enthusiast, this guide will explain what you need to know to start your own wine business.
Do You Need Formal Education to Start a Wine Business?
Unfortunately, there isn't a yes or no answer to this question. It's a bit more complex. Education can always help entrepreneurs jump-start their careers, but it's not always necessary.
In the wine business, there are multiple types of wine or business-related education opportunities. Where some might seek formal education in winemaking, others might have studied business and chose to hire a winemaker. In this section, we'll detail some of the common paths to opening your own wine business.
Attend Business School
Although going to business school is not required to start a wine business, it can help you gain valuable education to put back into your business. In many disciplines, formal education goes beyond providing you with the know-how of how to do specific tasks for a career. In business school, you can learn the basics of running a wine company, taking courses in accounting, finance, management, marketing, and operations.
In addition, you may also gain valuable experiences and build a powerful network. Going to business school might help you pinpoint co-founders for your wine business or it might help you network with alumni that can help your dreams come true.
Study Oenology
Another route is to study oenology. Oenologists play a key role in the production of wine, storage, preservation, bottling, and wine sales. The path to becoming a winemaker isn't straightforward. Winemakers come from all different fields. While some might have known they were called to be a winemaker, others might have come from unrelated industries. Oenologists do not need much of an appetite for wine. Rather, the number-one thing they need to know is how to make wine in their region.
Experienced professionals in the wine industry suggest a harvest internship for novices. This way, you can see if you truly want to study oenology or find another path to your business. An internship at a winery can help you foster life-long industry connections and build experience.
Learn From Sommeliers
Alternatively, you can become a sommelier or learn from them! Although a rather romantic idea, becoming a sommelier is a difficult process that requires an extensive level of education, which can prove quite costly. With that said, this education can be incredibly fulfilling, expanding your knowledge about wine.
The path to becoming a sommelier may not be one you care to take, but there are lessons to be learned from these experienced tasters. Sommeliers studied extensively for their certifications, and you can too without the financial commitment. Learning about wine independently or in a group setting can bring your knowledge to the next level. Once you've increased your knowledge of the industry and wine, in general, you're ready to step up your education. Traveling to famous wine regions, such as France, Spain, Chile, Argentina, and Napa Valley, California, can bring your knowledge to expert levels.
Setting Up Your Wine Business
Once you've learned the essential industry skills, you are ready to hone in on your business plan. Identifying your business goals and planning ahead can help you tremendously. Continue reading to learn how to plan your wine business.
Identify Your Target Market
First and foremost, you will need to identify your business's target market. The target market for your wine company is a specified group of customers in which your business will focus its marketing efforts. The targeted individuals should be interested in your wine and the experience you're selling. Not everyone can be your target audience. Instead, learning key details about your audience can help you target them moving forward.
How do you identify your target market? By following these seven steps:
- Pinpoint what the market lacks. As a wine business, what can you sell that your competitors aren't covering? For example, the issue could be the lack of sustainability in the industry and your solution could be selling sustainable, zero-waste wine.
- Highlight customer characteristics. What sets your customers apart? Following the example above, your target audience could be environmentalists.
- Determine your primary market. Not every marketing tactic needs to cover obscure niches. As a wine business owner, your primary market could be wine lovers of a specific type of wine (e.g., chardonnay or cabernet sauvignon), restaurants, or bars.
- Understand your customers. Maybe you've already started to market your winemaking business. Who is currently interested in your wine label? What characteristics do the customers share?
- Learn the industry. As discussed, understanding the wine industry is essential. Use the knowledge you learned about wine and build off that into understanding specifics about the market.
- Find your competitor's target market. Determine who your competitors are targeting. One way to do this is by tracking social media, marketing campaigns, brochures, and sales spiels from your top competitors.
- Identify who buys your product. Although your primary customers might be wine lovers, consider who buys the wine first. For example, a local bar might purchase your wine for a specific niche of wine lovers.
Understand Overhead Costs
The highest gross margin is to sell to the customer directly; however, there are still added costs to understand. As a wine business owner, you will need to consider several overhead costs in running your business:
- Insurance
- Property taxes
- Rent/property maintenance
- Cleaning supplies
- Production equipment repairs
- Utilities
Understanding your overhead expenses is important in pricing your wine based on the costs it takes to upkeep your business. Calculating overhead costs on a monthly basis can help you make quick decisions, determining whether pricing should be increased or decreased.
Determine Your Pricing Structure
More than 80% of bottled wine sold in the U.S. is below $15, putting pressure on business owners to price competitively. Determining a reasonable pricing structure requires that you factor in some of the major costs associated with your business.
Major costs associated with owning a wine business include:
- Labor: Growers for grape production, bottling, maintenance, and winemaking
- Materials: Costs to buy grapes or grow them, glass, corks, packaging materials, boxes, etc.
- Marketing: Social media, website maintenance, etc.
Wine that hits shelves at $10 a bottle would likely cost your own winery $3 to $5 to produce. One thing to consider when determining these costs is the middleman. How many individuals will handle the wine before it reaches the customer? If there are many middlemen before the wine hits a person's glass, it's likely that the end price will be higher.
With these factors in mind, you are ready to determine your pricing structure. One way to do so is by researching what your competitors are pricing their wine at. By understanding a base price in your industry, you can rest assured that you're not just guessing when putting together a pricing structure.
Once you have an idea about what other people are doing, determine price elasticity. Price elasticity is used to measure the relationship between a change in the quantity demanded of a good and a change in its price. In short, test your pricing theories to determine what will work best for your business and target market.
It's (Almost) Wine o'Clock
Before your wine business is ready to roll (or pour), there are a few legal steps you will need to take. Here are the final steps to start your wine business.
Decide If You'll Be an Alternating Proprietor
In the world of wine sales, you'll need to determine whether you'll be an alternating proprietor. An alternating proprietor arrangement happens when two or more persons or entities use the same equipment or space to produce wine. If you decide that your wine company will be an alternating proprietor, you are legally required to have a bonded winery application. Ultimately, this impacts whether you'll be able to ship between states.
Legally Form Your Wine Business
Next, you will need to legally form your business and choose a business model. This means you will need to apply to become a legal entity with your state. There are various types of business structures to choose from depending on the needs of your business. Examples of common business structures include a limited liability company (LLC), corporation, and partnership.
Once you have chosen your business structure, you will need to register your business name. At the least, you will need to register your business name at the state level. It's also recommended to have your business name trademarked so that you can be protected at the federal level.
Apply for a Wholesaler Permit
In most cases, winemakers are not permitted to sell their wine directly to retailers. Instead, you will need to apply for a federal license and, most likely, a state license. As a wine business owner, you will need to apply to the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) for a wholesaler license.
To apply for this license, you will need to submit important documentation, which includes the articles of incorporation or your partnership agreement. Additionally, you will need to include your business's official name and bank/loan records to show how you are funding your business.
Lastly, you should also consider what your state laws are to own a winery and sell wine. Across the U.S., different states have different laws for alcohol production and consumption. Be proactive and know your local laws, which could include a zoning code, local business licenses, unique requirements for distributors in your location, etc.
Start Marketing Your Wine
Remember your target market? Understanding your target market, how your own winery stands out, and what can resonate with your target customer will help you hone in and attract the attention of those that matter.
As a wine business, here are some effective tactics to get customers to notice your brand:
- Offer a wine club to wine-loving patrons who commit to buying 12 to 15 bottles a quarter. This can prove quite lucrative, as wine club sales make up 33% of a winery's average income.
- Set up Yelp and Google My Business accounts so happy customers can leave reviews, potential customers can see your hours, and you can boost references to your website on the internet.
- Provide a tasting room or tasting packages so your target audience gets a taste of your exceptional wine.
- Plan and develop a website for your winery business. The planning phase of website development should not be overlooked, as it's the backbone for the next step in creating the site. When creating your website, consider the look and feel of your theme and optimizing the content for Google and other search engines.
- Create and update social media platforms like Twitter, Instagram, Facebook, and TikTok to engage with wine-lovers and share important news, events, and information about the fermentation process/wine production, and to offer wine tasting to your target customers.
Continually Improve Business Processes
Just as with the pricing model and adjusting according to what you've learned about your audience, you will likely find other areas of improvement while forming and running your business. For example, you might find accounting to be tedious and time-consuming, taking away from your day-to-day duties. Finding the right tools and learning how to improve your business operations will help you run your business more efficiently.
As a wine business owner, finances will need to be a priority in your operations. Streamlining your processes with templates for purchase orders, sales orders, receipts, packing slips, and order confirmations can make your job easier. Skynova offers a variety of helpful, easy-to-use business templates that can be adapted to fit your unique business needs.
Partners in Wine: Accounting Software System and Business Templates
As the owner of a wine business, you need to look after state and federal guidelines, market your business, produce the wine, and work with retailers. It's no doubt that your work is business enough. Skynova helps reduce the administrative stress of running a wine business. Helping you maintain accurate records of your expenses, sales tax, payments, and income, our all-in-one accounting software was specifically created with small business owners in mind.