A recent survey conducted by the Wine Business Institute at Sonoma State University identified the top five success factors and five top challenges for a successful winery. The research, conducted in the Spring of 2011, included responses from 149 wineries, of which 90% were in California. In terms of size, 59% of the wineries produced under 10,000 cases, 22% ranged from 11 to 100,000 cases, and 19% were over 100,000 cases.
Top 5 Factors for Winery Success
Participants were give a list of 24 factors that are important in operating a winery and asked to rank them on a scale of 1 to 5, with 1 being not important and 5 being critical. The results, summarized in Table 1, show that understanding how to sell wine directly to consumers has now risen to the top spot – especially for small wineries. While this was important in the past, it has become increasingly more so with continued distributor consolidation and an extremely competitive marketplace.
The second most important factor is development of a strong business strategy. This has always been important, but is particularly so during tough economic times. Development of strategy includes continual assessment of both external and internal environments in order to respond proactively, rather than get caught in a reactive response to market changes. Third place is development of a strong wine brand, which is quite challenging in such a saturated market place, however, this, can be achieved with a clear understanding of how brands are built and sustained. Managing winemaking costs ranked above viticulture costs (#7), most likely because these types of costs are often higher; however this can change with fluctuations in grape supply. Finally understanding and keeping up with changes in compliance and regulatory issues has always been an important success factor in the wine industry.
Top 5 Challenges in the Wine Industry Today
Wineries were also asked to identify and rank the most pressing challenges they see in the wine industry today. The top 5 challenges are summarized in Figure 1 and show that concern for increased competition is the most challenging issue. Most respondents mentioned competition from imports as well as the growth of third-party labels.
The second most cited challenge was regulatory and compliance issues. “Way, way, way too many government regulations & taxes!” wrote one respondent. Managing all of the marketing and sales issues in operating a wine business was ranked as the third largest challenge. “Finding creative ways to sell within distribution channels, retail outlets…and direct to consumer” was an example of comments in this category. Controlling high costs to achieve decent profitability margins was mentioned frequently. As one winery leader stated “controlling costs while improving quality,” is very challenging. The fifth major challenge was understanding wine consumers and keeping pace with all of the changes in wine fads. “Adapting to the new trends in wine consumption,” was a common sentiment in this category.
I can help you navigate through all regulatory and compliance issues in a cost-effective manner; establish and protect your brand by trademark registration and enforcement; and develop a successful “Direct-to-Consumer” (DTC) program in your retail store, tasting room, or by mail/internet. Indeed, I can help you with every aspect of the challenging legal landscape associated with the production and distribution of wine.