Succeeding In The California
Wine Business By Really Trying
John McKinsey, Partner, Locke Lord LLP
Joe Genshlea, Partner/Founder, Revolution Wines
Wine is a Business?
• Yes, a very tough business.
• There were 3,364 wineries in California in
2010. That’s competition!
• The biggest three wine companies account for
about 90% of all wine produced, worldwide.
• Market access is restricted and challenging.
Wine is a Business?
• Yes, a very unique business.
• Tremendous variation in price for same
product.
• Differing, competing, international traditions.
• Agriculture + food processing + sales.
• In U.S., alcohol regulation history leaves
unique structures to navigate.
Wine is a Business?
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Yes, a fun, creative business.
Art, aesthetics, creativity are all rewarded.
It’s wine!
There are thousands of different wines to
make.
Case Study:
Revolution
Wines
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Being an urban winery to establish solid local customer base.
Growing and/or buying grapes.
Making wine in the city.
Serving food to make winery a destination.
Filling out production capacity of equipment through custom
crush operations.
• Going from local customer base to reach statewide, national
and international markets.
Primary Challenges of Wine Business
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Distinguishing/differentiating your wine.
Getting access to markets.
Selling wine at profitable price point.
Selling inventory before next year comes in.
Managing regulation.
Dealing with surprises and incidents.
Distinguishing Your Wine
By Taste?
Distinguishing Your Wine
By Name?
Distinguishing Your Wine
By Name?
Distinguishing Your Wine
By Name?
Distinguishing Your Wine
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Unique name, labels, story.
Finding product niches to build reputation in.
Getting reviews, acclaim, and demand.
Getting onto store shelves.
Keeping quality high and consistent.
Keeping price as low as you can go.
Getting access to markets
• Dealing with the three tier system
– Producers
– Distributors
– Retailers
Different
in
Each State!
• Dealing with the market dominators
– Big three make 90% of all wine.
– Finding openings to get your toe in the door (shelf
in a store, slot on a restaurant menu, etc.)
Profitable Price Points
• QUESTION: What is the difference between a
$2 bottle of merlot and a $100 bottle of
merlot?
• ANSWER: $98
• A key challenge is setting up a wine business
to operate profitably at a price point it can
compete at.
• Generally, the cheaper the better. But if you
cut costs too much, you will injure quality.
Moving Inventory
• A strength of the wine industry can also be its
bane: its annual cycle.
• Most wineries own their vineyards or contract
to buy wine grapes every year.
• So, each year, you need to move your wine
before the next year arrives.
• In early years of a new wine business, this can
be very hard (Lesson: make smaller amounts
of wine in early years).
Regulatory Compliance
• Wine business may be the most complicated
and regulated business in the world.
– Agriculture, environment, and farm labor
– Art and science of making good wine (the
winemaker)
– Food processing facilities
– Alcohol regulation
– Retail sales and tasting rooms and wine clubs
– Wholesale business to distributors
Unexpected Hurdles
• “The center cannot hold,” “things go wrong,”
“stuff happens.”
– Weather
– Bacteria
– Change in law
– Business partner quits industry or has problem
– Etc…
Resources for Wine Businesses
• California Department of Alcohol Beverage
Control (ABC)– Licenses to make wine and/or offer wine for sale.
– Data collection on grape and wine production.
• Federal Tax and Trade Bureau (TTB)
– Label approval.
– AVA/ appellation approval.
– Federal tax collection on wine.
• The Wine Institute
• Family Winemakers of California
• Local wine trade/industry associations
Time to Go!
Time to Go!
Joe Genshlea, Revolution Wines
joe@revolutuion-wines.com
(916) 444-7711
2116 P Street, Sacramento
www.revolution-wines.com
John McKinsey, Locke Lord LLP
jmckinsey@lockelord.com
(916) 930-2527