Why Wineries Fail

                Over the years I have seen quite a few wineries close their doors.  I have taken notice of the reasons for their demise so that I can more carefully understand the pitfalls in the industry.  This article explains the top 5 reasons why wineries go out of business that I have analyzed.

                The first is a bad product or product mix.  Not all people are destined to be winemakers, and not every region is destined to produce good wine.  Unfortunately, this does not stop people from trying to maintain a business that needs these two competencies.  One recent example was a winery that produced wine from concentrated grape juice that came in a kit form.  Now, I have made kits in my previous winemaking experience for my own consumption.  They are decent tasting and come in at about $5-$7 a bottle to produce.  However, it doesn’t produce anything extraordinary and compares to that which you can buy for that same $5-$7 in a store.  Why then, would someone pay a markup for the same stuff?  The fact was, the product wasn’t that good and people stopped buying it. 

                The second is bad marketing.  Wine is a very crowded space and good marketing is required in order for it to sell.  Ethical marketing is a key component to operating a successful winery, but not every person has the ability or time to do it.  Therefore, you can make the best product possible, but if your customers don’t know about it, it won’t sell.  Worse yet, if you choose a terrible brand name for your wine, your customers may actually be turned off by it.  They might not even go near your winery due to a poorly chosen name.  We have seen a few where I scratch my head and think, what was going through their mind when they came up with that name?

                The third is poor business operations.  Running a winery involves handling multiple different people and functions.  Good selection of employees is critical, but it doesn’t always work out.  Having a poor employee and managing them improperly can lead to disaster.  Especially in the Massachusetts, where the typical winery cannot afford to pay high salaries, they usually have difficulty finding quality talent.  In addition, the paperwork is a tremendous burden and can overwhelm the owner.  The regulations of not only running a business, but also complying with the alcohol regulations is enormous.  If this burden is not handled properly, it can consume your time and take away from other, more valuable tasks.


Buyer vs. Consumer

                The person who buys your product may not always be the same as the user of the product.  It is important to keep this in mind, since you will not want to market to users.  You want to focus on gaining the attention of the buyers.

                The consumer and buyer are not always the same for every product.  Therefore, it is important to understand the difference and market accordingly.  The most recent example of this segmentation was the Old Spice commercials.  They recently had a campaign which featured a bare chested male.  This image was particularly appealing to women.  A lot of people thought this was odd, since Old Spice did not have a brand for use by females.  The key was in who bought the users their deodorant.  Proctor and Gamble found in their research that although men used Old Spice, it was usually their girlfriend or wife who would purchase it.  In addition, men were found to simply use any brand that their female companion bought, regardless of their personal preference.  With this knowledge, P &G created advertising that ensured that women would look for Old Spice on their next shopping trip.  The ads were a success for Proctor and Gamble and Old Spice.  It isn’t intuitive, but through their research of their customers, they found something that would work.

                Bud Light and Miller Lite had a similar experience a few years ago.  Both operate in the very crowded light beer category, where advertising plays a big role in market share.  Bud Light found in its research that women were the ones who were more likely to purchase rather than consume.  In the same vein as the Old Spice, the men would then drink whatever their wife or girlfriend brought home.  So, Bud Light crafted an advertising campaign in which men were made to look sophomoric.  This was appealing to women.  At the same time, Miller Lite came out with ads featuring “catfights.”  Needless to say, Miller Lite didn’t exactly target the purchasers.  In fact, most women were turned off by the ads, although they were well received by men.  In the ensuing sales numbers, Miller Lite dropped off and Bud Light got a boost.  The reason was mostly due to the appeal to the purchasers in which Bud Light succeeded and Miler Lite failed.

                It is very important to understand your customer.  However, it makes sense to understand not only who is using it, but also who is purchasing it.  It isn’t always as simple as men versus women,  but there can be other differences.  This is why it makes sense to fully analyze your customers and understand their role with your product.  If not, your marketing dollars could be wasted on the wrong target.

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