Why Wineries Fail
- Created: Monday, 05 March 2012 19:15
- Published: Monday, 05 March 2012 19:15
- Written by David DeCiero
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.