The wine industry is estimated to be worth over $825 billion by 2030, expanding at a CAGR (compound annual growth rate) of 6.1%, so if you’ve been curious about how to start a wine business, this should give you confidence in the market’s potential. Whether you’re interested in wine production, running a tasting room, a wine shop, or a wine club, there’s more than enough depth in the industry to support your ambitions.
Why Start a Wine Business
The barrier to entry in the wine trade is lower than you might think. You don’t need to own rolling vineyards and state-of-the-art processing and bottling facilities to run a wine business. You can just buy finished wine from winemakers and innovate in the business side of things to set yourself apart from the competition. This is a major advantage since you don’t necessarily need to be a high-class sommelier or have the resources needed to buy and operate a vineyard.
11 Steps to Starting a Wine Business
Launching a wine business is going to take a lot of hard work and dedication, but it’s possible to set yourself up for success from the get-go by following these steps.
Research the Wine Industry
Start by thoroughly researching the wine industry to figure out how the opportunities available align with your passion. There will be different considerations and licensing requirements to keep in mind depending on the type of business you choose to launch. This part of the process will make sure that you’re fully aware of the challenges that exist in the type of wine business you’re going to launch.
Choose a Business Model
Your passion for wine may be limitless but you need to channel it into the right business model to bring your dreams of running a successful wine business to life.
Retail Wine Stores
The preferred way for most people to translate their passion for wine into a successful career is by opening a retail wine shop, either independently or as a franchise. Bonding with customers over this shared affection is the highlight of this business model. Taking the franchise route also makes it possible to get up and running quickly.
Costs are one major disadvantage of running a wine shop. It needs to be in a good location to have high footfall, so higher rent is a necessary business expense. Licensing and permit requirements vary and obtaining them can often be a headache. You may need to hire other employees as well to ensure smooth operations.
You should pursue this type of business if you’re a people person and love the idea of sharing your enthusiasm for wine with customers.
Online Wine Stores
It’s possible to sell wine online to customers either through a website or a mobile app, once the relevant licenses have been obtained. The biggest advantage of opening an online wine store is that it doesn’t have high overheads like a physical store. It’s a more flexible business model that you can operate entirely on your own.
The logistical challenges are a major disadvantage. Wine bottles are fragile and need to be shipped with care. You need to make sure that customers get them quickly. An increase in shipping costs can eat into margins and reduce profitability.
You should pursue this business if you have the adequate tech knowledge required to run an online platform. If the business is entirely online, the tech stack needs to run seamlessly.
Wine lovers choose to join a club for curated experiences and access to members-only events. If you pursue this type of business, you’ll need to offer curated wine shipment experiences to members. Since wine clubs are typically subscription-based, they bring in revenue from recurring membership fees.
It can be difficult to get a wine club off the ground. You may need to spend significantly on the initial membership drive to get new members onboard. Consider this type of business only if you’re able to provide a service that can continue to meet the expectations of members.
With a winery, you can produce wine even if you don’t own a vineyard. It can be a small or large-scale operation that produces a variety of wines or specializes in one particular type. Wineries typically have a tasting room as well where customers can sample the products.
Running a winery enables you to deliver a unique product that perfectly encapsulates your vision for the business and it also empowers you to better compete with rivals. However, purchasing or setting up a new winery is a very capital-intensive endeavor.
This is best suited to people who have experience running production operations or are willing to put in the time and effort required to gain that experience.
Vineyards are where the grapes are grown. Factors such as the soil, temperature, water, etc all influence the flavor, meaning that you’ll be able to create a truly unique product. It can be very expensive to buy or lease land for a vineyard. Significant resources and equipment are needed to plant, maintain, and harvest the vines. The workload can be intense and there’s always a risk of losing the crop due to improper maintenance.
Since vineyards tend to be unique, you can create a unique brand and thus command higher margins for the product. You can also set up a winery to streamline production and further increase margins. It can often take a long time for new vineyards to deliver a return on investment, so only consider this if you’re willing to give it the time it needs.
Develop a Business Plan
A solid business plan will determine the growth trajectory and ensure that your business is on the path to profitability from day one. A good business plan will cover the following elements:
Research the target market to make informed decisions about product variety, pricing, and marketing. If you plan to offer specialty wines, see if the target market is big enough for the business to be financially viable. Look at your competitors and their products to see where opportunities exist for you to innovate and disrupt.
Regardless of the type, operations for a wine business are always going to be complex. It’s a regulated product and business owners need to comply with strict requirements, including ensuring that the product is not sold to underage buyers. Operating a winery or vineyard is particularly complex as it covers the entire seed-to-bottle process.
Online wine sellers have to set up platforms that make the process of buying wine online seamless for customers. Retail wine shops need to hold considerable inventory and generally have multiple employees to run and manage the business.
Inventory is the biggest upfront cost for a retail wine shop and can vary significantly depending on the wines you want to stock. For example, rare and vintage wines can cost several thousand dollars or more per bottle. You’ll also need display cases, wine coolers, glasses, racks, and other equipment. The average startup cost can be around $50,000 and up, excluding rent, wages, licensing, and permit fees.
Online wine sellers avoid the other overheads and can get by with limited inventory. They need to invest in a good online e-commerce solution which can typically cost a few hundred dollars per month and use social media platforms to promote their business through targeted marketing campaigns.
The costs are much higher for wineries and vineyards, easily running into millions of dollars, as land will be among the biggest expenses, in addition to harvesting, production, and bottling equipment.
The pricing structure will differ depending on the type of customer you’re selling to. You may need to offer negotiated pricing to wholesale customers with slightly lower margins at higher volume.
When selling through a retail or online store, your margins will typically be higher. The average bottle of red wine costs between $15-20 and white wine between $30-40. Consider that the majority of sales are driven by customers in this segment of the price spectrum when deciding what to charge for your products.
A solid marketing strategy is essential to getting your business off the ground. Retail and online stores can both utilize social media platforms to increase awareness about their business and reach new customers. Running an online promotion or offering a discount to people who discover your business online is a great way to drive sales.
Vineyards can offer experiences that enable customers to visit the location, see how the grapes are grown and take part in a curated tasting event. Wineries focused primarily on wholesale customers who can market their offerings in industry magazines, newspapers, professional groups, and conferences.
Name of Business
Choosing a unique business name is very important in the wine business. The name is what makes your business stand out from the rest so it needs to be memorable and brandable. Ideally, it shouldn’t be too complex that people struggle to remember it, but should convey the vision and idea behind the business.
Choose Your Business Structure
You need to set up a legal entity before starting your business. Most people in the wine business will typically choose one of the following structures:
A sole proprietorship is an unincorporated business that has a single owner. It doesn’t provide any separation between the owner and the business, so they remain liable for all of the business obligations, with exposure to their personal assets. All income passes through to the owner who must pay taxes on it through their income tax return. Sole proprietorships are easy to set up and have minimal paperwork requirements, making them a good option if you want to get your business up and running quickly.
Similar to sole proprietorship, a general partnership includes two or more owners and they all share the liabilities of the business and also retain exposure to personal assets. General partnerships can be set up fairly quickly as there are very few documentation and reporting requirements, making this a useful entity type for multiple owners to pool their resources and start a business.
Limited partnerships work a bit differently. They include multiple partners who collectively choose a managing partner to run the business. The rest of them have no management control. The managing partner takes on unlimited liability for the business whereas the other partners have liability limited to the amount they’ve invested. It’s a simpler way for multiple partners to invest in a business run by a more operationally competent partner.
Limited Liability Company
A limited liability company or LLC is the preferred option for most small business owners as it provides them with liability protection, thus limiting the exposure to their personal assets in case the business is unable to meet its obligations. LLCs need to be registered with the secretary of state and are required to file an annual report. LLCs don’t operate in perpetuity, though, can be dissolved in case of bankruptcy or the owner’s death.
Corporations have stringent reporting requirements but they also provide the maximum liability protection to owners. They exist as a separate legal entity and can acquire assets, sue and enter into contracts on their own. Corporations can also raise funds from investors through the sale of shares.
Launching a wine business will require significant funds so you may want to consider seeking financing. If you have savings, you can use those to get your business off the ground. Financial institutions also provide loans to business owners. Expect them to conduct due diligence before approving you for a loan.
They’ll typically want to see a business plan and may also require a personal guarantee. You can also seek out investors, whether those in your social circle or through third parties, who may be willing to lend you money.
Set Up Location and Acquire Supplies
The location is what makes or breaks a business and that holds true in the wine industry as well. The location of vineyards will influence the quality of the product and consequently, your ability to price the product.
If you set up a retail wine shop, it needs to be in a good location that people can find easily and should be large enough to comfortably house the scale of your operations. You’ll also need to buy a lot of other supplies, including but not limited to packaging materials, tasting stations, shelves, glasses, refrigerators, and a POS system to effectively run the store.
Register Your Business
Depending on the type of business structure you choose, it will need to be registered with the secretary of state where it’s based and you will also need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). There may be additional registration requirements in your city or state, so it’s always good to find out what they are before proceeding.
Obtain Licenses and Insurance
The licensing requirements are going to vary depending on the type of wine business you launch. A liquor license will be required if you’re selling to customers in addition to standard business licenses that include alcohol dealer registration, retailer’s license, and winery license. Do make sure that you’re obtaining adequate insurance so that your business has liability protection.
Open a Business Bank Account
Opening a business bank account is the first thing you should do once the entity has been set up. It’s always recommended to keep your personal and business finances separate. This contributes to the effective management of the business and also makes things easier come tax season.
You can visit a bank to open an account for your business. They’ll generally ask for your business formation documents and personal identification before opening the account and offering additional services such as a line of credit.
Hire and Train Staff
Employees represent your business and play a major role in the customer experience. Hire and train the right staff so that they become an asset to your business.
Provide them with the knowledge they need to effectively recommend products and answer any queries that customers may have. Invest the time required to train them and improve their skills so that they can provide a great customer experience.
Market Your Wine Business
Your wine business needs customers so you should now focus your energies on marketing it. Here are a few ways you can do that:
- A good website that highlights your expertise
- Social media accounts that share valuable content
- Search engine optimization and pay-per-click ads
- Print media ads, marketing through other conventional means
- Visiting conferences and networking events
You’ll Soon Be Toasting to Your Success
A wine business can be a lucrative and fulfilling endeavor, allowing you to share your love for wine with customers and make a career out of your passion. If you set it up right and run it effectively, you’ll be toasting to your success in no time.
Effective financial management is key to running a good business and for that, you need diligent bookkeeping. doola Bookkeeping makes managing your books stress-free. It provides complete visibility into your income and expenses, enabling you to see the entire picture and make informed decisions.
Is wine business profitable?
The wine business is very profitable. Producers and vineyards typically have a 50% gross margin on their products whereas distributors and wholesalers have a margin of around 25-30%.
How much money do you need to start a winery?
The amount of money needed to buy a winery is significant, expect it to cost over $500,000 and into the millions. It largely depends on the price of the land where the winery is located and the equipment it has.
Can you start a winery without a vineyard?
You can start a winery without a vineyard, it’s not necessary to purchase a vineyard. You can just buy the grapes and the juice from vineyards, while you focus on the production, bottling, and business side of things.
How long does it take to start a winery?
It usually takes several months to start a winery as there are long processes involved in acquiring the land, the equipment, and all of the other resources required to start a winery that’s capable of producing wine.