What Does a Small Winery Consist of? How Small is a Small Production?

The Wine Press

by | May 2018 | Industry News

May 2018 | Industry News

The term vineyard is synonymous with luxury, romance, and wine. Wine lovers and entrepreneurs around the globe glamourise the idea of owning a vineyard and opening a winery to produce their very own premium wines. But before you start picturing yourself on your winery veranda, sipping the fruits of your labor, you need to know that the reality of opening a winery is often less romantic than imagined and replete with a multitude of variants and practicalities.

First, let’s tackle the variables. When deciding to open a winery, you are met with a magnitude of options. Do you grow the grapes and enlist the services of a custom crush facility to produce your wine for you? Do you start from the ground-up and purchase bare land, plant the grapes and wait at least 4 years for the vines to mature? Perhaps building a winery and purchasing the grapes is your plan? Maybe you wish to acquire a pre-established vineyard and winery? Will you mechanise your production process or go the hand-crafted route? The amount of options goes beyond the aforementioned and each come brimming with their own list of pros and cons, which require personal research and forethought.

Fast forward to when you’ve decided what model of small winery you’re going to open and let us discuss the practicalities of equipment and manpower. Standard equipment needed for opening a winery include tanks and barrels; pumps, hoses, and clamps; a destemmer and wine press; a bottling line; lab equipment, and let’s not forget making sure your small winery is temperature controlled. Some equipment and lab work can be hired or outsourced; however, during peak season, availability and price can be competitive.

For a small winery of, let’s say, 20 acres, it would be considered average to employ a vineyard manager, winemaker, and one assistant, plus additional help during harvest season. If you want to sell your wines directly (the biggest potential for maximizing profit) you’ll also need a sales and marketing team. Staying true to the variable theme, the equipment and manpower necessary for the success of a winery are dependent on the business model and size of your operation, which leads us to our next point of discussion – production size!

How small is small? A small winery is something that is difficult to define based solely on production size. We can all agree that small, or boutique wineries (sometimes also called ‘artisan’ or even ‘authentic’) are often associated with higher quality wines. It’s safe to say that industry professionals will agree that any winery with a production size that does not exceed 10,000 cases annually would neatly fall into the small winery category. But here’s where it get’s complex – if small wineries can target the market that is willing to pay more for quality wine, and we can agree that the true determining factor of a small winery is quality, then how does one explain that some of the finest premium wine producers can make upwards of 30,000 cases a year?

Furthermore, if one winemaker can make between 6000-7000 cases singlehandedly from vine to finish, what about the producers who use two side-by-side winemakers to craft 20,000 cases from the finest grapes in the region, is this still considered a small winery? When opening a winery you will undoubtedly be faced with deciding where you fit into this subjective category of both quality and size. It would be remiss not to mention that the annual case production size of a winery and the quality of it’s wines are not necessarily connected, but let’s save that topic for another time.

Lastly, let us focus on the advantages and disadvantages of opening a small winery, and most importantly the return on investment. We’ve already established that small winery products appeal to a market that is willing to pay more for premium quality wines. If the winery has an attractive location, the product can be sold directly to the consumer. This allows for the highest profit gain as it avoids any external intermediaries of distribution. Small wineries would also have lower operating costs, but when compared to larger operations a small winery is faced with higher costs per bottle, and they are also more susceptible to the economic impacts of possible vineyard disease or a poor growing season.

There is a well-known joke in the wine industry that goes: how does one make a small fortune in the wine industry? You start with a large one. While this joke is a deliberate exaggeration, it does capture the expensive nature of starting and maintaining a small winery. As discussed above there are countless options to consider when opening a winery, but regardless of the route you take, it won’t come cheaply. Multiple financial studies are available and show that when opening a winery from the ground-up most wineries start to make a return on investment after year ten. While gains are substantial, the investment is clearly long term. If you stick with it you’ll not only have a vertical collection of wines from the last decade, you’ll also have a bona fide successful winery.

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