Small Wineries vs. Larger Operations: Quality Against Quantity

Quality over quantity – it’s a simple concept everyone is familiar with – but it’s one that is often argued in the wine industry. Can one really gauge a wine’s quality by the number of bottles produced? In more cases than not, the answer is yes. This doesn’t mean that large winery operations aren’t capable of producing top-notch wines, only that when it comes to true artisanal wine, the benchmark is often determined by a limited production.

In small wineries, a winemaker has the control, time, and means to personally taste each and every barrel and tank of wine. Beyond the cellar doors, the vineyard manager will become accustomed to the individual conditions the vines and vineyard sections. In short, small wineries often put more effort and time into their winemaking than large-scale wineries. This level of control is unachievable in massive operations, not to mention it’s less costly to run to a small winery, where less manpower and equipment is required to keep up with demand.

Small wineries are able to take risks, think outside the box, and practice innovative winemaking techniques. For example, small wineries have the time and control to practice impressive winemaking techniques that are highly sought after by consumers.  Practices like using only wild yeast for fermentation (that can lead to more complexity in a  wine), a method that is not used in large-scale operations for sake of convenience. Small wine boutiques also are afforded the ability to experiment with untraditional oak barrels, like those typically used in whisky production which can lead to exciting and unchartered flavour profiles craved by consumers.

When exploring the focuses of a large winery, the goal of handcrafting premium, artisanal wines, are generally replaced with the goal to make as much money as quickly as possible and with the highest profit margins. While the wines aren’t necessarily of low quality, they are produced with less commitment per barrel and made to appeal to consumers with trendy packaging and more attractive price points. The focus is shifted from the hands-on winemaking attention seen in small wine boutiques, to the marketing. By shifting focus to the marketing, large wineries produce higher quantities of wine and rely on the branding to sell as many cases as possible.

How can a small wine boutique find a middle ground that allows them to charge a higher price point that will sell to the masses?  The answer is as simple as the truth – small-scale production implies rarity – a treasured interest for any company. Rarity demonstrates that small is beautiful and that a wine made by a winemaker who painstakingly looks after a small vineyard and winery will always be superior and more authentic than a wine produced by machine-filled, large-scale operations.  The message is as simple as the concept of quality over quantity – small wineries have the time and control to make the wines that consumers are willing to buy at higher price points because they offer a rare quality that can only be found off the beaten path. 

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

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.

The True Impact of Direct Sales for Small Wineries

In this article, we’ll discuss marketing tips for small wineries to sell more of their product directly to customers “out the cellar door.” We’ll also dive into the effect of small tasting rooms and wine sales.

Keep It Local

Keeping costs low is one of the most important things that can be mastered in order to maneuver the wine industry in a responsible way. This is especially critical for small wineries where the bottom line is much smaller than larger scale productions. So, how can you market to the locals while being fiscally responsible in building your brand?

Hosting an event is one way to draw interest into your cellar doors. Marketing can be as easy as placing a sign outside of the front door, on the yard or on poles around the neighborhood. If you’re in a more rural area, try placing an ad in the local newspaper or ask industry websites to send your event out to their networks via social media. Events may include wine tasting hours, cooking courses, festivals, and even small concerts.

Check in with your local chamber of commerce and invest in your local area. Locals are always searching for exciting new things to do and try – and wineries are usually right on the top of the list! In addition to your local chamber of commerce, it might behoove you to check in with tourism boards, hotels, inns, bed and breakfasts, and restaurants. Creating a cross-promotion that brings customers to everyone is beneficial and doesn’t have to be a mutually exclusive arrangement.

Direct-to-Customer Incentive

Silicon Valley Bank’s Wine Division founder Rob McMillan recently hosted a video discussion regarding the effect of direct-to-customer sales for small wineries. His research revealed that “direct-to-consumer wine sales is the future that has arrived.” Over 1,200 representatives responded to the survey, largely agreeing that future sustainability for small wineries would come from direct-to-customer interactions.

It’s currently estimated that 50 per cent of a wine’s success is directly tied to personal interactions with the customer. Customers are demanding that personal attention to make them invest in their new favorite varietals. Simply put, direct wine sales are good for business.

Tasting Room Strategies

When it’s time to open that tasting room, you want to ensure you have the best strategies at your fingertips to market your wine successfully. In Napa Valley, a hub for all things wine-related in Northern California, the rules of the road are: keep it light, educational and engaging, Wineries big and small take guests on tours of the proverbial cellar, answer questions guests may have, and supply snacks and water along with every pour in the tasting room. The experience is inviting from start to finish – and it goes a long way to foster continued brand loyalty.

After a positive experience, new customers often join the wine club, which reinforces the benefits of direct-to-customer sales. Wine clubs often feature specials, discounts and announcements for their members that are off-limits to other customers not on their lists. The membership buys the customer an exclusive look at their favorite winery and their offerings. In return, the wineries are tasked with collecting personal data in an effort to continue marketing and upselling their products to the database of loyal customers.

When a winery takes advantage of cutting out the middleman, everyone benefits. The customer obtains personal one-on-one service and tasting opportunities and the winery enjoys a larger profit margin than splitting it with a go-between service. Finding your network of customers through the marketing techniques above not only ensures positive outreach for the client – it also lays down the groundwork for a profitable enterprise no matter the size.