August 13 2010
There is a cottage industry of people writing self-help books and giving trade show speeches about following your passion. “If you love what you do, you’ll never work a day in your life,” goes the mantra. But, if you’re a wine enthusiast is following your passion crazy talk?
In fact, there’s a perfectly easy way to enjoy the fruit of the vine and it doesn’t require masochistic tendencies … it’s mostly at the kitchen table with a glass … as a consumer after work from a day job that presumably pays you commensurate with your capabilities. It’s a lot easier that way, surely.
Yet, the notion of jumping into the wine business has been top of mind lately … I’ve been thinking about it because there are precious few wine enthusiasts who are passionate enough to write online or engage in leading social media activity who don’t have a desire to make their way into the wine business either as a member of the media, on the production side, in marketing, or in the supply-chain.
That’s a lot of people ready to pounce on an opportunity if it presented itself.
Some have acted on it; others are attempting to act on it. I’ve already made a sojourn in and out of the business and I still think about it. It’s the genteel nature, the collegial spirit, the rhythm of the seasons. It’s the unfolding drama of watching something grow from nothing in between bud break and harvest and then turn into something magical during the winter quiet, the end result fostering conviviality and joy.
However, despite the mind’s eye mental picture of idyll, the question about going into the wine business has to be asked: Why invite the agony?
It’s not like it’s easy. In fact, I know it’s hard—harder and less lucrative than the industry and job that most people are coming from.
I’ve been reading the stories about the difficult sales environment that persists for most small vintners.
I’ve been reading the stories and watching acquaintances with marketing chops hang their own shingle.
I’ve been reading the stories about the weather in California and the stress of whether grapes will ripen, Mother Nature’s sub-plot this year.
Privately, I’ve been talking with a Mendocino vineyard owner who has 120 tons of very good fruit ripening at this moment. Its 120 tons that’s separate from what goes into his own luxury wine from the same vineyard—and he can’t find a buyer this year after contracts weren’t renewed.
Production in California is “rightsizing,” as they say.
Here’s the math he gave me:
A ton of Chardonnay costs about $1300 to grow and get to market. If he’s lucky, on a contract, he can sell it for $1100 a ton – it’s a paper loss, but a loss that can be rationalized as profitable against hard costs, but certainly not good business by any standard; it’s not “get ahead” living, more “get by” living.
However, if he makes wine from the tonnage, that creates another set of circumstances that has to be dealt with—there isn’t a market for expanded volume with his luxury label so he has to look at a second label. One ton of grapes will yield about 60 cases. So, our grower/vintner has a potential 7200 cases on his hands. This grower can produce an exceptionally high quality wine from these grapes, but would have to forsake oak barrels for oak by-products. Why oak at all you ask? Because the price point and style of wine that’s selling right now requires it.
If he has $4 in costs per bottle and he sells the wine for $8 a bottle wholesale so the wine can go on the shelf at $12 a bottle he has a chance to earn a nice return on the grapes.
But, here’s the rub. The second label hasn’t been created yet and creating a brand takes time and money. Nor is there a sales channel for this to-be-created wine, either.
This marketing and sales activity is outside of his manpower and capabilities, so he would have to get outside assistance – branding, web development, marketing, sales activity. Those are all costs with uncertain returns.
Of course, forget about bank financing because that has become exceedingly difficult to earn, especially for efforts that can’t be associated with hard assets like land or buildings.
It all adds up to this – take a total loss on the grapes by not doing anything with them OR take a huge financial risk by making wine that doesn’t have a brand and doesn’t have a sales destination.
These sorts of stories aren’t isolated to one person, or one segment of the wine business. Every aspect of the wine business supply-chain has a similar tale of woe where getting ahead of “getting by” meets consequential risk.
Yet, undaunted, the allure of the wine business holds steadfast for most.
Getting into the wine business? Crazy talk? Not unless you have an iron stomach, a penchant for hardship, a love for “poker chips in the middle of the table” risk and an opportunity for success that that gives the house a material edge.
Me? I just might simply open a bottle after a hard day’s work of doing something else, passion notwithstanding.