subscribe: Posts | Comments      Facebook      Email Steve

The struggle of small wineries

6 comments

 

This is a sad story, told by the Vancouver Sun, about a small British Columbia winery’s legitimate fear that it may get squeezed out of the market. It’s the same old story: Getting harder and harder to compete with the big wineries in shelf space, distribution and price.

When I read a tale like this, my heart goes out to the proprietors. It’s never been easy to sell wine (in either Canada or the U.S.), but it’s getting more difficult. I can’t imagine how emotionally upsetting it must be to put your heart and mind into building a small family winery, then find yourself in danger of losing everything, through no fault of your own.

There are a couple ways small wineries can fight back. One is, obviously, to focus on direct sales. Everybody I know is doing that, but it’s an uphill battle. DTC is trickier than it sounds. You can’t just build a website, start tweeting and Facebooking, and expect customers to flock to your door. It takes years of continuous effort, and even then, there are no guarantees. Of course, if you’re located on a busy road in a popular wine region, you can sell a lot of wine out the door. But not everyone is, especially in a place like British Columbia.

Nor is getting shelf space any easier, particularly in smaller cities and towns and more rural parts of the country. I suppose there’s some motive for a store to sell the local wines, but there’s probably more profit for them to sell distributor’s wines from large wine companies. Here in California wine country, I know that local markets do try to stock the local stuff. But the fact is that small family wineries generally have to charge more for their wine than a big wine company.

Here’s a shocking statement from the Vancouver Sun article: it costs [small wineries] somewhere between $10 and $12 to produce a bottle of wine. If the price point drops below $17, a lot of them are going to be squeezed out of business.” It’s not clear to me if that “below $17” price point is wholesale or retail, but either way, those little wineries up in B.C. seem like they’re facing almost insurmountable odds against them.

In California, small wineries can get away with charging a higher price than they can in British Columbia, but even so they face a dilemma: Do they go up against the popular premium-priced wines from big wine companies (which is virtually impossible, and would probably mean they’d have to sacrifice quality)? Or do they produce a quality wine that costs more than a comparable wine from a big company? There will always be consumers that prefer to buy a wine from a smaller winery, even if it’s more expensive than they want to pay for, simply because it’s a small winery.

But the majority of American wine drinkers are looking for something affordable, and that’s exactly where the big wineries have the upper hand. With their economies of scale and ability to sink their profits into better farming and technology, the big wineries seem destined to grab more and more of the profits.

The only way out—and fortunately, it’s not a complete fantasy—is this current “artisanal” or “craft” movement we see that happened first in beer, then spread to spirits and, finally, wine. It’s wonderful that consumers, mainly younger ones, are committing themselves to products they sense are authentically made by smaller producers. This is not entirely a guarantee of quality, of course, but there is a sense in which small producers understand that the only way for them to compete with the majors is to make wines so good that consumers will happily pay a premium price for them. Of course, there’s an equivalent challenge for big wineries: they, too, have to be artisanal, or at least present the image of homegrown.

  1. Bill Haydon says:

    I wouldn’t say the large wineries are sinking their profits into “better” farming. More productive and efficient farming, certainly. Better? I don’t see it.

  2. Steve, Keeping in mind the hurdles a small BC producer would face building a healthy direct business, I would guess the quoted numbers “$10 to $12” and reference to the $17 would be wholesale(traditionally 2/3 of retail).

  3. Even in California it is not easy to survive as a small producer. Yes, we are blessed with a lot more visitors but we also have a lot more wineries. It is a fierce competition and the larger wineries are usually have the limo companies and hotel concierge in their pocket if you know what I mean. Small wineries keep together and send customers to each other. Visitors like the intimate experience meeting with the winemaker and often better quality wine.

  4. Bob Henry says:

    ERRATUM to a comment awaiting “moderation.”

    Substituting a comma for a period in the number 3,331,577

  5. Bob Henry says:

    My Monday night comment still awaits moderation.

  6. Bob Henry says:

    Redux.

    Steve is invited to delete this when the original comment posts.

    How difficult is it for a British Columbia winery to ship directly to a U.S. resident?

    How expensive is it for a British Columbia winery to ship directly to a U.S. resident?

    I dunno — but I suspect onerously more difficult and ruinously more expensive than a California winery marketing to U.S. consumers.

    So that leaves the domestic Canadian market for this beleaguered British Columbia winery to exploit.

    Let’s volunteer some metrics to frame the discussion.

    Calendar year 2013 wine consumption:

    Canada . . . 14.52 liters per capita, 498,000 thousands of liters (pop. 34.3 million)

    United States . . . 10.62 liters per capita, 3,331,577 thousands of liters (pop. 313.9 million)

    Canada is roughly one-tenth the unit volume size of the United States market.

    Source: http://www.wineinstitute.org/files/Per%20Capita%20Wine%20Consumption%202013_(c)TradeDataAndAnalysis.pdf

    For more metrics, see Euromonitor International’s “Wine in Canada” $900 market research report (June 2015).

    Link: http://www.euromonitor.com/wine-in-canada/report

    For “information on legal issues related to the wine industry in Canada, particularly British Columbia. We cover such topics as shipping laws, marketing laws, labeling laws, environmental laws and licensing. All of the information presented here is written for the wine industry and for wine lovers.”, see this website:

    http://www.winelaw.ca/cms/

Leave a Reply

*

Recent Comments

Recent Posts

Categories

Archives