By: Quinton Jay
When it comes to creating a roadmap for your winery’s success, it can feel daunting to generate one that is both flexible and remains in line with your winery’s goals as a business. If it’s too flexible, then it will be difficult to keep your planning strategy aligned to your internal initiatives; if not flexible enough, your plan can break apart the first time you encounter an unexpected hurdle.
The landscape of wineries, and wine as a business, is far different than that of five or ten years ago. Because virtually every piece of the value chain has changed — from distributors and retailers/restaurateurs to consumers and capital providers — new strategies, partnerships, and resources are necessary to ensure your winery’s continued success.
Each piece of this chain has a unique impact on your winery’s business and its future as a brand. In order to not only survive but thrive amidst these changes and others affecting the wine industry, it is paramount that each winery formulates and implements a multi-faceted plan of success to help carry its business forward into the future. As founding father Benjamin Franklin once said, “a failure to plan is planning to fail.” However, like most aspects of operating a business, creating and enacting a successful roadmap is far easier said than done.
For the past 20 years, I have managed, consulted for, and invested in dozens of wineries and other businesses in the wine industry. Each one of those businesses, regardless of size, location, or consumer market all share one commonality: the most successful ones were those that possessed the foresight to plan for both the best and worst-case scenarios. In order to help you create a solid plan for your winery or wine business, I want to help offer some key steps to get you started.
Step #1: Gather the Facts
Whatever your business plan will look like, you need to have a clear picture of what your aspirations and goals are for it. The obvious caveat here is that, to do this successfully, you will need to envision what you want your business to look like in the future. Do you simply want to be your own boss or create an environment that is a fun and enjoyable place to work? Do you want to grow your winery into one boasting 1,000,000 cases with wine sold throughout retail chains, or do you want to grow it into one with 5,000 cases with a focus on direct-to-consumer sales?
Whatever your specific case may be, the first thing you need to do when forming your business’s plan is to gather the facts. This starts by analyzing your business’s segmentation, targeting, and positioning in the marketplace. Segmentation, or the process of grouping customers within a market according to similar needs, characteristics, or behaviors, will provide four key benefits to your business:
● Opportunities for building and strengthening long-term relationships with key customers and partners;
● Improved marketing efficiency and effectiveness;
● A better understanding of the competitive landscape, and;
● Faster responses to the changing needs of your customers
Once you have the facts of these segments gathered, the next set of facts you need to acquire are those acquired through consumer market research. By gathering information and trends on your wine business’s target market — including who they are, their likes and dislikes, and whether those markets are growing, declining, or remaining steady — you can better understand their wine consumption statistics, trends by price points, as well as the various demographic and geographic trends of that market.
After these facts have been answered and gathered, you will have a far clearer picture of your winery’s competitive niche, be it through a specific product (or set of products) or as a brand. From there, begin researching competitors with similar niche offerings. Who are they? What are their price points and pricing strategies? Is their business growing, declining, or remaining steady? What are their strengths and weaknesses, and how will your business compare to theirs?
Lastly, you will need to gather facts about your market’s current conditions. For example, take a look at your distribution channels to see which ones are consolidating or undergoing management changes. Another example of this is to find out whether your target consumer market is purchasing more wine at restaurants, retail stores, or online. Along with external conditions such as changes in shipping laws or current economic fluctuations, each of these fact sets will play a heavy role in determining what your winery’s business plan will look like.
Step #2: Analyze, Synthesize, and Develop Strategic Initiatives
After you have accumulated the different sets of factual data affecting your winery or wine business, the next step in formulating your business plan is to synthesize these facts with the strategic initiatives you develop that will affect your business’s marketing, sales, and finances as an operating brand.
Marketing Plan
As a brand, your winery can be defined as the relationship between your business and its consumers. It is a promise to the consumer to deliver a particular experience each and every time. This is what makes the key element of successfully marketing your business dependent on understanding your customers, including their likes, dislikes, and expectations.
By defining and analyzing your target market(s), you will be better poised to integrate your gathered facts into your marketing plan. You will also need a clear understanding of what your business’s goals are as an organization, which is where your consumer market research — as well as your competitive data set — comes back into play.
Sales Plan
Once you know what your business’s market is and who it consists of, you can then begin constructing a sales plan to forecast future sales, revenues, and prices. This plan will also let you identify gaps in your supply chain such as those in your distribution network, forecast additional human resources necessary to make the sales you’ve forecasted, and evaluate opportunities for direct-to-consumer (D2C) sales, and the costs of goods sold (COGS).
Production/Winemaking Plan
Though it may seem obvious, one integral part of a winery’s plan that often gets overshadowed is its production sales inventory (PSI) model. The PSI model allows you to forecast production and the tons of grapes needed to produce each case of wine made, as well as highlight vintage overages or shortages in sales and changes in release dates. Your PSI should also include a plan for sourcing grapes or bulk wine, as you will need to forecast the number of needed (and excess) tons of grapes both by vintage and product, and will help your business determine strategies in dealing with needs or excess of product.
Overall, your production plan’s purpose will act as a precursor to your financial plan, as it will grant you the ability to analyze internal capacity and forecast the following factors:
● Crush, production, and dry goods expenses;
● Barrel needs;
● Bottling costs, and;
● Capital expenditures
In order to create the clearest picture of these possible, you will need to gather historical data and information on your business. This historical data will likewise play a key role in forming your business’s financial plan.
Financial Plan
When gathering and analyzing your business’s historical data, you will want to consider factors such as your historical crush and production expenses which include your COGS. Keep in mind that salaries, benefits, supplies, repairs/maintenance, utilities and rent, as well as depreciation all play a part in calculating your COGS. Along with this, your business’s packaging, bottling, and warehousing costs will also factor into your COGS value.
Now that you have a clearer picture of your business’s COGS, as well as its sales and marketing plan, you can get started on formulating your financial plan. This will help you summarize your gross revenue, price support, EBITDA (operating profit), and net income, as well as craft stronger balance sheets and cash flow statements to better understand your business’s profitability by its products sold.
Along with these factors, your financial plan will also need to include an income statement to show your business’s operational performance over time, a breakeven statement to show the volume of revenue from sales to balance the sum of its expenses, and a product profitability statement to compare your revenues COGS, and gross profit per case to ultimately determine which products are generating the most profit for your business.
Each one of these individual plans is meant to help form concise and easily understood strategic initiatives for your winery or wine business. Together, they act as the foundation for creating and implementing those initiatives, as well as helping to determine which initiatives are meant for short-term or long-term business growth.
Step #3: Aggregate Into the Business Plan
Still with me here? Great — now that we’ve covered each crucial element to your winery’s plan, the next step is to outline that plan in a way that is easily digestible for you, your core team, your partners, and/or investors. As an example, a general outline for your business plan will appear as follows:
I. Executive Summary
II. Business Description
III. Marketing Plan
IV. Sales Plan
V. Winemaking/Vineyard Operations Plan
VI. Management and Organization
VII. Finances
VIII. Appendixes
Incorporating all functional plans of your winery or wine business into one unified document is where the results of each prior phase gets pulled together. This business plan will serve as the guiding document for your business’s entire organization, as it coordinates each sub-plan together to prepare them for execution.
When aggregating each sub-plan into your unified business plan, remember to collectively review your business’s strategic initiatives and incorporate them into the business plan according to each initiative’s specific function to ensure that your business’s structure — including its capital structure and financing — are geared for long-term growth and success.
Step #4: Develop Tactics and the Operating Plan
The last key step in forming a solid plan for your winery or wine business is to develop tactics and its operating plan. Though similar to a business plan, your operating plan is less an outline for your business as you envision it in the future and more a roadmap for how you will get it there.
As a rule of thumb, the tactics you create for your business must include (and clearly answer) the following criteria:
● What will be done?
● When will it be done?
● Who will get it done?
● How do these tactics define our success and how that success will be measured?
This is the point in planning where your key performance indicators (KPIs), otherwise known as the metrics used to measure your business’s success internally, become a vital element of your business’s future success or failure. If you haven’t already created KPIs use the SMART method:
● S: Specific
● M: Measurable
● A: Actionable
● R: Realistic
● T: Time-bound
Each metric used to measure your business’s success should contain a logical sequence of tasks, goals, and milestones, and should take into account your possession of the right resources and relationships to carry your organization forward through periods of growth.
With these final elements outlined, you can now incorporate all of your strategic initiatives and tactics into one final plan: your operating plan. This plan will serve as your business’s roadmap and a working document for each strategic initiative, and must also contain each actionable tactic listed as a supporting factor to those initiatives which will help you achieve your goals.
Concluding Thoughts
There is no single business or operating plan that universally supports each winery or wine business operating today. In order to create the clearest and strongest plans possible, it is your responsibility as a business founder or owner to understand your business inside and out. Once you do, you will be better positioned to formulate and integrate a plan that serves your unique business and its goals for continued success and future growth.
