Thinking of Opening a Winery in Napa? You Should Probably Read this First…
June 3, 2011
This is a slightly unusual post for me, but I should at least give you a short background on the following posts.
This original article appeared on the Quora.com, an extremely useful and fairly new website devoted to questions and answers from people of all backgrounds on a vast array of topics. It’s kind of like Yahoo Answers, except the people answering the questions tend to be much more credible in their knowledge. Make sure you check it out.
So, I stumbled across one answer recently posted by a guy I know named Lucas Meeker, Assistant Winemaker at Meeker Vineyards in Sonoma. Lucas is a very cool kid that I had met once at a tasting after sampling a few of his wines, and I was sizably blown away by the quality of the juice that he’s bottling.
The question Lucas answered was: What are some Strengths, Weaknesses, Opportunities, and Threats of Owning a Napa Winery?
Lucas’s level of insight is INSANE and thought his answer was so impressive that I asked him personally if I had his permission to repost on this website. The original post was almost 3,000 words, and so I have broken it down into 4 “bite-size” chunks. I recognize that most people simply just don’t have the time to be reading an article of that length at one sitting. Even as they stand right now, the posts are still going to be longer than average for this website, so get comfortable!
What follows is therefore a edited-down version of the original Quora post. I haven’t removed any text from the SWOT itself, just a small amount from the preamble. As a running dialogue, I’m going to add some of my own comments throughout the article, in the form of: [Notes like this], and as always I’ve highlighted what I consider to be the key points.
This is part one, the other three parts will appear at the same time over the next few days. Do yourself a favor, make sure you read the whole thing. It’s a very cool little insight into the wine industry, whether you’re already a part of it or not.
What are some Strengths, Weaknesses, Opportunities, and Threats of Owning a Napa Winery?
Answer by Lucas Meeker
I think it should be made clear that a SWOT that tries to argue that starting a winery is a safe, sound, and solid investment plan is basically impossible. At the end of the day, the wine business is about half as volatile as the restaurant business. That’s still insanely volatile. [Having worked in the restaurant industry my whole life, this is already something I can relate to.]
This analysis is based around the concept of a decent amount of start-up capital (but that’s scaleable) and the premise that you’re not a multi-kajillionaire who is happy to lose money for three decades. This is based on the goal of positive cash flow within 4-5 years and at least marginal profitability within 5-7.
N.B.: I’m not including vineyard purchasing / management / ownership / growing in this analysis because the question is specifically about a winery, and you don’t have to own a vineyard to have a winery, and in fact it’s a whole lot more cost-effective not to. One of the presumptions of the other Quora answers is that vineyard is being purchased. That’s not part of the question, and it’s not a cost-effective way to build a winery/brand in Napa to begin with (unless we are talking about millionaires throwing money away).
Strengths
There are plenty, but they come at a very high price if we’re talking specifically about Napa. If you handed me a million dollars to start a winery (which one of the other commenters on Quora suggested was impossible, it’s not) today, I wouldn’t choose Napa. The market is saturated and it’s not a particularly diverse growing region, in my opinion.
The market is saturated for a reason: Napa is by far the most advantageous AVA within domestic winemaking, and perhaps the third or fourth most advantageous in the world behind Burgundy, Bordeaux, and Champagne. That is a massive strength. And it’s easy for people in the industry, who have been exposed to tons of wines, to forget that region recognition is huge.
Sidebar note sort of proving my point here: When I tell people that I’m a winemaker and that my family has been making wine in Sonoma County for over thirty years, about 60-70% of people know what that means. And those are usually existing wine drinkers. People who don’t know, assume that I live in Napa. Seriously, even though I just told them loud and clear "Sonoma County", I regularly get responses like "So where in Napa is that?" I wish I was joking. [I love this! It seriously made me laugh! It’s kind of like when I tell people I’m from England, they immediately assume I’m from London.]
So yes, the strength of region is huge. It doesn’t just extend to casual consumers though. If you look at vintage quality charts from the various magazines (I can’t believe I’m suggesting this because the magazines are so isolated in their own little corner of the industry that it’s hard to believe they still exist (and the saddest part is they don’t even know how isolated they are)), they will invariably place Napa Cabs above Sonoma Cabs in every vintage, without fail. [Took the words right out of my mouth!] This is basically the most ridiculous thing in the world. Are some of the best Cabs in the world made in Napa? Yup. And some of the best are made in Sonoma too, and ours are usually half the price. [Ok, so obviously he’s a little biased being a Sonoma winemaker, but I can’t say I disagree with him.]
Oh, look another strength of the Napa region, you get to charge a price premium for being there. You can basically charge 1.5x to 2x for a similar quality of wine from other domestic AVAs. Depressing (for those of us who aren’t in Napa, at least) but true.
Assuming you’re going to have a tasting room, another strength of the region is the vastly superior visitor numbers that Napa has over competing regions. This comes with its own penalties though… you’ll have more overhead and less average sales success (because a lot of people won’t buy, they’re just there to "experience"), but you can actually make money just charging for tasting if you want (though I wouldn’t recommend it initially).
