Executive Summary
This business plan is for a proposed small premium winery, Top Notch Winery. The business will be located in the outskirts of Washington D.C. Annual production will commence at 2,000 cases in the first year and grow to 10,000 cases by the fifth year. Top Notch Winery’s production will consist four vinifera varietals: Riesling, Cabernet Franc, Pinot Noir, and Chardonnay. Much of the wine will be sold out of the winery’s tasting room, but other distribution such as wine shops and high-end restaurants will be utilized as production increases.
The competitive advantage of this winery will be high quality vinifera wine. Recent market research shows that consumers are yearning higher quality wines at relatively lower prices. There is an opportunity for the proposed winery to excel considering that there is currently a shortage of wineries in neighbourhood that exclusively deal in vinifera varietals. Filling this gap will differentiate Top Notch Wines from its local competitors.
Mission Statement
Our mission is to a producer of high quality vinifera wines from the suburbs of Washington D.C. The winery will offer utmost satisfaction to the end consumer and the business.
Business Description
The proposed winery is a Limited Liability Company (LLC) that will be stationed in the Washington D.C. suburbs of Rockville. The city of Rockville is strategically located approximately 12 miles northwest of Washington D.C., and thus serves as a drinking point of choice for most wine lovers from D.C. and Rockville itself. The suburb was chosen as the location of Top Notch Wines because of the massive renovation that has been done onto the Rockville Town to attract more economic activity (Pisoni & White, 2002). Most of the wineries in Rockville have specialized in native varieties as well as French-American hybrids. The growing demand for high quality vinifera wines from consumers in the region promises good business for Top Notch Wines. This is because of the increasing sophistication of consumers towards high, which has made them favour high quality vinifera wines. Grapes will be purchased from seasoned vineyards in the neighbourhood.
Figure 2: Full time Personnel Expenses & Requirements
Industry Analysis
Statistics from the industry analysis reflect favourable conditions in the domestic wine market as the total domestic and per capita wine consumption on a steady rise since 2000. In the last 5 years, retail wines sales have risen to 9 percent per year. The high premium wine segment generates great amount of revenue, with a revenue contribution of 65 percent.
Figure 3: Current Rockville wine shipment by price
Competitor Analysis
The U.S. wine industry is rather fragmented and highly competitive (Pisoni & White, 2002). Our small premium winery would face intense competition from local, domestic, and international competitors. Nonetheless, we are insulated from rivals outside the region given than most of their sales are done out of the tasting room. As such, Top Notch Wines Center’s direct competitors would be other small Rockville wineries that produce premium wines from the same varietals used.
The recent growth of the Rockville wine market has enabled wineries to expand the product offerings and volume. Consequently, they have larger profit margins along with double digit growth rates.
Figure 4: Number of Rockville wineries producing same varietals as our proposed winery
Marketing Mix
Target Market
The proposed winery targets wealthy, college-educated baby boomers. These are highly wine-educated, often dine out and hold business and social meetings or celebration at wine restaurants (Pisoni & White, 2002). We also target wholesale distributors, in-state restaurants, sommeliers, and in-state wine shop owners who deal in a variety of premium wines.
Product
Top Notch Wines will produce four vinifera varietals – two white and two red – which are: Chardonnay, Riesling, Carbernet Franc, and Pinot Noir. All the varieties suit the cool Rockville climate.
Volumes in year one would be 2,000 cases and increase as increased customer base is attained. Production will reach its peak of 10,000 cases in year five. The bulk of wine sales will be done in the tasting room during the initial years. By year five, it is hoped that a significant percent of wine would be sold to local wine restaurants and through distributors. Also, a full time sales/marketing person would be hired in year five.
Figure 5: Estimated annual case production volumes:
The winery will hire a professional to design an inviting, informative, aesthetically appealing label that reflects Top Notch’s identity. The bottles would be the standard 750-ml bottle that follows the contemporary European bottle shapes and colours: Pinto Noir and Chardonnay in Burgundy bottles; Cabernet Franc in dead leaf Bordeaux bottles, and Riesling in amber Riesling bottles. The bottle corks would be natural 2” long cork while the capsules would be the traditional foil capsules. The winery shall use cardboard twelve bottle cases to package the wine.
Top Notch Winery will also customers additional product activities to create a winery experience, namely: wines tasting daily, education winery tours on weekends, monthly wine tasting class, occasional harvest parties, live parties, and B-B-Q’s.
Price
Top Notch Wines will employ a high quality/high price quality pricing strategy. During the competitor analysis, it was noted that our proposed prices are relatively lower than those in other grape growing regions. Research shows that consumers are increasingly shifting from the current lighter, sweeter wines to drier, more complex wine varieties like ours.
Figure 6: Proposed Wine Prices for Top Notch Wines
Promotion
Top Notch’s promotion goal is differentiation, and all our promotion activities would be geared at reinforcing the winery’s premium positioning status. The target market would be end consumers and middlemen. End consumer promotion events would include dances, crush and bottling parties, tastings, barrel tastings, food pairings, home winemaking seminars, winery and vineyard tours (Pisoni & White, 2002). Middlemen promotion events would include regular visits to restaurants and wine shops, frequent wine samples, and special dinners and barrel tasting for top accounts.
Figure 7: Percentage of Wine meant for Promotional Uses
Place or Distribution
Our proposed winery shall use three wine marketing channels: direct sales to customers, direct sakes to in-state retailers, and selling to distributors.
Figure 7: Base Case Distribution Strategy for Top Notch Wines
Marketing Budget
Top Notch shall spend $5 per case to market its wines. The marketing budget factors in cost of promotional activities with the exception of labour which are summarized in the marketing plan of operations and considered under labour expense. A total of $10,000 in the marketing budget in year one is dedicated to the development of billboards and a webpage. Each year, $1,000 would be added to the marketing budget to cover website hosting and maintenance.
Financial Plan
Money would be spent on constructing of the winery and tasting room, purchase of relevant winemaking equipment, and covering annual expenses. Research showed that wineries are largely capital intensive (Storm, 2000). Further, cash flow analysis revealed that a new winery does not achieve a positive cash flow until it reaches year five. This implies that Top Notch Wines would not expect to withdraw any funds before the fifth year.
Figure 8: Amount of Money Needed Each Year for Top Notch Wines
Assumptions
Financial Assumptions
We estimated the inflation to be at 3.05%. In terms of press yields, we estimate 1 ton of grapes would yield 150 gallons of ready wine. Our product mix shall remain Pinot Noir, Riesling, Chardonnay, and Carbernet Franc.
Fragmentation:
– Pinot Noir: fermented in 1,400 gal. ss jacketed opentop fermenters,
– Riesling: fermented in 1,200 gal. ss jacketed fermenters
– Chardonnay: barrel fermented
– Cabernet Franc: fermented in 1,400 gal. ss jacketed opentop fermenters
Oak Assumptions
– 20 percent new French oak; 80 percent old French oak
Aging periods Assumptions
– Pinot Noir: 1 year in oak, half a year in bottle, then sold
– Chardonnay: 1 year in oak, half year in bottle, then sold
– Riesling: half a year in ss tanks, half a year in bottle, then sold
– Cabernet Franc: 1 year in oak, half a year in bottle, then sold
Percentage of unsold wine
– 14 percent of wine used in promotional events
Marketing channel margins
– Retail prices – Direct sales to customers
– Wholesale prices – direct sales to retailers (2/3 of retail)
– FOB prices – sales to distributors (1/2 of retail)
Financial analysis
– All equity financing
– Tax rate: 40 percent
– Carrying forward loses will reduce future taxes
– Cost of capital: 7.3 percent
Figure 9: Growth Assumptions
Figure 10: Retail Bottle Assumptions
Figure 11: Grape Price Assumptions (10% increase to Top Notch 5 year ave.)
Figure 12: Distribution & Production Assumptions
References:
Pisoni, E.M, & White, B, G. (2002). Writing a Business Plan: A Guide for Small Premium Wineries. Retrieved from: http://buildingfarmersinthewest.org/pdfs/Cornell_Business%20Plan_small_prem_winery.pdf
Storm, R. D. (2000). Winery Utilities: Planning, Design and Operation. New York: Springer.
