Do you want to know how much money winery businesses make yearly? If YES, here are 8 factors that determine the income & profit margin for wineries. A winery is a production facility that is used mainly for the production of wine, or a business involved in the production of wine, such as a wine company. It is the norm for wine companies to own many wineries.

Besides wine making equipment, larger wineries may also feature warehouses, bottling lines, laboratories, and large expanses of tanks known as tank farms. Wineries may have existed for as long as 8,000 years ago. Wineries basically employ employees known as winemakers to produce various wines from grapes by following the winemaking process.

This process involves the fermentation of fruit, as well as blending and aging of the juice. The grapes may be from vineyards owned by the winery or may be brought in from other locations. Many wineries also give tours and have cellar doors or tasting rooms where customers can taste wines before they make a purchase. Winery architecture is very varied and rich and it is used by wineries as a way to promote their wines and cellar doors.

How Do Winery Make Money?

  1. Standard winery make money by producing and selling (wholesaling, retailing or exporting) top taste and fine products such as Chardonnay, Cabernet Sauvignon, Merlot, Pinot, Grigio, Pinot Noir, Sauvignon Blanc, Zinfandel, Riesling and other blends of wines
  2. Farm wineries make money by producing fresh wines on the farm, and the final product is also sold on the farm
  3. Many urban wineries make money by offering production tours and a traditional tasting room for this purpose and also offer retail sales. This allows the consumer to purchase directly from the source ensuring that wines have been stored correctly and not subjected to extreme conditions that can occur in transport which can occasionally result in spoiled wines.
  4. A few urban wineries also make money by incorporating full-service restaurants or venues for live entertainment. Many also offer their customers the ability to make their own wine under the guidance of their winemaking team.

Amateur winemakers can choose the grape varieties, select an appellation, make production decisions along the way and participate in the final blending, bottling and even design their own labels. This has spawned a new generation of boutique wines that are available in micro quantities as small as 30 bottles.

8 Factors That Determine How Much Money Winery Make Yearly

The truth is that there is no one mold-fits-all when it comes to how much a winery is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average Winery make yearly and these factors are;

1. The Size of the Winery

One cannot conveniently state the amount a winery is expected to make yearly if you do not know the size of the Winery. As a matter of fact, the amount a mom and pop Winery is expected to make annually will be far different from the amount a standard Winery franchise with several outlets will make annually even if they operate in same location.

Of course, the amount invested in a small Winery is different from the amount invested in a large and well – organized Winery hence the amount they will both make will be different. For example, a small vineyard that produces 2 tons per acre makes about 1,440 bottles, or 120 cases, while an acre that yields 10 tons produces about 7,200 bottles, or 600 cases. Switching over to metric, yields are measured in hectoliter (100 liters) per hectare.

2. The Location of the Winery

Another decision to consider is where your business will be located. When choosing where to site your business, you will have to think of the climatic condition as grapes thrive in dry climates, cool days and hot nights. This is why places like Arizona and California are regarded as top wine growing and producing regions in United States of America because they have climatic conditions that suit the growth, cultivation and harvesting of grapes.

One good thing about winery business is that it is not location bound; you can start the business in the outskirts of town, in the middle of town or any location as long as you can secure a facility with government approval for the kind of production business that you want to start.

All you need to do is to ensure that you choose a good location that can give you easy access to raw material and available market. You can produce your bottled wine in the outskirt of town and still maximize sales. This is possible because all you should be concerned about is how to ensure that your bottled wine is distributed nationally and of course internationally.

In essence, you should ensure that you strike a balance in between securing an affordable facility in a good location and easy access to raw material, labor and available market.

3. The Type of Wines Produced in the Winery

Another important factor that will determine how much a winery is expected to make yearly is the type of wines produced in the winery. You will agree that there are wineries that produce top taste and fine products such as Chardonnay, Cabernet Sauvignon, Merlot, Pinot, Grigio, Pinot Noir, Sauvignon Blanc, Zinfandel, Riesling and other blends. The profits you are expected to make selling these different types of wines will sure be different.

4. Other Related Products and Services Offered by the Winery

Aside from supplying a wide range of wines to wholesalers, retailers and exporters, a winery can also make money by taking unique approaches. For example, a farm winery makes money by producing fresh wines on the farm, and the final product is also sold on the farm.

Many urban wineries make money by offering production tours and also offer retail sales. This allows the consumer to purchase directly from the source ensuring that wines have been stored correctly and not subjected to extreme conditions.

A few urban wineries also make money by incorporating full-service restaurants or venues for live entertainment. Many also offer their customers the ability to make their own wine under the guidance of their winemaking team.

Amateur winemakers can choose the grape varieties, select an appellation, make production decisions along the way and participate in the final blending, bottling and even design their own labels. This has spawned a new generation of boutique wines that are available in micro quantities as small as 30 bottles.

5. The Management Style of the Winery

Another key factor that will determine the amount a winery is expected to make yearly is the management style of the Winery. Trust me, the results you will get when you have a good manager and an average or bad manager will definitely be different. The idea is that a good manager will not just retain old customers, they will also keep getting new customers especially through recommendations.

6. The Business Model of the Winery

There are different business models that a winery can adopt and these business models offer different results. For example, some winery may decide to either own their vineyard and some may decide not to.

So also the amount a winery that also runs an online store with deliveries make yearly will be different from the amount a strictly brick and mortar winery will make yearly. Please note that different types of wineries adopt different business models and here are some of them?

Types of Winery Business Models

a. Farm Winery

A farm winery is a type of winery that allows farms to produce and sell wines on site. Farm wineries differ from commercial wineries because the fruit which is the source of the wine is usually produced on the farm, and the final product is also sold on the farm.

b. Micro – Winery

A micro-winery can either be at a small farm vineyard is a small wine producer or may not have its own vineyard, and instead source its grapes from outside suppliers. The concept is similar to a microbrewery, in that small batches of product are made primarily for local consumption.

The concept of the micro-winery is not as easily accepted as that of the microbrewery, however, as the general public has been conditioned to associate a winery as having a vineyard. A winery uses similar wine-making equipment as a major commercial winery, just on a smaller scale.

c. Urban Winery

The urban winery is a recent phenomenon whereby a wine producer chooses to locate their winemaking facility in an urban setting within a city rather than in the traditional rural setting near the vineyards. With advances in technology and transportation, it is not a problem for an urban winery to grow their grapes in a remote location and then transport them to the urban facility for crushing, fermentation and aging.

Urban wineries have been opened in cities across the United States including San Francisco; Sacramento; Portland, Oregon; Seattle; Frederick, Maryland; New York; Cincinnati; San Diego; and Los Angeles to name a few.

7. The Advertising and Marketing Strategies Adopted by the Winery

Another key factor that will determine the amount a winery can make yearly is the advertising and marketing strategies adopted by the Winery. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.

But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a winery that is engaging in aggressive advertising and marketing to make same amount yearly with a winery that is passive with its advertising and marketing.

8. The Number of Years the Business is in Existence

Lastly, another key factor that will determine the amount a winery is expected to make on a yearly basis is the number of years the business is in existence.

For example in your first fiscal year (FY1) you might make a hundred thousand dollars ($120,000), in your second fiscal year (FY2) you might make two hundred and twenty thousand dollars ($220,000) and in your third fiscal year (FY3) you might make four hundred and fifty thousand dollars ($450,000). Interestingly, most businesses including wineries usually breakeven from the third year of operation.

The amount a winery will make yearly is also dependent on the current price of grapes and other supplies needed in the production of the wine, especially if you don’t own a vineyard. Besides, wineries have to account for all the production costs.

That includes vineyards and winery, sales, marketing, loans, real estate, building maintenance, and administration. For example, the average price per ton of grape increased by 6.9 percent from $800 per ton to $855, with white grapes increasing in value 8 percent to an average of $635 per ton and red grapes 5.5 percent to $1,019 per ton.

The Estimated Profit Margin of a Winery

In the United States, wineries sell a case of wine for $100, which is around $8 or more per bottle and they make $50. That covers administrative costs, taxes, and profits. Usually, the average wine producers (wineries) and vineyards will make about 50 percent gross margin.

Wine distributors and wholesalers tend have a wine profit margin of around 28 to 30 percent. Restaurants and bars have around a 70 percent profit margin on wine, while retailers are typically between 30 to 50 percent.

Solomon. O'Chucks
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