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The struggle of small wineries

August 24, 2015 by  
Filed under Wine

 

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.

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