So You Want to Start a Winery?
Many attendees of the various recent Midwestern wine conferences this year were entrepreneurs gathering information to start a winery. At the Cold Climate Conference in St. Paul on February 24th, 2012, a panel made up of Midwest winery owners discussed various considerations for starting a winery. Participants in the discussion were:
Karin Koenen, Hinterland Vineyards, Clara City, Minnesota, started 2008
David Cushman, Park Farm Winery, Bankston, Iowa, started 2005, 12,000 gal/year
Ray Winter, Indian Island Winery, Janesville, Minnesota, starting third season, 9,000 gal/year
Steve Zeller, Parley Lake Winery, Waconia, Minnesota, started 2008, 2,000 cases/year
Paul Quast, St. Croix Vineyards, Stillwater, Minnesota, started 1992, 16,000 gallons/year
Ray Winter: Before starting our winery, we visited a lot of wineries in the Midwest. The main thing we saw that was working for other wineries was having ample space for parking and for people to sit and enjoy. Space for entertainment is important too. We wanted a location that was big enough that we would not outgrow it in a few years. Being on a paved road was also important.
We’re a family operation. My daughter is the winemaker. She studied enology at the University of Minnesota and worked at a large winery in New York before becoming our winemaker. My wife manages our gift shop. My son takes care of the vineyard. During the season, we’re all on duty during weekends.
We do wedding ceremonies, but not receptions. We close at 9:00 p.m. and I think the best place for a wedding reception is at a hotel.
Karin Koenen– We do production agriculture also, so the winery is a piece in the puzzle. My existing knowledge of plant biology transferred well to the winery. My eldest son who came into the business took classes at VESTA. He and I are the co-wine makers. To some people, that sounds odd. But my son, his wife and I do a lot of talking about how we want to direct our wines.
Another thing we learned early was the importance of networking with other wineries. We made a lot of phone calls in the beginning. Starting a winery, you’re going to feel like you’re annoying a lot of people, but it just has to be done.
Marketing is huge. We’re in western Minnesota, so we have marketing challenges. Our tasting room is small and we focus on wines sales, not accessories or events. As a family, we run the tasting room. We try to get a weekend off here and there. You can burn yourself out in the wine industry. I do love it, but you have to take a few days off now and then.
David Cushman– When we started, we hired an experienced wine maker right away. Having a seasoned wine maker at the start is a plus. I was able to follow our wine maker around and learn for about two years and then I took over the winemaking. When my brother graduated from college, he joined us to manage our vineyards. Things kind of snowballed in the wine industry and, like Karin said, you can get burned out. That’s one of the things you have to think about. You’re doing a lot of jobs at a small winery; you’re a farmer, you’re a manufacturer and a retailer too.
We also have gotten into events. When you start out, events seem like a natural fit. We had people knocking our doors down wanting to do weddings. So we hired an event coordinator and we were booked solid for weddings. Now we are thinking that weddings maybe are not worth it. Weddings bring a lot of people out, but they detract from the winery experience. If you’re thinking about building a new winery and having events, I suggest building an event center away from the tasting room and winery operations.
Our weekend music events do well. We regularly have over 400 people show up to listen to music. That makes your week right there.
Paul Quast– We started a series of music events and a great way to make the events successful is to tie them in with a local charity. This may not always bring lots of people out, but it gives your winery an identity within the community. Charging $5 to $8 for an event and giving a dollar of each ticket to charity helps buoy any event.
What’s also great for marketing is reaching out to other wineries in your area. The best situation is to have six or so good wineries around you so that you form a core destination. If you’re not that fortunate, then you can start a wine trail. You can also team up with brew pubs, antique shops or any business with the same customer demographic and have cross promotions.
Paul Quast: When you’re starting out, local licensing issues can be a greater issue than getting approval from the states or the fed. There was a winery in Minnesota that got their federal permits and state license and started making wine. Then, out of the blue, the local township informed the winery that the township was dry. So the winery could make wine, but they couldn’t sell it at their tasting room. Look into local use permits first. Whatever the local governing power is in your area, you need to know their rules.
Steve Zeller- We have good relations with everyone, including the township and the city. Except for one thing: we’re a mile and one half down a gravel road. The township has a new rule banning any new businesses on gravel roads. If we did not already have our apple orchard, we would have had a half million charge to tar a road. To understand all these local nuances, like how to treat your wastewater, you have to dive deep. The local government wants to help, but there’s eight to ten agencies in our area and we have to understand them all.
And don’t forget about your electrical and utility needs. Some winery equipment requires three-phase power or special circuits.
David Cushman– We had to get a special use permit to build the winery. We could build a hog confinement and nobody but us would have a say. However, building a winery requires a lot of public input. The public input process took us a year. It took longer to get the local permits than the fed and the state.
Tanks are something that you can buy as needed. But I would advise buying presses and filters with bigger capacity than what you initially will be producing. We had to replace most of our equipment within two years of opening because it wore out or was not large enough. You should also buy a sterile filter system instead of trying to get by on sorbates. And finally, before you buy any equipment, ask yourself, “How am I going to clean this?” There is some equipment that will operate well for you, however it will be a pain in the butt to clean.
Paul Quast- I’ve done some modeling of the economics of starting a winery. If you’re using existing buildings, which economizes things, then you need to be around 5,000 gallons a year to break even and maybe have a few bucks to keep for yourself. If you’re building a structure, then the break even number is probably closer to 8,000 gallons a year.
For more information on starting a winery, Iowa State University has multiple planning tools at http://www.extension.iastate.edu/wine/business-plans-feasibility-studies