How to start a wine business
This practical guide for starting a wine and spirits business includes fundamentals, strategies, a free financial planning template and hands-on advice from those successfully working in the industry right now.
A must-have tool-kit providing much of what you will need to become a successful wine merchant, retailer, importer or agency business.
The right time to start a wine business
In the last couple of decades, the wine and spirits market has expanded globally, driven by independent wine producers and speciality spirits. eCommerce has grown significantly, alongside emerging B2B platforms, while consumer digital channels show promise.
Despite challenges like market volatility, fluctuating interest rates, and periodic squeezes that impact discretionary spending by consumers, opportunities abound for newcomers with clear strategies. Amidst change, the enduring appeal of wine as both an epicurean aesthetic and luxury item endures, attracting foodies, hedonists, investors and entrepreneurs.
If you’re thinking about becoming a new entrant, this guide is for you. Santé!
Establishing Who You Are
Purpose
Define your purpose and a go-to-market proposition. In a noisy competitive world, being crystal clear about who you are and your ability to describe what that is, matters.
Build a picture (persona) of each target market or segment by characterising who they are, and why they’re going to be drawn to your proposition in particular.
What are your differentiators and therefore your right to compete?
Here are a few top-of-head examples:
- Relationships with sources of supply
- Customer experience
- Distinctive offering
- White glove/ advisory service
- Nature of your online proposition
Operating Model
Then consider the following business operating models and ask yourself how suited each is to your proposed offering.
Define your business as one or more of the following and describe what it means in terms of market positioning. Think about whether you see yourself as being a traditional operating model similar to existing market participants, a challenger or a disrupter and describe what makes you so.
- Importer
- Agency
- Merchant
- Broker
- Retailer
- Investment Business
Wine Inventory Choices and Working Capital Intensity Profiles
The following type of wine inventory choices describe the fundamentals of what product proposition is going to best support your business goals, or what mix of stockholding strategies you believe are optimal for your operating model, which also speaks to your approach to working capital (cash).
The relative merits of being a stockholder, or holding next to no stock in your own name, or determining a middle ground based on specific use cases, will in large part be a reflection of how you position your business.
Stockholder
Ties up capital, potentially allows for higher margins if the nature of the stock list allows you to keep enough stock back to release when everyone has sold through. Opens up pretty much all market segments to be serviceable by you, including consumers, on-trade, and other wine businesses.
Virtual Stockholder
Frees up capital, potentially allowing more money to be invested in people and marketing (all else being equal). Enables your business to offer a vast amount of SKUs, defines who you sell to because of delivery times. Requires management of stock feeds and a focus on margin management to ensure customer acquisition doesn’t become loss-making.
Blended Stock Strategy
Typically a stockholding core list augmented with virtual sources of supply, allowing for experimentation, enables a business to respond to what’s selling well at any given time. Encompasses the virtues of a stockholder and virtual stock model, and provides a degree of diversification in support of reaching a broader addressable market whilst still attaining gross margin goals.
Consignment/Brokerage
Characteristically similar to virtual stock (because the stock isn’t on your balance sheet) but in practice different due to you taking the primary margin and advising clients on secondary market pricing and market health.
Whilst there are plenty of wine businesses who strongly adhere to the merits of being a stockholder, there are rather few who adhere to a pure-play virtual stock model. At a very high level, here we propose some of the relative merits of the various models.
Insider Tips
Tom Mann, MD of wine merchant Mann Fine Wines and Violaine Manac’h, Co-founder of wine importers Halo Wines, have both started a wine business in recent years and could not have done it without help. Hear what they have to say.
Planning Your Wine Business
When we spoke to wine business owners and asked them what they’d do differently at the start up phase if they were to begin all over again, most of them wished they’d done more planning. They felt that more preparation would have provided a faster start and may have honed assumptions and provided a sharper point of market focus.
Research
A key planning step is validating your assumptions with quantitative and qualitative data.
Complete quantitative research online, use free AI tools like ChatGPT and gather free summaries from research sources like Neilson, Statistica, CBI Business Intelligence. You may be able also to validate some assumptions about the size and success of competitors you benchmark yourself against using subscription services such as Data Gardener.
If you’re getting money from backers, this data is useful to describe the size of the market, and to validate why there’s plenty of room for new entrants even where there’s lots of competition.
Qualitative research is arguably the most important research activity when serving highly fragmented markets, and will include discussing assumptions with potential customers who are verified as being squarely within your serviceable addressable market, finding out what their positive and negative experiences are, where they feel underserved, and which needs carry a higher priority in their minds than others.
Using email platforms to capture the research results that offer questionnaire functionality, or using a market research platform will help quantify the results rather than just relying on intuition. You can create your questionnaire and conduct your own analysis using an email tool like Survey Monkey or go to a market research expert, many of whom have their own platform and will conduct analytics for you. We also like QuMind.
Forecasting
Reviewing numbers based on assumptions and flexing those numbers according to your ‘what ifs’ is an essential planning step to verify whether your ideas are as strong as you think they are. It’s a great way to sense check assumptions and model the results of the first few periods’ income, gross margin and net profit in relation to the top line. Forecasting further out becomes rather more hypothetical with future scaling up.
Simple business forecasting comprises sales, cost of goods, gross margin, expenditure, and net profit before and after tax.
A good place to start your ‘what ifs’ is around expected gross margins since that speaks to how important it is to engineer your business to generate a strong bottom line. Based on expected gross margins and operating costs, how profitable is your business likely to be?
Creating a business planning financial model that allows you to flex assumptions is not straightforward, so we’ve created one for you!
Remember to also grab the user guidelines here for a step-by-step guide on how to best use our exclusive template.
Grab your FREE Financial Planning Template
Be one step ahead by working through P&L forecasting assumptions and ‘what ifs’, using this free financial planning template.
Insider Tips
Gilles Corre, MD of Asset Wines and James Sowden, Director of Cavendish Wine, cannot stress enough the importance of stock management when running a wine business. From logistics to informed buying decisions, listen to the wise words of these two wine business experts.
Get started with your startup checklist
Leave no stone unturned and avoid delays by using our start up checklist, created specifically for new wine businesses.
Choosing the right technology
Why spend on technology?
Why worry about technology from the outset until I know that I’ll be successful? Of course, you can start out managing your business on an accounting package and a spreadsheet.
There are two reasons why deferring the decision to start up with an inventory management platform that’s fit for purpose for wine and spirits may be a false economy:
Firstly, working on an inventory management system that masters all stock positions (e.g. physical, due, consigned and virtual) will prevent mistakes from being made that otherwise may be costly to remedy. Industry veteran Bud Cuchet, from Cuchet & Co, moved onto the Wine Hub after a few months’ trading and reckoned it has paid for itself purely based on the money he has saved from not making inventory-related mistakes.
Secondly, moving onto a wine and spirits business management platform well after you’ve started trading will involve a considerable investment in time and avoidable costs associated with data migration. If you are a well-established business with a large and fast changing stock position, pending orders and history, it’s not possible in most scenarios to avoid a costly data migration project.
As a start up, however, you are in an enviable position of starting with a more or less clean slate. Starting as you mean to go on, on the same platform as when you’re a business billing 7 or 8 figure sums. Taking this route will save money and reduce business risk further down the line. It does mean selecting a software provider whose platform offers the scalability and approach to supporting businesses of all sizes, enabling you to start small, on an affordable package, and using more of the functionality as you grow.
Operating efficiency and growth
Software should be an enabler of a business, not something that a business has to fit into. It should be possible to quantify its benefits, as we did in the business financial planning template, taking a hypothetical fine wine merchant as an example.
Software evaluation
One of the questions we get asked most frequently is, do I choose cross industry software used by all sorts of businesses (and that has general business applications such as accounting baked in), or do I go for an industry specific choice that connects to best in-class accounting, marketing and so on?
This is particularly critical when considering stock management in the wine and spirits industry. In fact a fundamental question to answer is, will XYZ software handle all the different inventory types that I need to provide for given my chosen business model, and therefore the range of stock I intend to encompass? We explore this question here.
We should say up-front that we believe in the value of industry specific software that’s adapted for wine businesses out of the box, and that’s capable of delivering an immediate return on investment for wine business start ups.
The shift of software into The Cloud and the provision of software as a service (SaaS) changed the landscape of business management operating platforms, because integration via APIs became a lot easier. That means it’s now possible to choose highly adapted software just for those aspects of a business where it’s needed, and connect to best in class software for everything else.
Read about the evolution from ERP to digital operating platforms (DOP), a term coined by tech consultancy Forrester Research.
Insider Tips
Should you be considering launching a wine and spirits business, we hope this guide helps give insight and raise questions to help you confidently pursue your entrepreneurial dream. This industry is very special in how it supports one another, so don’t be afraid to ask industry bodies, ourselves and other wine businesses for advice.
We’ll also be adding to this guide ongoing, as we collect more insider tips, advice and resources, so check back again for new valuable content.
Good luck with your new venture!