Why wineries close
It likely seems like a simple answer, but for many wine consumers it becomes more complex and puzzling when one of our favorite wineries shuts the doors. In some ways it is simple a winery closes for the same reasons any other business does, in other ways though it is more complex. Wineries after all are businesses and it is only with the deepest of pockets that they keep going regardless of their economic sustainability.
The non-economic reasons are understandable. An owner of an otherwise successful winery wants to retire and there is not a straightforward way to sell the business, we actually hear of this fairly frequently. Another common occurrence is when someone starts a winery due to their passion for wine, they are good at winemaking and the business enjoys success. The winemaker owner though has another career that they have worked at for a long time that they are also good at. The decision must be made where to spend their time, and the winery comes in second. We also know of many of those. And in other cases a grape grower begins producing their own wine and decides it is distracting resources and time away from the farming operations, we know of these too.
In just the last few months we have heard of a handful of wineries in the Northwest deciding to shut down. A couple have been due to the non-economic reasons, but more have been purely economic. So, why? What happens to a winery that may be one we really like and that seems successful and we go to visit and they are gone?
When we look at this set of circumstance critically, as an industry insider, and can completely divorce ourselves from the emotion of what we think of the wine it comes down to one thing. Pricing of the wine versus what it delivers to consumers. In our column last week we talked about a wine that over delivers, when wine under delivers versus the price though it is a perilous situation. It ultimately is not sustainable and the winery is unlikely to survive even when the economy is robust.
We have seen this set of circumstances play out countless times over the last ten years. We have tasted wines we truly enjoy. Mary and I think to ourselves “that is really good” and we discuss how to work it into the mix here at the shop only to hear the price and, sigh… The next thought is “not at that price.”
Just this past week we saw this situation in stark detail. We heard of a winery that is closing, we are omitting the name for now until we can confirm it is indeed shutting down. We have known the wines for some time and while we thought they were good we also felt they were overpriced for what they were. Many things go into this assessment, but perhaps the most important is competition. Think of it this way, when you increase the price on a bottle of wine how many other wines do you bring into the conversation to compete with that bottle? The other way to tell this is at work is when you have a bottle that seems to languish, but when you drop the price by 25 percent it flies out of the shop. This is more than just customers chasing a bargain, it is an assessment that the wine is worth the lower price but not the higher one.
We understand that a winery may not be able to make the economics work at a price that is 25 percent less for any given bottle. We see it a lot right now in Northwest wineries, but if the wines are not competitive where the winery needs to price them we can virtually see this same endgame play out in slow motion. It is in our opinion the biggest challenge to the wine industry here in the Northwest. Wines from Europe and even some from California are making for stiff competition on a dollar for dollar basis. Our fear is that if the pricing discrepancy is not dealt with we will see more wineries close due to the purest of economic forces.
If there is a topic you would like to read about or if you have questions on wine, you can email George@thedinnerpartyshop.com, or make suggestions by contacting the Healthy Community section at the Coeur d’Alene Press.
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George Balling is co-owner (with his wife Mary Lancaster) of the dinner party, a wine and table top décor shop located by Costco in Coeur d’Alene. George worked as a judge in many wine competitions, and his articles are published around the country. You can learn more about the dinner party at www.thedinnerpartyshop.com. Be sure and check out our weekly blog at www.thedinnerpartyshop.com/home/blog-2. You can get all of these articles as well as other great wine tips by friending us on Facebook at www.facebook.com/#!/dinnerpartyshop.