How Financial Crisis Led a Winery to Success
Running a winery isn’t easy. There are grapes to cultivate or buy, fermentation processes to oversee, product to bottle and sell, customers to please, and bills to pay. And when the great recession hit a few years ago, winery owners had one more task to complete: They needed to figure out how to stay open as consumers began to shun luxury wines ($50 a bottle) for more economic ($10 a bottle) ones.
Brett Isenhower, co-owner of Isenhower Cellars in Walla Walla, Wash., came up with an innovative solution to the problem: He cut production and adopted a new sales and distribution strategy. In the process, he says, he obtained some much-needed work-life balance.
The Traditional Model
A traditional winery produces wine and hires an army of distributors to sell it. This can cut down the winery’s paperwork and up-front costs, because distributors already have all of the licenses required to sell alcoholic beverages. But managing the distribution relationships can be tricky.
“Selling wine through distributors is not a walk in the park,” Isenhower says. “If you want the distributor to sell your wine, the owner or winemaker has to make frequent market visits to sell wine and keep the distribution sales reps aware of your wine.”
Distributors also take a cut of the profits for each bottle of wine they sell. When prices are low, that percentage can really diminish profits, he says.
A Shift in Operations
Isenhower initially responded to the recession by cutting back production from 4,500 to 2,700 cases. He then stopped using distributors, opting to sell the bulk of his products through his wine club and two tasting rooms.
This model wouldn’t work for every winery. But it has been effective for Isenhower. "The winery has been bottom line profitable in 2011, 2012, and 2013 while paying off bank debt," he says. Reining in production and distribution has done more than cut costs. “Many of our customers feel closer and are more loyal to the winery now then before,” he says.
That’s because now when customers buy wine, they connect with the family, Isenhower explains. If they walk into the tasting room, they are greeted by his wife, Denise. If they place an order online, they receive a personal confirmation note from him. At formal club dinners, customers can meet the couple’s children, who sometimes create the artwork on the bottles. He believes that this increased engagement makes buyers more likely to support the winery even when their budgets are tight. After all, they’re dealing with a family, not just a business.
Changes to the company have enabled Isenhower to achieve better work-life balance, too. “My daughters are 10, 8, and 6 years old, so spending quality time with them is important, because in a few years they will not need me as much,” he says.
Isenhower no longer needs to travel to markets to help a distributor move wine, and he’s not required to meet those professionals during his busy harvest season, either. He’s also not working at a breakneck pace just to make ends meet, he says.
The takeaway: “The business should work for the owner. The owner should not work for the business. … If you are not happy, then it is not worth all the hassles of owning a business,” he says.
How could you eliminate hassles that aren't worth the trouble and make your business more efficient? It’s a point worth pondering in 2014.
Photo courtesy Mark VanDonge.
Jean Dion is a business writer for Intuit and is passionate about solving small business problems.