Having a vineyard can be a very lucrative business investment. In many wine producing areas, it costs about $5,000 an acre annually to operate a vineyard. With wine grapes selling for between $1,500 and $3,500 a ton, an acre of land can produce about $11,000 worth of grapes each year. That is a good return on investment. That means the owner of a small 20- or 30-acre vineyard can easily make $120,000 profit a year or more. The key to success when owning a vineyard is to ensure it is well run and properly marketed. Vineyard owners who do both of those things well can enjoy even greater profits.
The Fixed Costs
The fixed costs associated with owning a vineyard include purchasing the land, the vineyard equipment, the vineyard supplies and paying workers to operate the orchard equipment required to plant, nurture, and harvest the grapes. With proper planning and management practices, vineyard owners can find ways to keep their fixed costs down while maximizing their yields and their profits. Despite the weather’s unpredictability, the vagaries of farming and changes in demand for particular types of grapes in the marketplace, growing wine grapes has long been a lucrative enterprise.
Pretty Predictable Operating Costs
Once the land, vineyard equipment and orchard equipment have been purchased, the vineyard has been established and the cost of the needed annual vineyard supplies has been calculated, a vineyard has predictable operating costs. Once nature cooperates, making a good profit off a vineyard becomes a function of proper, visionary, innovative, management and marketing practices. Disciplined, creative, vineyard owners can find consistent ways to cover their predictable operating costs while identifying lucrative additional income streams that can generate more annual profits.
Tons Per Acre
One decision vineyard owners make that can impact the amount of profit they make is the quality of grapes they grow. High quality varieties of grapes like Pinot Noir yield an average of 4 to 5 tons per acre. Lower quality white and other varieties of grapes can yield as much as 10 tons an acre. The owner of the vineyard has to decide whether they will focus on growing 4 to 5 tons of Russian River Pinot and other high quality grapes which can sell for as much as $3,500 a ton or 10 tons of Chardonnay that sells for $1,200 to $1,500 a ton. That decision will significantly impact their profits.
Prestige Over Profits
Some vineyard owners decide the prestige of being known for growing the highest quality grapes is more important than the short-term profits they can make buy growing lower quality grapes. If they develop an effective long-term marketing strategy and campaign designed to increase the prestige and prices of the grapes they grow, some vineyard owners can increase both the prestige and the profits generated by their grapes. Others find it more cost-effective to simply grow and sell as many low-quality grapes as they can and make their money by doing a high-volume business.
Energy, Imagination, Hard Work and Risk
To make a handsome profit running a vineyard requires an appetite for risk, lots of energy, a vivid imagination, and a willingness to work hard. The amount of each one you need to remain profitable changes from year to year. For some people simply being winemaking renegades energizes them and fills them with excitement and enthusiasm focusing only on profits never will. For them, risking it all to grow high quality grapes recognized, respected and in demand the world over makes up for what they may lose in cash profits. Others use their energy, imagination, hard work and appetite for risk to better manage and market their vineyard and make the most profit possible.
Mass Appeal Versus Niche Marketing
A common marketing decision vineyard owners must make when it comes to the profitability of their wines is what is most important mass appeal or a prestigious niche market. With the right management and marketing strategy, either of these methods have the potential to generate rich returns. Some find it easier to produce a good Chardonnay and sell it to millions of customers, while others may see how it can be more profitable to make millions selling to a few rich customers. The question is in which market one is better able to establish a foothold and a lucrative customer base.
Accurately Assessing Your Skills and Resources
An especially important step that determines if one can make a large and consistent profit is the ability to accurately assess one’s skills and resources. It takes a specific skillset and resources to effectively manage and market a vineyard. Before taking the plunge, it would be wise to be brutally honest with oneself about one’s management and marketing skills and resources. Only people with the right skillset and resources can create, run, and maintain profitable vineyards. Countless inadequately prepared rich, intelligent, people have lost their shirts trying to build profitable vineyards.
Sacrifices and Struggle Is not Enough
Building a successful vineyard requires a lot more than a love of wine and a willingness to sacrifice and struggle. Successful vineyards require a major financial investment before they become sources of pride and profit. They require the knowledge, resources, understanding and connections to navigate the complex red tape, paperwork, rules, and regulations involved in selling alcohol wholesale. It’s so complicated many smart people take years for their vineyards to become profitable. Vineyards also require a substantial amount of money, time and management and marketing skills or they can become awfully expensive full-time hobbies.
More Than A Passion Investment
Among the wealthy, building personal vineyards is the newest trend in passion investments. It allows them to combine investing their money in things they love, with entertainment and enjoying a hobby. For wealthy property owners investing in a vineyard improves their social standing. But unless it iseffectively managed and marketed, a vineyard can become just another passion investment. People who want a vineyard that consistently produces profits must acquire the necessary management and marketing skills or hire a team with those skills to help them to be able to succeed.
Some Key Necessities
There are several key elements necessary for building, maintaining, and growing a profitable vineyard. Those elements include:
- A fertile, sunny, piece of land
- The right amount of water or a good irrigation system
- Rich soil with the appropriate pH balance
- Warm temperature
- Ownership of or connection to custom crush facilities to handle production
- Temperature-controlled jacketed steel tanks for controlling fermentation rate
- Expert advice on financing, management, and marketing strategy
- Vineyard equipment and orchard equipment
- Patience. It often takes two years to produce the first bottle of wine
To create an additional income stream, many vineyards set up tasting rooms and create wine clubs to attract tourists. They also send samples of their wines to industry publications for review. This increases direct-to-consumer sales and generates a growing number of new customers who are loyal to the vineyard and local wine producers.
However, vineyard must be sure to get local and federal sales licenses before selling and shipping the brand of wines that the proud culmination of their effort’s city, county, state and nationwide.
More Than Love and Money
It takes much more than money, a love of farming and being a wine connoisseur to create a profitable vineyard. You also need vision, proper planning, excellent management skills and a well thought out marketing strategy.