Wine Business 101

Posted by Keith Wallace

The wine business has unique traits without parallel in other markets. Wine is an agricultural product, but it’s also a lifestyle commodity; wine bottles are collectible items in some cases. In others, they are merely quaffable thirst-quenchers for Sunday evenings.

The Business of Wine

Wine Economics

Wine is one of the few products that can cost a few bucks per bottle or a few thousand retail. There are over two million wine brands available in the US. Internationally, over seven billion gallons of is produced annually.

The wine trade is here to stay; it’s been around for thousands of years and is now made in all corners of the globe. With dozens of grape varieties and a handful of wine styles, wine is unmeasurable and undeniably engraved in today’s society.

Wine Certification

Most wine professionals do not opt for a university degree. Instead, they seek out certification from a wine school. Are you looking to become part of the wine trade? We recommend professional certification via the National Wine School. Certification is essential in the wine trade.

Wine Labels and Regulations

After all, every country has its laws; wine is a controlled substance. Legislation typically has two main functions. The first is to protect the consumer. The second is to safeguard wine producers from counterfeiters. For example, the European Union developed the AOP system (Appellations of Origin) to guarantee the quality and provenance of its most famous wine styles.

Red Wine Bottle Label Mockup

The US has a similar policy, the AVA (American Viticultural Areas). In a nutshell, the information on the label must be accurate, and the government monitors this closely. Understanding labeling wine laws is essential to grasp the wine business, but so is understanding the laws that regulate the surrounding market, from producers to the end consumer.

Wine Sales and Distribution

To sell wine in the US, you must first go through the three-tier system’s unique path. Set in place soon after the repeal of prohibition, the three-tier system controls the commercialization and consumption of alcoholic drinks.

Three-Tier-System

This is the heart and soul of the American wine trade. A producer typically can not sell its products directly to a consumer in another state; A wine distributor typically has the right to sell the product to licensed retailers. However, only a retailer (a wine shop, grocery store, or restaurant) can sell alcohol to the consumer.

State Laws

The system is more complicated than that, every state has its own rules, and municipal governments often have a say. Some states have relaxed their alcohol laws, but others are as strict as dictatorships.

Direct to Consumer

Laws vary widely from state to state, and what’s OK in some might be strictly forbidden in others. This is why we advise careful examination of your local laws. This is a growing sector in the wine trade.

Illegal in Some States

Wine producers in many states can’t sell their wine to customers across a state line. These are the alcohol control states; this includes Utah, where the government holds a monopoly on all alcoholic beverages, both as wholesalers and retailers.

Liberal states like California allow producers to make on-site sales to visitors, making the wine tourism industry a significant part of the producer’s bottom line. The same states also allow wines to be shipped directly to consumers.

Retail Wine Outlets

Online Wine Shops

Online wine sales have been flourishing. However, the three-tier system holds online wine sales back, as it’s virtually impossible to ship wine across the country because of control states.

Big retailers have circled the strict laws establishing local distribution centers that comply with local laws, while other online wine stores don’t give service to certain states.

On-Premise Sales (AKA Restaurants)

Restaurants are an essential part of the wine business. Once with a valid license, they can serve their customers, which leads us to the following question: How is wine priced?

A restaurant might sell a bottle of wine two, three, or even five times what they paid for the bottle. A winery might sell its bottles of wine to distributors for as little as $5; the same bottle you end up buying at a restaurant for $30.

Even after the pandemic, restaurants are a key sector of the wine trade.

Wine Shops

The traditional way to buy wines, and one that we love. Working at a wine shop is a great way to get into the wine business. If you live near Philly, we maintain a list of the best local wine shops.

Wine Producers

These are the wineries and wine import companies that supply the wine to all of us.

Wine Taxes

Taxes play a big part in the wine market’s inefficiency. Most states charge a per-volume fee that can go from as little as 0.20 cents per gallon (California) to as much as $3.26 per gallon (Kentucky).

Why The Complexity?

All of this might seem a little unfair, but it’s all the result of a lack of moderation in the first half of the 20th century. Alcohol consumers, including wine lovers, are known for over-drinking now and then, but education and social responsibility are quite different today than a century ago.

Wine Trade Q&A

Is the wine business profitable?

Running a business in the wine sector can be very profitable. Along with a stable income, the wine business has a lot of perks.

How do I start a wine business?

The first step in building a wine business is to earn a degree. Whether it’s a business degree, a winemaking degree, or a sommelier certification, it doesn’t really matter. Having some credentials is an important first step.

Is a wine business a good investment?

If you are ahead of a rising trend, the wine business can be an exceptional investment. The rise in winemaking in many parts of the United States is currently a great example of investment potential in the wine trade.

How much money can you make in the wine industry?

Millionaires are made in the wine industry, but the average salary is in the low three figures.

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