# Going Commercial



## sdelli (Jul 7, 2018)

Well...... Another hobby that got out of hand and now taking to the next level. With my cellar approaching 1400 bottles and wine season just around the corner. I figured it was time to find a way to start making it go away or my hobby would have to stop. So, I am getting my small wine makers license and have purchased a small commercial house in a quant downtown city. The basement is being converted to a wine cellar. The upstairs is going to look like a wine cafe. Starbucks style. Wine tasting, Free internet, Wine parties, Wine classes, Crush parties. Rent the cellar out for small parties.
Still renovating.... Hopefully done in a couple months.
The name.... “The Wine House”


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## sdelli (Jul 7, 2018)




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## sour_grapes (Jul 7, 2018)

Best of luck, sdelli! Hope your new endeavor really takes off. (For the record, I would have been willing to stop by and help you keep your 1400 bottle inventory under control!  )


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## CK55 (Jul 8, 2018)

NIce,


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## ibglowin (Jul 8, 2018)

Congratulations! Looking forward to watching you take the next step.


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## CheerfulHeart (Jul 8, 2018)

Best luck in your new adventure! Looks like it's going to be a great place to be.


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## Kraffty (Jul 8, 2018)

I'm suing for Copyright infringement! Congratulations, very cute looking building and an exciting and hopefully fun adventure. Keep us informed, lots of updates and pics. Mike


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## sdelli (Jul 8, 2018)

Kraffty said:


> I'm suing for Copyright infringement! Congratulations, very cute looking building and an exciting and hopefully fun adventure. Keep us informed, lots of updates and pics. Mike
> View attachment 49688



Funny... Maybe other way around. I registered mine. How is it working out?


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## CK55 (Jul 8, 2018)

sdelli said:


> Funny... Maybe other way around. I registered mine. How is it working out?


lol


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## crushday (Jul 9, 2018)

sdelli said:


> Well...... Another hobby that got out of hand and now taking to the next level. With my cellar approaching 1400 bottles and wine season just around the corner. I figured it was time to find a way to start making it go away or my hobby would have to stop. So, I am getting my small wine makers license and have purchased a small commercial house in a quant downtown city. The basement is being converted to a wine cellar. The upstairs is going to look like a wine cafe. Starbucks style. Wine tasting, Free internet, Wine parties, Wine classes, Crush parties. Rent the cellar out for small parties.
> Still renovating.... Hopefully done in a couple months.
> The name.... “The Wine House”


This sounds intriguing and something I’m considering. Can you keep me posted on the licensing process? My personal email is [email protected] - that would be amazing...


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## HopsandVine (Jul 9, 2018)

Congrats and best of luck with everything!


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## Boatboy24 (Jul 12, 2018)

Best of luck! Please keep us posted.


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## GaDawg (Jul 12, 2018)

As a hobby we make wine we like, as a business we make wine others like.


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## CK55 (Jul 12, 2018)

GaDawg said:


> As a hobby we make wine we like, as a business we make wine others like.


Haha, I make wine that others like as I do not drink much wine. So I guess I'm operating more of as if I was a buisiness even though I'm a home wine maker


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## askins3097 (Jul 15, 2018)

Congrats. I’m hoping to do something similar after I graduate grad school. My entrepreneurial project is going to be based around a unique winery concept. 

Pennsylvania has finally eased up on their restrictions and created a lot more options with what you can do with a limited winery license so it’s pretty exciting in that regard. They’re starting to pop up everywhere. If they would just get rid of the 350 mile radius rule for produce, I think small private wineries would become as popular as craft breweries.


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## WinoDave (Jul 16, 2018)

Congrats. Wishing you much success.


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## sdelli (Jul 18, 2018)

This past Monday I got City Council approval for a commercial wine makers license! It was a tough road with them and this should be the last piece of the puzzle the state needs to give me my license. Especially since there is another one a few doors down that makes wine kits.


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## KevinL (Jul 19, 2018)

Congrats! I'm on a similar journey myself right now. I actually have my hearing with the city next month.

All the red tape is maddening but manageable. I figure at the very least I'll get one of my hobbies to pay for itself.


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## sdelli (Jul 25, 2018)

Had my meeting with the city a week ago. Kinda sticky but all went well! Got their blessing. Now the last part is getting all my ducks in a row for the local state inspector and we should be on our way!


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## sdelli (Jul 25, 2018)

The Wine House been getting a lot of work done the last month or so. Wine cellar almost finished. Painters in painting. Wood floors getting sanded and finished. I am back in Italy so shopping for some unique things to add to it.


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## CK55 (Jul 25, 2018)

sdelli said:


> The Wine House been getting a lot of work done the last month or so. Wine cellar almost finished. Painters in painting. Wood floors getting sanded and finished. I am back in Italy so shopping for some unique things to add to it.


Good  Cant wait to see it when its 100% completed


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## KevinL (Jul 25, 2018)

If I had the spare cash to have someone else do my dry walling it is. As it stands I've put in the sinks for my Winery (Ran the plumbing) and have been building it out with good old fashioned sweat equity. I've got my ILCC (State) Inspection next week.

Great to hear things went well with the city. It's going to be exciting to see what it looks like when it's done and to start moving the wine!


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## sdelli (Sep 30, 2018)

Well... It has been a hard run these past few months but just a final inspection and I have my small winemakers license to produce wine for sale!


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## sdelli (Sep 30, 2018)

And The Wine House is done!
Just build and fill the wine cellar now....


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## sdelli (Sep 30, 2018)




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## sdelli (Sep 30, 2018)




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## sour_grapes (Sep 30, 2018)

Awwwww-RIGHT! Congratu-lucking-fations! It looks great.


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## ASR (Oct 1, 2018)

Congratulations!!!!!!


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## ASR (Oct 1, 2018)

George Burgin said:


> This sounds intriguing and something I’m considering. Can you keep me posted on the licensing process? My personal email is [email protected] - that would be amazing...


I am also thinking of going to the next step, good luck!


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## Dennis Griffith (Oct 1, 2018)

Please post the address (and hours) for those close enough to visit. I live in Ohio and find myself in Toledo regularly (son lives there). So, we could stop by and sample some of your product!


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## KevinL (Oct 4, 2018)

Congratulations, that looks fantastic. Your hard work is paying off. I'm wrapping up my red tape journey within the next few weeks. I'll post my narrative when it's all said and done.


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## Dom Lausic (Oct 4, 2018)

Wow!! Definitely jealous...…. Beats my home winery, working around the snowmobile!! Congrats!


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## peterseng (Nov 9, 2018)

askins3097 said:


> Congrats. I’m hoping to do something similar after I graduate grad school. My entrepreneurial project is going to be based around a unique winery concept.
> 
> Pennsylvania has finally eased up on their restrictions and created a lot more options with what you can do with a limited winery license so it’s pretty exciting in that regard. They’re starting to pop up everywhere. If they would just get rid of the 350 mile radius rule for produce, I think small private wineries would become as popular as craft breweries.



askinks3097, there is an interesting thread here regarding PA licensing for wineries - and some of the complexities and also some of the ways some wine makers are turning the changes to their advantage. Here's a link if you want to check it out:

https://www.winemakingtalk.com/threads/pennsylvania-winery-question.57379/page-3

That being said, I've been making wine as a hobby for a few years now and recently started making more and more of it (seems hard to leave the primary empty these days, lol)... and I too am considering one day moving toward a more commercial operation. I'd love to "start small" in my spare time, but the limits in PA seem to make that a bit challenging.


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## peterseng (Nov 9, 2018)

sdelli said:


> And The Wine House is done!
> Just build and fill the wine cellar now....



Congrats sdelli! Looks amazing! Hope it brings you years and years of joy and fulfillment... and profits!


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## Hokapsig (Nov 10, 2018)

Just an FYI, 1400 bottles is nothing. make sure to keep your tanks full, and be prepared for a LOT of work, everyday.Good luck and Congrats!!!!


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## SethF (Nov 10, 2018)

Very excited for you! The place looks fabulous.

What kind of winters do you guys experience in Ohio? Is the through the wall cooling system going to have issues?

Please continue to post pictures especially as you build out your cellar.


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## danno (Dec 15, 2018)

I'm a bit jealous, being an amateur who would like to go pro but live in a dry county. It might go wet so there's still hope. I'm curious about what your expectations are from a profitability standpoint. Personally, I wouldn't go commercial if I didn't think I could do it profitably. 
Anyway- best of luck!


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## jgmillr1 (Dec 21, 2018)

Been 4 1/2 years since the doors opened and I'm still waiting.


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## KevinL (Dec 26, 2018)

I'm operating out of my house commercially, so my overhead is quite a bit lower. I'm going into year 4 (only 1st year of "doors" open) now looking like I might make a hundred bucks profit if everything goes well. Labor of love?


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## danno (Jan 10, 2019)

KevinL said:


> I'm operating out of my house commercially, so my overhead is quite a bit lower. I'm going into year 4 (only 1st year of "doors" open) now looking like I might make a hundred bucks profit if everything goes well. Labor of love?


In your profit calculation are you including the startup costs or is the $100 the difference between your sales revenue and your current costs?


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## Hokapsig (Jan 10, 2019)

your first 5 years you are not expected to turn a profit. operating from your house allows you to write off a TON of expenses related to the house.


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## KevinL (Jan 11, 2019)

danno said:


> In your profit calculation are you including the startup costs or is the $100 the difference between your sales revenue and your current costs?



That'll be the profit (Revenue-Expenses). My break even point on the investment is years away I think. I'm hoping when all is said and done this year that I've got a small profit under my belt. My understanding is that since I'll have taken 3 years of write offs as I've established the business, I need to show a profit in 2 out of 5 years to avoid being classified as a hobby by the IRS. I have to show a profit next year on the taxes. Even though I have additional plantings that I intend to do, I will be holding off on them for 2019 just to keep expenses down.

I know I could clearly demonstrate that I am doing this as a business and intend to turn a profit (I've got the business plan, licenses, etc...) but I'd prefer not to attract their attention if I can help it.


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## danno (Jan 12, 2019)

Wow - I, as an amateur wanting to go commercial but need my county to become "wet" to get a winery permit, am very interested in what it takes to be profitable.
Since you operate out of your home I would think that you have practically no overhead and your expenses would be only your production costs to produce your wine. My production costs per bottle are around $4.50. Assuming I could sell my wine at between $12 and $20 per bottle, I would make $100 by the time I sold 10 bottles. I'm sure you sold more than 10 bottles so what am I not seeing here?


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## jgmillr1 (Jan 12, 2019)

danno said:


> Wow - I, as an amateur wanting to go commercial but need my county to become "wet" to get a winery permit, am very interested in what it takes to be profitable.
> Since you operate out of your home I would think that you have practically no overhead and your expenses would be only your production costs to produce your wine. My production costs per bottle are around $4.50. Assuming I could sell my wine at between $12 and $20 per bottle, I would make $100 by the time I sold 10 bottles. I'm sure you sold more than 10 bottles so what am I not seeing here?



A few logistical things you may be missing when stepping from a hobby to a commercial winery (aka: things I had to do to make/sell wine in a separete building on my property)
* You may not be zoned to sell commercially on your property. You would have to petition for a hearing from your local plan commission to be re-zoned. Your neighbors will have a chance to argue against it.
* You probably must receive a permit from local health dept to do tastings. Depending on where you would perform the tastings, you may have to perform many upgrades to bring it to code. They also will periodically drop in to perform an inspection.
* You will very much want to get insurance for the business including liquor liability. Your current home insurance agent likely does not offer such a policy and will quickly drop your policy once it comes to their attention you plan to sell alcohol on your premises. (This happened to me)
* The manufacturing space must be open to inspection by the federal TTB and your state excise police. You will be visited by both periodically.
* Is your manufacturing space large enough to handle even a small sales volume such as 500 gallons / yr? Need sufficient tanks, barrels, pumps, hoses, labeling eqp, clamps, valves, o-rings, filtration eqp, bottling filler, corker, capsuler, chilling eqp, floor drain, and enough electric supply to run it all.
* You will have to register with the FDA as a food manufacturer.
* Does your building have sufficient parking?
* Will the county allow a sign to be placed in your yard?
* How will you plan an advertising campaign?
* Do you have a label designer and who is your label printer? All labels must be approved by the TTB.
* What kind of wine do you make and can it sell for $12-20? Your competition is the corner grocery store and the local tastes may be different than your own personal tastes for wine.
* Need to purchase a point-of-sale machine or find a merchant device so you can take credit cards. 75% of the sales are using a credit card.
* You will need to open wine for customers to sample, cutting into your per bottle profit.
* You will need a health dept approved glass washing system (3-bay sink or commercial dish washer, typically).

So, the bottom line is that there are many factors that must be considered and many up-front expenses which must be incorporated into the bottle cost.


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## KevinL (Jan 12, 2019)

danno said:


> Wow - I, as an amateur wanting to go commercial but need my county to become "wet" to get a winery permit, am very interested in what it takes to be profitable.
> Since you operate out of your home I would think that you have practically no overhead and your expenses would be only your production costs to produce your wine. My production costs per bottle are around $4.50. Assuming I could sell my wine at between $12 and $20 per bottle, I would make $100 by the time I sold 10 bottles. I'm sure you sold more than 10 bottles so what am I not seeing here?



I don't anticipate that your county would change it's status easily. I imagine the lobbying would be an uphill grind. Also some states have crazy restrictions about who can sell such as county-owned or state-owned liquor stores. 

The majority of my annual overhead is Insurance and licenses to the tune of $2,500 a year or so. When I put in the variable costs like bottling and excise tax, I need to sell around 300-350 bottles before I break even, much less turn a profit. Since I dropped a considerable amount into establishing my vineyard, I've got a ways to go before I break even on the non-annual overhead.

I work in the insurance field, so I'm quite familiar with homeowners liability. Because I am set up as a Partnership, I have infinite personal liability, so I got a nice GL policy to cover the business activities on top of the liquor policy. I will probably switch to an LLC when we change facilities because I'll need to reapply to the TTB anyways.

jgmillr's list of things to consider is spot on. Other things to consider, the TTB will require a separate exit and a portion of the house that can be secured off by a door or wall from the rest of the house. You can't just pick a room in the house and start operating, you'll need exterior access.

This past year I went through the whole licensing deal, starting with the TTB, to the ILCC (I am in Illinois) and my own City. I am in a residential neighborhood, so I had to go before the plan commission and obtain a special use permit. I recognize that I can't operate profitably if I did tastings (Can't afford to open 3-4 bottles of a small harvest and not get them fully consumed), and also I realized that I didn't expect my neighbors to be okay with what is essentially a bar opening up in the neighborhood. As a result I decided that there would be no tastings. Because of that I am able to get around the county health department (Which was also at the city's discretion). I still had an inspector from the ILCC come out and inspect my facility. We don't have a sign in front of the business, because we want things to look like a residential neighborhood. We direct customers to get to us when they do the pickups. 

I checked with all of my neighbors before I got started, and talked with them about what I intended to do. I keep open lines of communications with all of them to make sure that there are no issues.

The type of license I got from the state doesn't allow me to do events. If I want to have a tasting event, I will need someone who holds a retail license to agree to host it for me, buy from me at wholesale, and do the pouring. I would just do the talking. Not the "romantic" winery owner ideal, but it'll be the way I have to do things. Plus if I do it that way I can guarantee that more of a bottle gets consumed in tasting rather than having to pour it down the sink.

Per bottle costs are a bit more than the wine. I've got to buy the glass, cork, and then the label. Each bottle also comes with an excise tax from the feds and from the state (It's charged per gallon.) The wine is actually the cheapest part really, the taxes, label and glass come out to more.

All in all it's been a ton of work. It's been really fun though. The people in my town have been really excited about having a little winery in town, and I'm happy to be the guy running it (with my lovely business partner aka wife.) When we opened this past fall we only had a tiny inventory (about 15 cases) and it evaporated in about 3 weeks.

www.lfvwarrenville.com if you want to take a look.


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## danno (Jan 13, 2019)

jgmillr1 said:


> A few logistical things you may be missing when stepping from a hobby to a commercial winery (aka: things I had to do to make/sell wine in a separete building on my property)
> * You may not be zoned to sell commercially on your property. You would have to petition for a hearing from your local plan commission to be re-zoned. Your neighbors will have a chance to argue against it.
> * You probably must receive a permit from local health dept to do tastings. Depending on where you would perform the tastings, you may have to perform many upgrades to bring it to code. They also will periodically drop in to perform an inspection.
> * You will very much want to get insurance for the business including liquor liability. Your current home insurance agent likely does not offer such a policy and will quickly drop your policy once it comes to their attention you plan to sell alcohol on your premises. (This happened to me)
> ...


Thanks for the input. I would consider the costs associated with the activities you mention to be mostly "sunk" costs, other than the insurance premium which would definitely be a current cost. 
As to the $12-$20 per bottle selling prices, they certainly aren't out of line with boutique winery prices in my region. I'm located in central Arkansas and am currently producing some good crops of vinifera varieties- Cab, Merlot, Shiraz, Chardonnay, and Sauvignon Blanc. Maybe I'm wrong but getting say $16-$20 for estate bottled viniferas, and around $12 for sweet wines which I would make from local hybrid grapes, which are readily available and relatively cheap, does not seem unreasonable.
Your comment about competing with the corner grocery store puzzles me very much. Maybe it's a regional thing but I see people from the urban centers in Missouri, Arkansas, and Texas flocking on weekends to wineries in small outlying towns an hour or two away to buy locally produced (and mostly hybrid) wines at prices considerably higher than what they would pay for a semi-decent bottle of California wine at Whole Foods. 
Anyway, thanks again for the input- much to think about.


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## danno (Jan 13, 2019)

KevinL said:


> I don't anticipate that your county would change it's status easily. I imagine the lobbying would be an uphill grind. Also some states have crazy restrictions about who can sell such as county-owned or state-owned liquor stores.
> 
> The majority of my annual overhead is Insurance and licenses to the tune of $2,500 a year or so. When I put in the variable costs like bottling and excise tax, I need to sell around 300-350 bottles before I break even, much less turn a profit. Since I dropped a considerable amount into establishing my vineyard, I've got a ways to go before I break even on the non-annual overhead.
> 
> ...



Very nice website- looks like you're on your way. In my $4.50/bottle cost I did include the costs for bottles, labels, corks, etc. but not for excise taxes. May I ask what your tax per gallon is?


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## PhilDarby (Jan 14, 2019)

Not sure how things stand in the US in the UK the main supporter of micro breweries is wetherspoons, it isnt easy to get into, as I believe you have to pay the tax up front, at least in the Uk, then the alcohol is bonded, in a warehouse, so, basically it needs money up front, I considered going that route when i had more money, it is / was taxed by Abv and by the type eg cider etc, when i considered my options it wasnt worth the investment, or hassles, so, I took my life down other avenues.


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## PhilDarby (Jan 14, 2019)

Good luck with your venture, hope it turns out well for you.


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## jgmillr1 (Jan 14, 2019)

danno said:


> Thanks for the input. I would consider the costs associated with the activities you mention to be mostly "sunk" costs, other than the insurance premium which would definitely be a current cost.



Yes, these are the fixed up-front costs (easily running into 5- or 6-figures) that you slowly will recover in time. I don't consider running a profit until the initial expenses are paid back. There are also credit card swipe fees, bank fees, and such that eat into your revenue. Staffing is a major expense along with the associated worker's comp insurance and fed/state withholding.

You also need to give customers a reason to visit your winery the first time and reasons to return more than once. This means advertising costs since customers won't immediately flock to your door as soon as a sign is out front. Perhaps consider hiring musicians for entertainment. Hosting events. But these are all recurring expenses.



danno said:


> As to the $12-$20 per bottle selling prices, they certainly aren't out of line with boutique winery prices in my region. I'm located in central Arkansas and am currently producing some good crops of vinifera varieties- Cab, Merlot, Shiraz, Chardonnay, and Sauvignon Blanc. Maybe I'm wrong but getting say $16-$20 for estate bottled viniferas, and around $12 for sweet wines which I would make from local hybrid grapes, which are readily available and relatively cheap, does not seem unreasonable.



Awesome you can grown those varieties there. But you are probably aware that unless you live in an AVA, you are not allowed to label your wine as "estate" (though can refer to it as "estate" in the tasting room). You could certainly command $16-20 for the vinifera wines and over $12 for hybrid wines.



danno said:


> Your comment about competing with the corner grocery store puzzles me very much. Maybe it's a regional thing but I see people from the urban centers in Missouri, Arkansas, and Texas flocking on weekends to wineries in small outlying towns an hour or two away to buy locally produced (and mostly hybrid) wines at prices considerably higher than what they would pay for a semi-decent bottle of California wine at Whole Foods.
> Anyway, thanks again for the input- much to think about.



I meant that consumers will choose whether to buy your Cab or the one at the grocery store from Cali for less. Whereas grocery stores usually have very few hybrid wines and people often enjoy getting something different and locally produced from the winery. After offering a number of vinifera wines as "safe" choices for the unadventurous, I found they only slowly sold compared to the other hybrid varieties. After all, why buy a Riesling here when you can get a volume-produced one at the corner store for half the price? I made the choice to focus solely on hybrid & American grapes since those will grow in my Indiana vineyard while vinifera won't easily grow here. Local tastes dictate what you make. Over 2/3 of my sales are of semi-sweet and sweet wine, in spite of the fact that I prefer the barrel-aged bold dry reds and have a large selection of dry wines available.



danno said:


> May I ask what your tax per gallon is?



Tax varies considerably state to state. Looks like Arkansas is running $0.75/gallon for excise tax (link). California is $0.20/gal. Indiana is $0.57/gal. Federal excise tax is only $0.07/gallon (under 14%) unless you make sparkling wine, which is $2.30/gallon

Good luck with your venture. It is good to fully consider all the costs for opening even a small winery. You definitely don't want to spend the cash and find it loses money.


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## danno (Jan 14, 2019)

Thanks for the info- great stuff. I do live in an AVA so I can label my wine from homegrown grapes Estate Bottled. Like most winemakers I too prefer the dry. I'm not surprised that 2/3 of your sales are sweet or semisweet - I hear that from just about every winery owner around here that I've talked to. Attached is a picture of my 2017 whites.


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## KevinL (Jan 16, 2019)

danno said:


> Very nice website- looks like you're on your way. In my $4.50/bottle cost I did include the costs for bottles, labels, corks, etc. but not for excise taxes. May I ask what your tax per gallon is?



In Illinois it is a little over a dollar a gallon. I'm finding it adds up rather quickly. Fortunately we don't have to pay the state excise tax until the wine is sold. It's good while I'm turning what cash I have left over into inventory.


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## sdelli (Feb 8, 2019)

Opening a winery to create a profit could be a challenging effort. Too much competition at that level. My model is a "Wine Café". I believe you must open something that creates the correct environment for your wine sales. You cannot be just selling wine! The draw must be much more unique then that. I am fully licensed in the state of Michigan for a small winemakers license now. Still finishing up the location but in no big hurry. This is not what I do for a living. It is just another level of my hobby I have created. More of special invitations and parties then an everyday walk in business. Some call it an elaborate man cave..... lol
I will upload some up to date pictures on the progress.....


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## sdelli (Feb 8, 2019)




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## sdelli (Feb 8, 2019)

Wine cellar almost ready for racks....


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## sour_grapes (Feb 8, 2019)

I really like those false murals. (I am not sure I would call them trompe l'oeil, but pretty close.) Very cute and inviting.


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