What is a Virtual Winery?

In our Twitter profile under the bio line for @CBCwinery  (That's our Twitter ID) we have written the following:

 

"Covered Bridge Cellars is a virtual winery making ridiculously small amounts of Pinot Noir and Chardonnay at Crushpad. Tweets by Casey and Jeremy."

 

A recent new follower on Twitter via a Direct Message (DM) asked us a simple question: What is a virtual winery?

 

Below is our less than 140 characters repsonse:

 

"VW's don't own vineyards or winemaking facilities. @crushpad makes our wines to our specs. Check this article out: http://bit.ly/1304c "

 

The link is to an article from winebusiness.com about the technical definitions of a virtual winery as it relates to various winery licenses. The numbers are from 2005, but that's not important. Here are the key takeaways:

 

"As of November 2005, the number of wineries in the United States has increased to 5,364, according to the latest Wine Business Monthly proprietary research. This figure includes 3,606 bonded grape wineries and 1,758 "virtual," or non-bonded, wineries. The data excludes mead or non-grape wineries.

 

The Wine Business Monthly count includes 1,758 virtual wineries. Virtual wineries are wineries that do not hold their own bond. A virtual winery has a physical location (which may be at another winery), produces at least one brand, and has its own management and winemaker although the winemaker can be a consultant or work for multiple wineries.

 

Wine Business Monthly includes virtual wineries in the final count for several reasons. In many cases, a virtual winery acts in much the same way a bonded winery would act, differing only in that the virtual winery has to use an outside bonded facility to physically make and bottle the wine. It is also not uncommon for a bonded winery to have begun operations as a virtual winery and then eventually grow large enough to invest in their own bonded facilities. By definition, all virtual wineries have complete control over decisions regarding the wine, from vine to bottle."

 

So from a legal standpoint a virtual winery is simply "non-bonded." The article goes on to state that these entities often migrate to bonded status at some point. And if you look at more recent industry figures, 2008 for instance, you will see that bonded wineries indeed represent a greater proportion of the total. This could also mean that fewer virtual wineries are being formed relative to bonded wineries.

 

From a business perspective, the virtual winery model is very compelling. It's less risky, as large capital outlays are not necessary since the winemaking is essentially outsourced. Variations on this theme would include winemakers utilizing some other bonded wineries facilities, but making the wine themselves. They might already have fruit sources available, but not enough production to justify building their own winery. This is very common in the industry and the level of involvement by virtual winery "owners" varies considerably.

 

Take the Crushpad model for instance. Someone like David Dain, the proprietor behind Dain Wines, takes vacation time from his day job to go to the Crushpad facility to make his wines each year, whereas for us, getting fully involved in the actual winemaking process over several weeks is a challenge. And yet still, other brands producing commercial product at Crushpad might not have any desire to deal with the "wine production" aspect of the business at all, as they are content to simply market and promote their wines. Their only involvement might simply be to say to their winemaker: "just make the best wine possible, thanks!"

 

So that's pretty much it in a nutshell. We like the virtual winery model because it allows us to produce a high-end commercial wine product without the need to come up with a few million bucks for land, buildings, and equipment. Since the vineyard management, winemaking, compliance, shipping, fulfillment and back office work is completed by Crushpad, we have plenty of time to build close ties with our customers, which is something we really like doing. It also allows gives us time to enjoy the wines we make with family and friends. In a future post I'll delve into some of the defining charateristics of the Crushpad model since it really is unique to the industry.

 

Jeremy