The location of the proposed premium winery will be in New York in the region of Finger Lakes. The production per year will start at about 1,800 cases in the initial year and is expected to increase to around 10,000 cases in the fifth year. The winery business will specialize in the production of several vinifera varieties which include Cabernet Franc, Pinot Noir, and Riesling. Most of the wine that will be produced will be sold in the local market at the initial stages. However, as the business grows more distributions channels will be opened to ensure the business reaches a wider market both in the national and international levels. The distribution channels that will assist in reaching a wide range of customers will include wine shops and restaurants.
The winery premium is expected to produce high quality wine products. This forms the basis for success of the winery business since customers prefer quality products and services. The market research that has been undertaken indicates that the targeted consumers use higher quality and expensive wines for drinking purposes. The winery business proposed in this business plan will capitalize on this trend of consumption to yield success. There are few businesses within this region in the winery that focus on vinifera varietals and, thus, engaging in this business will offer a differential factor from the rest of the businesses in the local market.
The business plan proposes financial forecast of the winery business to be about $ 1.8 million for the first four years of operations. The forecast has been made for four years to enable the business to deal with the challenges that may arise during its inception. The utilization of the money will be based on the various functions to be undertaken by the business. These include construction of tasting room and winery, covering of operating expenses, and purchase of the winery equipment that is necessary for the wine making process.
The mission of the business is to become the largest producer of vinifera wines of the highest quality in New York in the region of Finger Lakes. The business will reach both local and international consumers offering adequate and enjoyable lifestyle to the stakeholders.
Types of business
There are various forms of business that exist within the United State boundaries. The setting of a business may either be a sole proprietorship, partnership, or even a company. The setting of a company may either be a private company or a public company. The business proposed is going to take the form of a private company. There are various requirements that a business has to meet before it is registered as a private company within the laws of the United States. There are various documents that promoters of a company have to submit to the registrar of companies before registration takes effect.
The company is required to fill an application form for registration of a company. This stage requires appointment of the officers of the company, detailed information regarding the address of the registered office, as well as the names of the share subscribers. The promoters also need to furnish the registrar of companies with a memorandum of association. This is a statement by the promoters of a company of their intention to establish a company.
The other requirement for the establishment of the company regards the presence of articles of association. The proposed company’s internal rules are contained in this document. The promoters have to develop the rules that will guide the operation of the company before the establishment of the company. These rules have to be approved by the registrar of companies before the certificate of registration is issued. It is advisable that a company should engage a professional in deciding the kind of articles that the proposed company requires. Filing of these documents with the companies’ registrar goes together with the nominal registration fee.
Once verification of the documents has been done, certificate of incorporation will be issued to the company by the registrar. The issuance of certificate is a legal requirement for the company to be deemed legally existing. Without the certificate, the company cannot have any legal backing for its existence. The certificate indicates a unique number of the company and the date within which incorporation took place.
However, there exists regarding the choice of the name of the company. If these restrictions are not met, then the company cannot be registered. The registrar of companies cannot register a name that is identical to an already registered company. Choosing of the company’s name should indulge careful consideration to ensure coming up with a name that is not similar to that of a registered company. Deregistration may be deemed necessary if it is realized that the name of a company coincides with that of an earlier registered company. The company may be enjoying benefits including goodwill that it has not created by using the reputation of another company.
If the name chosen indicates any connection with the state and lacks the support from the specific government, then the company cannot be registered under that name. In addition, if the name chosen gives an indication of a criminal offence, then that company cannot be registered.
Licenses for the Winery
Alcoholic Beverage Control License
There are several types of licenses required to allow for the inception of the winery business in this region. The business requires acquiring the control license on the alcoholic beverage. Any business dealing with the retail of liqor needs to have this kind of license in order to be considered legally operating. There certain requirements that has to be met if this license is to be issued to the promoters of the business. The license of operating this kind of business is given to persons strictly of at least 21 years of age. The person receiving such certification must be a citizen of the United States or an alien who is admitted for lawful permanent residence. The person should not be a victim of conviction due to felony, permitting or promoting prostitution, or selling liqor without the alcoholic beverage license. The person should not be a police officer or one whose license was previously revoked. All these conditions have to be met before an individual or an entity is granted the right to operate a liqor retailing business. The same procedure has to be identified for businesses wanting to deal in wholesale business. The wholesale license on alcoholic beverage has to be sought before the business is legally instituted.
Air Pollution Control Permit
Businesses dealing in production and activities that may have some implications on the environment need to have this form of license. The Department of Environmental Conservation ensures safeguarding and protection of air within New York. The goals of Department of Environmental Conservation revolve around public welfare and health. They accomplish this by ensuring that the industries that are set within the region are environmentally sound. Before commencing any project, a business requires to obtain permit from the department of environmental conservation. Any business that engages in a business that has negative implication on the environment without acquiring the environment permit is subject to legal action. The implication may either be a court preceding or fines.
Any business that is dealing with employees is supposed to have certain kinds of insurances as required by law. These include unemployment insurance, workers compensation insurance, and disability insurance depending on the business locality. The workers compensation policy protects employees against loss of income. The policy also shields employees from incurring medical expenses through accidents related to the job. The compensation insurance coverage on workers may be done through a self-insured basis, commercial carrier, or even through a compensation program on state workers.
In the event that the workers become disabled, the disability insurance cover protects them from loss of income. The employer may also cover himself against loss of income due to disability that may befall them. Most of the upcoming investors in most cases do not consider insuring themselves. They fail to consider the implications of the occurrence of the risk on their beneficiaries. New York state requires employers to undertake insurance coverage on partial wage replacement to the employees that are eligible in the event of injury or sickness that is not related to work.
There exists a requirement for the payment unemployment insurance taxes for businesses with employees. The business has to be registered with the workforce agency of the state. Third party insurance is another cover that is required to be maintained by businesses. This insurance covers third parties from injuries. This is a motor insurance where a company is required to insure against third parties who may fall victim in the event of accident occurring.
Types of Contracts
Centralized State Contracts
The centralized contracts covers a range of services, commodities, and technologies that fir the needs of the users of a contract. A centralized contract occurs through a competitive bidding process that is open to eligible businesses with the objective of purchasing commodities. The best value is used in the process of securing technology and service contracts. The centralized contracts are mostly used by state agencies among any other authorized user. The centralized contracts occur in three categories. These include service, technology, and commodity contracts.
These are contracts that are established by agencies for the purpose of procuring on an ongoing basis. These contracts often take place for a number of years. The agency that is purchasing the contract has the responsibility of determining whether it meets function, form, and utility. Determination should also be made as to whether the contract will allow inter-agency use.
Where the requirements of an agency fails to be met via a preferable source, agency contract, or centralized contract, private procurement may be an option to the process. This form of procurement may involve a competitive bid that is formal or a purchase that depends on discretionary spending. The choice of the two on the value attached to the procurement. Discretionary purchases are made below monetary levels established by the statute and are done at the will of the agencies. Discretionary purchase does not require a competitive procurement process that is formal but has to give justification on the vendor selection. This selection also requires to be documented by the agencies. The policies and procedures of the internal agency have to be complied with alongside having reasonableness of price. There should also be an assurance that the purchases that have been made meet the requirement of function, form, and utility.
The proposed business will make use of the private procurement contracts. This type of contract does not involve a lot of procedural practices that have to be met before a purchase is made. Given that it is a new business, the procedural requirements may derail the performance and operations of the business. The owner of the business has the discretion regarding the purchases to undertake and who to contract to supply certain goods and services. The absence of formal requirements and legal documentation makes the contract easier to undertake.
The analysis on the industry indicates that the existing consumption trend is favorable as far as the domestic wine market is concerned. The case is even better for the businesses producing ultra premium wines. Since the year 1993 the per capita on consumption of wine has been increasing. In the last few years, the sales on the retail wine have been increasing by 8.2% each year. This increasing trend may be due to the increment in the popularity of wines. The increasing performance of the wine business in the region makes the business more lucrative, especially for profit maximizing investors. This is an opportunity for investors in this sector since there is surety of market due to the positive performance trend. The performance of this business is expected to grow into an international business majoring in exportation in the long run.
Experts in the sector of wine production portend that the positive performance in the market of premium wine is a result of the aging of baby boomers. This group of baby boomers is getting into the drinking age and, hence, creates an expansive market. The consumption of premium wine is, therefore, expected to increase in unrolling years. Most of the baby boomers have a lot of wealth that has been accumulated over their active years. In this regard, they have sufficient money to spend on the purchase of luxury items like wine. A survey conducted in the United States indicates that the majority of the aged people above 50 years consume a lot of wine compared to citizens within the age bracket of 21-29 years. This demographic trend is favorable for the performance of wine business as it allows to enter expansive market. Business entering this market has no much worry regarding the availability of market.
The federal government highly regulates the market of alcoholic beverages, wine being one of them. There is requirement for application of special license for businesses engaging to invest in this sector. Due to the complexity of the process of achieving the legal requirements there is a necessity of hiring a lawyer. Without the help of a lawyer the process may be tedious, expensive, and time consuming for the investor. There are several things that require approval prior to the process of production. These include the expected wine labels, storage facilities, and production facilities. The business has to incur payment of federal exercise taxes for the sales made. The exercise tax in New York is cheaper due the credit tax given to the farm wineries, thus, lowering the effective exercise tax to the federal government. There are other exercise taxes by the state that have to be complied with if the business is to run in the economy. There exist annual payment taxes for the small business, and the business has to incur the cost of farm winery permit in the event that requirement will necessitate the application of one.
Insurance is a vital element in the operations of a business. Insuring the business is optional for the businesses in this region. However, there is a requirement for the businesses to ensure their employees during their period of engagement with the company.
Once all the legal requirements are met, the business is at liberty to operate without infringement of its rights. The constitution of the United States prohibits the taking of private property without just compensation for the sake of public use. The clause on takings is found in the Fifth Amendment of the constitution of the United States Fifth Amendment. This protection is also found within the international laws of investment where expropriation is prohibited without due compensation.
Out-of-state wine shipments are complicated as well as highly regulated. The 21st amendment to the constitution of the United States created prohibition in regard to the exportation of alcoholic beverages. The amendment stipulated that individual state has the responsibility of determining the regulation of transportation and importation of alcoholic beverages. The establishment that followed by most states is the three tier system of distribution. The suppliers are placed on one end and the retailers placed on the other end. Wholesalers operate in between the suppliers and the retailers. The three tier system of distribution prohibits the wineries from selling wine directly to foreign consumers.
There are other states that do not have this system of distribution. The exportation of wine to these states is easier due to lack of stringent requirements. However, New York does not observe this kind of distribution structure and makes it hard for the business to deal with the exportation business. However, the business will establish external outlets within several foreign states. The distribution centers will be based in Europe and Africa. Since foreign sales have to be made through a wholesaler and, hence, the necessity to establish distribution agencies.
Any foreign investor is bound by the rules and regulations that exist in the host country. The investor and the host government enter into treaties and consensuses as to the regulations and requirements on the part of the state. The extent of observance of these obligations determines to a greater extent the performance of the foreign investment in the host country. The umbrella clauses functionality is in the arbitral jurisprudence (North American Free Trade Agreement 67). The contractual relationship brought about under the umbrella clauses have the possibility of bringing about the creation of treaties. The umbrella clauses necessitated the emergence of tribunals tasked in solving disputes in case they arise. In coming up with a judgment, the tribunal should distinguish whether it is invoking the international law or the domestic law. The winery business is set to follow the domestic laws of the countries where we will engage our products (Cassese 91).
Environment regulations have a major impact on the winemaking and grape growing process. There is a large amount of waste water that is produced by wineries. There exists regulation regarding the disposal of this water. International investment law regulates investment in project that will lead to environmental degradation.
The international law has a backing on environmental and social justice. As regards investments that influence the social and environmental policies, disputes are likely to arise between the investor and the host country. The country will impose rules and regulations to protect its citizens from injustices by a foreign investment. The criticality of the issue when it comes to the violation of social justice is of prime importance to the host government. The core value of a government is to protect its citizens from the violation of their rights (Bath et al. 43). Various bodies and tribunals have been set under the international investment laws to ensure dispute resolution. Since the proposed businesses is expected to operate internationally with due time, the measures set regarding environment regulation have to be observed and, any dispute arising dealt with accordingly.
Fragmentation of the wine industry is high and has high competition. A winery premium that is small may expect some competition from domestic, local, and international producers. However, most wineries in Finger Lake have a kind of insulation against competition outside the region due to the majority of sales being made within the tasting room. The competition that is likely to be faced by the business comes from the small businesses operating in the same business within the region. These small businesses will be the direct competitors of the business. The increase in consumption of the domestic wine has enhanced the expansive nature of the market. The growth in the market has encouraged the wine producers to improve their quality to take advantage of the larger profit margins, hence, doubling their growth rates. New firms dealing with the production of wines are entering the market resulting in positive trend in the growth of industry in line with the consumption trend.
The distribution strategy of the business requires the majority of the wine to be produced and sold locally via the tasting room. Core competitors to this business will be small wineries in Finger Lake that specialize in the production of premium wines using the same varietals as is the case of the study.
The competitive advantage of the proposed winery is the production of vinifera wines basing the resources on the top vineyards within its locality. Unlike other producers in Finger Lake, the winery proposed in this study will lay its emphasis on vinifera varietals. The business identifies itself as the producer of vinifera wines that are of high quality. Through the purchase of the best grapes, the business will be able to produce wines of higher quality compared to its competitors’. The business will also invest in wine making equipments that are of the highest quality. This generates a competitive advantage for the business and acts as the strength of the proposed business. The business will emphasize on a more focused strategy by having fewer but quality products in the market. In the long run the business will utilize other distribution channels that include wine shops and high end restaurants. This will result in weaker dependence on tasting room for sales purposes in the long run. This will assist in the reinforcing of the ultra premium strategy.
The target population of the proposed business is the wealthier consumers and the educated baby boomers. These customers possess high wine education, regularly entertain friends and business associates, and enjoy dining out. Various groups of businesses also form part of the target market for the proposed business. Wholesale distributors are effective in ensuring distribution to wine shops and restaurants situated within the nation. These will be a major group of customers for sales outside the tasting room.
Packaging is another important aspect in the marketing of the product. There should be appealing packaging to ensure that the product sells to a larger population in the market. Every item, regardless of the value it has, attracts customers when the wrapping is done using an attractive package. Wine makers have to make decisions on the labels to use, the text to be put on the labels, the type of corks and bottles to use, boxes, and capsules. All these aspects make a contribution to the consumption experience of an individual. The packaging decisions communicate information about the wine quality. The label is the first that the consumers notice ones doing window shopping. The label, therefore, contributes towards the decision a consumer makes regarding the purchase of the wine. The labels are just as important as the product itself, and needs critical evaluation before settling on the label to use. Labels should be esthetically appealing, inviting, informative, and should reflect the identity of the winery. The proposed business will have to hire a designer to take charge of ensuring a kind of label.
Bottling of the wine will be done on a standard bottle and will use the colors and shapes that have been traditionally used in the European bottles. This is the design that has been generally used by winery companies all over the world. Pinot Noir will be packed in burgundy bottles, Riesling in amber Riesling, and Cabernet Franc in Bordeaux bottles. The business also has to make a decision on the type of cork to use. The choice must be made between synthetic and traditional corks. There has been an increase in the use of synthetic corks increasing the popularity of the cork. The corks, according to the manufacturers, do not allow leakage and they eliminate evaporation. Natural corks make use of a traditional sealing material, which is preferable to many consumers since it allows smelling of the cork, hence. adding sophistication and romance of the drinking experience of wine. The tradition of wine in Europe makes use of natural corks, and consumers have adapted to this type of sealing. In this case, therefore, the proposed winery business will make use of the natural corks as the bottle seals.
Capsules help in completing the package, thus, adding a professional appearance to the bottle. Due to their cosmetic nature, necessary care should be observed in ensuring that the objective of complementing packaging and label is achieved. The proposed business will make use of the traditional foil type of capsule. The packaging of wine is done using a variety of boxes. In the wine making industry, the standard box that is commonly used for packaging purposes is the twelve bottle cases cardboard. This type of box will be used in the proposed business to ensure consumers’ needs are met.
Additional products will be given to ensure that the business performs better compared to other businesses. This will ensure retention of the customers and attraction of more customers. The additional services offered are intended to create a winery experience among the consumers. Tasting of wine will be encouraged to tract customers, both existing and potential, to visit the business and have a tryout of the various wines. Winery tours, which are educational, will be offered during weekends to ensure that the customers possess knowledge on grape growing and winemaking process. Other services like entertainment during the harvest period and holding of harvest parties will be encouraged. These additional products will serve to differentiate the proposed business with the existing winery businesses. This creates a competitive advantage to the proposed business.
The proposed winery business will adopt a strategy of high quality pricing. Under this strategy the company will charge higher prices for its products that are high quality. The prestige pricing will be an indication of the quality of the product that is being sold. Prices in the region of Finger Lakes are very low compared to the prices prevailing in other regions that grow grapes. Traditionally, wineries in Finger Lake have produced wines that are lowly priced from French American hybrids and native varieties. Most of the local consumers are used to wines that are sweet, fruity, and lighter. In this regard, most of the local consumers may not have the will to pay prices that are high to vinifera wines, which seem complex. The reliance on sales in the tasting room gives a cap on the prices that producers from Finger Lake may charge. However, research indicates that preferences and tastes by consumers will shift to complex wines from the lighter wines. Finger Lake producers may have an opportunity of increasing prices when the preferences changes. Some wineries in Finger Lake have of late started to produce vinifera wines that are of higher quality although the prices charged are lower compared to other regions. The prices charged by the competitors should act as a guide in the setting future prices once the producers have acquired knowledge of quality products production. The aspect of having higher prices in the future forms the basis for adopting high pricing strategy.
Producers may make use of a combination of promotional practices. These may include advertising, sales promotion, personal selling, direct marketing, and public relations. The proposed promotion goal of the winery will make use of differentiation as well as other promotional activities that will assist in improving the premium positioning status of the winery. The promotional activities will target both the middle men and the end consumers. The promotional activities of the end consumers are intended to converge the consumers to the winery. The business will also seek to create a close relationship with the middle men and establish a contact link that will keep them at bay. A small proportion of wine produced in the business will be used for promotional services. Promotion is a vital aspect of the business as it contributes towards effective performance of the business. Promotion assists in increasing the sales made by the business and, hence, the profitability of the business. These promotional activities, therefore, help the business in the achievement of the inception goals.
The channel that is preferred initially is the direct selling to the consumers. The direct selling favor the performance of the business as it allows the winery to collect their retail prices for the wines they sell. The kind of direct sales that is most common in the region of Finger Lakes is the tasting room sales. The initial market for the business has been proposed to be the tasting room; hence, the channel of direct sales will be more efficient. Wine trail programs have been successful within the region and, thus, enabling the small wineries to sell their wine in the tasting room.
The second channel of marketing involves selling directly to in-house distributors. This distribution channel allows the business to sell their products directly to restaurants, wine shops, and the liquor stores. The advantage of using this channel of distribution is that the business will acquire higher margins. The businesses will also be able to create a relationship with the retailers. The process of selling to retailers may, however, be time consuming as it involves making regular visits to the account service .
The third channel of marketing involves selling the products to the distributors. Distributors may be effective in making supplies to the retailers, thus, making the role of distribution easier for the business. Due to the projected nature of growth of the business, all the three channels of distribution will be used. However, in the initial stages of operating of the business the first distribution channel will be more efficient. The other channels will be used later as the business becomes more stable and continues to grow (Young 13).