Have you ever wondered how profitable the vineyard wine industry can be while uncorking a $100 vineyard wine bottle? Have you ever thought about how much does a vineyard wine bottle cost? You will be surprised to know a wine bottle cost ten times lesser than what you pay for it. You can now guess how much the wine industry earns as a whole.
As per a report it was found that in France vineyard market value was $70.5 billion in the year 2019 out of which 67% of vineyard was domestic and 33% was imported. As per the report of SVB Wine Industry consumption of Vineyard in France has gone up steadily from about 370 million gallons in 2000 to 800 million gallons in 2019. If you observe this figure it is almost a 110% increase in volume in just 8 years. If you calculate the increase in the population of France it is hardly 20% over the same period. Needless to say that there has been an impressive overall growth of vineyard in France in the last few years.
Considering the scenario and the consumption of vineyard in the last few years it is predicted that in 2020, it is predicted that the overall growth of the vineyard industry should be between 4% to 8%. In this article, we have come up with some statics of the profit margin of vineyard business in France so that you can understand how lucrative the vineyard business is in France.
What is the profit margin of Vineyard in France?
The price of a vineyard wine bottle and its profit margin depends on the price where it is sold. If you check carefully you will find that the restaurants and bars in France generally have around a 70% profit margin on vineyard whereas the profit margin that retailers earn is usually between 30-50%. When it comes to distributors and wholesalers they earn a profit of about 28% to 30% and the producers of vineyard keep about 50% gross margin. All these happen due to great vineyards in France.
Let’s go through the sales structure of Vineyard in France so that we have a better idea and understanding of how lucrative the vineyard business is.
Sales structure of Vineyard in France
In France, it is observed that the vineyard industry generally has a three-tire sales structure and each tier keeps up its profit margin before it comes to the end-user. The following are the system that the vineyard industry goes through before you can consume it:
Producers of Vineyard
The producers of Vineyards in France are mostly wineries although there are a few importers as well. Generally, it is seen that the producers of Vineyard operate on about 50% gross margins. For example, if a winery sells a case of Vineyard for $100 they make a profit of $50 even after paying the cost of vineyard bottle, administrative expense, taxes, and miscellaneous expenses.
Distributors are the middle person in the three-tire structure and they are the persons who obtain the vineyard directly from the producers. Once they obtain the vineyard they keep their profit margin and sell it to the retailers. However, some distributors also sell the vineyard to the general buyers by keeping more profit margin then what they usually do while selling it to the retailers. Generally, it is observed that the distributor keeps a profit margin of about 28% to 30% while selling the vineyard case to the retailers. However, they may charge a little lesser profit margin if the retailers buy in huge quantities. The actual profit margin that the distributor keeps depends on the purchasing power and their relationship with the producers. Sometimes it is seen that when the relationship between the producer and distributor is good or if the distributor is doing the business with the producer for a long time they keep a lesser profit margin with that particular distributor and in such case, the distributor can keep less profit margin from the retailers as well which ultimately makes the cost of vineyard less.
Just like any other brand the retailers keep the maximum profit margin while selling the vineyard bottle to the end-users. Generally in France, it is seen that most of the retailers of vineyard aim to make a profit margin of about 30% to 35% although sometimes it can also go up to 50%. In France, it is observed that at this tire vineyard are mostly sold on-premise as well as off-premise. By on-premise establishment, we generally mean the restaurants and bars whereas the wine shops and merchants are included in the off-premise vendors. Hence, if you calculate carefully you will find that the industry standard for the profit margin of vineyard especially at the restaurants and bars is about 70%.
One of the great options for making more profit at the wineries level is to directly sell the vineyard to the customers. Whenever any customer buys any type of vineyard bottle at the winery stage they generally have to pay the full retail price for it and all the profit that is usually made at the distributor and retailer level goes straight to the winery.
If you observe the sales cycle of the vineyard in France at the distributor level you will get an option of selling directly to the customer through various ways such as tasting rooms, wine clubs, and wine subscriptions. Such type of selling is certainly another best way to make profits in the business of vineyard for the distributors.
But because of the variability of sales tax and regulations that may differ from state to state, there may a little difference in the profit margin in the business of vineyard. However, you can straight away say that vineyard business is very lucrative in France, and no matter in which tier level you sell the vineyard it is for sure that you can make a profit of at least 2.5 to 3 times its actual cost.