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03.05.2013  
 

Wineries Experiment With Crowd Sourcing

While challenging, crowd funding has been successful for some small wineries

 
by Andrew Adams
 
 
two shepherds
 
William Allen, owner of Two Shepherds Vineyards, samples Grenache Blanc wine from a concrete barrel that he was able to buy with money raised through a Kickstarter crowd funding campaign.
San Rafael, Calif.—When Mark Henry was starting his business in 2005 he had a vision of his own winery but little winemaking equipment.

After a few years of running a winery out of his home in the small Sierra Nevada Foothills town of Chicago Park, Calif., near Grass Valley, he eventually built a small winery in 2008. One of the neighboring winemakers in the area had an old screw press that could handle 2 tons, and the winemaker was willing to hand it down to Henry for $2,000.

Henry, the owner of Montoliva Vineyard & Winery, said he grew to love the loud, rather inefficient press that had been modified to run on an old gas engine. But by the 2012 vintage, when he was pressing 35 tons, he had finally outgrown the old press.

For a small winery with limited capital and modest sales, the high cost of new barrels, new tanks or a new press can be daunting. Yet it’s those new French barrels or a more efficient, gentle press that could send a small-lot Pinot from obscurity to critical acclaim and allocation-only status. 

Hitting up the crowd
Henry, like a few other owners of small wineries in the United States, decided to turn to the crowd-funding website Kickstarter to raise the $25,000 he needed for a new SK Group membrane press.

He said $25,000 isn’t peanuts, but he found most equipment financers aren’t quick to help at that level. Banks also aren’t eager to help a small company purchase an expensive piece of equipment that’s only used two to three weeks per year—especially when the company is still building its sales. “My balance sheet doesn’t really look like Constellation Wines’ balance sheet,” he said.

With about a month to go, Henry’s project on Kickstarter has earned $2,085 in pledges from 13 backers. Talking to Wines & Vines last week, Henry wasn’t too optimistic about his chances.

Every Kickstarter campaign offers those who pledge money rewards for their contributions. Henry is offering rewards ranging from a corkscrew and public “thank you” on the winery’s website and newsletter for a pledge of $25 or more to a private dinner for six at the winery for those who pledge $5,000 or more.

The challenge, however, is that Kickstarter doesn’t allow firms to give away alcohol as a reward—quite the hurdle for a winery. It’s one of the obstacles winemakers say they have to overcome to make crowd funding effective.

Websites take a percentage of funds raised
Kickstarter makes its money by taking a 5% cut of the total funding, and Amazon will take between 3% and 5% to process the payment. Projects are only funded if they reach the stated goal, and the funding comes with no ownership stake. The “investors” only receive the rewards offered by those running the campaign.

Other websites like Indigogo, Razoo and Rocket Hub operate with a similar model but some different conditions. Rocket Hub, for example, allows someone to collect any money raised even if they don’t reach their goal, though the company will take a larger fee if the campaign doesn’t hit its goal.

Kickstarter appeared to have the largest number of wine-related projects based on searches through each company’s website. Some of those campaigns included:

• In 2012, Torvald Adolphson, founder of Wide-in-Wisdom Winery in Bastrop County, Texas, raised $4,502 ($552 more than his goal) to make the inaugural batch of his Vanaheim Gold brand of mead.

• On the North Fork of Long Island the owners of Southhold Farm + Cellar have collected a little more than $6,000 toward their goal of $15,000 to plant 1 acre of Teroldego. Regan and Carey Meador say they are looking to plant 7 of their 23 acres with “weird grapes” such as Lagrein and Goldmuskateller to bring diversity to the wine world.

• Alice Feiring, author and proponent of “natural” and organic wines, raised almost $17,000, more than double her goal in September of 2012 to launch her newsletter “The Feiring Line.”

Worth the effort?
William Allen’s second career is making Rhone wines in a small, shared cellar near Santa Rosa, Calif., for his Two Shepherds Vineyards brand.

Allen collected $2,350 from 41 backers on Kickstarter in October of 2012 to buy a 70-gallon Eco Barrel by Vino Vessel in Paso Robles, Calif.

Allen, who also works in the tech sector, said he had supported a few Kickstarter campaigns and figured he’d try it to fund buying the concrete barrel for a Grenache Blanc wine.

He said he quickly realized it would be challenge to entice people to support the project without being able to give away wine. Most campaigns are for apps, devices, games, music or videos that can be given to donors. Without being able to give away wine, Allen said he really had to push the project on his social media channels to drum up support.

Kickstarter “wouldn’t budge” when it came to offering wine club memberships or wine futures, Allen said. Henry from Montoliva winery said the company also flagged him for using the word “wine” in his reward offers.

Contacted by email, a Kickstarter representative said “since alcohol is prohibited under Amazon’s Acceptable Use Policy, the rules prohibiting alcohol on Kickstarter aren’t just Kickstarter’s alone, so there isn’t much leeway in terms of projects being able to offer alcohol.”

Allen said he was very happy with the Grenache Blanc, which exhibited great texture and minerality. He went out and purchased two more concrete vessels with cash. Explaining why he opted not to run another crowd funding campaign, Allen said, “It’s a ridiculous amount of effort.”

Henry sold the old press for $1,000 to another aspiring winemaker who moved to the area, so he’s on the hook to buy that new press for this year whether the crowd funding campaign pays off or not.

If the crowd funding doesn’t work , Henry said he at least has the contact information of the group of people who were willing to pledge money. “I could use a new forklift, too, so I may try this again,” he said.

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LATEST READER COMMENTS
 
 
Posted on 03.08.2013 - 11:57:16 PST
 
My name is Jason Brumley and last year my business partner and I started a residence-based commercial winery, Xylem Wines, in the basement of my home in McMinnville, OR. We needed a bit of capital to purchase necessary equipment. The credit cards were maxed and the savings were drained after remodeling and upgrades to satisfy specialty codes. We looked to Kickstarter to help gain the funds. We were successful in our project and raised over $20,000. We are looking forward to our inaugural release of a rosé, Müller-Thurgau, and Riesling in June, 2013, with Chardonnay and Pinot Noir to be released later.

The experience was wonderful and we've gained new supporters of our winery.
 
Jason Brumley
 
 

 
Posted on 03.08.2013 - 14:50:03 PST
 
That's great Jason, glad to hear you guys found success. What were you offering as rewards for your pledges?
 
Andrew Adams
 
 

 
Posted on 03.09.2013 - 07:49:27 PST
 
As we couldn't give away alcohol, it was a bit difficult. For anyone who gave anything, they were mentioned on a special "Supporters" page of our website.

People who gave $25+ were entitled to a vine sponsorship program (their choice of Pinot Noir, Pinot Meunier, or Chardonnay). We have young vines that are just beginning to put off fruit. We are taking pictures periodically of their particular vine and keeping them posted on the vine's progress and what's taking place in the vineyard. They could even name the vine if they wanted (we've had some fun and interesting names.)

For other tiers, we gave away wine glasses, tours of our vineyard along with tours of some of our favorite wineries (we love to support the Oregon wine industry as a whole.) We also had special dinners (we couldn't mention tasting) for some of the higher tiers.

We ended up averaging almost $90/pledge.
 
Jason Brumley
 
 

 
Posted on 03.27.2013 - 08:59:42 PST
 
I asked the VP of Amazon's Marketplace how they can be in the business of selling wine, but wineries working with Kickstarter can't give away wine because of Amazon's use policy. It comes back to the fact that even though wine is in its marketplace, Amazon still isn't actually selling or handling wine leaving that responsibility to the wineries themselves.
 
Andrew Adams
 
 
 
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