Adapting for Changing Demographics
And more advice from David Wolin, Owner of Old York Cellars. Nestled in the foothills of the Sourland Mountains in western New Jersey, Old York Cellars offers a full winery experience, including guided wine tastings, food and wine pairings, weekend music, wine and comedy shows, private cabanas and large event seating for private events.
1.Adapting for Changing Demographics
I bought this property in 2008. And we opened up in 2010. There was a previous winery that went out of business just before I bought the place here. What started as a hobby business type turned into a much bigger operation.
It has been hard for various reasons. The industry shifts that are going on, which started before Covid we recognize and were dealing with, have just accelerated in the last four years and are still manifesting themselves today and changing. We're going through the fourth year of a transformation here. And we're making other changes based on everything we've learned over the last couple of years and adapting to the current market situation. And, hopefully, we're getting it right.
Gen Z and the Millennials are less interested in drinking overall. Not only are they drinking less, but their attitudes toward drinking are different. But they're also drinking other things to a certain degree. They could say I'm a wine drinker. I'm a beer drinker. I'm a spirits drinker or a non-drinker. Those folks are drinking cross categories. They may have a little wine today and a seltzer or a wine cooler the next.
And this is not unusual for these younger generations. They don't sit there and watch network TV or a cable channel. They're just going to pick and choose. They will get this over here and that over there and watch it when they want. So, the viewing habits are similar to the drinking habits.
Going back 4 or 5 years ago, I've noticed a bunch of trends, and I have a small sample of people coming here. But to give you some information on how the market has changed when we first opened up our first or second year, I could tell if we were having a good or bad day, depending on watching people walking to their car in their driveway from the winery. If 5 or 6 or 7 cases were going up the driveway, we were having a good day. These days, we are lucky to sell 1 to 2 full cases a weekend. Yet our revenue on a given weekend day is 5 to 6 times more than it was back then. We have had a 10-15% increase since Covid.
Now, we're just not selling it the same way and the same thing. So when I noticed this 4 or 5 years ago, we would have a bunch of tables outside. It could be 10 or 12 millennials or now Gen Z's. You clean off that table at the end of the day, and there'd be 12 bottles of wine on it. We sold the same case just differently. What I didn't see right was they were also walking out with a couple of bottles or a bottle each or a bottle for every couple. That table sold a dozen bottles of wine, tastings, and some food. They were spending more money than they did in the past.
Our revenues have been going up, but the weird thing is we're selling less wine. So not only are they buying it differently, but they don't use the case discount. If you have two tables full of younger folks with 12 bottles, you know they're paying full price. They're just buying it in ones and twos and don't worry about it. That's not their thing. It's not the discount, but the total amount. They're coming out to have a good time and have decided [[[that if ]]they have $75 to spend or $50 or $100, whatever it is, and that is what they will spend.
2. Team members may not be a fit for other locations/initiatives
We had some remote outlets within a half hour here in 2017 and 2019. That accounted for 25% of our sales, but we also spent a lot of money on them. Those satellites closed because of Covid, which we couldn't have predicted.
We had this opportunity to open a place in Bridgewater Commons in New Jersey. We should have taken a step back, waited, built up the foundation, and brought in the folks to run it instead of chasing what we thought was a good opportunity. We tried to use the same winery team to run the remote location. In hindsight, it was a foolish way to go. We get a ton of opportunities all the time to do different things. We learned to step back, and we've since consolidated to focus on our core business.
Not only have we consolidated, but we have changed in different ways. I've since found that you need different expertise in various areas with these outlets to sell. A retail wine bar is a very different skill set than running a winery, and we needed different people because it needed to be marketed and run differently. It's hard to rush into that type of business. Even other things like selling more wines online take a different skill set. And unfortunately, we do need to do it. We must build the right website for marketing, fulfillment, and operations. It is creating a much bigger operation than Old York Cellars has right now.
3. Plan for Growth
When we first opened up our facilities, they weren't that great. This goes back 15 years ago. I should have stepped back and built the facilities better, anticipating our growth. Right before Covid, we were selling about 10,000 cases a year. I can't do that here. So, we're renting space. We're very inefficient in running the business. I probably should have stepped back and said, okay, let's build a new building here or do something else to build out our equipment as opposed to renting a place and using different facilities. So that was when we were built for a business half the size that we are now. And we're stretching at the seams. But that's not only on the winemaking side but also on the hospitality side.
4. Don't Keep Your Eyes Off of the Ledger Sheet
As in many businesses, one of our large expenses is labor costs. And every time, I would expand and find out that. I thought my current staff couldn't handle this. I'm adding another person and another. We were a lot of extra folks, and I had a bloated payroll. We're down significantly now. We're probably about 20% fewer folks than we had at our height. It comes back to someone watching the cost. And, when you're expanding inefficiently, the costs are just escalating. And so it does relate somewhat back to my other point. If I had built the foundation 5 or 6 years ago, with some capital improvements in it, down the line, it would have helped to keep the overall costs down.
5. Challenges of Being a Solo Owner
It's too hard to be a solo owner in a line of business like this. There are just too many aspects of this business for one person to run. So at some point, I think I'd be having more fun if I had a strategic investor or somebody who's coming in here who knows 1 or 2 more aspects of the business that I can silo off. A person who handles a certain part of the business, whether it's the hospitality side, the wine business side, or the marketing and internet side of the company, would take off some of the pressure. Watching every aspect of the business daily is hard, but it is still fun.