Wine Merchant and Storage Facility

BUSINESS OVERVIEW

PRODUCTS & SERVICES

MARKET ANALYSIS

COMPETITION

CUSTOMERS

ADVERTISING

GROWTH STRATEGY

Wine Seller Cellar

5123 Walnut St.
Baltimore, Maryland 21201

Greg Darnell, Kyle Jobe, Joe LaMonica, Audrey Speak, and Dan Weller

The Wine Seller Cellar is a dream come true for people living in crowded cities, small apartments, or anyone with a large wine collection and no place to store it. The Wine Seller Cellar is a full service wine merchant and storage facility that offers the perfect environment to store your wine. Whether you don’t have the space, proper storage conditions in your home, or you’re simply clueless as to what conditions will provide for optimal aging, Wine Seller Cellar is the place for you. Not only does the facility offer perfect and safe storage for your wine, but we also offer a fine selection of wines and champagnes that can be enjoyed right there at our wine bar.

BUSINESS OVERVIEW

The Wine Seller Cellar will provide people with a place to store their wine in the proper storing conditions. Our storage will also save space in people’s apartments, houses, etc. Another unique advantage is that the facility has 24 hour access.

The facility will also have a wine bar. People will have a place to enjoy their wine with friends and other wine connoisseurs. This will help create a great customer experience. This will also give people the opportunity to try other wines. If we are successful, there could be an opportunity to create a wine of our own.

This is an opportunity to become a trend setter in Baltimore. A great way to start this trend would be by word–of–mouth, which could make storing wine and enjoying it at our facility the “thing to do”. This trend setting will allow us to capitalize on being a first mover in the Baltimore area. If successful, we could branch out to other east–coast cities.

PRODUCTS & SERVICES

The business that we are in is the sale and storage of alcoholic beverages. We will compete with other bars, yet differ from them in the sense that the bar section of the facility is strictly a wine bar. The facility is also a place for people to store any amount of wine and have the freedom to access it at any time.

Unique Features and Benefits

As many already know, most wine gets better with age. But in order to achieve the exact “matured” taste, wine needs to be stored in a proper and extremely particular environment. Our facility offers a state–of–the–art storage locker that provides the perfect environment for your wine collection. Many factors go into the growth and maturity of wine. These include: ideal temperature, ideal humidity, the right amount of light, the right amount of air flow and insulation, and a storage place that is vibration free. The Wine Seller Cellar was created to provide all of these features to insure optimal growth and maturity.

The storage cellars are protected by 24 hour security cameras. An access code is needed in order to enter the storage cellar. This not only provides the security of your wine, but the security of those who wish to access the cellar after hours since the storage section of the facility is conveniently accessible 24 hours a day.

There is a wine bar located at the storage facility for everyone to enjoy, whether they store wine with us or simply want to stop in to enjoy a glass of wine in our comfortable, unique atmosphere. People can even drop in to enjoy a bottle of their own wine that they have stored in our facility.

The facility is convenient to all customers in numerous ways. First, if they choose to store wine with us, they have the freedom to access their collection at any time of the day, on any day of the week. Next, the facility gives wine lovers the chance to either start a collection, or to continue their existing collection without the worry of crowding their homes or storing their wine improperly. This is especially convenient for those who live in apartments or condos and have no extra room for a desired wine collection.

These specific features meet the needs or preferences of the customer because it is a great way to build, or continue to build a wine collection. With plenty of storage space available at our facility, there is no need to limit your wine collection. And this even applies to people who do have the room in their homes to store wine, yet do not have the knowledge or time to create the perfect wine–storing environment. Why invest in fine wines if they cannot be properly stored and matured?

Currently in the Baltimore area there are no facilities like this that exist. The Red Carpet Room at the Inn at the Park does have a similar service though. There is a Wine Room with a dine–in wine cellar. This is primarily used for large parties, business meetings, or events, whereas our facility can be used for many other occasions.

The benefit of our service compared to the competition is that it applies to a broader market. Anyone who wishes to store wine, any amount, is welcome to utilize the facility. They are able to stop by at any time to pick up their wine, not just during business hours. The facility is also available to other customers who simply want to stop in for a glass or two of wine.

Risk Factors

There are few limitations to our service since wine drinking has increased greatly over the years and is predicted to continue growing. Yet there are some matters to take into consideration. First, the insurance cost to protect the facility and to serve alcohol is very high. There is a large liability placed on the facility since the storage lockers will contain a vast amount of others’ “property”. Another slighter limitation to our service is introducing it to the market. Since there are basically no other facilities similar to ours that exist in the area, it could be difficult convincing people to try new ideas, such as ours.

MARKET ANALYSIS

Our service has surpassed the idea stage since there are currently facilities very similar to ours in existence in other states. Researching these existing facilities has proved that the idea is quite plausible and successful; leading us to believe that it will flourish in the Baltimore area. Since very few are located in the area, the competition is scarce, allowing for a perfect market niche. To help matters along, the consumption of wine in the United States has greatly increased recently and is only expected to continue increasing.

Industry Trends

There are very few wine storage facilities on the East Coast. Wine storage locations are becoming popular on the east coast. The closest wine storage facility that operates strictly as a wine storage location is in Bangor. A wine storage location in Baltimore would offer a unique service and accommodate a growing market trend. A wine storage facility could offer its services to wineries, shop owners, distributors, importers, exporters, restaurants, wine clubs, schools, or any other kind of institution. Baltimore contains 147,000 housing units and 78,000 rent occupied units. The city is experiencing new growth and expansion and more people will be living in apartments and lofts with limited storage space. Root Avenue in downtown Baltimore is an area that is experiencing much revitalization that could accommodate such a business. A factor to be considered while starting a wine storage business would be that 98 percent of all wine sold in retail stores is drunk within 24 hours. A wine storage facility would be marketed to people who have wine collections or people that save their wine for occasions and aging considerations. Establishing a perceived benefit for the proper storage of wine will be crucial to the success of a wine storage business. As people drink wine for their beverage of choice their knowledge of the product will increase also. If people understand that the taste of wine is affected by how it is stored then they will see the need to keep it in an ideal condition.

More people are choosing to drink wine but many wine drinkers are unaware of the proper storage techniques needed to keep wine in its ideal state. Many people store wine because of its investment value. During the last few years, the value of wine purchased young and properly stored has increased many times over. With the increasing popularity of wine, this trend is expected to continue to grow. Many people work on a rotation system, storing wine for their own consumption in future years. The best system is to buy fine wines upon release and properly store them until they mature. For any wine lover, storing wine well is very important. There are a few simple principles that need to be understood in order to select proper wine storage conditions. Ideal wine conditions are difficult to establish in a home or loft. A good storage location for wine is generally dark, is free of vibration, has high humidity and has a low stable temperature. Generally accepted ‘ideal’ conditions are 50 to 55 degrees and 70 percent humidity or higher. The high humidity is important because it keeps the corks from drying and minimizes evaporation. The only problem with even higher levels of humidity is that it brings on growth of mold on the labels or the loosening of labels that have water soluble glue.

There are many studies that show how wine consumption is increasing. Adults now prefer to drink wine over beer. Wine is aligned with cultural trends in America, including a focus on family and tradition. For the first time since Gallup began measuring Americans’ drinking preferences in 1992, wine passed beer in 2005 as the alcoholic beverage adult drinkers consume most often. Gallup’s Consumption Habits poll found that 39 percent of American drinkers consume wine most often, and 36 percent consume beer most often. That data followed research conducted on behalf of Wine Market Council that also showed the “Millennial” generation (consumers between 21 and 30 years old) taking a strong liking to wine. Currently the U.S. is the fourth largest producer of wine in the world yet only accounts for approximately 4.2 percent of the total wine export market based on volume. One reason for this disparity can be attributed to the low level of strategic importance placed on exporting by most U.S. wineries.

By 2008, U.S. consumers will account for 25 percent of all the wine drunk in the world, up from 19 percent, according to a new study conducted for the Bordeaux–based trade group, VinExpo. This would make the United States top spot for World Wine consumption. Wine consumption is increasing everywhere; there is a predicted 14.7 percent worldwide increase in total wine industry revenues by 2008. U.S. wine consumption growth began a steady climb in 1991 after the CBS “60 Minutes” French Paradox broadcast and hundreds of other news media reported on the favorable health effects of moderate wine consumption. Wine sales in the U.S. have undergone constant growth since 1975. California wine sales in the U.S. reached another record high of 441 million gallons in 2005 with a retail value of $16.5 billion, according to wine industry consultant Jon Fredrikson of Woodside and publisher of the Gomberg-Fredrikson Report. Total California winery shipments to all markets both in the U.S. and abroad reached 532 million gallons (223.9 nine–liter cases) last year. The strong performance reflects the overall growth trend of wine demand in the U.S. and can be attributed to several developments. Wine has enjoyed the most positive image it has had in years from consumers, the media and government. The May 2005 U.S. Supreme Court decision on direct–to–consumer sales not only benefited U.S. wineries, but had a favorable impact on public opinion and awareness of wine. Shortly after the ruling, a Gallup poll named wine as America’s most preferred alcohol beverage citing growth trends from several different demographic groups.

The popularity of the hit movie “Sideways” continued to lift the public’s interest in wine, particularly in Pinot Noir from California. U.S. supermarket sales also reflected the growth of upscale wines, with wines priced $6 and above showing double–digit increases by volume, according to ACNielsen, which tracks laser–scanning data from 3000 supermarkets across the country. For the second year in recent history, red wine edged out white as the top seller by volume in food stores, holding a 41.7 percent market share. White accounted for an estimated 41.0 percent share, while blush represented 17.4 percent share of volume. Still benefiting from the “Sideways” effect, Pinot Noir shipments experienced a dramatic 70 percent jump in food stores, compared to the previous year, though from a small base of two percent share by volume. Chardonnay remained the top–selling wine, followed by Merlot, White Zinfandel and Cabernet Sauvignon. Together, these top four varietals totaled 53 percent of all table wine volume in food stores.

The U.S. wine market, with the adult population, aged 21 to 65, has grown by 10.4 million since 2000. “Echo Boomers,” the adult children of the “Baby Boomer” generation that adopted wine in the 1960s and 1970s, are increasingly making wine more a part of their lifestyle. The leading edge of the Echo Boomer generation, the 70 million Americans who will be between the ages of 11 and 28 in 2005, began to reach the legal drinking age of 21 in 1998. The Millennial generation is providing the wine industry with extreme growth potential according to the Wine Market Council. Baby Boomers, who currently make up the largest segment of the U.S. population, also favor wine.

Several industries play an integral role in the idea. The wine industry is important, because without a demand for wine then there will be no need for a place to store wine. The idea also encompasses the service industry in the sense that the portable wine storage is providing a service for customers. If demand for services such as storing wine tapers off, then there is no need to offer a wine storage service.

The probable industry for the idea would be drinking places for alcoholic beverages. This industry has a SIC code of 5813. This industry deals mainly with the wholesale of alcoholic beverages. Although the idea primarily deals with wine storage, there will still be a wine bar (which was given as an example) with some sales. Either way, the wine self–storage facility will allow people to consume wine inside the premises which would make it a drinking place for alcoholic beverages.

There is very good market potential for this industry. “By the mid–2000s the U.S. wine industry was picking up. California wineries shipped a record amount of products, with approximately 428 million gallons shipped domestically, from a total 522 million gallons shipped worldwide. While so–called “extreme value” varieties continued to sell well, the expensive premium wines also were seeing increases, accounting for 64 percent of industry revenues (Business & Company Resource Center).”

“By the decade’s end, the Australian Wine Bureau reported that more than 4 million cases of Australian wine would be shipped to the United States by 2001, and by 2026 shipments should total more than 10 million cases with an estimated value of $440 million (Business & Company Resource Center).”

These quotes show that the demand for U.S. wine and foreign wines from places like Australia is on the rise. Therefore, this industry is in a period of growth due to the increasing wine sales. Demand for wine has been rising, and thus the demand for a place to store it should also increase over the next couple of years. The graph below shows that there has been an upward trend in wine sales since 1999, and this trend is projected to continue into the year 2009.

Technology should only help the industry, because people will be able to look at the different wines available in the world to purchase. The internet will also allow the wine storage facility to have a website that would allow potential customers to find out about the location, prices, etc. The wine storage will also have state of the art technology in order to make sure that it offers the mot ideal place to store wine. Other technological devices like security cameras and alarms that will ensure that the customers have the best experience in storing their wine and enjoying it too.

COMPETITION

There is no direct competition in Baltimore for a wine storage facility. Our service will be very unique to the city of Baltimore. This uniqueness will help us to have a first mover advantage in the city of Baltimore. However, direct competition for a wine self–storage does exist outside of Baltimore. Some of the cities where this idea is already in place are in cities like Bangor, Maine, and Madison, Wisconsin.

There is competition within Baltimore for our business. Regarding wine storage, we will be competing with companies that offer wine storage in people’s homes. This is a big reason why the suburbs will not be the ideal location for our service. People in the suburbs have more room to create a place to store their own wine. However, we will have a lot of competition in Baltimore along the lines of a place for drinking alcoholic beverages. We will be competing with the various bars and clubs throughout the city. We will want to attract people to come to our place to drink wine rather than go to another bar to drink wine. The biggest threat in the city will be wine bars.

CUSTOMERS

The two largest segments of the U.S. population are the echo boomer generation and the baby boomer generation. Both of these demographics enjoy wine. The table below displays the age breakdown for the Baltimore area in the year 2005. This table shows that the nation wide age phenomenon applies to the city of Baltimore too. Just like throughout the country, the baby boomers (41–59 years) represent a large percentage of people in Baltimore. The echo boomer generation (11–28 years) also represents a large percentage of the population. The baby boomers are the current target audience, and this is the largest audience in Baltimore. The echo boomers represent a chance for growth into the future. And this growth is present in the city of Baltimore.

The echo boomer (Millennial) generation represent people aged 12–29 in 2006. “The Millennial generation is providing the wine industry with the ‘kind of growth potential not seen in more than 30 years,’ according to the Wine Market Council (Mintel Reports).” This growth potential will create the customer base needed for the wine business to continue growing into the future. When looking at starting a business, it is very important to make sure that there will be a demand, and this quote reaffirms the fact that there will be a demand for years to come. It is up to us to recognize this demand and provide the proper supply to meet this demand.

Scarborough Research also revealed that consumers aged 21–35 are 84 percent more likely to spend more than $20 for a bottle of premium wine than those aged 35–54. This indicates that the increased wine consumption of this generation will also be more profitable for winemakers (Mintel Reports).”

The need for wine storage will be even more important if these echo boomers are purchasing more expensive wine, because they will want some place to store this wine. This quote once again provides positive reinforcement for the service that we will offer. Most people will not want to spend money to store cheap wine, but people will definitely want a place to store more expensive wine. The bottom line is that if someone is going to go out of there way to spend the money on good wine, then they will want to spend the money on a place to store their wine at the proper conditions so that they may have the best experience when it comes to enjoying their wine.

The baby boomer generation is the main target demographic. This demographic is also the largest generation. They also have the most disposable income. The best thing is that this generation enjoys drinking wine. All of these facts are very positive for the industry and specifically our service. We could not ask for anything better, because our target audience is the largest audience, and this audience has the most money to spend on our service. Therefore, our customer base is the ideal base that every business would want to possess.

“Wine industry researcher MFK Research reported that, in the year 2000, consumers in their forties and fifties (which covers Baby Boomers) drank an average of 14 bottles and 16 bottles of wine, respectively. This is in comparison to an average of 15 bottles consumed by individuals in their sixties, and ten bottles consumed by individuals in their thirties (Mintel Reports).”

This quote reaffirms the fact that the baby boomers are wine drinkers. Once the baby boomers start to retire, they can store wine in our wine storage. They can also enjoy their wine at the wine bar provided with friends and family as a means of recreation. Our service will provide the baby boomers with more than a place to store and drink wine. We will provide an experience that the boomers will not be able to find anywhere else in the city of Baltimore, Maryland. This unique service should do very well.

According to the Fall 2004 Simmons NCS (Mintel Reports): 37 percent of adult respondents over age 21 drink wine, 35 percent of male respondents drink wine 39 percent of female respondents drink wine, older respondents drink more than younger respondents, more educated people tend to be more inclined to drink wine. These facts are also favorable for the industry. Women make up the largest percentage of people in Baltimore. This is good, because women are more inclined to drink wine. Another thing from above is that older people drink more wine than younger people which coincides with our research that the baby boomers enjoy their wine. Another positive trend is that more educated people tend to drink wine. This will provide favorable demographic for us in the future. The city of Baltimore has many local universities and college enrollment has been on the rise too. This will create more educated people in the city for years to come who will enjoy drinking wine.

ADVERTISING

We will reach target consumers by picking a location where the target consumers live and go out. The best location would be downtown. More people are starting to move back to the downtown area which will be beneficial to us if we do indeed choose a downtown location. Our service will also provide people a place to go before and after downtown attractions such as concerts, games, etc. Most of the entertainment in Baltimore occurs in the downtown area. We can capitalize on this fact. People often want to go somewhere before and after an event. Our wine storage service will provide people with an opportunity to socialize with friends and families by enjoying their wine before and after these events. Our service will also help with the revitalization of downtown Baltimore. Our place will bring more people and business into the downtown area. Therefore, we think that downtown will be the ideal location. This will be especially true if the baby boomers start to move out of the suburbs and back downtown. This trend could easily start to happen. As the boomers kids move out of their houses, they will be looking to downsize. Therefore, the apartments and lofts that exist downtown could be an ideal place for the baby boomers.

Another option for our service would be Boston. There are several advantages of choosing Boston. There are a lot of businesses in Boston. This would be beneficial, because people can enjoy their wines stored in the wine storage while entertaining clients. It will also provide people with a place to go after work hours for a happy hour type of environment. Another big advantage about Boston is that there is a lot of money in Boston. A great way for our service to make money is to attract some of the wealthy residents and workers in Boston. Following the money will be a good way to make money. However, there are already a lot of nice restaurants and bars in the area. I think the downtown Baltimore area has the most potential for growth. Therefore, Boston would be a good location, but downtown Baltimore is still the ideal location for our service.

Yet another option to locate our service is the suburbs. There are a lot of baby boomers in the suburbs. However, these baby boomers might not want to stay there once their kids move out of the house. These boomers will no longer need the space that the suburbs offer them. Another reason why the suburbs will not be the best location is that these people will already have a lot of space to store their wine. While they will not have the optimal storing conditions that we will offer, they will still have a cheaper substitute that will be good enough for them. Also, it would be more beneficial for these people to have a place downtown to enjoy their wine, because it will give them a place to go when they do indeed go downtown for events. Therefore, we do not think that the suburbs will be the best location for our service.

Advertising will be important in order to spread the word about our unique service to the city of Baltimore. A great way to advertise is by creating a website. People will be able to see what we are all about by simply visiting our website. We will provide things such as: services offered, directions, contact information, etc. Another way we will advertise is by making newspaper and magazine ads. Another way we will advertise is by doing so at the stores where the wine is actually purchased. This should be very beneficial, because when people actually go to purchase their wine they will see our advertisement which will provide them a place to store and enjoy their newly bough wine. The best part is that everyone who purchases wine is someone we want to target, because we want to target all wine drinkers. Word–of–mouth will also help in the advancement of the business. Happy customers will tell their friends and family which should create more business. People are more likely to listen to someone they know then some random person on a commercial. Therefore, a big way we will penetrate our market is by advertising, especially by word–of–mouth.

GROWTH STRATEGY

There is a huge market for this industry, especially in the downtown Baltimore area. This offers our everyday wine connoisseur a way to properly store their wine while having the option to come and use our elegant lounge area to indulge in their wine while meeting new and exciting people within their community. After we open our first location and market our industry we could expand and open up locations around the area and possibly offer our own brand of wine. The service we wish to create is past the idea stage and already in existence in a few other states. From researching these existing successful facilities and their locations, a wine storage facility in the Baltimore area seems very feasible.

Next Steps

One thing we will definitely need to inquire about is the start–up capital. We will need money in order to buy property, build a storage facility, hire people, and various other marketing expenses. Some of the sources for start–up capital would include: wealthy owners who have the funds to invest into the business, family and friends, and loans. We will need to get a bank loan. We will want to try and obtain a favorable rate. We also need to open a business bank account.

We will also want to talk to people who have been successful with this idea in other cities. We would want to find out things like: how long it would take to get the business operational, how long it will take for construction if built from scratch, how long to hire and train employees, and would there be opportunities to expand business into other markets. Specifically we would want to know if we could expand into other market in the Midwest, and even in other areas of the United States.

Management Summary

• Mentor: Peter Raset
• Idea Originator: Tiffany O’Conner
• Attorney: TBD. Will establish the type of business organization (i.e. LLC, Partnership, Sole Proprietorship, etc.) and acquire a permit to sell alcohol on the premises.
• Accountant: TBD. Will keep the books.
• Contractor: TBD. Will help us with finding and building the wine storage facility.
• Website Designer: TBD. Will create a unique and informative website to attract customers.