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Wine Store Financial Feasibility Model

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DescriptionNotes

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Illustrative Only

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Input section

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Buyer Numbers:

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Population of Geographical Area25,000look for local stats

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Annual population growth rate (%)1.0%look for local stats

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Adult Population60.0%look for local stats

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Wine Drinkers as a % of adult population32.6%core (13.7) plus marginal (18.9) wine drinkers (p.30 Wine Mktg Sales)

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Year123constant

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Store Penetration %25.0%50.0%75.0%Estimate: occasional customer, x% buys at least 1 bottle pa. Not market share – see My Market Share of Segment.

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Segment:% of drinkersProject Genome: US Constellation Wine Study

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Enthusiasts9.00%Project Genome

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Luxury Enthusiasts3.00%Project Genome

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Image Seekers18.00%Project Genome

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Luxury Image Seekers2.00%Project Genome

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Savvy Shoppers15.00%Project Genome

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Traditionalists16.00%Project Genome

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Satisfied Sippers14.00%Project Genome

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Overwhelmed23.00%Project Genome

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My Market Share of Segment:market share %Eg. Half of purchases reflects everyday wine bought from discounter. Three other local average liquor stores.

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Enthusiasts25.00%Like the range

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Luxury Enthusiasts50.00%Love the range

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Image Seekers25.00%Like the descriptions and ratings

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Luxury Image Seekers50.00%Love the descriptions and ratings, and higher prices

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Savvy Shoppers5.00%Too expensive, only on impulse

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Traditionalists15.00%Find reputable wine brands

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Satisfied Sippers5.00%Too expensive, only on impulse

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Overwhelmed5.00%Too expensive, only on impulse

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Price / bottle (USD ex tax)Price categories, rounded to nearest $5 price point (p.41 Wine Mktg Sales)

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Enthusiasts$15.00Super Premium

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Luxury Enthusiasts$25.00Ultra Premium

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Image Seekers$15.00Super Premium

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Luxury Image Seekers$25.00Ultra Premium

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Savvy Shoppers$5.00Sub Premium

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Traditionalists$10.00Premium

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Satisfied Sippers$5.00Super Value Wine

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Overwhelmed$5.00Super Value Wine

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Quantity pa (bottles)Based off Aussie Johnson and Bruwer study. Checked against US average.

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Enthusiasts104Estimate 2 bottles pw

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Luxury Enthusiasts104Estimate 2 bottles pw

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Image Seekers104Estimate 2 bottles pw

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Luxury Image Seekers104Estimate 2 bottles pw

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Savvy Shoppers52Estimate 1 bottles pw

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Traditionalists52Estimate 1 bottles pw

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Satisfied Sippers52Estimate 1 bottles pw

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Overwhelmed52Estimate 1 bottles pw

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Margin:

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Retailer Gross margin (%)30.0%Industry standard

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Expenses:

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Store Lease per period ($)$30,000 1000 ft2 @ $30 / ft2 pa

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Manager's required income per year ($)$45,000 Employed or Owner Manager

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Staff Salary$35,000 estimate

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Number of Staff (exc Manager)1estimate

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Administration ($ pa)$20,000 Accounting and legal, insurance, utilities, security

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Capital:

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Inventory$25,000 estimate

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Store Fit out$20,000 estimate includes IT

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Promotion:

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Year123constant

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Internet Marketing activity (1 = active, 0 = inactive)111dummy variable

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Tastings activity (1 = active, 0 = inactive)111dummy variable

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Tastings Vending Machine activity (1 = active, 0 = inactive)000dummy variable

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Concept Store PR activity (1 = active, 0 = inactive)000dummy variable

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Price promotions activity (1 = active, 0 = inactive)000dummy variable

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Local newspaper advertising activity (1 = active, 0 = inactive)000dummy variable

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Internet Marketing Visitors6000estimate 500pm

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Internet Marketing Conversion Rate0.5%estimate

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Post Store Purchase (Macys Factor)5Macys $5.70 factor, i.e. for every $1 bought online $5.70 bought in-store

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Impact on Sales of Tastings5%estimate

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Impact on Sales of Tastings Vending Machine 10%estimate

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Impact on Sales of Concept Store PR 10%estimate

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Price Elasticity 1estimate (eg 1=same % increase in buyers as discount, or 1.5= 50% increase in buyers vs discount amount)

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Dollars newspaper advertising per customer ($)100estimate: every $100 of advertising brings 1 customer

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Cost of internet marketing / year ($)5000estimate

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Cost of tastings500estimate

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Cost of Tasting Vending Machines10000Estimate: 8 slot www.enomaticusa.com

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Cost of Concept Store extras5000estimate: mainly computer equipment

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Price Promotion Discount (%)20.0%variable

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Cost of local print advertising/year ($)$5,000 estimate

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Revenue Calculations

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DescriptionYear123Notes

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Total population25,00025,25025,503Population * growth rate

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Available population4,8904,9394,988Total population *Adult% * Wine Drinkers %

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Store Penetration1,2232,4693,741Available Population * Store Penetration %

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% of popn that uses store at least once pa.

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Store Penetration By Segment:Store customers look like this:

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Enthusiasts110222337Store Penetration * Segment % of drinkers

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Luxury Enthusiasts3774112Store Penetration * Segment % of drinkers

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Image Seekers220445673Store Penetration * Segment % of drinkers

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Luxury Image Seekers244975Store Penetration * Segment % of drinkers

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Savvy Shoppers183370561Store Penetration * Segment % of drinkers

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Traditionalists196395599Store Penetration * Segment % of drinkers

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Satisfied Sippers171346524Store Penetration * Segment % of drinkers

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Overwhelmed281568860Store Penetration * Segment % of drinkers

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Buyers # (without marketing)1,2232,4693,741Sum of Store Penetration

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Store's Annual Wine Revenue by Segment Customer:Each customer purchases this amount from My store pa

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Enthusiasts$390Segment's Price * Quantity * My Market Share

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Luxury Enthusiasts$1,300Segment's Price * Quantity * My Market Share

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Image Seekers$390Segment's Price * Quantity * My Market Share

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Luxury Image Seekers$1,300Segment's Price * Quantity * My Market Share

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Savvy Shoppers$13Segment's Price * Quantity * My Market Share

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Traditionalists$78Segment's Price * Quantity * My Market Share

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Satisfied Sippers$13Segment's Price * Quantity * My Market Share

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Overwhelmed$13Segment's Price * Quantity * My Market Share

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Revenue by Segment:I then multiply this by Store Penetration customers

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Enthusiasts$42,910$86,678$131,317Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Luxury Enthusiasts$47,678$96,309$145,907Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Image Seekers$85,820$173,355$262,633Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Luxury Image Seekers$31,785$64,206$97,272Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Savvy Shoppers$2,384$4,815$7,295Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Traditionalists$15,257$30,819$46,690Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Satisfied Sippers$2,225$4,494$6,809Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Overwhelmed$3,655$7,384$11,186Segment Store Penetration * Store's Annual Wine Revenue by Segment Customer

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Revenue without marketing$231,713$468,060$709,110Sum of Revenue by Segment

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Buyers from Marketing:

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Internet Marketing150150150(Visitors * Macy's Factor) * Conversion Rate * on/off

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Tastings61123187Buyers # (without marketing) * impact of tastings * on/off

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Tastings Vending Machine 000Buyers # (without marketing) * impact of vending machines * on/off

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Concept Store PR 000Buyers # (without marketing) * impact of concept store PR * on/off

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Price promotions 000Price Promotion % * Price elasticity * Buyers # (without marketing) * on/off

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Local newspaper advertising000Cost of print advertising / Dollars per customer * on/off

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Sum of Incremental Buyers211273337Sum of buyers from marketing

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Weighted Average Revenue per non marketing buyer$190$190$190Revenue without marketing / Buyers # (without marketing)

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Revenue from Marketing$40,017$51,834$63,887Buyers from marketing * Weighted Average Revenue per non marketing buyer

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Revenue$271,729 $519,894 $772,997 Price * Number of purchases per year

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Variable cost calculations

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Year123Notes

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COGS$190,210 $363,925 $541,098 Revenue * (1 – Gross Margin)

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Cost of Price Promotion Discount$0 $0 $0 Revenue * Discount % * on/off

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Variable costs$190,210 $363,925 $541,098 Sum of variable costs above

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Fixed cost calculations

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Year123Notes

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Lease$30,000 $30,000 $30,000 Store Lease per period ($)

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Salaries$80,000 $80,000 $80,000 Manager's salary + (staff salary * staff #)

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Administration$20,000 $20,000 $20,000 Administration

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Internet Marketing$5,000 $5,000 $5,000 Cost of internet marketing / year ($)

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Tastings Activity$500 $500 $500 Cost of tastings

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Tastings Vending Machine$0 $0 $0 Cost of Tasting Vending Machines

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Concept Store PR activity$0 $0 $0 Cost of Concept Store extras

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Local newspaper advertising activity $0 $0 $0 Cost of local print advertising/year ($)

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Inventory$25,000 Inventory

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Store Fit out$20,000 Store Fit out

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Fixed costs$180,500 $135,500 $135,500 Sum of fixed costs above

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Worksheet 5 - Cashflow calculations

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Year123Notes

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Net Cash flow($98,981)$20,468 $96,399 Revenue per year -(Variable costs per year+Fixed costs per year)

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Cumulative cash flow periods 1 -3$17,886 Sum of cash flows of periods 1, 2 & 3

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Notes:

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Ignores tourism purchases during summer

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May overstate the number of permanent residents during winter.

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“Wine Marketing and Sales”. Wagner, Olsen, Thach 2007

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Ignores all taxs (sales, company)

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Macys factor see: http://www.mylocalwinestore.com/wine-internet-marketing/every-dollar-spent-online-influences-money-spent-in-store/

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Johnson,  T, & Bruwer, J. “An Empirical Confirmation of Wine-Related Lifestyle Segments.” 2003

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--- check on Aussie study bottle consumption #s:

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DescriptionNumberSource

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Wine Case US Consumption249000000p.25 Wine Mktg Sales: 2005 figure

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bottles per case12

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US Consumption bottles2988000000

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US popn281000000Census 2000

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Adult Population40.00%Census 2000 (approx)

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US Adult Popn112400000

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Wine Drinkers % of adult popn32.60%above

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Wine Drinkers36642400

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Bottles per Drinker pa81.544876973124Average is similar to 104 and 52 above

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Note this is for illustrative purposes only. Before starting a business you should get professional accounting and legal advice.

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Uses Rob Hamlin modelling process: “Talking to our Financial Backers: The Key Role of Financial 'Offer Models'”, University of Otago.

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Source: http://MyLocalWineStore.com