Don Ross, founder and chairman of Cardinal Shower Enclosures, offers a particularly telling example. He bought 2.5 acres in the Napa Valley in 2003. It came with rows of cabernet sauvignon vines. A lifelong wine lover — he has 7,000 bottles in his cellar — he started making wine under the label Shibumi Knoll. Then, he bought some chardonnay grapes from another vineyard and made that, too.
The business was going along modestly until 2005, when Mr. Ross gave a bottle of the chardonnay to his golf pro who passed it on to his next client, an influential wine critic. That critic later rated the wine a 97 out of 100 in a blind tasting, and Mr. Ross’s phone started to ring.
Today, his wine is served at the French Laundry and other fine restaurants in Napa Valley and one in Tennessee, and he sells the rest through his wine club. You would think Mr. Ross has a profitable side business. Alas, no.
“This wine business, we don’t make any money,” Mr. Ross said. “I do it for love. I sell shower doors for money.”
He said the costs of making a high-quality but small-production wine make it difficult to turn a profit. There are the salaries of the vineyard manager and the winemaker and also the costs of the bottles, labels and corks, which, he said, are $2 each.
Yet Mr. Ross’s story is far from a cautionary tale in the wine-growing regions of California. It is more of a model.
Larry Hayes, whose company Mulberry Trample specializes in discreetly selling a producer’s excess wine so the prices of labeled bottles do not drop, said aspiring winemakers would be better off buying a piece of land they like and letting that dictate what wine gets made.
He said the big risk for most wealthy enthusiasts is buying too much land too quickly at too high a price and then thinking that they will be able to get whatever wine they make distributed to wine stores.
“These people really don’t have the access or the ability to get distribution through the wine distribution network,” Mr. Hayes said. “It’s a tough, tough deal. Everyone wants brands that they know. If you’re a small producer, that distribution is not available to you. And if you get in, you’re not the biggest fish in that pond.”
Many people think if they can get a high score, as Mr. Ross did, then everything will be set. But a good review is not something that can be bought.
Aaron Pott, a winemaker and consultant in Napa Valley, said he received calls all the time from people saying they wanted to make a 100-point wine and were willing to pay to do it.
“My first warning is, don’t go into the business looking for a certain score,” he said. “If you’re unrealistic, you’re going to be disappointed.”
Mr. Pott, who charges a monthly consulting fee of $8,000, said he weeded out people who did not have their own vineyards but figured they could buy the grapes they needed to make their wine. “You’re giving them false hopes,” he said. “If they’re just buying fruit from someone else, it’s not very long-lasting. The contracts could end or the prices could go up.”
Even winemakers who seem to be doing everything right struggle with distribution. Bill Foley, who made his fortune in title insurance and other real estate businesses, owns nine wineries in California, one in Washington State and two in New Zealand, and he hopes to buy five more on the West Coast. This year, his Foley Family Wines will sell 1.3 million cases.
His distribution, he said, “rides along with Sebastiani,” a lower-end brand. His high-end Chalk Hill wines, with 40,000 cases a year, would be a blip on a distributor’s screen without the Sebastiani association.
Still, he said he was running his wine business as he did Fidelity National Financial, a holding company he helped build. When he buys a vineyard — he is known in wine circles for his acquisitiveness — he consolidates all the back-office operations, like accounting and wine club management, to free up resources to promote and improve the wines.
Having spent tens, if not hundreds of millions, of dollars buying wineries since 2007, he has yet to turn a profit, but the wineries are at least covering their costs. Still, he said he was glad he had done it. “When you’re out in the vineyards, drinking your own wines, with your kids, it’s fun,” Mr. Foley said.