Transforming wine by paying farmer's first.
How can a wine company have a social impact?
Check it out. Red Hen is the place where investing intersects with social-justice, where wine drinkers intersect with farmers, and where communities deepen connections within themselves. We are building a business model that shares risk and profit across the whole chain, and nothing is business as usual. What is our model? If you haven’t heard of Revenue Share, take a minute and discover how we are investing passionately and harvesting collectively.
Financial talk may make your eyes glaze if you’re used to suits telling you you’re too stupid (or not rich enough) to understand these things, but the reality is this: we’ve all been at the bottom end of some trickle-down scenario, whether it’s the last piece of pie on Thanksgiving or shelling out to cover the rest of the dinner check when everyone agreed to just “put in enough to cover what we each ate”... there ain’t a lot left by the time you get to the end of the line. And sometimes the remainder looks more like a debt than a bonus. You don’t need to have a degree in finance to recognize when it’s time for a recount.
Red Hen is calling for that recount. Founded on the principle that risk and benefit sharing build better businesses, we start by taking care of our farmers first. All across the wine industry and agriculture in general, the folks at the beginning of it all - the ones with their hands and boots in the dirt every day - are the last in line to get paid. That means that while you and I have to fork over our hard earned dollars for a bottle of wine before we get to pull the cork, there’s a long line of people taking their cut of the check before the farmer ever sees their share. My buzz may be long worn off before the folks who grew those grapes and made that wine get paid for it. At the bottom of the food-chain, farmers find themselves financing the industry tiers above them. The impossible economic burden of being everyone else's interest-free credit card has made sustainable and artisan winegrowers an endangered species.
There are no white hats and black hats here, it’s not as simple as identifying the greedy evil villains and outing them. The reality is, our current system is a bit of a clunker and we need to engineer one that closes the gaps. It takes a little bit of learning and a bit of visioning and a bit of changing from everyone along the way. It means we have to talk about the not-so-romantic stuff: sustainable wine has as much to do with what our money is up to as it does with ladybugs, moon phases and bio-diesel. So how do we MacGuyver this machine to make an economy that works for everyone and brings us the wines we love for generations to come?
It’s pretty tough to build a wine company without some real capital. Wine isn’t made in a day. It doesn’t make it’s way over oceans and continents over night and if we were not going to use our farmers as interest-free credit cards anymore, then we needed to find like-minded wine and farmer-lovers who were willing to invest with us. It’s a long game. Climate-change is having more and more frequently devastating effects on wine producers so supply fluctuates, and cultivating clients for life takes trust. Trust takes time. Needless to say, no Shark Tank is eyeing Red Hen hungrily; it’s not an explosive-profit, quick turnaround proposition. Wine is a life-long commitment. Our investors are just as connected to this principle as our producers. Enter Revenue Share.
Revenue Share is an innovative investing model that promotes stability for new businesses and security for investors. This ain’t Kickstarter, folks. But anyone can do it. We structured our investments like loans: giving promissory notes to every investor, which committed Red Hen to paying back the loan amount, plus a sweet dollop of interest. Investors recoup their investment and interest through a set percentage of Red Hen’s annual revenue which gets fairly distributed at the end of each business year. What that means is, as long as there is revenue (as long as doors are open for sales), investors are getting returns - small in slow years, bigger in bumper-crop years, as Red Hen steadily pays back it's loans on a timeline that evolves with the economy and growth of the business.
This flexibility means we get to make smart, long-term decisions for our company instead of the quick-and-dirty choices that happen when debt doesn’t accommodate the ebbs and flows of a business in real time. It also means investors get to know exactly what their investment is doing (a far cry from what we know when Wall Street gets to play with our money). Red Hen shares our financials every year, who our leadership is and how we’re leading. Investors get to see the real impact that comes with a risk-sharing/benefit-sharing model: a mission-driven company gets the capital required to play in the big leagues, winegrowers get to invest in better and better farming while build stronger businesses themselves. The Red Hen family is building stronger communities and economies at home and abroad, seeding the next generation of sustainable businesses and agriculture.
In the end, taking the long road together means we all win: investors, farmers, employees and wine drinkers. The resiliency and security from Revenue Sharing protects all these stakeholders, even in the face of unforeseeable economic or environmental crises that threaten supply or demand. We all get to drink wine made by families instead of factories and cagey corporations. We know our money is moving our values forward in the world, not sneaking around behind our backs and funding the very sources of scarcity. We share the windfall in times of plenty and we forge a chain of mutual support: this the powerful potential when everyone is invested. It’s more than a metaphor or a model, it’s a movement. Welcome to the new wine economy.