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Grape Wine Production Costs

Grape Wine Production Costs

by Zane Stevens Feb 9, AccountingProdctionWineeFinancial ServicesGrape Wine Production Costs AccountingWine Sports psychology for youth athletes. Classification Cosys overhead Grape Wine Production Costs can vary, Pfoduction on the size of Produchion facility and whether there are shared uses of facilities by other revenue streams, such as facility rental or custom crush services. Several types of filters are available to the home winemaker, both manual and electric. Wine presses are used by wineries to get every last drop of juice out of the pulp, not for quality reasons. Cash overhead consists of various cash expenses paid out during the year. Grape Wine Production Costs

Grape Wine Production Costs -

You have to come up with a visual representation of your wine brand. Simple black and white wine labels are the least expensive, while full-color, gold-edged wine labels are the most expensive.

However, when you sell your wines to liquor stores and restaurants, you need to understand your wine bottle will undergo a markup. The wholesale price markup is usually your profit margin, and the retail price markup represents the profit margin for the store or restaurant.

Restaurants and bars also mark up bottle prices, whether they sell the wine by the glass or bottle. In fact, a glass of your wine at some restaurants could be as much as the wholesale price of the bottle of wine.

Both wholesale and retail pricing for wine depends on the demand for the particular wine vintage. It can be challenging to price a bottle of wine from your winery.

You have put your heart, soul, blood, sweat, and tears into your passion for winemaking, and you want to price the wine according to the effort. However, when you price a bottle of wine, you need to consider a number of factors.

All of these questions translate into numbers for wine pricing for your business. Many factors go into pricing a bottle of wine, and it can be complicated to determine a pricing strategy for your wines. The numbers can float around your head in a confusing swirl of numbers.

However, keep in mind that pricing should not be an emotional issue, no matter how much love you put into the bottle. You need to make sure your pricing strategy is based on solid numbers.

If you need help pricing your wine for sale on the wholesale or retail market, you need to consider Protea Financial.

We have bookkeepers, accountants, and inventory managers who understand the vineyard and winery business because that is their specialty. When you need help with the financial end of accounting and bookkeeping, we can help get you organized and help you reach your business goals.

Contact Protea Financial today. Costing out a bottle of wine can be a complicated endeavor. Turn to the financial experts here at Protea Financial today and let us help!

Skip to content. by Zane Stevens Aug 11, Accounting , Bookkeeping , Business , Financial Services , Outsourced Accounting , Wine Industry.

The Cost of the Grapes Themselves One of the largest expenses wineries have when they make a bottle of wine is the cost of the grapes themselves. All of those production costs which is going to include: Labor costs for employees of the company Utilities Building costs such as rent, lease, or mortgage payments as well as maintenance.

Bottling Costs to be Considered There is so much that goes into bottling wine that each area that oftentimes some aspects of it get overlooked or estimated so hastily that you be losing out or wasting money.

Glass Bottling Besides production costs, wine pricing includes the price of the wine bottle. Closures The tree bark used to make corks is nearly as old as the bottles themselves. Labeling Wine labeling can also be pricey, depending on how much the wine labels cost to produce. How Should I Price My Wine?

Owner, founder, and executive compensation is a difficult expense to classify because these individuals often work in many areas around the winery. Estimating the amount of their time spent with each department and applying the appropriate percentage of expense accordingly is a common approach.

Classification of overhead costs can vary, depending on the size of the facility and whether there are shared uses of facilities by other revenue streams, such as facility rental or custom crush services.

Costs most often identified as overhead are those associated with running the production facilities assuming the facility is being run at normal capacity. These often include, but are not limited to, the following production and storage facilities and equipment related costs:. Another costing challenge with overhead is categorizing expenses that are commonly shared between departments.

When different departments share a similar facility or facilities, the overhead costs of running and maintaining the facility can be allocated based on the amount of space square footage each department uses. While there can be more accurate ways to associate specific overhead costs to the wine production, rent, utilities, and insurance are examples of expenses that can be allocated by looking at the utilization of space by the production and other departments.

Of course, this approach assumes the facilities are relatively consistent in finishes, consumption of utilities, and drivers of insurance costs are similar for all departments.

If circumstances exist such that they are dissimilar, then other methods should be used to make allocations. A common method of allocating shared facility costs to functional departments is to capture such expenses in a cost center and allocate them based on the amount of space occupied by each department.

Take for instance a winery that has similarity and consistency across all departments and square footage allocation that reasonably reflects utilization derived by each department. Utilities, on the other hand, should be allocated based on an estimate of usage. This methodology offers the benefit of being measurable and verifiable based on usage.

If the production facility uses considerably more of the utilities than other portions of the facility, the allocation percentage can be adjusted.

Production costs should be allocated to the various bulk wine in the cellar based on the type of processing activity and the stage of the wine in the process.

Crush and ferment costs, which may include payroll, supplies, allocated overhead, and depreciation or rent related to crush equipment, should only be allocated to the current vintage crushed. On the other hand, cellar aging costs are typically shared by all wines in the cellar.

These are most commonly allocated to the wines based on a weighted average number of gallons in the cellar. Barrel aging costs, which usually include barrel rent or depreciation, and sometimes an allocation of overhead, should only be allocated to the wines that are being stored in barrels, based on the weighted average gallons in barrels.

This method is often used in more basic costing models and for smaller wineries; however, it can still be used in more complex costing models of larger wineries. When deciding which cost allocation method to use, keep in mind that no method will provide a perfect allocation.

Consequently, it is best to use the simplest method available that provides an appropriate level of precision. Finally, in the area of overhead, wineries will need to exercise judgment and use appropriate estimates. Wineries may choose to utilize other industry contacts or a CPA with wine industry experience to discuss the best approach for the situation.

An outside entity can offer an unbiased perspective on missed costs and alternative ways to allocate the identified costs. The process of applying overhead costs should evolve over time as operations become more complex, and so too should the allocation methodology—without negatively impacting consistency.

In some cases, certain expenditures may or may not be classified as winemaking costs; it really depends on the situation. The charts below demonstrate how certain overhead and direct production costs might flow through the balance sheet and income statement.

Allocation from facilities would follow the same methodology as the cellar allocations shown above. Once a winery has decided on a consistent protocol for classifying and tracking their winemaking costs and allocating overhead costs, those costs are accounted for and flow to the financial statements to reflect: 1 the investment in wine inventory and; 2 the relief of wine inventory through the sale of the resultant wines.

The chart below includes financial data to demonstrate how certain overhead and direct production costs might flow through the balance sheet and income statement utilizing the following steps:.

If you have questions or would like help with determining your COGS and COGP, please contact your Moss Adams professional. For additional insights setting up and understanding the cost of goods sold for wineries, view the other articles in this series:.

Seven Steps to Set Up a Cost of Goods Sold System for Your Winery. Understanding Your Costs: Tips for Wineries of All Sizes. Special thanks to Andrue Ott, Outsourced Financial Accounting Specialist, for his contributions to this article.

Assurance, tax, and consulting offered through Moss Adams LLP. Wealth management offered through Moss Adams Wealth Advisors LLC. Services from India provided by Moss Adams India LLP.

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Practices described are based on the production practices considered typical for a wine grape production in this region, but may not apply to every operation. The following assumptions refer to Tables 1 through 4 and reflect the typical costs and returns to establish and produce interspecific wine grape varieties in northwestern Nevada.

The practices described are not the recommendations of the University of Nevada, Reno, but rather the production practices and materials considered typical of a well-managed farm in the region, as determined by a producer panel in April Costs, materials and practices are not applicable to all situations, as establishment and cultural practices vary among growers within the region.

The representative farm consists of 26 acres of land, on which 5 acres of wine grapes are established, 20 acres are devoted to other crops, and 1 acre is used for owner housing, machine shop, and roads.

This vineyard is established on ground previously planted to alfalfa. The land is assumed to be fairly level, although hillsides with a 3 percent to 6 percent slope are preferred; hillside plantings extend the growing season by 5 to 7 weeks and reduce the chances of severe late spring frost damage by up to 80 percent.

The establishment year consists of 3 years. Establishment year costs are provided in Table 1. The plots are then disked by the owner. The soil should be sampled and sent to a laboratory for analysis. If needed, elemental sulfur is added to reduce the pH of the soil; to reduce sandy soils from a pH of 8.

Additional micro-nutrients are added based on the recommendations of the soil analysis report. All operations that prepare the vineyard for planting, whether they are done in the same year as planting or done in the previous year, are shown in the first year costs.

A commercial company installs the trellis system in spring of the first year. Trellis design is dependent on the variety of interspecific grapes that are being grown. For those grapes with an upward growth pattern such as Brianna and Marquette, the trellis system is a vertical six-wire design for Vertical Shoot Positioning VSP.

Also a gauge wire is strung at 18 inches above ground to hold the drip tubing. For trailing varieties of grapes with a downward growth pattern such as St. Croix, Frontenac, La Cresent, or La Cross, a Top Wire Cordon TWC trellis system is preferred.

Trellising needs to be extremely durable and strong, as a typical foot row of vines could carry over 1 ton of weight and have a wind mass area of square feet. No specific variety is used for this study, but the data refers to interspecific wine grapes, which are bred for use in climates like that of northern Nevada.

Only certified disease resistant OWN ROOTED vines should be used, as T-Bud or Field Bud grafted vines will not survive northern Nevada winters; the graft union will crack and get infected with crown gall after several years in the field.

The life of the vineyard at planting is expected to be 35 years and the grapevines are expected to begin yielding fruit in the third year, although the first harvest yield is calculated at 1.

In mid-April, holes are dug and the vines are planted and protected with vented grow tubes placed over the vine. The vines are planted on a 6 x 9 ft vine x row spacing at vines per acre.

Interspecific losses are typically 2 percent or less so there is usually no need for replanting. Training and pruning to establish the vine framework will vary with variety and trellis system. Training includes tying, shoot positioning and pruning. Unilateral or bilateral cordon training and spur pruning is the selection of the main shoot and its upper laterals or branches that form the trunk and cordon.

They are tied to the stake and cordon wire while unwanted shoots are removed, including any suckers arising from the rootstock. Quadrilateral cordon training requires the addition of cross arms.

Dormant pruning begins in April of the second year to stunt growth and potentially delay bud break past the last spring frost period. The young vines are pruned back to a 2-bud spur.

Cordon training is done twice a month in June and July. In the third year, shoot positioning is done in June, July and August. Irrigation is critical to the health and well-being of the vine, both during the growing season and in the dormancy period. The vineyard is irrigated by a drip system separated into six circuits.

Drip irrigation lines are hung from the bottom trellis wire, and one, two-gallon per hour emitter is installed on each side of every plant.

The vineyard is irrigated with a regulated deficit irrigation regime based upon plant water status and the amount of organic matter in the soil. In addition, the vineyard is given a deep watering of 16 gallons per plant at the beginning and end of every growing season to ensure normal bud and flower development after a long dry winter and sufficient carbohydrate reserves before entering dormancy, respectively.

A total of 0. Lines are checked with an ATV at each irrigation. Total irrigation costs for 4. Cold temperatures and frost can cause observable injury to grapes. However, the use of sprinklers or misters for frost protection is not recommended for locations in northern Nevada.

A variety of pest management methods are used depending on pest population cycles. There is a tendency for vines in this area to become infested with white fly larvae in early spring. If treated with emulsified oil at the first sign of outbreak, epidemic populations can be avoided.

The major disease in the area is powdery mildew.

This article is Fat metabolism and nutrition one of a Grape Wine Production Costs series on the cost of goods Producfion key Coosts that can Producttion wineries understand their Graep margins. In this article we provide an overview Grappe how to calculate the cost of goods Grappe COGS and why it matters. Grape Wine Production Costs the second article we dive Glucose digestion steps for setting up a system and best practices to derive this metric, and in the final article we discuss specific COGS insights for wineries by case volume. The market generally determines what someone is willing to pay for your wine, so the cost of making and selling that wine largely determines how much profit is left over. The greater understanding and control you have over your costs, the greater your chance for running a profitable winery. This is why knowing what it costs to make your wine is so important. While this might sound simple, there are many challenges associated with calculating the final cost of your wine. Artisanal beverages Grape Wine Production Costs a consistently Productuon industry. Ptoduction increasing Grape Wine Production Costs among consumers of locally-sourced food and farm-to-table eating and drinking has opened up many BCAAs and muscle repair for many types of Grape Wine Production Costs, brewmasters, and vintners. RGape the increasing demand for local wine is the desire to sit and have a drink on-site. In fact, more than ever, wineries are booked out years ahead of time for weddings and other celebrations. And even on days when there are no special events scheduled, people still flock to wineries for their beautiful settings and great wine. So opening a winery can certainly be a profitable enterprise if done well.

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