Comments on: Starting a Winery - OIV Day 3 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/ A blog about starting and building a family winery in the Russian River Valley Fri, 21 Nov 2008 22:25:31 +0000 http://wordpress.org/?v=2.6.3 By: Josh http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1189 Josh Sun, 16 Jul 2006 22:05:54 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1189 Our actual farming costs are very similar to yours (right around 3500). Our opportunity cost is the next best use of the grapes. In this case it is selling them to Gloria Ferrer for their sparkling wine program. Pinot for sparkling is harvested early at around 18 brix and we are encouraged to crop up the vines as high as they will go. It's a great way to finance a new vineyard as the vines mature (ours are 9 years old now). To match the income lost from not selling, we charge ourselves 6000/ton. It's an accounting fiction, but it's important to view the forgone next best use as a real cost. For our calculation we just multiply the price per ton on contract with the tonnage we're able to get (around 6 tons/acre) farming for sparkling. Then take that total per acre and divide it by the tonnage we've identified as crucial to producing great pinot (around 2.5 tons/acre) and out falls the "true" cost of grapes. Looking forward to a post on how the Pinot dinner went later this month! Our actual farming costs are very similar to yours (right around 3500).

Our opportunity cost is the next best use of the grapes. In this case it is selling them to Gloria Ferrer for their sparkling wine program. Pinot for sparkling is harvested early at around 18 brix and we are encouraged to crop up the vines as high as they will go. It’s a great way to finance a new vineyard as the vines mature (ours are 9 years old now).

To match the income lost from not selling, we charge ourselves 6000/ton. It’s an accounting fiction, but it’s important to view the forgone next best use as a real cost.

For our calculation we just multiply the price per ton on contract with the tonnage we’re able to get (around 6 tons/acre) farming for sparkling. Then take that total per acre and divide it by the tonnage we’ve identified as crucial to producing great pinot (around 2.5 tons/acre) and out falls the “true” cost of grapes.

Looking forward to a post on how the Pinot dinner went later this month!

]]> By: Craig Camp http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1185 Craig Camp Sun, 16 Jul 2006 06:41:25 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1185 I thought your yields would be lower than 4 tons, after all your not growing cabernet! Farming costs are about $3600 on 1 acre planted at a density of 2000 or so vines, which gives us two tons if we're lucky. What to you define as "opportunity costs" and how do you calculate it? I thought your yields would be lower than 4 tons, after all your not growing cabernet! Farming costs are about $3600 on 1 acre planted at a density of 2000 or so vines, which gives us two tons if we’re lucky.

What to you define as “opportunity costs” and how do you calculate it?

]]> By: Josh http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1178 Josh Sat, 15 Jul 2006 00:07:29 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1178 Craig, Only 2400 a ton up there in grape costs? When we factor in next best use (sparkling wine production at ~6 ton/acre) our opportunity costs are closer to 6K per ton. As for yield, we\'ve been able to get \"high quality\" from 2.5 tons an acre with moderately aggressive vine densities and canopy management. We leave the 1 ton per acre to the hard core fellas on the coast. Craig,

Only 2400 a ton up there in grape costs? When we factor in next best use (sparkling wine production at ~6 ton/acre) our opportunity costs are closer to 6K per ton.

As for yield, we\’ve been able to get \”high quality\” from 2.5 tons an acre with moderately aggressive vine densities and canopy management.

We leave the 1 ton per acre to the hard core fellas on the coast.

]]> By: Craig Camp http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1177 Craig Camp Fri, 14 Jul 2006 23:16:32 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1177 Try this - take your 4 tons and reduce that to 2 tons per acre and leave all your other costs the same. That's the Oregon profit picture. Try this - take your 4 tons and reduce that to 2 tons per acre and leave all your other costs the same. That’s the Oregon profit picture.

]]> By: Josh http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1176 Josh Fri, 14 Jul 2006 19:44:49 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1176 Thanks to both of you (and congrats Paul!). I'm much more scared of this little boy than I am of anything winery related :) Thanks to both of you (and congrats Paul!). I’m much more scared of this little boy than I am of anything winery related :)

]]> By: Joel http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1174 Joel Fri, 14 Jul 2006 19:05:57 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1174 BTW: Congrats to you both on your upcoming additions. Speaking of dispelling myths and not know what you're getting into if this is your first get ready - its not all peaches and cream! :) My first is 8 months now and I can say that NOW she's really getting to be fun. The first few month was cry, s**t, sleep, eat...thats it. It takes 2-3 months for even a real "thats funny" smile.... But I wouldn't trade the experience for anything... BTW: Congrats to you both on your upcoming additions. Speaking of dispelling myths and not know what you’re getting into if this is your first get ready - its not all peaches and cream! :) My first is 8 months now and I can say that NOW she’s really getting to be fun. The first few month was cry, s**t, sleep, eat…thats it. It takes 2-3 months for even a real “thats funny” smile….

But I wouldn’t trade the experience for anything…

]]> By: Paul Mabray http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1168 Paul Mabray Fri, 14 Jul 2006 05:57:29 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1168 Josh, Great sharing (and congrats on the upcoming baby, my wife is having ours on Sept 10). People who choose to start a winery have no idea the committment they are making. It is quite the challenge in this ever competitive market. The oldest saying in the industry is that it takes a large fortune to make a small fortune in the wine industry. All I can recommend to add to this is SELL DIRECT (both consumer direct and direct to trade). Wineries analyzed by MKF and SVB noted that the ones that were the most stable and profitable were wineries that focued on direct sales. Inertia - Powering the WIne Revolution ---Paul Mabray - CEO Josh,
Great sharing (and congrats on the upcoming baby, my wife is having ours on Sept 10). People who choose to start a winery have no idea the committment they are making. It is quite the challenge in this ever competitive market. The oldest saying in the industry is that it takes a large fortune to make a small fortune in the wine industry. All I can recommend to add to this is SELL DIRECT (both consumer direct and direct to trade). Wineries analyzed by MKF and SVB noted that the ones that were the most stable and profitable were wineries that focued on direct sales.

Inertia - Powering the WIne Revolution

—Paul Mabray - CEO

]]> By: Joel http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1163 Joel Fri, 14 Jul 2006 00:36:37 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1163 Yes, I think the longevity and maketing is the key as well as new direct to consumer laws. The challenge with any consumer product/commodity is to establish a brand that gains traction and creates a little pull through. PR helps there of course. the owners that I know/have talked to for the most part had a bunch of money from somewhere else (Testarossa is an Internet millionaire) and therefore have the resources to stick it out and gain traction. Gaining the following and community is definitely key....getting a 90+ in Wine Dictator doesn't hurt either ;) Yes, I think the longevity and maketing is the key as well as new direct to consumer laws. The challenge with any consumer product/commodity is to establish a brand that gains traction and creates a little pull through. PR helps there of course.

the owners that I know/have talked to for the most part had a bunch of money from somewhere else (Testarossa is an Internet millionaire) and therefore have the resources to stick it out and gain traction. Gaining the following and community is definitely key….getting a 90+ in Wine Dictator doesn’t hurt either ;)

]]> By: Josh http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1160 Josh Thu, 13 Jul 2006 20:00:05 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1160 Joel, Heh, I never said *positive* cash flow, any old cash will do! ;) Four years is just a general figure that should alert you to the fact that you won't be actually generating revenue for quite a while. And if a winery never makes any money, well, you had better have a lucrative primary/second job to subsidise it indefinately (and some wineries do). Most brands that stick around for many years however do make a profit (gross margins on the high end Napa and Sonoma wines are 75%), and those that sell mostly direct can make very decent returns. IF you can market and sell the wine. There is nothing romantic about the hard work involved there! Spoilage and waste are factored into the 60 cases per ton figure (or the 165 gallon per ton). But these are really really rough estimates. Quality decisions will also drive how many cases you actualy get from a ton of grapes. If you want only the best press fractions like us, you will leave a sizeable amount of juice in the press (or sell it as bulk wine). Thanks for the comments! Joel,

Heh, I never said *positive* cash flow, any old cash will do! ;) Four years is just a general figure that should alert you to the fact that you won’t be actually generating revenue for quite a while. And if a winery never makes any money, well, you had better have a lucrative primary/second job to subsidise it indefinately (and some wineries do).

Most brands that stick around for many years however do make a profit (gross margins on the high end Napa and Sonoma wines are 75%), and those that sell mostly direct can make very decent returns. IF you can market and sell the wine. There is nothing romantic about the hard work involved there!

Spoilage and waste are factored into the 60 cases per ton figure (or the 165 gallon per ton). But these are really really rough estimates. Quality decisions will also drive how many cases you actualy get from a ton of grapes. If you want only the best press fractions like us, you will leave a sizeable amount of juice in the press (or sell it as bulk wine).

Thanks for the comments!

]]> By: Joel http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1159 Joel Thu, 13 Jul 2006 17:16:06 +0000 http://www.pinotblogger.com/2006/07/12/starting-a-winery-oiv-day-3/#comment-1159 4 years without positive cash flow? That is being pretty optimistic. I know a few people who own wineries and have met and spoken to the owners of Testarossa (in Los Gatos CA) and they all are unanimous in saying - a winery is WAY more work and expense then they ever estimated and take forever to make money if they ever do! I think its a bit romanticized (I mean what wine lover wouldn't want their own label!). BTW - don't you have to knock something off for spoilage/waste? 4 years without positive cash flow? That is being pretty optimistic. I know a few people who own wineries and have met and spoken to the owners of Testarossa (in Los Gatos CA) and they all are unanimous in saying - a winery is WAY more work and expense then they ever estimated and take forever to make money if they ever do!

I think its a bit romanticized (I mean what wine lover wouldn’t want their own label!).

BTW - don’t you have to knock something off for spoilage/waste?

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