You Really Don’t Have to Lose a Million Dollars a Year, a Cost/Price Analytical Journey through the World of Winemaking
It’s been said that the best way to lose a million dollars a year is to open a winery, the question that as cost analysts is “why?”
By conducting interviews with several small winery owners I found that their business model is more often than not reliant on the pricing structure of large wineries in their region, rather than determining how much they can afford in direct and indirect costs.
Since 1997 I have been working with wineries (large and small) developing databases that track the wine from “berry to bottle”, create and track work orders, wine clubs, and create and track weigh tickets. The factors that are usually taken into consideration when calculating profits or determining how much to charge for a bottle of wine usually , revolves around the cost of the fruit, the cost of the glass (bottles), cost of the bottling process, the cost of the labels, and the cost of the corks. These are all obvious direct costs, but do not take into consideration the indirect cost for materials, chemicals, equipment, and labor.
This paper will take a journey through the process of making a wine and the costs associated with its production. This journey will include how cost plays a role in growing grapes, processing grapes, and the finished product. We will examine the indirect factors that play a role in the final price of the wine. Finally we will see how you don’t need to lose a million dollars a year, if you estimate, plan, and execute what you’re doing at the winery and vineyard.
With over 25 years experience in the field of cost estimating and analysis, Scheduling, and Earned Value Management working for companies such as; Hughes Aircraft Company, Rockwell International North American Aircraft Organization, and Northrop Electronics Division, Decision Planning Corporation, Chemical Waste Management, Rust Remedial Services, GrapeWare Database Consulting, ACE Construction Services, PMA, and MCR LLC.
From 1997 through 2003 Mike was the owner and developer of custom data bases and program management support for wineries and vineyards in California. His clients included Meridian Vineyards, Chuemia, Tobin James Cellars, Peachy Canyon Winery, Arroyo Seco Vineyards, Rosenblum Cellars, and Westberg Cellars. In 2009 he was approached to bring up to date the database for Westberg Cellars. It was during this engagement that the idea of merging cost/price analysis with the ability to track the wine “from berry to bottle” emerged.
Mr. Thompson’s formal education includes a BA from California State University at Fullerton, Continuing Education classes at University of California at Los Angeles, and Enology and Brewing classes at the University of California at Davis.