2. Costs Through The Supply Chain Flashcards
What are the two types of costs when growing grapes and making wine
- Capital costs: money spent to improve or maintain assets such as land, buildings and equipment
- Operating costs: day-to-day costs such as producing and packaging wine
What are the main factors that influence costs in the supply chain
- Grape growing
- Winemaking
- Transport
- Import
- Sales
- Marketing
- Legislation
- Fluctuations in currency
Give examples how GI influences the cost of vineyard land
- In California, land in Napa Valley is 10 times more expensive than in Central Valley
- In Bordeaux, the best parts of Médoc AOCs are 100 times more expensive as generic Bordeaux AOC
Give examples of the capital costs when establishing a vineyard
- Surveying land to decide which grapes are most suitable (e.g. taking soil samples)
- Site clearance (e.g. removing large rocks)
- Building acces roads
- Buying and planting vines
- Buying stakes and wires
- Installation of drainage/irrigation
- Protection against weather/animals (e.g. wind breaks/fences)
- Buying machines/ equipment (e.g. spraying equipment) (sometimes renting is a better option) + storage
Name the different options to fund capital costs
- Loaning (interest and capital repayments into long-term businessplan)
- Funding from investors (expect return on investments or get involved in management)
- Subsidies from the government, in the form of tax incentives or lump-sum contributions
Give examples of operating costs involved in vineyard management
- Labour
- Machinery and fuel
- Supplies
- Vineyard treatments
- Water
- Electricity
- Insurance and depreciation
Give examples of vineyards where high labour per hectare is required
- Organic and biodynamic vineyards due to the additional procedures
- The steep vineyards of the Mosel, where mechanisation is impossible. In contrast, Central Valley in California is flat and does require less labour per hectare.
Give examples of the balance between labour costs and the capital costs of machinery
- In Chile, labour cost is low, so there is less incentive to invest in machinery
- In Coonawarra, labour cost is high, so investment in machinery is a better option
Give examples of the factors adding to costs of vineyard treatments
For conventional vineyards:
- Agro-chemicals
For organic and biodynamic vineyards:
- Weather forecasts as part of integrated pest management: own weather station, or pay for government-run station
- Small quantities of treatments (sulfur and bordeaux mixture)
Give examples of capital costs when establishing a winery
- Purchasing the land
- Building the winery
- Equipment such as presses, tanks, pumps
Give examples of operating costs involved in winemaking
- Grape growing costs/buying fruit (blending in a cheaper variety may be cost-effective e.g. Semillon with Chardonnay)
- Labour
- Machinery and equipment running costs such as fuel, electricity and maintenance
- Winery materials such as sugar, acids, cultured yeast, inert gas, fining agents etc
- Water for cleaning (Investment in water treatment plant may be cost-effective)
- Electricity (Investment in solar panels may be cost-effective)
- Maturation: storage space, type of vessel, loss of cashflow
- Packaging: materials, bottling line (can also be hired or outsourced), labour to design packaging, labour to package
- Depreciation
Give an example of wine that is barrel-aged for an extended period
Brunello di Montalcino can be released from the January five years after harvest
What are transportation companies called? Give an example of a company specialised in the transportation of wine
Freight forwarders: JF Hildebrand
List the different ways of transporting wine in bottle, starting with the most expensive
- Air: bottles are heavy so require more fuel, only used in certain circumstances (e.g. the deadline of getting Beaujolais Nouveau to the Japanese market)
- Road: most efficient for short journeys (e.g. Epernay to Brussels) and when loading onto a ferry (e.g. when crossing the English Channel)
- Rail: containerisation may be cost-efficient, but freight rates vary
- Sea: containerisation is essential, slow method (e.g. Australia to UK takes 40 days)
Explain why and when shipping in bulk may be beneficial
More wine can be shipped at once
Shipping container volume: 10k L
Flexitank volume: 24k L
ISO tank volume: 26k L
No bottles need to be shipped, less weight = less fuel needed
Cheaper and more environmentally friendly
BUT only suitable for large volumes of the same wine
