Chapter 2 Factors that Affect the Price of a Bottle of Wine – Costs through the Supply Chain Flashcards
What is the first stage of the supply chain?
Grape Growing
What two types of costs are associated with grape growing
- Capital costs & Operating costs.
- Capital costs are the money spent by a business in acquiring, improving or maintaining long-term assets such as land, buildings and equipment.
- Operating costs are the day-to-day costs relating to producing and packaging wine
What are the two overall grape growing costs
- Vineyard Establishment
- Vineyard Management
The price of land is determined by:
- Land’s potential to produce high-quality fruit
- The name of the appellation
- Scarcity of land
Name some costs that will need to be incurred before the vineyard can become operational
- Surveying the land
- Site clearance
- Building access roads
- Buying and planting vines;
- Buying stakes and wires
- Installation of deep drainage channels
- Establishing an irrigation system
- Protection against weather hazards
- Protection from animal pests
- Buying machinery and equipment
Costs such as these incurred in establishing a business are known as
Capital Costs
List the Vineyard Management Costs
- Labor
- Machinery and fuel
- Supplies
- Vineyard treatments
- Water
- Electricity
- Insurance and depreciation
Explain Labor Costs of vineyard management
- Varies greatly according to the size, topography and other factors in the vineyard.
- Organic and biodynamic vineyards are more labour intensive
- The type of labour required in a vineyard varies through the year. (Pickers vs full time)
Explain Depreciation
For accounting purposes, businesses would normally include a sum for depreciation, the reduction in the value of assets over time based on their useful life. In the vineyard this could include an amount for replacing a tractor or trellising systems. In the winery, presses and other equipment will need to be replaced in time.
What are the two overall winemaking costs?
- Winery Establishment
- Winemaking Costs
Give examples of winery establishment costs
- The land on which the winery will be built may need to be purchased
- Costs of building the winery and fitting it out with equipment
List the winemaking costs
- Grape growing costs / cost of fruit
- Labour
- Machinery and equipment running costs
- Winery materials
- Water
- Electricity
- Maturation
- Packaging
- Depreciation
What are the two types of wine transportation?
- In-bottle
- Bulk
What are the four ways to transport wine around the world?
- Air
- Road
- Rail
- Sea
Transportation by Air
Very expensive
Used in special circumstances, such as:
- Sending bottles to a competition or samples to a trade/consumer fair
- For very high value wines or where deadlines are important
Transportation by Road
For short journeys road freight is very efficient as it takes the wine directly from the winery to the point of delivery.
