Cost through the supply chain Flashcards
What is the first cost that most prospective wineries/producers encounter?
Renting or buying land to establish a vineyard.
What factors play into how much a parcel of land may cost?
- Reputation of a region (Margaux vs Haut-Medoc vs generic Bordeaux)
- Scarcity of land
- Limited amount of land available in a certain GI
What cost must be incurred to make a newly purchased area of land operational?
- Surveying of the land to make sure it is suitable for viticulture and deciding which grapes to plant
- Site clearance; removing any vegetation, rocks, or maybe even trees
- Building access roads in the vineyard and between vineyard plots
- buying plants and vines
- Buying stakes and wines for trellising
- potentially installing drainage channels and pipework
- Establishing an irrigation system if needed
- Creating windbreaks
- Buying protective mesh in high hail risk areas
- Setting up frost protection measures
- Putting up any fencing or netting for protecting the vines from animals
- Buying vineyard equipment like tractors, spraying equipment, harvesters, etc…
- Building sheds for all the equipment
What is the name of cost incurred for establishing a business?
Capital cost
Capital cost for establishing a vineyard are very high, but what else can exacerbate the problem of repaying those cost?
Vines take at least three years before they come into production
What are some of the ways that prospective producers look to fund these capital cost?
- Loans
- Finding investors
- Depending on the country, there may be subsidies to help with the capital cost
What are some things to remember about getting loans or getting money from investors?
- Interest and capital repayments on loans must be factored into the long-term business plan
- Investors will expect a return on their Investment and a share in the profits
- Some investors may even want to get involved with managing the business
List the cost associated with managing a vineyard
- Labor cost
- Machinery and equipment running cost
- Vineyard treatments
- Water
- Electricity
How can labor cost vary between regions or even neighboring vineyards?
It depends on how the vineyards are set up.
- Flat land vs steep hill/mountain sides
- Availability of cheap labor
- Vineyard practices (organic vs conventional farming)
How can harvest affect labor cost for producers?
- Producers man hire teams of relatively unskilled workers since harvesting procedures can be taught relatively easily. This labor is relatively inexpensive.
- However, if there is a labor shortage, the laborers may go choose to work for the highest bidder
Aside from harvest, what do labor cost look like for producers?
- Labor cost during most of the year is carried out by a smaller, more expensive staff. Which usually require higher compensation
- If there is machinery being used, the staff may shrink, but those staff workers must be trained to use the machines effectively.
What are examples of machinery and equipment running cost?
- Fuel
- Maintenance
Why do conventionally farmed vineyards cost so much to run?
Because those types of vineyards use large amounts of agro-chemicals like herbicides, fungicides and insecticides.
Do organic and biodynamic producers still incur cost for vineyard treatments?
They still use small quantities of more traditional treatments like sulfur or the Bordeaux mixture (copper sulfate, lime and water), so yes.
List the main costs associated with winemaking
- Labor
- Machinery and Equipment Cost
- Winery Materials
- Bought-in Fruit
- Water
- Electricity
- Maturation
- Packaging
What would classify as ‘Winery Materials’?
- Sugar
- Acid
- De-acidifying agents
- cultured yeast
- CO2 and/or other inert gases
- Fining and filtering agents
What are some ways to offset the cost of bought-in fruit?
Bought-in fruit is already a significant cost to a winery. But if the winery needs to hit a certain price point, they may take an inexpensive variety (colombard, trebbiano etc…) with a more expensive variety (chardonnay, sauv blanc, etc…)
What factors can affect how much brought-in fruit will cost?
- Vintage
- Quality upon arrival
- Grape varietal
Wineries use up a lot of water for sanitation. In regions where water is scarce, water cost are even higher.
What is a way wineries look to offset that cost?
Wineries have found it cost-effective to invest in water treatment plants so they can reuse as much water as possible.
Things like refrigeration, ventilation, presses, pumps and lighting use a lot of electricity. As a result, wineries decide to generate their own electricity using what modern invention?
Solar Panels
