Yes, this blog post is later than usual, but don't blame Peter - the delay is entirely Woot's fault.
For What It's Worth - Tue. July 8, 2008
Dan Berger, one of the more interesting wine writers around, would occasionally list various production costs when talking about wine prices. Some were very accurate, but others out of line with each other, e.g. cheap glass with expensive corks. In light of recent discussions on the w00t forums about price, quality and value, I thought it might be interesting to list our costs and some idea of the range of various costs.
Dan always gave the most detail about bottling costs, so I'll start there. Most of our bottles run around $9.00 a case, with a range from $7.50 to $12.00. Industry ranges are < $5.00 to > $20.00. Our corks are around 30¢ each ($3.50/case), with an industry range of < 10¢ to > $1.00 each (there are also low cost alternative closures). We use tin capsules, at 17¢ each ($2.00/case). Polylaminate, PVC, heat-shrink plastic and other alternatives run 2-10¢ each. Front labels @ 7¢ and backs @ 4¢ adds another $1.40 a case for us. Label cost is probably the biggest variable in packaging costs because there is a tremendous economy of scale; small runs of ornate labels can cost a dollar a label. Mobile bottling is around $2.50 a case. If you have your own bottling line (a large capital investment) costs are considerably lower. Bottling labor for us is around $0.60 per case. We spend $19 a case to bottle our wine. Big wineries can get it done for $7-8, high end “vanity labels” may spend as much as $50 a case or more.
Grapes are the biggest cost in Sonoma and Napa wines, but not in the Central Valley. Cabernet averaged over $4000 a ton in Napa in 2007, but only $330 in Lodi and $260 or less in the rest of the Central Valley. The average grape cost in a case of Cabernet is over $60 using Napa fruit, and less than $2.00 using Kern County fruit. Growing your own grapes can be a lot cheaper than buying grapes. In 2006 our own grapes cost us $1160 a ton, our purchased grapes averaged $2040 a ton. Our grape cost per case averaged around $26.
French oak barrels are $1000+ a pop. That means $20 a case for a winery that uses 50% new French oak, a common practice for high end Napa and Sonoma Cabs ($80 a case for Caymus Special Select @ 200% new oak). American oak is $200-350 a barrel; staves, chips and sawdust range from pennies up to $2 a case or so. We average $4 a case for oak (ranging from $0 to 20, depending on the wine). Other winemaking and lab supplies add up to a dollar or so.
Large wineries realize tremendous economy of scale with winemaking labor, often spending less than they do on bottling labor. Counting labor overhead and a portion of my salary, our winemaking cost is $7 a case. I won't consider consultant's fees here, but some vanity labels pay “superstar” winemakers six figure fees to create cult brands.
Overhead can be quite variable depending on renting vs. owning, taxes, depreciation, loan interest, etc. We spent a buck a case on utilities before we installed our photovoltaic system, now we have to add both the accelerated depreciation on it and the interest on the loan to our “book cost” for IRS purposes.
I won't make you do the math. Our direct cost per case is around $57. Two Buck Chuck probably costs about $9-10 a case to produce, and an elite Napa Cab might cost $140-200. Add a bit of tax, warehousing, marketing (can be a huge expense) and overhead and you get to the winery cost of sales. Assuming sales through the three tier system, markup will be 100% between the winery and the store shelf. Hence Two Buck Chuck and $40-50 Napa Cabs.
Smoke Gets In Your Eyes - Thu. July 10, 2008
Dry lightning started over a thousand fires in northern California on June 22nd. Even though none of the fires were in Sonoma County, we were inundated by smoke for a week. One night the smoke detector in our bedroom went off at 3 AM. When I sulfur dusted on the 27th I didn't even realize the sun had risen until I noticed a pale red, moon-like circle above the mountains. I had Sam wash the solar panels when things cleared up last week – they were coated with ash and dust. I wish I had looked at the electrical output before washing; I'd be curious to know how much generation was compromised. After a week of blue skies the smoke returned Monday and has been getting thicker every day. There are still over 300 fires burning 18 days after they started, with 20 described as major fires. It's also been over 100°F all week, making for burning eyes, throats and lungs. I feel like I'm breathing with my body uider water; I can only imagine what it's like for people with respiratory diseases.
There's been speculation about diminished sunlight slowing ripening or other fire effects on grapes, but I don't think it really makes a difference right now. Light is rarely the limiting factor in photosynthetic rate. Heat determines rate of photosynthesis, with a maximum rate around 90-92°F, dropping to virtually no activity below 50° or above 105°. We have had a cooler than average year so far, and harvest may start a little later than average. I also saw mention of a company that can remove “smoke taint” - aromas from wildfires adsorbed by the grapes. I'm guessing that may not be much of an issue with these early season fires, but certainly could be if there are similar conditions closer to harvest.
The Circle Goes Round And Round - Wed. July 16, 2008
We're getting closer to harvest and closer to the end of my year of (mostly) voluntary servitude - blogging. I think my last blog may come during September, so if you have any burning questions, ask now or forever hold your peace. Besides, I'm worried about running out of cheesy cultural references for titles and headings – I'm down to Buffalo Springfield, The Platters and Joni Mitchell this week. We've finalized all our blends for this year, with the last bottling scheduled for Aug. 19th & 20th. The Sonoma Valley Zin is 14.3% alcohol, with 7% Durif (PS to you, Loweel). The Duke is 44% Zin, 28% Merlot, 16% Cabernet sauvignon and 12% Petite Verdot. We've started to re-taste the 2007 Cabernets and other Bordeaux varieties. Now that they have 9 months or so of barrel age we can confidently select candidates for Victory trials, and start blending other lots for the bases of our varietal and single vineyard bottlings. We'll do a few more tastings before harvest, then take a hiatus until December.
I've only got a couple of sulfur dust applications left (no need after veraison), and there's no more mowing – the permanent cover crops went completely dormant very early this year. After that, there's just irrigation and watching. We're starting crush plans – ordering yeast and other supplies, looking for crush help, making barrel plans, visiting vineyards. It's also time for Sam, Lynda and myself to take pre-crush vacations and make sure our batteries are fully charged going into harvest. I've got a one week sales trip planned just before (I hope) crush begins.