The Three “Main Events” of Wine Costing
Wine costing isn’t just one number—it’s three distinct events that happen across the life of your wine. Getting clear on the distinctions between these stages—and understanding what they are, why they matter, and when they occur—is essential for any winery owner.
Just as important is understanding how these numbers connect: each costing event feeds into the others, and together they play a key role in shaping pricing, profitability, and planning.
Keeping these numbers accurate is one of the things that makes winery accounting so complex. It takes clean processes, consistent communication, and specialized knowledge. But a good place to start is a basic understanding of what each phase of costing is, when it happens, and what your accountant needs from you to get it right.
So to dig in, let’s clarify that when we talk about “wine costing,” we're usually referring to one of three interrelated numbers:
Cost of goods produced (COGP) – what it costs to make your wine
Cost of goods sold (COGS) – the cost of wine you’ve sold, which drives your margins
Inventory valuation – the total value of unsold wine
To make this more tangible, here’s a quick visual of the why, when, and what of each piece of the wine costing system:
Why Each Costing Event Matters
Each of these metrics plays a critical role in your business:
Cost of goods produced (COGP) is your starting point. It tells you how much it actually costs to make your wine—from grapes and glass to labor and overhead. With good systems, you can calculate the unit cost of each SKU and lot—the cost per bottle of finished wines and the cost per gallon of bulk wines. You can also calculate the total cost it takes to produce a given wine, and total cost you have spent in a year in the production of your wine.
The cost per bottle of your finished wine is usually the most interesting to winery owners. Without this number, it's almost impossible to set prices strategically. If you don’t know your production costs, you could be underpricing premium wines, or overpricing wines that are cheap to produce, leaving money on the table either way.
Cost of goods sold (COGS) brings your profitability into focus. This is the cost of the wine you’ve actually sold, not just what you've made. If you're tracking COGS correctly and regularly, you can see which wines have strong margins and which ones might be draining resources. COGS also ties directly into your financial statements, and if it’s not being posted monthly, you’re probably making decisions with outdated or misleading data.
Inventory valuation tells you how much capital is tied up in unsold wine. This number is critical for tax reporting, lending, and insurance. But it can also help you make smarter production and sales decisions. For example, if your 2019 Syrah is still sitting in the warehouse while your 2021 Rosé is flying off the shelves, your inventory report might prompt a promo push or a change in future production volumes. It also helps you identify shrinkage, spoilage, or wine that’s gone missing altogether.
When Does Each Costing Event Happen?
Understanding what these numbers mean is just the beginning—it is also helpful to know when each is calculated. What are the critical points where your production and accounting cycle meet?
Keeping your costing data timely is essential for decision-making. These metrics can quickly lose value if they’re outdated, incomplete, or tracked inconsistently.
Cost of goods produced (COGP) should be calculated every time you bottle. This gives you a clear per-case or per-bottle cost for each new wine release. Timely COGP data empowers you to evaluate whether production changes are driving costs up or down, and helps you adjust your pricing accordingly. If you're bottling a wine but haven't updated its production cost, you could end up with misaligned pricing or unhelpful profitability data down the line.
Cost of goods sold (COGS) should be posted monthly, at a minimum. This figure should flow through your financial statements and tie back to your wine sales. Regularly updating COGS ensures that your gross margin numbers are accurate—and that you’re not making decisions based on stale data. If your accountant isn’t recording this consistently, you may be flying blind when it comes to understanding which wines are actually profitable.
Tracking cost of goods sold with some granularity can also help you know which channels are most profitable. It’s helpful to know your margins on wholesale channels vs wine club vs on-premise sales.
Inventory value should be reviewed and reconciled any time you conduct a physical count—and no less than once a year. To determine your inventory value, you count the physical inventory on hand and multiply each item by its unit cost to calculate the total cost of inventory. That total is then compared to the inventory value shown on your balance sheet. If the numbers don’t match, an adjustment against cost of goods sold is required. In other words, changing the value on your balance sheet changes your profit and loss and impacts your bottom line.
In theory, if you were accounting for every movement of wine correctly—every time wine is bottled, sold, sampled, otherwise used, or lost—there would be no need to make these inventory adjustments. Large inventory adjustments can indicate a need to tighten up your inventory controls and review your systems for tracking wine production and depletions.
What Does Your Accountant Need From You at Each Stage?
Each of the three costing events—cost of goods produced, cost of goods sold, and inventory valuation—requires different pieces of information from you to ensure the numbers are accurate and meaningful.
For the cost of goods produced, your accountant needs to know the total production costs for a wine, the specific lots or SKUs to assign those costs to, and how many bottles or cases were produced. This includes grapes, bulk wine, glass, labels, corks, capsules, labor, overhead, and any other relevant costs. It's also critical that you and your accountant come to an agreement of how those costs should be grouped—for example, by vintage, by varietal, or by SKU.
If you're using software like InnoVint, much of this information can be gathered and exported directly. Using software like Innovint makes it easier to track direct costs to individual SKUs and allocate overhead costs over multiple SKUs. Tracking at this level in Excel is definitely possible, but gets sticky quickly.
For the cost of goods sold, the key piece of information is how many units were sold, used, or otherwise depleted. This means your point-of-sale (POS) data needs to be accurate—and that can be tricky when you're selling through tasting rooms, wine clubs, distributors, and e-commerce platforms, often across multiple systems. Your accountant will need a full picture of sales activity to determine how many bottles or bulk gallons left the building. That same data is also critical for sales and excise tax filings, so good tracking isn’t just about profitability—it’s about compliance. Ideally, COGS can be calculated automatically within your accounting or POS system, but only if the data is clean and centralized. If your accountant doesn’t know what sold or how much, they’re stuck guessing—and so are you.
For inventory valuation, the missing piece that you need to communicate to your accountant is your physical count. At this point, your accountant already knows what you made and what you sold. The only question left is what’s still on hand. A good physical count tells you that. Once the count is complete, your accountant can compare it to the inventory listed in your books and calculate any overages or shortages. They may need your help explaining any differences—whether that means identifying unrecorded depletions, correcting a timing error, or simply acknowledging that a few cases went missing. These adjustments can be small and routine, or large and disruptive, depending on how tightly you control your inventory.
Want to dig deeper?
Check out my video with InnoVint: Bridging the Gap Between Winemaking and Accounting, where I walk through how production data and accounting decisions intersect, and why communication between departments is the key to successful costing.
At the end of the day, wine costing doesn’t have to be a mystery. By understanding the different parts of costing, the cadence of the wine costing process, and what your accountant will need at each state, you can take control of one of the most important levers in your business. Clear costing leads to better decisions—and better results.
Would you like help implementing a costing method that actually works for your business? Head over to our Getting Started page to get in touch with us!
