"How much does my wine cost to make? " seems like it should be a straightforward question but if you are a winemaker, business owner, or wine accountant, you know that that is far from the case. Wine Costing is as complex as it is essential to a winery. Detailed and accurate costing reports are crucial in wine business decision making and maintaining that level of detail and accuracy requires excellent communication, utilizing the expertise of multiple departments.

In this post, we will provide an overview of what Wine Costing means, explain the basics of what goes into the process, and briefly discuss best practices. By the end, you should have a clear understanding of the fundamentals and terminology which will empower you to communicate more effectively about costing.

"So what is Wine Costing?"

In reality there are three different events which fall under the umbrella term of Wine Costing: determining the cost of goods produced, determining the cost of goods sold, and determining the cost of inventory on hand

Cost of Goods Produced

This happens at bottling, utilizing production software like InnoVint or Excel. InnoVint has the unique advantage of a specific module where you can do costing directly. However, even if you are not utilizing the costing module, Innovint provides a simple way to gather data on bulk wine flow. First, the accountant will need to know which costs are assigned to which items. Specifically, how do you want to group your costing? There are many options but the most common are by fiscal year, by vintage, and by SKU.

Costing by Fiscal Year

This method works best for wineries who are not currently growing and whose purchasing and bottling timelines are extremely consistent. If your purchasing or bottling change one year for any reason, you are stuck with unusual new standard of costing for the entire following year. It is the easiest method because it requires the least amount of detail but as a result, it doesn't really allow for any detailed analysis

Costing by Vintage

Like the name implies, this method groups the costing by vintage of grapes. For example, if you were looking at 2024, you would want to know what you spent growing grapes in 2024, what you spent to buy grapes in 2024, and what you spent in 2024 on crush and wine making. With this method, every vintage has a unit cost but the downside is that that you cannot track the differences between reds, whites, sparking, premium, or everyday wines.

Costing by SKU

Last but certainly not least, there is costing by SKU which tracks each individual variation. While this method provides the most detailed reporting and therefore the greatest level of analysis, it can be challenging for much larger wineries, especially if that that is not the way they set up their books. Additionally, it requires excellent communication between the winemaker and the accountant

Once you've determined how you'd like to assign costs, you will also need to provide your accountant with your costs. Keep in mind, costs include non-incidental materials and supplies AKA direct costs (grapes, glass, label, cork, any bulk wine purchased) as well as overhead like facility costs, labor, interest, insurance, and property taxes.

Lastly, you will need to give your accountant information on amount of units produced.

The basic equation is:

Of course, costing is not just understanding the cost of each unit but providing sales insights as well.

2. Costs of Goods Sold

This process happens at the time of sales, with the best practices being to review them monthly, just like sales. We recommend making it a part of your regular month end close process! The costing itself utilizes the Point of Sale software (QBO, Shopify, OrderPort, etc.) or Excel. Your accountant will need to know the unit cost (AKA the Cost of Goods Produced discussed in the previous section) and they will also need to know the number of units sold or used (for example, depletions from the Tasting Room). By comparing the costs with sales, this report provides the winery owner with greater insight on their margins.

3. Cost of Inventory

Also referred to as inventory evaluation, this process typically utilizes Quickbooks and happens when inventory is counted. Attempting to do inventory costing too often can cause unnecessary chaos but at minimum, it should happen annually, with accountants usually preparing this report around tax time. Your accountant will need the cost of the units as well as clear physical inventory counts. Cost of Inventory may not be of the greatest concern to a winery owner but it is crucial information to have on hand. For example, if a winery needs an inventory loan, a lender will need to know the value of what the winery has in their inventory.

Here’s a resource which breaks down everything discussed above:

At the end of the day, Wine Costing is a complicated topic with lots of moving pieces that need to be accounted for. It is a deeply collaborative process which requires the expertise of both winemaker and accountant.

Looking for a financial team with the know-how to navigate the complexities of costing? Head over to our Getting Started page to get in touch with us!

Wine Costing 101