How to set wine benchmarks for your winery
As a business owner, it's only natural to be curious about how your performance stacks up against the competition. Questions like:
“Is my net profit below or above average?”
“How are my sales doing this year vs. my competitors?”
These are common questions that can help gauge your winery's health and identify areas for improvement.
But in the wine world, finding answers isn't as straightforward.
Many wineries are family-owned and not publicly traded, which means their financial information isn't readily available. Plus, wineries come in all shapes and sizes, making it tricky to find a fair comparison.
This blog should help give you an overview of the benchmarks you can use for your winery, along with a few general targets to strive for.
But before we dive into the essential wine benchmarks, let's start by getting clear on what a benchmark is.
Benchmarks are essentially a standard or reference point used for comparison.
Not to be mistaken for a KPI or performance metric, benchmarks are industry-wide measures. They provide a reference point for how your business is performing relative to others in the same field.
On the other hand, KPIs and performance metrics are more company-specific measures. They help you evaluate progress towards your own goals and objectives.
For the purpose of this blog, we’re going to focus on benchmarks (i.e. external).
Typical wine industry benchmarks
Benchmarks typically cover a range of financial, operational, and performance metrics.
Here's a breakdown of some common benchmarks in the context of a winery:
Financial Metrics
Revenue: Total income generated from wine sales and other sources.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a winery's operating profitability.
Inventory Value: The total value of wine in stock.
Gross Margin %: Gross profit divided by revenue, indicating the profitability of each sale.
Operating Profit %: Profit divided by revenue, showing the profitability of operations.
% of Revenue Spent on Marketing: The proportion of revenue allocated to marketing efforts.
Return on Equity: The return on investment for the winery's owners.
Inventory Days: The average number of days it takes to sell wine from inventory.
Debt Service Coverage Ratio: A measure of the winery's ability to meet debt obligations.
Current Ratio: Current assets divided by current liabilities, indicating liquidity.
Quick Ratio: A more conservative measure of liquidity, excluding inventory.
Operational Metrics
Cases Sold: The number of wine cases sold to customers.
Cases Produced: The number of wine cases produced by the winery.
Operational Ratios
Production to Sales Ratio: Cases produced divided by cases sold, showing production efficiency.
COGS (Cost of Goods Sold) per Case: The cost of producing each wine case.
Ratios that combine financial and operational data
Average Sales Price per Case: The average price at which each case of wine is sold.
COGS per Case: The cost of goods sold per case, indicating production efficiency and profitability.
How to find targets for your own winery
While you won’t find all of the listed metrics in the same report, here are a few good resources you can use to find benchmarks for your winery performance:
Silicon Valley Bank: This is the most recent benchmarks report (2023) for the wine industry we’ve found. It covers a range of metrics, including consumer spending, demographics, and consumer preferences.
Moss Adams Surveys: While several years old now, Moss Adams has previously published a 2017 report available here and a 2014 report available here. It’s important to note that these surveys lump together all wineries under 15,000 cases. So, the reports may not be super relevant for wineries in the 3,000-5,000 case range.
Community Benchmark: Community Benchmark is a software tool, rather than a report; it compiles a scorecard of your key performance indicators (KPIs) and compares them to other wineries to showcase how you stack up. We’ve found it super useful for analyzing key metrics & discovering opportunities.
Additionally, your winery accounting firm may be able to help.
Here at Northwest Wine Accounting, our clients tend to fall into the startup to 10,000 case range.
To give you an idea of our client benchmarks, typical Gross Profit sits around 60-70%, and Net Profit Margin hovers around 5-10%.
These are very rough numbers but may give you an idea if you are new to the topic.
Should you worry about industry benchmarks?
As accountants in the industry, we understand the curiosity to compare your winery to others.
However, benchmarks aren’t always the most reliable indicator of success, especially in this industry.
Due to a lack of data standardization, it’s not easy to compare benchmarks from multiple sources with any real reliability.
For example, the marketing ratio in the report above includes “winery programming and business-related travel.” Travel and programming expenses are not always categorized in this way, so the marketing ratio may not be comparable from winery to winery.
Instead, year-over-year comparisons from a single source, such as your own winery, can often be more dependable because they use consistent methodologies over time.
But, this doesn't mean that wine benchmarks should be disregarded entirely.
They serve essential purposes:
Dream Bigger: Benchmarks can help you envision the potential of your winery. By looking at benchmarks for sales in your region or other key metrics, you can set higher targets for your own operations.
Business Valuation: When you start considering the sale of your winery, benchmarks become valuable tools for developing comparables. They provide a basis for determining the fair market value of your business.
If you’d like more help analyzing the financial health of your winery, we’re always here to help. You can reach out by filling in the form on our contact page.
Until next time, check out our blog post on quarterly financial reviews here. We think you’ll find it helpful!
