2012 Harvest - Survey Results

We received 161 responses to our 2012 Harvest survey. The summarized results follow. The respondents will receive a more detailed analysis.


SUMMARY
While the "word on the street" has been that the 2012 harvest has been very successful, we at BPM have aimed to dig into that and get a bit more specific. As you will see in the summarized responses below, the results from the survey represent a great cross-section of the industry in terms of location, size and price point, and the overall assessment of this year's harvest has been extremely positive. Not only are yields greater than 2011 (which was expected given the very low levels last year), but also compared to 2010. In addition, the initial assessment of grape quality from this year are also quite high. Growers seem to be taking advantage of their positive position, and price increases are being planned from a large % of our respondents. 


Who responded
Nearly 80% of respondents come from the 3 main grape-growing regions of Sonoma, Napa and Central Coast.

There was a broad distribution of vineyard size, as shown below.

Harvest Techniques
The graphs below show that 63% of respondents do not use machine harvesting techniques at all, with level of use among the other 37% varying greatly. We can also see that there is a continued trend towards machine harvesting, with 23% of respondents reporting an increase over the past few years, and only 4% reporting a decrease.

Yields
The following graphs show the yield levels in 2012, and how those levels compared to both the 2011 and 2010 harvests.

The graph below shows that 83% of respondents saw an increase in yield levels compared to 2011, and 77% saw an increase compared to 2010. In 2011, more significant increases were realized, as 73% saw increase of at least 10%.

Quality
While the number of grapes per acre has clearly increased, we want to keep track of the quality of those grapes, as well. While the measure is subjective, the following graphs show the assessment of 2012 grape quality as a stand-alone vintage, and in comparison to 2011.

Price
Given the previous responses regarding yields and quality, BPM asked respondents to show the pricing level of their main varietal, and how their pricing has changes in 2012 relative to 2011.

We see from the graph below that only 8% are planning a price decrease, while 17% are planning an increase of more than 10%. 76% of respondents are planning either no change in their pricing, or a slight increase of 10% or less.

Thank you again for your interest in the BPM Wine survey series.
If you have any questions, please do not hesitate to contact us:

Steve Jannicelli, CPA, MBA

Business Advisory Services
BPM | Accountants & Consultants

sjannicelli@bpmcpa.com

bpmwine@bpmcpa.com

Twitter: BPM Wine

2012 Harvest Survey - Preliminary Results

With the 2012 Harvest coming to a close, we already have over 100 responses to our survey. There is still time to complete:

http://www.bpmcpa.com/Survey/Wine4.asp

One of the key trends we are tracking is the yield levels this year as composed to the previous 2 years.

These preliminary results show that 82% of respondents are seeing 2012 yields greater than those from 2011, with 40% of respondents reporting yield increases of greater than 20% as compared to 2011, and 70% of respondents reporting yield increases of greater than 10%. 

As 2011 yields were notably low, we also asked about the 2012 Harvest compared to 2010. Similarly, 77% of respondents' yields in 2012 are greater than what they experienced in 2010.

Stay tuned for the final results from the survey. You can also track updated findings via Twitter @BPMWine:

https://twitter.com/BPMWine

Wine Industry Cash Flow Forecasting

The Wine Industry already has enough built-in risks. Operating without a solid, integrated financial forecasting model doesn’t need to be one of them.

The BPM Wine Industry Cash Flow Forecasting model takes all of the information that an owner or manager lives and breathes every day, and creates from that integrated projected financial statements and other key metrics and indicators. This is more than a budget, but an operational tool that is used throughout the year to gauge performance and offer more information with which both tactical and strategic decisions can be made.

Whether you are just starting, contemplating a growth strategy or trying to maximize returns, it is critical to understand and quantify the drivers of the business. It is also imperative that you stay in front of how your operational plan might impact future profits, cash, and bank covenants. Many owners have experienced periods of increased sales and decreased cash – this is both common, and predictable. With the right planning model and process, these periods can be foreseen and managed – before it’s too late.

Our planning process starts from the ground up, literally. Grape sources can be planned individually, whether estate vineyards, grape contracts, or juice purchased on the spot market. The same process holds for specific wine labels, where the planning for each includes sourcing, packaging, pricing, channels, and timing of production, release and sell-through.  

BPM will create a model that is customized to your operations and the way that you want to see the data. The result is an actionable level of reporting, including inventory costing, contribution margins, and specific analyses by label, brand, channel, department, etc. Results are projected monthly, quarterly and annually for 10 years, and provides that data needed to reduce the risk of the unknown.

BPM Business Consultants are experienced in assisting clients from start-up to wind-down, in topics from growth strategy to turnaround management. To get started or to ask questions, contact:

Steve Jannicelli, CPA, MBA

Sr. Manager, Consulting Group
BPM | Accountants and Consultants
(707) 524-6560
sjannicelli@bpmcpa.com
http://www.bpmcpa.com/People/SteveJannicelli.asp

Survey #2 - Past, Present & Future - Expanded Results

The following graphs are examples of the expanded results preformed on our latest survey. All respondents receive a full report of additional analyses as a "thank you" for participating in the survey. Here are 2 graphs from Survey #2 - Past, Present & Future.

The chart below shows how Case Sales in Q4 2011 compared to Q4 2010, broken down by Region. Over 45% of Napa respondents experienced Case Sales growth of over 10%, while only 10% of respondents from Napa showed any decrease in cases sold. Results varied outside of California, where over 30% of respondents reported very strong growth, but over 20% experienced a decrease in case sales of over 10%.

In the graph below, we see the trend of owners creating financial projections when they enter the business. While 100% of respondents who have entered the business in the last 3 years have created financial projections, only 45% of those who have been owners for more than 3 years created financial projections. In the report sent to respondents, we also noted the direct correlation between financial planning and financial performance.

Survey #2 Results - Past, Present & Future

The second edition of our survey garnered over 200 responses! The general results are found below. The respondents will get an additional report with more detailed results emailed to them at the end of the week.
Please visit http://bpmcpa.com/wine/ for a printable version of the results.

Executive Summary
There were several questions that we set out to answer in this edition of the survey. First, we wanted to find out how Q4 sales were, and how they compared to last year. With Harvest and Holiday sales behind us, we also wanted to get a sense for the industry's outlook for the next couple of years. Finally, a topic that has re-emerged recently over many conversations in many different arenas is that of exit strategy planning and execution. How do owners plan to exit their business? How soon? Have they started really working towards that exit?
The results below answer these questions, and more. You will see that Q4 results are generally very strong, as are respondents' projections for the next 3 years. You will also see that nearly 1 in 3 winery owners plan to exit in the next 10 years, and that a great number of them are hoping for an external transaction as their strategy.
The expanded results sent to the respondents will also seek to find correlations among the various categories and answers.
We hope you find these results as interesting as we did. We always welcome your feedback, and ideas for future surveys. See our profile page to contact us directly.
- The BPM Wine Team

Who Responded
The following charts show a summary of who responded to the survey.
These respondents represent a really strong cross-section of the industry in the categories of Region, Size and Price Point, as shown below:

Q4 Results
A key economic indicator for the industry is holiday sales. The following charts show the comparative results for Q4 (Oct, Nov, Dec) Sales in 2011 relative to the same months in 2010.
Sales results are clearly positive. Nearly 70% of respondents experienced an increase in Cases Sold in Q4 2011 compared to Q4 2010:

A very similar trend in the Sales Dollars metric suggests that prices are staying firm while cases sales are increasing - a positive sign.

The Gross Margin chart below suggests even more good news. Not only are top-line sales increasing, but Margin trends are also very positive. 55% of respondents showed improvement in this area, while only 12% showed worse results in 2011 relative to 2010.

Outlook
With the contrast of a difficult 2011 Harvest but very positive 2011 Holiday Sales, we asked respondents to project the next 3 years. Almost 90% of respondents project an increase in case sales over the next 3 years, including 55% who anticipate case sales growth of over 10%.

In addition to just an increase in case sales, over 70% of respondents anticipate an increase in Gross Margins over the next 3 years.

As Gross Margins can be affected by multiple drivers, we asked which factor would have the greatest influence on respondent's projection of the Gross Margin increases over the next 3 years. Nearly half of the respondents anticipate price increases over the next 3 years as the main driver to the increase in Gross Margin.

Exit Strategy
One of the most interesting statistics from this survey was that only 60% of respondents said that they had financial targets and projections when they started the business.

It does appear that the general level of planning has increased substantially, with almost 80% of respondents showing that they have created or updated projections in the last 12 months. However, the other side of this statistic is that 1 in 5 respondents are not actively creating or updating projections at all.

Over 10% of owners plan to exit in the next 5 years. Over 30% plan to exit within 10 years.

Nearly half of the respondents plan to transfer ownership internally, primarily to family members.
Almost 1 in 4 plan to sell their winery to outside buyers as their method of exit.

Of the respondents who identified an exit strategy of either internal transfer or external sale, we asked about their progress thus far. 1 in 4 respondents have identified a successor/buyer, but only 10% have gone so far as discussing value or price.

Survey respondents are generally quite confident in their exit strategy.

Thank you again for your interest and participation in this survey. We will be conducting surveys throughout the year. As we are providing this service for the benefit of the industry, we would really appreciate hearing from you about how we can make the survey better, and with ideas for future topics and questions. Please do not hesitate to contact us:

Steve Jannicelli, CPA, MBA

Sr. Manager, Private Company Services

Business Advisor in Winery & Vineyard Industry Group

Email: sjannicelli@bpmcpa.com

Phone: 707-524-6560

You can also follow us on twitter @BPMWine

2011 Harvest Survey: Additional Analyses

The 168 participants of the 2011 Harvest Survey have received a 20-page report that breaks down the key metrics by categories such as Region, Grape Prices and Yields. Below are 2 of the graphs included in that report.

The graph above shows the quality assessment across the various regions. While 29% of Sonoma respondents and 40% of Napa respondents assessed the quality of 2011 grapes as “a little below average”, only 19% of Central Coast and 5% of Other California respondents had the same assessment.

The chart above shows that there is some inverse correlation between yield levels and price points. The respondents with yields over 3 tons per acre have the highest concentration of grapes sold in the lowest pricing category (less than $3,000 per ton). However, we were surprised to see that the highest concentration of the most expensive grapes (the top, purple section of the stacks above) was also found among the highest yield vineyards.

Survey Results: 2011 Harvest

Thank you to the 168 respondents to our inaugural survey! 

In addition to the summarized results below, the respondents will be receiving a more detailed analysis that breaks down many of the metrics below by attributes such as Region, Yield Level and Pricing Segment.
Executive Summary
After countless anecdotal conversations about the 2011 harvest, we were very interested to see the quantified results of this survey. The "Who Responded" section below indicates the representation among the various regions, business types and vineyard size (in acres). The subsequent "Survey Results" section shows the yield categories of the respondents, and also shows the notable decrease in yields from 2010, as well as some stated reasons for those decreases. Early quality assessments were positive for the 2011 harvest, and in comparison to 2010. However, while prices have increased from 2010, they have done so only slightly, indicating a general decrease in overall revenues for the respondents. The percentage of respondents' grapes that were under contract varied greatly, but there were expected results regarding respondents' ability to meet contractual volume and quality obligations. The most pressing concerns for the respondents included immediate cash flow, the macroeconomic environment, and holiday sales ... which may just be the subject of our next survey - stay tuned!

We hope you find these results interesting and useful. We welcome your feedback and input. Our contact information is at the bottom on this post.

Happy Holidays!
- The BPM Wine Team
Who Responded

Survey Results

84% of survey respondents saw yields less than 3.5 tons/acre, as shown in the chart below. The following chart shows that most respondents saw their yields either remain flat (14%) or decrease (78%). In fact, more than half (53%) of the respondents experienced a decrease in yields of over 10% from 2010.

Respondents gave several reasons for this year's lower yields. Among the most common answers were "General Climate" and "Bunch Rot/Mildew", as shown below:

As expected, the majority of survey respondents sell their grapes for less than $3,000 per ton, as shown in the graph below. The following chart shows that pricing trends are just slightly higher than in 2010. That is, the lower quantities have not yet pushed grape prices notably higher.

This graph shows an interesting phenomenon in the industry - growers are either in contract for over 90% of their grapes, or for less than 50%. Only 14% of respondents appear in the large gap between those two extremes.

Consistent with the yield graphs above, respondents dealt with quantity issues more so than quality issues related to their contractual obligations this year.

The general assessment of the quality of the grapes in 2011 was a bit better than average, as shown below. However, the following graph shows that respondents generally see the 2011 quality as slightly worse than 2010.

The graph below shows that survey respondents are primarily concerned with the 3 items that have the most immediate impact. This is, in fact, a consumer-driven industry during the time of year in which cash is the most tight and sales volumes are the highest.

Thank you again for your interest and participation in this survey. We will be conducting surveys throughout the year. As we are providing this service for the benefit of the industry, we would really appreciate hearing from you about how we can make the survey better, and with ideas for future topics and questions. Please do not hesitate to contact us:

Steve Jannicelli, CPA, MBA

Sr. Manager, Private Company Services

Business Advisor in Winery & Vineyard Industry Group

Email: sjannicelli@bpmcpa.com

Phone: 707-524-6560

You can also follow us on twitter @BPMWine