Record Keeping and Your Winery Part 3

Written by Wine Alliance Treasurer Mike Stubbs

Previously, I have written articles dealing with record keeping and your winery. If you are producing more than one varietal of wine and are running your winery as a business venture, you will need to keep the production costs of each varietal separated so as to determine the cost per bottle.

Any time a business sells a product that either they purchased for resale or produced for retail, they need to know their cost per item. In our case, that means the cost per bottle of wine for both accounting and tax purposes. At the end of every accounting period, your Income Statement needs to show total sales dollars and cost of sales dollars for each line item or varietal of wine sold.

I like to use a “Job Cost Sheet” for each varietal. From day one with grape or juice costs, to final bottling, I break down my Job Cost Sheets into two parts. First, all material costs such as grapes, top off wine, bottles, corks and labels, as well as other similar category items would be included in this section. My second section includes any and all labor costs that you might incur from A to Z in making your wine. Examples include transportation labor, chemical testing or other outside labor, crushing labor, racking costs and final bottling costs.

I do not include equipment costs, mainly depreciation, as those costs are indirect and most all equipment is depreciated over a specific life. Since said equipment is generally good for more than one particular varietal, equipment is an expense item separately  listed in the expense section of your Income Statement. Other expense items in this section would be utilities, maintenance of equipment, advertising, and so on.

When a given varietal is bottled and ready to sell, all that is necessary is to total all costs on your Job Cost Sheet and divide that amount by the number of bottles produced. Every time you sell a bottle of that varietal, you now know what your cost was and how much profit you are making per bottle.

Even if you are only making wine for yourself and not as a business, would it not be nice to know what it took in dollars to make that bottle that you just gave as a present to Uncle Joe?

Record Keeping and Your Winery Part 2

by Wine Alliance Treasurer Mike Stubbs

This is my second article on the subject of record keeping and your wine operation.

In my first article, I addressed several reasons for recording all financial expenditures for your proposed private wine making operation. I will now expand on this issue whereby you have now decided to make your wine operation a business. First, and here is where the Yucaipa Valley Wine Alliance can be of help, you must address the necessary Governmental agencies that control and/or regulate the wine making business. Some of the important things that you must have in place to be a legal winery are as follows; The approved and licensed location for your sales outlet, the actual bonding of your winery, the approval process of your labeling on each varietal as well as City business license, State sales tax licensing, Department of Agriculture reports and so on.

As I stated in my first article, if you keep track of ALL of your expenditures right from the beginning, you will be able to determine when your operation is making a profit. Keep in mind that in the beginning, your capital outlay will be significant. Try to plan for where you would like to be in 3 to 5 years. This is important because based on your forecast of volume of production, it is far better to acquire the correct type and size of equipment right from the start. It will save you dollars if you do not need to upgrade the size of your equipment. For example, you find that you are crushing several tons of grapes with a crusher that is far too small or storing filled wine barrels somewhere that needs a temperature controlled environment when you have no space.

You should start a Job sheet or ledger for each varietal where you charge out ALL costs for that Job. Meaning, cost of grapes, chemicals, testing fees, any outside labor, and the cost of bottles, corks and labels. When the Job is complete, you are then able to divide the number of produced bottles for that Job into the TOTAL for that Job Cost Sheet. This will give you your COST per bottle and allow you to better determine what to charge your customers.

At the end of each month, quarter or especially the end of your accounting year, you need to be able to produce an Income Statement which lists your Sales, Cost of Sales, followed by your indirect expenses. Some examples of those expenses are Equipment Depreciation, Electricity, Water, Licensing Fees, Advertising, Maintenance, General supplies and so on. All of this will be needed for your Schedule “C” Business Tax Return for the IRS and the FTB. Again, this is why I emphasized tracking ALL expenditures right from the beginning.

In the space of our Wine Alliance Newsletter, I can only touch on the main points for creating a profitable and controlled wine business. I am able to give a more detailed analysis if you might be interested as this is only one of several subjects that The Alliance is able to provide for its members.

Record Keeping and Your Winery Part 1

by Wine Alliance Treasurer Mike Stubbs

This is the first of three parts being written concentrating on keeping track of your wine hobby or business.

If you are interested in making wine for personal use, this part is for you. I will not be addressing licensing or any regulation as well as any necessary chemical testing in this dialogue.

Making wine as a hobby will require some equipment in order to be able to process your grapes. From initial crushing, through fermentation and aging, to bottling your juice when it is ready, will require a financial investment. Added to that investment, is the cost of purchasing grapes from someone else or the time and expense of planting your own vineyard. My recommendation is to keep track of ALL of your expenditures right from the start. A small press, a tank for fermentation and a barrel for aging along with bottling supplies will add up very fast.

Two reasons for this recommendation, are first, when you complete the process and have a certain number of bottles filled, you and your friends will be interested in what that entire process cost as compared to going to the store and purchasing wine over the counter. Of course, the enjoyment of producing your own wine as a hobby is hard to put a value on. Second, and far more important, is that if the hobby leads to starting your own winery, all of your investments will be needed for your accountant to list as depreciable assets and/or expenses.

How to Order Wine at a Restaurant

by Board Member and Restaurant Critic David Cohen

Sometimes it can be rather intimidating to order wine in a restaurant that has a huge wine cellar, lots of unfamiliar bottles, and a sommelier walking around with a silver tastevin cup hanging from a chain around their neck.  You might start asking yourself questions such as:  What do I order?  What do I do with the cork?  How do I know if the wine that I ordered is fit to drink? 

I hope this piece will demystify the experience.

The first decision is figure out if you want to drink wine by the glass, by the half bottle or by the bottle.  Ordering by the glass allows you to match a given wine with a particular course, let’s your dining companion order a different wine if they wish, and best of all--you can usually sample a taste of the wine before requesting a full glass. 

There are a couple of caveats.  Always ask your server how long the bottle that they are pouring from has been open and to pour the glass at the table.  If a wine has been open longer than 24 hours, request that they open a new bottle to ensure freshness.  Pouring the wine table side always ensures that the wine your ordered is the one being poured.

The advantage of ordering half bottles is that if your dining companion prefers white and you prefer red or your individual menu choices would suggest both red and white wines, you can each have a sufficient amount of wine to get you through the meal without ordering full bottles or a number of different single glasses. Keep in mind that half bottles mature more quickly than full bottles.

Now, if you both (or a bigger party) decide on a particular bottle to share (this may also apply to half bottles), there are some important things to consider.  You can get around five 5 oz. pours from a full bottle of wine and two plus glasses from a half bottle.  When the bottle comes to the table, you can note the level of the wine in the bottle.  It should not be below the bottom of the neck as this may indicate significant leakage from the cork and consequently oxygen may have entered the bottle, which is the enemy of wine. 

Also look for seepage or mold around the cork.  When the sommelier or server opens the bottle and presents the cork to you, pick it up and feel for dampness.  The bottom of the cork should not be dry to the touch.  If it is, the wine may not have been stored properly in a horizontal manner, possibly allowing oxygen to seep into the bottle through a defective cork.  Smelling the cork serves no useful purpose.

So, you’ve reached the moment of truth.  Now for that first taste.  You look at the color (brownish hues are a warning sign).  Swirl the wine to release the aromas, inhale and finally take a sip.  if the wine smells like dirty sweat socks, the wine is deemed “corked” (contaminated with a chemical called TCA) and should be sent back.  Any wine that tastes sour or has off-putting aromas should not be drunk.  You can always ask the sommelier to taste the wine if you thing there’s something amiss.  You might not like the wine, but there may not be anything intrinsically wrong with it.  In that case, whether the bottle will be replaced is usually at the discretion of the individual restaurant. Sometimes they may opt to sell what remains in the bottle by the glass, and allow you to select something else.  If you don’t know if you’ll like a certain wine, it is a good idea to order a taste of a couple of the wines they offer by the glass and if you find one which pleases your palate, order a bottle of that particular wine.   

Now lets move to decanting, a method used to aerate and soften a wine or remove particulate matter that develops over long periods of time in older vintages.  Decanting can be a personal preference, but generally big red wines with less than 3-5 years of bottle age should be decanted (again, at the table) to soften the wine’s tannins and bring out the flavors and bouquet to a greater extent.  Older red wines 10 years and up may need to be decanted to remove sediment that has precipitated out of the wine over the years.  In general, any red wine with significant sediment deposits along the side of the bottle during storage should always be decanted.

Finally, take advantage of the sommelier’s knowledge if the restaurant has one or more on staff.  Ask for his or her recommendations based on how much you want to spend per bottle, which wines pair well with the food you’re ordering, and what you can expect flavor and bouquet-wise from various varietals.  He or she should also be able to recommend certain vintage years for a given varietal and country of origin, if they carry multiple vintages of a particular wine  In general, red wines with more bottle age command  higher prices than more recent vintages.

Hopefully, this article will provide you with a road map for ordering wine which will please your palate and go well with your food.  It’s often a blend of art and science.  Enjoy your vino!

Craig Suveg on Oak Barrels, Their Flavors, and Their Place in Winemaking

By President Craig Suveg

While working in the tasting room, I receive many different questions concerning wine making techniques and procedures. One often asked question involves my use of oak. The use of oak for aging  wine has always been of interest to me so I decided to share some of my thoughts on the subject.

Oak barrels simply represent a storage vessel for aging wine; the general purpose being the gradual introduction of oxygen into the wine in order to stabilize color, vary the flavor and tannin profile and define the wine’s texture. The exposure of the wine to oak creates different flavor profiles depending on several factors including the species of oak, the capacity of the barrel, toast levels (wine barrels are toasted while whisky barrels are charred!) and percentage of aging time in neutral versus new barrels. Depending on the intensity and exposure to heat, toasting of the barrels breaks the chemical bands of wood sugars including cellulose and hemi-cellulose after which tannins are broken down in order to emit ellagic and gallic acids, which are part of the polyphenolic family tree of tannins. Generally speaking, flavor profiles can be characterized in five categories:

1 Eugenols – cinnamon, clove and spice;

2 Furferols – carmel, butterscotch;

3 Guaiacols – smoke, charcoal

4 Vanillin – vanilla;

5 Lactones – coconut, toast

In 2010, we began winery operations using exclusively Hungarian oak. All wine produced was aged in a combination of Quercus patraea and Quecus robur 114 liter and 225 liter new Hungarian oak barrels using medium to medium plus toast. The use of French oak was not added until our 2014 vintage. We have never used Quercus alba, or white American oak, in an effort to produce old world style wines.

The two main European oak species used for our wine barrels are Quercus robur, also known as pedunculate oak, and Quercus petraea, also known as sessile oak. Acorns on the Quercus robur are attached to branches by a little stem or oedicle, hence the name pedunculate. Acorns on the Quercus patraea sit directly on the branches, hence the name sessile which refers to sitting. Essentially, petraea produces barrel staves that provide pronounced aromatic character and low tannin content to wine while robur provides fuller body and more tannin structure while giving less complexity and elegance than petraea.

The two European species prefer different growing conditions. Robur performs best with more water richer soil and greater nutrition while petraea can survive will fewer amenities in thinner soil, colder temperatures and longer winters.

Many of the winery’s current barrel inventory features Quercus patraea oak sourced from the Zemplen forest in the mountains of northeast Hungary near the winemaking region of Tokaj. Tokal forests produce 95% petraea and are unequivocally unique and prized in Europe. The combination of cold climate, high altitude and volcanic soil create a species of tighter wood grain imparting greater aromatics. Petraea trees in the Zemplen forest are stressed for nutrition and water and grow mainly in the early season. Tight grain is always more aromatic because the aromatics develop in the spring or early season.