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August 2015 WINES&VINES 57 BARRELS 9 Space cost This piece of the puzzle calculates the cost of barrel aging space on a yearly basis, incor- porating both the cost of the building and the cost of the energy required to heat and/or cool the area. The owners of Bigteaux plan to stack their barrels four high in barrel racks that hold two barrels each. This arrangement utilizes about 17.5 square feet per stack of eight barrels, or about 2.2 square feet of floor space per barrel. This gives a little room between stacks. But after allowing for room to access the barrels for topping, they find they need about 5.5 square feet per barrel. This also provided a little room for expansion. In all, they decided on a barrel room measuring 22 feet x 50 feet. The annual costs of the actual barrel room building (depreciated over a 20-year period) plus annual energy costs to maintain the proper aging temperatures throughout the year pro- vide an accurate estimate for our fictitious Chateau Bigteaux; the yearly depreciation on a 20-year depreciation schedule is $4,200, and heating/cooling is $800. 10 Number of barrels in space The total number of barrels in the barrel room is used to calculate the "space costs" on a per-barrel basis. Chateau Bigteaux houses 200 barrels in its barrel room. 11 Finished bulk wine costs We need to assign a value to the wine lost through evaporation, as this is a cost uniquely identified with barrel aging. The bulk wine cost, if aged exclusively in stainless steel, should be used here. Chateau Bigteaux's bulk wines are worth $18 per gallon. 12 Barrel resale price at end of life Used barrels can usually be sold even though they have exhausted their utility in the barrel room. Subtracting a barrel's end-of-life salvage price from its original purchase price provides an adjustment for the original outlay. Chateau Bigteaux easily dispatches its spent barrels for $50 each to local home winemakers and flow- erpot makers. With all this data in hand, the accountants— and you—can now calculate the cost of barrel aging/bottle. The numbers as discussed above are derived from real-life experience, and as far as Chateau Bigteaux is concerned, are fairly accurate. The barrel cost calculator tables sum- marize the results of Bigteaux's analysis per- formed for American oak and French oak barrels. Bigteaux's curious proprietors can now generate some hard numbers regarding the relative costs per bottle of their barrel options. As stated earlier, Chateau Bigteaux was considering the impact on bottle cost if they were to age their reserve Chardonnay in 100% French oak rather than American oak. Here we can see that American oak will cost them 68 cents per bottle versus 92 cents per bottle for French, an increase of 24 cents per bottle. If all other costs of production are equal, they would have to charge 24 cents per bottle more to net the same return. In all likelihood, their reserve wine will sell for significantly more than their standard offering. Even if they cap- tured a mere $1 more for their reserve, there is still a greater margin using a more expensive barrel if that creates value in the consumer's mind commensurate with the higher price tag. Interestingly, while the French oak barrel itself requires 116% greater cash outlay, in the final analysis it only increases barreling cost slightly more than 35%. We can see here that the cost of the barrel itself ranges from about 27% for the cheaper barrel to 46.3% for the more expensive barrel as a percentage of over- all barreling costs. It is interesting to note that in this scenario, the cost of the barrel doesn't reach 50% of barreling costs until it passes $1,094 per barrel. Before doing this in-depth analysis, the owners of Chateau Bigteaux, like most of the rest of us, routinely attributed the majority of their barreled wine costs to the up-front price of their barrels. It is also worth noting the effect that increased bulk wine cost per gallon has on the overall cost of oak aging. As seen above, the cost of bulk wine used in topping is normally the first- or second- largest component in the cost of oak aging. In our examples above, this cost ranges from 36% to 48% of the total cost of barrel aging. Chateau Bigteaux's accountants have noted the significant impact the number of fills over the life of the barrel and evaporative loss com- bined with bulk wine costs have on their analy- sis. Any person wishing to conduct their own analysis using data specific to their unique situation can easily do so. A copy of the spreadsheet containing the calculator used in this article is available at winesandvines.com/barrelcalculator. The reader can use the spreadsheet to verify that if the bulk wine cost is increased to $27 per gallon, the cost of bulk wine for topping becomes 45% of the cost of oak aging using French oak bar- rels and 58% of the cost of oak aging using American oak barrels. In both cases, topping costs dominate the cost of the barrel itself. Chris Stamp is president and winemaker at Lakewood Vineyards in Watkins Glen, N.Y. He started his wine career as winemaker at Cayuga Vineyards in the Finger Lakes and in 1986 took a position as enology research and extension associate at the Ohio Agricultural Re- search Development Center in Wooster, Ohio. When his family opened Lakewood Vineyards winery in 1988, he returned to New York to become the winemaker there. He would like to thank Mark Rondinaro for his help in generating real-life data for this analysis. 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