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  December 6, 2017
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WISE Bites   Tasting Room Spotlight
Budgeting Terror or Triumph, Part II: Budgeting Expenses   Gloria Ferrer
Caves & Vineyards

We hope the sales budgeting process we covered last month has worked well for you. To complete our budget, we now turn our attention to expense budgeting. There are several types of expenses to budget. Let’s gather some historical data and get to work on a five-step process for expense budgeting. Like our sales history, if we’ve been vigilant in keeping up with our monthly expense history, this will be easy. If we haven’t, let’s vow to do this in the future.

 

Welcoming an estimated 80,000 visitors per year, Gloria Ferrer Champagne Caves is one of the busiest tasting rooms in Sonoma County. Even on a frigid, drizzly Monday in November, when only a handful of hardy guests braved its famed deck overlooking the Los Carneros vineyards, the winery’s indoor tasting room was bustling. 

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 "WISE Bites" continued.

 

 "Tasting Room Forum" continued.

Step 1: Determine the Type
Determine which expense budget line items are based on historical data. An example of this might be our cleaning costs: Is the service we use maintaining the same price this year, or will we see an increase in this line item? Alternately, are we going to hire someone to clean and then need to add this new position to our headcount? Identify all the expenses that are based on set prices (maintaining, increasing or decreasing, as the case may be). Then, identify the expenses that are calculated as a percentage of sales, such as credit card fees and sales commissions. Any expense that can be calculated as a percentage of sales should be done this way. Some expenses are based on headcount, such as projected training costs. We’ll use our previous year’s expense budget line items to help determine these expenses, and we will want to make a note of our assumptions and the type of budget for each line item this year so we don’t have to try to remember this next year.

Step 2: Determine the COGS
If our business has consistent margins every year, we will use a percentage of sales. This is the easiest kind of planning because the expense rises or falls along with the sales budget. We need to make sure we know what is included in Cost of Goods Sold (COGS): Wine only? Food? Shipping? We will check in with our finance team to be sure we are on the same page. If we want to change our COGS percentage, we can change cost of the wine, the retail price of the wine, our product mix and the level of discounting for club members and for case purchases. Lots of levers are at our disposal to impact this critical component of our budget.

Step 3: Budget Labor Costs
For this category, we will include base salary plus a percentage overhead “load” by headcount. The load will cover benefits, payroll taxes and workers’ compensation insurance. Consider changes required if we are adding new guest experiences versus last year. We will also provide for the impact of internal changes such as training, incentive compensation, promotions and our event calendar.

Step 4: Budget Cases for Wine Clubs
We need to budget our wine club needs for specific wines out as far in advance a possible. We will project quantities needed for inventory and production planning purposes. Project revenue (net of club member discount) and make sure price points of all shipments are maximized. Project COGS for each wine to then calculate total revenue, COGS and gross profit per shipment. Compare this to the average historical COGS and gross margin percentage.

Step 5: Reality Check and Action Plan
We have spent a lot of time on the details, and now it is time for the "Budget Roll-Up." This is our reality check against goals that management has specified, and against historical metrics. Is our plan doable? Have we planned in any additional resources (time, people, money) needed for our anticipated changes?

Finally, we will clarify the goals we have set in our budget and create action plans. What will need to happen in order for us to meet our sales and expense goals? This is the perfect time to develop SMART goals: Specific, Measurable, Achievable, Relevant and Time-bound. We’ll use our SMART goals to help us identify champions and timelines for each goal so we have a roadmap to follow and deliver results on budget.

Ready, Set, Budget! 

Source: WISE Academy,
www.wineindustrysaleseducation.com


Stats from WineJobs.com

October saw the Winery Job Index drop 6% versus a year earlier to 153. This was the third straight month the index declined.

DtC Jobs

Demand for direct-to-consumer positions, including tasting room and retail staff, dropped 28% in October versus a year ago. The monthly index stood at 217, its lowest level since December 2015.

 

The convenient location at the entrance to Sonoma wine country isn’t the only attraction for throngs of thirsty visitors. Gloria Ferrer, a subsidiary of Spain’s Freixenet Group, is best known for its sparkling wines, making it a festive destination for devotees of bubbly. But among its 120,000-case annual production are also estate Pinot Noir, Chardonnay, Pinot Blanc and Cabernet Sauvignon still wines, and tasters may order from a varied menu of small plates to accompany their beverage selections.

The interior lighting installed during a tasting room remodel three years ago is flattering and easy on the eyes. Geraldine Flatt, vice president of human resources and retail operations, has spent her entire 17-year wine business career at Gloria Ferrer, and was placed in charge of the tasting room in 2011. She now supervises a team of 40 staffers, including four tasting room managers.

Workers are scheduled according to expected traffic, with visitors typically numbering as many as 8,000 per month in spring and autumn, and dipping to about 3,000 in January. This year, of course, was not typical. Wildfires in October forced most visitors to cancel their plans and reservations, and the tasting room closed for a week. After reopening, Flatt recalled it took three or four weeks before tasting room traffic seemed to bounce back.

About 60% of visitors come from the San Francisco Bay Area, drawn by cross promotion with Sonoma County Vintners and local tourist publications. A prominent billboard advertising Gloria Ferrer on the heavily traveled Highway 37 burned in the fires but will be reinstalled. 

Given the tasting room workload, “We are always looking for new people,” Flatt said. There are plenty of local candidates, though they are not always from the wine industry. “Wine is a product that can be taught,” she noted. Flatt seeks servers who are generally interested in people. “We take care of each other, and that translates into taking care of the customers.”

Turnover is very low, Flatt said. Several years ago, staff was primarily part time, but now the budget is set up to provide salary and benefits to more full-time employees, a sign of the winery’s commitment to keeping them.

Training consists of learning the history of the winery, its style and the Ferrer family. “They have to enjoy coming to work every day,” Flatt commented. When training is complete, new hires get a pay raise, and there are incentives for group sales such as commissions between 2% and 4% as well as bonuses of $7 to $25 for club memberships, depending on the club joined and hours worked.

“It’s about teamwork. There always kudos for team players,” Flatt said.

• Food offerings are not a profit center, she conceded, but food has been part of the package for a long time. Flatt believes the optional munchies—from tapas to charcuterie and chocolates—keep guests happier and create a more memorable experience.

Most guests opt for flights, but by-the-glass options can be helpful for those who know what they prefer. “Not a lot of people know about our small-production still wines,” Flatt said. Average bottle price is $30.

Only about 6% of visitors enroll in the wine club, although club members enjoy reserved indoor/outdoor spaces at the winery. “We try to have them come back for a second date,” Flatt commented.

• All the wines are available for sale at the counter, but some guests may miss the retail space, tucked discretely behind the check-out. Logo hats and shirts are not on the racks. Purses and trays created from cork connect with the wine, as do flutes and other stemware designed by family matriarch Sra. Gloria Ferrer herself. Food items and estate-grown olive oil are popular as well. Flatt also stocks a few impulse purchases, especially wine bottle stoppers, which she personally favors as hostess gifts.

Supplying the tasting room

Tasting room supplies are pretty simple. At Gloria Ferrer, serving stemware comes from Glass Tech. The dishwasher is a Hobart, as in many professional kitchens. Aramark towels are used to polish the stemware.

 

The all-important point-of-sale system, synced with the DtC and wine club, is from Vin65 (formerly Wine Direct).

Not surprisingly for a sparkling wine specialist, preservation of open bottles is minimal. “We open new bottles every day,” Flatt said. When necessary, air is pumped out of the open bottles and argon is pumped in for preservation.

—Jane Firstenfeld

Wines & Vines contributing editor Jane Firstenfeld has been writing about the North American wine industry since the 1970s. If there are any questions you would like answered by future Tasting Room Spotlight participants—or if you would like to have your tasting room featured—email her here.

News Briefs

Cloverdale tasting room
Kathleen Kelley Young recently opened an inn and tasting room in Cloverdale, Calif. According to Wines Vines Analytics, Kelley & Young Wines produces 1,500 cases that are sold mainly direct to consumer. For more information, visit kelleyyoungwines.com.

Wine in a vintage barn
Howard and Marjorie Feldman renovated a barn from the 1850s for the new tasting room of their Foon Estate Vineyard in Roseburg, Ore. Located in the Umpqua Valley growing region, Foon Estate offers Viognier, Albariño, Tempranillo and Malbec. The new tasting room is open Saturdays and Sundays.

Taos tasting room closes
Jerry and Lynda Burd, owners of Black Mesa Winery, will close their tasting room in Taos, N.M., at the end of this month. The winery in Velarde, N.M., will continue to operate.

Pennsylvania grape and fruit wines
Winemaker Mark Rozum opened the Black Dog Wine Co. last month in North Fayette, Pa. In addition to six wines, the tasting room sells local honey, and the tasting room is open Thursdays through Sundays. For details, visit blackdogwinecompany.com.

Panther on the move
Panther Creek Cellars closed its tasting room in Dundee, Ore., and will open a new location in Woodinville, Wash., in early 2018. The winery plans to host pop-up tastings in Oregon. For more information, visit panthercreekcellars.com.

Cullari’s satellite location
Cullari Vineyards of Pennsylvania is opening a second tasting room in Brickerville, Pa. (Lancaster County). The original location near Hershey, Pa., caters to tourists visiting Hershey Park, and its Coco Nostra chocolate wine is popular with visitors. Visit cullarivineyards.com for more information.

Please send suggestions to trf@winesandvines.com



 

 

       

 

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