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The best way to calculate the cost price of your wines!

Par Vitisphere Le 28 mai 2010
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The best way to calculate the cost price of your wines!
T

he price of a bottle of wine has become the most essential element of commercial negotiations. It is best to know how to calculate it in advance to avoid any nasty surprises!

The cost price of a batch of wine is the sum total of costs related to purchasing (raw materials, transportation…) production (labour, depreciation, rental costs…), distribution (commission, transportation, packaging…) as well as the administrative expenses necessary to manufacture the product.
It is also necessary to distinguish between two types of expenditure:
· direct costs which can be directly incorporated into the cost price (cost of raw materials, production costs, general expenses, labour costs…)
· indirect costs, which are general costs related to maintaining winemaking equipment and have to be split between all production runs (rent, fixed asset depreciation, water and electricity charges, machinery, trade fairs, travel expenses…)

After having identified all costs, the following outline of all the elements that make up the cost price can be drawn up:
1. Net purchase price + purchasing expenses = Purchasing costs
2. Purchasing costs + production expenses = Production costs
3. Production costs + distribution expenses = Commercial costs
4. Commercial costs + administrative expenses = Cost price
5. Cost price + margins = Sales price ex. tax

Two types of margin must be taken into account:
· The GROSS margin is the amount the producer makes or the difference between the Sales price ex. tax and the Purchase price.
· The NET margin is the actual amount the producer makes, taking all expenses into account. It is the difference between the Sales price ex. tax and the Cost price.

After all this, determining the "right" sales price ex. tax becomes quite an arduous task due to the multitude of variables that can influence the price and are by no means insignificant:
· the renown of the cuvée, the estate or the winegrower,
· the appellation
· the level of competition,
· the distribution network in question,
· the volumes of product at stake…

This alchemical process is the key to your work and to your recognition.

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