"She was wise, subtle, and knew more than one way to skin a cat."

Mark Twain 1889

Whether you are an older business or a newer business there are a few things that you need to know when choosing a sales structure. As with many decisions there are no right and wrong answers, more like benefits and drawbacks. The important part is that you understand you can change different aspects of your structure as your business needs change. Let’s discuss some of the most important parts of vineyard sales strcutures.

To preface the discussion there are a few items that a company should not be leinent on changing.

Always have a written contract. They are a pain to deal with, they take time and they are difficult to track through the process, but, man you’ll be glad you did when you need it.

Always keep your word. It almost goes without saying, except that it doesn’t. Trust isa sacred part of your businesses sales structure. Without it, crazy things happen.

Be predictable. There is nothing worse than someone trying to be mister fancy pants. If you make a plan stick to it and think about how it is going to affect others. Make changes if neccesary at natural break points in the business or relationship. Not in the middle of a transaction or contract.

Aside from those items, how should you sell your grapes by the ton? By the acre? Both? Are there any other things to consider?

Tonnage Sales. Tonnage sales allow a vineyard to sell fruit by weight and not area in a vineyard. This allows the vineyard flexibility for recieving what I like to call the “ups” in terms of income. If your crop levels are slightly higher than predicted you can sell the remaining fruit to another client and make more money per acre. The opposite is also true, if there is less crop than predicted you have less to sell and need to “short” a client tonnage that you promised them. This can amount to either much more income than predicted or much less.

Acreage Sales. Acreage sales allow a vineyard to sell fruit by area and not by weight. This allows the vineyard to have guaranteed income stability. If you grow more per acre the client gets more for less. If you grow less per acre the client pays more per ton, but the vineyard sees the same amount of return per acre. There are no “ups” in acreage sales only protection from low yields.

Which is better? The answer is neither. They are both equally as important. Deciding which you prefer is up to you, but here are some things to consider when choosing.

How many acres do you have? It may just be easier is some cases to do one or the other if you do not have many acres.

How leveraged is the business? It’s relatively common for young or establishing vineyard businesses to sign multi-year acreage contracts to appease lenders during the inception of a project. Although this gives the bank a paycheck to count on it also, has the potential to hold your business back during this period for many reasons. If you have a qualified manager that understands the marketing and sales process you can get the grapes up and running several thousand dollars ahead of what you could under a multi-year contract. Not to mention the marketing aspect. Typically these contracts are written by larger businesses who will blend your grapes into a much larger tank with other vineyards and varieties. This doesn’t allow for you to show case your particular site and vineyard to the market. When the contract ends after 5 years or 10 years, you have much older plants but, likely nobody will know what your site can do and you will have to start with lower prices and work your way up from that point.

In the business that I manage we contract about 50% by the ton and 50% by the acre. This allows us the greatest flexibility in terms of our returns each vintage. We have insulation when we need it. We also have the ability to get some of the ups when they come about. It also helps us service our customers better when someone has a last minute need we have more tools to help in finding a solution. In our case we charge the same by the ton or by the acre equivalent. If the fruit has a 4 ton to the acre goal at 2500/T we charge 10,000/Acre.

Is this approach hard to track? Hardly. Leave it up to the customer to decide if they want one or the other. Look over your allocations each year by variety and see how imbalance you are with acreage versus tonnage contracts. It doesn’t have to be perfect. If you feel like you’re out of balance from your goals. Don’t offer one or the other service, unless you feel you need to. Set minimums for acreage allocations and sell the rest by the ton.

“If you can’t measure it, you can’t manage it.”

Any other things to consider?

Allotment Percentages. Don’t put all your eggs in one basket. This saying is true for many things in life, selling grapes is no different. I like viewing grape income and tonnages kind of like stocks in the stock market. Just like you wouldn’t want to put all your money in one investment, you shouldn’t get all your money from one business. This lessens the risk asscociated with selling to other entities that you do not control. As a general rule of thumb I begin to get nervous when a company is heading over the 10% mark. No matter how good of a relationship you think you might have, when things happen none of that matters anymore. There are probably exceptions but, I haven’t been witness to any. I have been witness to the other side of the picture though. In a couple cases it was a 20% stake that was dropped from one year to the next on 400 tons. That meant negotiated returns on the current year’s 20% of income plus an available 80 tons to sell the next year with no home. The vineyard had to lower prices to make it work and that affects market perception. In another case it was 100% of their crop on over 100 acres. This owner had never known how to sell grapes because he never had to up until that point.

Vineyard incomes. What should a vineyard income should look like from one year to the next is a graph similar to a consistenly increasing stock price. There should be no major income swings up or down, at least not in our area that is. Higher risk sites for early frost or winter freeze will have more ups and downs than a site with less risk will for sure, but even some of those issues can be mitigated with the cultural management activities in the vineyard. The one number you should be tracking in your business related to income is total grapes harvested divided by total amount of income. You can track this on an acreage basis side by side. If you can’t measure it, you can’t mangage it.

Sales Strategy. Building Resilience into your Vineyard Income Plan.