The Winery: Keys to Financial Success

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In June I attended the National Farm and Ranch Business Management Educators annual conference in Rochester NY. Steve Richards, manager at Casa Larga Vineyards and Winery (Fairport, NY), shared his expertise on managing a winery. Steve also worked for many years at Farm Credit East and the Winery Benchmarks Program: https://www.farmcrediteast.com/winerybenchmarks

New York State Wine Overview

• Influence of international trade: when Australia grape/juice prices go down, wineries will increase usage of this supply up to the allowable thresholds under current regulations
• 60% of wine volume produced is non-varietal sweeter wines
• Riesling is the top NYS varietal, about 10-15% of overall wine volume produced
• A good way to forecast wholesale wine sales is to research the general restaurant sales forecast for the upcoming periods.

Keys to Financial Success:

Inventory Turnover: a typical winery will to have 1.5- 3 years max of annual sales in inventory. Larger inventory is less favorable and wineries must work to increase the number of inventory turns per year to over 1. Successful wineries move inventory faster and bottle final product as close to sales date as possible (accounting for any bottling/conditioning factors influencing final quality). Aging inventories over 3 years old is less desirable.
Labor Efficiency: Wineries track cases per worker and this is a key focus of scaling the business. The biggest cost factor as a winery grows is the overhead costs of marketing and regulatory compliance. There are labor efficiency sweet spots at different scales

  • 500-2,500 cases is a good place to be. Labor efficiency ranges from 6k-10k  cases per full time worker.
  • At ~5,000 cases the retail only establishment has maxxed out on sales. The winery begins to wholesale product. This creates an increased administrative burden to serve these new markets.
  • 5,000 – 10,000 cases tends to be poor scale for labor efficiency, possibly down to 4k cases per worker
  • At around 15,000 cases the labor efficiency curve begins to get better.
    Labor efficiency peaks at the scale of ~35,000 cases per year, with the labor benchmark approaching 10,000 cases per full time worker.

Free for Farmers! Workplace Services and Counseling

Farm First is a free and confidential  program available for Vermont farm owners and family members seeking assistance on a  personal and workplace issues. The program can provide assistance when dealing with farm labor issues  that are difficult to resolve on your own.

The program can also provide confidential counseling services related to stress, anxiety, depression,addiction and other situations where the guidance of a professional is needed. The program is available to farm owners and related family members involved in the business. Farm owners can also consider if they want to enroll in expanded employee assistance programs (EAP) to make similar services available for their employees at a very low cost.

Call Farm First at  1- 877- 493- 6216

Click this link for the Farm First description at the Vermont Agency of Agriculture website: Farm First for Vermont Farmers

Follow this web link to Invest EAP

 

Navigating Federal Laws on Farm Labor

This morning agency representatives and professionals hosted a session at the Vermont State House devoted to understanding labor laws for agricultural employers. Agricultural employers cannot expect to be experts on these topics but they must be aware of the important issues and understand when it is essential to contact specialists to assess specific situations.

Today’s topics included key provisions of the Federal Labor Standards Act (FLSA) and an introduction to potential exemptions for agricultural businesses. It was explained that the Wage and Hour determinations are based on a week of work. So if you have an agricultural employee working 38 hours in the field picking strawberries and that same worker spends just 3 hours in the farm retail store running a register…that entire week could be considered non-agricultural and subject to FLSA (wages and overtime were the most common discussion topics). Notice I said “could be” as it could vary based on if the store sells strawberry jam or if other products from other farms are resold in the store. There are a variety of agricultural exemptions that should be understood thoroughly to ensure a business remains in compliance with the law.

And for the details… here are several of the resources that were referenced.  US Department of Labor Fact Sheets: #71 Interships, #13 Relationship Determinations, #26 H-2-A, #12 AG Employees, #14 Coverage, #50 Trasportation, #49 Migrant and Seasonals, #40/43 Youth.

To access these sheets, click this link to the DOL Wage and Hour Fact Sheets online.

The US Department of Labor has a district office in New Hampshire that can be contacted at information listed here: http://www.dol.gov/whd/america2.htm#Vermont

Health Care Changes for Farms

Vermont Health Connect has been providing information sessions about important changes to health care enrollment for farmers.  Most recently they have developed this guide:VT Health Connect Ag Producer Resource Packet 3.3.14.

This is a critical time for businesses and individuals. There is a March 15th sign up deadline for individuals seeking coverage to begin April 1st. Many group association plans that farmers have traditionally enrolled through will expire on March 31st.

Click the link above to open the most recent VT Health Connect guide and find details, frequently asked questions and important contacts.

 

IRS Publication 225: Farmer’s Tax Guide

It is the time of year for many questions that lead back to tax preparation.

Here is a link to the current IRS Farmer’s Tax Guide

We are also seeing more scrutiny being placed on the distinction between “agricultural” employees compared to “retail” or “non-ag” employees. Owners of businesses that diversify,  take on retail operations or manage  non-traditional farm activities will want to get familiar with the legal thresholds on employee classification. Read more in the IRS Publication 51: Agricultural Employers Tax Guide. Look at sections relating to Form 943 starting on page 18.

IRS pub 51 ag employers

 

 

Problems with Employee Housing

Here is a question that we received this week, “….I am a farm owner and I have employees that live in housing on the farm. What are my rights or responsibilities if I decide to terminate the employee or terminate the housing agreement? Since the housing is linked to employment is this different than a standard renter/landlord situation?”

There are a variety of things to consider when setting up a housing agreement with a farm employee. There are also a number of laws that needs to be considered. In 2010 the VT Legislature passed Act 89 “An Act Relating to the Termination of Occupancy of Farm Employee Housing”. Click Here to read Act 89: ACT089_VT Statute

UVM Extension Farming Across Cultures Program has also posted this resource sheet that describes the specific steps a farm owner/landlord can take if employment or housing arrangements are to be terminated. Click this link to their: http://www.uvm.edu/extension/agriculture/faccp/files/aglabor_housing/farm_housing_statute.pdf

Farm owners can also contact the VT Department of Housing and Community Development to find resources for  landlords. Click here for their website: http://accd.vermont.gov/strong_communities/housing/housing_resources/rental

Afforable Care Act: Essential Info for Farm Employers

Despite the lack of clarity and challenges of the new national Affordable Care Act, farm employers must prepare to set up the appropriate health care options for their employees (or make the accurate determination that no plans will be offered).

Farm Credit East just posted a detailed webinar: (click below to link to webinar)

The Affordable Care Act:What Farmers Need to Know

Farm owners and farm business advisers should review this material and plan to keep up with current news to determine if and how they need to provide coverage for employees. * It is important to research the specific policies in each state. For example, the State of Vermont law only provides an exemption for 4 or less employees. That is very different than the federal exemption of 50 or less employees. Farms in VT whose employee base meets the criteria of 5 or more full time employees may  be required to provide health care or to pay a penalty if care is not provided.

Vermont farm owners can research their particular situation at VT Health Connect: Small Business Resources

Farm Employer Fact Sheet Posted

We have just posted a Farm Employer Fact Sheet to our Resource Library.

[We have just updated the sheet. We found an error relating to the VT laws related to the new Affordable Care Act]

Are you in compliance with labor laws? Do you know who to contact if you have questions? This general overview explains the basic steps to getting a employee set up, basic workers compensation issues, Affordable Care Act updates and key agency resources to contact for more information.

Check it out the, click here:  Farm Employer Overview