Winery: margin per bottle and margin per year

“I thought the reserve was our pride and our earnings. Until I counted how many years that money stands in the cellar”

Myroslav Duda is in his twelfth year of making wine in Berehove. The estate is small and family-run, with its own vines and one hired winemaker. The range holds three lines: young wine, one-year ageing and reserve.

The whole family is proud of the reserve. It brings the medals home from competitions and holds the price of the whole range in restaurants. Young wine opens no such conversation with a head sommelier.

Last winter Myroslav sat down to count time instead of margin. The work took one evening and needed nothing but a spreadsheet. The result turned his picture of his own winery upside down.

What the winery really sells

For twelve years Myroslav believed he sold wine of different quality. The distributor, the winemaker and everyone who came for a tasting thought the same.

Young wine is simple, for the supermarket shelf. One year of ageing is for wine shops. The reserve is for restaurants and gifts.

The logic seemed obvious. The longer the wine lies, the dearer it is and the more it earns. No winemaker in the region would argue with that.

In fact the winery does not sell quality. It sells time packed into a bottle.

Young wine reaches the shelf half a year after the picking. The reserve lies in the cellar for three years. The grapes are the same, and the work at the start is the same.

The only difference is how many months the money stays away from the owner.

Ageing is not quality. It is the payback time of capital.

While all three lines are judged by one measure, the difference between them stays hidden. The winery looks like one business with three price tags.

In fact these are three different businesses from one raw material. Each has its own time, its own risk and its own need for working capital.

The harvest in figures

Last year the vines gave 18 tonnes of grapes. That is an average year for the estate — no hail and no record. Myroslav builds his planning on a harvest like that.

His yield is steady: 700 litres per tonne. He has held that figure for several seasons and plans by it.

A steady yield is no accident. It follows from pressing the same way every time. When the yield jumps, planning the lines is impossible at all.

Eighteen tonnes give 12 600 litres. In 0.75 litre bottles that is exactly 16 800 units. From here the decisions begin, and each one has a price.

The grapes are his own. For a long time that kept them out of the cost calculation entirely.

The mistake is typical of estates with their own vines. A vineyard needs pruning, spraying, picking and people for all of it. Free grapes do not exist even on your own land.

Upkeep costs 14 000 ₴ a tonne. Across the whole harvest that is 252 000 ₴, which used to dissolve into the general costs of the estate.

Processing adds 8 ₴ a litre. Across the whole volume that is another 100 800 ₴ — crusher, press, electricity and wages during the picking.

“My longest argument was with myself, about the price of my own grapes. Until I asked what I would sell them to a neighbour for”

The question settled it. Once the grapes had a price, all three lines had a cost.

Before that the calculation stopped at the label. The estate counted the cost of the bottle, not of the wine inside it.

Cost at the start

Grapes and processing together come to 352 800 ₴ for 16 800 bottles.

Per bottle that is 21 ₴. The figure is the same for all three lines, because the wine is not split yet at this stage.

Next comes what Myroslav calls dry goods. Glass, cork and label add another 24 ₴ a bottle. These costs do not depend on the ageing time either.

So every bottle costs 45 ₴ before anyone decides its fate.

This is the common point for all three lines. At this stage young wine and reserve cost exactly the same. The difference between them has not even started.

They part ways after the wine is bottled. One batch goes to the retail chain warehouse, the other goes down into the cellar for years.

This is where most wineries stop their accounting. Beyond it lies the cellar, and the cellar rarely reaches the cost calculation.

45 ₴ at the start against 4 ₴ of storage a year

These two figures are easy to mix up in conversation. 45 ₴ is a one-off cost before ageing.

4 ₴ is only the storage part, and only for one year. They live in different lines.

What a year of ageing costs

Myroslav broke a year of ageing into three parts. They used to get lost in general costs.

• A barrel costs 24 000 ₴ and lasts 4 years. It holds 300 bottles. That works out at 20 ₴ a bottle a year
• Storage with a held temperature — 4 ₴ a bottle a year
• Evaporation through the staves — another 6 ₴ a bottle a year

Together a year of ageing costs 30 ₴ a bottle. Myroslav now holds that figure in his head as firmly as the shelf price.

The figure depends on how many years the barrel lasts. Stretching it to five years lowers the item but changes the taste.

That is the winemaker's call, not the accountant's. But it has a price, and now both of them know it. The argument about barrels stopped being an argument about taste.

The barrel surprised Myroslav most. It had always been treated as a one-off purchase, written down as investment and then never mentioned again.

“For ten years I took the barrel for a one-off purchase. It is rent, only paid up front”

He had not counted evaporation as money either. Wine simply left the barrel, and everyone took that as natural. Natural it stayed — but now with a price.

Three lines on one table

Myroslav put the lines into one table. For the first time, not only with prices but with costs.

Total revenue comes to 5 180 000 ₴ if the whole volume sells. The cost of all three lines is 1 188 000 ₴.

Gross profit works out at 3 992 000 ₴. The figure is large, and that is why the question of time never came up for years.

The table confirmed what Myroslav had believed for years. The reserve really does give the biggest margin per bottle, and there was no ground to argue.

The volumes in the table are not accidental either. Less reserve is made, because the cellar is not elastic and the barrels are limited. Every new barrel means 24 000 ₴ and four years of service.

135 ₴ appears twice

135 ₴ is the margin of young wine. And 135 ₴ is the cost of the reserve.

Same figure, opposite meaning. In conversation the two get mixed up constantly, and then people argue about different things.

18 tonnes and 180 ₴ are different things

18 is the tonnes of harvest. 180 is the price of a young bottle in hryvnia. Similar figures, nothing in common between them.

Margin per bottle

By this table the reserve wins outright. Anyone glancing at the last column would advise making more reserve.

515 ₴ a bottle against 135 ₴ for young wine. Almost four times more from the same fruit and the same vines.

That is exactly how Myroslav thought for twelve years running. Every decision about volumes was made on that one column.

Every talk with the distributor ended the same way. They asked for more reserve, and Myroslav agreed without haggling over payment terms.

The distributor was acting perfectly rationally. A dear bottle pays him better, because his margin is counted per unit too.

The interests matched only at first glance. The distributor's money came back in a month, Myroslav's in three and a half years.

The argument looked ironclad: the reserve brings four times more per bottle. Neither side asked when exactly it brings it.

Margin per unit answers “how much”. It says nothing about “when”.

Margin per year of capital

Then Myroslav added one column to the table. He touched neither prices nor costs — he only wrote in the time.

How long passes from the moment the money goes in to the moment it comes back. Not from bottling, but from laying down the harvest.

Young wine comes back half a year after the picking. One year of ageing comes back in a year and a half. The reserve, in three and a half.

Half a year for young wine is not ageing time, it is time to payment. The wine is bottled right after the picking, the chain pays months later, and in between the estate lives on its own money.

Then he divided the margin by that time. The operation is trivial, but nobody at the estate had done it before.

The ranking turned over completely. What stood at the bottom of the first table ended up at the top of the second.

Young wine earns the most for every year of money tied up. The reserve earns the least, despite four times the margin per bottle.

Why the rankings invert

The reason is arithmetic, not the quality of the wine. Myroslav checked it twice, because at first he did not believe the result.

From young wine to reserve the margin grows 3.8 times. The time grows 7 times.

Margin grows more slowly than time. That gap alone is enough to flip the ranking.

The rule works in any business with a long cycle. Timber, cheese, equipment leasing — anywhere the goods must sit before they sell. The longer the cycle, the further the two rankings drift apart.

Myroslav tested it on every pair of lines. The pattern held everywhere, whichever two positions he compared.

“The distributor asked for more reserve. I agreed out of pride, not out of arithmetic”

The flip does not mean “ageing is bad”

The reserve holds the price of the whole range. It opens doors into restaurants where young wine will never get in.

But it is a different operation with a different payback time. And it has to be judged on its own.

The mistake was not that Myroslav made reserve. The mistake was comparing it with young wine on one figure.

What sits in the cellar

The next question Myroslav asked himself for the first time in twelve years. Until then the cellar was a place, not a line in a calculation.

How much money lies in the cellar permanently, not at the peak of the season? The question sounds simple, but nobody had counted the answer.

Six thousand bottles of one-year ageing stand at an average cost of 60 ₴. The average is used because the costs build up gradually.

The reserve is harder to count. It lies for three years, so the cellar always holds three vintages at once, not one. This is where Myroslav was most wrong.

That is 8 400 bottles at an average cost of 90 ₴. None of them sells this year.

The average sits between 45 ₴ at laying down and 135 ₴ at the exit. Wine in its first year of ageing costs less than wine in its third.

Go down into the cellar in midwinter and this is what stands there at any moment:

• 6 000 bottles of one-year ageing at an average cost of 60 ₴
• 8 400 bottles of reserve from three vintages at an average cost of 90 ₴
• No young wine — it leaves the cellar before the new harvest

Altogether 1 116 000 ₴ stands in the cellar. The sum is more than a quarter of the annual gross profit of the estate.

This is not a finished goods store. This is capital that does not move.

Three vintages at once, not one

The reserve sells once a year — one vintage. Three of them are lying there meanwhile.

Owners routinely count one vintage and then wonder why the estate has less money than the profit shows.

Fixed costs and net profit

Gross profit is not the owner's money yet. The winery carries fixed costs whatever the lines do.

• Wages — 1 200 000 ₴
• Rent and utilities — 480 000 ₴
• Excise and licence — 320 000 ₴
• Marketing and tastings — 240 000 ₴
• Other — 180 000 ₴

Together that is 2 420 000 ₴ a year. Not one of these items waits for the reserve to mature.

Wages are paid every month, whatever happens in the cellar. Excise is charged on shipment, not on ageing.

Net profit works out at 1 572 000 ₴, or 30.3% of revenue. For winemaking that is a decent result.

But on its own that figure says nothing about time. It would look the same if the money in the cellar stood there twice as long.

First move: count the time

Myroslav set a simple rule for himself and for the winemaker. It takes one line and applies to every volume decision.

Every line has two figures, not one. Both stand side by side in the same table, and neither can be hidden.

Margin per bottle shows the quality of a decision. Margin per year shows its price.

The rule forbids nothing and cancels nothing. It only stops one figure from being enough for a volume decision.

The winemaker took the rule warily at first. He assumed finance was about to cut ageing for the sake of turnover.

That did not happen. Reserve volumes stayed the same, and only the grounds for approving them changed.

“I did not start making less reserve. I stopped calling it the most profitable”

Second move: price the cellar

The second decision was about the bank. Myroslav had long felt the credit talks were going the wrong way.

Every year he applied for a credit line against turnover. Every time he talked revenue and every time he heard a question about collateral.

This time he showed the loan officer the cellar — in figures, not on a tour.

One million one hundred and sixteen thousand hryvnia in stock is collateral, not dead weight.

For the first time the bank saw the structure of the stock, not a total. One-year wine turns over faster than the reserve, and the table shows it. Different times mean different quality of collateral.

Capital you have not counted does no work in negotiations.

The cellar is an argument, not an excuse

The bank looks at stock turnover. An owner who knows the time of each line explains that turnover himself.

The conversation moves from feelings to figures. The bank hears a turnover period instead of a story about medals.

Third move: shift the volume

Then came the obvious question, put off for a third year. It was about the structure of the range, not about prices.

What if two thousand bottles moved from one-year ageing into the reserve? The distributor has been asking for a third season running.

On paper the decision looks right and even obvious. That is exactly how the distributor presented it.

Gross profit grows by 540 000 ₴. Capital in the cellar grows by 420 000 ₴.

The second figure matters no less than the first. A volume shift always means more money standing in the cellar for longer.

The price of a right decision

There is one condition the table does not show. It concerns the calendar, not the money.

Those two thousand bottles do not sell for three years. They are no longer young wine and not yet reserve.

Each year revenue is 640 000 ₴ lower. Three years running, with no exceptions and no way to speed it up.

Altogether that is 1 920 000 ₴ of money not received before the first upswing.

The sum is close to the annual net profit of the estate. Getting through a dip like that without a credit line or a buffer of your own is impossible. That is exactly what Myroslav never thought about when he used to agree to more reserve.

“The decision is right. But it costs three years, and I have to have something to carry me through them”

A right decision and an affordable decision are different questions.

640 000 ₴ is not a loss

It is deferred revenue, not lost revenue. It comes back, and comes back bigger — the whole calculation rests on that.

But not this year and not the next. Wages meanwhile are paid every month.

So Myroslav did not drop the shift. He broke it into parts: five hundred bottles a season instead of two thousand at once.

The revenue dip becomes four times smaller — 160 000 ₴ a year instead of 640 000 ₴. The upswing comes later, but the estate reaches it without a loan.

What to do on Monday

Myroslav reduced it all to three actions. None of them needs software or a consultant.

• Add to every line the time from laying down to money
• Count at cost what is lying in the cellar right now
• Before every volume shift, check what will cover the revenue dip

None of these actions changes the wine. The process, the barrels and the varieties stay as they were.

All three change the decisions the owner makes.

The first two are a one-off job of a few hours. The third becomes a habit, and it is the one that costs most if you skip it.

“Now I tell the distributor neither „yes“ nor „no“. I tell him what it costs and when it comes back”

An owner who knows the time negotiates differently.

Money does not disappear — you simply do not see it

Nothing has physically changed at the winery of Myroslav. This season the line volumes almost repeat last year's.

The same grapes, the same barrels, the same cellar and the same family at the picking. Not one new investment.

One thing changed. Time now always stands next to margin, and both figures look at the owner at once. Neither of them decides on its own any more.

Every next batch is decided on two figures, not on one.

That did not make the winery more profitable this year. It made the next three years predictable — and predictability is exactly what an estate with a long cycle lacks.

Profit is measured in money. Decisions are measured in time.

How to see this at your own winery

Everything above rests on one column: not the range as a single margin, but each line on its own — with its price, its cost and the time from laying down to money. As long as decisions follow the margin per bottle, you see neither that the reserve earns the least per year of capital, nor that 1 116 000 ₴ sits permanently in the cellar. When the same data is collected automatically, the cost of time in each line becomes visible — which is exactly why owners of small and medium businesses use Finmap: to see the financial picture rather than reconstruct it from memory.

Read also

• Craft Brewery: Cost Per Batch, Kegs vs Bottles, and Where the Cash Freezes
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Topic foundation: Management Accounting Explained: What It Is and Why Owners Need It