How's Your Winery Doing?

Michigan's new Benchmark Program will allow wineries to understand their competitive position

by Linda Jones McKee
The new Michigan Benchmark Program to help winery owners understand their strengths and weaknesses will draw upon a similar program in the northeast.
Lansing, Mich.—As a winery owner, you know how much wine you make and how much you sell. But do you know what your competitive position is within the wine industry marketplace? Do you know about industry trends? And do you understand the financial implications of your grapegrowing, winemaking and marketing decisions and practices? If you’re located on the West Coast, in New York or New England, you have access to benchmark programs that will allow you to find the answers to those questions. As of this month, wineries and vineyards in Michigan will have a similar program in place so they, too, can learn how their businesses stack up to their peers.

The Michigan Winery and Vineyard Benchmark Program was created by the partnership of GreenStone Farm Credit Services, Michigan and northeast Wisconsin’s largest agricultural lender; North Coast Ag Advisors, an advisory firm in Traverse City, Mich., that works with family-owned farms on business planning and financial management; and Farm Credit East, a financial services and lending institution that has run the North East Winery Benchmark Program in New York and six other states in the northeast for seven years. GreenStone is the sponsoring underwriter of the program, Farm Credit East is supplying the technology for the necessary data analysis, and North Coast Ag Advisors will be the primary contact for the vineyards and wineries that want to participate in the Michigan Benchmark Program.

According to Jim Casler, president of North Coast, the company will work with winery owners and senior managers “to learn how they are doing relative to other wineries like them. We help business recognize their strengths and weaknesses.” The program representative will also help wineries find strategies to capture the full market value of their products, develop marketing programs and find ways to control costs and increase efficiency.

Getting into the program
In order to participate in the Michigan Winery Benchmark Program, a winery must have the ability to supply information about their finances and operations. While the goal is to bring as many winery and vineyard businesses into the Benchmark Program as possible, not every winery and/or vineyard will meet the minimum standards required for participation. Most of these requirements concern the winery or vineyard’s ability to collect financial and operational data accurately and reliably.

“It helps to have good systems in place to gather data,” Casler told Wines & Vines. The winery will find it easier to compile the information if they have a POS system that tracks tasting room information and sales—both direct to consumer and to distributors—and a program such as Quick Books to generate necessary financial reports. The Benchmark Program representative will also gather other basic information about the winery, from the square footage of the tasting room to winery production information.

A winery or vineyard interested in participating in the program can complete a preliminary assessment form that includes general information about operations, annual wine production, internal management systems and tasting room information. There also are questions concerning vineyard acreage, varieties of grapes grown and tons produced.

Benefits of the Benchmark Program
When a winery or vineyard has qualified for the Benchmark Program, a representative from North Coast Ag Advisors will meet with the owner or manager to compile the data covering many aspects of the business. A program professional will then analyze the winery’s data and incorporate the results with information from other wineries in the program. The winery will receive a customized, in-depth financial and operational report that compares the winery’s data with other winery businesses of similar size, business model and region. In order to maintain the confidentiality of program participants, all identifying information will be removed from the data before it is analyzed to determine financial ratios, operating efficiency and other performance indicators.

An annual State of the Industry Benchmark Report will then be prepared that includes the data from all program participants. Casler noted, “The information in the annual report and the individualized follow-up analysis is not easy for the average winery owner to obtain. In fact, it’s been almost impossible until now. Since most of the 100-plus wineries in Michigan are privately owned, the information just isn’t out there like it would be if they were all public companies.” An annual one-day conference will be held to share the report, present information on management topics, answer questions and allow participating wineries to network.

According to Tyson Lemon, vice president of commercial lending at GreenStone, the Michigan Benchmark Program will be very similar to the benchmark program that Farm Credit East established in New York and the northeast. “The Michigan program is not recreating the wheel,” he told Wines & Vines. “We’re trying to emulate their program, which has been quite successful in New York.”

Gregg McConnell, director of the Farm Credit East Winery Benchmarks Program, commented, “We’re excited to provide the technology to get the Michigan Winery Benchmark going with our colleagues GreenStone Farm Credit and North Coast Ag. The program has been a great assistance to wineries in the northeast for the past seven years, and now through collaboration the impact is expanding to Michigan.”

He went on to explain that Farm Credit East has the technology to analyze the data and do the reports. “The average results of all the wineries are helpful,” McConnell stated, “but the real value comes in the subsets of the data. We can isolate the highest price wineries from the lowest, the largest wineries from the smallest, and for specific regions, and also find trends over time. Those data sorts are extremely valuable.” Marketing for the New York program takes place in January, all data is turned in by May from the wineries, and the program seminar takes place in the Finger Lakes during the first week in August. Following the seminar a Farm Credit East consultant meets with each winery or vineyard to review their benchmark results in detail and develop a plan to put improvements into action to impact the winery’s bottom line. Currently the New York Benchmark Program has 30 participants.

The Michigan Winery Benchmark Program will continue for at least three years. The goal is to attract a participation rate of 20% of Michigan’s eligible wineries and vineyards.

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