Case Study
ISSN 1940-204X
À Votre Santé: Product Costing and Decision Analysis in the Wine Industry
Priscilla S. Wisner University of Tennessee
BACKGROUND
The Aproveche family owns and operates a small independent winery located in the Napa Valley California American Viticultural Area (AVA).1 À Votre Santé (AVS), which means “to your health” in French, enjoys a reputation for producing small amounts of quality wines. AVS was started by Jerome Aproveche in 2005 as an extension of the family’s grapegrowing operations and as a means to involve his children in the wine business. This path is not an unusual one in Napa Valley, where there are more than 600 grape growers and over 500 wine producers and blenders, many of which are small family-owned operations. In the Napa Valley region, over 9 million cases of wine are typically produced and sold annually. With its operation of about 4,000 cases produced each year, AVS is considered to be a small winery. AVS is managed by Kay Aproveche, the founder’s daughter. AVS buys two types of wine grapes from the family’s grapegrowing operations – a Chardonnay and a generic white grape. AVS is responsible for harvesting and processing the grapes into three types of wine that have been made by AVS since its founding – a Chardonnay-Estate, a Chardonnay, and a Blanc de Blanc. AVS wines are bought by local restaurants to serve to their customers; every year AVS has sold all the wine that it has produced. In 2010, AVS earned an 11.1% profit margin on sales
1
of $848,000 (see Exhibit 1). Kay was concerned that the 2010 profit margin had declined from the 2009 profit margin of 14%, despite a small increase in sales volume.
WINEMAKING PROCESS
The process of winemaking is fairly simple, yet requires much attention to process details. Harvest takes place in the late summer and early fall months; typically, the time elapsed from harvest to final sale is about 11 months. After harvest, the grapes are brought to the winery for washing and
À Votre Santé: Product Costing and Decision Analysis in the Wine Industry
Priscilla S. Wisner University of Tennessee
BACKGROUND
The Aproveche family owns and operates a small independent winery located in the Napa Valley California American Viticultural Area (AVA).1 À Votre Santé (AVS), which means “to your health” in French, enjoys a reputation for producing small amounts of quality wines. AVS was started by Jerome Aproveche in 2005 as an extension of the family’s grapegrowing operations and as a means to involve his children in the wine business. This path is not an unusual one in Napa Valley, where there are more than 600 grape growers and over 500 wine producers and blenders, many of which are small family-owned operations. In the Napa Valley region, over 9 million cases of wine are typically produced and sold annually. With its operation of about 4,000 cases produced each year, AVS is considered to be a small winery. AVS is managed by Kay Aproveche, the founder’s daughter. AVS buys two types of wine grapes from the family’s grapegrowing operations – a Chardonnay and a generic white grape. AVS is responsible for harvesting and processing the grapes into three types of wine that have been made by AVS since its founding – a Chardonnay-Estate, a Chardonnay, and a Blanc de Blanc. AVS wines are bought by local restaurants to serve to their customers; every year AVS has sold all the wine that it has produced. In 2010, AVS earned an 11.1% profit margin on sales
1
of $848,000 (see Exhibit 1). Kay was concerned that the 2010 profit margin had declined from the 2009 profit margin of 14%, despite a small increase in sales volume.
WINEMAKING PROCESS
The process of winemaking is fairly simple, yet requires much attention to process details. Harvest takes place in the late summer and early fall months; typically, the time elapsed from harvest to final sale is about 11 months. After harvest, the grapes are brought to the winery for washing and