Vineyard Performance Benchmarking

AHA Viticulture currently provides the Australian wine industry with a financial and technical benchmarking program called VineSite.

The website is located at www.vinesite.pvaustralia.com.au

VineSite was developed in a joint project between AHA Viticulture and GWRDC in 2005/2006.
It is currently free to participate in, so if you are a grower or a grower group, go to www.vinesite.pvaustralia.com.au to get started, or contact us.

Why is our benchmark service different?

Since 1996, we have provided monthly management variance reports to our vineyard managers and clients. This requires the preparation of detailed budgets and the collection of accurate vineyard costs. The aim of the reports is to provide the manager and owner with current management information that is of direct use in improving the performance of the vineyard. We need to have answers to questions such as:

• Why has my budget blown out?
• Fruit prices are down, should I cut my inputs or should I increase yields?
• Does it pay to install and manage a costly split canopy system like Smart Dyson or Lyre?
• What is the impact on fruit quality, fruit price and vineyard profits of thinning fruit?
• What additional costs will I incur in order to achieve the winery's quality bonus; is it worth the effort or should I keep costs down and accept a lower price?
• What does it cost to establish and operate a vineyard on my property?
• What is an economic size for a vineyard?
• Where are my profits?
• Can I believe my neighbour's claims?

The key to good management of operations is activity-based accounting.

We collect costs against an activity-based chart of accounts, rather than the conventional accounting chart which is designed for statutory and tax reporting for operations management. Activity- based accounting is commonly used in mining and industry to isolate the performance of key sections of the operation and hence to better manage the costs of each activity. Thus, in our chart of accounts, the activity "Pest & Disease Control" will include not only agricultural chemicals, but also the labour hours used to procure, mix and apply the chemicals, the cost of running the tractor and equipment, the supervisor's time instructing the operators, calibrating the equipment and attending to records. The AHA chart does not have cost groups called "labour", or "fuel", or "chemicals".

Each vineyard is divided into units that form profit centres.

Our vineyards are divided into blocks or management units with similar viticultural characteristics, as is common practice throughout the industry. We treat each management unit as an individual profit centre. Thus the cost of each activity is known for each unit, as is the contribution made to the profit of the enterprise by each unit.

Is it worth the effort?

Undoubtedly! Every year, analysis of the information provided by the management reports has been illuminating. Not only are there large variations in performance between enterprises, but the variation between units within each vineyard is astounding. In 2002, a grower enterprise that generated above average surpluses of $9,500 per hectare was found to include one block that generated a surplus of $15,900 per hectare and another that showed a loss of $35 per hectare. This year one grower generated an average loss of $10,009 per hectare, but had one block that generated an outstanding profit of $18,953 per hectare. While all of the wineries in the study showed reasonable average profits, there were also huge ranges in profitability between their blocks. For example, losses ranged from $6,810 per hectare to one block showing a profit of $17,545 per hectare. Vine performance and fruit quality data is also collected for each block, aiding in identifying the reasons for a block's financial performance. Knowing which portion of the vineyard contributes (or detracts) from the bottom line, and why it does, enables us to maximise the performance of the whole enterprise.

What are the principal benefits of benchmarking?

For the accountant, strategic planner, valuer, vineyard owner:

• Understand the range of cost integral to establishing and operating a vineyard.
• Identify the variance between individual vineyard performance and industry performance; hence assist with financial planning, management, control.
• Compare performance across the region, between regions and between producer countries, hence contributing to the competitive performance of the region.

For the owner/manager:

• At the enterprise level, to set performance targets and measure outcomes, thus empowering managers and motivating personnel.
• Set development and operating budgets based on reliable information that is appropriate to the site.
• Analyse the financial and viticultural performance of sectors within the enterprise to improve the contribution to the bottom line.
• Provide vertical comparisons of performance between vintages, hence improving the understanding of seasonal influences on yield, fruit quality and costs.

How do we do it?

• Collect a suite of KPI that are readily available and reliable (e.g. yield per variety per hectare, pruning weight/crop ratio, sugar and acid at harvest, cost to prune, spray, etc).
• Collect data that is comparable, compare grapes with grapes (e.g. vineyards from similar regions, of similar size, of similar age/stage).
• Ensure confidentiality of data as each vineyard remains an anonymous, randomly generated code that is inaccessible to the regional representative or AHA without the owner's authority.

If you would like more information on this service, please contact our office and we will direct you to the appropriate person:

Phone: (08) 9756 8011
Fax: (08) 9756 8033

© AHA Viticulture 2007