Issue link: http://read.dmtmag.com/i/123973
School of Business and Economics at Sonoma State University and the Wine Division at Silicon Valley Bank (SVB). Over roughly the past decade SVB has collected financial statement data from client wineries. It provided winery data from 2006-2010 for our analysis after company names were removed to retain confidentiality. DTC SALES AND PROFITABILITY/ GROWTH There is a general perception in the wine industry that more DTC sales lead to more profitability and growth. Since most winery financial data is proprietary, it has been difficult to validate this perception. However, access to the data from SVB and application of the wine industry differentiation matrix allows us to empirically test the connection between DTC sales and winery profitability and growth. In order to determine if Paces- OzOne etter wineries are more profitable than those in other categories, we averaged the gross profit margin (GPM) and return on assets (ROA) data for the wineries in each quadrant for each year, and we also averaged the aggregated data for all five years of data. (The results are shown in Tables 1 and 2 to the right.) There is no data for the Image Makers quadrant because only one winery that fell into that category. The raw GPM data in Table 1 suggests that the Pacesetter wineries are more profitable in terms of profit margin than Reactives and Classics. The average GPM for the Pacesetter wineries is higher each year than the other two categories and the aggregated five-year average profit margin is also higher. Thus, the GPM data supports the hypothesis that the Pacesetter wineries are more profitable than the Reactives and Classics. To further investigate the con- TeCHnOLOGY fOr Wine PrOduCTiOn Ozone replaces harsh chemical cleaners, heat and steam and citric acid rinses while saving energy, time and money. •Barrelwashing •Surfaceandequipment sanitization •Tankcleaning •Clean-in-place(CIP) ofprocessand transferpiping Portablecartsystemsand complete integrated centralized ozonesystemsforwineries. Pacific Ozone – your ozone technology partner. TM (707) 747-9600 www.pacificozone.com Simple • Proven • Ozone Technology 92 nection between DTC sales and profitability, we looked at the profitability of Pacesetter wineries compared to the other categories by looking at ROA. Results of the analysis are shown in Table 2. The Table 2 results show that the average ROA for the Pacesetter wineries is higher than the other categories in four of five years and that the aggregated average for the entire five years of data is also higher. As with the GPM results, ROA results support the idea that there is a connection between winery profitability and DTC sales. We also examined the connection between DTC sales and winery growth rate. In order to test this, we calculated the compound annual growth rate in net cased good sales (in dollars) and winery production and sales (in cases). We then averaged the growth rates for the wineries in the Reactives, Classics and Pacesetters quadrants of Figure 1. The results are shown in Table 3. V I N E YARD & WINERY MANAGEMENT | May - June 2013 "All of the Customer Service from Carlsen & Associates is great. They schedule and provide a maintenance program for all of the equipment. We are very happy with the performance and reliability from all the C&A equipment." Grant Hermann Bennet Lane Winery Calistoga, CA Carlsen & Associates 707-431-2000 w w w. v w m m e d i a . c o m