Cost Economies and Economic Impacts of Pricing and Product Mix Decisions in Premium Table Wine Wineries

Abstract

Investments and operating costs in wineries producing premium table wines ranging in size from 2000 to 500 000 cases (one case = 12 bottles of 750 ml capacity) were estimated. The wineries, which were 200 000 cases or more, produced generic table wines. The initial investment costs ranged from $451 170 (US dollars) to $26 225 720. Cost economies were found, with the average total operating cost for the 2000-case winery being $101.67 per case and for the 500 000-case winery only $38.88 per case. All of the wineries produced positive cash flows by the third year. The net present value of the investment over a 10-year period was positive for all the wineries under 200 000 cases. The wineries of 200 000 cases and more were more sensitive to product and input price changes than were the smaller wineries.

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