Agribusiness Trends and Financial Implications

Agri Business

The challenges of distributing products to end users is common in all industries. In the wine industry, customer access to bottled wine is primarily from supermarkets, wine specialty shops and restaurants. Further, there are more than 9,000 North American wineries that battle for shelf and menu space to sell product. Those wineries, including some of the larger houses, need a distribution model which maximizes revenue and minimizes the cost of distribution. In wine industry parlance, the distribution model has been coined “three-tier” distribution; however, the model is not unique to the wine industry.

The distributor provides more than just “pure distribution” to key markets. The additional services include marketing, advertising, inventory management systems, warehousing, sales programs, customer behavior metrics and other specially designed programs to attract customers. Therefore, the winery must pay a fee to compensate the distributor for the added services; the compensation can approximate 50% of the end user/retail price.

Wineries have determined that self-distribution, “Direct-To-Consumer”, can be much more profitable than the traditional three-tier model. Also, the winery is better equipped to control the customer’s wine purchase experience and enhance its brand. Although the initial bottle price received by the winery is much more (less discounted), the winery must design, develop and implement infrastructure, processes and systems to sell on-premise (i.e. tasting room sales) and off-premise (i.e. wine club/internet sales). Therefore, it’s critical that a winery determines its return on investment to provide the better wine experience over an extended period of time.

The CFOs2Go Agriculture Practice Group collaborates with clients to assess a Direct-To-Consumer sales program. The assessment includes pricing model development, state (intrastate and interstate) and federal compliance adherence, financial reporting, point-of-sales systems, building construction considerations and other incremental costs.

 


 

Marc Loupé leads the AgriTech, AgriBusiness, Winery and Cannabis Business Practice Group for CFOs2Go. With more than 25 years of comprehensive global financial and operational management experience, he helps companies with integration of innovative methods and technologies to ensure companies function effectively. He brings to clients the value of his experience in senior financial management roles in a broad spectrum of industries — including agriculture, technology, aviation, real estate and professional services.  His accounting, finance and operational experiences include strategy development and implementations, company transformations, acquisitions and divestitures, financial and operational systems implementations, profitability and cash flow improvement programs, improved financial governance and accounting processes, treasury operations, international business, legal operations, human resources, sales development, product line general management and Co-CEO.

If you would like to speak with Marc, please use the comments section to make a request.

 

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