Cost Accounting Concepts with Frances Spangler

The financial side of running a winery is just as crucial as the winemaking itself. From grape costs to barrel depreciation, understanding cost accounting concepts can make or break your financial strategy. In this episode of Expert Talks, we sat down with Frances Spangler, CFO at Bricoleur Vineyards, for a deep dive into winery cost accounting.

In this episode, Frances shares her expertise on how wineries can refine their financial processes, tackle unique industry challenges, and use cost accounting to drive better business decisions. If you’re in a finance, bookkeeping, or ownership role at a winery, this conversation is packed with insights to help you maintain cleaner books and improve profitability.

What is Cost Accounting & Why Does It Matter?

Cost accounting is the process of capturing all production costs—fixed and variable—and applying them to finished goods inventory. In the winery setting, it helps track the true cost of making a bottle of wine, ensuring expenses are properly allocated and matched to revenue. This, in turn, supports better pricing decisions, operational efficiency, and long-term financial planning.

However, as Frances points out, cost accounting in the wine industry presents unique challenges due to the lack of standardization. Unlike other manufacturing sectors, wineries don’t have a dedicated Generally Accepted Accounting Principles (GAAP) guide, meaning financial leaders must rely on industry best practices and expert insights to navigate cost tracking effectively.

Breaking Down the Cost of a Bottle of Wine

Understanding the core components that contribute to the cost of producing wine is essential for accurate accounting. Frances highlights five primary cost categories:

• Grapes – Whether grown in-house or purchased, grape costs are foundational to the overall cost structure.
• Winemaking Process – Costs vary depending on whether production is handled in-house or outsourced to a custom crush facility.
• Storage & Aging – Factors like barrel vs. stainless steel storage impact cost allocation and depreciation.
• Overhead & Variable Costs – Labor, utilities, facility maintenance, and other indirect expenses.
• Packaging – Bottles, corks, labels, and other packaging materials add to the final product cost.

Costing Challenges: Barrels & Grape Allocation

One of the most interesting cost accounting considerations is barrel depreciation. Frances explains that barrels are typically depreciated using the straight-line method over four years, but their impact on wine quality diminishes over time. This creates a mismatch between cost allocation and benefit received, requiring wineries to carefully evaluate their barrel investments.

Similarly, grape costs pose a unique challenge. Wineries must decide whether to “sell” their own grapes to themselves at market rate or at a break-even cost, ensuring the true cost of in-house farming is reflected in the bottle price. Frances emphasizes that proper tracking of grape costs per variety and vineyard block can significantly impact financial decision-making.

The Rosé Dilemma: Costing Out By-Products

Frances provides an example with Rosé production, specifically the Saignée method. When juice is bled off from Pinot Noir production, wineries must decide whether to treat the juice as a “free” by-product or allocate a cost per gallon to it. This decision affects the perceived profitability of Rosé and Pinot Noir, making it essential to analyze both SKUs independently rather than together.

Technical Accounting vs. Managerial Accounting

Understanding the distinction between financial (technical) accounting and managerial accounting is critical for wineries making strategic decisions:

• Financial Accounting: Follows GAAP for external reporting, emphasizing historical data and compliance.
• Managerial Accounting: Used internally for budgeting, forecasting, and decision-making, often offering more flexibility in cost analysis.

While GAAP-based cost accounting provides structure, Frances highlights the importance of using managerial accounting to evaluate real-world business scenarios and optimize profitability.

Key Takeaways & Next Steps

For winery owners and finance professionals looking to improve cost accounting practices, Frances offers these key recommendations:

• Understand Your Costing Methodology – Be clear on whether you’re using GAAP-compliant costs or a management accounting approach.
• Leverage Industry Resources – Seek guidance from industry experts like Moss Adams and BPM, as well as peer networking groups.
• Utilize Community Networks – Platforms like The Punchdown provide valuable opportunities to connect with others facing similar challenges.

Cost accounting may seem complex, but as Frances emphasizes, having a structured and strategic approach will set your winery up for long-term financial success. For more insights from industry experts, stay tuned to Expert Talks—where we talk with experts on top-of-mind topics affecting the wine industry today.