And Why Most Producers Underestimate It
If someone asked you exactly what it costs to produce one litre of your wine, could you give them a number you trust?
Most producers know their major costs. Grapes, harvest, additives, labour and packaging are all relatively easy to identify. The harder part is making sure the less obvious costs are captured and allocated properly.
That matters because when you’re producing thousands—or hundreds of thousands—of litres, even a small difference in your cost per litre can have a significant impact on your margin.
You don’t need to make costing complicated. But you do need to make it complete.
Start With the Cost of Making the Wine
The first part of the calculation is the cost of getting the grapes into the winery and turning them into wine.
For purchased fruit, this starts with the cost of the grapes. For estate-grown fruit, the cost sits across the vineyard operations required to produce it.
Then there are harvest, transport and production costs, including things such as:
- Yeast, nutrients and other additives
- Filtration and production materials
- Laboratory and quality testing
- Direct production labour
- Other inputs used throughout the winemaking process
These costs are generally easier to connect to a particular wine or production run.
But they aren’t the whole picture.
Don’t Forget the Overheads
A winery has costs that don’t necessarily belong to one particular tank or batch, but are still essential to producing wine.
Electricity and water. Cleaning. Repairs and maintenance. Production staff. Equipment and depreciation. The costs of operating the winery itself. These are production overheads, and they need to be accounted for when you’re trying to understand what your wine actually costs to produce.
This is where costing can become less straightforward. Not every expense can simply be assigned to one litre, so appropriate allocation becomes important.
Good records matter too
Accurate costing also goes hand in hand with good accounting records.
For New Zealand winemakers, Inland Revenue’s Winemakers guidance discusses the treatment and valuation of trading stock and the production costs that can be relevant, including direct and indirect materials and labour, utilities, repairs and maintenance and certain factory costs.
Keeping these costs properly recorded isn’t just about meeting tax obligations. It gives you a more accurate picture of the value of your inventory, what your wine has actually cost to produce and the margin you’re working with.
For Australian producers, the Australian Taxation Office also provides guidance around the treatment of trading stock and business costs.
Production Cost Isn’t the Same as the Cost of Running the Business
There are also costs that sit outside the manufacturing cost of the wine but still affect profitability – Marketing, sales, administration, insurance and professional services all cost money to run a wine business.
These shouldn’t necessarily be lumped into the manufacturing cost of every litre. Instead, it helps to distinguish between two questions:
What does it cost me to produce the wine?
and
What does it cost me to run and do sales?
Keeping that distinction clear gives you a much better understanding of both production costs and overall profitability.
If you’re selling finished bottles rather than bulk wine, packaging is one of the largest direct costs and should be included in the final cost calculation. Bottles, front and back labels, closures or screw caps, cartons, capsules and third-party bottling fees can quickly add up, making packaging one of the biggest contributors to the cost of every bottle that leaves the winery.
Why One Cent Matters
This is where accurate costing becomes much more than an accounting exercise.
Imagine a winery sells 50,000 cases a year.
At 12 bottles per case and 750ml per bottle, that’s:
50,000 × 12 × 0.75 = 450,000 litres
Now imagine your cost per litre is underestimated by just one cent.
Across 450,000 litres, that’s:
$4,500
A five-cent difference becomes:
$22,500
And a ten-cent difference becomes:
$45,000
One cent doesn’t look like much when you’re looking at a single litre.
Across an entire year’s production, it can be a very different story.
This is why knowing your cost per litre as accurately as reasonably possible matters. It gives you a much stronger basis for understanding margins, setting prices and making production decisions.
What Can You Do With an Accurate Cost Per Litre?
Once you have a reliable number, it becomes more than an accounting figure—it becomes a decision-making tool.
Accurate cost per litre helps you understand your Cost of Goods Sold (COGS), measure gross profit across different wines and blends, and see which products are genuinely contributing to profitability.
That insight can shape important business decisions, including:
- Pricing wine with greater confidence.
- Comparing the profitability of different vintages, varieties and blends.
- Identifying where production costs are increasing.
- Assessing the financial impact of changing ingredients, packaging or production processes.
- Understanding the true value of wine held in inventory.
- Deciding which wines deserve greater marketing investment—and which may no longer be commercially viable.
Sometimes the biggest surprise isn’t that a wine is expensive to produce. It’s discovering that a wine with strong sales is only delivering a 2% profit margin, while another product is generating significantly better returns. Those are the kinds of insights that can influence everything from production planning to future vintage decisions.
Know What Your Wine Really Costs
The cost of a litre of wine is more than the price of the grapes.
It is the accumulation of the materials, labour, utilities, equipment and other production costs required to bring that wine to its current state.
You don’t need to make costing unnecessarily complicated. But you do need to make it complete enough to reflect the reality of your operation.
Making Costing Easier to Track
The challenge isn’t knowing that these costs exist. It’s capturing them consistently, throughout all different stages of the winemaking process, and bringing them together.
Vinsight helps producers track production costs, inventory and overheads throughout the production process, making it easier to understand the cost per litre and the margins behind the wine.
