Winery risk management: Are you prepared for the unpredictable?

Published on Tue, 09/29/2015 - 00:56
harvesting grapes

The wine industry in the U.S. is enjoying the sweet taste of success. We’re currently the largest wine producing nation in the world, and new wineries are cropping up all the time. According to the San Francisco-based Wine Institute, the 2014 grape harvest in California was the third largest on record, and the overall U.S. wine market grew another 1 percent last year, worth an estimated $37.6 billion.

But as any experienced winery owner knows, success comes with a host of growing and evolving risks.

  • The whims of Mother Nature, changes in distribution channels, fluctuations in revenue, and worker shortages are just a few of the challenges you face every day. You have to be prepared for the unexpected:
  • The August 2014 earthquake that struck the California Bay Area affected more than 120 wineries, with total losses estimated at $50 million according to the Napa Valley Vintners.
  • The State of California and advocacy groups are increasingly putting winery owners’ hiring practices under a microscope for their use of volunteers and interns.
  • U.S. and California wine producers could get caught up in a totally unrelated trade dispute with Canada and Mexico over the labeling of beef and other meat imports. The Wine Institute and other U.S. trade groups are concerned that Mexico and Canada will impose high tariffs on U.S. vintages as part of that ongoing battle.

This year’s challenge: an unusually early harvest

The choking drought California has endured for the last several years has pushed up the growing season. Wineries in California and other states are reporting harvests this year that are historically early and brief. Some have even finished harvesting earlier than they traditionally start. On top of that, overall yields are low this year. But with fewer ripe grapes, the flavors are more concentrated and the early harvest means the grapes retain more acid – so the quality of the end product could be the best ever. On the other hand, many winery owners are concerned about the financial impact of the lower yields.

It’s such a gamble, isn’t it? You never know what challenges you might face from year to year.

So how do you manage the unpredictable? It all starts with understanding the multidimensional components of your unique risks:

  • Agricultural. You’re involved in growing things, so you’re exposed to risks from Mother Nature, the use of pesticides and chemicals, and the chance of workplace injuries.
  • Manufacturing. You operate processing equipment and machinery to turn raw products into fine wines, so you’re exposed to all kinds of safety hazards, plus possible leakage, contamination, or malicious tampering of your product. You also have exposure to the usual supply chain risks.
  • Entertainment. You may sell your wines to retail and wholesale customers around the world, as well as at your own winery. That means you’re exposed to liquor liability and alcohol distribution laws.

Unique risks require unique protection

Your winery needs all the same standard business insurance coverages as any other business, but you also need specialized coverages and high liability limits for some of your unique exposures:

  • Insurance for your crops, trellises, vines, and potential chemical drift
  • Specialty coverage for leakage, contamination, or malicious tampering
  • Coverage for liquor liability
  • Personal liability for owners who live on the property
  • Coverage for employees

One common mistake among many vineyard owners is a simple lack of attention to detail, which can lead to gaps in coverage. This happens often when companies change carriers or policies.

That’s why you need an insurance partner who knows your operation as well as you do. With more than 20 years’ experience in the industry, Heffernan's Vintners & Growers Insurance Practice can help you manage the unpredictable.