By Gene Russell, Manex President and CEO
California winemaking is massive as one might expect. The business is complex requiring many skill sets including farming, science, production, marketing, and finance.
During the pandemic, wineries struggled with non-essential business closures, limited tasting rooms, and reduced sales to restaurants. Growth has returned post-pandemic to a U.S. total of $26.1 billion. California generates 64% of that total and employs 53% of the total U.S. winery workforce.
Competition is stiff. New wineries are always opening, and breweries and distilleries offer ample substitutes. Some wineries like those owned by EJ Gallo, Bronco, The Wine Group, and Constellation brands compete on national recognition and value pricing. These are the exceptions. Most wineries, particularly here in Northern California must gain customer loyalty from a local base and build out a healthy wine club with both tourists and locals. International imports totaled $10.9 billion – some from famous or newly famous wine-growing regions and are strong competitors to all U.S. wineries.
Key Success Factors
- Viticulture and farming in general
- Enology skills and application
- Branding
- Supply contracts
- Economies at any scale
- Expanding scope of product to meet shifting consumer tastes
- Capitalization
- Financial management
- Workforce
Economies at any scale, is the application of lean production techniques to increase the gross margin and net margins in any winery – not just EJ Gallo. The point being lean production for winemakers works at the small-scale facilities as well as the large ones. As sales grow either organically or through the acquisition of other wineries, Lean production allows the winery to scale perhaps into one production facility with a more automated and skilled workforce. It’s much more difficult to instill lean techniques and principles down the road when all the inefficient work layouts, procedures, and workforce are deeply embedded in the process and culture. Lean should be fully in place prior to any automation. Automating bad processes is a bad idea. The increased efficiencies and larger resulting margin can then fund capital equipment, more branding, and perhaps even some forays into export.
I’ve included a case study from a Scheid Vineyards, Inc. (“SVI”) Lean project as one example where Manex can be very helpful:
“We enjoyed working with the Manex team. It was a success, especially giving us a new perspective and analytical tools to further evaluate our processes.” Kurt Gollnick, COO, Scheid Vineyards
Situation for Manex’s Lean work with SVI, a California winemaker
During harvest, Manex provided Lean consulting services to SVI to help improve harvest operational efficiencies.
Approach for Lean process
Manex led a process team with the following steps:
- Identified goals, measures, and activities taught core Lean problem-solving skills
- Analyzed process and sources of problematic issues, observed process in action
- Developed solutions and verified effectiveness
- Quantified improved process gains and cost savings
Manex assisted SVI in achieving two primary goals in this project:
- Calculate efficiencies gained through deployment of a new mobile harvest inventory tracking system
- Define further opportunities to increase efficiencies, enhance communication, and drive costs down in the harvest operation
Manex consultants interviewed personnel and shadowed harvest operations. Original harvest procedures were studied to determine current manpower demands, find additional improvement opportunities, and forecast future harvest manning needs after making improvements.
Manex identified specific, realistic improvements, which were then mapped and compared to the current state map to calculate gained efficiencies.
Lean Created Tangible Results for Winemaker
The streamlined process combined with mobile harvest inventory tracking allows SVI to reduce waste, resulting in significant cost savings.
Specific results include:
- 11% reduction in manpower at harvest. The implementation of harvest inventory tracking reduced $30,000 of time per harvest season, and
- Biggest opportunity was in additional process flow improvements, reducing manpower needs an additional 10%, and saving $400,000 per harvest.
Reducing and eliminating waste across the manufacturing flow of a company’s operation — from core to shipping – results in better ROI and improved profit. At Manex, our Lean consultants work closely with you to optimize your processes and operation by bringing Lean manufacturing into your business. Contact Manex [email protected] to schedule a complimentary consultation.
*Industry Data: 2023 IBIS World Report on US Wineries.
About the Author
Gene Russell, President and CEO, Manex Consulting
At Manex, Gene Russell is a driving force behind the firm’s successful track record helping California manufacturing companies grow and thrive. He has held three successful CEO positions over a 20-year period for businesses that included early-stage, private equity and non-profit. He has served as senior leadership for global Fortune 100 and iconic consumer branded companies. Prior to Manex, Russell led a turnaround at a California midsized manufacturer. His experience in global sourcing and manufacturing over several decades led him to Manex where he brings real-world experiences, and as a result, a personal passion to restore and invigorate domestic USA-based manufacturing.
