How many people does it take to produce a case of wine? Well, it depends on how you look at it — and the number may surprise you.

When you think about all of the steps in the process from vineyard to cellar to bottling line and so forth, it seems like a lot of different people must be involved although the degree of labor-intensity necessarily depends on many factors. Where wages are high as in Europe and the United States, more of the steps are likely to be mechanized compared with Chile or South Africa, for example.

And there are economies of scale at certain production levels. But it still seems like lots of hands are needed to produce a bottle of wine.

(In The Wine Economist’s very first post, I counted about twelve workers needed to simply bottle a vintage of Fielding Hills wine.)

So how man of these people will a winery end up employing? All of them, you might think, if you have that romantic image of an estate winery stuck in your head, where all of the production from vines to wines to finished product takes place on the same property.

Specialization and the Division of Labor

But this picture ignores the fact of disintermediation, which I wrote about a few weeks ago. Disintermediation is basically Adam Smith’s theory of specialization of labor applied to the entire product chain. Instead of specialization within a business (specialized vineyard labor and cellar crews, for example) you have different businesses specializing in each function within the process. That traditional estate winery is deconstructed into perhaps a dozen different specialized business units.

Thus, for example, many wineries rely upon outside contract labor firms to maintain the vineyards and harvest the grapes and thus do not have such workers listed directly on their payrolls. Many also contract with mobile bottling lines to handle that important function. And of course buying grapes is a way to disintermediate compared to growing them yourself and buying wine from others takes desconstruction one additional step.

With product chain disintermediation, the number of people actually employed by a winery can be surprisingly small with that tiny workforce specializing in coordinating the various firms and contractors that make up the links in the chain.

Small is Beautiful?

How small can the winery staff be (which is another way of asking how far can you push disintermediation)? Well, the data provided in Wine Business Monthly’s annual “Review of the Industry” issue (February 2014) gives us a glimpse at how disintermediation is working in the American wine industry. Here are WBM’s data for the 30 largest wine companies in the United States.

Rank Wine Company U.S. Production Number of Employees 1 E&J Gallo Winery 80 million cases (US, estimate) 85 million (global, estimate) 4000 2 The Wine Group 57.5 million 1000 3 Constellation Brands 50 million (US) 64 million (global) 6000 (global) 4 Bronco Wine Company 20 million n/a 5 Trinchero Family Estates 18.5 million 1000 6 Treasury Wine Estates 15.4 million (US) 32.1 million (global) 1140 (US) 3600 (global) 7 Ste Michelle Wine Estates 7.5 million 800 8 DFV Wines 7 million 600 9 Jackson Family Estates 5.5 million 1000 10 Diageo Chateau & Estates 3.8 million 2700 (US & Canada) 11 Viña Concha Y Toro (Fetzer) 2.7 million (US) 30 million (global) 308 (US) 12 Korbel Wine Estates 2.3 million 450 13 Bogle Vineyards 1.7 million 95 14 CK Mondavi Family Vineyards 1.6 million 120 15 J. Lohr Vineyards & Wines 1.55 million 250 16 Don Sebastiani & Sons 1.5 million 90 17 Francis Ford Coppola Winery 1.25 million (est) n/a 18 Precept Wine 1.1 million 350 19 Foley Family Wines 950,000 cases (US) 1.45 million (global) 400 20 Rodney Strong Vineyards 820,000 164 21 Caymus Vineyards 800,000 (est) n/a 22 Vintage Wine Estates 800,000 280 23 Boisset Family Estates 750,000 (US) 6.5 million (global) n/a 24 Wente Vineyards 750,000 550 25 The Hess Collection 700,000 140 26 Mesa Vineyards 650,000 n/a 27 Domaine Chandon 625,000 217 28 Castle Rock Winery 550,000 9 29 Michael David Winery 420,000 150 30 Purple Wine Company 400,000 60

You can see that the degree of disintermediation varies quite a bit within the US wine industry with wineries of similar production size often directly employing very different numbers of workers (see Don Sebastiani & Sons versus J. Lohr) and wineries with about the same direct payrolls pumping out vastly different amounts of wine (compare The Wine Group, Trinchero, and Jackson Family Estates).

Modesto’s Tight Ship

The most interesting winery from this standpoint is obviously Castle Rock, which sells more than a half million cases of wine but directly employs just nine people! Wow, that’s just amazing — about 61,000 cases of wine for each person on the payroll. Of course it takes many more people working for contractors and so forth to actually get the job done. Castle Rock is a disintermediation machine!

As the Wine Business Monthly profile of Castle Rock notes, the company does not own any wineries or vineyards. The original business model was based upon opportunistic bulk wine purchases that were then bottled by others and brought to market. Now the business is built around long-term contracts with vineyards and production wineries that also grow grapes and make wine for others. WBM reports that the portfolio includes about 20 different wines at any time, many of them relatively site-specific offerings.

What if giant Gallo embraced disintermediation to the same degree as Castle Rock? Well, the math is easy to do. Gallo makes about 150 times the amount of wine, so it might in theory be able to reduce its direct employment from 4000 workers to 9 x 150 = 1350 people on staff. I suppose that you could look at that number and conclude that Gallo is way over-staffed at the moment.

But I see it the other way. Given that Gallo does own wineries and other production functions that Castle Rock eschews, I’d say that folks in Modesto run a very tight ship!

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