Reduce Cost Structure
Reduce product costs
- new management structure
- centralize production to optimize existing facilities
- increase percentage of self-sourced grapes
- $30 million annual savings by fiscal 2007
Notes:
- Having a single executive in charge of all vineyard and winemaking operations will improve prioritization and utilization of our resources allowing us to remove costs from our production system without sacrificing quality.
- COGS will begin to benefit from investments made over the past several years to increase the vineyard acreage under our direct control. This will improve both grape quality and cost. We expect the percentage of self-sourced grapes will grow from 10% in 2002 harvest to more than 22% next year.
- Our goal is to reduce production costs by 10% by fiscal 2007, which would translate into $30 million in annual savings. While we are implementing these production cost savings this year, the long processing and inventory cycle of premium wine delays the impact to the P&L. We expect the production savings will phase in beginning with $4 million in F05, $12 million in F06, and finally $30 million in F07.