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OUTSOURCING OF WINE SERVICES - GOOD IDEA OR TEMPTATION?

The management of a wine estate means mastering several different jobs throughout the year, some of which are carried out on an occasional basis, others on a recurring basis.
In order to rationalize operating expenses and optimize performance in an increasingly competitive environment, the owner is today led to outsource some of these tasks.

      HOW TO GET HELP ?
Outsourcing operational functions is not automatically good business. It is always necessary to check whether what one would like to outsource would be feasible at lower cost in another framework, in which case outsourcing would be favorable. On the other hand, there is a great risk that the economic equilibrium of the operation will be jeopardized by the use of an unsuitable service provider.
Many providers offer a variety of models of care.
Some service providers offer simple subcontracting solutions for each activity of the winery, others offer support for the personnel in a training process for the team in place. And other service providers, specialized in the management of wineries, offer turnkey solutions to owners by providing all services and personnel.

      OUTSOURCE WHAT IS NEEDED AND ONLY WHAT IS NEEDED
It is always difficult to find personnel in number for short periods or for specific tasks such as harvesting, pruning or disbudding. And the internal monitoring of the quality of the work of these casual workers often poses difficulties for structures that are not accustomed to it. In addition, the execution of certain tasks (soil preparation, planting, trellising, etc.) requires expensive dedicated equipment.
Many service providers have developed these specialized services and offer fixed-price solutions that are well managed and come with guarantees.
In fact, it is easy to understand the interest of these solutions for a small or medium-sized operation. On the one hand, the operator is freed from the management of the personnel and the operations while having a guarantee of good execution. On the other hand, the cost of these services remains competitive compared to the cost of occasional labor, to which is added a heavy administrative and technical management.

      WHAT FUNCTIONS TO KEEP?
For permanent employees of a winery, such as the farm manager, the crop manager, the cellarman, the tractor operator, the secretary, etc., the question arises differently.
These are jobs that are intended to be permanent on the farm, that contribute to the identity of the estate and that are active as economic levers of the enterprise. They are therefore directly linked to the economic functions of the farm and intrinsically attached to the estate as an economic unit.

      WHAT ARE THE RISKS IF WE OUTSOURCE ANYWAY?
The turnkey solution integrating the outsourcing of these functions may be attractive for the owner of a domain who would not have the possibility to manage internally his own resources and who would nevertheless ensure the continuity of his operation, but at what price?
In concrete terms, this model has the effect of emptying the operation of its strategic staff and replacing them with seconded staff under the orders of a service provider.
On the managerial level, the owner is deprived of any recourse to human resources. He has only financial recourse to his service provider on whom he has become totally dependent. This situation, occasionally opportune, but economically dangerous, has in practice led to numerous financial abuses.
From an economic point of view, the company thus structured is more like an empty shell than an autonomous economic unit. Hello damage to resale!
In addition, from a financial point of view, the personnel that could have been directly employed by the domain, but who are employed by a third party and re-invoiced to the domain, naturally induce an additional cost compared to that of the internal workforce.
Thus configured, the farm has lost all autonomy, the owner is entirely dependent on his service provider, who has control over the domain and its future.
Finally, if the choice of a traditional or turnkey management solution does not have an impact on the reference value of the estate, it will have an impact on its liquidity. In terms of transactions, the lack of liquidity always has a significant impact on the sale price...
A potential buyer wishing to develop a project in complete independence will be concerned if the winery presented, even a renowned one, is devoid of its strategic personnel.
On the one hand, this transfer corresponds more to a transfer of assets than to that of an economically viable company. On the other hand, if the service provider is not renewed, continuity of operations may not be assured. It is therefore easy to understand the apprehension of potential buyers when faced with operations with so many risks.

      IN CONCLUSION
No wise entrepreneur would relinquish control of his business at the risk of losing control by dreaming that someone else would do better. And to neglect the entrepreneurial aspect of a wine estate is to forget that its value is directly linked to its status as an economic entity, which one day the transaction market will soon remind the seller, who, like the crow, will swear but a little late...
The outsourcing of wine services is therefore convincing when it concerns specific tasks, but it risks being expensive and damaging in the long term when it concerns the management of the entire wine estate.

Arnaud COURRET
BLUE SIDE - Vineyard Properties - 11/07/2014
www.blue-side-proprietes-viticoles.com

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