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Post-quake tips to help wineries, other businesses get back on track

Adam Beak
Posted by Adam Beak
Agribusiness Banking

Everyone in the Napa wine business is working as quickly as possible to get back to normal after the August 24 earthquake, and Bank of the West’s Premium Wine Group is no exception.

Closeup of large cracks in a road with dense groups of green trees on either side.Since the quake, we have been on the ground meeting with clients about the impact on their business, checking inventories in the off-site storage facility at the quake’s epicenter, and volunteering to help get tasting rooms cleaned up in time for the Labor Day weekend rush.

When our friends at Napa Valley Vintners asked for our insights about how wineries can manage the earthquake’s effect on their businesses, we were happy to share some of the recommendations we have given clients (and these may apply to other business, as well):

1) Assess the damage.
By now, you’ve had time to confirm your employees’ safety and can begin to focus on any potential business losses. First, calculate lost inventory at your physical location(s), as well as any damage to equipment or facilities that will require cash to repair or replace. Also figure out losses at any third-party storage warehouses you use and whether they are covered by your insurance.

2) Proactively communicate with your partners (including suppliers, distributors, tax and legal professionals, and bankers).
Proactive communication can help mitigate unexpected losses. For example, if you have to push back payments to suppliers, they’ll be more likely to understand your position if you communicate as soon as possible. Likewise, get in touch with your distributors so they’ll know if you expect to have less wine of a particular vintage. Talk with your banker about how the situation impacts liquidity, future plans, etc.

3) Work with your partners to understand the broader impact and develop a plan.
Good partners can play a big role in helping you move forward. Consider the effect of the damage on future cash flows, liquidity, availability of inventory to sell, brand perception, and contractual agreements. Distributors may be able to offer programs that create liquidity in the short term by selling more product. They may also be able to help explain any shortages to the market to prevent future surprises. Your banker may be able to help you with strategies to keep cash flow strong.

4) Execute on the plan, report regularly on milestones, and adjust as needed.
Once you’ve designed a plan that makes sense for your business, keep your partners posted about your progress and any changes.

As we’ve seen time and time again, the wine business is cyclical and dependent on Mother Nature. Obviously, the best time to deal with a challenge like this one is before it happens.

Preparing for unforeseen setbacks entails making sure your business is on solid financial footing with adequate liquidity in reserve, further strengthened by working with partners who have long-term perspectives, understand your business, and believe in what you’re doing.

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