The wine and spirits industry is under immense stress. The result of decades-long structural issues is breaking under the weight of excess production, new consumer behavior, and the business-killing role of distributors, which has nothing to do with performance earned and everything to do with a century-old gift from federal regulation, unlike any found elsewhere in the world.
Companies have an all-time need for financial reporting that provides insights into “where, when, how” they are developing their brand — not just for leadership, retail partners, investors, but also lenders with large swaths of their credit portfolio seeing leverage ratios increase from a norm of 3x to 4x to 8x to 12x — the age-old Achilles’ heel of wine and spirits companies is revealing itself by handicapping their ability to respond to financial and strategic challenges put in front of them.
Accounting and finance have long been an industry afterthought behind production, sales, and marketing, but wine and spirits companies now need more from these teams while also reducing department costs. Demeter Advisory Group, the leading investment bank serving wine and spirits companies, is once again upping the game on how strategic and financial advisory services are provided to clients focused on growth.
“We’re leveraging the way we manage accounting and finance for the wine and spirits brands we directly invest in — along with Linda King’s expertise as former Assistant Controller at Campari North America — to help clients drive measurable improvements across their entire business. In 2024, Demeter Advisory Group began offering advisory services for ERP transitions and re-implementations, covering everything from policy and procedure reviews to chart of accounts design and full system integration. Our goal is to ensure each platform meets current operational needs while enabling future scalability,” said Jeff Menashe, Founder and CEO of Demeter Advisory Group.
According to Linda King, “There is a clear and realized opportunity for our industry to field best-in-class accounting and finance teams and thereby improve performance for the business as a whole by aligning team members, policies and procedures, and modern software platforms.”
1. Staffed Up, Yet Missing Strategic Controller Leadership
There is a shortage in the labor market for skilled accounting professionals, especially in the wine and spirits industry, which is nuanced when it comes to product costing, aging inventory with evaporation rates, product pricing that varies by state, and trade spending or depletion allowances. As a result, it is becoming more difficult for companies to find and recruit proven, experienced candidates for the controller role.
Many small to mid-size wine and spirits companies lack a controller with the capacity to help lead the company in three major areas, namely:
- Develop comprehensive accounting policies and procedures to ensure accurate, consistent, and transparent financial records.
- Establish effective internal controls to safeguard the company’s assets and reduce the risk of fraud as well as human errors.
- Design and implement a robust accounting ERP system to meet the company’s financial reporting requirements and future investor and audit requirements.
To reduce costs with the objective of improving reporting, a growing number of small and mid-sized wine and spirits brands are considering outsourcing their accounting needs offshore. In doing so, they are underestimating potential service issues attributed to the offshore firm’s lack of industry expertise, GAAP accounting knowledge, and accounting standards, as well as time zones, language barriers, etc. These issues typically lead to miscommunication and generic and often inaccurate financial statements, which lack insightful and compliant financial reporting to help the business with budgeting, forecasting, and decision-making.
2. Failing Enterprise Resource Planning (ERP) Systems
Many wineries and distilleries rely on accounting systems that don’t fit their needs. Some use outdated industry-specific platforms (like Advanced Management Systems in wine), others adopt enterprise-level tools that are far too complex for businesses under $50 million in revenue (like NetSuite), while others depend on basic bookkeeping software (like QuickBooks for spirits brands). None of these options provides the insights wine and spirits companies need to make effective business decisions.
Although QuickBooks Online is user- and budget-friendly bookkeeping software, it lacks many critical accounting ERP features such as purchase order 3-way matching, audit trails, and multi-dimensional analysis that wineries and distilleries need. When accounting teams have to rely on spreadsheets to plug holes, errors multiply, and productivity falls. Inflexible reports, data gaps, and manual input create a cascade of problems. Also, most off-the-shelf ERPs don’t support full syncing with wine/spirits production software or direct-to-consumer sales platforms.
When small to mid-sized wine and spirits brands decide to implement a new ERP, they typically do so with an inexperienced implementation team. In-house personnel are devoid of implementation experience, and the ERP advisory community lacks wine and spirits experience, creating a vicious loop of what is often the “best least attractive option.” Without the leadership of an experienced implementation team, these ERP implementations fail to design and set up the new ERP with comprehensive accounting structures and processes that meet the company’s financial reporting needs.
In the wine industry, Demeter Advisory Group sees clients successfully making the transition from AMS and QuickBooks to Microsoft 365 Business Central, which offers them a cloud-based, comprehensive accounting ERP system. Even the basic Business Central license provides AP automation, purchase order 3-way matching, multi-dimensional analysis feature, as well as audit trails at a comparable price point as QuickBooks. Business Central also grows with offers growth potential on advanced customized manufacturing, consolidations, tailor-made full configuration with DTC online platforms, so the ERP implementation again as the business grows.
3. Designing for ERP Success
Without documented approvals, clear segregation of duties, and/or established internal controls, companies risk exposure to fraud and failed audits. Adding more staff without a strong management structure compounds the problem by blurring accountability, muddying responsibilities, and allowing mistakes to fester until they become real threats to the business. Ultimately, the accounting team ends up spending weeks trying to close the month-end, whereas with a well-developed accounting process and a true controller, month-end closing should take no more than 3-5 business days. Leadership no longer needs to make decisions based on outdated, incomplete, or inaccurate information.
A modern ERP can transform winery and distillery operations, but only if it’s thoughtfully designed and properly implemented. At the core of success are two essential components: a well-structured chart of accounts and the strategic use of data dimensions aligned with the business’s unique needs. The chart of accounts must be designed to capture all necessary data for accurate reporting and compliance across the entire winery and distillery group.
Data dimensions add depth and need information, allowing teams to analyze results by department, cost centers, project, spirits type and/or varietal, location, or sales channel for better decision-making. Seamless accounting automation across banking, accounts payable, expense management, and production processes can reduce manual effort and errors. However, integration with external applications for production management tools (such as InnoVint) is rarely straightforward.
For wine and spirits companies ready to break this cycle, the path forward is clear. Document processes, re-evaluate policies, tighten oversight, equip the team with the right ERP resource, and invest in the right systems that fit today and tomorrow’s needs. In addition, prioritize training and shared accountability. These changes drive real savings, boost reporting clarity, and help the entire company run with success.
