5 Things to Remember About Wine Grape Sales and Purchases
Five things to consider when drafting a Grape Purchase Agreement between a Grape Grower and a Winery
Protecting your grape growing business means more than protecting your agricultural harvest. You may have to work just as hard at finding a proper purchaser of your harvest as you have at growing your grapes. Once the buyer is found you need to think about memorializing your agreement with a proper business contract so that your investment comes to full fruition. Here are five things to think about:
1) In an ideal world, you would have a buyer for your grapes long before they are ready for harvest, possibly even years before. Just as the grower wants predictability, so does the winery. Long term pre-planting contracts are certainly a possibility for both grower and winery. Having a long-term contract in place could be very important to the business growth of both parties to this agreement. If lending is in place or required to fund the ventures of either the grower or the winery, a proper contract will be of high interest to the business lender.
2) All parties want their customers to be pleased with their product. Growers are wise to consider the winery’s concern for product quality and consistency when executing its viticulture practices. Expectations relating to viticultural practices can be very specific in the contract and related to issues such as diseases control, production levels, irrigation, pruning, thinning, cultivation, etc. The best practice for all concerned it to discuss and draft specific terms for viticultural practices to enhance the likelihood of contract renewal for the grower and source consistency for the winery.
3) A detailed plan for harvest and delivery should be considered in the purchase agreement. Clearly the input of all parties is important. While the terms of this part of the agreement may need to be flexible due to the fact that grapes are an agricultural crop that is dependent in part on weather, it is still important to set out expectations relating to a projected harvest date, prior delivery schedules, labor availability, equipment needs, storage space, etc.
4) Clearly both parties want to deal with high quality product, however, the definition of a high quality grape may differ and as such, grape quality and inspection rights will be important to define. Some contracts will set parameters for Brix, pH, and total acidity that reflect optimum levels along with minimum and maximum content levels which vary based on the type of grape. The winery will generally want to have the right to inspect and test, but the grower will not want to be put in a position where a winery has an absolute right of rejection absent pre-defined quality standards. It may very well be appropriate to identify an independent third party to act as an inspector should the parties disagree.
5) Pricing of the grapes is one of the most important terms of any contract. And, there are many ways that pricing can be determined. Per acreage price or price based on tonnage is common. An escalator for long term contracts may be useful to pre-determine prices for future years. Or, some growers and wineries prefer to negotiate each year. If that is your preference, then you should establish a date in your contract by which the price shall be determined and consider language that creates a default if the parties are unable to agree - which could be as simple as a percentage or multiplier of the price of a prior year.
These are just some of the terms that should be considered in a Grape Growers contract. All parties stand to benefit from conversations and decisions made and set forth in writing. Should you require any assistance with contracts of this type as a grower or a winery, feel free to contact our office.