Should Your Winery Lease or Buy Barrels?
As someone who's spent more than a decade helping wineries manage their financial decisions, I know how important winery barrel management is. Barrels are integral to the winemaking process, shaping flavors, aromas, textures, tannins, and mouthfeel that define your wine.
Whether you’re sourcing barrels for the first time or rethinking your approach, deciding between leasing or buying can feel overwhelming. Making the right choice can meaningfully impact your winery’s financial health, production capacity, and long-term goals. Let’s explore whether you should lease vs. buy barrels so you can confidently choose the best path for your business.
What to Know About the Costs of Leasing Barrels
Barrel leasing for wineries is an appealing option, especially for those aiming to preserve cash flow while managing seasonal production demands. When you lease, you typically pay an annual fee per barrel, which is far lower upfront than purchasing outright. For instance, leasing new French oak barrels might cost $100 to $200 annually, depending on the supplier and specific features, compared to buying at $1,200 to $2,000 per barrel.
Leasing often comes with added benefits like maintenance, cleaning, repairs, insurance coverage, and flexibility to return barrels after a set period. The leasing company typically handles rehydration, sanitization, and inspections, saving time and resources while reducing risks associated with improper care.
However, leasing also has potential drawbacks you should consider carefully:
Recurring fees: While the initial cost is lower, leasing expenses accumulate over time and can exceed the price of outright ownership. For instance, over 5 years, leasing 50 barrels at $150 each annually could total $37,500.
No ownership benefits: Leased barrels are not assets, so you lose out on depreciation tax advantages, residual value, and opportunities for repurposing.
Contract limitations: Lease agreements often include penalties for early termination, damage, or deviations from usage terms.
Customization restrictions: Leased barrels may offer fewer options for tailoring specifications like toasting levels, grain tightness, or wood origin to your specific winemaking needs.
Long-term cost impact: As your production grows, leasing fees can become a burden on cash flow, especially if you're expanding quickly or experimenting with diverse wine styles.
Leasing can be an excellent choice for wineries seeking to remain flexible or operating with limited capital, but it’s vital to weigh these limitations before committing.
What to Know About the Costs of Buying Barrels
Buying barrels is a significant upfront investment, but the benefits extend well beyond the initial expense. New barrels, particularly French oak, can cost $1,200 to $2,000 each, depending on the cooperage. American oak typically costs between $600 and $1,000.
Owning barrels gives you complete control over the specifications and long-term management of your aging process:
Customization freedom: You can tailor barrel features like wood origin, toasting levels, dimensions, stave thickness, and surface treatments to create the exact profile you desire.
Asset value: Purchased barrels add to your winery’s assets, contributing to its balance sheet and overall valuation while providing opportunities for financing or investment leverage.
Cost efficiency over time: Ownership is often more economical than leasing across the typical 3 to 5 years of a barrel’s primary life. For example, owning barrels for 5 years at $1,200 each costs $60,000 for 50 barrels, compared to $37,500 for leasing—but ownership allows for resale or repurposing, recouping some costs.
Depreciation tax benefits: Barrels can be depreciated as tangible assets, offering tax savings that reduce the effective cost of ownership.
Secondary market opportunities: Once their primary use is complete, barrels can be sold or repurposed for aging spirits, beer, or secondary fermentations. They can also be transformed into furniture or décor.
That said, ownership also comes with responsibilities:
Maintenance and care: Barrel ownership requires a commitment to regular cleaning, sanitization, rehydration, repair, and inspections to avoid spoilage or contamination that can compromise wine quality.
Storage demands: Properly storing barrels requires adequate space with controlled humidity, temperature, ventilation, and light conditions.
Higher upfront investment: Purchasing barrels requires significant capital allocation, which can strain cash flow during periods of growth or unexpected expenses.
Replacement planning: While barrels can last several years, they eventually need replacing, and long-term planning is necessary to avoid operational disruptions.
Increased risk exposure: Owning barrels introduces risks like pest infestations, environmental damage, or improper handling that leasing may mitigate.
Buying barrels can deliver greater control, cost savings, and long-term flexibility when you have a stable production volume, clear goals for wine aging, and sufficient capital reserves.
Key Considerations for Leasing vs. Buying Barrels
The decision to lease or buy barrels hinges on factors such as production goals, financial strategy, and operational resources. Let's look at how these considerations affect your choice:
Flexibility in Production
Leasing barrels offers exceptional adaptability, especially for wineries experiencing fluctuating production volumes or exploring new wine styles. For instance, if you decide to experiment with Chardonnay aged in American oak, leasing allows you to test this variation without a long-term commitment. Leased barrels can also be returned, swapped for different specifications, or scaled up or down as production demands change.
In contrast, owning barrels ensures consistent access to the exact specifications you need. If you’re producing a signature wine or scaling a flagship product, having your own barrels ensures reliability and continuity without being at the mercy of leasing availability or restrictions.
Maintenance and Quality Control
Leasing barrels typically includes services like cleaning, rehydration, sanitization, insurance coverage, and general upkeep, relieving you of these responsibilities. While convenient, you may have less control over the timing and quality of maintenance, which can affect wine outcomes.
Owning barrels puts you in charge of every aspect of maintenance, allowing you to align care protocols with your production schedule. For example, you can sanitize barrels at the optimal moment to prevent microbial contamination or customize cleaning processes to suit specific aging needs.
Financial Strategy and Cash Flow
Leasing barrels minimizes upfront financial outlay, preserving cash flow for other priorities like marketing campaigns, equipment upgrades, vineyard development, or staffing expansion. However, the recurring fees can become burdensome as production scales or financial priorities shift.
Buying barrels for wine production involves higher upfront costs but offers long-term savings and adds value to your winery’s balance sheet. Depreciation and eventual resale opportunities further offset the initial expense, making ownership a strategic investment for established wineries.
The Long-Term Financial Impact
To illustrate the financial implications of leasing vs. buying barrels, let’s consider a practical example. Imagine your winery requires 50 new barrels for an upcoming vintage:
Leasing costs over 5 years:
Annual lease fee: $150 x 50 barrels = $7,500 per year
Total lease cost: $7,500 x 5 years = $37,500
Additional fees: Damages, early terminations, or overuse charges could add $2,000 to $5,000.
Buying costs over 5 years:
Purchase price: $1,200 x 50 barrels = $60,000 upfront
Depreciation savings: Straight-line depreciation over 5 years provides a $12,000 annual tax deduction.
Resale value: After 5 years, barrels may retain a resale value of $100 to $200 each, totaling $5,000 to $10,000.
Although leasing provides immediate cash flow relief, buying offers more financial advantages in the long run. Ownership builds equity, supports cost-efficient production, and offers additional revenue potential through secondary market sales.
Finding the Right Barrel Strategy for Your Winery
Ultimately, the decision to lease or buy barrels depends on your winery’s production needs, financial priorities, and long-term goals. Here’s a quick guide:
Consider leasing if: Your production volumes vary, you’re exploring new styles, or you want to minimize upfront costs while focusing resources on marketing, staffing, and growth.
Consider buying if: Your production is stable, you prioritize customization, or you’re focused on long-term financial efficiency with greater control over aging processes.
We've worked with wineries at every stage to navigate the wine barrel cost comparison process. Are you ready to make the smartest barrel investment for your winery?
Let’s discuss how Balanced Business Group can help. Contact us today to schedule a consultation, and together, we’ll create a plan that sets your winery up for long-term success.
Explore our finance services and operations services. Also, read our article on Understanding Key Financial Metrics for Food and Wine Entrepreneurs.
Author: Eileen Vasko
Eileen Vasko is an accomplished Accounting professional with over 10 years of experience in financial management, cost accounting, and compliance. As a former Controller at Iron Horse Vineyards, she excelled at managing complex financial operations, including inventory cost accounting. As the Accountant Manager Team Lead at BBG, Eileen specializes in building highly efficient accounting processes including accounts payable/receivable, payroll, and tax reporting. Eileen is highly skilled in using advanced accounting platforms and tools to drive efficient processes.
