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15. SEGMENT REPORTING

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

SEGMENT REPORTING

The Company has identified two operating segments, Direct Sales and Distributor Sales, based upon their different distribution channels, margins and selling strategies. Direct Sales includes retail sales in the tasting room and remote sites, Wine Club sales, on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary. Distributor Sales include all sales through a third party where prices are given at a wholesale rate.

The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment, including depreciation of segment specific assets, are included however centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income information for the respective segments is not available. Discrete financial information related to segment assets, other than segment specific depreciation associated with selling, is not available and that information continues to be aggregated.

The following table outlines the sales, cost of sales, gross margin, directly attributable selling expenses, and contribution margin of the segments for the twelve-month periods ending December 31, 2018 and 2017. Sales figures are net of related excise taxes.

		Twelve Months Ended December 31,
		Direct Sales								Distributor Sales								Total
		2019				2018				2019				2018				2019				2018
Sales, net		$	9,463,481			$	9,115,074			$	15,285,782			$	13,964,665			$	24,749,263			$	23,079,739
Cost of Sales			2,521,094				2,430,148				6,933,587				5,868,092				9,454,681				8,298,240
Gross Margin			6,942,387				6,684,926				8,352,195				8,096,573				15,294,582				14,781,499
Selling Expenses			4,659,543				4,255,324				2,201,091				2,134,665				6,860,634				6,389,989
Contribution Margin		$	2,282,844			$	2,429,602			$	6,151,104			$	5,961,908			$	8,433,948			$	8,391,510
Percent of Sales, net			38.2	%			39.5	%			61.8	%			60.5	%			100.0	%			100.0	%

Direct sales include $156,768 and $368,046 of bulk wine and grape sales in the years ended December 31, 2019 and 2018, respectively.

Net direct-to-consumer sales, including bulk wine, miscellaneous sales, and grape sales, represented approximately 38.2% and 39.5% of total net revenue for 2019 and 2018, respectively.

Net sales through distributors represented approximately 61.8% and 60.5% of total net revenue for 2019 and 2018, respectively.

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- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

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