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6. SEGMENT REPORTING
 6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
NOTE 6. 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, including sales of bulk wine or grapes. 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 three and six month periods ending June 30, 2020 and 2019. Sales figures are net of related excise taxes.

 

    Three Months Ended June 30,  
    Direct Sales     Distributor Sales     Total  
    2020     2019     2020     2019     2020     2019  
                                     
Sales, net   $ 2,202,642     $ 2,359,444     $ 3,366,012     $ 3,431,393     $ 5,568,654     $ 5,790,837  
Cost of Sales     489,596       689,204       1,577,526       1,603,275       2,067,122       2,292,479  
Gross Margin     1,713,046       1,670,240       1,788,486       1,828,118       3,501,532       3,498,358  
Selling Expenses     1,166,551       1,156,397       333,850       578,391       1,500,401       1,734,788  
Contribution Margin   $ 546,495     $ 513,843     $ 1,454,636     $ 1,249,727     $ 2,001,131     $ 1,763,570  
Percent of Sales     39.6 %     40.7 %     60.4 %     59.3 %     100.0 %     100.0 %
                                                 
    Six Months Ended June 30,  
    Direct Sales     Distributor Sales     Total  
    2020     2019     2020     2019     2020     2019  
                                     
Sales, net   $ 4,154,953     $ 4,079,621     $ 7,935,596     $ 6,710,002     $ 12,090,549     $ 10,789,623  
Cost of Sales     967,228       1,032,643       3,709,747       2,977,986       4,676,975       4,010,629  
Gross Margin     3,187,725       3,046,978       4,225,849       3,732,016       7,413,574       6,778,994  
Selling Expenses     2,297,098       2,230,768       820,246       1,131,059       3,117,344       3,361,827  
Contribution Margin   $ 890,627     $ 816,210     $ 3,405,603     $ 2,600,957     $ 4,296,230     $ 3,417,167  
Percent of Sales     34.4 %     37.8 %     65.6 %     62.2 %     100.0 %     100.0 %

 

Direct sales include zero and $2,800 of bulk wine sales in the three months ended June 30, 2020 and 2019, respectively. Direct sales include $28,734 and $45,563 of bulk wine sales in the six months ended June 30, 2020 and 2019, respectively.