Category: Current Articles

Fire Insurance Protection

Cyndi

Smoke Index (FIP-SI)

CALISTOGA, CA - SEPTEMBER 30: The Glass Fire burns near the Jericho Canyon Vineyard and Winery about a mile out of downtown Calistoga, Calif., on Wednesday, Sept. 30, 2020. (Jane Tyska/Digital First Media/East Bay Times via Getty Images)
CALISTOGA, CA – SEPTEMBER 30: The Glass Fire burns near the Jericho Canyon Vineyard and Winery about a mile out of downtown Calistoga, Calif., on Wednesday, Sept. 30, 2020.
(Jane Tyska/Digital First Media/East Bay Times via Getty Images)

By: Trevor Troyer – Agricultural Risk Management

You may have heard about the new optional endorsement to your grape crop insurance policy.  It’s called Fire Insurance Protection – Smoke Index or FIP-SI for short.  This does not replace your policy.  It is an additional endorsement or option that can be added to your policy.  This endorsement is currently only available in California.

  The 2020 wildfires had a huge impact on California’s wine production.  Vineyards and wineries had huge losses due to smoke taint from these fires.  Fire Insurance Protection – Smoke Index adds an additional layer of protection to vineyards impacted by these kinds of fires.

  If you are familiar with the Grape Crop Insurance policy you know that there is a deductible.  You are covering an average of your historical production per variety.   You can coverage an average of your production from 50% to 85%.  50% is cheaper and less likely to pay out and 85% is more expensive but you are more likely to have a claim paid.  In my opinion, the sweet spot is around 70% to 75% depending on the size of the vineyard. 

  If you had 75% coverage you would have a 25% production deductible.  In other words, you would have to lose over 25% of your crop to have a payable claim.  The first 25% is your deductible.  So, if you had 10 acres of Cabernet Sauvignon in Napa and your average tons per acre was 3 your average production would be 30 tons.  At the 75% level you would be covered for 22.5 tons and your deductible would be 7.5 tons.  I am not going to get into the value per ton as that changes from county to county and can be even higher if a grower has contracts with wineries.

Fire Insurance Protection – Smoke Index helps cover some of the deductible.  It’s additional coverage that sits on top of the policy.  Here is what it says in the USDA Risk Management Agency’s Fire Insurance Protection – Smoke Index Fact Sheet – “The Fired Insurance Protection-Smoke Index (FIP-SI) Endorsement covers a portion of the deductible of the Grape Crop Provisions when the insured county experiences a minimum number of Smoke Events as determined by the Federal Crop Insurance Corporation (FCIC) in accordance with the Smoke Index Data Provisions (SIDP) and identified in the actuarial documents.” 

  This endorsement is based on the prices per ton and the tons used in the underlying policy.  You cannot cover 100% of your average with crop insurance.  You can cover up to 95%, even though a policy may not have that high of coverage.  This is done with optional endorsements etc.  The FIP-SI covers the deductible portion up to 95%.  If you had 50% coverage on your grapes it would cover 45% of your deductible.  If you had 75% coverage the FIP-SI endorsement would cover 20% etc.

  You sign up for Fire Insurance Protection – Smoke Index by January 31st.  This is the Sales Closing Date for Grape Crop Insurance in California.  The insurance period for FIP-SI begins on June 1st and ends on November 10th. You do not need to report your acres separately as it uses the underlying policies acres.

Here is the Cause of Loss from the 25-FIP-SI Endorsement: 

Cause of Loss

(a) This Endorsement provides protection for Smoke Events that meet the County Loss Trigger when the minimum number of Smoke Events occur in the county as identified in the actuarial documents. Triggered counties will be determined after the end of the Insurance Period.

(b) Individual vineyard yields are not considered under this Endorsement. It is possible that your individual vineyard may experience reduced yield(s) and you do not receive an indemnity under this Endorsement.

(c) The notice provisions in section 14(b) of the Basic Provisions do not apply to this Endorsement.

(d) Once published, FCIC’s determination in section 8(a) is final and is a matter of general applicability, presumed to be accurate, and will not be changed. 

  So, you may not have any damage to your vineyard or grapes but still get paid.  This is based on your County.  No adjuster is required on this. You are not required to file a Notice of Loss with your crop insurance agent.

  The USDA Risk Management Agency uses NOAA’s Hazard Mapping System’s (HMS) data for calculating Smoke Events and the Smoke Index.  You can find more information on this at www.ospo.noaa.gov/Products/land/hms.html.

  Premiums will vary with amount of coverage you choose.  Prices per ton, averages and acres all change the premium as well.  There is a separate administrative fee charged for the FIP-SI endorsement as well. 

  This is a risk management tool that can help vineyards throughout the state recoup losses due to smoke events. 

Trevor Troyer

Agricultural Risk Management

ttroyer@agriskmgmt.com

toll free: 888-319-1627

Fatten the Offer: Further Your Reach Through Strategic Partnerships

Cyndi
gears with words strategic and partnership

In the increasingly competitive world of wine, producers are continually seeking new ways to expand their awareness with media, trade and consumers. One of the most effective strategies that wineries can use to broaden their presence is through partnerships with other wineries that have a common thread. Through collaboration, wineries can leverage new opportunities, strengthen their offer and build a better rapport with journalists who constantly try to stay impartial.

Media Roundtables

  Whether virtual or in-person, intimate roundtables with top tier media is a really good way to connect with writers and get your wine in front of the right people. Less is more is the motto. While filling a room with 300 people might seem productive, it often isn’t since organizers end up inviting random people who will not bolster your brand (an Instagram story of your wine label does not move the needle).

  An effective way to sweeten your offer to journalists and trade is to partner with another winery that shares a common thread with you. For example, you could organize a seminar on U.S. domestic Petit Manseng and partner with wineries across the U.S. who produce this grape at the same or better quality level than you. This engages writers because they will get to taste a few versions of the grape from different producers, and when they publish their piece, each winery will be included. While this does not result in a solo feature of your brand, it creates an engaging story that helps consumers and trade understand the category as a whole through the lens of your winery. Journalists (at least the best ones) also love to stay impartial and by partnering with several wineries, it helps them convince their editors to approved the story.

  These events are integral to building a winery’s reputation and attracting new customers. Partnering with another winery for a joint tasting event offers an excellent opportunity to showcase each other’s products to a wider audience. Such collaborations can also involve local festivals, wine fairs, or even private events where wineries share a booth or organize a group tasting.

  One of the big reasons Argentina was able to grow so quickly in quality and recognition over the course of 20 years (whereas places like Burgundy took hundreds) was through collaboration. Sure, there’s competition between the wineries in terms of sales and route to market, but the energy within the domestic industry is one of sharing technology, space in the media market and discussions on how to advance the region in global markets. Roundtable discussions in the U.S. market with a panel of Argentinean producers was one of the big ways they were able to do that.

  Partnerships could also take the form of press trips. It helps reduce cost and bring people to your vineyards. For example, you could have two wineries in Virginia band together and organize a trip and split the work. First, find the common thread between both producers and conduct outreach to get media and/or sommeliers to the wineries and develop an engaging itinerary. It is intriguing for media to have the ability to learn from two or more producers and come back to their table with a story to tell.

  Other strategic partnerships don’t have to include partnering with a wine producer. For example, in 2024 the McBride Sisters Collection partnering with Colgate Optic White in a very successful campaign. For $50, the Central California and New Zealand producer sold their red blend with Optic White Overnight Whitening Pens. It was a smart way to promote the wine but also touch upon a big worry for some people: wine stained teeth! This gets to a new audience without the high costs typically associated with traditional advertising.

  Similarly, wineries can collaborate with local hotels, resorts, or tourism companies to offer package deals, such as weekend stays that include winery tours and tastings. These partnerships expose the wineries to tourists and out-of-town visitors who may not have otherwise been aware of them. By associating their brand with other quality local businesses, wineries can increase their credibility and attract customers who are already engaged with other aspects of the local economy.

Conclusion

  In an industry that relies heavily on brand recognition and customer loyalty, winery partnerships can be an effective way to expand reach, enhance brand awareness, and drive growth with editors. Whether through co-branding initiatives, collaborative events, distribution deals, or digital campaigns, the opportunities for wineries to work together are plentiful and can result in significant benefits for all parties involved. By forming partnerships with other wineries, wineries not only increase their exposure but also contribute to a broader sense of community within the wine industry, which ultimately benefits everyone from the producer to the consumer.