How do Wine Makers Price their wine?
When I browse the wine section in my super-market or Costco or my local wine specialty store or VinoShipper.com I see quite a range in the price of wines. I realize wines are not commodities like wheat, oats, hay, soybeans, oil, gas and hog-bellies. Wine is a "produced" product based on the commodity grapes along with the Art and Science of Winemaking. Which means you have a complex set of factors involved in setting a market price for your product.
Here are the factors I can see that might play in the market pricing of a wine.
The Quantity and Quality of the harvest.
The Quantity and Quality of the wine making process.
The past reputation of the Winery/Wine Maker.
The Market Demand for the varietal.
The Assessment of the Critics
The Profit Motive
And there are probably more...
Of course I may have the factors all wrong.
SO... how do Wine Makers price their wines?
amanda
Here are the factors I can see that might play in the market pricing of a wine.
The Quantity and Quality of the harvest.
The Quantity and Quality of the wine making process.
The past reputation of the Winery/Wine Maker.
The Market Demand for the varietal.
The Assessment of the Critics
The Profit Motive
And there are probably more...
Of course I may have the factors all wrong.
SO... how do Wine Makers price their wines?
amanda
Replies to This Discussion
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Permalink Reply by Gary Miller on -
Good Morning Amanda,
In my mind, the object is to produce great quality, for a price at which value is perceived.
We know what we have in a given wine in terms of cost. This leads us to a ballpark estimate of how we would like to price it. We then taste each of our wines blind, with our peers, against wines of lower, equal, and higher price points. This gives us a pretty good idea of the price-to-value ratio of each wine ( usually in about a $5 range ), and allows us to set recommended retail pricing.
Cheers, Gary
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Permalink Reply by Andy Phipps on -
There are also many other factors:
> Grape Cost per Ton
> Amount of time in barrel
> Amount of time in bottle
> Production methods like hand-sorting, extended maceration, barrel fermentation, etc.
> Ratings
...Just to name a few.
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Permalink Reply by Jon Bjork on
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I don't think it makes sense to make a new wine without having some idea of the price point first.
If someone is trying to make a $10 bottle of wine, there are immediate limitations on choice of oak and choice of packaging, as well as design and marketing, depending, of course, on volume. Up the price to $30, and options become much less limited. Up it to $100, and the wine, packaging, and marketing had better be very distinctive.
I think it's great if a winemaker can afford to perfectly express a vineyard he/she owns, then set the price after the wine is bottled. However, I've seen too many people having problems selling wine, then wondering why they can't pay the bills.
Another consideration, in my opinion, is that many experienced wine drinkers could blindly sort any wine into three groups: sub-$5, $5-$25, over $25. I seriously doubt that the majority of wine drinkers (with most of the population knowing very little about wine in the first place) could get more detailed than that.
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Permalink Reply by Janet on -
Very true. Ultimately it is the market that determines what a wine is worth. It's only "worth" a particular price when someone pays that amount for it. The winery puts the price on the wine - they are only "selling" at that price if someone is buying it at that price.
Janet
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Permalink Reply by Jennifer Nichols on -
There is one other aspect to pricing wines that has yet to be mentioned. With the three tiered system, you must be able to make a profit at the lowest point. So for instance, if I sell my wine retail at $30.00, then I sell that same wine direct to a restaurant at $21 (30% discount), and then if I use a distributor, I then have to discount 50% off of my retail price to $15. So if it cost me more than $15 to make the wine, then I shouldn't sell it at $30 retail. It would be great if all of our sales were retail and directly out of the tasting room, but it isn't realistic. I also can't sell directly to restaurants in New York or California, so I have to use a distributor if I want representation in those states.
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Permalink Reply by Patrick on -
What about if you make a product out of a varietal that is very well known, but unfortunately the region you're growing and making the wine from is not well known.
Unfortunately if you want to get the realistic market value (price / Quailty), the region also needs a reputation that fits to the price.
e.g. Does anybody know the Kaiserstuhl???
I know of very well made Wines from Portugal that deserve a price of 40$ but nobody wants them because that country hasn't got the reputation for it. (Just too far south of Bordeaux ;-)
Cheers Patrick
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Welcome to my world!
Here in Lodi, we're in the process of convincing the world that, in addition to Zinfandel, we can grow amazing Rhone varietals, such as Petite Sirah and Viognier. We've come a long way from our image of jug wines, but we've got aways to go to be accepted for $50/bottle wines.
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Permalink Reply by Andrew on -
Somewhat off topic [sorry]: from the non-expert, casual buyer's perspective, there's little correlation between price and perceived quality. I thought I could tell a $5 wine from a $20 one; a recent blind tasting study suggests otherwise:
http://www.wine-economics.org/workingpapers/AAWE_WP16.pdf
"Individuals who are unaware of the price do not derive more enjoyment from more expensive wine. In a sample of more than 6,000 blind tastings, we find that the correlation between price and overall rating is small and negative, suggesting that individuals on average enjoy more expensive wines slightly less. For individuals with wine training, however, we find indications of a positive relationship between price and enjoyment."
When buying for myself, relatively cheap but good works every time.
On the other hand, when buying for a special occasion or present, I feel better spending $20+, figuring that is some indication/guarantee of quality.
Andrew
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Permalink Reply by Allan Johnston on -
So what about 2 buck chuck? how the hell do they make money ? is it water?
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Permalink Reply by Andrew on
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[Two Buck Chuck costs about four bucks at Trader Joe’s in Northern Virginia.]
Many cheap acres and apparently good blending of surplus product:
From CNN Money:
“Franzia built Two Buck Chuck by buying extensive vineyard property in a cheap area - in his case, the San Joaquin Valley. He bought 35,000 acres stretching from Sacramento to Santa Barbara, the largest acreage of any wine company in the state, to which he's adding three square miles each year. Then he added staggering amounts of bulk wine he scooped up nearly free from other vineyards during the glut that followed the wine boom of the late 1990s.”
http://money.cnn.com/2007/09/05/news/companies/Two_Buck_Chuck.biz2/...
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Permalink Reply by Andrew on
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The metaphysics of wine pricing:
in the intersection of terroir and law, only the lawyers are happy. Feature NYT article on the St. Émilion classification controversy in France.
http://www.nytimes.com/2008/08/17/magazine/17wine-t.html?ref=magazi...
“Most declassified vineyard owners find that their vital distribution lines have dried up, and the market will take their wines only at a discount of 30 to 50 percent.”
Andrew
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Permalink Reply by Janet on
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and don't forget operating expenses. The price of the wine must support all the expenses involved in selling it. It costs money to enter wine competitions, to participate in wine tastings, for the owners or winemaker to travel to promote his wine, licensing, the telephone bill, filling up the pick-up with gas, etc. etc. Unless the winemaker is the owner of the winery, he doesn't decide the price of the wine - the owner of the winery does.
Janet
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