Pricing Considerations
Strategies for implementing a successful price push on a wine
Increase the perception of quality of the wine:
Change the label and marketing to promote a serious wine and be consistent of the quality in the bottle
Intentionally inefficient to:
- increase the minimum price of alcohol to control abuse (leftover from prohibition laws)
- reduce the ability to create a monopoly in the market and limit consumer choice
Standard distribution of profits in a three tiered sales system
Producer - 50%
Distributor - 20%
Retailer- 30%
Significant differences between a Large Grocery Wine Retailers and Fine Wine Retailers
High Volume/Low Margin vs. Low Volume/High Margin
- discounting vs value added service
- National Brands vs. niche producers
- wine tastings focused on bringing in new customers vs. wine tastings focused on valued regular customers
Difference between Advertising and Public Relations
Advertising:
Bringing wine brand to the attention of customers through a variety of media including print ads, brochures, radio, TV, internet, email, direct mailing, signs and personal contact. Usually requires payment
Public Relations :
The building of good relationships with the winery’s various stakeholders/audiences (customers, shareholders, community, press, wine writers, online, etc) by obtaining positive publicity, managing unfavorable events, and creating a good corporate image. Can often be free, except for salary or consulting fees for professional services.
This is the oldest method for pricing wine. What is it, and why is it no longer often used
Production-cost pricing method - Bottle price is based on the price per ton of grapes used.
Simple, but does not take into account the cost of the land value or the cost of the winery time.
Five Ways a winery can sell directly to a customer
Main ways that distributors help producers making it valuable to use outside distributors vs. self-distribution
States that have government-controlled wine stores
and philosophy as to why
- Alabama, Idaho, New Hampshire, Oregon, North Carolina, Pennsylvania, Virginia, Washington and Utah
- controlling availability without encouraging consumption
Key reasons to advertise
It supports distributor sales for in a market
It can lead to PR coverage in publications
It creates long-term image for the brand
It guarantees that your message is seen when and as you want it, and keeps brand in front of the target market
The two most significant contributors to cost of a bottle of wine
Benefits of Direct to Consumer Sales
Higher Margins
Brand Awareness and Loyalty
Low entry costs
Improved US law on direct shipping
Types of Distributors
Wine Brokers
National Distributor (Southern Glazer is biggest)
Specialty Wholesaler
Online Distributor
Importers
Wine List Philosophy of Fine Dining Restaurants
Types of Media Outlets
The reason why a bottle of wine won't sell at $6, but when price is raised to $12 the wine sells
Limitations of Direct to Consumer Sales
Not able to ship to all 50 states
Potential conflict of interest with distributors and retailers
Cost of implementing high end consumer direct program
Key Attributes of Successful Distribution Account Managers
- Showing Benefit of a wine (vs. simply featuring it)
- Look for opportunities at the retail level
- Provide consulting to retailers to how customers purchase
- Help create a blended selection of wines based on variety and price point
General rule for pricing wines by the glass in an on-premise retailer
Audiences other than media that a winery would promote to
The Distribution Network (They want help selling).
Industry Professionals – Educators and Sommeliers (They want support through donated product in return for word of mouth marketing)
Retailers & Restaurants (They want support through the sharing and populating of events with other PR audiences when co-sponsoring.)
Wine Organizations (These associations serve as gate-keepers for large groups of the wine drinking public. They want information to represent wines and winery to the members. Presentations at conventions and conferences are key, as is sponsorship.)
Company ownership/shareholders and Employees (They want clear explanations of strategy, goals and expected results)
Community (They want help with community causes through donations and support)
The most effective way to price wine in today's market
Combination of Production & Market Driven pricing:
Start with production costs
Submit wine competitions & wine ratings to establish market value
Combine consumer perception of quality and pricing with competitive pricing data to identify price range
Important outcomes of running and participating in wine events
- Building relationships
- Building wine club membership through pushing boundaries in perception of quality and relationships
- Staying involved in and supporting the community
Explain why a winery (producer) would choose a smaller distributor with less reach than a larger distributor with more coverage
More personalized attention
Depth of coverage vs breadth
Better services
Different promotional strategies in a Wine Bar to create and maintain popularity
Goals and Benefits of being a part of a Trade Association
Provide strength through numbers.
Joint promotion for a product or a region increases the total time, energy, creativity and money to help achieve mutual goals.
Puts your message and product into the minds of a very targeted audience, and increase product demand.
Successful trade association relationship is when: