Wines & Vines Home
   
 
Welcome Guest
LOGIN |  CREATE ACCOUNT
 
ADVERTISEMENT
 
 
 
10.26.2012  
 

The Strategy of Pricing Wine

Panel of experts review process behind pricing at SSU

 
by Andrew Adams
 
 
jon fredrikson gomberg bulk costs
 
Jon Fredrikson tells an audience at Sonoma State University that wine prices are increasing on the whole.
Rohnert Park, Calif.—Intense competition and retailer discounts kept wine prices in check during the recession, but that appears to be changing.

Jon Fredrikson, principal with Gomberg, Fredrikson & Associates, said that in the past two years there have been more price changes—especially at the lower and higher price categories—and prices on the whole have been increasing. “It’s clear people are dealing with rising costs,” he said.

Fredrikson was one of three experts discussing wine pricing at a forum hosted by Sonoma State University’s Wine Business Institute on Thursday night. About 70 people attended the event, part of an ongoing series of seminars and forums hosted by the school. Fredrikson was joined by Dr. Steven Cuellar, an SSU economics professor who studies the wine industry, and Chris Spear of TradePulse, a sales technology and information supplier to the wine industry. Another panel of experts discussed some of the major consumer trends in the wine industry Friday afternoon.

A flood of imported bulk
At the low end of the price spectrum, the industry’s major producers have had to import bulk wine to offset the lack of Californian wine. Fredrikson said that in the past 12 months, 40 million cases of bulk wine have been shipped through San Francisco alone. Most of the wine is coming from Argentina, Chile and Australia. “We ran out of wine in California, (and) to support their brands this is what they had to do,” he said.

Total imports from Argentina and Chile are four times higher than in 2011. The two countries accounted for about 14.5 million 9-liter cases in 2012 through August. Australian imports rose from about 2.5 million to about 5.5 million case equivalents.

While large American producers were able to turn to bulk imports to make up the balance of their value wines, overall global supply is expected to continue to decline; Fredrikson noted there’s 3% less total global vineyard acreage.

Ultimately though, the U.S. wine market is the world’s largest and most competitive. Fredrickson said that TTB approved 120,000 new labels in 2011 and whenever he attends international wine conferences people ask how to get wines into the hands of American buyers. “Because it is so competitive it’s a dream market for American consumers,” he said. Gomberg, Fredrikson & Associates publishes a monthly WINEDATA pricing report for more than 16,000 American and imported wines.

Price elasticity
SSU’s Cuellar has developed models that predict price equilibrium points based on factors such as retail data and market information. The models can also calculate a product’s price elasticity or the point at which a consumer will switch to a different product. Cuellar stressed that the figure is not a set number but a flexible factor that changes from market to market and other factors. “It makes perfect sense that consumers in San Francisco have different tastes than, say, in Sacramento,” Cuellar said.

With that in mind, Cuellar noted the need for “price discrimination,” or finding the different price points between different markets.

When asked about how Flash sites could be affecting wine prices, Cuellar said he has not seen much impact yet. He said one would expect to see greater elasticity in prices as retail channels compete with the online deals, but so far that has not been the case. “We haven’t seen elasticity increasing over time,” he said.

Streamlining pricing information
Spear, the vice president of business solutions for TradePulse, said the alcoholic beverage industry is a bit different in that it’s not selling a “free market” product. He noted there probably are countless online consumers who are eager to buy wine but live in states that do not allow direct shipping.

TradePulse provides clients with a suite of software to help manage and link pricing to sales, promotions and depletions. He said the models discussed by Cuellar should be used as an element of a winery’s pricing strategy.

Many wineries struggle with too many price points, which others try to simplify with one FOB price that fails to account for market differences or the costs of getting the product to market. Then price information can become confused between suppliers and wholesalers.

Spear went on to say that the “holy grail” of price control would be to eventually automate bill backs between wholesalers and wineries for a smooth settlement process. “This is a serious pain point for them as well,” he said.

SHARE »
Close
 
Currently no comments posted for this article.
 
CURRENT NEWS INDEX »


 
Wines & Vines Home
 
866.453.9701 | 415.453.9700 | Fax: 415.453.2517
65 Mitchell Blvd., Ste. A San Rafael, CA 94903
info@winesandvines.com
Wine Industry Metrics
 
Off-Premise Sales » Month   12 Months  
March 2015 $622 million
7%
$7,995 million
5%
March 2014 $582 million $7,588 million
     
Direct-to-Consumer Shipments » Month   12 Months  
March 2015 $252 million
19%
$1,863 million
14%
March 2014 $213 million $1,634 million
     
Winery Job Index » Month   12 Months  
March 2015 356
22%
243
16%
March 2014 292 210
     
 
MORE » Released on 04.15.2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct To Consumer
Wine Shipping Report
2015
 
Download full report »
 
 

Practical Winery & Vineyard Library
 
Search the PWV archive »
 
 

CALENDAR
  • April 25-26
     
    Vineyard to Vintner in Stags Leap
     
  • April 25-27
     
    World Wine Meetings America
     
  • April 26
     
    TAPAS Grand Tasting
     
  • April 26
     
    Vintners Hall of Fame
     
  • MORE »
 

READER COMMENTS
 
Article: Bedroom Communities Seek Vineyard AVA »
 
Why not just bottle under a vineyard designation? The bond will have a city or...
Reader: Guest
 
Article: Is Organic Grape Growing Possible in the East? »
 
FWIW, We make a few wines from a certified Organic vineyard growing cabernet franc, merlot,...
Reader: southoldfc
 
Article: Specialty Tanks Encourage Oak Extraction »
 
According to the manufacturer, the logs are made through compression and not with a binding...
Reader: Andrew Adams
 
Article: Specialty Tanks Encourage Oak Extraction »
 
What is the bonding agent of the Pressed Oak Logs?
Reader: Guest
 
Article: Is Organic Grape Growing Possible in the East? »
 
Some Long Island, NY, vineyard farmers are already using nearly organic methods. They have worked...
Reader: envcat
 
 


Directory/Buyer's Guide — Your Wine Industry Marketplace
 
 
WINERY SEARCH
 
 
Advanced Search »
SUPPLIER SEARCH
   by Product
 by Company Name or Brand
 
Browse by Category »
2015 Directory/Buyer's Guide
The Wines & Vines Directory and Buyer's Guide
 
 
EXPANDED ONLINE SEARCH INCLUDED WITH PURCHASE
 
ORDER NOW »
 
LEARN MORE »
 
 
Wines & Vines Magazine
 
 
LEARN MORE »
 
SUBSCRIBE »
 
Digital Edition Now Available!
Wines & Vines Digital Edition Now Available
 
LEARN MORE »
 
ORDER NOW »
 
 
The Wines & Vines Online Marketing System
 
The Industry Standard winery marketing application
 
FREE LIVE DEMO »
 
VIEW VIDEO »
 
 
 
 
Latest Job Listings
 Northwest Regional Man...
 Seattle, WA
Sales and Marketing
 Tasting Room Sales
 Forestville, CA
DTC, Tasting Room and Retai
 Sales & Hospitality
 Napa (Silverado Trail), CA
DTC, Tasting Room and Retai
 Manager And Full/Part-...
 Boston, MA
Sales and Marketing
 National Sales Manager
 St Helena, CA
Sales and Marketing
 Tasting Room Manager (...
 Sebastopol, CA
DTC, Tasting Room and Retai
 Tasting Room Manager
 Los Gatos, CA
DTC, Tasting Room and Retai
 Tasting Room Cashier/G...
 Napa, CA
DTC, Tasting Room and Retai
 Tasting Room Associate
 St. Helena, CA
DTC, Tasting Room and Retai
 Dtc Sales/Marketing Co...
 Napa, CA
DTC, Tasting Room and Retai
 
More Job Listings >>
Follow Us On:
 
 





Home  |  About Us  |  Editors  |  Subscribe  |  Print Edition  |  Digital Edition

Advertise  |  Site Map  |  Contact Us  |  Privacy Policy
 
 
Copyright © 2001-2015 by Wine Communications Group, Inc. All Rights Reserved.
No material may be reproduced without written permission of the Publisher.
Wines&Vines does not assume any responsibility for any unsolicited manuscripts or materials.