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  
April 2015 $627 million
5%
$8,028 million
5%
April 2014 $595 million $7,623 million
     
Direct-to-Consumer Shipments » Month   12 Months  
April 2015 $184 million
17%
$1,890 million
15%
April 2014 $157 million $1,649 million
     
Winery Job Index » Month   12 Months  
April 2015 406
34%
252
19%
April 2014 302 212
     
 
MORE » Released on 05.15.2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Direct To Consumer
Wine Shipping Report
2015
 
Download full report »
 
 

Practical Winery & Vineyard Library
 
Search the PWV archive »
 
 

CALENDAR
  • May 28-29
     
    Direct2015
     
  • May 28-30
     
    WIneMaker Annual Conference
     
  • May 28-30
     
    International Chardonnay Symposium
     
  • June 2
     
    Taste of Mendocino
     
  • MORE »
 

READER COMMENTS
 
Article: $10 Wine Would Cost $40-plus Under COOL »
 
As a Napa Valley producer, we have spent 30 years building our brands in the...
Reader: Pete Przybylinski
 
Article: Be a Sustainable Wine Ambassador »
 
A great idea. All TR employees at every responsible estate should be encouraged/required to become...
Reader: Guest
 
Article: Historic Napa Winery Standing Tall Again »
 
It would be nice to know that Trost Jacking and Heavy Moving is the structural...
Reader: Guest
 
Article: Women for WineSense offering scholarships »
 
This is fantastic! Women in Wine Education must find ways to continue their individual pursuit...
Reader: Guest
 
Article: Historic Napa Winery Standing Tall Again »
 
Very Interesting, I'm so glad the building is successfully being saved.
Reader: Guest
 
 


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
 Wine Country Concierge
 Napa, CA
Sales and Marketing
 Harvest Intern
 Geyserville, CA
Cellar, Lab and Production
 Wine Educator
 Healdsburg, CA
DTC, Tasting Room and Retai
 Bussers
 Santa Rosa, CA
DTC, Tasting Room and Retai
 Wine Specialist
 New York, NY
Sales and Marketing
 Tasting Room Represent...
 Napa, CA
DTC, Tasting Room and Retai
 Wine And Spirits Sales...
 San Diego, CA
Sales and Marketing
 Region Manager, Artisa...
 Los Angeles, CA
Sales and Marketing
 Region Sales Manager -...
 Manchester, NH
Sales and Marketing
 Senior Brand Manager
 Napa, CA
Sales and Marketing
 
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.