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  
November 2014 $708 million
5%
$7,844 million
6%
November 2013 $673 million $7,428 million
     
Direct-to-Consumer Shipments » Month   12 Months  
November 2014 $274 million
21%
$1,799 million
16%
November 2013 $225 million $1,558 million
     
Winery Job Index » Month   12 Months  
November 2014 127
-5%
226
15%
November 2013 134 196
     
 
MORE » Released on 12.15.2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

FEATURES
 

Practical Winery & Vineyard Library
 
Search the PWV archive »
 
 

Direct To Consumer
Wine Shipping Report
2014
 
Download full report »
 
 

CALENDAR
  • January 7
     
    Putting Your Brand to Work
     
  • January 9-18
     
    Icewine Festival
     
  • January 13-16
     
    VinCO
     
  • January 15
     
    WineFlavor 101B
     
  • MORE »
 

READER COMMENTS
 
Article: Grape Industry Lukewarm on Immigration Act »
 
A band-aid it may be but instead of the negative tone of this article which...
Reader: Guest
 
Article: Oregon Wine Institute Plans for the Future »
 
When Mark is involved, things are going to work out just great! We miss the...
Reader: Peter Bell
 
Article: Spanish Cooper Sells Chinese Oak »
 
I would love to find Us wineries using the Chinese oak barrels. Do you know...
Reader: Guest
 
Article: Prohibition Laws Linger 81 Years Later »
 
Trader Joe's (Union Square) and Whole Foods (Upper West Side) both have wine shops attached...
Reader: Guest
 
Article: Prohibition Laws Linger 81 Years Later »
 
Maybe the economy could use another boost by repealing the post-prohibitionary laws too. Make it...
Reader: csm noble
 
 


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
 Viticulturist
 West Sussex, UK
Winemaking and Production
 Winemaker & Vineyard M...
 Markham, VA
Winemaking and Production
 Back Office Manager
 New York, NY
General Administration and
 Sales Coordinator
 Paso Robles, CA
Sales and Marketing
 Retail Wine Department
 Napa, CA
DTC, Tasting Room and Retai
 Senior Vice President
 American Canyon, CA
General Administration and
 Administrative Assista...
 New York, NY
General Administration and
 Driver/Shipping And Re...
 Novato, CA
General Administration and
 Night Superintendent
 Ripon, CA
Winemaking and Production
 Tasting Room Sales -Fu...
 Calistoga, 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 © 2001-2014 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.