Monday, February 21, 2011

How Much is that Bottle Worth?

Generally spring is a busy time for us at the winery. This year I spent two weeks of spring at the Washington Association of Grape Growers (WAWGG) Meeting and at the Unified Grape Symposium in Sacramento. As gut wrenching as it is for me to be away from work it was great to go see what the rest of the wine world is up to. Topics ranged from "Is Syrah a Star or FUBAR" to how to more effectively use social media for wineries. Generally the mood is "grim optimism" out there, but a few glasses of Syrah tend to help the mood. California is still trying to work out supply and demand issues in the current economic downturn. Washington is doing the same. Wineries are discounting their wines to move inventory and production is down somewhat to match sales trends. So where does Idaho fit into all this?
We're still so new we don't have much name recognition and our prices are bargians in the world of premium wines. Our problem seems to be that we have lots of producers all at about the same price level. That's great in some ways because we're almost all on a level playing field and those with the best quality will win out. The problem becomes that if we're all of roughly the same level of quality and the same price we end up fighting for the same consumers and the same restaurant accounts. In a way we're beating down our own industry.
All over the industry we're seeing discounting. Wines that were priced up to the $100's of dollars a bottle are now selling for fifty cents on the dollar or less. It's a buyer's market out there right now and some of the best wines in the world are selling at a fraction of their pre-econmic downturn prices. We see wineries in Idaho by and large sticking to their current price points and hoping for sales. Do we discount the prices of our wines and run the risk of never reaching pre-recession price points again? Do we stick it out and hope the consumer will stick with us?
How do we address this problem? I think it means we have to diversify as wineries. We need to produce wines at differing case levels, price levels, and honestly levels of quality. Nobody wants to admit it but not all of our wines are up to the $40 price for quality level. Some aren't even up to the $20 price for quality level. We need to be honest with ourselves as winemakers and winery owners and price some of our wines into the lower price category. That helps us to reach out to different levels of consumers as well. If your 20 cases of Cabernet Sauvignon, Cab. Franc and Petite Verdot blend really is of that $40 quality level then price it at that point, see if consumers are willing to spend that much for that wine. If you're not getting to that quality level spend the time and money to get that wine there if you want to price your wines at that level. If your red blend should be priced at $10.95 a bottle be honest with yourself and price it there. Consumers will thank you for making wines that are priced equitably for their level of quality and your sales might increase as you reach out to a more value minded consumer base.
I know a lot of wineries worry that these price points near their cost of production as they are smaller producers that don't have great economies of scale. We need to look at the rest of the wine world when we think about profits. Many of those producers are seeing returns of $0.25/Per bottle but they are moving their inventories of wine out into the hands of the consumer. Maybe we need to face the reality that we can't net as much for our wines as we thought. We keep hearing about a "new normal" where consumers are more frugal and are looking for value in all aspects of their lives. Maybe it's time for wineries to face up to the reality that they need to be providing better value to their customers. Maybe it's time for us to price our wines at what they are worth.

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