What Price Communicates for Fine Wine
Peter dives into the various messages embedded in a winery’s decision to set price.
There’s a lot of data hidden in a price…and a lot to consider by wineries when they set the price. During the Nov 2022 wine2wine conference in Verona, Italy, host Peter Yeung presented the five factors that price communicates for fine wine. Building off his research for Luxury Wine Marketing, Peter dives into the various messages embedded in a winery’s decision to set price.
Detailed Show Notes:
Wine2Wine presentation link
Defining fine and luxury wine
- Vs. commercial or mass market wines which are more substitutable
- For fine wine, the brand value is more than just the wine
- It has different consumers than commercial wines
- Different sales channels (e.g., specialty wine stores, higher-end restaurants, direct-to-consumer)
The fine wine consumer
- For mass-market wines - more women, lower price points
- For fine wine - older and male; however, more women buying fine wines
Fine wine pricing drivers
- Costs more to produce (land, labor, packaging)
- Higher willingness to pay from consumers
- Higher brand value makes the wines less substitutable - e.g., entry-level Champagne is ~$50/btl high-quality traditional method sparkling from the US can be ~$25/btl
What price communicates (for fine wine) - i.e., what a winery is communicating to consumers / the market with their price
- Value proposition to consumers - the offering a winery is giving their customers
- Expected quality - higher prices tend to be correlated with higher scores, including in the Luxury Wine Database of prices vs. Wine Spectator scores
- Brand reputation - getting a 100-point score can often make a wine trade for $300/btl; however, the many wines priced above that do so based on their brand value
- Relative quality - showing how a wine stacks w/in a winery’s portfolio or against other peer wines; the most expensive wine implies its the best
- Consumer willingness to pay - e.g., Liber Pater made an “original Bordeaux” wine from own-rooted vines, 500 bottles w/ the 2015 vintage, and ran a Dutch auction to set the price, a record 30,000 euros/btl
Price is more than one number; there are:
- Suggested Retail Price (set by winery)
- Average selling price (retail, restaurants)
- Secondary market
Secondary market price from trading through merchants (e.g., on Liv-Ex) or via auctions
- It gives wineries a sense of consumers’ willingness to pay
- Often small volume - not enough trading for true price discovery
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