What Price Communicates for Fine Wine

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 linkDefining fine and luxury wineVs. commercial or mass market wines which are more substitutableFor fine wine, the brand value is more than just the wineIt has different consumers than commercial winesDifferent sales channels (e.g., specialty wine stores, higher-end restaurants, direct-to-consumer)The fine wine consumerFor mass-market wines - more women, lower price pointsFor fine wine - older and male; however, more women buying fine winesFine wine pricing driversCosts more to produce (land, labor, packaging)Higher willingness to pay from consumersHigher 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/btlWhat price communicates (for fine wine) - i.e., what a winery is communicating to consumers / the market with their priceValue proposition to consumers - the offering a winery is giving their customersExpected quality - higher prices tend to be correlated with higher scores, including in the Luxury Wine Database of prices vs. Wine Spectator scoresBrand 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 valueRelative quality - showing how a wine stacks w/in a winery’s portfolio or against other peer wines; the most expensive wine implies its the bestConsumer 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/btlPrice is more than one number; there are:Suggested Retail Price (set by winery)Average selling price (retail, restaurants)Secondary marketSecondary market price from trading through merchants (e.g., on Liv-Ex) or via auctionsIt gives wineries a sense of consumers’ willingness to payOften small volume - not enough trading for true price discovery Get access to library episodes Hosted on Acast. See acast.com/privacy for more information.