UBlink wrote:I always thought that pricing was pretty much based on what the market will bear - most of us would price our products higher if we thought there was a market at the higher price. My theory is that at that $15-25 price point there's an inherent tradeoff between costs that go in the bottle vs costs incurred to somehow differentiate your product from all the other ones out there (marketing, broadly defined). Thus, for a consumer this price point can be "scary".
In comparing wineries with your philosophy vs. those who have the same costs in the bottle but price their product higher, I would be surprised if the high priced group (as a group) has any more financial success.
There are so many factors that go into producing a bottle of wine. I produce bottles of wine from $14 to $85 a bottle retail. If you’re in the bulk juice market, you can cut out a lot of costs and can provide wines at a better price. If you had to produce the wines from start to finish you have a lot more costs. Here is a Napa Valley breakdown: custom crush fees (if you don’t own you own winery, which also carries a little cost to it) $35 - $50 (goes as high as $150) a case, 50% new oak (American $10, French $20), Fruit - Napa Average Cabernet $69 a case (2007 Napa Valley average was $4,300 a ton), packaging $15 a case (very basic), bottling $4-$6 a case, winemaker if you need one $20 (low to mid range) a case. This doesn't count the costs of money being tide up for 2 years, traveling, marketing, samples (for trade and personal consumption once you figured out what you just got yourself into...), health insurance, life insurance....(all this can add up to20% to 30% of sales) say $40 a case (20%). This is working at par. Here is the tough part, most people look at these costs and look at it from a retail perspective and we all wish we could sell everything at retail! But, in the real world, most of the wine is being sold at FOB to our out of state markets, which is 50% of retail. Put these costs together and you have roughly $204 in per case or $17 per bottle which translates into a $34 retail, $204 FOB. You still haven't factored in making a profit on all your work and travels. I’m not trying to be a syndic, but I like people to understand what goes into a bottle of wine. On the bulk side, you buy juice, blend and may need to do a little winemaking, bottle it and start selling – fun and straight forward.
This obviously all depends on quantity of scale, but it's pretty accurate for the small producer of 7,000 case and under.