When Carol
from Duckhorn talked about the pricing strategy for her company, she underlined
how they decided that $20 would be the minimum price of the wine sold by any
Duckhorn brand, in order to protect the brand reputation.
According
to the traditional classification of wine per price (often seen in class),
premium wines start at above $7. However, given the rising prices of
Californian wine, is it reasonable to consider the “old” threshold of $7 for
premium wines too low? The following table shows that in 2002 30% of wines sold
were above $7. That seems a high percentage for a product which is supposed to
be premium. It could be time to revisit the traditional pricing segmentation [1].
[1]
As I
consider myself a non-premium wine drinker, I reflected on my purchasing patterns
and on Duckhorn’s $20 threshold. I realized that I hardly buy any bottle above $20,
but I do buy bottles which cost above $7 quite often and, occasionally, above
$14. Looking at numerous K&L newsletters which I receive, I often notice a
concentration of wines at the $19.99 price point. Above 19.99$, prices tend to
escalate quite quickly.
Special K&L February 2017 newsletter on Burgundy
It appears
that (in 2013) only 5% of US families buy wine above the $20 price point, and
those people are the same one that buy $30, $50 and $100+ prices bottles of
wine [2].
The market may
have shifted towards considering $20 as the threshold between an affordable
(maybe still not everyday) wine and a premium offering, and in that case wineries
should price-position their offering accordingly, considering if they want to
be present in the sub-premium market, or exclusively in the premium segment.
I would be curious to see how the sub categories (super premium and ultra premium) would be defined given this new price point.
Sources:
Very interesting analysis Sebastiano! definitely curious to see how this shifts the entire chain. The semantics here are so misleading!
ReplyDeleteJust to throw it out there, as the resident central banking nerd, if you take the $7 and $14 cutoffs from 2002 and inflation-adjust them for today's dollars you actually get ~$10 and ~$20, respectively!
ReplyDelete