Advice to the Greedy: It’s Not Time to Raise Prices

Advice to the Greedy: It's Not Time to Raise Prices

According to the U.S. Department of Commerce, consumer spending rose over the winter, aided by a jump in worker income and an improved job market.

That’s great news for the wine industry.

Now that the recession appears to be ending, Americans might be in a mood to spend a little more on wine than they did during the worst years of the slump, from 2009–11.

The conventional wisdom then was that people were still drinking, but were spending less. The person who previously paid $15 for a bottle of wine was willing to spring only for $10, or less. Even the cult wine collectors scaled back—winery owners in Napa Valley admitted as much.

If consumers are starting to spend again, what does this mean for the domestic wine industry, and California wineries in particular, which still supply the majority of wine that Americans drink?

It means they should develop a new game plan.

Winery owners should dismiss the temptation to raise prices. Asking for a few more bucks may seem reasonable. But it would be a mistake.

The economy may be expanding, but consumers still feel pinched. They’re looking for bargains, not conspicuous consumption.

That new slice of the drinking population—Millennials—is said to be open-minded, not particularly brand-loyal when it comes to alcoholic beverages, and willing to try anything if their friends recommend it.

Their parents may have grown up drinking California wine, but Millennials have no special devotion to it. As a recent Wine Market Council report indicated, older Boomers have become settled in their purchasing habits, while Millennials are much more adventurous.

California wineries should realize that it’s time to reshuffle the deck. Whatever the plan was before the recession (many family-owned wineries didn’t even have a plan), the economic downturn changed the rules.

I know, from my relationships with winery owners and managers, that they’re frustrated. They sense that things have changed and will continue to change, but they don’t know what to do. They’re bombarded with advice from all sides, much of it conflicting.

Jump into social media. Don’t waste your time with social media. Experiment with different kinds of wines. Don’t risk tinkering with weirdo varieties. Be a leader. Follow the markets. Redesign your brand for a younger demographic. Don’t muddle your image.

It’s no wonder that public relations firms, media consultants and branding experts are in such demand. Winery owners, increasingly confused, are turning to them in sheer desperation.

But instead of viewing this as an unwelcome hassle, wineries should see it as an opportunity. So here’s my advice:

  • Watch your prices. This simply isn’t the time to seek increases, particularly after 2012’s record crush, which will make California wines more available than ever.
  • Be honest about your wines’ price-quality ratio. An $8 bottle should offer at least $8 worth of value. A $25 bottle should offer at least $25 worth of value. Unfortunately, too many California wines remain overpriced. Ultimately, being too expensive for the quality will come back to bite you.
  • Don’t break your back trying to do it all. A little Twitter, a little Facebook or whatever can’t hurt. Do whatever degree of social media feels comfortable. But every winery should definitely keep its Web site up to date. I’m repeatedly shocked at how poorly maintained some sites are, combining out-of-date vintages with an overall lack of information.
  • Showcase your wine. Working through regional winery and vintners associations, pour at events like Rhone Rangers, Family Winemakers, World of Pinot Noir, Paso CAB Collective, The Chardonnay Symposium and so on. Get your wine and winemaker out there for face time. You can’t hide under a bush and expect the world to discover you.
Published on July 2, 2013
Topics: Value WinesWine News