I’ve been doing some work recently that got me thinking about how much a wine’s price is determined by the actual quality of the wine in the bottle and how much by the demand created through marketing. Aside from a few very rare exceptions, wine needs to be marketed to be sold. This is normally done through retail stores, the winery tasting room, to wine clubs and increasingly through online wine merchants. All these add to the costs a winery has to pay in order to get their wines to the customer but they are not the main cost driver; the grapes are.

If you are Fred Franzia making his famous “Two-buck Chuck” you are paying about $100 a ton for your over-cropped Central Valley Cabernet Sauvignon. The yield per ton is probably something like 7 tons per acre which doesn’t produce the most concentrated fruit. That ton of fruit will make around 60 cases or 720 standard bottles so Fred’s got around 14 cents per bottle in fruit costs. Now you can start to see how he can make money selling it for $1.99 at Trader Joe’s. Contrast that with the premium producer in Napa Valley who spends $6,000 a ton on fruit and up. There the yield is between 3 and 4 tons per acre that will produce a more concentrated, complex wine. Assuming the same 60 cases are made, the Napa Valley producer has around $8.30 in fruit costs. Not too bad if the wine will be selling for $50 or $60 a bottle but still 60 times more costly than Mr.Franzia’s wine. But this post is not intended to be a forensic dissection of the wine cost structure, for that, visit my friend Vini.

So getting back to the wine in the bottle, the basic difference is in the quality of the fruit and cellar treatment (i.e. new oak barrels vs. chips, aging time, etc.). For producers making the finest wines they tend to spend a lot more on these items but in the final analysis the most extravagant producer might have something like $30 of cost in each bottle produced. Since distributors buy at an average of 40% off retail, this wine would sell for a minimum of $57 a bottle assuming a 10% winery profit. But what if this wine is priced at $150 or $500 a bottle? Well, the profit margin is certainly higher but there are probably higher marketing costs, as well.

As I learned last week, there seems to be a point where price and quality diverge. The reputation of a winery, bolstered by glossy treatment in the wine magazines and 95+ Parker scores also help to push the demand, and price, for these wines. But are they the best example of a certain wine region or variety? Well that, my friends, is in the eye, and palate, of the beholder. You might think Screaming Eagle is the zenith of Napa Cabernet while I prefer what Ladera is doing for a lot less. Preferences aside, there are many great quality wines from all over the world that compete for our hard earned wine dollar. What really separates them is not the quality of what’s in the bottle but the demand that is created for those bottles. That, in a nutshell, is the essence of marketing… at least in my book.

By Tim Elliott: www.winecast.net

 

The Luxury Touch

Filed Under Wine Branding | Comments Off

Traditionally wine producers have been focused on production rather than marketing or branding. According to a study that was published recently on www.strategy-business.com superb service is the indispensable ingredient of successful high-end brands. This is food for thought for premium and icon wine producers as well as wine tourism marketers, who should be looking to add value to their product offerings. Here’s a short extract from the report:

“The relationship between quality of service and the luxury touch is often noticed, but its significance is rarely understood. A recent Booz Allen Hamilton study suggests that with luxury brands, the excellence of the underlying product is merely a starting point. Interviews with 40 executives at a broad spectrum of high-performing luxury brand companies confirm that what makes these luxury products truly stand apart is the superb level of service in which they are wrapped. Indeed, the services surrounding each of these brands can be viewed not only as an intrinsic part of the products themselves, but as an important differentiator of the brand.

Although there’s no single process for achieving high levels of customer satisfaction, four principles are common to nearly all top-performing luxury brand companies:

  1. They create a customer-centered culture that identifies, nurtures, and reinforces service as a primary value. When it comes to sales and service excellence, the leading luxury brands do not take shortcuts. High-performance luxury brands maintain their commitment to service in good times and bad, emphasizing long-term vision over short-term expediency.

  2. They use a rigorous selection process to populate the organization with superior sales and support staff. The impulse to care about accommodating customers cannot be taught to people who are not predisposed to it - “The smile has to come naturally.”

  3. They constantly retrain employees to perpetuate organizational values and to help them attain greater mastery of products and procedures. This continuous training includes training in new products and sales procedures as well as constant reinforcement of the company values and heritage. The average Ritz-Carlton employee receives 232 hours of training per year, almost four times the average of their counterparts at peer hospitality companies.

  4. They systematically measure and reward customer-centric behavior and excellence in sales and service to enforce high standards and reinforce expectations. When employees recognize that they are valued and share in the rewards, they can commit themselves wholeheartedly to the company’s mission. That, in turn, will demonstrate to outsiders that the company not only has set strong values but also lives by them, and that these values make possible a growing reputation for premium products and service.

When these four principles are at work, the result is a highly integrated business model that combines a superior product line with outstanding sales and service quality, driving strong growth and profitability in the process”.

By Mike Carter.

Read the entire report: http://www.strategy-business.com/press/enewsarticl…

Blogging is an incredibly effective way to reach out and find new clients.

Peter Flaschner, Founder and Creative Director of The Blog Studio offers 16 reasons why wine businesses should be blogging.

  • Build time-based relationships
  • Tap into strong branding power
  • Great value – can’t beat the price
  • Expand your reach – take your business global
  • Find new markets – take advantage of the long tail to do what you really love
  • Turn customers into evangelists
  • Create dialog with your clients
  • Find hidden opportunities – see find new markets above
  • Force you to think about your business – an often overlooked benefit of writing about your stuff regularly
  • Build relationships with your most vocal customers
  • Replace yellow pages – know anyone under 30 who uses the yellow pages?
  • Spread buzz
  • Humanizing – puts a face and personality to the business
  • Create top of mind awareness
  • Build trust-based relationships
  • Take advantage of virtual word of mouth marketing

By Peter Flaschner.

Download The Guide to Business Blogging: http://www.theblogstudio.com/mint/pepper/orderedli…

The New Ice Age

Filed Under Wine Innovation | Comments Off

stormhoek-couture.jpg

As far as wine marketing goes Stormhoek is a wine marketing and blogging success story. And from a product innovation perspective they haven’t disappointed either.

Stormhoek have just announced the imminent release of a concept wine in the UK named Couture – a Rosé made by Stormhoek winemaker Graham Knox, in a style intended to be consumed with ice.

Couture - a blend of Pinotage, Shiraz and Cabernet Sauvignon - launches in June in a major UK retailer at £6.99. It is packaged in a tall, colourful, modern, and chic bottle, its developers say, and its secret recipe and different serving techniques, including draught on tap for the on-trade, they believe give the product an edge in all market sectors.

Knox credits his wife Dianne for the idea: “I’ve watched my wife drink Rosé for years and the one thing she’s always complained about, was that it tasted watered down when she put ice in it, so I made Couture especially for her!”

“The ongoing popularity of Rosé, the success of Magners Cider ‘over ice’ and a survey we conducted in South Africa, gave us the idea to take Graham’s ‘secret’ and develop it,” says Jason Korman, CEO of Stormhoek Vineyards. “You can serve it many different ways, on ice and even as a mixer - we see it as part of a trend where Rosé can be consumed like a cocktail, making it an even more sophisticated drink.” 

Sixty-thousand consumers at Taste London 2007 will witness the launch of Couture, where an Interactive Ice Bar filled with huge blocks of multi-coloured ice, will have a mixologist serving Couture in its four guises: wine glass, tumbler, martini glass and champagne flute. The brand launch will be supported by pre-event video trailers on www.youtube.com and on its website, which launches this week.

The national campaign will see a Couture branded ice-cream van, with film crew and ice bar, travel around the UK visiting supermarkets and wine specialists, sampling its secret blend to thousands of consumers.

In addition, the consumer campaign will be supported by radio, TV and a link up with a top San Francisco global cosmetics company which has “a similar vision, and sense of ‘play’ and entertainment,” according to Catherine Monahan from Orbital Wines, owner of the Stormhoek brand. 

First published on www.wine.co.za

By Mike Carter.

v-twin-zin-small1.jpg

Great brands find relevant ways to tap the emotional drivers that already reside deep within each of us. And according to Scott Bedbury author of “A New Brand World”, Harley-Davidson has succeeded in developing an emotional connection with one of the most diverse ranges of consumers on the planet.

“Harley-Davidson has intentionally cultivated a relationship with consumers that radically transcend a product-only relationship. People don’t just buy a Harley; they become members of a community bound by an ethos and shared set of values that cross many social and economic strata”.

In the last 20 years, the “outlaw biker” image associated with Harleys has been replaced by a new demographic. Most bikers are now in their 40s and 50s, with steady careers and families. What they share is a love of the finer things in life, and an interest in good food, good times … and of course, good wine.

Scott Del Fava, Brand Manager for V-Twin Vineyards relates how the idea to produce a range of wines inspired by Harley-Davidson motorcycles was dreamed up:

“A few years back we were sitting around the Harley-Davidson Café in Las Vegas. We had just come back from the River Run over in Laughlin and faced the prospect of going back to our 9-to-5 jobs. Over dinner we were trying to figure out a way to do what we really enjoyed - riding motorcycles - and still pay the bills. We started throwing out ideas & the name V-Twin Zin was born. It took a few years - and more than a few dollars - before our first tangible efforts were seen. Our good friends ( Neil & Phil ) patiently tasted countless blends and vineyard samples with us in an effort to define our style for our first public offering”.     

“For now - we are still operating as a virtual winery, doing custom crushing and blending - but we’ll have a public Tasting Room in the not so distant future. Our loyal friends and winery contacts have been supportive in helping us to source the right vineyards & wines to help us produce great wines at reasonable prices”.

“I won’t bore you with the usual family winery history thing - or my resume (blah, blah, blah) - because all of that means nothing if you don’t like our wines. We’re about great wines, great friends and living life to its fullest every day - the synergy of these three make great memories. So… the next time you come back from a great ride - even if it’s from work - kick back and open a bottle our wine and share your stories”.

So, what sort of wine do you drink after you park your Harley-Davidson and unzip your leathers?

Thanks to Lorenzo Gabba for spotting this story on www.decanter.com

By Mike Carter.

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