By: Briana Tomkinson
Mass-market Canadian wine producers like Arterra and Constellation Brands have something most family-run boutique wineries don’t: teams who use insights from sales data to optimize their pricing strategies.
Smaller wineries who don’t have the expertise, staff or time to do this tend to price based on intuition. According to British Columbia wine pricing consultant Lindsay Kaisaris, many bou-tique wineries are unknowingly leaving a lot of money on the table.
“The hardest thing to do when you make something with your hands is to price accordingly,” Kaisaris said.
A few cents can make all the difference
When the wine is flying off the shelf, it’s a good sign people love your wine. Yet selling out too fast can actually be bad for your brand. Smaller wineries in this situation can increase prices by a few dollars to strategically slow sales velocity, Kaisaris said, and sell out at the appropriate time—just before the next year’s release.
On the other hand, when a wine isn’t selling well, many smaller wineries will offer a discount of a few dollars to try and clear out inventory. In some cases, adjusting the wholesale price by just a few cents can make a drastic difference in how well a wine sells.
In British Columbia, most wine retailers like to work on a 30% margin. A wine that wholesales at $15, for example, would retail around $20—a “dead” price for a bottle of wine. Most con-sumers are either looking to buy a wine for less than $20, or looking to spend a few bucks more. Even though it is only a penny less, wine sales trends show that the majority of consum-ers prefer to buy a $19.99 bottle of wine or a $21.99 bottle of wine.
“No one wants to buy a $20 wine,” Kaisaris said. “A couple of dollars makes a big difference on the shelf.”
By reducing the wholesale price from $15 to $14.39, Kaisaris said, it gives the retailer more room to set the price at $18.99, which would make the wine stand out next to the $19.99 bot-tles on the shelf.
Lowering the wholesale price by a few cents isn’t the only way to put your wine into a more favorable price category on the shelf. In one case, after analyzing sales numbers and the com-petition on the shelf, Kaisaris advised a client to increase the price instead. Sales of the wine had been stagnant at $44.99, but when the retail price increased to $49.99, the wine sold out.
Kaisaris recommends doing a careful competitive audit of the other wines in your category, and price strategically so that your wine isn’t crowded out by too many similar ones at the same price.
Vary the Price of Your Wines
Another common mistake smaller wineries make is to price all their wines close to the same value, Kaisaris said.
If your winery has five or 10 different wines, try marketing at least one at a lower “entry-level” price point, and one at a more premium price. That allows customers to compare prices and select a wine that feels more or less expensive.
If a winery has seven labels all priced between $20 to $28, the price point can alienate a new customer who is looking for something more economical, and yet won’t be expensive enough to attract a customer aiming for a “special” bottle. Kaisaris recommended decreasing the price of the cheapest bottle so it retails just under $20, and increasing the cost of the most expen-sive bottle to ensure there is at least one premium label above $30.
Another pricing trick wineries can use to increase sales is to bundle wines, rather than discount them. For example, three $25 wines could be sold as a package for $65 instead of $75.
“You’ve discounted, but it’s not quite as evident. You might have hit a price that is more com-petitive, but you haven’t shown everyone that you’ve taken $5 off the bottle, so you can con-tinue to offer in singles at the higher price,” said Kaisaris.
Carefully Monitor Sales Volume in Different Channels
It’s common in British Columbia that restaurant sales of white wine spike in summer and drop off towards the fall as the weather cools. At that point, it makes more sense for wineries to shift their sales efforts for white wine to retail stores.
“If you can do that in mid-September instead of waiting until November, you can beat your competition, who’s trying to do the same thing, without having to discount the price,” Kaisaris said. “Stop selling to restaurants then, and let them know your product will no longer be avail-able after that date. Then you can load it into stores for the Christmas season.”
The biggest season for wine sales is fall, during October, November and December. That’s when savvy wineries try to get a lot of product in stores and offer incentives to sweeten the deal for restaurants to push wine for Christmas parties and New Year’s Eve bashes. Yet often, the big guys get there before the smaller wineries have a chance to start.
“The small guys have already lost sales velocity in restaurants and then failed to capture the extra sales in retail over that two-month holiday period,” said Kaisaris.
Since the British Columbia Liquor Distribution Board establishes retail prices based on a fairly consistent markup, some boutique local and international wineries have made the strategic decision not to sell through provincially owned liquor stores. This allows wineries to set a price that is more profitable for restaurants and privately owned liquor stores and creates an incen-tive to feature that wine over others with slimmer profit margins.
Some larger wineries do both. Oliver-based Tinhorn Creek, for example, is a well-known label at provincially run liquor stores, but also offers some premium varieties at higher price points that are exclusively available at private retailers.
“These are not things small wineries do, which puts them at a disadvantage,” Kaisaris said.
Tips for Pricing Wine in British Columbia
According to Big Sage Strategies wine pricing consultant Lindsay Kaisaris, some wine price categories offer more opportunities than others.
Wine priced in the $20 range sells better than wine priced above $30. If you can, set the wholesale price to make it possible for your $30 wine to be priced at $29.99 or less in-store.
The mid-40s price point is a dead zone: “$44.99 is neither premium nor mid-range,” Kaisaris said. “At $49.99, it’s benchmarked against flagship wines and seen as a premium bottle.” Wines at this price point might even be placed in a different section of some stores, alongside premium brands.”
If you’re selling a premium product, price it boldly. If your customer is likely to be shopping for an expensive bottle to give as a gift with a $100 budget in mind, they may actually be more likely to spend $89.99 than $74. “Price elasticity gets wider the higher up you go,” she said.
