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    Thursday, March 12, 2009

    Changing the wine pricing game

    DISCLAIMER: The following is based on my experiences in the wine wholesaling world and research I have put together for my company.

    You may or may not be aware of this, but when you buy a glass of wine at a restaurant you are usually paying for 3/4 or more of the business cost of buying the bottle. This is why wine is always so much more expensive then beer at restaurants and the like. Why is this you might ask? You certainly aren't drinking enough of the bottle to justify it, assuming they get 4 glasses out of each bottle then they are taking a 300% mark-up, which is huge. The problem though, is they can't necessarily count on selling all 4 glasses in a bottle, and wine doesn't really keep over-night that well unless you invest in expensive preservation systems like argon canisters and even then that just extends the life. What is really happening is that a restaurant is assuming it well sell on average two glasses of wine out of every bottle they open giving them a 150% mark-up over cost, which is about what retailers ask on bottles anyways.
    The other problem with wine pricing making it overly inflated as compared to beer is that everyone that makes wine knows that this is what restaurants do, and so they sell at less of a discount to restaurants then they do to retailers. Producers think if the restaurant is going to charge $9/glass anyways, I might as well make a little more money as well in this situation and charge them a higher price per bottle because they command a higher price per glass.
    Does it have to be this way though? Your average middle market wines, the wines typically available at $9 or so per glass probably cost roughly $4-$6/bottle to make (This is based solely on my experiences and the research I have done for my own company). So that equates to lest say $1.50/glass average cost of production. So isn't it conceivable that producers could sell at $2.50/glass to restaurants who could then turn around and sell to consumers at $3.50 or $4.00? Of course it is, but this only works if we price by the glass from the start, which we cant do because everyone produces bottles and you run into the loss do to spoilage problem.
    I am planning to get rid of this crazy pricing structure and hopefully you will see Glossophilia wines at bars where they wouldn't otherwise serve wines and a glass will only cost as much as your favorite pint. Until we get rid of this insane per-glass pricing the US wine market will never catch up to other parts of the world in terms of Avg. gallons/person

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