If only the wine sold itself.
You want to create it and share it with friends and visitors to your winery. If only someone would take the bulk of the production from you at a great profit to you wouldn’t life be great?
Unfortunately, you must sell your wine, and to sell it the wine must be correctly priced.
Price the wine too low, and you don’t make enough to cover the costs. You also feel like an amateur (chose your own word) for not reading your market correctly.
Price the wine too high, and you will be storing it in inventory.
Correct pricing is not guesswork.
It is the result of selecting your market segment, knowing what your customers like, why they buy from you, and assessing competitive offerings. Your own costs come last.
So how well do you know your market? Are you selling
- directly to the consumer,
- to restaurants,
- and/or to the LCBO?
If you said all of them then you may want to reconsider.
The table below illustrates four broad segments related to wineries that require different strengths and provide different rewards. Not all wineries need to play in all arenas.
| Segment | Why They Buy | Pricing | Considerations and Challenges |
|---|---|---|---|
| Tasting Room | Entertainment.People visit the County and a winery visit is part of the experience, and it it is usually a fun filled time |
Customers are willing to pay a premium for the experience. On holidays one always pays more. |
You control the experience. You must manage the tastings. Calculate waste vs. revenue per tasting. Select staff for selling ability. |
| Wine Club | Customers love the price point of the wine. It saves running out to buy wine at the LCBO. They feel special and privileged. |
Willing to pay a premium price for a premium wine. However, the experience must be perceived as providing great value for the price |
To secure loyalty must offer some deal such as a free gift or meal coupon. Requires continuous reinforcement to maintain loyalty. Expect high turnover among members. Requires recruiting and monitoring by dedicated staff. |
| Restaurants | To make a high markup on resale. To carry the type of wine their customers demand. Because they have a relationship with you |
To entice the restaurant to select your wine among many competitors, the price must be low enough to make margins attractive for the restaurant. | You have little control. Substantial investment in sales force. No volume advantage. Remote inventory management. |
| LCBO | Politics. Ontario shelf space. |
Competitive pricing depending on how badly one wants shelf space. | They hold the power. No control by winery. Very low margins |
In which segment do you offer the best value proposition? I would argue that in most cases it’s the one where you have control i.e., the experience and where the customers are primed to purchase. This of course means direct sales via the tasting room. It’s up to you to create the right environment, have the right staff, and market yourself successfully.
Restaurants control the price at which your wine sells, and the way they chose to recommend your wine.
The LCBO holds all the cards and the margins are tiny.
It’s up to each grower to decide where they are best positioned to meet the demands of the various segments. Ultimately it’s a matter of weighing the costs against the expected revenues.