“Wine is more guts than brain,” goes the famous quote from Swiss billionaire Thomas Schmidheiny. Schmidheiny was once listed as the 255th richest person in the world (4th richest in Switzerland). He is a wine aficionado, an owner of vineyards and wineries in Napa Valley, Australia, Argentina, and Switzerland. But that doesn’t mean everything in the wine business. Though Schmidheiny is considered an aficionado in the realms of owning and tasting wine, he’s not necessarily an expert at selling it.
Selling wine is an art all on its own. Any time celebrities and business moguls get into the wine business, they are often quickly reminded that there are two different components to the business: making and selling. And like making wine, there is also a science in selling it. This combination of art and science is what turns farmers into millionaire wine producers.
The farmer to winery story isn’t an uncommon one. When the Casella family left Italy for Australia in the 50s, they did not expect to be millionaires. Although they did expect a better life for themselves, they did not think that their family would run one of the most successful wineries in the country, in turn making them one of the biggest success stories in wine making history. Initially, the Casella family harvested grapes to eventually sell them to local wine producers. Eventually they started to make their own wine, and with some help, some 30 odd years later, they sold eight million cases. Today that wine is known as Yellow Tail.
So how did a cheap wine end up becoming a success story? Well, in business there’s product and there’s selling. When products don’t sell, the tendency is to re-jig the product, which is contrary to a generally accepted concept: products don’t sell themselves. When wines don’t sell, wine masters are asked to re-jig the recipe – add fruit, age it longer, alter the aging process, tweak the wine enough to get people to love it. But in the end, the art and science of wine making will just make a better wine, not necessarily sell it. Just like in any other business, there are trade secrets to making and selling. And although having success in both is generally a good thing, you only ever need to be the best at one – selling.
So how do wineries sell wine? What distinguishes successful wines from not-so successful wines? How did a $6 bottle of Yellow Tail become a phenomenon even though the Casella family admitted it was too acidic for even them to drink? Behind the wine madness is a method, and certain wineries know it all too well – allowing them to repeat it and reap the rewards. There are over 7,000 wineries in the US alone, and while most struggle, some prevail. The success of a few cannot be coincidental if they repeat their successes time and time again. Here are five trade secrets you may not have known about in the wine business.
5. They Price The Wine Just Right
Pricing wine is part science and part guessing. There are many wine drinkers, seasoned and non-seasoned, and they each have their own expectations on how much a bottle of “good” wine should cost. This essentially means that there are no industry standards on pricing. Naturally, cost dictates the minimum price, like in most industries, but once wine producers, importers, and retailers have calculated the cost of production, care, transport fee, and labor, the final price is determined by perceived quality and good old scarcity – or perceived scarcity.
In the end, wine is priced based on what retailers feel people will pay for it. Inevitably, the final price is actually a hunch. Certain wines are also priced differently in different regions – again, another hunch that “region X will pay more for this type of wine.” Like most specialized products, the retail price is not a consistent formula. Once cost is out of the way, the key is to price the wine high enough to convince consumers they are buying quality, but keep it within the highest possible range of what it is worth.
4. And Have An Attractive Label And Bottle
The name, label design, and bottle type all influence what consumers think of a wine – specifically how much it’s worth. There are recognized key characteristics that wine producers leverage to influence consumers’ perception of the quality of their wine. These characteristics are the color and design of the label, the bottle used (its punt, color, shape and weight), and the actual name of the wine.
More and more wine producers are sourcing out their label design to recognized artists or industry leading marketing firms. Not all designs need to be unique. Even some recognized wine producers are wisely leveraging trends in colors, such as the now popular paper bag brown label – once only generally found on a few Tuscan wines.
The weight of the bottle is another key characteristic that wine producers leverage. Consumers do acknowledge the heavier bottles, specifically when they pull them off the shelf. These heavier bottles – generally reserved for higher end bottles also have deep punts (the indentation found at the bottom of the bottle) – another gimmicky characteristic of “better wines.”
The name of a wine is also a carefully thought-out decision. Italian wines generally use simple elegant names that roll off the tongue for even non-Italian speaking wine enthusiasts, while French wines’ names are generally longer, with an emphasis on deep-rooted historic regions. Californian and Australian wines are often recognized for their rather unique names, which often do not cite a region, grape, or even vineyard. Examples include “The Show” or “Butcher’s Gold.”
3. They Get Their Product Out In Front
Getting out in front is critical for any business. It generally comes at a heavy price in marketing, retailing, and promotion costs. The results can be astonishing or punishing. However it works out, it is a critical component of every wine company’s business.
Having a wine buried in the back of a shelf at a local 7/11 is a sure way to solidify a winery’s inevitable demise. Yet, getting a wine out on the first shelf of every major wine retailer in countries like Italy, France, Spain, Australia, United States, and Canada will most definitely drive sales. No TV ads necessary – when’s the last time you saw one? It’s simply a retail war day in and day out, and only those who know how to get in front prevail.
2. They Establish A Solid Reputation
Making one successful wine can pay dividends for years to come. All it takes is one successful year to break the seal. Once that’s done, then selling a second wine with the same label is significantly easier. Wine producers will go to market once their wine reaches its highest potential. This ensures they have the best wine out there. But if they have experienced success from previous years, then they might be forced to go to market sooner than they would like.
The first ultimately comes at the hand of the consumer. Can you recall buying your favorite wine a year later only to find out it is half as good but just as expensive as the year prior? Why does this happen? It’s simple: reputation raises the bar, and if you paid $20 for a 2009 last year (because it was a good year), you will still pay $20 for the 2010 (even though it might be half as good).
1. They Form Contacts
Distribution is the key to getting out in front. But that can’t be guaranteed successfully without knowing who can move a wine from vineyard to shelf. There are many players in the wine distribution business, and they range from heavy hitters to small-time nickel and dimers. Nonetheless, getting the right distributor is so pivotal to a winery; it can make or break the wine’s success.
Some wineries avoid distribution for fear of distrust or cut margins. They might go directly to the retailer, banking on deals with giants like Costco. However, in most cases, wineries look for the right distributor. They want the one that can take a $6 Yellow Tail and sell over eight million cases to make the Casella’s one of the most successful wineries in Australia and even the world. They’re not just hanging around, but they’re well worth getting on board when trying to break in to the competitive world of wines.
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