Saturday, October 18, 2014

Will Bottle Prices Increase in 2015?

 
The Annual Wine Conditions Survey will close this Friday. Thus far over 300 of your fellow wineries have participated from across the entire West Coast and Nation. It takes 12 minutes to complete and helps us all understand industry dynamics better. Participants are the ones who will most benefit for small time invested, as they are the only ones who will get the complete results and added analysis.
 
Please join your fellow wineries and participate in the survey before the close Friday [LINK].

Bottle Price Increases
 
One of the early charts from the survey surrounds pricing expectations. Almost 40% of the business believe they can hold prices, and another 40% believe they can take a small increase. That's an interesting conclusion to me given a world economy that's slowing down over previous expectations, particularly in emerging countries, Europe and China.
 
Also considering the large harvests from the past 3 years where there is still plenty of juice out there, one would think intuitively that heavy supply should lead to price discounting. So this chart which is showing a rather optimistic industry is intriguing.  You have to ask yourself why is the industry so optimistic? Perhaps there is a belief the long awaited Millennials will finally start to impact demand?
 
 
Millennial Myth
 
Perhaps but digging back into the survey, an early read on which age groups are buying wine reveals that not much has changed from last year, and there has only been a modest change over the past 4 years in cohort purchasing behavior.
 
No, it's pretty clear that contrary to common belief, the Millennials still aren't moving the needle for most wineries, but they are the future. The fact Boomers are still so dominant in US wealth held, income, and wine purchasing isn't a good thing long term given the declining functionality of livers and kidneys in the cohort, so this isn't a reason for the optimism. We need the younger generations to find their way to the tasting room.
 
 
Direct to Consumer Sales
 
Once we close the survey this Friday, we'll be able to do some more work on cleaning up the responses and can separate responses by case production and region. That may give us another look at this optimistic finding. But the above chart may help explain this a bit.
 
We asked respondents to give us a reading on the sales channels they used. As you can see, there is a heavy emphasis in this respondent set in wine club and tasting room sales. While overall wine sales in 2014 have been slanted to higher priced wines, its the club and direct sales that are showing the best growth rates. That may suggest that the higher priced wines may have pricing power higher supported by a healthy affluent consumer.
 
What do you think? Will wineries be able to increase prices in 2015?

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1 comment:

  1. Rob,

    The survey closes this Friday.

    Do you have a projected calendar date for publicizing the results?

    ~~ Bob

    ReplyDelete

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