The Luxury of Perception

The reality about perception is what you perceive becomes a reality. Let’s delve further for a deeper understanding of the subject with relevance to the wine industry. Imagine a Person A with an annual income of $30,000, and Person B with an income of a $150,000 a year. Their income as well as several other factors discussed further down the article will become the determining factor of the wine that will be perceived as a luxury wine for each of these individuals. For Person A, a $13 Kendall Jackson could easily be perceived as a luxury wine, or a Saturday night wine, while for Person B a $265 Vineyard 29 could be perceived as a weekender wine. For Person A the $265 Vineyard 29 could become a wedding wine bottle, while for Person B a chardonnay complex of maybe upwards of  $1000 could be perceived as luxury.

The example was iterated with reference to income while keeping other factors like the ones explained below as constant. Income does come into account, but when there are enough options of wines in a particularly perceived luxury price bracket, other factors always come into play.

Marketing it as special

“You can convey scarcity and exclusivity even when scarcity is not an issue”, Eric Guerra, Chief Sales and Marketing  Officer, Vineyard 29, spoke these words in a speech at the alcohol and beverage import and distribution conference, hosted by the Beverage Trade Network.

The 1992 Screaming Eagle Cabernet Sauvignon which was auctioned for a whopping $500,000 dollars for charity has broken the record for a wine being special. The price per bottle is somewhere around $8000. But what makes this wine so special?

The scarcity of the Screaming Eagle Cabernet Sauvignon 1992 is in the production of it being around 500-1000 cases a year. They are also rumoured for producing 25-30 cases a year for their in-house consumption.

Even if you raise the bar from 500-1000 to 15,000-20,000 cases a year, your wine could still be marketed to be perceived as scarce. Your marketing tools and actions used would be what would ultimately determine how much your wine is perceived as special. Again a wine can be made special in other ways like having a back story, its vintage, who created it, who drank the wine once, etc., i.e. stories sell wines while making them special.

Price High, With Confidence (Very Difficult)

Justifying your price for the wine is very difficult. Owning a winery in Napa Valley is expensive, and if let’s say you own a winery there, you do get some leeway on the price forefront. Let’s say your grapes are seasonal, you get a pass to raise your price, further more let’s say your grapes are not only seasonal but the soil in which they are grown is a rare type, you will certainly get a way better price for that, since these are various factors that account for it becoming more rare, and hence making it more special and valuable. If you are better than another brand, go ahead and place your price above them. But to re-enforce what has already been said, the price must be justifiable and the consumers or buyers must be able buy the justification for whatever the price may be. The fact that Bentley cars are special in numerous ways is why they have the confidence to price it that high.

No concessions

No one asks for a discount when they go to buy a Rolls Royce. Similarly, if to the Person A in the above example if he/she perceives Kendall Jackson as a luxury wine, the most that he/she would do is look at various places and buy from anywhere where it is priced the least, but would never ask for a discount, since for Person A, that is something which he/she is paying for beyond his necessity. To Person A, most people within his/her circle, do not drink a Kendall Jackson every now and then, which is hence perceived as exclusive to Person A.

Raise those prices, slowly!

Price hikes as a matter of fact serve two unique purposes.

1. A slow and gradual price raise would imply that the brand is doing well, and hence the brand increases their prices since it is an unsaid rule that everything becomes more expensive over time.

2. It nearly creates a positive puzzle in the mind of a consumer who seems interested in a wine brand that has increased their prices over time hinting its direct proportionality to its demand over time.

Never Chase Volumes

Let’s say you are a new wine brand entering a pretty tough and competitive market like USA. Trying to chase volumes is not going to help you, since there are plenty of market players who are doing exactly that. By not chasing volumes and by releasing only a certain volume of your phase one production, you get to dip your feet into the pool of the wine market. You hold onto your volumes until demand comes back to you after it becomes special, and it becomes special only when someone asks for it again. That is when you wait for a brief period again, and release some more volume of your wine. Now this might seem like a dreamland, but it goes without saying that you will have to work other ways to create that buzz, and only then would someone come back asking for it again.

Where does the wine go?

It may seem a little odd, but Eric Guerra laid it down for the attendees on how distribution is one of the biggest driving forces for a luxury brand to stay relevant at the conference for alcohol and beverage import and distribution, 2019, hosted by Beverage Trade Network. These conferences are a part of the USATT, United States Trade Tasting by the Beverage Trade Network.

One thing that Guerra keeps everyone working under him very clear of is 5 targets where their wine is distributed in order to focus all their energies into getting that done right, and after a habit of that is set, then growing on it.

Eric Guerra is an excellent orator, and this article was sourced from his speech at the conference for alcohol and beverage import and distribution, 2019, hosted by Beverage Trade Network with attendees comprising of importers and distributors from all over the world.