If we are going to get people to pay more for their next bottle of wine then we have to get them more interested, excited and willing to do so.
OK, deep breath. I have a confession to make. Earlier this month I went to see Depeche Mode live in concert at London’s Olympic Stadium. Not exactly the most happening and hip gig to have taken place this year, but for me it was well worth the £100 ticket (including all the booking fees) I paid to be there.
Now, there are plenty of people reading this who might not even want to spend three minutes of their life listening to a Depeche Mode song on the radio, never mind give up a three figure sum to watch them live.
But it’s those individual likes, dislikes and willingness to spend what we think a certain product, service or event is worth that makes the world go round. It is the beauty of economics and what every marketplace is based on.
What’s a wine really worth?
How much you are prepared to pay for a bottle of wine is very different to other people
Particularly so in wine where there are some people willing to spend seemingly any price to be able to possess some of the most coveted and expensive wines on the planet. Even though, ultimately, they still come in the same 75cl bottle of glass with a front and back label that the cheapest bottle of wine in a supermarket does.
This relationship between price, value and demand works just as well at the other end of the wine spectrum.
Time and again we hear about the cheapest wine on sale in a discounter like Aldi beating some of the most prestigious names in wine at world wine competitions. But although they might have a Trophy or a Gold medal to put on their label, Aldi still knows its customer base is only going to be willing to spend a certain amount for it, regardless of how many plaudits it wins.
The UK wine trade might lament the fact they can’t convince the average shopper to spend much more than £5 on a bottle of wine, but if that’s the current market price it collectively just has to do a better job to push that price point up – and not just because of inflationary or duty rise.
Pay what we can
Even at £5 a bottle wine makes up the largest part of the average supermarket shopping trolley
Are you willing to consistently spend a couple pounds more on other every day household items in your average shopping basket? Then why should a customer do so for wine, unless they are given a very good reason to do so.
Wine enthusiasts might start there average wine search at £10 or over, but if you just like your wine per se and are not that serious about it then why would you spend more than £10? After all if the world of wine is truly fixated on making the best quality wine at every price point then if your budget is £5 or £7 or £9 then you should find all you need in those price categories.
We have all done a weekly grocery shop and noticed the big difference in the final tally if you decide to buy wine or not. It will be the most expensive item in your trolley so it makes sense to seek out the promotions and try and keep your wine costs down – and subconsciously – the final bill smaller.
World wine prices
It was, therefore, fascinating to read the latest price comparison chart to be released by Wine Searcher that shows how much one particular bottle of French wine, in this case a bottle of 2012 E Guigal Côtes-du-Rhône, costs in US$, including tax, around the world.
Now the wine industry has long criticised itself for its inability to get the average customer to trade up and spend a little bit more for their wine. Particularly when you factor in issues such as local alcohol duty, and tax rates that mean there is effectively even less actual wine in a bottle of wine once you also take out all the margin, packaging and logistics costs.
But whilst there are some parts of the world, particularly in northern Europe where it is hard to get the mainstream drinker out of entry level pricing, there are other areas, noticeably emerging and new markets for wine, where the consumer is quite happy spending more on a bottle of wine.
Take the Wine Searcher example. At the bottom of its price list for what is after all a reasonable quality French Rhône wine comes Germany with an average selling price of $8.33. The French are only willing to spend a fraction more for their own wine at an average bottle spend of $8.57, quickly followed by the Netherlands at $9.65. Other key countries include the UK selling at $12.39, the US at around $ 14.12, Australia at $16.94 and Italy at $17.68.
Happy to pay more
The Chinese are quite happy paying what we would see as a super premium price for the same bottle of wine
But look at the top of the price charts and you have China selling the same bottle, admittedly with all its taxes added on, at an average of $34.52. Sill well over four times what it retails for in Germany.
Just below China comes Russia and Singapore with still very high average selling prices of $29.55 and $28.51, respectively.
All very different countries which are at varying levels of economic development and consumerism. But the three countries also share a consumer interest in wine that comes not from just satisfying every day drinking needs like in Northern Europe, but for how it is also perceived as a luxury product and the reputation and prestige it gives you amongst your peers for drinking it.
Perception and value
It is admittedly a mixed picture, but what it demonstrates very clearly is the perception and value of a bottle of wine varies enormously around the world. What one country will spend huge sums of money on, others will dismiss, unless it is on sale at an affordable level.
It is a scenario that international wine producers, buyers and sellers might want to bear in mind when coming to your price negotiations. It is why even with bad harvests and the rise in the price of grapes there is always someone, somewhere willing to pay for them. Higher priced grapes might push the traditional markets away, but it leaves the door open for developing countries quite happy to pay a premium for them. In fact they might even be attracted by the slightly higher prices.
It also leaves the market at certain lower price points very much in the hands of a certain band of buyers, from particular countries that are unwilling to play or pay at higher levels.
We have heard a lot about how the global wine industry is polarising and why the future for many wine producers could be in expanding their distribution across Asia, in to China and also in to the US. Whilst others will be quite happy swimming at the lower end of the market.
Price charts like this will only help speed up that process.
- This is an adapted article from one first published on Vinex, the global bulk wine trading website.
