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January 20, 2010

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Brendan Eliason

Michael, thanks for the mention! Since it had been over 10 years since I wrote my original article while working at Coffaro, I recently updated it for my Blog ThePunchdown.com. Here's the link to the newest version: http://www.thepunchdown.com/Site/Esoterica_%26_Lies/Entries/2009/5/29_How_to_Build_a_$100_Bottle_of_wine.html

Cheers,
Brendan

rick

Meh. He mixes in a lot of silly expenses with regular ones... but his point is wrong in any event. Pricing for goods, especially luxury goods like fine wine, isn't done on a cost-plus basis, but on what the market will bear. Presuming you want to maximize revenue, you want to price at the margin, the point where increasing your price more will reduce the demand enough that the price increase actually reduces revenue.

Funnily enough I just had this conversation about digital content, something many people feel should be free since the incremental cost of product is effectively zero. The idea of price having a relationship to cost simply isn't relevant though - price is a measure of the value placed on the good by the customer. Some people only value a nice bottle of wine at $20 or less. Some at $10. And some at $250. As long as the bottle delivers the value the customer expects (not 'the market' but that specific customer set) then the price is fair. In wine, some of this value has nothing to do with how good the wine is but scores, rarity, cachet, snob appeal, etc.

Jo Diaz

Mike,

Thanks for continuing the story.

Wooden Valley Winery in Suisun Valley has been selling directly to consumer for about 50 years. They've only recently branched out to an East Coast distribution center. That's only because they are now selling grapes to home winemakers on the East Coast, and have begun having relationships.

It CAN be done. One just has to bite the bullet and go for it.

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