A $100 Bottle Of Wine

I recently wrote about Jo Diaz's post, What Are The Marketing Costs For a $50 Bottle of Wine? At the time, her post reminded me of something Dave Coffaro wrote a long time ago, but I didn't have time to chase it right then.  

Today, I took a moment to visit the Coffaro Web site and turned up not only Dave's original rant on the difference between what a bottle costs and what it is sold for, but this article from Brendan Eliason, entitled My $100 Bottle of Wine.

(BTW, Brendan is now the owner of urban winery Periscope Cellars.)

One of the things which the Internet has done so well is to remove intermediaries (anyone remember travel agents?).

Brendan's article  show that it's possible to make 95+ point wines for a cost that would allow them to be sold direct and still yield a substantial profit for the winery, even if you can only sell them in states that allow direct shipment.

It occurs to me that there's probably an opportunity for an extremely high-end winery which sells *only* direct to consumer/trade via the Internet.  It would require (I think) a whole new approach/mindset to be successful, but it's possible.

Unfortunately, I'm not rich enough to run that experiment (though I'd like to).  If you know of someone who's trying it in a serious way, please let me know in the comments.

Comments

[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.