The Price Point Of Wine

2205 Words Oct 11th, 2014 9 Pages
Executive Summary

The report will analyse and expose the various factors that contribute to determine the price point of wine factors including the labour cost to grow grapes and produce wine, the size and reputation of the vineyard and the exclusivity and scarcity of the wine. Studies have shown that the global wine market is divided into four quality segments or categories known as basic premium, popular premium, super premium and ultra premium. Input costs for single vineyards have been divided into five categories known as direct, labour, mechanisation, and maintenance and general costs. Hedonic pricing and statistical analysis review qualities of wine that induce to price differentiation Studies have shown that different regions
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2. Wine categorisation and marketing decisions

As Perrin & Lockshin (2001) and Blok (2007) state, input costs must be related to the retail segment prices or price points that are given to wines. According to studies taken by Ernst & Young Consulting in 1999, global wine market is divided into four quality segments or categories (Perrin & Locksin, 2001). These categories are known as basic premium, popular premium, super premium and ultra premium. When the winemaker acknowledge the categories of their various wines they will know which are viable to produce in relation the retail price point that has been given.

Studies done in Australia during 2001 by the wine journal industry emerged with a very similar quality segment system which is divided in four categories as well; Commercial wines, Semi-premium wines, Premium wines and ultra-premium wines. Various winemakers have stated that there is only a hedonic difference between the last two categories (Blok, 2007). Retail distribution channels will therefore vary between wine categories as the winery management determines which channel to target. Depending on quality and quantity the winery could select to distribute for wholesalers, retailers, cellar doors, direct consumers or a combination of these (Heijbroek, 2003; SCSD, 2010).

Marketing, advertising and distribution are considered overhead costs as they are not part of the production process. Marketing

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